ANNUAL report
2011
Guidance
of at least
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2010
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Annual Report
1
Corporate Governance Statement
Financial Statements
11
Transurban Holdings Limited and Controlled Entities
125
Transurban Holding Trust and Controlled Entities
205
Transurban International Limited and Controlled Entities
287
Security Holder Information
22001111 CCOORRPPOORRAATTEE GGOOVVEERRNNAANNCCEE SSTTAATTEEMMEENNTT
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 2011 (the reporting period), Transurban’s governance arrangements complied with the
A checklist cross-
ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations.1
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.
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 these changes.
1
1 TRANSURBAN ANNUAL REPORT 2011
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
(cid:57) Diversity Policy
Board structure
The Board is structured so that its membership provides the mix of qualifications, skills, experience and diversity 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, the bye-laws of TIL, and the
law.
The Board of THL and the Board of TIML have common directors and meetings are held concurrently. This Board currently
comprises 9 directors, with 8 non-executive directors, including the Chairman, and 1 executive director, the CEO. During the
reporting period, David Ryan resigned as Chairman and was replaced by Lindsay Maxsted. Bob Officer and Sam Mostyn
also joined the Board. These changes were further significant steps in the Board renewal process.
The Board of TIL meets separately. This Board currently comprises 4 directors, with 3 non-executive directors, including the
Chairman, and 1 executive director, the CEO. During the reporting period, David Ryan resigned as Chairman of TIL and
was replaced by Lindsay Maxsted.
Each director’s skills, qualifications, experience, relevant expertise and period in office 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 material2
is assessed from the perspective of both Transurban and the director.
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 relevant information to enable it to make
this assessment.
The Board has reviewed the positions and associations of the non-executive directors named in the Directors’ Report,
including the Chairman. The Board 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 CP2 Limited, one of Transurban’s largest security holders.
Lindsay Maxsted, Neil Chatfield, Rodney Slater, Samantha Mostyn and Jennifer Eve each hold 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 Chatfield, Mr Slater, Ms
Mostyn nor Ms Eve were, or are, involved in any procurement or other Board decision making regarding the companies or
firms with which they have an association.
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.
2
2 TRANSURBAN ANNUAL REPORT 2011
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 performance
evaluation and his or her tenure.
The Board does not set fixed tenure limits for non-executive directors. It is the Board’s intention that non-executive directors
serve up to three terms, but tenure remains a matter for the Board’s discretion on a case-by-case basis.
In the case of long-serving non-executive directors who are standing for re-election at an AGM but who intend to retire from
the Board within their next term, this intention to retire will be clearly disclosed in the AGM notice of meeting.
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. The assessment is assisted by the development and use of a
Board ‘skills matrix’ to identify any gaps. Where a need or gap is identified or arises, the Nomination Committee commences
a search process for potential appointees across a diverse candidate pool, with the assistance of external consultants as
necessary. The Nomination Committee then undertakes an assessment of short listed potential appointees. 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.
During the reporting period, the Board reviewed the mix of skills and diversity which it is looking to achieve in its
membership. It identified additional gender diversity and engineering, major projects and infrastructure skills and experience
as priorities. A search process has commenced for an additional one or two directors who meet the Board’s criteria.
The Board recognises that diversity is a competitive advantage bringing real value and adding to the collective skills and
experience of the Board. The Nomination Committee is responsible for making recommendations to the Board on
strategies for addressing Board diversity (see section 4 below).
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,
the role and
responsibilities of senior executives, the role of board committees, meeting arrangements and director interaction with each
other, senior executives and other stakeholders.
its culture and values,
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.
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3 TRANSURBAN ANNUAL REPORT 2011
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.
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
The Board has established three standing committees of directors: the Audit and Risk Committee, the Nomination
Committee and the Remuneration Committee.
In August 2010, the Board agreed that as sustainability was now sufficiently embedded in Transurban’s business, the
Sustainability Committee would be disbanded and all sustainability matters would be overseen by the full Board.
Each standing 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 the Audit
and Risk Committee Charter and the Remuneration Committee Charter.
Committee composition as at 30 June 2011:
Audit and Risk Committee
Nomination Committee
Remuneration Committee
(cid:120) Neil Chatfield (Chair);
(cid:120) Lindsay Maxsted ;
(cid:120) Jeremy Davis; and
(cid:120) 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.
(cid:57)
(cid:57)
(cid:57)
(cid:120) Lindsay Maxsted (Chair);
(cid:120) Neil Chatfield;
(cid:120) Geoff Cosgriff;
(cid:120) Jeremy Davis;
(cid:120) Bob Edgar;
(cid:120) Samantha Mostyn;
(cid:120) Bob Officer; and
(cid:120) Rodney Slater.
Only non-executive directors,
all of whom are independent,
except Bob Officer.
At least 3 members.
An independent Chair.
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(cid:120) Geoff Cosgriff (Chair);
(cid:120) Jeremy Davis; and
(cid:120) Bob Edgar.
(cid:57)
(cid:57)
(cid:57)
Only non-executive directors,
all of whom are independent.
At least 3 members.
An independent Chair.
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(cid:120) Integrity of financial reporting;
(cid:120) Effectiveness of systems of financial
risk management and internal control;
(cid:120) Internal and external audit functions;
(cid:120) Effectiveness of the risk management
framework and supporting risk
management systems.
(cid:120) Size and composition of the Board and
new Board appointments;
(cid:120) Board gender diversity and diversity in
general;
(cid:120) Board, committee and director
performance;
(cid:120) Board and senior executive
succession planning.
(cid:120) Remuneration of directors;
(cid:120) Performance and remuneration of, and
incentives for, the CEO and other
senior executives;
(cid:120) Remuneration by gender;
(cid:120) Remuneration strategies, practices
and disclosures generally.
4
4 TRANSURBAN ANNUAL REPORT 2011
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.
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 third year. This arrangement is supplemented by 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 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 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, Transurban has established a Diversity Policy and the Board has established measurable
objectives for achieving gender diversity. Achieving these objectives will be a measure against which performance of the
Board is assessed 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.
Subsequent to the reporting period, certain committees also undertook an assessment by reference to the objectives and
responsibilities set out in their charters. The results of the assessment were considered by the relevant committees 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 also 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 2010 were conducted during the
reporting period. Detailed information regarding these reviews, and the reward structure and remuneration outcomes for the
CEO and other 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 2011 were conducted in July 2011.
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.
For the reporting period, the remuneration of the CEO and other senior executives comprised 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. During the reporting period, a comprehensive review of Transurban’s remuneration
framework was undertaken in light of feedback received from security holders and other stakeholders, market expectations
and regulatory developments. As a result, the Board approved a new remuneration framework for the year commencing 1
July 2011, details of which are summarised in the Remuneration Report within the Directors’ Report.
5 TRANSURBAN ANNUAL REPORT 2011
5
4
ETHICAL CONDUCT AND RESPONSIBLE DECISION-MAKING
Relevant governance documents:
(cid:57) How We Work @ TU
(cid:57) Whistleblower Policy
(cid:57) Fraud Policy
(cid:57) Dealing in Securities Policy
(cid:57) Diversity Policy
(cid:57) Sustainability Report
Conduct and ethics
Transurban’s code of conduct, “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 entitlements to securities under a Transurban equity plan may not hedge against those entitlements
until they have vested. In addition, directors and senior executives may not hedge against entitlements that have vested but
remain subject to a holding lock. Directors and employees are also prohibited from entering into margin lending
arrangements using Transurban securities as security.
Diversity
Transurban’s workforce is made up of individuals with diverse skills, values, backgrounds, experiences and needs.
Transurban values this diversity and recognises the organisational strength, opportunities for innovation and other corporate
benefits that it brings. Transurban is committed to providing an environment in which all employees are treated with fairness
and respect, and have equal access to opportunities at work. Transurban has, and will continue to develop, practices,
programs and initiatives to support and assist with improving diversity at all levels of the business.
Transurban believes that genuine diversity drives strategic advantage and contributes to the achievement of its corporate
objectives. It enables Transurban to attract people with the best skills and attributes, and to develop a workforce selected
from all available talent, whose diversity reflects that of the customers and communities Transurban serves.
Transurban was an early adopter of the diversity measures set out in the ASX Corporate Governance Council’s Principles
and Recommendations that came in to effect for financial years ending on or after 1 January 2011. In 2010, Transurban
established a Diversity Policy that included a requirement for the Board to set measurable objectives for achieving gender
diversity and review both the objectives and the progress in achieving them annually.
6 TRANSURBAN ANNUAL REPORT 2011
6
Transurban’s gender diversity profile as at 30 June 2011 is set out below.
Transurban’s measurable gender diversity objectives for the reporting period, and the progress in achieving those
objectives during that period, are outlined below.
Recruitment
Objective
FY10 Actual and FY11 Target
Outcome as at 30 June 2011
Increase the proportion of
women on the Board
ü FY10 (Actual) – 1 female non-
executive director
ü FY11/12 (Target) – 1 additional
female non-executive director
ü FY10 (Actual) – 25% of senior
executive positions held by women
ü FY11 (Target) – 30% of senior
executive positions held by women
ü Minimum of 1 female candidate
included in every Board /
management interview list
Samantha Mostyn was appointed to the Board on 8 December 2010. Her
appointment was another important step in the Board’s ongoing renewal
process. A search process is currently underway for another female Board
member.
29% of senior executive positions are held by women. During the reporting
period, Transurban implemented a ‘Women in Leadership’ Program to assist
with the development of high potential women in the business and improve the
proportion of women in executive positions in the future. As at 30 June 2011,
22 women had participated in the program.
Female candidates were included in every Board / management interview list.
During the reporting period, 1 female was appointed to the Board, and
management appointments occurred through the implementation of succession
plans.
FY10 Actual and FY11 Target
Outcome as at 30 June 2011
ü FY10 (Actual) – 100% of
development plans completed for
women in senior executive positions
ü FY11 (Target) – 100% of
development plans completed and
updated
ü FY10 (Actual) – 39% of promotions
into and within management were
earned by women
ü FY11 (Target) – 45% of promotions
into and within management were
earned by women
ü FY11 (target) – Enhancement to
Parental Leave Policy and
introduction of Purchasing Leave
Policy
100% of development plans were completed and updated.
In 2010, targeted development plans were formalised and actioned for all
women in senior executive positions. During the reporting period, these plans
were updated to reflect each executive’s progress.
During the reporting period, there were 9 senior executive and senior
management promotions. 4 (44%) of these positions were earned by
female employees.
Transurban has an extensive workplace flexibility program offering.
Enhancements to the program were made during the reporting period:
ü Parental Leave Policy – which includes expansion of paid weeks to 12
weeks for maternity leave (with additional 2 week return to work bonus) and
2 weeks for paternity leave. Extensive supporting tools were also developed
to guide employees and managers through pre, during and post paternal
leave arrangements; and
ü Purchasing Leave Policy – this was the first year Transurban introduced this
policy for employees to purchase up to 4 weeks additional leave. 37
employees chose to take up this option in 2011.
7
Increase the proportion of
women in senior executive
positions
Proactive consideration of
female candidates for
Board and management
positions
Development
Objective
Development plans in
place for all women in
senior executive positions
Women promoted into and
within management
positions
Enhance workplace
flexibility options
7 TRANSURBAN ANNUAL REPORT 2011
Women in Leadership Program
As noted above, during the reporting period, Transurban initiated a ‘Women in Leadership’ program to support its gender
diversity objectives. The program outcomes were to:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
increase the proportion of women in leadership roles and the retention of existing women leaders;
increase the self-awareness of women leaders (and potential leaders);
empower women leaders to honour and value their unique perspective and contribution to leadership; and
create a forum where women leaders could create informal networks and establish support mechanisms.
A pilot program was held in February 2011, targeting female senior managers. Due to the success of the pilot, another
program followed in April 2011 with high potential female middle managers invited to participate. A total of 22 high
potential women took part. Feedback was positive with participants acknowledging it was a great forum to share
experiences and challenges as well as recognising conscious and subconscious barriers and stereotyping. A third group
of women participated in the program in August 2011.
A gender pay equity review also commenced during the reporting period as part of Transurban’s commitment to gender
diversity.
Sustainability
The Board is committed to ensuring that all Transurban operations work to sustainable business practices. Further
information on Transurban’s approach to sustainability is set out in Transurban’s Sustainability Report which will be
published in October 2011.
5
INTEGRITY IN FINANCIAL REPORTING
Relevant governance documents:
(cid:57) Audit and Risk Committee Charter
(cid:57) 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.
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.
8
8 TRANSURBAN ANNUAL REPORT 2011
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.
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 Communications 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 updates. 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.
9 TRANSURBAN ANNUAL REPORT 2011
9
8
RISK MANAGEMENT
Relevant governance documents:
(cid:57) Audit and Risk Committee Charter
(cid:57) 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 ISO 31000:2009) that seeks to embed risk management processes into Transurban’s business activities and
functions.
Within the framework, each business unit is required to formally consider its risk environment and create a register of
identified risks, controls, a risk treatment plan and a risk management plan which are stored in a risk management
information system. Risk Management Facilitators are appointed to each business unit to support Managers in implementing
a robust and consistent approach to the identification and management of risks. 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 at least a biennial basis.
The Audit and Risk Committee assists the Board in overseeing Transurban’s Risk Management 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 2011. 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.
10 TRANSURBAN ANNUAL REPORT 2011
10
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 2011
11 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited ABN 86 098 143 429
Annual financial report - 30 June 2011
Directors' report
Auditor's Independence Declaration
Financial report
Directors' declaration
Independent auditor's report to the members
Page
13
47
48
122
123
12 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
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 2011.
Group accounts
The Transurban Group financial statements have been prepared as an aggregation of the financial statements of
Transurban Holdings Limited (THL) and controlled entities, Transurban International Limited (TIL) and controlled entities
and Transurban Holding Trust (THT) and controlled entities, 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, Transurban Infrastructure
Management Limited (TIML) and TIL during the whole of the financial year and up to the date of this report.
THL
TIML
TIL
Non-executive directors
Lindsay P Maxsted *
David J Ryan AO (Resigned 12 August 2010)
Neil G Chatfield
Geoffrey O Cosgriff
Jeremy G A Davis AM
Robert J Edgar
Samantha J Mostyn (Appointed 8 December 2010)
Robert R Officer (Appointed 20 August 2010)
Rodney E Slater
Jennifer S Eve
James M Keyes
Executive director
Christopher J Lynch
(*) - Appointed to TIL on 12 August 2010
Results
The consolidated net profit for the year for the Group was $118,158,000 (2010: profit of $59,605,000). The net profit
attributable to ordinary equity holders of the Group for the year was $112,467,000 (2010: profit of $59,418,000).
Principal activities
The principal activities of the Group during the financial year were the development, operation and maintenance of toll
roads.
13 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(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: 14 cents (2010: 12 cents)
per fully paid Stapled Security payable 11 August 2011
Distributions paid during the year
Final distribution for 2010 financial year of 12.0 cents (2009: 11.0 cents) per fully
paid Stapled Security paid 27 August 2010
Interim distribution for 2011 financial year of 13.0 cents (2010: 12.0 cents) per fully
paid Stapled Security paid 15 February 2011
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 2011 and 30 June
2010
Paid in cash
Executive loans - repayments
Satisfied by issue of Stapled Securities
Funds available (from)/for future distribution reinvestment plans
30 June
2011
$'000
30 June
2010
$'000
202,096
202,096
169,760
169,760
169,760
141,095
187,367
357,127
154,806
295,901
232,577
-
124,557
(7)
357,127
230,451
65
65,381
4
295,901
The distributions are unfranked and have a minimal tax deferred component.
Review of operations
Transurban's net profit for the year ended 30 June 2011 was $118.2 million. Toll revenue increased by 5.8 per cent to
$724.1 million. Strong traffic growth on CityLink following completion of construction of the Southern Link upgrade was a
key driver behind the revenue increase, with the contribution from the Lane Cove Tunnel in its first year since acquisition
assisting by partially offsetting the effect of the M4 concession ending in the prior year.
Performance of Transurban’s portfolio of assets
CityLink (Melbourne)
CityLink toll revenue for the year ended 30 June 2011 increased 11.5 per cent to $434.6 million. Average daily
transactions increased 8.8 per cent.
Traffic volumes have been strong across the network following the completion of construction works on the
Southern Link section of CityLink in October 2010, bringing to a close major works impacting motorists.
Lane Cove Tunnel/Military Road e-Ramps (Sydney)
The acquisition of Lane Cove Tunnel was completed on 10 August 2010 and was successfully integrated into
Transurban’s business during the year.
Toll revenue from the date of acquisition to 30 June 2011 for the Lane Cove Tunnel and Military Road e-Ramps
was $51.7 million. Average daily trips increased 4.2 per cent over the previous year (prior to acquisition by
Transurban).
14 TRANSURBAN ANNUAL REPORT 2011
Review of operations (continued)
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
Hills M2 (Sydney)
Toll revenue for the year ended 30 June 2011 for Hills M2 increased 3.0 per cent to $145.7 million. Average
daily trips increased 0.3 per cent.
On 26 October 2010, Transurban announced that it had reached contractual close with the NSW Government
for the $550.0 million upgrade of the Hills M2 Motorway. Financial close was reached on 19 November 2010
and construction commenced in January 2011.
Under the agreement to upgrade the M2, tolls will increase by approximately 7.7 per cent at construction
completion and the concession will be extended four years to 2046. The works will increase capacity on the M2
by increasing the number of traffic lanes and the provision of new tolled ramps which will improve traffic flow
and accessibility of the motorway.
M1 Eastern Distributor (Sydney) – Airport Motorway Group
Toll revenue for the year ended 30 June 2011 for the M1 Eastern Distributor increased 12.0 per cent to $92.1
million. Average daily trips increased 2.5 percent.
The toll revenue increase was driven by toll increases for cars on 1 July 2010 and for trucks on 1 January 2011.
M5 (Sydney) - Interlink Roads Pty Limited
Toll revenue for the year ended 30 June 2011 for the M5 increased 3.0 per cent to $167.5 million. Average
daily trips increased 1.6 per cent.
Transurban and its partners are in continuing discussions with the NSW Government to widen the M5 corridor.
At this stage, there is no agreement in place but Transurban continues to support the proposal and stands
ready to bring greater capacity to the M5 corridor as a matter of priority.
Westlink M7 (Sydney) - Westlink Motorway Group
Toll revenue for the year ended 30 June 2011 for Westlink M7 increased 8.6 per cent to $190.6 million.
Average daily trips increased 6.2 per cent.
Growth in the southern section of Westlink M7 continues to be strong reflecting further development within the
corridor during the year.
Pocahontas 895 (Virginia USA) - Transurban DRIVe
Toll revenue for the year ended 30 June 2011 for Pocahontas 895 increased 2.4 per cent to $14.1 million.
Average daily trips increased 1.8 per cent.
On 13 January 2011 the Richmond Airport Connector, linking Richmond International Airport with Pocahontas
895, was opened for traffic. This completed a two year construction of the connector.
Capital Beltway (Virginia USA) – Transurban DRIVe
Construction on the Capital Beltway (I-495) High Occupancy Toll (HOT) lane project is now more than 70 per
cent complete after a very strong construction period. The construction project remains on budget and on track
for completion in late 2012, with first tolls expected in 2013.
Other corporate activities
Organisational restructure
On 27 January 2011 Transurban announced a restructured Executive Committee. The amended organisational
structure is aligned with Transurban’s focus to ensure clear market based accountability at the senior executive
level, and concentrate efforts around regional and market based relationships with the respective Government
customers and communities Transurban serves.
Cost control
Cost control and efficiency continues to be a strong focus of the Group for the year ended 30 June 2011. The
Group has a long term target of flat nominal costs.
15 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
Review of operations (continued)
Refinancing activities
Transurban continued to have success in refinancing activities in the year ended 30 June 2011.
August 2010
Raised $260.0 million of non-recourse project debt to partially fund the acquisition of Lane
Cove Tunnel.
September 2010
In conjunction with Westlink Motorway Group, refinanced $505.0 million of non-recourse
project debt on the Westlink M7.
November 2010
Refinanced $465.0 million of non-recourse project debt on the Hills M2 and raised $275.0
million of additional financing to fund the debt component of the M2 Upgrade project. The
refinancing of $465.0 million replaced financing put in place in May 2009 and was completed
on competitive terms in an improved credit market.
December 2010
Refinanced $270.0 million of Working Capital. This replaced $320.0 million that was due to
mature in February 2011.
May 2011
Issued $200.0 million of domestic medium term notes, to partially fund $300.0 million existing
notes maturing in September 2011.
July 2011
Refinanced $520.0 million of non-recourse project debt on the M1 Eastern Distributor.
Significant changes in the state of affairs
On 10 August 2010, the Group completed the acquisition of the Lane Cove Tunnel and Military Road e-Ramps motorway
concession in Sydney, for consideration (including costs) of $634.6 million.
Matters subsequent to the end of the financial year
As noted above, on 7 July 2011, the Group completed a refinancing of $520.0 million of non-recourse project debt for the
M1 Eastern Distributor. The refinancing replaces existing $515.0 million non-recourse debt that was due to mature in July
2012, July 2014 and July 2016.
At the date of this report the directors are not aware of any other circumstances that have arisen since 30 June 2011 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 assets.
16 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
Information on directors
Lindsay P Maxsted Dip Bus, FCA.
Chairman and independent non-executive director
Term of office
Director since 1 March 2008. Chairman since 12 August 2010.
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 BHP Billiton Limited and BHP Billiton plc, a non-executive director of W estpac 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 interests in 30,000 Stapled Securities.
Transurban Board Committee membership
Chairman of the Nomination Committee and a member of the Audit and Risk Committee.
Christopher J Lynch B Comm, MBA, FCPA, FAICD.
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 resourcing 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, CFO Europe, and Managing
Director of KAAL Australia Limited.
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 an AFL Commissioner.
Chris holds interests in 255,401 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
Chairman of the Audit and Risk Committee and a member of the Nomination Committee.
17 TRANSURBAN ANNUAL REPORT 2011
Information on directors (continued)
Geoffrey O Cosgriff BAppSc, Company Director Diploma, FIE(Aust), FAICD.
Independent non-executive director
Term of office
Director since 19 December 2000.
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
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 also 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.
Geoff holds interests in 152,236 Stapled Securities.
Transurban Board Committee membership
Chairman of the Remuneration Committee and a member of the Nomination Committee.
Jeremy G A Davis AM BEc, MBA, MA, FAICD.
Independent non-executive director
Term of office
Director since 16 December 1997.
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 Board of one of ANZ’s Asian banks, Bank of Tianjin. He was
previously on the Boards of AMMB Holdings Berhad and Shanghai Rural Commercial Bank.
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 18,627 Stapled Securities.
Transurban Board Committee membership
Member of each of the Audit and Risk, Nomination and Remuneration Committees.
18 TRANSURBAN ANNUAL REPORT 2011
Information on directors (continued)
Samantha J Mostyn BA, LLB.
Independent non-executive director
Term of office
Director since 8 December 2010.
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
Sam has more than 15 years experience in senior management roles, including as Director of the Institute for
Sustainable Solutions at the University of Sydney until November 2010. Prior to that appointment her roles
included corporate affairs, culture and human resources positions at Insurance Australia Group, Optus
Communications and Cable & Wireless Plc. She also held senior policy advisory positions with a previous
federal government.
Sam's other Board roles include Virgin Blue Holdings Limited and Citigroup Pty Ltd, the AFL Commission, the
Australian Museum Trust and the Sydney Theatre Company. She is the Chair of the Stakeholders Advisory
Council of the CSIRO's Climate Adaptation Flagship, a member of the NSW Climate Change Council and serves
on the advisory board of ClimateWorks Australia.
Sam holds no Stapled Securities.
Transurban Board Committee membership
Member of the Nomination Committee.
Robert R Officer BAgSc (Melb), MAgEc (New Eng), MBA, PhD (Chicago), FASSA, FSIA.
Non-independent non-executive director
Term of office
Director since 20 August 2010.
Bob is currently Professor Emeritus of the University of Melbourne. He was previously the Deputy Director and
AMP professor of Finance at the Melbourne Business School, and he held a Chair at Monash University and
positions at the Universities of Queensland, Chicago, Rochester, Stanford and the Wharton School at the
University of Pennsylvania.
Bob is currently Chairman of Acorn Capital Ltd and JCP Investment Partners Ltd. He is on the Boards of CP2
Limited, the Transport Accident Commission, Colonial Foundation, Melbourne University Publishing Pty Ltd and
Tactical Global Management Ltd. He is a past Chairman of Victorian Funds Management Corporation, Victorian
WorkCover Authority, and the Personal Injury Education Foundation Ltd, and was on the Boards of the Bank of
Melbourne and the Over Fifty Group.
Bob holds interests in 19,089 Stapled Securities.
Transurban Board Committee membership
Member of the Nomination Committee.
Rodney E Slater J.D., BS.
Independent non-executive director
Term of office
Director since 22 June 2009.
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, and Verizon Communications Inc. He was formerly a director of Parsons Brinckerhoff, Delta
Airlines Inc, and ICx Technologies Inc. He also served on Transurban's US Advisory Board until November
2008.
Rodney holds no Stapled Securities.
Transurban Board Committee membership
Member of the Nomination Committee.
19 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
Information on directors (continued)
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.
Company secretaries
Amanda Street LLB (Hons), BComm.
Amanda joined Transurban in September 2008 and was appointed as Company Secretary in February 2011.
Before joining Transurban, Amanda was Assistant Company Secretary at SP Ausnet and Senior Corporate
Counsel at National Australia Bank. She has over 10 years of legal, company secretarial and other relevant
experience. Prior to her in-house work, Amanda was a solicitor specialising in M&A work with Australian law
firm Mallesons.
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.
Appleby Services (Bermuda) Ltd
Appleby Services (Bermuda) Ltd is a wholly owned subsidiary of the global law firm Appleby and is licensed to
conduct trust business by the Bermudan Monetary Authority. Appleby Services (Bermuda) Ltd, through its
corporate administration and trust services divisions, provides company secretarial services to TIL.
20 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
Meetings of directors
The number of meetings of the Boards of directors of THL, TIML and TIL held during the year ended 30 June 2011, and
the number of meetings attended by each director are set out in the following tables:
Meetings of the board of directors of THL and TIML were held jointly.
Board of Directors
THL
Board of Directors
TIML
Attended Held# Attended Held# Attended Held#
Board of Directors
TIL
Lindsay P Maxsted
David J Ryan (Resigned 12 August 2010)
Christopher J Lynch
Neil G Chatfield
Geoffrey O Cosgriff
Jeremy G A Davis
Robert J Edgar
Samantha J Mostyn (Appointed 8 December 2010)
Robert R Officer (Appointed 20 August 2010)
Rodney E Slater
Jennifer S Eve
James M Keyes
# = Number of meetings held during the time the director held office
* = Not a member of the relevant Board
10
3
10
10
10
10
10
4
6
10
*
*
10
3
10
10
10
10
10
4
6
10
*
*
10
3
10
10
10
10
10
4
6
10
*
*
10
3
10
10
10
10
10
4
6
10
*
*
3
1
4
*
*
*
*
*
*
*
4
4
3
1
4
*
*
*
*
*
*
*
4
4
The number of meetings of each Board committee of THL, TIML and TIL held during the year ended 30 June 2011, 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#
Lindsay P Maxsted
David J Ryan (Resigned 12 August 2010)
Christopher J Lynch
Neil G Chatfield
Geoffrey O Cosgriff
Jeremy G A Davis
Robert J Edgar
Samantha J Mostyn (Appointed 8 December 2010)
Robert R Officer (Appointed 20 August 2010)
Rodney E Slater
Jennifer S Eve
James M Keyes
7
2
7
7
2
7
5
*
1
1
*
*
7
2
*
7
*
7
5
*
*
*
*
*
5
2
11
3
12
12
8
3
2
1
*
*
*
2
*
*
12
12
10
*
*
*
*
*
3
*
3
3
3
3
3
2
3
3
*
*
3
*
*
3
3
3
3
2
3
3
*
*
1
1
1
*
*
*
1
*
*
1
*
*
1
1
*
*
*
*
1
*
*
1
*
*
3
1
3
2
*
*
*
*
*
*
*
*
3
1
3
2
*
*
*
*
*
*
*
*
# = Number of meetings held during the time the director held office and was a member of the committee
* = Not a member of the relevant committee
(1) - Chris Lynch, Geoffrey Cosgriff, Bob Officer and Rodney Slater were not members of the Audit and Risk Committee
but attended meetings during the year.
(2) - Lindsay Maxsted, Chris Lynch, Neil Chatfield, Samantha Mostyn, Bob Officer and Rodney Slater 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 meetings during the year.
(4) - The Sustainability Committee was disbanded on 10 August 2010 and is no longer a separate committee of the Board.
Chris Lynch was not a member of the Sustainability Committee but attended the meeting during the year.
21 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
2011 REMUNERATION REPORT (AUDITED)
INTRODUCTION
The Remuneration Report, prepared in accordance with section 300A of the Corporations Act 2001, 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 and
Transurban Holdings Limited for the year ended 30 June 2011, and are listed in the tables below:
Senior Executives
Name and position
Chris Lynch, Executive Director, Chief Executive Officer (CEO)
Brendan Bourke,1 Chief Operating Officer
Ken Daley, President, International Development
Megan Fletcher,1 Group General Manager, Public Affairs
Andrew Head,1 Group General Manager, NSW
Samantha Hogg,1 Group General Manager, Corporate Services
Tom Honan, Chief Financial Officer
Michael Kulper, President, North America
Elizabeth Mildwater,1 Group General Manager, Victoria
Non-Executive Directors
Name
Lindsay Maxsted (appointed Chairman on 12 August 2010)
David Ryan (resigned as Chairman on 12 August 2010)
Neil Chatfield
Geoff Cosgriff
Jeremy Davis
Bob Edgar
Samantha Mostyn (appointed on 8 December 2010)
Bob Officer (appointed on 20 August 2010)
Rodney Slater
Jennifer Eve (Director of TIL only)
James Keyes (Director of TIL only)
1
As part of the Group’s organisational restructure announced on 27 January 2011, Brendan Bourke ceased as Chief Operating
Officer with effect from 28 February 2011 and Megan Fletcher ceased as Group General Manager, Public Affairs with effect from
4 February 2011. Andrew Head changed role from Group General Manager, Strategy and Development to Group General
Manager, NSW, Samantha Hogg (previously Acting Group General Manager, People, Legal and Governance) was appointed as
Group General Manager, Corporate Services, and Elizabeth Mildwater changed role from Group General Manager, People Legal
and Governance to Group General Manager, Victoria, all with effect from 1 February 2011. Elizabeth Mildwater resigned as
Company Secretary on 9 February 2011.
A comprehensive review of the Group’s remuneration framework has been undertaken in light of feedback received from
security holders and other stakeholders on the Group’s remuneration arrangements, market expectations and regulatory
developments. As a result, the Board has approved a new remuneration framework for the year ending 30 June 2012,
details of which are summarised on page 23 and will be disclosed in detail in next year’s Remuneration Report.
CONTENTS
The remuneration information contained in the Remuneration Report is presented as follows:
Content
1 Changes To The Remuneration Framework For The Year Ending 30 June 2012
2 Remuneration Governance
3 Remuneration In Context
4 CEO and Senior Executive Remuneration for the year ended 30 June 2011
5 Link Between Group Performance, security holder wealth and remuneration
6 Non-Executive Director remuneration for the year ended 30 June 2011
7 Glossary Of Terms
All values in this Remuneration Report are in Australian dollars, unless otherwise stated.
Page
Page 23
Page 24
Page 24
Page 25
Page 39
Page 41
Page 44
22 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
1 CHANGES TO THE REMUNERATION FRAMEWORK FOR THE YEAR ENDING 30 JUNE 2012
A NEW REMUNERATION FRAMEWORK
Following the 2010 Annual General Meeting (AGM), the Remuneration Committee on behalf of the Board undertook a
comprehensive review of the Group’s remuneration framework for Senior Executives and Senior Managers, with
assistance from independent advisers Ernst & Young. Feedback received from security holders and other stakeholders,
market expectations and regulatory developments were all considered as part of the review.
In undertaking the review, the Remuneration Committee sought to balance the needs and expectations of security holders
and other stakeholders with business strategy considerations and the need to remunerate Senior Executives and Senior
Managers appropriately in a competitive marketplace, and to focus on linking performance and reward whilst taking into
account the particular challenges facing the Group.
The review led to the Remuneration Committee recommending, and the Board approving, the adoption of a new
remuneration framework for Senior Executives and Senior Managers effective 1 July 2011. An overview of the new
framework for Senior Executives is set out below.
OVERVIEW OF THE NEW REMUNERATION FRAMEWORK FOR SENIOR EXECUTIVES
Remuneration mix
To more closely align Senior Executives’ remuneration packages with security holder return and business strategy,
variable and equity based components of total target remuneration will increase in the year ending 30 June 2012. With the
introduction of STI deferral (see below), Senior Executives’ equity exposure will increase as a percentage of total target
remuneration.
% of total Senior Executive remuneration (annualised) (at
target) - 2012
Fixed (TEC)
Variable (performance based)
33.3
45
STI
33.3*
30*
LTI
33.3
25
CEO
Other Senior Executives
*With 30% STI deferral (see below).
The transition to the desired remuneration mix will be achieved over a maximum period of three years. Any remuneration
package increases will be directed to STI/STI deferral.
Short term incentive (STI)
In the year ending 30 June 2012, a mandatory 30 per cent STI deferral into securities will be introduced for Senior
Executives (including the CEO). The deferral period will be three years (including a one year performance period). This
component of remuneration will be subject to clawback. An example of a clawback event is misconduct or misstatement of
financial results. These changes reflect security holder expectations. They will also act as a positive retention tool.
Long term incentive (LTI)
The performance measures for the LTI plan for the year ending 30 June 2012 will change to the following:
50 per cent relative Total Shareholder Return (TSR) measured against a bespoke comparator group comprising
companies in the transport, utilities, real estate, construction and infrastructure Global Industry Classification
Standards (GICS) sectors of the ASX150; and
50 per cent Free Cash Flow (FCF) per security which reflects the Group’s focus on the maximisation of free cash to
drive security holder return. The definition of FCF per security is outlined in the glossary of terms on page 44. The
FCF calculation is included in note 21 of the audited financial statements.
These measures have been selected as they are meaningful for Senior Executives and reflect security holder
expectations.
The treatment of unvested LTI awards (granted in the year ending 30 June 2012) on a change of control will now be
subject to Board discretion.
23 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
2 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 may seek and consider advice from independent remuneration consultants where appropriate. Any advice
from consultants is used to guide the Remuneration Committee and the Board, but does 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 2011, the Hay Group, an independent external consultant, were engaged to provide market
remuneration data to assist the Remuneration Committee in making decisions regarding Senior Executive remuneration.
In addition, the Remuneration Committee engaged Ernst & Young to provide market remuneration data and conduct an
independent review of the Group’s new remuneration framework for the year ending 30 June 2012.
3 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 for quality assets 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 100 per cent 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 per cent), the M5 (50.0 per cent), and the M7 (50.0 per
cent). In North America, the Group has interests in two assets, Pocahontas 895 (75.0 per cent) and the Capital Beltway
Express (67.5 per cent), 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.
24 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
4 CEO AND SENIOR EXECUTIVE REMUNERATION FOR THE YEAR ENDED 30 JUNE 2011
A
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
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 remuneration
Total Employment Cost:
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' remuneration
Short term incentive:
Rewards tied to pre-determined annual individual and Group 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 achievement of internal and external performance targets.
Encourages sustainable performance in the medium to longer term, and provides a retention element.
25 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
B
REMUNERATION MIX
For the year ended 30 June 2011, the remuneration of the CEO and other Senior Executives was 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 were determined
by the Board (on the recommendation of the Remuneration Committee) and are set out in the table below:
Relative weightings of remuneration components1
% of total remuneration (annualised) (at target) - 2011
Fixed (TEC)
Variable (performance-based)
CEO
Other Senior Executives
1
LTI
33
25
These figures do not necessarily reflect the relative value derived from each of the components, which depends on actual
performance against targets for the variable components (refer below). The above STI percentages are based on achieving the
relevant performance targets. The above LTI percentages are based on the maximum LTI available at the time of grant to each
Senior Executive if the awards granted vest at the end of the performance period. The table above reflects the percentage value
of remuneration which consists of awards for each Senior Executive, apart from the CEO’s LTI granted in the year ended 30 June
2011 which was granted in cash, subject to the same terms and conditions as the LTI plan offered to other Senior Executives.
The CEO’s LTI grant for all other years has consisted of awards.
STI
33
25
34
50
C
FIXED REMUNERATION - TOTAL EMPLOYMENT COST (TEC)
What is TEC?
Fixed remuneration is represented by total employment cost (TEC) comprising base salary, superannuation contributions
and benefits such as salary continuance, death and disability insurance.
Fixed 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.
The Board instituted a salary freeze for the CEO and other Senior Executives for the year ended 30 June 2010. The
Board determined that this freeze should continue in the year ended 30 June 2011, with three exceptions. TEC increases
were given to three Senior Executives during the year. These executives changed roles as a result of the Group’s
organisational restructure announced on 27 January 2011. The revised remuneration was based on market remuneration
data provided by the Hay Group.
How is TEC determined?
TEC levels are reviewed annually by the Remuneration Committee at the beginning of each financial year with reference to
an individual’s role, experience and performance, as well as relevant comparative market data. Independent remuneration
consultants and surveys, internal considerations and market conditions also provide guidance. TEC is also reviewed on a
change in role.
D
SHORT TERM INCENTIVE (STI)
How did the STI plan operate?
The STI plan was an annual cash incentive plan linked to the attainment of specific pre-determined Group, team and
individual performance measures. All permanent Group employees, including the CEO and other Senior Executives,
participated in the STI plan.
For the year ended 30 June 2011, the CEO had a target STI opportunity of 100 per cent of his annualised TEC. Other
Senior Executives had a target STI opportunity of 50 per cent of their annualised TEC.
The STI plan put a significant proportion of remuneration 'at risk' subject to meeting specific targets linked to the Group's
business objectives. The STI plan focused participants on achieving performance targets and provided an incentive for
high performance. This aligned executive interests with the Group's financial performance, as well as management
principles and the Group’s cultural values.
26 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
What were the STI 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 2011. They were chosen to provide a balance between corporate, individual, operational, strategic, financial and non
financial aspects of performance and are described below:
STI performance measures for the year ended 30 June 2011
Performance measure and %
of target award measure
applies to
Group performance targets
50%
Target(s) for performance measure
To ensure that STI payments were aligned with business performance and the creation
of security holder value, there were two Group performance targets:
growth in proportional EBITDA; and
cost management based on proportional net costs.
Each accounted for 50% of the Group performance targets.
Shared Senior Executive Safety
KPI
To achieve the business objective of creating and maintaining a safety culture, the
Senior Executive team shared a safety KPI.
10%
For Senior Executives based in Australia, outcomes were required in relation to:
a reduction in lost time injury frequency rates; and
achievement of AS4801 certification.
For Senior Executives based in the US, outcomes were required in relation to:
maintaining zero lost time injury occurrence;
development of appropriate OHS plans; and
the completion of risk assessments.
Individual key performance
indicators (KPIs)
40%
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 outcomes
through their actions.
Who sets the STI performance measures?
The CEO's individual KPIs are set by the Board. All other Senior Executives’ individual KPIs and the shared Senior
Executive safety 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 one of the primary measures that the Board uses to assess the operating performance of the
Group, with an aim to maintain a focus on the Group’s operating results and associated cash generation. 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.
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 provides a better reflection of the underlying
performance of the Group’s assets than statutory EBITDA. The EBITDA calculation from the statutory accounts would not
include the EBITDA contribution of the M5, M7 or DRIVe (equity accounted in the statutory results), which are meaningful
contributors to the Group’s performance. Proportional EBITDA figures used to assess performance are included in note 2
of the audited financial statements.
27 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
The Board can decide to exclude specific items from proportional EBITDA to provide an underlying result when
determining performance incentives. These items reflect one-off, non recurring items, both revenue and expenses, that will
not contribute to the Group’s performance in future periods. For the year ended 30 June 2011, the Board has excluded
the release of the M4 maintenance provision, which would have increased the proportional EBITDA growth outcome.
Since 2009, proportional EBITDA has been used by the Group as a performance measure for STIs.
What is proportional net costs and why does Transurban use it as a performance measure?
The STI cost management performance 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 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-related performance measure 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. Proportional net costs was first used by the Group as an STI
performance measure in the year ended 30 June 2010.
What were the proportional EBITDA and proportional net costs targets for the year ended 30 June 2011?
The proportional EBITDA and proportional net costs targets for the year ended 30 June 2011 were set against the
previous year’s results and the Group’s 30 June 2011 budget.
The targets for the year ended 30 June 2011 are set out in the table below:
Proportional EBITDA result
Percentage of STI that
vests ^
Proportional net costs result
Result is less than 7% above the
underlying result for the year ended 30
June 2010
Result is 7% above the underlying result
for the year ended 30 June 2010
Budgeted proportional EBITDA is
achieved for the year ended 30 June
2011 (which was 11.4% growth on 30
June 2010 result)
Result is 17% above the underlying
result for the year ended 30 June 2010
0%
50%
100%
150%
Actual underlying proportional net costs are over
budget for the year ended 30 June 2011
Actual underlying proportional net costs on budget
for the year ended 30 June 2011
Actual underlying proportional net costs are 5%
below budgeted underlying proportional net costs
for the year ended 30 June 2011
Actual underlying proportional net costs are 15%
below budgeted underlying proportional net costs
for the year ended 30 June 2011
^ straight line vesting applies between 50-100% and 100-150%
How are the varying levels of performance achievement rewarded?
STI targets are designed to differentiate and reward high performance.
50 per cent of the available STI vests for threshold performance, 100 per cent vests for on-target performance and up to
an additional 50 per cent can be earned for outperformance. These targets are consistent for all of the Group's eligible
employees.
Given that STI awards are contingent on performance across a range of measures, maximum STI awards can only be
achieved for performance that is strong on all measures.
How is performance assessed?
Group performance targets: The performance of Senior Executives against the Group performance targets is assessed
by the Board. The results are independently reviewed.
Shared Senior Executive Safety KPI: 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 independently
reviewed.
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 assessment.
28 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
Once KPIs have been assessed, the Board approves STI awards. STI awards for the year ended 30 June 2011 will be
paid in August 2011.
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 ceased employment?
Under the CEO’s employment contract in place for the year ended 30 June 2011, if the CEO's employment was terminated
by the Group other than for cause, the CEO would receive a pro-rata payment of the greater of target STI or actual
performance.
Under the employment contracts in place for the year ended 30 June 2011, if a Senior Executive (excluding the CEO)
ceased employment with the Group before STI targets were achieved, the Senior Executive would generally not have been
entitled to receive any STI payment, unless otherwise determined by the Board.
STI performance outcomes for the year ended 30 June 2011
Group performance in respect of the proportional EBITDA and proportional net costs performance measures for the year
ended 30 June 2011 was assessed by the Board as 122.7 per cent.
STI payments for the CEO and other Senior Executives for the year ended 30 June 2011 are set out in the table below:
Actual STI awarded 2
Target STI paid
Target STI forfeited
Name
Chris Lynch
Brendan Bourke1
Ken Daley
Megan Fletcher1
Andrew Head
Samantha Hogg
Tom Honan
Michael Kulper
Elizabeth Mildwater
$
2,461,680
254,163
431,438
110,656
323,640
241,285
587,250
573,750
319,633
%
118
104
115
104
117
117
117
115
115
%
-
-
-
-
-
-
-
-
-
1
2
As part of the Group’s organisational restructure announced on 27 January 2011, Brendan Bourke and Megan Fletcher exited the
business. Their STI awards for the year ended 30 June 2011 were pro-rated and awarded based on individual performance and
Group performance which was forecasted to the end of the STI performance period.
The threshold level of performance must be achieved before any STI is awarded. Therefore, the minimum potential value of the
STI in respect of the year ended 30 June 2011 was nil. The maximum potential value of the STI was $6,435,000 (awarded for
outperformance), excluding the exited employees. The STI payments in respect of the year ended 30 June 2011 will be paid in
August 2011.
29 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
E
LONG TERM INCENTIVE (LTI)
How did the LTI plan operate?
The LTI plan aligns reward with security holder value by tying this component of executive remuneration to the
achievement of performance measures that underpin sustainable long term growth.
Participation in the LTI plan is only offered to Senior Executives, and certain other Senior Managers approved by the
Board. For the year ended 30 June 2011, the CEO was offered an LTI grant equivalent to 100 per cent of his annualised
TEC. Other Senior Executives were offered grants representing 50 per cent of their annualised TEC.
LTI grants are delivered in the form of Performance Awards under the Group’s Performance Awards Plan (PAP). 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
performance measures are satisfied, the Performance Awards vest and Transurban securities will be delivered to the
participant. 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. Overseas
participants were granted Performance Awards which provided for cash payments upon vesting, subject to the
achievement of performance measures.
Performance Awards that do not vest after testing of the performance measures lapse.
Performance Awards are not transferable and do not carry voting or distribution rights. However securities allocated upon
vesting of Performance Awards carry the same rights as other Transurban securities.
Security holder approval was not obtained at the 2010 AGM for the proposed grant of Performance Awards to the CEO.
The CEO was therefore entitled under his employment agreement to receive, and did receive, a cash-based award in
December 2010 subject to the terms and conditions of the LTI plan as outlined in this section.
What were the LTI performance measures?
Participants do not derive actual value from their LTI grants unless performance targets are achieved.
Performance Awards granted during the year ended 30 June 2011 are subject to the following dual performance measures
over a three year performance period:
relative TSR ranked against the S&P/ASX100 group of companies; and
growth in proportional EBITDA.
Each condition applies to 50 per cent of the available LTI award.
What were the performance targets?
Relative TSR
For Performance Awards granted during the year ended 30 June 2011, the relative TSR component of the award 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
For Performance Awards granted during the year ended 30 June 2011, the proportional EBITDA component of the award
that will vest will depend on the Group's percentage compound proportional EBITDA growth over the three financial year
performance period (including on a part-year basis), as set out below:
30 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
Proportional EBITDA vesting schedule
% compound proportional EBITDA annual growth
% of Performance Awards that vest
7%
Between 7% and 11%
11% or more
50%
Straight line vesting between 50-100%
100%
Why were these performance measures selected?
The TSR target 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 target provides evidence of the Group's growth in earnings and is linked to its overall strategic
objectives. The movement in proportional EBITDA reflects Transurban's underlying business performance and its goal of
long term sustainable growth in earnings from existing operations.
How will the performance targets be measured?
Relative TSR
The Group will receive 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 will be 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 will determine the extent to which Performance Awards subject to this target will vest.
Proportional EBITDA
The Group's proportional EBITDA percentage growth rate will be calculated based on EBITDA results included in the
Group's audited financial statements.
The measure may be adjusted to include or exclude the relevant EBITDA from acquisitions and divestments that may
occur during the performance period, in order to ring fence performance based on the known asset portfolio at the start of
the performance period. In addition, the Board may decide to exclude specific items from proportional EBITDA to provide
an underlying result when determining performance incentives. These adjustments reflect one-off, non recurring items,
both revenue and expenses, that will not contribute to the Group’s performance in future periods. The result will be subject
to Board approval.
The Board believes the above methods of assessment are rigorous and provide an appropriate assessment of the Group’s
performance against the performance measures.
For further proportional EBITDA information see Note 2 Segment information in the Transurban Holdings Limited financial
statements.
What if a Senior Executive ceases employment?
Under the CEO’s employment contract in place for the year ended 30 June 2011, if the CEO's employment was terminated
by the Company other than for cause, the CEO would receive a pro-rated Performance Award calculated from his
appointment anniversary date to his termination date, vesting in accordance with the performance measures under LTI
plan as at the time of grant. If the CEO ceased employment with the Group before the performance measures are tested,
then he would be entitled to retain any unvested Performance Awards or cash-based awards, which would vest in
accordance with the performance measures under the LTI plan as at the time of grant.
Under the terms of the employment contracts in place for the year ended 30 June 2011, if any other Senior Executives
cease employment with the Group before the performance measures are tested, then their unvested Performance Awards
will lapse, unless the Board determines otherwise.
What will happen 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 granted before 30 June 2011 will automatically vest. Performance Awards that
vest following a change of control will not generally be subject to restrictions on dealing.
31 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
What was the grant, movement in the number and value of Performance Awards by Senior Executives during the
year ended 30 June 2011?
These are summarised in tables below.
Performance Awards granted in the year ended 30 June 2011
Performance criteria
Grant date
Vesting date
TSR
EBITDA
1-Nov 10
1-Nov-10
1-Nov 13
1-Nov-13
Fair value of awards
at grant date1
VWAP at grant date
$
3.23
4.62
$
5.31
5.31
1
The fair value was calculated as at the grant date of 1 November 2010. 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 2011
Number of Performance
Awards granted 2
Value at grant date
Maximum total value of
grant yet to vest 3
Name
Chris Lynch1
Brendan Bourke4
Ken Daley
Megan Fletcher4
Andrew Head
Samantha Hogg
Tom Honan
Michael Kulper
Elizabeth Mildwater
-
120,972
123,441
52,668
90,523
65,835
164,587
170,433
90,523
$
-
474,815
484,506
206,722
355,303
258,402
646,004
668,950
355,303
$
-
51,940
484,506
22,612
355,303
258,402
646,004
668,950
355,303
Performance Awards lapse where the performance measures 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
The CEO was granted a cash-based award of 684,683 units, linked to Transurban’s security price, on 23
December 2010 subject to the terms and conditions of the LTI plan offered for the year ended 30 June 2011.
The vesting date, fair value at grant date and VWAP at grant date are equivalent to the information outlined in
the table above. The value of this award at the grant date was $2,687,381 and the maximum total value of the
grant yet to vest is $2,687,381.
The grants made to Senior Executives constituted their full LTI entitlement for the year ended 30 June 2011
and were made on 1 November 2010 on the terms summarised above. Performance Awards vest subject to
performance over the period from 1 November 2010 through to 1 November 2013.
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 measures are not met, is nil.
As part of the Group’s organisational restructure, Brendan Bourke and Megan Fletcher exited the business.
The Board exercised its discretion to allow Brendan Bourke and Megan Fletcher to retain a pro-rated
proportion of their year ended 30 June 2011 Performance Awards (13,233 Performance Awards retained by
Brendan Bourke and 5,761 Performance Awards retained by Megan Fletcher). These awards are subject to
post-employment vesting, to be tested at the normal vesting date based on achievement of the performance
measures. Brendan Bourke forfeited 107,739 Performance Awards. The value of the forfeited awards at the
grant date was $422,876. Megan Fletcher forfeited 46,907 Performance Awards. The value of the forfeited
awards at the grant date was $184,110.
32 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
F
LEGACY LTI PLANS
The Group has a number of legacy LTI plans that are no longer offered but which have existing participants. Details of
these plans are set out below:
FY2008 Performance Rights Plan (PRP) (Performance Rights for Australian and overseas participants)
Plan terms and conditions
Grant date:
Vesting date:
Fair value per right at grant date:
Spot price at grant date:
Details of plan
1 Nov 2007
1 Nov 2010
TSR: $3.50, Statutory EBITDA and DRIVe
management fee $5.96
$7.29
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 measures. Each Performance Right entitled
the participant to one fully paid Transurban security. Performance Rights which did not vest after testing of the
performance measures lapsed.
Overseas participants were granted Performance Rights which provided for cash payments upon vesting, subject to the
achievement of performance measures.
Performance measures and targets
For Australian participants, the PRP had two performance measures, statutory EBITDA and relative TSR against the
constituents of the S&P/ASX 100, each applying to 50 per cent of the award.
For overseas participants, the PRP had two performance measures, DRIVe management fee growth and relative TSR
against the constituents of the S&P/ASX 100, each applying to 50 per cent of the award.
TSR vesting schedule
The Group's relative TSR ranking in the S&P/ASX100 Index
% of Performance Rights 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%
Statutory EBITDA and DRIVe management fee vesting schedule
% compound statutory EBITDA annual growth
% of Performance Rights that vest
10%
Between 10% and 15%
15% or more
50%
Straight line vesting between 50-100%
100%
% compound growth of DRIVe management fee
% of Performance Rights that vest
20%
Between 20% and 25%
25% or more
50%
Straight line vesting between 50-100%
100%
33 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
Result - movements in plan for the year ended 30 June 2011
The 2008 award matured on 1 November 2010. 84.44 per cent of awards subject to the TSR performance measure
vested based on the Group’s ranking against the constituents of the S&P/ASX 100. 15.56 per cent of the TSR awards
were forfeited. None of the awards subject to the statutory EBITDA growth or DRIVe management fee growth measures
vested as the prescribed performance targets were not met. Therefore, 100 per cent of the EBITDA/DRIVe awards were
forfeited.
The following Transurban securities and Performance Rights lapsed and vested during the year ended 30 June 2011 for
the following KMP:
Lapsed
Vested
Name
B Bourke
K Daley
M Fletcher
A Head
M Kulper
Number
Value ($)
Number
Value ($)
53,653
45,398
6,438
8,584
44,362
301,999
255,536
36,237
48,319
249,705
39,204
33,173
4,704
6,273
32,416
137,215
116,104
16,465
21,954
113,455
FY2009 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 received a grant of Performance Rights at no cost which entitles participants to receive
Transurban securities which vest at the end of a three year vesting period.
Performance targets
Vesting is based on service during the three year performance period.
Movements in plan for the year ended 30 June 2011
The Board exercised its discretion in awarding 19,146 securities to Brendan Bourke, and 19,146 securities to Megan
Fletcher. The value of these securities under the Plan was $81,753 and $81,753 respectively.
FY2009 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:
Details of plan
$5.22
Participants were granted Performance Awards 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 measures.
34 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
Each Performance Award entitles the participant to one fully paid Transurban security. Performance Awards which do not
vest after testing of the performance measures will lapse.
The Board has discretion to award cash payments of equivalent value upon vesting.
Performance targets
The PAP has two performance measures, proportional EBITDA and relative TSR against the constituents of the S&P/ASX
100, each applying to 50 per cent of the award.
The awards are tested at the end of each year 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. A retest is applied at the end of each
subsequent year for each tranche, up to year three. At the end of the three years a cumulative test of the performance
measures is applied to any unvested awards.
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 vesting schedule
% compound proportional EBITDA annual growth
% of Performance Awards that vest
5%
Between 5% and 9%
9% or more
50%
Straight line vesting between 50-100%
100%
Movements in plan for the year ended 30 June 2011
The table below sets out the performance targets achieved over the testing period, banked awards and unvested awards
from each tranche which vested in the period.
Performance
Measure
Number of
awards banked
in tranche 1
Number of
awards banked
in tranche 2
Number of
awards banked
in tranche 3
Number of
unvested
awards from
tranches 1 & 2
which vested
in the year
TSR
Proportional
EBITDA
$
-
$
207,475
$
-
To be
calculated 1
Nov 2011
To be
calculated 1
Nov 2011
181,810
182,785
6,956
185,690
19,192
-
Number of
unvested
awards from
tranche 3
which vested
in the year
$
Number of
awards for
testing 1 Nov
2011
$
422,582
During the year ended 30 June 2011, 9,713 performance awards were forfeited by Brendan Bourke. The value of the
forfeited awards was $36,764. 3,964 performance awards were forfeited by Megan Fletcher. The value of the forfeited
awards was $15,004. The Board exercised its discretion to allow pro-rata amounts of outstanding Performance Awards to
continue subject to the terms and conditions of the plan (75,752 awards for Brendan Bourke at a grant value of $286,721;
30,920 awards for Megan Fletcher and a grant value of $117,032).
35 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
FY2010 Performance Awards Plan (PAP) (Performance Awards for Australian and overseas participants)
Plan terms and conditions
Grant date:
Vesting date:
11 Dec 2009
11 Dec 2012
Fair value per right at grant date:
TSR $3.33, Proportional EBITDA $4.97
Spot price at grant date:
Details of plan
$5.55
Participants were granted Performance Awards that entitle them to receive Transurban securities at no cost at the end of a
three year performance period, subject to the achievement of performance measures.
Each Performance Award entitles the participant to one fully paid Transurban security. Performance Awards which do not
vest after testing of the performance measures will lapse.
The Board has discretion to award cash payments of equivalent value upon vesting.
Performance targets
The PAP has two performance measures, proportional EBITDA and relative TSR against the constituents of the S&P/ASX
100, each applying to 50 per cent of the award.
The awards are tested at the end of the three year performance period only.
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 vesting schedule
% compound proportional EBITDA annual growth
% of Performance Awards that vest
6%
Between 6% and 9%
9% or more
50%
Straight line vesting between 50-100%
100%
Movements in plan for the year ended 30 June 2011
During the year ended 30 June 2011, 64,814 Performance Awards were forfeited by Brendan Bourke. The value of the
forfeited awards was $268,980. 28,218 Performance Awards were forfeited by Megan Fletcher. The value of the forfeited
awards was $117,105.
The Board exercised its discretion to allow pro-rata amounts of outstanding Performance Awards to continue subject to the
terms and conditions of the plan (44,236 awards for Brendan Bourke at a grant value of $183,579; 19,260 awards for
Megan Fletcher at a grant value of $79,929).
36 TRANSURBAN ANNUAL REPORT 2011
G REMUNERATION PAID TO THE CEO AND OTHER SENIOR EXECUTIVES
Remuneration for the years ended 30 June 2011 and 30 June 2010
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
Short-term employee benefits
Non-
monetary
benefits2
Cash
Bonus1
Post-
employ-
ment
benefits
Super-
annuation
Long term
benefits
Long
service
leave
Termin-
ation
benefits
Share based benefits3
Total
2008 PRP
2009, 2010
& 2011 PAP 2009 EEP
-
-
254,163
432,400
456,860
687,093
227,968
296,196
702,287
706,407
110,656
185,050
-
157,544
431,438
1,271,200
2,461,680
2,740,000
2,033,360
2,030,860
Cash salary
and fees
Executive director
C Lynch
2011
2010
Other key management personnel
B Bourke4, 5
2011
2010
D Cardiff
2011
2010
K Daley
2011
2010
M Fletcher4
2011
2010
A Head
2011
2010
S Hogg
2011
2010
T Honan
2011
2010
M Kulper
2011
2010
E Mildwater
2011
2010
Total
2011
2010
Notes:
1
1,017,385
1,126,355
6,930,103
6,902,285
5,303,495
6,596,840
323,640
271,300
541,554
376,772
573,750
725,390
319,633
273,750
540,797
410,093
241,285
49,500
587,250
648,250
433,494
134,569
976,398
976,396
18,557
6,049
47,500
50,000
21,309
-
-
-
-
-
2,054,484
1,079,488
113,261
113,261
6,750,151
6,019,658
9,097
6,049
58,333
49,107
-
13,148
958,759
-
(227,067)
24,800
132,745
346,315
36,476
132,046
1,679,366
1,690,958
-
-
123,596
53,677
3,114
-
6,232
-
5,882
-
8,178
-
8,199
-
6,311
-
-
10,420
48,995
49,004
22,917
24,481
24,243
24,330
25,000
11,292
25,000
25,000
-
4,443
-
268,637
-
5,425
-
(65,233)
-
(29,389)
-
351,847
11,627
14,168
-
-
(192,133)
-
345,116
280,674
-
11,697
402,234
-
(27,246)
-
55,612
95,895
25,662
15,080
3,342
-
-
-
(36,330)
3,488
218,883
127,201
151,828
65,449
-
-
-
-
27,226
27,226
36,476
27,226
27,226
27,226
21,780
21,780
1,498,152
2,402,356
831,731
640,545
1,131,110
845,397
882,611
282,590
640,437
406,064
121,547
121,547
2,358,810
2,177,257
9,800
8,729
19,690
52,446
25,000
24,330
5,419
-
(187,748)
-
554,433
415,367
-
-
207,150
87,458
34,049
34,049
27,226
27,226
2,029,558
2,362,336
1,131,536
822,857
-
-
-
-
-
-
-
-
-
-
189,166
65,775
286,788
276,693
87,049 1,360,993
268,637
110,982
(670,524)
33,713
4,360,688
2,838,678
445,267
502,198
18,293,025
17,595,801
2
3
4
5
The amount represents cash STI payments to the Senior Executive for the year ended 30 June 2011, which will be paid in
August 2011
Non-monetary benefits include Group insurance, vehicle allowance and expatriate allowances (where relevant).
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 independently determined in
accordance with AASB 2. The TSR component of the Performance Awards has been valued applying a Monte-Carlo simulation
to model Transurban’s security price and TSR performance against the comparator group performance. The assumptions
underpinning these valuations are set out in Note 35 to the financial statements.
As part of the Group’s organisational restructure announced on 27 January 2011, Brendan Bourke and Megan Fletcher exited
the business. Their STI payments for the year ended 30 June 2011 are detailed on page 29. The Board exercised its discretion
to allow pro-rata amounts of outstanding LTI awards to continue subject to post-employment vesting, as detailed in the legacy
LTI plan information at sections E and F. Their termination benefits include accrued annual leave, long service leave, payment
in lieu of notice and ex-gratia payment.
Brendan Bourke participated in the ShareLink Investment Tax Exempt Plan (receiving securities to the value of $250) and the
ShareLink Tax Deferred Plan (receiving securities to the value of $1,500) for the year ended 30 June 2011.
37 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
H
ADDITIONAL REMUNERATION INFORMATION
(I) EMPLOYEE SECURITY 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 23 February 2011. 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 prior year performance and is not intended to serve
as a future incentive, there are no performance measures attached to grants of securities or cash payments under the
plan.
ShareLink Investment Tax Exempt Plan and ShareLink Investment Tax Deferred Plan
The ShareLink Investment Tax Exempt Plan provides eligible employees the opportunity to invest up to $1,000 per annum
in Transurban securities, on a tax-exempt basis. Participants contribute up to $500 by way of salary sacrifice, which is
matched by the Group dollar for dollar. Acquisitions are made quarterly in September, December, March and June each
year.
The ShareLink Investment Tax Deferred Plan provides eligible employees with the opportunity to contribute up to $5,000
per annum by way of salary sacrifice to be invested in Transurban securities. The Group matches participants’
contributions dollar for dollar up to $3,000. The plan has a maximum disposal restriction period of three years from the
date of acquisition, including a 12 month forfeiture period.
Grants under both of these plans are designed to encourage employee security holdings and to align the interests of
employees with the Group and are therefore not subject to performance measures.
(II) DEALINGS IN SECURITIES
In accordance with the Group’s Dealing in Securities Policy, employees who have awards under an LTI plan may not
hedge against those awards.
Employees and Directors are not permitted to obtain margin loans using Transurban securities (either solely or as part of a
portfolio) as security for loans.
38 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
(III) 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.
The CEO’s contract includes an entitlement to participate in an LTI plan (or equivalent cash plan). 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 in place in the year ended 30 June 2011 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.
5 LINK BETWEEN GROUP PERFORMANCE, SECURITY HOLDER WEALTH AND
REMUNERATION
The remuneration of the CEO and other Senior Executives is linked to the Group’s performance through the use of targets
based on the operating performance of the business for both short and long term incentives.
A
GROUP PERFORMANCE AND STI
For the year ended 30 June 2011, 25 per cent of Senior Executive STIs were determined with reference to proportional
EBITDA and 25 per cent with reference to proportional net costs as discussed on page 27.
Proportional EBITDA
The underlying proportional EBITDA result for the year ended 30 June 2011 was $718.7 million, a 13.1 per cent increase
from the prior year result. This result exceeded the Group’s budget by 1.4 per cent, allowing the payment of 116.9 per
cent 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.
Refer to the graph over the following page which outlines the Group’s proportional EBITDA results over the five-year
period from 1 July 2006 to 30 June 2011.
Proportional net costs
The underlying proportional net costs result for the year ended 30 June 2011 was $172.3 million, a 1.2 per cent
improvement from the prior year result. This result was below the Group’s budget by 9.3 per cent, resulting in the payment
of 128.6 per cent 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 also contributed to the cost reductions.
Safety
For the year ended 30 June 2011, the safety performance measure resulted in the payment of 150 per cent of the eligible
STI for Senior Executives based in Australia, and 133 per cent for the eligible STI for Senior Executives based in the US.
The safety KPI target included several components as discussed on page 27 of which a reduction in lost time injury
frequency rates was one element. In the year ended 30 June 2011, lost time injury frequency rates decreased from 3.64
to 1.17.
39 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
B
GROUP PERFORMANCE AND LTI
For the year ended 30 June 2011, LTIs were linked to proportional EBITDA and relative TSR. The performance targets for
the current plans are outlined on pages 30 - 31.
Proportional EBITDA
The performance target for proportional EBITDA of between 7 per cent and 11 per cent compound growth was 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, LTI targets have been based on cumulative performance in relation to proportional EBITDA over preceding
years. The following graph shows the growth in proportional EBITDA from 1 July 2006. 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
and includes Lane Cove Tunnel from 10 August 2010.
The table below illustrates the Group's annual compound growth for the relevant non-market measure of each plan:
LTI plan
Performance Awards Plan 2009
Performance Awards Plan 2010
Performance Awards Plan 2011
TSR performance
Group compound growth as at 30 June 2011
8.2%
10.2%
15.2%
The table below summarises the relative TSR performance over the performance period to date in respect of unvested
LTIs
Long term incentive plan
Group TSR growth from start of
performance period to 30 June 2011
Transurban's indicative percentile
ranking compared to comparator
group
Performance Awards Plan 2009
Performance Awards Plan 2010
Performance Awards Plan 2011
13.87%
3.12%
2.81%
50.00%
48.84%
60.44%
40 TRANSURBAN ANNUAL REPORT 2011
Distributions paid over the past five financial years are summarised in the table below:
Amount (cents)
14.00
13.00
12.00
12.00
11.00
11.00
29.00
28.00
27.50
26.50
25.50
Ex date
24 Jun 2011
23 Dec 2010
24 Jun 2010
23 Dec 2009
24 Jun 2009
23 Dec 2008
24 Jun 2008 *
21 Dec 2007 *
29 Jun 2007 *
22 Dec 2006 *
26 Jun 2006 *
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
Payment date
11 Aug 2011
15 Feb 2011
27 Aug 2010
26 Feb 2010
28 Aug 2009
27 Feb 2009
29 Aug 2008
27 Feb 2008
27 Aug 2007
28 Feb 2007
25 Aug 2006
* Distributions made under a previous distribution policy no longer applied by the Group.
6 NON-EXECUTIVE DIRECTOR REMUNERATION
A
REMUNERATION POLICY
The diagram below sets out the key objectives of the Group’s Non-Executive Director policy and how they are
implemented through the Group’s remuneration framework:
Securing and retaining talented,
qualified Directors
Non-Executive Director fee levels are
set with regard to:
the responsibilities and risks
attached to the role;
the time commitment expected
and the workload;
Director experience and
expertise; and
market benchmark data
provided by independent
remuneration consultants.
Preserve independence and
impartiality
Aligning Non-Executive Director and
security holder interests
Non-Executive Directors are
encouraged to hold
Transurban securities.
Non-Executive Director
remuneration consists of base
(Director) fees and Committee
fees.
No element of Non-Executive
Director remuneration is ‘at
risk’ – that is, fees are not
based on the performance of
the Group or individual
Directors from year to year.
B
REMUNERATION ARRANGEMENTS
Maximum aggregate remuneration
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 of $2,400,000 per year (inclusive of superannuation
contributions) was approved by security holders at the 2010 AGM. No change to this amount is proposed for the year
ending 30 June 2012.
The aggregate fee pool and the manner in which it is apportioned amongst Non-Executive Directors is reviewed annually.
The Remuneration Committee undertakes this review and makes recommendations to the Board. In conducting the
review, the Remuneration Committee takes market benchmarking advice from independent remuneration consultants.
41 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
2011 Non-Executive Director fees
There was no increase in Non-Executive Directors fees during the year ended 30 June 2011. Non-Executive Director fees
were last increased in January 2010.
Current base (Director) fees and Committee1 fees per year are set out below:
Board
Audit and Risk Committee
Nomination Committee
Remuneration Committee
Chair fee $
455,000
40,000
10,000
25,000
Member fee $
170,000
20,000
10,000
20,000
The Sustainability Committee was disbanded on 11 August 2010 and is no longer a separate Committee of the Board. The Chair
1
fee of $25,000 per year and the member fee of $15,000 per year ceased on 11 August 2010.
The Chairman of the Board does not receive any additional fees for his Committee responsibilities.
Non-Executive Directors are permitted to be paid additional fees for special duties or exertions. No such fees were paid
during the year ended 30 June 2011.
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.
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 Non-Executive Directors are entitled to any retirement benefits.
The following table details the retirement benefit amounts provided and expensed in the years ended 30 June 2011 and 30
June 2010.
Accrued – Geoff Cosgriff
Accrued – Jeremy Davis
16,301
27,155
15,210
25,338
2011 financial year $
2010 financial year $
No retirement benefits were paid out in the current year (2010: $nil).
ShareLink Investment Tax Deferred Plan
Under the ShareLink Investment Tax Deferred Plan, Non-Executive Directors are able to sacrifice up to 50 per cent of their
pre-tax fees to acquire up to $5,000 of Transurban securities per annum through a tax deferred arrangement.
42 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
C
REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS
Details of Non-Executive Directors’ remuneration for the years ended 30 June 2011 and 30 June 2010 are set out below:
Short-term benefits
Post-employment benefits
Total
Fees
Superannuation
contributions1
Retirement benefits2
188,153
171,880
199,828
167,818
196,552
155,739
394,593
194,826
201,920
175,084
Current Non-Executive Directors
Lindsay Maxsted (Appointed Chairman 12 August 2010)
2011
2010
Neil Chatfield
2011
2010
Geoff Cosgriff
2011
2010
Jeremy Davis
2011
2010
Bob Edgar
2011
2010
Rodney Slater
155,268
2011
2010
125,975
Bob Officer (Appointed 20 August 2010)
141,066
2011
2010
-
Samantha Mostyn (Appointed 8 December 2010)
2011
2010
Jennifer Eve
2011
2010
James Keyes
2011
2010
Former Non-Executive Directors
David Ryan (Resigned 12 August 2010)
49,199
2011
2010
401,546
Total
2011
2010
1
1,747,043
1,509,780
93,996
-
34,984
39,597
91,484
77,315
35,513
17,534
17,985
15,104
16,934
15,469
27,750
22,500
17,690
14,016
-
10,932
12,696
-
8,460
-
-
-
-
-
4,428
36,139
141,456
131,694
-
-
-
-
16,301
15,210
27,155
25,338
-
-
-
-
-
-
-
-
-
-
-
-
-
-
43,456
40,548
430,106
212,360
217,813
182,922
221,388
202,559
256,825
222,922
214,242
169,755
155,268
136,907
153,762
-
102,456
-
91,484
77,315
34,984
39,597
53,627
437,685
1,931,955
1,682,022
Superannuation contributions made on behalf of non-executive directors to satisfy the Group’s obligations
under applicable Superannuation Guarantee legislation.
2
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.
43 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(continued)
7 GLOSSARY OF TERMS
Term
EBITDA
Definition
Earnings before interest, tax, depreciation and amortisation.
Free Cash Flow (FCF) per security
Within Transurban, FCF per security is defined as:
Key Management Personnel (KMP)
Long term incentive (LTI)
Proportional EBITDA
Group’s cash flow from operating activities
Less: Cash flows from operating activities of non-100 per cent owned
controlled assets
Add Back: Maintenance Capital Expenditure for 100 per cent owned
assets
Less: Accounting charge for maintenance provision for the year
Less: Actual tag expenditure in 100 per cent owned assets
Add: Dividends received from non-100 per cent owned assets
Divided by: Weighted average of securities issued.
Those persons having authority and responsibility for planning, directing and
controlling the major activities of the Group and Transurban Holdings Limited,
directly or indirectly, including any Director (whether executive or otherwise), as
listed on page 22.
An 'at risk' component of executive remuneration under which an equity reward
may be provided to participants based on achievement of specific performance
measures over a performance period of three years.
EBITDA calculated based on percentage of Transurban asset ownership as
follows: CityLink (100 per cent), Hills M2 (100 per cent), LCT (100 per cent),
Roam (100 per cent), Tollaust (100 per cent), M1 Eastern Distributor (75.1 per
cent), M5 (50 per cent), M7 (50 per cent) and DRIVe (75 per cent including 67.5
per cent of Capital Beltway Express and 75 per cent of Pocahontas 895).
The proportional EBITDA result is included in the audited financial statements.
Proportional net costs
Net costs include the operating, corporate and business development costs of
the Group less non-toll revenues (fees and other).
Relative total shareholder return
(TSR)
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.
Senior Executives
Short term incentive (STI)
Statutory EBITDA
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.
The executives who are the KMP of the Group (including the CEO), as listed on
page 22.
An 'at risk' component of executive remuneration under which a cash reward
may be payable based on achievement of individual and Group performance
measures.
100% of the EBITDA from controlled entities (CityLink, Hills M2, LCT, M1
Eastern Distributor, Roam, Tollaust) regardless of Transurban’s ownership
percentage. It excludes the EBITDA contribution from non-controlled interests
(M5 Motorway, Westlink M7 and DRIVe).
Total employment cost (TEC)
Base salary and other benefits including superannuation paid to an executive.
44 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(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 $5,000) or the Chair of the Audit and Risk Committee (in all other cases).
The Board 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
Transurban Holdings Limited, 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 remuneration for PricewaterhouseCoopers
Amounts received or due and receivable by other 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
30 June
2011
$
30 June
2010
$
1,091,000
1,022,000
69,887
1,160,887
474,802
1,496,802
-
-
-
-
88,400
296,550
95,847
480,797
1,160,887
1,977,599
The prior year audit fee relates to the amount due to Ernst & Young who were the auditors of Statewide Roads Limited.
Other assurance and tax fees are for other services Ernst and Young were engaged for throughout the Group.
45 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Directors' report
30 June 2011
(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 47.
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.
Lindsay P Maxsted
Director
Christopher J Lynch
Director
Melbourne
3 August 2011
46 TRANSURBAN ANNUAL REPORT 2011
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 2011, 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
3 August 2011
Liability limited by a scheme approved under Professional Standards Legislation
47 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited ABN 86 098 143 429
Annual financial report - 30 June 2011
Financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members
Page
49
50
51
52
53
54
122
123
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 3 August 2011. 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
48 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Consolidated income statement
For the year ended 30 June 2011
30 June
2011
$'000
30 June
2010
$'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 before income tax
Income tax benefit
Profit for the year
Profit 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
799,217
220,015
17,284
1,036,516
(160,396)
(39,117)
(13,070)
(220,015)
(432,598)
751,107
46,822
19,240
817,169
(179,312)
(44,742)
(18,830)
(46,822)
(289,706)
603,918
527,463
(289,435)
(305,051)
270,757
(456,270)
(185,513)
280,644
(456,964)
(176,320)
(20,198)
(20,549)
108,772
25,543
9,386
34,062
118,158
59,605
112,467
5,691
118,158
59,418
187
59,605
Cents
Cents
7.8
7.8
4.6
4.6
The above consolidated income statement should be read in conjunction with the accompanying notes.
49 TRANSURBAN ANNUAL REPORT 2011
Profit 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, net of tax
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 interests
Transurban Holdings Limited
Consolidated statement of comprehensive income
For the year ended 30 June 2011
30 June
2011
$'000
30 June
2010
$'000
118,158
59,605
(17,216)
(7,613)
(24,829)
22,026
(1,780)
20,246
93,329
79,851
110,722
(17,393)
93,329
133,269
(53,418)
79,851
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
50 TRANSURBAN ANNUAL REPORT 2011
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 2011
30 June
2011
$'000
30 June
2010
$'000
Notes
7
8
11
9
10
11
12
13
14
15
16
11
17
18
16
13
17
11
18
19
20
20
411,880
217,560
1,065
630,505
524,834
724,225
55,238
177,548
12,899
8,278,281
9,773,025
681,259
205,607
271
887,137
599,459
678,044
79,959
146,053
12,051
7,678,619
9,194,185
10,403,530
10,081,322
221,363
202,870
136,431
13,706
296,586
89,622
960,578
4,035,817
843,846
262,573
255,711
52,654
5,450,601
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
6,411,179
5,904,813
3,992,351
4,176,509
7,772,117
26,461
(4,085,426)
104,041
175,158
7,656,383
52,594
(3,836,959)
118,197
186,294
3,992,351
4,176,509
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
51 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Consolidated statement of changes in equity
For the year ended 30 June 2011
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 2009
7,106,243
12,230
(3,605,921) 3,512,552
328,584 3,841,136
Comprehensive income
Profit (loss) for the year
Other comprehensive income
20
20
Total comprehensive income
Transactions with owners in their
capacity as owners:
Contributions of equity net of
transaction costs
Treasury securities
Distribution reinvestment plan
Distributions provided or paid
Dividends provided for or paid to
non-controlling interest in
subsidiaries
Change in value of share-based
payment reserve
19
19
19
20
20
-
-
-
-
39,741
39,741
93,528
-
93,528
93,528
39,741
133,269
(33,923)
(19,495)
(53,418)
59,605
20,246
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
Balance at 1 July 2010
7,656,383
52,594
(3,836,959) 3,872,018
304,491 4,176,509
Comprehensive income
Profit (loss) for the year
Other comprehensive income
20
20
Total comprehensive income
Transactions with owners in their
capacity as owners:
Contributions of equity, net of
transaction costs
Treasury securities
Distribution reinvestment plan
Distribution provided for or paid
Distribution provided for or paid to
non-controlling interest in
subsidiaries
Change in value of share-based
payment reserve
Balance at 30 June 2011
19
19
19
20
20
-
-
-
-
(30,193)
(30,193)
140,915
-
140,915
140,915
(30,193)
110,722
(22,757)
5,364
(17,393)
118,158
(24,829)
93,329
-
91
115,831
-
-
-
-
-
-
-
-
-
-
(389,463)
-
91
115,831
(389,463)
-
12
8,719
-
-
103
124,550
(389,463)
-
-
(17,226)
(17,226)
(188)
115,734
7,772,117
4,060
4,060
26,461
81
(389,382)
3,953
(269,588)
(4,085,426) 3,713,152
596
(7,899)
4,549
(277,487)
279,199 3,992,351
Non-controlling interests include Transurban International Limited and other non-controlling interests outside of the Group
The above statement of changes in equity should be read in conjunction with the accompanying notes.
52 TRANSURBAN ANNUAL REPORT 2011
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Payments for maintenance of intangible assets
Other revenue
Interest received
Interest paid
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Payments for equity accounted investments
Payments for intangible assets
Payments for property, plant and equipment
Payment for settlement of CityLink concession notes
Distributions received from equity investments
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
Distributions paid to Group's security holders
Distributions paid to non-controlling interests
Net cash inflow from financing activities
Net (decrease) increase 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 statement of cash flows
For the year ended 30 June 2011
30 June
2011
$'000
30 June
2010
$'000
Notes
31
21
912,781
(338,579)
(18,429)
24,869
217,598
(380,900)
(42,649)
374,691
(29,356)
(797,733)
(36,617)
-
41,000
(822,706)
-
103
1,067,641
(639,130)
(232,577)
(15,542)
180,495
(267,520)
681,259
(1,859)
857,082
(308,736)
(22,396)
19,892
196,486
(347,945)
(60,997)
333,386
(24,804)
(56,059)
(46,829)
(61,795)
36,500
(152,987)
530,929
4,540
1,177,477
(1,154,033)
(230,451)
(28,158)
300,304
480,703
199,805
751
Cash and cash equivalents at end of year
7
411,880
681,259
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
53 TRANSURBAN ANNUAL REPORT 2011
Contents of the notes to the financial statements
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
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
55
66
72
72
73
74
75
75
77
79
80
81
82
83
84
85
88
90
91
92
94
96
97
97
98
99
100
102
103
104
105
105
105
106
107
111
115
117
54 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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.
The Group’s current liabilities exceed its current assets by $330.1 million as at 30 June 2011. The financial report has
been prepared on a going concern basis, which contemplates the continuity of normal operations, as the Group is trading
profitably and has continually been able to refinance maturing debt. In addition, at 30 June 2011 the Group has available
a total of $410.8 million of unused working capital facilities.
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).
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.
55 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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).
(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.
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
56 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(d) Foreign currency translation (continued)
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 revenue - Business development revenue is recognised when earned, 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.
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.
57 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(f)
Income tax (continued)
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.
(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.
58 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(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.
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.
59 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(k)
Investments and other financial assets (continued)
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.
(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. 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.
60 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(l) Derivatives and hedging activities (continued)
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.
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.
61 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(n)
Intangible assets (continued)
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.
(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.
62 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(r) Provisions (continued)
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.
(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.
63 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(s) Employee benefits (continued)
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.
(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 and associates
Investments in subsidiaries and associates 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.
64 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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 2011
reporting periods. The Group's assessment of the impact of these new standards and interpretations is set out below.
(i)
AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9
and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from
1 January 2013)
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and
financial liabilities. The standard is not applicable until 1 July 2013 but is available for early adoption. Management are in
the process of assessing the impact on financial assets but do not believe this will be significant.
There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the
accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any
such liabilities. The Group has not yet decided when to adopt AASB 9.
(ii) 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 July 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. The Group will apply the amended standard from
1 July 2011. When the amendments are applied, the Group will need to disclose any transactions between its subsidiaries
and its associates. However, there will be no impact on any of the amounts recognised in the financial statements.
(iii) 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 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.
(iv) 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 2011/1 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 2011. 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.
(v) AASB 2010-6 Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets
(effective for annual reporting periods beginning on or after 1 July 2011)
In November 2010, the AASB made amendments to AASB 7 Financial Instruments: Disclosures which introduce
additional disclosures in respect of risk exposures arising from transferred financial assets. The amendments will affect
particularly entities that sell, factor, securitise, lend or otherwise transfer financial assets to other parties. They are not
expected to have any significant impact on the Group's disclosures.
65 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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
New South Wales, Australia
USA
Assets
CityLink
Hills M2 Motorway
Lane Cove Tunnel
75.1 per cent interest in the M1 Eastern
Distributor
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.
66 TRANSURBAN ANNUAL REPORT 2011
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Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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 attributable to non-controlling interests
Less: Revenue of non-controlled assets
Construction revenue
Business development revenue
Other
Total revenue (note 3)
30 June
2011
$'000
30 June
2010
$'000
965,613
25,682
(196,515)
220,015
16,255
5,466
1,036,516
880,306
57,499
(188,052)
46,822
18,447
2,147
817,169
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 attributable to non-controlling interests
Add: Foreign exchange gains
Less: Interest revenue of non-controlled assets
Total finance income (note 5)
30 June
2011
$'000
30 June
2010
$'000
232,572
42,672
-
(4,487)
270,757
245,139
38,969
137
(3,601)
280,644
69 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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 attributable to non-controlling interests
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 for the year
30 June
2011
$'000
30 June
2010
$'000
737,309
18,645
(75,171)
(74,658)
(6,321)
4,114
629,942
42,247
(74,743)
(69,503)
(4,853)
4,373
603,918
527,463
(185,513)
(289,435)
(20,198)
9,386
118,158
(176,320)
(305,051)
(20,549)
34,062
59,605
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:
M4 handback provision and reversal of contingent liability recognised on acquisition
Corporate advisory costs (relating to the change of control proposal)
30 June
2011
$'000
30 June
2010
$'000
18,625
-
18,625
-
(5,409)
(5,409)
70 TRANSURBAN ANNUAL REPORT 2011
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3
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
Notes
(a)
(a)
(b)
(c)
(d)
724,130
56,693
18,394
799,217
684,390
49,967
16,750
751,107
220,015
46,822
16,255
1,029
17,284
18,447
793
19,240
1,036,516
817,169
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
Total revenue
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 to third parties.
4 Expenses
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
Provision for maintenance recognised during the year
M4 handback provision and reversal of contingent liability recognised on acquisition
Concession fees (road operating cost) are attributable to:
Hills M2 Motorway
M1 Eastern Distributor
M4 Motorway
30 June
2011
$'000
30 June
2010
$'000
1,537
4,828
88,262
4,889
4,581
14,748
(18,625)
1,280
1,689
-
2,969
1,216
6,119
83,397
4,887
5,159
17,758
-
919
1,457
1,668
4,044
72 TRANSURBAN ANNUAL REPORT 2011
4 Expenses (continued)
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
Net foreign exchange gains
Total finance income
Finance costs
Interest and finance charges paid/payable
Interest charges paid/payable on infrastructure bonds
Unwind of discount on liabilities
Foreign exchange losses
Total finance costs
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
285,008
4,427
289,435
299,532
5,519
305,051
30 June
2011
$'000
30 June
2010
$'000
168,403
84,565
17,789
-
270,757
(324,899)
(113,546)
(17,156)
(669)
(456,270)
190,605
78,879
11,023
137
280,644
(314,583)
(129,378)
(13,003)
-
(456,964)
Net finance costs
(185,513)
(176,320)
73 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
6 Income tax benefit
Income tax benefit
Current tax
Deferred tax
Under (over) provided in prior years
Deferred income tax (benefit) expense included in income tax benefit comprises:
(Increase) in deferred tax assets (note 13)
Increase (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% (2010 - 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
Tax expense (income) relating to items of other comprehensive income
Cash flow hedges (note 20)
Foreign currency translation (note 20)
Tax consolidation legislation
30 June
2011
$'000
30 June
2010
$'000
31,084
(47,973)
7,503
(9,386)
(81,669)
33,696
(47,973)
108,772
32,632
(93,123)
5,094
34,064
6,059
(1,615)
(16,889)
7,503
(9,386)
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)
(12,560)
(432)
(12,992)
13,635
-
13,635
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.
74 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
411,880
411,880
681,259
681,259
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 $77.8 million not available for general use at 30 June 2011 (2010: $84.8
million). This comprises amounts required to be held under maintenance and funding reserves, and prepaid tolls, which
are restricted from general use.
8 Current assets - Trade and other receivables
Trade receivables
Provision for impairment of receivables
Infrastructure bond interest receivable
Prepayments
Other receivables
30 June
2011
$'000
30 June
2010
$'000
36,094
(5,462)
30,632
149,370
5,354
32,204
217,560
32,353
(4,408)
27,945
139,483
6,235
31,944
205,607
Provision for impaired trade and other receivables
As at 30 June 2011 current trade receivables of the Group with a nominal value of $5,462,000 (2010: $4,408,000) were
considered impaired and accordingly the Group held a provision for impairment of $5,462,000 (2010: $4,408,000). As at
30 June 2011, trade receivables of $1,910,000 (2010: $3,271,000) were past due but not impaired.
The ageing of these receivables is as follows:
For the year ended 30 June 2011
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
Impaired
$'000
Allowance for
Doubtful
Debts
$'000
28,535
1,617
327
52
101
30,632
1,739
1,666
1,599
86
372
5,462
1,739
1,666
1,599
86
372
5,462
75 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
8 Current assets - Trade and other receivables (continued)
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
Impaired
$'000
Allowance for
Doubtful Debts
$'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
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 uncollectable
At 30 June
30 June
2011
$'000
30 June
2010
$'000
4,408
1,537
(483)
5,462
3,972
1,216
(780)
4,408
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 it is 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’.
76 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
Ownership
interest
30 June 30 June
2011
%
2010
%
Carrying amount
30 June
2011
$'000
30 June
2010
$'000
50
50
50
50
50
75
50
50
50
50
50
75
-
-
-
-
-
-
-
-
383,890
428,747
140,944
524,834
170,712
599,459
9 Equity accounted investments
Name of company
Westlink M7:
WSO Company Pty Limited
Westlink Motorway Limited
WSO Finance Pty Limited
Westlink Motorway Partnership
Interlink Roads Pty Ltd (M5 Motorway)
Transurban DRIVe Holdings LLC (Transurban DRIVe)
Summarised financial information of associates
2011
Westlink M7
M5 Motorway
Transurban DRIVe
2010
Westlink M7
M5 Motorway
Transurban DRIVe
Ownership
Interest
%
Assets
$'000
Liabilities
$'000
Revenues
$'000
Profit (loss)
$'000
Group's share of:
50
50
75
50
50
75
997,769
682,555
1,376,446
3,056,770
(1,404,116)
(298,665)
(1,235,502)
(2,938,283)
1,015,260
722,789
2,110,104
3,848,153
(1,359,438)
(294,042)
(1,939,392)
(3,592,872)
96,544
89,135
10,837
196,516
88,838
87,407
11,807
188,052
(70,236)
(3,857)
(16,341)
(90,434)
(7,066)
(2,709)
(17,840)
(27,615)
77 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
9 Equity accounted investments (continued)
Westlink M7
M5 Motorway
30 June
2011
$'000
30 June
2010
$'000
30 June
2011
$'000
30 June
2010
$'000
Transurban DRIVe
30 June
30 June
2010
2011
$'000
$'000
Total
30 June
2011
$'000
30 June
2010
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
428,747
-
(3,857)
(41,000)
-
-
383,890
467,956
-
(2,709)
(36,500)
-
-
428,747
170,712
28,103
(16,341)
-
(52,957)
11,427
140,944
196,203
24,452
(17,840)
-
(11,940)
(20,163)
170,712
599,459
28,103
(20,198)
(41,000)
(52,957)
11,427
524,834
664,159
24,452
(20,549)
(36,500)
(11,940)
(20,163)
599,459
11,417
13,229
(22,664)
(24,890)
(11,247)
(11,661)
(15,274)
(3,857)
(15,938)
(2,709)
6,323
(16,341)
7,050
(17,840)
(8,951)
(20,198)
(8,888)
(20,549)
271,260
264,194
70,236
341,496
7,066
271,260
-
191,045
-
191,045
-
196,322
-
196,322
-
-
-
-
-
-
-
604
-
-
604
-
-
-
-
-
-
-
-
-
-
-
271,260
264,194
70,236
341,496
7,066
271,260
-
152
-
152
323,835
143,657
-
467,492
780,440
134,782
-
915,222
324,439
334,702
-
659,141
780,440
331,256
-
1,111,696
-
-
-
-
-
-
-
-
-
-
Movements in carrying
amounts
Carrying amount 1 July
Investments in associate
Share of losses after tax
Distributions received
Movement in exchange rate
Movement in reserves
Carrying amount at 30 June
Share of profits or losses
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 per cent 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 until February 2037. 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.
78 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
9 Equity accounted investments (continued)
M5 Motorway
Transurban holds a 50 per cent 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 (Electronic Toll Collection) 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
Transurban owns 75 per cent of Transurban DRIVe Holdings LLC (DRIVe). Whilst Transurban ownership represents
greater than half of the voting rights of DRIVe, it does not have power to govern its financial, investing and operating
policies and accordingly accounts for DRIVe as an associate.
A Meeting of Members of DRIVe is required to make decisions in relation to such areas as the legal and financial structure
of DRIVe, including distribution policies. 80 per cent or more of the membership interests of those voting is required to
pass a decision of the Meeting of Members. Key decisions relating to the operations and financing of DRIVe, such as
approval to bid for or dispose of an investment and approval of budgets, are made by the Investment and Management
Review Committee (IMRC). IMRC decisions also require an affirmative vote by all current members.
DRIVe owns 100 per cent of Pocahontas 895 and 90 per cent 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
2011
$'000
30 June
2010
$'000
724,225
724,225
678,044
678,044
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 2011 the Group capitalised interest of $46.2 million (2010: $44.8 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.
79 TRANSURBAN ANNUAL REPORT 2011
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 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
1,065
1,065
15,361
39,877
55,238
271
271
17,484
62,475
79,959
Total derivative financial instrument assets
56,303
80,230
Current liabilities
Forward exchange contracts - cash flow hedges
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
135,677
754
136,431
69,404
186,307
-
255,711
-
2,822
2,822
96,223
4,416
40,391
141,030
Total derivative financial instrument liabilities
392,142
143,852
Instruments used by the Group
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 interest rate of 6.23 per cent (2010: 6.1 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 99 per cent (2010: 100 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 7.0 per cent (2010: 7.2 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.
80 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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
Equipment,
fittings and
operating
systems
$'000
254,675
(138,219)
116,456
116,456
44,961
(15,364)
146,053
284,285
(138,232)
146,053
146,053
44,308
(1,121)
(11,560)
(132)
177,548
319,675
(142,127)
177,548
At 1 July 2009
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2010
Opening net book amount
Additions
Depreciation charge
Closing net book amount
At 30 June 2010
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2011
Opening net book amount
Additions
Disposals
Depreciation charge
Movement in foreign exchange rates
Closing net book amount
At 30 June 2011
Cost
Accumulated depreciation
Net book amount
Included in property, plant and equipment is operating systems, equipment and fittings.
81 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
13 Deferred tax assets and liabilities
Assets
Liabilities
Net
30 June
2011
$'000
30 June
2010
$'000
30 June
2011
$'000
30 June
2010
$'000
30 June
2011
$'000
30 June
2010
$'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
2,218
74,619
459,883
-
19,494
6,813
-
27,488
-
-
112,979
2,261
705,755
(692,856)
12,899
2,200
75,819
400,440
-
15,236
3,464
-
14,299
-
-
39,278
2,895
553,631
(541,580)
12,051
-
-
-
-
-
(1,013,821)
(46,119)
(13,862)
(9,986)
(327,826)
(125,088)
-
(1,536,702)
692,856
(843,846)
-
-
-
-
-
(1,004,716)
(44,506)
(11,501)
-
(318,335)
(63,947)
(37)
(1,443,042)
541,580
(901,462)
2,218
74,619
459,883
-
19,494
(1,007,008)
(46,119)
13,626
(9,986)
(327,826)
(12,109)
2,261
(830,947)
-
(830,947)
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)
553,631
514,671
(1,443,042)
(1,445,014)
(889,411)
(930,343)
81,669
73,701
-
(3,246)
28,672
11,064
(611)
(189)
(33,696)
(60,709)
-
745
25,726
(23,801)
-
71
47,973
12,992
-
(2,501)
54,398
(12,737)
(611)
(118)
-
705,755
24
553,631
-
(1,536,702)
(24)
(1,443,042)
-
(830,947)
-
(889,411)
705,755
705,755
553,631
553,631
(1,536,702)
(1,536,702)
(1,443,042)
(1,443,042)
(830,947)
(830,947)
(889,411)
(889,411)
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, and separately, the deferred tax balances for United States domiciled entities
that are levied tax by the Internal Revenue Service.
82 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
14 Non-current assets - Intangible assets
Goodwill
$'000
CityLink
$'000
Hills M2
Motorway
$'000
M1 Eastern
Distributor M4 Motorway
$'000
$'000
Lane Cove
Tunnel
$'000
Assets under
construction
$'000
Total
$'000
At 1 July 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
Year ended 30 June 2011
Opening net book amount
Additions
Transfer
Amortisation charge
Closing net book amount
At 30 June 2011
Cost
Accumulated amortisation
Net book amount
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
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
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
-
-
-
-
-
-
-
-
-
-
125,592
-
125,592
125,592
56,059
-
181,651
181,651
-
181,651
260,288
-
-
-
260,288
3,186,998
51,611
139,368
(139,140)
3,238,837
2,065,030
-
-
(64,340)
2,000,690
1,982,178
-
-
(52,050)
1,930,128
2,474
-
-
(501)
1,973
-
648,068
-
(21,844)
626,224
181,651
177,858
(139,368)
-
220,141
9,675,333
(1,813,068)
7,862,265
7,862,265
106,041
(289,687)
7,678,619
9,781,374
(2,102,755)
7,678,619
7,678,619
877,537
-
(277,875)
8,278,281
260,288
-
260,288
4,679,980
(1,441,143)
3,238,837
2,517,866
(517,176)
2,000,690
2,153,780
(223,652)
1,930,128
178,788
(176,815)
1,973
648,068
(21,844)
626,224
220,141
-
220,141
10,658,911
(2,380,630)
8,278,281
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, M4 Motorway and Lane Cove Tunnel 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.
During the year $139.4 million of assets under construction was transferred to the CityLink concession asset, representing
the completed components of the CityLink Upgrade.
83 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
14 Non-current assets - Intangible assets (continued)
Hills M2 concession asset
Transurban has the right to toll the Hills M2 Motorway until 2046. 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.
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 per cent 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.
Lane Cove Tunnel
Transurban has the right to toll the Lane Cove Tunnel until January 2037.
Toll increases for the Lane Cove Tunnel are based on a theoretical toll increase as defined in the Concession Deed, being
a quarterly escalation of CPI, subject to the nearest whole cent rounding. At the end of the concession period, all
concession assets will be returned to the NSW State Government.
Assets under construction
The Group is currently undertaking upgrade works on CityLink and the Hills M2 Motorway. The CityLink upgrade is
substantially complete, and is expected to be fully complete in calendar year 2011. Construction on the M2 Upgrade
commenced in January 2011. These will be transferred to the respective intangible assets upon completion. During the
year completed works of $139.4 million were transferred to the CityLink concession asset.
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 ranging from 8.8 to 11.0 per cent (2010: 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 W eekly Earnings (AWE)
forecasts. A long term CPI rate of 2.5 per cent (2010: 2.5 per cent) and AWE of 4.0 per cent (2010: 4.0 per cent) have
been used.
15 Current liabilities - Trade and other payables
Trade payables and accruals
Infrastructure bond interest payable
84 TRANSURBAN ANNUAL REPORT 2011
30 June
2011
$'000
30 June
2010
$'000
109,821
111,542
221,363
99,834
102,520
202,354
16 Borrowings
Current
Infrastructure facilities
Less: Infrastructure facility cash reserve
Working capital facilities
Capital Markets Debt
Non-current
Infrastructure Facilities
Less: Infrastructure facility cash reserve
Working capital facilities
Capital Markets Debt
Term debt
U.S. Private Placement
Syndicated facility
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
Notes
(a)
(a)
(b)
(c)
(a)
(a)
(b)
(c)
(d)
(e)
(f)
1,292,301
(1,292,301)
-
202,870
202,870
-
-
37,383
1,037,377
1,286,769
1,074,951
599,337
4,035,817
-
-
35,604
-
35,604
1,187,777
(1,187,777)
-
1,136,627
964,507
1,306,161
597,715
4,005,010
Total borrowings
4,238,687
4,040,614
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
$1,292.3 million (2010: $1,187.8 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 in August 2011. The facility was fully drawn down at 30 June 2011.
(b) Working capital facilities
The Group has the following facilities in place:
$220.0 million facility which is for a term of 3 years, maturing December 2013. At 30 June 2011, $39.2 million of
the facility was drawn-down in cash.
$130.0 million facility which is for a term of 3 years, maturing June 2013. At 30 June 2011, the facility was un-
drawn.
$100.0 million facility which is for a term of 3 years, maturing April 2013. At 30 June 2011, the facility was un-
drawn.
These facilities are secured by a first ranking charge over the cash flows of the Transurban Group. The facilities has
deferred borrowing costs of $1.8 million.
85 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
16 Borrowings (continued)
(c) 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 ($300.0 million)
and 12 years ($300.0 million) with interest currently payable at 5.4 per cent at 30 June 2011. These facilities are
fully hedged with all-in rates of 7.4 and 5.1 per cent respectively.
$137.5 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.
$65.4 million non-credit wrapped floating rate bonds raised in September 2006 with a term of 5 years. Interest is
currently payable at 5.5 per cent at 30 June 2011. 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.
$200.0 million non-credit wrapped fixed bond raised in June 2011 with a term of 5 years. Interest is payable at 6.8
per cent.
The facilities have deferred borrowing costs of $12.6 million. These facilities are secured by first ranking charge over the
cash flows of the Group.
(d) Term debt
The term debt facilities are comprised of:
$515.0 million facility entered into by AMT Management Limited (as trustee for Airport Motorway Trust). The facility
has deferred borrowing costs of $6.4 million.
$740.0 million facility entered into by Hills Motorway Management Limited (as trustee for Hills Motorway Trust). The
facility has deferred borrowing costs of $9.1 million.
$260.0 million facility entered into by LCT-MRE Nominees Pty Limited (as trustee for LCT-MRE Trust). The facility
has deferred borrowing costs of $1.7 million.
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 4.89 per cent (2010: 7.6 per cent). These facilities are fully hedged to an all-in rate after
hedging of 8.4 per cent.
On 7 July 2011, the above facilities were refinanced and replaced with $520.0 million of non-recourse project debt
maturing in July 2014 ($295.0 million) and July 2018 ($225.0 million).
The Hills M2 facility was refinanced in November 2010 and is fully secured against the respective rights of Hills Motorway
Limited and Hills Motorway Trust and their assets. The facility is a non-recourse syndicated facility totalling $740.0 million.
The financing is comprised of: the refinancing of $465.0 million of existing debt with terms of four years ($400.0 million),
and six years ($65.0 million); and a new construction capex facility of $275.0 million with a term of 6 years. As at 30 June
2011, $64.1 million was drawn under the construction capex facility. The total facility is currently 95.8 per cent hedged
with an all-in rate after hedging of 6.8 per cent.
The Lane Cove Tunnel facility was established in August 2010 to partially finance the acquisition of the Lane Cove Tunnel
and is fully secured against the respective rights of LCT-MRE Pty Limited and LCT-MRE Trust and their assets. This
facility is a non-recourse syndicated facility with a term of 3 years. The current floating rate applicable to the facility is 4.9
per cent. The facility is fully hedged to an all-in rate after hedging of 7.0 per cent.
86 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
16 Borrowings (continued)
(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
Rate
5.02%
5.17%
5.47%
5.04%
5.19%
5.35%
5.71%
5.86%
5.95%
6.06%
5.92%
USD
$'000
100,000
38,900
108,600
98,000
125,500
156,500
55,398
176,367
157,533
65,410
1,082,208
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
93,119
36,223
101,127
91,256
116,864
145,730
51,586
164,230
146,692
60,909
1,007,736
72,000
72,000
1,079,736
(4,785)
1,074,951
Note that the Dec 04 - Tranche D facility is fully hedged with an all in rate after hedging 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 2011, the Group has deferred $53.2 million in gains (2010: $16.8 million).
(f) Syndicated facility
This facility, established in August 2007, 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 5.5 and 5.7 per cent. This facility is fully hedged with an all-in rate after hedging
of 7.3 per cent.
The facility has deferred borrowing costs of $0.7 million. This facility is secured by a first ranking charge over the cash
flows of the Group.
Letters of credit and corporate credit facilities
The Group has a $50 million letter of credit facility which is for a term of 3 years, maturing December 2013. As at 30 June
2011, letters of credit to the value of $42.8 million have been issued which are currently undrawn and therefore no liability
has been recorded.
A $6.6 million general credit facility is in place covering corporate requirements including letters of credit, credit card
facilities, online banking and an overdraft facility. As at 30 June 2011, a $5.6 million bank guarantee had been issued
which is currently undrawn and therefore no liability has been recorded. The 364 day facility matures on 2 June 2012.
Set-off of assets and liabilities
A legal right of set-off exists in respect of the specific cash deposit of $1,292.3 million (2010: $1,187.8 million) representing
collateralisation of the M1 Airport Motorway Infrastructure Facility.
87 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
16 Borrowings (continued)
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 per cent. Based on the
balance sheet as at 30 June 2011, the Group's security price would need to close below $2.17 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
Lane Cove Tunnel - ICR greater than 1.15 times
17 Provisions
Current
Employee benefits
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
30 June
2011
$'000
30 June
2010
$'000
Notes
(a)
(b)
(c)
(c)
(d)
(a)
(d)
(e)
20,118
2,101
202,146
29,347
42,874
296,586
2,226
158,749
101,598
262,573
25,185
2,876
169,818
27,662
68,028
293,569
1,645
129,980
49,987
181,612
Total provisions
559,159
475,181
88 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
17 Provisions (continued)
Movements in provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Current
Non-current
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
2,876
169,818
-
-
-
-
(283)
(492)
-
-
2,101
389,463
-
-
-
(357,135)
-
-
-
202,146
27,662
12,416
-
-
-
(10,731)
-
-
-
29,347
68,028
129,980
21,714
(6,966)
(13,625)
1,594
(24,175)
-
-
(3,696)
42,874
-
-
-
12,400
-
-
12,673
3,696
158,749
49,987
51,611
-
-
-
-
-
-
-
101,598
Consolidated - 2011
Balance at 1 July
Additional provision
recognised
Unutilised amounts
M4 handback provision
Provision recognised - on
acquisition
Amounts paid/utilised
Movements in foreign
exchange rates
Unwinding of discount
Transfer
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) Onerous lease provision
An onerous lease is recognised when the Group has lease commitments on property no longer used.
(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.
(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 toll revenue resulting from the upgrade once the agreed 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 this increased revenue. Actual toll revenue for 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.
89 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
Notes
(a)
(b)
(c)
59,046
29,995
581
89,622
49,510
2,565
579
52,654
56,393
21,063
579
78,035
41,846
3,146
544
45,536
142,276
123,571
18 Other liabilities
Current
Prepaid tolls
Unearned income
Other
Non-current
Concession and promissory notes
Lease incentive
Other
Total other liabilities
Description of other liabilities
(a) Prepaid tolls
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) 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 2011 is $210.0 million (2010: $195.0 million). The net present
value at 30 June 2011 of the redemption payments relating to these Concession Notes is $29.8 million (2010: $25.2
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 2011 is $126.5 million (2010: $116.2 million). The net present
value at 30 June 2011 of the redemption payments relating to these Promissory Notes is $19.7 million (2010: $16.6
million).
90 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
7,772,117
7,772,117
7,656,383
7,656,383
Number
'000
Number
'000
1,443,193
1,443,193
1,414,295
1,414,295
19 Contributed equity
Share capital
Fully paid stapled securities
Fully paid stapled securities
Stapled securities
The number of stapled securities on issue is 1,443,543,731 (2010: 1,414,667,986). The difference of 351,075 (2010:
373,804) 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.
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 its 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 2009
Distribution reinvestment plan
Purchase, disposal and vesting of treasury securities
Rights issue, net of transaction costs
Less: Amounts attributable to Transurban International Limited
Closing balance at 30 June 2010
Opening balance at 1 July 2010
Distribution reinvestment plan
Purchase, disposal and vesting of treasury securities
Transfer vesting portion of LTI from share-based payment reserve
Purchase of Performance Rights Plan units
Less: Amounts attributable to Transurban International Limited
Closing balance at 30 June 2011
Number of
securities
'000
Consolidated
$'000
Notes
(a)
(b)
(c)
(d)
(a)
(b)
(b)
(b)
(d)
1,281,363
14,069
946
117,917
-
1,414,295
1,414,295
28,876
22
-
-
-
1,443,193
7,106,243
65,381
8,437
530,313
(53,991)
7,656,383
7,656,383
124,550
103
440
(675)
(8,684)
7,772,117
91 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
19 Contributed equity (continued)
(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.
(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) Rights issue
On 10 June 2010, Transurban raised $542.4 million, less costs, via an equity raising, issuing 117.9 million stapled
securities.
(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.
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
Transfer vesting portion of LTI to contributed equity
Transfer non-vesting portion of LTI to retained earnings
Balance 30 June
30 June
2011
$'000
30 June
2010
$'000
34,560
10,188
(13,160)
(5,127)
26,461
63,602
(45,578)
12,560
4,375
(399)
11,427
(11,427)
34,560
6,128
4,581
(440)
(81)
10,188
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
92 TRANSURBAN ANNUAL REPORT 2011
20 Reserves and accumulated losses (continued)
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
Foreign currency translation
Balance 1 July
Currency translation differences arising during the year
Deferred tax
Currency translation differences arising during the year attributable to non-controlling
interest
Balance 30 June
(12,009)
(8,045)
432
6,462
(13,160)
(8,892)
(1,780)
-
(1,337)
(12,009)
Transactions with non-controlling interests
Balance 1 July
Balance 30 June
Accumulated losses
Movements in (accumulated losses) were as follows:
(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
Transfer non-vesting portion of LTI from share-based payment reserve
Balance 30 June
(3,836,959)
112,467
(389,463)
28,448
81
(4,085,426)
(3,605,921)
59,418
(324,566)
34,110
-
(3,836,959)
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.
93 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
21 Distributions
Distributions payable
Final distribution payable and recognised as a liability:
14 cents (2010: 12.0 cents) per fully paid stapled security payable 11 August 2011
Distributions paid during the year
Final distribution for 2010 financial year of 12.0 cents (2009: 11.0 cents) per fully paid
Stapled Security paid 27 August 2010
Interim distribution for 2011 financial year of 13.0 cents (2010: 12.0 cents) per fully paid
Stapled Security paid 15 February 2011
Distributions paid in cash or satisfied by the issue of Stapled Securities under the
distribution reinvestment plan during the years ended 30 June 2011 and 30 June 2010
Paid in cash
Executive loans - repayments
Satisfied by issue of Stapled Securities
Funds available (from)/for future distribution reinvestment plans
30 June
2011
$'000
30 June
2010
$'000
202,096
202,096
169,760
169,760
169,760
141,095
187,367
357,127
154,806
295,901
232,577
-
124,557
(7)
357,127
230,451
65
65,381
4
295,901
94 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
21 Distributions (continued)
Distribution policy and free cash calculation
The Group's distribution policy is to align distributions with free cash from operations. The Group calculated free cash as follows:
Cash flows from operating activities
Less Westlink M7 Term Loan Note interest received
Add back payments for maintenance of intangibles
Less cash flows from operating activities - M1 Eastern Distributor and M4
Controlled cash
Add dividends and distributions received
M1 Eastern Distributor
M4 Statewide Roads
M5 Interlink
Westlink M7 Term Loan Note interest
Less allowance for maintenance capital expenditure for CityLink, Hills M2 and Lane Cove
Tunnel, and e-Tag expenditure
Free cash
One-off items
Contribution from M4
Corporate advisory costs
Underlying free cash
Weighted average securities on issue (millions)
Underlying free cash per security (cents) - weighted average securities
Free cash per security (cents) - weighted average securities
Securities on issue (millions)
Underlying free cash per security (cents) - securities on issue
Free cash per security (cents) - securities on issue
Franking credits
30 June
2011
$'000
30 June
2010
$'000
374,691
(36,991)
18,429
356,129
(53,069)
303,060
32,368
4,877
41,000
36,991
333,386
(32,759)
22,396
323,023
(72,653)
250,370
43,649
12,994
36,500
32,759
(23,035)
395,261
(20,136)
356,136
(4,877)
-
390,384
(12,994)
4,400
347,542
1,438
27.1
27.5
1,444
27.0
27.4
1,302
26.7
27.4
1,415
24.6
25.2
30 June
2011
$'000
30 June
2010
$'000
Franking credits available for subsequent financial years based on a tax rate of 30%
(2010 - 30%)
282,254
216,076
95 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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
Total remuneration for PricewaterhouseCoopers
Amounts received or due and receivable by other audit firms for:
Audit services
Audit and review of financial report
Other services
- Other assurance services
- Taxation services
Total remuneration for other audit firms
30 June
2011
$
30 June
2010
$
1,091,000
1,022,000
69,887
1,160,887
474,802
1,496,802
1,160,887
1,496,802
-
-
-
-
88,400
296,550
95,847
480,797
Total auditors remuneration
1,160,887
1,977,599
The prior year audit fee relates to the amount due to Ernst & Young who were 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 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
23 Contingencies
Contingent liabilities
The Group and parent entity had contingent liabilities at 30 June 2011 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 be complete in late 2012 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 per cent 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$159,690,077 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 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 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 2011, 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 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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:
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 payable:
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
2011
$'000
30 June
2010
$'000
14,214
2,414
-
16,628
60,631
95,326
347,776
503,733
283,597
109,442
393,039
5,490
-
-
5,490
41,977
70,093
307,011
419,081
35,000
13,600
48,600
3,973
15,247
1,874
21,094
4,506
15,869
5,232
25,607
812
812
1,592
1,592
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 TRANSURBAN ANNUAL REPORT 2011
26 Related party transactions
Transactions with associates
The following transactions occurred with related parties:
Revenue from services
Operating electronic tolling system for Westlink M7
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
Loans to Transurban DRIVe Holdings LLC
Beginning of the year
Foreign exchange movements
Loans repaid
Loans from Transurban DRIVe Holdings LLC
Beginning of the year
Foreign exchange movements
Loans repaid
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
$
30 June
2010
$
11,768,736
16,254,993
-
28,023,729
6,477,365
18,446,959
750,000
25,674,324
84,565,108
78,879,621
30 June
2011
$
30 June
2010
$
678,044,167
46,181,129
724,225,296
633,272,067
44,772,100
678,044,167
-
-
-
-
-
-
-
-
10,968,696
(221,202)
(10,747,494)
-
(12,799,885)
221,202
12,578,683
-
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.
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.
99 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
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
2010
2011
%
%
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
T (895) Finance Trust
Transurban International Holdings Limited
Transurban DRIVe Management LLC
Sydney Roads Limited
Sydney Roads Trust
Sydney Roads Management Limited
Airport Motorway Trust
Airport Motorway Holdings Pty Limited
Airport Motorway Limited
Airport Motorway Construction Company Pty Limited
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
Australia
Bermuda
USA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100 TRANSURBAN ANNUAL REPORT 2011
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
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
75.10
75.10
75.10
75.10
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
75.10
75.10
75.10
75.10
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
27 Subsidiaries (continued)
Name of entity
Country of
incorporation Class of shares
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
LCT-MRE Holdings Trust
LCT-MRE Holdings Pty Limited
LCT-MRE No.1 Pty Limited
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
Equity holding
2010
2011
%
%
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
50.61
50.61
50.61
50.61
50.61
50.61
50.61
50.61
100
100
100
100
-
-
101 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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 (loss)
Guarantees entered into by the parent entity
30 June
2011
$'000
30 June
2010
$'000
187,020
700,802
2,374,953
1,971,408
2,561,973
2,672,210
149,308
469,836
1,754,621
1,511,820
1,903,929
1,981,656
583,896
5,026
69,122
658,044
552,883
2,775
134,896
690,554
(65,774)
(37,438)
(65,774)
(37,438)
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 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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 2011 and 30 June 2010 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
Profit for the year
Statement of comprehensive income
Profit (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
Profit (loss) for the year
Transfer of non-vesting portion of LTI from share-based payment reserve
Retained earnings at the end of the financial year
30 June
2011
$'000
30 June
2010
$'000
98,352
(110,842)
(5,808)
(79,182)
(97,480)
37,955
(59,525)
141,081
(102,462)
(7,482)
(68,845)
(37,708)
34,506
(3,202)
(59,525)
-
(59,525)
(3,202)
-
(3,202)
(78,743)
(59,525)
4
(138,264)
(75,541)
(3,202)
-
(78,743)
103 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
29 Deed of cross guarantee (continued)
Consolidated balance sheet
Set out below is a consolidated balance sheet as at 30 June 2011 and 30 June 2010 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
2011
$'000
30 June
2010
$'000
94,770
339,137
433,907
516,255
359,317
875,572
1,541,621
173,778
468,981
2,184,380
1,286,015
129,178
410,187
1,825,380
2,618,287
2,700,952
1,519,914
16,111
1,536,025
1,600,650
15,578
1,616,228
593,115
36,263
2,226
631,604
597,620
7,961
2,228
607,809
2,167,629
2,224,037
450,658
476,915
583,896
5,026
(138,264)
450,658
552,883
2,775
(78,743)
476,915
Under the stapling arrangement, each entity directly and/or indirectly supports each entity and its controlled entities within
the Transurban Group on a continual basis.
Where necessary, prior year comparatives have been reclassified for comparative purposes.
30 Events occurring after the balance sheet date
Apart from the refinancing of the debt as disclosed in note 16(d), 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
Group, the results of those operations or the state of affairs of the Group in subsequent financial years.
104 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
31 Reconciliation of profit after income tax to net cash inflow from operating activities
Profit for the year
Depreciation and amortisation
Non-cash share-based payments expense
Non-cash finance costs
Share of net losses of equity accounted investments
Change in operating assets and liabilities
Increase in concession and promissory note liability
Increase in operating creditors and accruals
(Increase) decrease in debtors
(Increase) in term loan notes
(Decrease) increase in operating provisions
(Decrease) in maintenance provision
Movement in current tax liabilities and deferred taxes
Net cash inflow (outflow) 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 share
Earnings per security attributable to the ordinary equity holders of the stapled group
Diluted earnings per share
Earnings per security attributable to the ordinary equity holders of the stapled group
30 June
2011
$'000
30 June
2010
$'000
118,158
289,435
4,581
44,966
20,198
7,664
15,308
(13,815)
(46,181)
(5,261)
(10,385)
(49,977)
374,691
59,605
305,051
5,159
56,827
20,549
16,656
7,130
8,232
(44,772)
2,817
(5,484)
(98,384)
333,386
30 June
2011
$'000
30 June
2010
$'000
124,557
124,557
65,381
65,381
30 June
2011
Cents
30 June
2010
Cents
7.8
7.8
7.8
7.8
4.6
4.6
4.6
4.6
105 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
33 Earnings per stapled security (continued)
Reconciliations of earnings used in calculating earnings per security
30 June
2011
$'000
30 June
2010
$'000
Basic and diluted earnings per security
Profit for the year
Profit attributable to non-controlling interests
Profit attributable to ordinary equity holders of the stapled group used in calculating
earnings per security
118,158
(5,691)
112,467
59,605
(187)
59,418
Weighted average number of securities used as the denominator
30 June
2011
Number
30 June
2010
Number
Weighted average number of securities used as the denominator in calculating basic
and diluted earnings per security
1,437,820,619
1,301,035,941
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
2011
$'000
30 June
2010
$'000
Net tangible asset backing per stapled security *
2.59
2.77
(*) - Net tangible assets used as the basis for this calculation include the relative concessions and permits relating to the
operational assets of the Group. Assets of this type are characterised as intangibles under AASB 138.
106 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
35 Share-based payments
Performance Awards Plan
Under the Performance Awards Plan (PAP), eligible executives receive a grant of Performance Awards which entitles
participants to receive securities at no cost subject to the achievement of performance conditions. The Board has
discretion as to the form of the award at the end of the performance period and may grant cash payments of equivalent
value at vesting. No dividends or distributions on securities are payable to participants prior to vesting.
Dual performance measures (earnings before interest, tax, depreciation and amortisation (EBITDA) measure and relative
total security holder return (TSR)) apply to Performance Awards, each representing 50 per cent of the award. The use of
dual measures balances the need to both improve the underlying performance of the business over the long term as well
as appropriate returns relative to the market.
Performance Awards were granted with a three year vesting period. For the 1 November 2008 grant, the awards are
tested at the end of each year. If the performance measures are satisfied for the year, one third of the awards are
preserved until the end of the three year period. At the end of the three years a cumulative test of the performance
measures is applied to any unvested awards. For the 11 December 2009 and future grants, the awards are tested at the
end of the three year vesting period only.
Vesting /
Expiry date
Fair value at grant date
($)
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
1 Nov 2013
1 Nov 2013
3.30
3.33
3.23
3.33
4.27
4.97
4.62
4.97
1,277,630
1,990,913
-
-
3,268,543
-
-
1,658,614
684,683
2,343,297
Weighted average exercise price
$4.01
$3.99
$-
Grant Date
Vesting /
Expiry date
Fair value at grant date
($)
TSR
EBIDTA
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
2010
1 Nov 2008
11 Dec 2009
Total
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
-
-
-
-
-
-
-
-
(17,517)
(214,330)
(257,039)
-
(488,886)
1,260,113
1,776,583
1,401,575
684,683
5,122,954
$4.02
$4.00
Forfeited
during the
year
Number
Balance at
end of the
year
Number
(36,658)
-
(36,658)
1,277,630
1,990,913
3,268,543
Grant Date
2011
1 Nov 2008
11 Dec 2009
1 Nov 2010
23 Dec 2010
Total
Weighted average exercise price
$3.79
$4.15
$-
$3.79
$4.01
107 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
35 Share-based payments (continued)
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
2011
1 Nov 2008
Total
Expiry date
Exercise
price
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
$4.27
548,650
548,650
-
-
(72,334)
(72,334)
(42,594)
(42,594)
433,722
433,722
Weighted average exercise price
$4.27
$-
$4.27
$4.27
$4.27
Grant Date
2010
1 Nov 2008
Total
Expiry date
Exercise
price
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
$4.27
611,692
611,692
-
-
(2,953)
(2,953)
(60,089)
(60,089)
548,650
548,650
Weighted average exercise price
$4.27
$-
$4.27
$4.27
$4.27
108 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
35 Share-based payments (continued)
Performance rights plan
The Performance Rights Plan (PRP) enabled eligible executives to receive a grant of Performance Rights that entitled
participants to receive stapled securities in the Transurban Group (Securities) at no cost at the end of a three year
performance period, subject to the achievement of performance conditions. No dividends or distributions on Securities
were payable to participants prior to vesting. The Plan has two performance measures, EBITDA and relative TSR against
the S&P/ASX 100 Industrials, each applied to 50 per cent of the PRP award. For US participants of the plan, they will be
awarded a cash amount instead of stapled securities at the end of the three year performance period, subject to
performance conditions. There is only one testing date at the end of the performance hurdles at the vesting date.
Awards were last made under the PRP in November 2007. This award matured on 1 November 2010. 84.44% of awards
subject to the TSR performance condition vested based on Transurban's ranking against the constituents of the S&P/ASX
100. None of the awards subject to the statutory EBITDA growth or DRIVe management fee growth conditions vested as
the prescribed performance conditions were not met.
Australian based plan
Grant Date
Vesting /
Expiry date
Fair value at grant date
($)
TSR
EBIDTA
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Lapsed
during the
year
Number
Balance at
end of the
year
Number
2011
1 Nov 2007
Total
1 Nov 2010
3.50
5.96
331,594
331,594
-
-
(143,060)
(143,060)
(188,534)
(188,534)
-
-
Weighted average exercise price
$4.73
$-
$4.73
$4.73
$-
Grant Date
Vesting /
Expiry date
Fair value at grant date
($)
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 2007
Total
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
$4.73
Overseas based plan
Grant Date
2011
1 Nov 2007
Total
Vesting /
Expiry date
Fair value at grant date
($)
TSR
DRIVe mgt
fee
Balance at
start of the
year
Vested
during the
year
Lapsed
during the
year
Balance at
end of the
year
Number
Number
Number
Number
1 Nov 2010
3.50
5.96
247,561
247,561
(107,007)
(107,007)
(140,554)
(140,554)
-
-
Weighted average exercise price
$4.26
$4.26
$4.26
$-
109 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
35 Share-based payments (continued)
Grant Date
2010
1 Nov 2007
Total
Vesting /
Expiry date
Fair value at grant date
($)
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
Assessed fair value
The assessed fair value at grant date of the plans above has been independently determined in accordance with AASB 2.
The TSR component of the Performance Awards has been valued applying a Monte-Carlo simulation (of a geometric
Brownian motion process, as used in the Black-Scholes framework) to model Transurban's future security price and TSR
performance against the comparator group performance at vesting date. The valuation model takes into account the term
of the award, 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 award.
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 2010 to 30 June 2011, the cost of company matches was
$304,375 (2010: $125,517) for the Investment Tax Exempt Plan and $89,885 (2010: $nil) 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.
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 2011, each
participant was allocated 100 stapled securities at a value of $5.26 per security. Stapled securities provided under the
Plan were acquired on the open market.
2011
Number
2010
Number
Shares purchased on the market under the plan and provided to participating employees
42,200
44,800
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 $4.6 million (2010: $5.2million).
110 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
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
Lindsay Maxsted (Chairman of THL and TIML from 12 August 2010, Director and Chairman of TIL from 12 August 2010)
David J Ryan (resigned 12 August 2010) (Chairman of THL, TIML and TIL until 12 August 2010)
Neil G Chatfield (THL and TIML)
Geoffrey O Cosgriff (THL and TIML)
Jeremy GA Davis (THL and TIML)
Robert J Edgar (THL and TIML)
Samantha J Mostyn (appointed 8 December 2010) (THL and TIML)
Robert R Officer (appointed 20 August 2010) (THL and TIML)
Rodney Slater (THL and TIML)
Jennifer S Eve (TIL)
James M Keyes (TIL)
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 (resigned 28 February 2011)
K Daley
M Fletcher (resigned 28 February 2011)
A Head
S Hogg
T Honan
M Kulper
E Mildwater
Key management personnel compensation
Chief Operating Officer
President, International Development
Group General Manager, Public Affairs
Group General Manager, New South Wales
Group General Manager, Corporate Services
Chief Financial Officer
President, Transurban North America
Group General Manager, Victoria
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
2011
$
30 June
2010
$
14,169,807
471,700
87,049
1,360,993
4,135,431
20,224,980
15,074,681
448,936
110,982
268,637
3,374,587
19,277,823
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.
111 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
36 Key management personnel disclosures (continued)
Performance Awards Plan
2011
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
1,100,932
Other key management personnel of the Group
194,515
B Bourke
178,427
K Daley
82,362
M Fletcher
105,859
A Head
70,734
S Hogg
380,926
T Honan
307,378
M Kulper
95,836
E Mildwater
2010
684,683
13,233
123,441
5,761
90,523
65,835
164,587
170,433
90,523
-
-
1,785,615
(39,204)
(33,173)
(4,704)
(6,273)
-
-
(32,416)
-
(168,544)
(45,398)
(83,419)
(8,584)
-
-
(44,362)
-
-
223,297
-
181,525
136,569
545,513
401,033
186,359
-
-
-
-
-
-
-
-
-
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
483,721
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
-
-
-
-
-
-
-
-
-
-
-
1,100,932
-
(46,512)
-
-
-
-
-
-
-
194,515
-
178,427
82,362
105,859
70,734
380,926
307,378
95,836
-
-
-
-
-
-
-
-
-
-
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.
112 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
36 Key management personnel disclosures (continued)
Stapled Securities
2011
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
Directors of the Group
L P Maxsted
D J Ryan *
N G Chatfield
G O Cosgriff
J G A Davis
R J Edgar
S J Mostyn
R R Officer
R E Slater
J S Eve
J M Keyes
C J Lynch
Other key management personnel of the Group
B Bourke *
K Daley
M Fletcher *
A Head
S Hogg
T Honan
M Kulper
E Mildwater
12,000
66,486
20,910
144,423
158,188
11,836
-
19,089
-
-
-
254,966
460,251
384,678
34,491
23,842
15,516
93,574
103,944
25,196
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,000
(66,486)
-
7,813
-
6,791
-
-
-
-
-
435
(460,251)
-
(34,491)
(2,730)
100
1,246
-
1,902
30,000
-
20,910
152,236
158,188
18,627
-
19,089
-
-
-
255,401
-
384,678
-
21,112
15,616
94,820
103,944
27,098
* These individuals are not Key Management Personnel at 30 June 2011, therefore their opening balance has been
reduced to zero through "other changes during the year" in the table above.
2010
Directors of the Group
L P Maxsted
D J Ryan
N G Chatfield
G O Cosgriff
J G A Davis
R J Edgar
R E Slater
J S Eve
J M Keyes
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
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,000
5,541
20,910
18,411
33,183
4,127
-
-
-
21,925
100
(158,477)
100
1,000
100
(7,265)
8,100
-
556
12,000
66,486
20,910
144,423
158,188
11,836
-
-
-
254,966
460,251
-
384,678
34,491
23,842
15,516
93,574
103,944
25,196
113 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
36 Key management personnel disclosures (continued)
Executive Equity Plan (EEP)
2011
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
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
-
-
-
-
-
-
-
-
-
-
(19,146)
-
(19,146)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
79,647
-
19,146
-
19,146
15,316
85,474
23,944
19,146
-
-
-
-
-
-
-
-
-
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
79,647
C J Lynch
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
-
-
-
-
-
-
-
-
-
-
Performance Rights Plan
2011
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
78,571
K Daley
11,142
M Fletcher
14,857
A Head
76,778
M Kulper
-
-
-
-
-
(39,204)
(33,173)
(4,704)
(6,273)
(32,416)
(53,653)
(45,398)
(6,438)
(8,584)
(44,362)
-
-
-
-
-
-
-
-
-
-
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
-
-
-
-
-
-
-
-
-
-
-
-
-
(27,428)
-
-
-
-
92,857
-
78,571
11,142
14,857
76,778
-
-
-
-
-
-
114 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
36 Key management personnel disclosures (continued)
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. This relationship is 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. A company with which Mr Maxsted is associated has an alliance agreement with 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. This
relationship is based on normal commercial terms.
Mr Chatfield is also Chairman of, and Ms Sam Mostyn is a non-executive director of, Virgin Blue Holdings Limited.
Transurban uses air travel services provided by Virgin Blue. This relationship is 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. In the USA tax losses generally expire after a 20 year period. Management has reviewed the potential
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.
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.
115 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
37 Critical accounting estimates and judgements (continued)
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.
116 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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 cash flows, 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
Net exposure
30 June
2011
USD
$'000
7,068
209,083
(1,124,261)
933,406
25,296
30 June 2010
USD
$'000
11,611
184,744
(1,090,163)
933,406
39,598
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
$108,000 lower (2010: $825,000 lower) or $131,000 higher (2010: $1,044,000 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 less sensitive to movements in the Australian dollar/US dollar exchange rate in the current
year due to an decrease 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 $24,286,000 lower (2010: $40,924,000 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 $29,009,000
higher (2010: $60,922,000 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.
117 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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 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 2011 98
per cent (2010: 99 per cent) 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 2011
30 June 2010
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
%5.3
%6.2
%5.0
(411,880)
2,680,609
(2,619,400)
(350,671)
%4.6
%6.1
%4.4
(681,259)
2,387,604
(2,351,979)
(645,634)
An analysis by maturities is provided in Liquidity risk below.
Sensitivity
At 30 June 2011, 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 $3,507,000 higher/lower (2010: $6,456,000 higher/lower). Profit is
less sensitive to movements in interest rates in 2011 than 2010, due mainly to an decrease 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 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.
118 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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
2011
$'000
2010
$'000
-
418,002
418,002
270,971
230,000
500,971
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 2011
$'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/fx forwards)
Total derivatives
414,832
232,994
216,453
864,279
-
736,382
93,118
829,500
-
431,833
340,347
772,180
-
877,284
212,108
1,089,392
-
367,368
397,707
765,075
338,957
733,374
1,372,316
2,444,647
753,789
3,379,235
2,632,049
6,765,073
464,921
2,680,609
1,558,077
4,703,607
31,272
24,702
12,313
4,652
(2,500)
(8,675)
61,764
53,732
19,935
51,207
27,172
51,874
28,275
40,588
57,068
61,720
44,475
41,975
198,418
189,743
375,343
437,107
282,107
335,839
119 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Financial risk management (continued)
At 30 June 2010
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
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
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/fx forwards)
Total derivatives
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.
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)
120 TRANSURBAN ANNUAL REPORT 2011
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2011
(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 2011 and
30 June 2010.
As at 30 June 2011
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
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
Level 1
$'000
-
-
-
-
-
-
-
-
56,303
56,303
392,142
392,142
Level 2
$'000
Level 3
$'000
80,230
80,230
143,852
143,852
-
-
-
-
-
-
-
-
56,303
56,303
392,142
392,142
Total
$'000
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.
121 TRANSURBAN ANNUAL REPORT 2011
In the directors' opinion:
Transurban Holdings Limited
Directors' declaration
30 June 2011
(a)
(b)
(c)
the financial statements and notes set out on pages 48 to 121 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 2011 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.
Lindsay P Maxsted
Director
Christopher J Lynch
Director
Melbourne
3 August 2011
122 TRANSURBAN ANNUAL REPORT 2011
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 2011, 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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Liability limited by a scheme approved under Professional Standards Legislation
123 TRANSURBAN ANNUAL REPORT 2011
Independent auditor's report to the members of
Transurban Holdings Limited (continued)
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
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 2011 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 44 of the directors’ report for the year ended
30 June 2011. 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 2011, complies with
section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
John Yeoman
Partner
Melbourne
3 August 2011
124 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust and
Controlled Entities
ARSN 098 807 419
Annual financial report
for the year ended 30 June 2011
125 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust ARSN 098 807 419
Annual financial report - 30 June 2011
Directors' report
Auditor's Independence Declaration
Financial statements
Directors' declaration
Independent auditor's report to the members
Page
12(cid:26)
13(cid:20)
13(cid:21)
20(cid:21)
20(cid:22)
126 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Directors' report
30 June 2011
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 2011.
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
Lindsay P Maxsted
David J Ryan AO (Resigned 12 August 2010)
Neil Chatfield
Geoffrey O Cosgriff
Jeremy G A Davis AM
Robert J Edgar
Samantha J Mostyn (Appointed 8 December 2010)
Robert R Officer (Appointed 20 August 2010)
Rodney E Slater
Executive directors
Christopher J Lynch
Results
The consolidated net profit for the Group was $318,384,000 (2010: profit of $305,502,000). The net profit attributable to
ordinary unit holders of the Group for the year was $306,024,000 (2010: $294,256,000).
Principal Activities
The principal activities of the Group during the year were the leasing of assets and the provision of funding to the
Transurban Group or associates of the Transurban Group.
127 TRANSURBAN ANNUAL REPORT 2011
Distributions
Distributions paid to members during the financial year were as follows:
Distributions proposed
Final distribution payable and recognised as a liability: 14.0 cents (2010: 12.0 cents)
per fully paid Stapled Security payable 11 August 2011
Distributions paid during the year
Final distribution for 2010 financial year of 12.0 cents (2009: 11.0 cents) per fully paid
Stapled Security paid 27 August 2010
Interim distribution for 2011 financial year of 13.0 cents (2010: 12.0 cents) per fully
paid Stapled Security paid 15 February 2011
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 2011 and 30 June
2010
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 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
202,096
202,096
169,760
169,760
169,760
141,095
187,367
357,127
154,806
295,901
232,577
-
124,557
(7)
357,127
230,451
65
65,381
4
295,901
The distributions are unfranked and have a minimal tax deferred component.
Review of operations
Total revenue for the Group increased by 87.2% to $412.3 million. The profit for the year was $318.4 million.
M2 upgrade
On 26 October 2010, Transurban announced that it had reached contractual close with the NSW Government for the
$550.0 million upgrade of the Hills M2 Motorway. Financial close was reached on 19 November 2010 and construction
commenced in January 2011.
Under the agreement to upgrade the M2, tolls will increase by approximately 7.7 per cent at construction completion and
the concession will be extended four years to 2046. The works will increase capacity on the M2 by increasing the number
of traffic lanes and the provision of tolled ramps which will improve traffic flow and accessibility of the motorway.
Refinancing activities
The Group continued to have success in refinancing activities in the year ended 30 June 2011.
August 2010
Raised $260.0 million of non-recourse project debt to partially fund the acquisition of Lane Cove
Tunnel.
November 2010
Refinanced $465.0 million of non-recourse project debt on the Hills M2 and raised $275.0 million of
additional financing to fund the debt component of the M2 Upgrade project. The refinancing of
$465.0 million replaced financing put in place in May 2009 and was completed on competitive terms
in an improved credit market.
July 2011
Refinanced $520.0 million of non-recourse project debt on the M1 Eastern Distributor.
Significant changes in the state of affairs
On 10 August 2010, the Transurban Group completed the acquisition of the Lane Cove Tunnel and Military Road e-Ramps
motorway concession in Sydney, for consideration (including costs) of $634.6 million. As part of the acquisition, the
Transurban Holding Trust Group paid $348.3 million for its portion of the motorway concession.
128 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Directors' report
30 June 2011
(continued)
Matters subsequent to the end of the financial year
As noted above, on 7 July 2011, the Group completed a refinancing of $520.0 million of non-recourse project debt for the
M1 Eastern Distributor. The refinancing replaces existing $515.0 million non-recourse debt that was due to mature in July
2012, July 2014 and July 2016.
At the date of this report the directors are not aware of any other circumstances that have arisen since 30 June 2011 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
Information on likely developments in the operations of the Group and the expected results of operations have not been
included in this report because the directors of the responsible entity 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
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 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 Group issued during the financial
year
Balance at 1 July
Units issued during the year
Balance at 30 June
Value of Assets
Value of Group assets at 30 June
30 June
2011
Number
'000
30 June
2010
Number
'000
1,414,295
28,898
1,443,193
1,281,363
132,932
1,414,295
2011
$'000
2010
$'000
10,425,042
9,943,978
The value of the Group's assets is derived using the basis of accounting set out in Note 1 to the financial statements.
129 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Directors' report
30 June 2011
(continued)
Units under option
There are 5,556,676 units of Transurban Holding Trust under share based payment schemes. 2,343,297 units were
granted in the current year. 322,401 units were issued on the exercise of the relevant schemes.
Directors' Interests
The directors of the Responsible Entity have disclosed relevant interests in Stapled Securities issued by the Transurban
Group as follows:
Non-executive directors
L P Maxsted
N G Chatfield
G O Cosgriff
J G A Davis
R J Edgar
S J Mostyn (appointed 8 December 2010)
R R Officer (appointed 20 August 2010)
R Slater
Executive directors
C J Lynch
Auditor's independence declaration
Number of
Stapled Securities
30,000
20,910
152,236
158,188
18,627
-
19,089
-
255,401
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
on page 131.
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.
Lindsay P Maxsted
Chairman
Christopher J Lynch
Director
Melbourne
3 August 2011
130 TRANSURBAN ANNUAL REPORT 2011
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 2011, 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
3 August 2011
Liability limited by a scheme approved under Professional Standards Legislation
131 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust ARSN 098 807 419
Annual financial report - 30 June 2011
Financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members
Page
13(cid:22)
13(cid:23)
13(cid:24)
13(cid:25)
13(cid:26)
1(cid:22)(cid:27)
20(cid:21)
20(cid:22)
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 3 August 2011. The directors have 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
132 TRANSURBAN ANNUAL REPORT 2011
Revenue
Other income
Administration costs
Promissory notes
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 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
Consolidated income statement
For the year ended 30 June 2011
30 June
2011
$'000
30 June
2010
$'000
Notes
4
5
6
7
12
8
412,341
220,219
74,374
101,857
(3,949)
(1,280)
(160,751)
(165,980)
(3,403)
(919)
-
(4,322)
320,735
317,754
(106,745)
(92,106)
444,162
(337,062)
107,100
-
321,090
(2,706)
318,384
403,641
(322,142)
81,499
-
307,147
(1,645)
305,502
306,024
12,360
318,384
294,256
11,246
305,502
Earnings per unit for profit attributable to the ordinary unit holders:
Basic earnings per unit
Diluted earnings per unit
Cents
Cents
34
34
21.3
21.3
22.6
22.6
The above consolidated income statement should be read in conjunction with the accompanying notes.
133 TRANSURBAN ANNUAL REPORT 2011
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
Consolidated statement of comprehensive income
For the year ended 30 June 2011
30 June
2011
$'000
30 June
2010
$'000
318,384
305,502
(4,263)
(4,263)
(3,355)
(3,355)
314,121
302,147
301,362
12,759
314,121
291,570
10,577
302,147
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
134 TRANSURBAN ANNUAL REPORT 2011
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
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 unit holders' funds
Transurban Holding Trust
Consolidated balance sheet
As at 30 June 2011
30 June
2011
$'000
30 June
2010
$'000
Notes
9
10
14
11
13
14
15
16
17
14
19
20
18
14
20
21
22
22
11,036
212,642
913
224,591
6,364,880
724,225
750
1,764
3,108,832
10,200,451
4,177
569,227
257
573,661
5,981,577
678,044
3,172
988
2,706,536
9,370,317
10,425,042
9,943,978
192,540
754
235
231,493
33,287
458,309
161,855
2,667
1,516
197,478
-
363,516
4,522,642
14,666
19,720
4,557,028
4,142,699
10,257
16,645
4,169,601
5,015,337
4,533,117
5,409,705
5,410,861
7,188,221
(6,839)
(1,814,990)
43,313
7,103,500
(3,985)
(1,731,625)
42,971
5,409,705
5,410,861
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
135 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Consolidated statement of changes in equity
For the year ended 30 June 2011
Attributable to members of
Transurban Holding Trust
Issued
units
$'000
Reserves
$'000
Accumulated
losses
$'000
Notes
Non-
controlling
interests
$'000
Total unit
holders'
funds
$'000
Balance at 1 July 2009
6,692,365
(330)
(1,701,315)
44,007 5,034,727
Comprehensive income
Profit (loss) for the year
Other comprehensive income
Total comprehensive income
Transactions with owners in their
capacity as owners:
Contributions of equity, net of transaction
costs
Treasury units
Distribution reinvestment plan
Change in value of share-based payment
reserve
Distributions provided for or paid
Distributions paid to non-controlling interest
Balance at 30 June 2010
Balance at 1 July 2010
Comprehensive income
Profit (loss) for the year
Other comprehensive income
Total comprehensive income
Transactions with owners in their
capacity as owners:
Treasury units
Distribution reinvestment plan
Change in value of share-based payment
reserve
Distributions provided for or paid
Distributions paid to non-controlling interest
22
22
21
21
21
22
22
22
21
21
22
-
-
-
-
(2,686)
(2,686)
294,256
-
294,256
11,246
(669)
10,577
305,502
(3,355)
302,147
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
7,103,500
(3,985)
(1,731,625)
42,971 5,410,861
7,103,500
(3,985)
(1,731,625)
42,971
5,410,861
-
-
-
-
(4,662)
(4,662)
306,024
-
306,024
12,360
399
12,759
318,384
(4,263)
314,121
68
84,691
(38)
-
-
84,721
-
-
1,808
-
-
1,808
-
-
-
-
68
84,691
74
(389,463)
-
(389,389)
-
-
(12,417)
(12,417)
1,844
(389,463)
(12,417)
(315,277)
Balance at 30 June 2011
7,188,221
(6,839)
(1,814,990)
43,313
5,409,705
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
136 TRANSURBAN ANNUAL REPORT 2011
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
Payments for intangible assets
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 inflow (outflow) from financing activities
Net increase (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
Consolidated statement of cash flows
For the year ended 30 June 2011
30 June
2011
$'000
30 June
2010
$'000
Notes
239,395
(6,857)
122,005
(275,088)
(4,654)
74,801
(480,741)
-
(480,741)
-
67
775,803
(465,000)
(240,547)
585,786
(232,577)
(10,733)
412,799
6,859
4,177
11,036
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
32
23
9
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
137 TRANSURBAN ANNUAL REPORT 2011
Contents of the notes to the financial statements
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
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
Trust formation and termination
Segment information
Revenue
Other income
Expenses
Net finance income
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
Issued units
Reserves and accumulated losses
Distributions
Remuneration of auditors
Contingencies
Intra-group guarantees
Commitments
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
Non-cash investing and financing activities
Earnings per unit
Share-based payments
Critical accounting estimates and judgements
Financial risk management
Key management personnel disclosures
Page
1(cid:22)(cid:28)
14(cid:25)
14(cid:25)
14(cid:26)
14(cid:26)
14(cid:26)
1(cid:23)(cid:27)
1(cid:23)(cid:27)
1(cid:23)(cid:28)
1(cid:23)(cid:28)
1(cid:23)(cid:28)
15(cid:19)
15(cid:20)
15(cid:21)
15(cid:22)
15(cid:23)
15(cid:24)
15(cid:24)
15(cid:26)
15(cid:26)
1(cid:24)(cid:27)
16(cid:19)
16(cid:20)
16(cid:20)
16(cid:20)
16(cid:21)
16(cid:21)
16(cid:22)
16(cid:23)
16(cid:24)
16(cid:24)
16(cid:25)
16(cid:25)
16(cid:26)
1(cid:25)(cid:27)
17(cid:21)
17(cid:21)
17(cid:26)
138 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
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.
The Group’s current liabilities exceed its current assets by $233.7 million as at 30 June 2011. The financial report has
been prepared on a going concern basis, which contemplates the continuity of normal operations, as the Group is trading
profitably and has continually been able to refinance maturing debt. In addition, at 30 June 2011 the Transurban Group
has available a total of $410.8 million of unused working capital facilities.
Where necessary, comparatives have been reclassified for consistency with current year disclosures.
Compliance with International Financial Reporting Standards (IFRS)
The consolidated financial statements of the Transurban Holding Trust also comply with IFRS 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).
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 consolidated 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).
Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost.
139 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(b) Principles of consolidation (continued)
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).
(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.
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.
140 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(e)
Income tax (continued)
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.
(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.
141 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(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 (current) and in receivables (non-current) in the balance sheet (see 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.
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.
142 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(j)
Investments and other financial assets (continued)
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 Group 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.
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.
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.
143 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(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.
(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.
144 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(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.
(r) Parent entity financial information
The financial information for the parent entity, Transurban Holding Trust, disclosed in note 30 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 consolidated
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 2011
reporting periods. The Group's assessment of the impact of these new standards and interpretations is set out below.
AASB 9 Financial Instruments, AASB 2009-11Amendments to Australian Accounting Standards arising from AASB 9
(i)
and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective for
annual reporting periods beginning on or after 1 January 2013)
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and
financial liabilities. The standard is not applicable until 1 July 2013 but is available for early adoption.
Management are in the process of assessing the impact on financial assets but do not believe this will be significant.
There will be no impact on the Group's accounting for financial liabilities, as the new requirements only affect the
accounting for financial liabilities that are designated as at fair value through profit or loss and the Group does not have
any such liabilities. The Group has not yet decided when to adopt AASB 9.
(ii) Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards
(effective from 1 July 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. The Group will apply the amended standard from
1 July 2011 and will need to disclose any transactions between its subsidiaries and its associates. However, there will be
no impact on any of the amounts recognised in the financial statements.
145 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(t) New accounting standards and interpretations (continued)
(iii) 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 2011. 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.
(iv) 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.
(v) AASB 2010-6 Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets
(effective for annual reporting periods beginning on or after 1 July 2011)
In November 2010, the AASB made amendments to AASB 7 Financial Instruments: Disclosures which introduce additional
disclosures in respect of risk exposures arising from transferred financial assets. The amendments will affect particularly
entities that sell, factor, securitise, lend or otherwise transfer financial assets to other parties. They are not expected to
have any significant impact on the Group's disclosures.
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.
146 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
Notes
(a)
(b)
30 June
2011
$'000
30 June
2010
$'000
251,385
160,751
205
412,341
219,952
-
267
220,219
4 Revenue
Rental income
Construction revenue
Other revenue
Total revenue
(a) Rental income
Rental income is derived from property held by the Group and is recognised in the income statement in accordance with
the lease contract.
(b) Construction revenue
Construction revenue is recognised during the construction phase of an intangible asset.
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.
5 Other income
Concession notes
Re-measurement of concession notes
(a) Concession notes
Notes
(a)
(b)
30 June
2011
$'000
30 June
2010
$'000
24,115
50,259
74,374
23,087
78,770
101,857
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) Re-measurement of concession notes
Re-measurement 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
30 June
2011
$'000
30 June
2010
$'000
106,745
106,745
92,106
92,106
147 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
443,674
488
444,162
403,287
354
403,641
(327,069)
(8,385)
(1,608)
(337,062)
(315,511)
(1,877)
(4,754)
(322,142)
107,100
81,499
30 June
2011
$'000
30 June
2010
$'000
3,480
(776)
2
2,706
(860)
84
(776)
321,090
96,327
(93,623)
2,704
2
2,706
3,184
(1,537)
(2)
1,645
(1,619)
82
(1,537)
307,147
92,144
(90,497)
1,647
(2)
1,645
7 Net finance income
Finance income
Interest income from related parties
Other interest income
Total finance income
Finance costs
Interest and finance charges paid/payable
Net foreign exchange losses
Net movement in promissory note payable
Total finance costs
Net finance income
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% (2010 - 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
148 TRANSURBAN ANNUAL REPORT 2011
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
Other receivables
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
11,036
11,036
4,177
4,177
Notes
(a)
(b)
30 June
2011
$'000
30 June
2010
$'000
210,633
1,352
657
212,642
568,063
1,164
-
569,227
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.
(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 2011.
11 Non-current assets - Receivables
Concession notes
Loans to related parties
Notes
(a)
30 June
2011
$'000
30 June
2010
$'000
554,341
5,810,539
6,364,880
479,967
5,501,610
5,981,577
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.
149 TRANSURBAN ANNUAL REPORT 2011
12 Equity accounted investments
Name of company
Westlink M7:
Westlink Motorway Limited
WSO Finance Pty Limited
Westlink Motorway Partnership
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
Ownership
interest
30
June
2011
%
30
June
2010
%
50
50
50
50
50
50
Carrying amount
30 June
2011
$'000
30 June
2010
$'000
-
-
-
-
-
-
-
-
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. Westlink M7 holds the right to toll the road for 34 years until February 2037. 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
2011
Westlink M7
2010
Westlink M7
Ownership
Interest
%
50
50
Group's share of:
Assets
$'000
Liabilities
$'000
Revenues
$'000
Profit/(loss)
$'000
702,292
702,292
(876,307)
(876,307)
57,316
57,316
(26,128)
(26,128)
714,035
714,035
(869,990)
(869,990)
54,573
54,573
(23,779)
(23,779)
150 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
12 Equity accounted investments (continued)
Movements in carrying amounts
Balance at 1 July
Share of losses after income tax
Additional investment acquired
Balance 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
Westlink M7
30 June
2011
$'000
30 June
2010
$'000
-
-
-
-
-
-
-
-
-
-
-
-
100,440
26,128
126,568
76,661
23,779
100,440
Share of associates' 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
2011
$'000
30 June
2010
$'000
724,225
724,225
678,044
678,044
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 2011 the Group capitalised interest of $46.2 million (2010: $44.8 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.
151 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
913
913
750
750
1,663
754
754
14,666
14,666
15,420
257
257
3,172
3,172
3,429
2,667
2,667
10,257
10,257
12,924
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 Group
The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to
fluctuations in interest rates in accordance with the Group's financial risk management policies. (refer to note 37).
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 interest rate of 7.2 per cent (2010: 7.5 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 98 per cent (2010: 100 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 7.5 per
cent (2010: 8.2 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.
152 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
15 Deferred tax assets and liabilities
Assets
Liabilities
Net
30 June
2011
$'000
30 June
2010
$'000
30 June
2011
$'000
30 June
2010
$'000
30 June
2011
$'000
30 June
2010
$'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
consolidated income statement
Tax losses utilised
Closing balance at 30 June
Deferred tax assets to be
recovered after more than 12
months
3,072
-
3,072
(1,308)
1,764
2,212
860
-
3,072
2,212
-
2,212
(1,224)
988
1,204
1,619
(611)
2,212
-
(1,308)
(1,308)
1,308
-
-
(1,224)
(1,224)
1,224
-
(1,224)
(1,140)
(84)
-
(1,308)
(84)
-
(1,224)
3,072
(1,308)
1,764
-
1,764
988
776
-
1,764
2,212
(1,224)
988
-
988
64
1,535
(611)
988
3,072
3,072
2,212
2,212
(1,308)
(1,308)
(1,224)
(1,224)
1,764
1,764
988
988
153 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
16 Non-current assets - Intangible assets
CityLink
$'000
Hills M2
Motorway
$'000
Lane Cove
Tunnel
$'000
Assets under
construction
$'000
Total
$'000
1,207,442
(216,531)
990,911
2,116,141
(308,410)
1,807,731
990,911
(37,632)
953,279
1,807,731
(54,474)
1,753,257
1,207,442
(254,163)
953,279
2,116,141
(362,884)
1,753,257
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,323,583
(524,941)
2,798,642
2,798,642
(92,106)
2,706,536
3,323,583
(617,047)
2,706,536
953,279
-
(40,475)
912,804
1,753,257
-
(54,530)
1,698,727
-
348,290
(11,740)
336,550
-
160,751
-
160,751
2,706,536
509,041
(106,745)
3,108,832
1,207,442
(294,638)
912,804
2,116,141
(417,414)
1,698,727
348,290
(11,740)
336,550
160,751
-
160,751
3,832,624
(723,792)
3,108,832
At 1 July 2009
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2010
Opening net book amount
Amortisation charge
Closing net book amount
At 30 June 2010
Cost
Accumulated amortisation
Net book amount
Year 30 June 2011
Opening net book amount
Additions
Amortisation charge
Closing net book amount
At 30 June 2011
Cost
Accumulated amortisation
Net book amount
Description of intangible assets
Concession assets
The CityLink, Hills M2 and Lane Cove Tunnel 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 2046. 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.
154 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
16 Non-current assets - Intangible assets (continued)
Lane Cove Tunnel
Transurban has the right to toll the Lane Cove Tunnel until January 2037.
Toll increases for the Lane Cove Tunnel are based on a theoretical toll increase as defined in the Concession Deed, being
a quarterly escalation of CPI, subject to the nearest whole cent rounding. At the end of the concession period, all
concession assets will be returned to the NSW State Government.
Assets under construction
The Group is currently undertaking an upgrade of the Hills M2 Motorway. Construction on the M2 upgrade commenced in
January 2011. This will be transferred to the intangible asset upon completion.
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 ranging from 8.8 to 11.0 per cent (2010: 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 CPI and Average Weekly Earnings (AWE) forecasts. A long term CPI
rate of 2.5 per cent (2010: 2.5 per cent) and AWE of 4.0 per cent (2010: 4.0 per cent) have been used.
17 Current liabilities - Trade and other payables
30 June
2011
$'000
30 June
2010
$'000
18,613
173,927
192,540
8,050
153,805
161,855
Notes
(a)
(b)
30 June
2011
$'000
30 June
2010
$'000
1,286,769
3,235,873
4,522,642
964,507
3,178,192
4,142,699
Trade payables and accruals
Related party payables
18 Borrowings
Term debt
Loans from related parties
155 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
18 Borrowings (continued)
(a) Term debt
The term debt facilities are comprised of:
$515.0 million facility entered into by AMT Management Limited (as trustee for Airport Motorway Trust). The facility
has deferred borrowing costs of $6.3 million.
$740.0 million facility entered into by Hills Motorway Management Limited (as trustee for Hills Motorway Trust). The
facility has deferred borrowing costs of $9.1 million.
$260.0 million facility entered into by LCT-MRE Nominees Pty Limited (as trustee for LCT-MRE Trust). The facility
has deferred borrowing costs of $1.7 million.
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 4.89 per cent (2010: 7.6 per cent). The facility is fully hedged to an all-in rate after hedging of
8.4 per cent.
On 7 July 2011, the above facilities were refinanced and replaced with $520.0 million of non-recourse project debt
maturing in July 2014 ($295.0 million) and July 2018 ($225.0 million).
The Hills M2 facility was refinanced in November 2010 and is fully secured against the respective rights of Hills Motorway
Limited and Hills Motorway Trust and their assets. The total facility is a non-recourse syndicated facility totalling $740.0
million. The financing is comprised of: the refinancing of $465.0 million of existing debt with terms of four years ($400.0
million) and six years ($65.0 million); and a new construction capex facility of $275.0 million with a term of six years. As at
30 June 2011, $64.1 million was drawn under the construction capex facility. The facility is currently 95.8 per cent hedged
with an all-in rate after hedging of 6.8 per cent.
The Lane Cove Tunnel facility was established in August 2010 to partially finance the acquisition of the Lane Cove Tunnel
and is fully secured against the respective rights of LCT-MRE Pty Limited and LCT-MRE Trust and their assets. This
facility is a non-recourse syndicated facility with a term of three years. The current floating rate applicable to the facility is
4.9 per cent. The facility is fully hedged to an all-in rate after hedging of 7.0 per cent.
(b) Loans from related parties
The Group receives funding from a related party, Transurban Finance Company Pty Limited, 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 Transurban Group has a market capitalisation clause where gearing must not exceed 60 per cent. Based
on the balance sheet at 30 June 2011, the Transurban Group's Security price would need to close below $2.17 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
Lane Cove Tunnel - ICR greater than 1.15 times
156 TRANSURBAN ANNUAL REPORT 2011
19 Current liabilities - Provisions
Distribution to security holders
Distribution to non-controlling interests in subsidiaries
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
Notes
(a)
(a)
30 June
2011
$'000
30 June
2010
$'000
202,146
29,347
231,493
169,816
27,662
197,478
(a) Distributions to security holders and non-controlling interests
These distributions are provided for once approved by the Board and are announced to equity holders.
Movements in provisions
Movements in each class of provision during the financial year are set out below:
2011
Carrying amount at start of year
Provision recognised
Amounts paid / utilised during the year
Carrying amount at end of year
20 Other liabilities
Current
Unearned income (related parties)
Non-current
Promissory notes
Total other liabilities
(a) Unearned income
Distribution to
security
holders
$'000
Distribution to
non-
controlling
interests in
subsidiaries
$'000
169,816
389,463
(357,133)
202,146
27,662
12,416
(10,731)
29,347
30 June
2011
$'000
30 June
2010
$'000
Notes
(a)
(b)
33,287
33,287
19,720
19,720
-
-
16,645
16,645
53,007
16,645
Unearned income related to rental income received in advance from a related party.
157 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
20 Other liabilities (continued)
(b) 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 CPI 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 (2010: 12 per cent) which recognises their
subordinated nature.
The face value of Promissory Notes on issue at 30 June 2011 is $126.5 million (2010: $116.2 million). The net present
value at 30 June 2011 of the redemption payments relating to these Promissory Notes is $19.7 million (2010: $16.6
million).
21 Issued units
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.
Issued units
Ordinary units fully paid
Issued units
Ordinary units fully paid
Units in trust
2011
$'000
2010
$'000
7,188,221
7,188,221
7,103,500
7,103,500
2011
Number
'000
2010
Number
'000
1,443,193
1,443,193
1,414,295
1,414,295
The number of units on issue is 1,443,543,731 (2010: 1,414,667,986). The difference of 351,075 (2010: 373,804) 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.
158 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
21 Issued units (continued)
Capital risk management
The Transurban 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 its 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.
Movements in issued units
Details
Opening balance at 1 July 2009
Distribution reinvestment plan
Purchase, disposal and vesting of treasury units
Rights issue, net of transaction costs
Closing balance at 30 June 2010
Opening balance at 1 July 2010
Distribution reinvestment plan
Purchase, disposal and vesting of treasury units
Transfer vesting portion of LTI from share based payment reserve
Purchase of Performance Rights Plan units
Closing balance at 30 June 2011
Number of
units
'000
Notes
(a)
(b)
(c)
(a)
(b)
1,281,363
14,069
946
117,917
1,414,295
1,414,295
28,876
22
-
-
1,443,193
$'000
6,692,365
44,460
6,673
360,002
7,103,500
7,103,500
84,691
68
420
(458)
7,188,221
(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.
(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) Rights issue
On 10 June 2010, the Transurban Group raised $542.4 million via an equity raising, issuing 117.9 million stapled
securities. The Group's share was $360.0 million.
159 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
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 non-controlling interest
Balance 30 June
Share-based payments
Balance 1 July
Employee share plan expense
Employee distribution
Transfer vesting portion of LTI to issued units
Transfer non-vesting portion of LTI from retained earnings
Balance 30 June
Accumulated losses
Movements in accumulated losses were as follows:
Balance 1 July
Net profit for the year
Distributions
Transfer non-vesting portion of LTI from share-based payments reserve
Balance 30 June
30 June
2011
$'000
30 June
2010
$'000
(12,001)
5,162
(6,839)
(7,339)
3,354
(3,985)
(7,339)
(4,263)
-
(399)
(12,001)
3,354
2,302
-
(420)
(74)
5,162
(4,653)
(721)
(2,634)
669
(7,339)
4,323
2,164
63
(3,196)
-
3,354
30 June
2011
$'000
30 June
2010
$'000
(1,731,625)
306,024
(389,463)
74
(1,814,990)
(1,701,315)
294,256
(324,566)
-
(1,731,625)
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(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.
160 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
23 Distributions
Distributions proposed
Final distribution payable and recognised as a liability: 14.0 cents (2010: 12.0 cents)
per fully paid Stapled Security payable 11 August 2011
Distributions paid during the year
Final distribution for 2010 financial year of 12.0 cents (2009: 11.0 cents) per fully paid
Stapled Security paid 27 August 2010
Interim distribution for 2011 financial year of 13.0 cents (2010: 12.0 cents) per fully
paid Stapled Security paid 15 February 2011
Paid in cash
Executive loans - repayments
Satisfied by issue of Stapled Securities (a)
Funds available for future distribution reinvestment plans
30 June
2011
$'000
30 June
2010
$'000
202,096
202,096
169,760
169,760
169,760
141,095
187,367
357,127
154,806
295,901
232,577
-
124,557
(7)
357,127
230,451
65
65,381
4
295,901
(a) The value of stapled securities represents the total value of securities issued, however, this value is apportioned
between Transurban Holding Trust ($84.7 million), Transurban Holdings Limited ($31.1 million) and Transurban
International Limited ($8.7 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 2011 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 be complete in late 2012 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 per cent 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$159,690,077 had been paid at balance sheet date.
161 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(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 2011, 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
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Intangible assets
Payable:
Within one year
Later than one year but not later than five years
Later than five years
30 June
2011
$'000
30 June
2010
$'000
242,997
98,498
-
341,495
-
-
-
-
Promissory Notes
The Responsible Entity, on behalf of the Hills Motorway Trust, has entered into an agreement with the RTA. Annual
liabilities under this agreement total $7.0 million indexed annually to the CPI 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.
162 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(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 Maxsted 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.
The following transactions occurred with related parties:
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
Loan to/from related parties
30 June
2011
$
30 June
2010
$
251,384,307
359,109,721
84,565,108
695,059,136
219,951,604
324,407,165
78,789,621
623,148,390
227,015,493
2,714,245
229,729,738
229,921,886
2,553,236
232,475,122
210,633,245
724,225,027
5,810,538,998
6,745,397,270
568,063,115
678,044,167
5,501,610,391
6,747,717,673
173,927,225
3,235,872,868
3,409,800,093
153,805,376
3,178,191,878
3,331,997,254
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.
163 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(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
Airport Motorway Trust
LCT-MRE Trust
LCT-MRE Holding 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
The proportion of ownership interest is equal to the proportion of voting power held.
2011
%
2010
%
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
100
100
164 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
30 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
Unit holders' funds
Issued units
Reserves
Accumulated losses
Profit 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
2011
$'000
30 June
2010
$'000
512,008
779,105
7,460,573
6,897,760
7,972,581
7,676,865
308,721
169,817
1,984,012
1,989,922
2,292,733
2,159,739
7,188,221
5,162
(1,513,535)
5,679,848
7,103,500
3,353
(1,589,727)
5,517,126
465,577
267,656
465,577
267,656
31 Events occurring after the balance sheet date
Apart from the refinancing of the debt as disclosed in note 18(a), there are no other 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 Group, the results of those operations or the state of affairs of the Group in subsequent financial years.
165 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
32 Reconciliation of profit after income tax to net cash inflow from operating activities
Profit for the year
Depreciation and amortisation
Capitalised term loan note interest
Non-cash concession notes income
Non cash finance costs
Change in operating assets and liabilities
(Increase) in receivables & prepayments
(Increase) in operating related party balances
Movement in current tax liabilities and deferred taxes
Increase (decrease) in payables
Increase (decrease) in unearned income
Increase in Promissory Note liability
Net cash inflow from operating activities
33 Non-cash investing and financing activities
Distributions satisfied by the issue of units under the distribution reinvestment plan
30 June
2011
$'000
30 June
2010
$'000
318,384
106,745
(46,181)
(74,374)
44,996
(845)
(310,760)
(505)
979
33,287
3,075
74,801
305,502
92,106
(44,772)
(101,857)
10,546
(347)
(92,944)
(145)
(7,053)
(17,285)
6,032
149,783
30 June
2011
$'000
30 June
2010
$'000
84,691
84,691
44,460
44,460
166 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
34 Earnings per unit
Basic earnings per unit
Earnings attributable to the ordinary unit holder
Total basic earnings per unit attributable to the ordinary equity holders of the trust
Diluted earnings per unit
Earnings attributable to the ordinary unit holder
Total diluted earnings per unit attributable to the ordinary equity holders of the trust
Reconciliations of earnings used in calculating earnings per unit
30 June
2011
Cents
30 June
2010
Cents
21.3
21.3
21.3
21.3
22.6
22.6
22.6
22.6
30 June
2011
$'000
30 June
2010
$'000
Basic and diluted earnings per unit
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
318,384
(12,360)
305,502
(11,246)
306,024
294,256
Weighted average number of units used as the denominator
30 June
2011
Number
30 June
2010
Number
Weighted average number of units used in calculating basic and diluted earnings per
unit
Basic earnings per unit
1,437,820,619
1,301,035,941
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.
167 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
35 Share-based payments
Performance Awards Plan
Under the Performance Awards Plan (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 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 and future grants, the awards are tested at the
end of the three year vesting period only.
Grant Date
2011
1 Nov 2008
11 Dec 2009
1 Nov 2010
23 Dec 2010
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
1 Nov 2013
1 Nov 2013
3.30
3.33
3.23
3.33
4.27
4.97
4.62
4.97
1,277,630
1,990,913
-
-
3,268,543
-
-
1,658,614
684,683
2,343,297
-
-
-
-
-
(17,517)
(214,330)
(257,039)
-
(488,886)
1,260,113
1,776,583
1,401,575
684,683
5,122,954
Weighted average exercise price
$4.01
$3.99
$-
$4.02
$4.00
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
168 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
35 Share-based payments (continued)
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
2011
1 Nov 2008
Total
Expiry date
Exercise
price
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
$4.27
548,650
548,650
-
-
(72,334)
(72,334)
(42,594)
(42,594)
433,722
433,722
Weighted average exercise price
$4.27
$-
$4.27
$4.27
$4.27
Grant Date
2010
1 Nov 2008
Total
Expiry date
Exercise
price
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
$4.27
611,692
611,692
-
-
(2,953)
(2,953)
(60,089)
(60,089)
548,650
548,650
Weighted average exercise price
$4.27
$-
$4.27
$4.27
$4.27
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. This award matured on 1 November 2010. 84.44 per cent of
awards subject to the TSR performance condition vested based on Transurban's ranking against the constituents of the
S&P/ASX 100. None of the awards subject to the statutory EBITDA growth or DRIVe management fee growth conditions
vested as the prescribed performance conditions were not met.
169 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
35 Share-based payments (continued)
Australian based plan
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
Lapsed
during the
year
Number
Balance at
end of the
year
Number
2011
1 Nov 2007
Total
1 Nov 2010
3.50
5.96
331,594
331,594
-
-
(143,060)
(143,060)
(188,534)
(188,534)
-
-
Weighted average exercise price
$4.73
$-
$4.73
$4.73
$-
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 2007
Total
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
Overseas based plan
Grant Date
2011
1 Nov 2007
Total
Vesting /
Expiry date
Fair value at grant date
$
TSR
DRIVe mgt
fee
Balance at
start of the
year
Vested
during the
year
Lapsed
during the
year
Balance at
end of the
year
Number
Number
Number
Number
1 Nov 2010
3.50
5.96
247,561
247,561
(107,007)
(107,007)
(140,554)
(140,554)
-
-
Weighted average exercise price
$4.26
$4.26
$4.26
$-
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
170 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
35 Share-based payments (continued)
Assessed fair value
The assessed fair value at grant date of the plans above has been independently determined in accordance with AASB 2.
The TSR component of the Performance Awards has been valued applying a Monte-Carlo simulation (of geometric
Brownian motion process, as used in the Black-Scholes framework) to model Transurban's future security price and TSR
performance against the comparator group performance at vesting date. The valuation model takes into account the term
of the award, 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 award.
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 2010 to 30 June 2011, the cost of company matches was
$304,375 (2010: $125,517) for the Investment Tax Exempt Plan and $89,885 (2010: $nil) 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.
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 2011, each
participant was allocated 100 stapled securities at a value of $5.26 per security. Stapled Securities provided under the
Plan were acquired on the open market.
2011
Number
2010
Number
Shares purchased on the market under the plan and provided to participating employees
42,200
44,800
171 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
36 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
The Group 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.
37 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 cash flows, 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.
172 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
37 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
2011
USD
$'000
30 June
2010
USD
$'000
357,265
(313,600)
43,665
336,666
(276,001)
60,665
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
$3,464,000 lower (2010: $7,474,000 lower) or $4,175,000 higher (2010: $9,461,000 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 2011, 98 per cent (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 Group had the following variable rate borrowings and interest rate swap contracts
outstanding:
30 June 2011
30 June 2010
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
%5.5
%7.2
%4.9
(11,036)
1,304,050
(1,282,000)
11,014
%4.1
%7.5
%4.8
(4,177)
980,000
(980,000)
(4,177)
An analysis by maturities is provided in liquidity risk below.
Sensitivity
At 30 June 2011, 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 $110,000 higher/lower (2010: $42,000 higher/lower).
173 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
37 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 five 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
2011
$'000
2010
$'000
-
418,002
418,002
270,971
230,000
500,971
The facilities are committed for the term of the facility and cannot be withdrawn by the bank without notice.
174 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
37 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 2011
$'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 2010
Non-derivatives
Non-interest bearing
Variable rate
Fixed rate
Total non-
derivatives
Derivatives
Net settled (interest
rate swaps)
Total derivatives
415,936
96,769
399,469
-
293,247
559,199
-
384,578
411,279
-
725,116
381,684
-
14,716
760,541
126,465
204,460
1,617,211
542,401
1,718,886
4,129,383
435,656
1,325,928
3,196,714
912,174
852,446
795,857
1,106,800
775,257
1,948,136
6,390,670
4,958,298
5,257
5,257
4,956
4,956
2,563
2,563
2,601
2,601
1,141
1,141
258
258
16,776
16,776
13,757
13,757
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
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
175 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
37 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.
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 2011 and
30 June 2010.
As at 30 June 2011
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
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
Level 1
$'000
-
-
-
-
-
-
-
-
1,663
1,663
15,420
15,420
Level 2
$'000
Level 3
$'000
3,429
3,429
12,924
12,924
-
-
-
-
-
-
-
-
1,663
1,663
15,420
15,420
Total
$'000
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.
176 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 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:
Executive directors
Christopher J Lynch
Non-executive directors
Lindsay P Maxsted
David J Ryan (resigned 12 August 2010)
Neil G Chatfield
Geoffrey O Cosgriff
Jeremy GA Davis
Robert J Edgar
Samantha J Mostyn (appointed 8 December 2010)
Robert R Officer (appointed 20 August 2010)
Rodney Slater
Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Trust,
directly or indirectly, during the financial year:
B Bourke (resigned 28 February 2011)
K Daley
M Fletcher (resigned 28 February 2011)
A Head
S Hogg
T Honan
M Kulper
E Mildwater
Chief Operating Officer
President International Development
Group General Manager, Public Affairs
Group General Manager, New South Wales
Group General Manager, Corporate Services
Chief Financial Officer
President, Transurban North America
Group General Manager, Victoria
177 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
2011 REMUNERATION REPORT
INTRODUCTION
The Remuneration Report, prepared in accordance with section 300A of the Corporations Act 2001, 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 and
Transurban Holdings Limited for the year ended 30 June 2011, and are listed in the tables below:
Senior Executives
Name and position
Chris Lynch, Executive Director, Chief Executive Officer (CEO)
Brendan Bourke,1 Chief Operating Officer
Ken Daley, President, International Development
Megan Fletcher,1 Group General Manager, Public Affairs
Andrew Head,1 Group General Manager, NSW
Samantha Hogg,1 Group General Manager, Corporate Services
Tom Honan, Chief Financial Officer
Michael Kulper, President, North America
Elizabeth Mildwater,1 Group General Manager, Victoria
Non-Executive Directors
Name
Lindsay Maxsted (appointed as Chairman on 12 August 2010)
David Ryan (resigned as Chairman on 12 August 2010)
Neil Chatfield
Geoff Cosgriff
Jeremy Davis
Bob Edgar
Samantha Mostyn (appointed on 8 December 2010)
Bob Officer (appointed on 20 August 2010)
Rodney Slater
Jennifer Eve (Director of TIL only)
James Keyes (Director of TIL only)
1
As part of the Group’s organisational restructure announced on 27 January 2011, Brendan Bourke ceased as Chief Operating
Officer with effect from 28 February 2011 and Megan Fletcher ceased as Group General Manager, Public Affairs with effect from
4 February 2011. Andrew Head changed role from Group General Manager, Strategy and Development to Group General
Manager, NSW, Samantha Hogg (previously Acting Group General Manager, People, Legal and Governance) was appointed as
Group General Manager, Corporate Services, and Elizabeth Mildwater changed role from Group General Manager, People Legal
and Governance to Group General Manager, Victoria, all with effect from 1 February 2011. Elizabeth Mildwater resigned as
Company Secretary on 9 February 2011.
A comprehensive review of the Group’s remuneration framework has been undertaken in light of feedback received from
security holders and other stakeholders on the Group’s remuneration arrangements, market expectations and regulatory
developments. As a result, the Board has approved a new remuneration framework for the year ending 30 June 2012,
details of which are summarised on page 1(cid:26)(cid:28) and will be disclosed in detail in next year's Remuneration Report.
CONTENTS
The remuneration information contained in the Remuneration Report is presented as follows:
Content
1
Changes to the remuneration framework for the year ending 30 June 2012
2
3
4
5
6
7
Remuneration governance
Remuneration in context
CEO and Senior Executive remuneration for the year ended 30 June 2011
Link between Group performance, security holder wealth and remuneration
Non-Executive Director remuneration for the year ended 30 June 2011
Glossary Of Terms
All values in this Remuneration Report are in Australian dollars, unless otherwise stated.
Page
Page 1(cid:26)(cid:28)
Page 18(cid:19)
Page 18(cid:19)
Page 18(cid:20)
Page 19(cid:25)
Page (cid:20)(cid:28)(cid:27)
Page 20(cid:20)
178 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
1 CHANGES TO THE REMUNERATION FRAMEWORK FOR THE YEAR ENDING 30 JUNE 2012
A NEW REMUNERATION FRAMEWORK
Following the 2010 Annual General Meeting (AGM), the Remuneration Committee on behalf of the Board undertook a
comprehensive review of the Group’s remuneration framework for Senior Executives and senior managers, with
assistance from independent advisers Ernst & Young. Feedback received from security holders and other stakeholders,
market expectations and regulatory developments were all considered as part of the review.
In undertaking the review, the Remuneration Committee sought to balance the needs and expectations of security holders
and other stakeholders with business strategy considerations and the need to remunerate Senior Executives and Senior
Managers appropriately in a competitive marketplace, and to focus on linking performance and reward whilst taking into
account the particular challenges facing the Group.
The review led to the Remuneration Committee recommending, and the Board approving, the adoption of a new
remuneration framework for Senior Executives and Senior Managers effective 1 July 2011. An overview of the new
framework for Senior Executives is set out below.
OVERVIEW OF THE NEW REMUNERATION FRAMEWORK FOR SENIOR EXECUTIVES
Remuneration mix
To more closely align Senior Executives’ remuneration packages with security holder return and business strategy,
variable and equity based components of total target remuneration will increase in the year ending 30 June 2012. With the
introduction of STI deferral (see below), Senior Executives’ equity exposure will increase as a percentage of total target
remuneration.
CEO
Other Senior Executives
*With 30% STI deferral (see below).
% of total Senior Executive remuneration (annualised) (at
target) - 2012
Fixed (TEC)
Variable (performance based)
33.3
45
STI
33.3*
30*
LTI
33.3
25
The transition to the desired remuneration mix will be achieved over a maximum period of three years. Any remuneration
package increases will be directed to STI/STI deferral.
Short term incentive (STI)
In the year ending 30 June 2012, a mandatory 30 per cent STI deferral into securities will be introduced for Senior
Executives (including the CEO). The deferral period will be three years (including a one year performance period). This
component of remuneration will be subject to clawback. An example of a clawback event is misconduct or misstatement of
financial results. These changes reflect security holder expectations. They will also act as a positive retention tool.
Long term incentive (LTI)
The performance measures for the LTI plan for the year ending 30 June 2012 will change to the following:
50 per cent relative Total Shareholder Return (TSR) measured against a bespoke comparator group comprising
companies in the transport, utilities, real estate, construction and infrastructure Global Industry Classification
Standards (GICS) sectors of the ASX150; and
50 per cent Free Cash Flow (FCF) per security which reflects the Group’s focus on the maximisation of free cash to
drive security holder return. The definition of FCF per security is outlined in the glossary of terms on page 20(cid:20). The
FCF calculation is included in Note 21 Distributions in the Transurban Holdings Limited financial statements.
These measures have been selected as they are meaningful for Senior Executives and reflect security holder
expectations.
The treatment of unvested LTI awards (granted in the year ending 30 June 2012) on a change of control will now be
subject to Board discretion.
179 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
2 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, certain 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 may seek and consider advice from independent remuneration consultants where appropriate. Any advice
from consultants is used to guide the Remuneration Committee and the Board, but does 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 2011, the Hay Group, an independent external consultant, were engaged to provide market
remuneration data to assist the Remuneration Committee in making decisions regarding Senior Executive remuneration.
In addition, the Remuneration Committee engaged Ernst & Young to provide market remuneration data and conduct an
independent review of the Group’s new remuneration framework for the year ending 30 June 2012.
3 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 for quality assets 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 100 per cent 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 per cent), the M5 (50 per cent), and the M7 (50 per cent).
In North America, the Group has interests in two assets, Pocahontas 895 (75 per cent) and the Capital Beltway Express
(67.5 per cent), 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 Group’s 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 Group’s remuneration framework is determined having regard to this.
180 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
4 CEO AND SENIOR EXECUTIVE REMUNERATION FOR THE YEAR ENDED 30 JUNE 2011
A
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
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 remuneration
Total Employment Cost:
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' remuneration
Short Term Incentive:
Rewards tied to pre-determined annual 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 achievement of internal and external performance targets.
Encourages sustainable performance in the medium to longer term, and provides a retention element.
181 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
B
REMUNERATION MIX
For the year ended 30 June 2011, the remuneration of the CEO and other Senior Executives was 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 were determined
by the Board (on the recommendation of the Remuneration Committee) and are set out in the table below:
Relative weightings of remuneration components for the year ended 30 June 20111
% of total remuneration (annualised) (at target) - 2011
Fixed (TEC)
Variable (performance based)
CEO
Other Senior Executives
34
50
STI
33
25
LTI
33
25
1
These figures do not necessarily reflect the relative value derived from each of the components, which depends on actual
performance against targets for the variable components (refer below). The above STI percentages are based on achieving the
relevant performance targets. The above LTI percentages are based on the maximum LTI available at the time of grant to each
Senior Executive if the awards granted vest at the end of the performance period. The table above reflects the percentage value
of remuneration which consists of awards for each Senior Executive, apart from the CEO’s LTI granted in the year ended 30 June
2011 which was granted in cash, subject to the same terms and conditions as the LTI plan offered to other Senior Executives.
The CEO’s LTI grant for all other years has consisted of awards.
C
FIXED REMUNERATION - TOTAL EMPLOYMENT COST (TEC)
What is TEC?
Fixed remuneration is represented by total employment cost (TEC) comprising base salary, superannuation contributions
and benefits such as salary continuance, death and disability insurance.
Fixed 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.
The Board instituted a salary freeze for the CEO and other Senior Executives for the year ended 30 June 2010. The
Board determined that this freeze should continue in the year ended 30 June 2011, with three exceptions. TEC increases
were given to three Senior Executives during the year. These executives changed roles as a result of the Group’s
organisational restructure announced on 27 January 2011. The revised remuneration was based on market remuneration
data provided by the Hay Group.
How is TEC determined?
TEC levels are reviewed annually by the Remuneration Committee at the beginning of each financial year with reference to
an individual’s role, experience and performance, as well as relevant comparative market data. Independent remuneration
consultants and surveys, internal considerations and market conditions also provide guidance. TEC is also reviewed on a
change in role.
D
SHORT TERM INCENTIVE (STI)
How did the STI plan operate?
The STI plan was an annual cash incentive plan linked to the attainment of specific pre-determined Group, team and
individual performance measures. All permanent Group employees, including the CEO and other Senior Executives,
participated in the STI plan.
For the year ended 30 June 2011, the CEO had a target STI opportunity of 100 per cent of his annualised TEC. Other
Senior Executives had a target STI opportunity of 50 per cent of their annualised TEC.
182 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
The STI plan put a significant proportion of remuneration 'at risk' subject to meeting specific targets linked to the Group's
business objectives. The STI plan focused participants on achieving performance targets and provided an incentive for
high performance. This aligned executive interests with the Group's financial performance, as well as management
principles and the Group’s cultural values.
What were the STI 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 2011. They were chosen to provide a balance between corporate, individual, operational, strategic, financial and
non-financial aspects of performance and are described below:
STI performance measures for the year ended 30 June 2011
Performance measure and %
of target award measure
applies to
Group performance targets
50%
Target(s) for performance measure
To ensure that STI payments were aligned with business performance and the creation
of security holder value, there were two Group performance targets:
growth in proportional EBITDA; and
cost management based on proportional net costs.
Each accounted for 50% of the Group performance targets.
Shared Senior Executive Safety
KPI
To achieve the business objective of creating and maintaining a safety culture, the
Senior Executive team shared a safety KPI.
10%
For Senior Executives based in Australia, outcomes were required in relation to:
a reduction in lost time injury frequency rates; and
achievement of AS4801 certification.
For Senior Executives based in the US, outcomes were required in relation to:
maintaining zero lost time injury occurrence;
development of appropriate OHS plans; and
the completion of risk assessments.
Individual key performance
indicators (KPIs)
40%
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 outcomes
through their actions.
Who sets the STI performance measures?
The CEO's individual KPIs are set by the Board. All other Senior Executives’ individual KPIs and the shared Senior
Executive safety KPI are set by the CEO and approved by the Board. The Board sets the Group performance targets.
183 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 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 one of the primary measures that the Board uses to assess the operating performance of the
Group, with an aim to maintain a focus on the Group’s operating results and associated cash generation. 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.
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 provides a better reflection of the underlying
performance of the Group’s assets than statutory EBITDA. The EBITDA calculation from the statutory accounts would not
include the EBITDA contribution of the M5, M7 or DRIVe (equity accounted in the statutory results), which are meaningful
contributors to the Group’s performance. Proportional EBITDA figures used to assess performance are included in Note 2
Segment information in the Transurban Holdings Limited financial statements.
The Board can decide to exclude specific items from proportional EBITDA to provide an underlying result when
determining performance incentives. These items reflect one-off, non-recurring items, both revenue and expenses, that will
not contribute to the Group’s performance in future periods. For the year ended 30 June 2011, the Board has excluded
the release of the M4 maintenance provision, which would have increased the proportional EBITDA growth outcome.
Since 2009, proportional EBITDA has been used by the Group as a performance measure for STIs.
What is proportional net costs and why does Transurban use it as a performance measure?
The STI cost management performance 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 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-related performance measure 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. Proportional net costs was first used by the Group as an STI
performance measure in the year ended 30 June 2010.
What were the proportional EBITDA and proportional net costs targets for the year ended 30 June 2011?
The proportional EBITDA and proportional net costs targets for the year ended 30 June 2011 were set against the
previous year’s results and the Group’s 30 June 2011 budget.
The targets for the year ended 30 June 2011 are set out in the table below:
Proportional EBITDA result
% of STI that vests*
Proportional net costs result
Result is less than 7% above the
underlying result for the year ended 30
June 2010
Result is 7% above the underlying result
for the year ended 30 June 2010
Budgeted proportional EBITDA is
achieved for the year ended 30 June
2011 (which was 11.4% growth on 30
June 2010 result)
Result is 17% above the underlying
result for the year ended 30 June 2010
* 50-100% and 100-150%
0%
50%
100%
150%
Actual underlying proportional net costs are over
budget for the year ended 30 June 2011
Actual underlying proportional net costs on budget
for the year ended 30 June 2011
Actual underling proportional net costs are 5%
below the budgeted underlying proportional net
costs for the year ended 30 June 2011
Actual underlying proportional net costs are 15%
below budgeted underlying proportional net costs
for the year ended 30 June 2011
How are the varying levels of performance achievement rewarded?
STI targets are designed to differentiate and reward high performance.
184 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
50 per cent of the available STI vests for threshold performance, 100 per cent vests for on-target performance and an
additional 50 per cent can be earned for outperformance. These targets are consistent for all of the Group's eligible
employees.
Given that STI awards are contingent on performance across a range of measures, maximum STI awards can only be
achieved for performance that is strong on all measures.
How is performance assessed?
Group performance targets: The performance of Senior Executives against the Group performance targets is assessed
by the Board. The results are independently reviewed.
Shared Senior Executive Safety KPI: 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 independently
reviewed.
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 assessment.
Once KPIs have been assessed, the Board approves STI awards. STI awards for the year ended 30 June 2011 will be
paid in August 2011.
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 ceased employment?
Under the CEO’s employment contract in place for the year ended 30 June 2011, if the CEO's employment was terminated
by the Group other than for cause, the CEO would receive a pro-rata payment of the greater of target STI or actual
performance.
Under the employment contracts in place for the year ended 30 June 2011, if a Senior Executive (excluding the CEO)
ceased employment with the Group before STI targets were achieved, the Senior Executive would generally not have been
entitled to receive any STI payment, unless otherwise determined by the Board.
STI performance outcomes for the year ended 30 June 2011
Group performance in respect of the proportional EBITDA and proportional net costs performance measures for the year
ended 30 June 2011 was assessed by the Board as 122.7 per cent.
STI payments for the CEO and other Senior Executives for the year ended 30 June 2011 are set out in the table below:
Actual STI awarded 2
Target STI paid
Target STI forfeited
Name
Chris Lynch
Brendan Bourke1
Ken Daley
Megan Fletcher1
Andrew Head
Samantha Hogg
Tom Honan
Michael Kulper
Elizabeth Mildwater
$
2,461,680
254,163
431,438
110,656
323,640
241,285
587,250
573,750
319,633
%
118
104
115
104
117
117
117
115
115
%
-
-
-
-
-
-
-
-
-
1
As part of the Group’s organisational restructure announced on 27 January 2011, Brendan Bourke and Megan Fletcher exited the
business. Their STI awards for the year ended 30 June 2011 were pro-rated and awarded based on individual performance and
Group performance which was forecasted to the end of the STI performance period.
185 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
2
The threshold level of performance must be achieved before any STI is awarded. Therefore, the minimum potential value of the
STI in respect of the year ended 30 June 2011 was nil. The maximum potential value of the STI was $6,435,000 (awarded for
outperformance), excluding the exited employees. The STI payments in respect of the year ended 30 June 2011 will be paid in
August 2011.
E
LONG TERM INCENTIVE (LTI)
How did the LTI plan operate?
The LTI plan aligns reward with security holder value by tying this component of executive remuneration to the
achievement of performance measures that underpin sustainable long term growth.
Participation in the LTI plan is only offered to Senior Executives, and certain other Senior Managers approved by the
Board. For the year ended 30 June 2011, the CEO was offered an LTI grant equivalent to 100 per cent of his annualised
TEC. Other Senior Executives were offered grants representing 50 per cent of their annualised TEC.
LTI grants are delivered in the form of Performance Awards under the Group’s Performance Awards Plan (PAP). 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
performance measures are satisfied, the Performance Awards vest and Transurban securities will be delivered to the
participant. 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. Overseas
participants were granted performance awards which provided for cash payments upon vesting subject to the achievement
of performance measures.
Performance Awards that do not vest after testing of the performance measures lapse.
Performance Awards are not transferable and do not carry voting or distribution rights. However securities allocated upon
vesting of Performance Awards carry the same rights as other Transurban securities.
Security holder approval was not obtained at the 2010 AGM for the proposed grant of Performance Awards to the CEO.
The CEO was therefore entitled under his employment agreement to receive, and did receive, a cash-based award in
December 2010 subject to the terms and conditions of the LTI plan as outlined in this section.
What were the LTI performance measures?
Participants do not derive actual value from their LTI grants unless performance targets are achieved.
Performance Awards granted during the year ended 30 June 2011 are subject to the following dual performance measures
over a three year performance period:
relative TSR ranked against the S&P/ASX100 group of companies; and
growth in proportional EBITDA.
Each measure applies to 50 per cent of the available LTI award.
What were the performance targets?
Relative TSR
For Performance Awards granted during the year ended 30 June 2011, the relative TSR component of the award 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:
186 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
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
For Performance Awards granted during the year ended 30 June 2011, the proportional EBITDA component of the award
that will vest will depend on the Group's percentage compound proportional EBITDA growth over the three financial year
performance period (including on a part-year basis), as set out below:
Proportional EBITDA vesting schedule
% compound proportional EBITDA annual growth
% of Performance Awards that vest
7%
Between 7% and 11%
11% or more
50%
Straight line vesting between 50-100%
100%
Why were these performance measures selected?
The TSR target 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 target provides evidence of the Group's growth in earnings and is linked to its overall strategic
objectives. The movement in proportional EBITDA reflects Transurban's underlying business performance and its goal of
long term sustainable growth in earnings from existing operations.
How will the performance targets be measured?
Relative TSR
The Group will receive 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 will be 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 will determine the extent to which Performance Awards subject to this target will vest.
Proportional EBITDA
The Group's proportional EBITDA percentage growth rate will be calculated based on EBITDA results included in the
Group's audited financial statements.
The measure may be adjusted to include or exclude the relevant EBITDA from acquisitions and divestments that may
occur during the performance period, in order to ring fence performance based on the known asset portfolio at the start of
the performance period. In addition, the Board may decide to exclude specific items from proportional EBITDA to provide
an underlying result when determining performance incentives. These adjustments reflect one-off, non recurring items,
both revenue and expenses, that will not contribute to the Group’s performance in future periods. The result will be subject
to Board approval.
The Board believes the above methods of assessment are rigorous and provide an appropriate assessment of the Group’s
performance against the performance measures.
For further proportional EBITDA information see Note 2 Segment information in the Transurban Holdings Limited financial
statements.
187 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
What if a Senior Executive ceases employment?
Under the CEO’s employment contract in place for the year ended 30 June 2011, if the CEO's employment was terminated
by the Group other than for cause, the CEO would receive a pro-rated Performance Award calculated from his
appointment anniversary date to his termination date, vesting in accordance with the performance measures under LTI
plan as at the time of grant. If the CEO ceased employment with the Group before the performance measures are tested,
then he would be entitled to retain any unvested Performance Awards or cash-based awards, which would vest in
accordance with the performance measures under the LTI plan as at the time of grant.
Under the terms of the employment contracts in place for the year ended 30 June 2011, if any other Senior Executives
cease employment with the Group before the performance measures are tested, then their unvested Performance Awards
will lapse, unless the Board determines otherwise.
What will happen 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 granted before 30 June 2011 will automatically vest. Performance Awards that
vest following a change of control will not generally be subject to restrictions on dealing.
What was the grant, movement in the number and value of Performance Awards by Senior Executives during the
year ended 30 June 2011?
These are summarised in the tables below:
Performance Awards granted in the year ended 30 June 2011
Performance criteria
Grant date
Vesting date
Fair value of awards
at grant date1 ($)
VWAP at grant date
($)
TSR
EBITDA
1-Nov-10
1-Nov-10
1-Nov-13
1-Nov-13
3.23
4.62
5.31
5.31
1
The fair value was calculated as at the grant date of 1 November 2010. An explanation of the pricing model used to calculate
these values is set out in Note 35 to the financial statements.
Performance Awards granted in the year ended 30 June 2011
Name
Chris Lynch1
Brendan Bourke4
Ken Daley
Megan Fletcher4
Andrew Head
Samantha Hogg
Tom Honan
Michael Kulper
Elizabeth Mildwater
Number of Performance
Awards granted 2
Value at grant date
($)
Maximum total value of
grant yet to vest 3 ($)
-
120,972
123,441
52,668
90,523
65,835
164,587
170,433
90,523
-
474,815
484,506
206,722
355,303
258,402
646,004
668,950
355,303
-
51,940
484,506
22,612
355,303
258,402
646,004
668,950
355,303
Performance Awards lapse where the performance measures 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
The CEO was granted a cash-based award of 684,683 units, linked to Transurban’s security price, on 23
December 2010 subject to the terms and conditions of the LTI plan offered for the year ended 30 June 2011.
The vesting date, fair value at grant date and VWAP at grant date are equivalent to the information outlined in
the table above. The value of this award at the grant date was $2,687,381 and the maximum total value of the
grant yet to vest is $2,687,381.
188 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
2
3
4
The grants made to Senior Executives constituted their full LTI entitlement for the year ended 30 June 2011
and were made on 1 November 2010 on the terms summarised above. Performance Awards vest subject to
performance over the period from 1 November 2010 through to 1 November 2013.
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 measures are not met, is nil.
As part of the Group’s organisational restructure, Brendan Bourke and Megan Fletcher exited the business.
The Board exercised its discretion to allow Brendan Bourke and Megan Fletcher to retain a pro-rated
proportion of their year ended 30 June 2011 Performance Awards (13,233 Performance Awards retained by
Brendan Bourke and 5,761 Performance Awards retained by Megan Fletcher). These awards are subject to
post-employment vesting, to be tested at the normal vesting date based on achievement of the performance
measures. Brendan Bourke forfeited 107,739 Performance Awards. The value of the forfeited awards at the
grant date was $422,876. Megan Fletcher forfeited 46,907 Performance Awards. The value of the forfeited
awards at the grant date was $184,110.
F
LEGACY LTI PLANS
The Group has a number of legacy LTI plans that are no longer offered but which have existing participants. Details of
these plans are set out below:
FY2008 Performance Rights Plan (PRP) (Performance Rights for Australian and overseas participants)
Plan terms and conditions
Grant date:
Vesting date:
Fair value per right at grant date:
Spot price at grant date:
Details of plan
1 Nov 2007
1 Nov 2010
TSR $3.50, Statutory EBITDA and DRIVe
management fee $5.96
$7.29
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 measures. Each Performance Right entitled
the participant to one fully paid Transurban security. Performance Rights which did not vest after testing of the
performance measures lapsed.
Overseas participants were granted Performance Rights which provided for cash payments upon vesting, subject to the
achievement of performance measures.
Performance measures and targets
For Australian participants, the PRP had two performance measures, statutory EBITDA and relative TSR against the
constituents of the S&P/ASX 100, each applying to 50 per cent of the award.
For overseas participants, the PRP had two performance measures, DRIVe management fee growth and relative TSR
against the constituents of the S&P/ASX 100, each applying to 50 per cent of the award.
TSR vesting schedule
The Group's relative TSR ranking in the S&P/ASX100 Index
% of Performance Rights 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%
189 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
Statutory EBITDA and DRIVe management fee vesting schedule
% compound statutory EBITDA annual growth
% of Performance Rights that vest
10%
Between 10% and 15%
15% or more
50%
Straight line vesting between 50-100%
100%
% compound growth of DRIVe management fee
% of Performance Rights that vest
20%
Between 20% and 25%
25% or more
50%
Straight line vesting between 50-100%
100%
Result - movements in plan for the year ended 30 June 2011
The 2008 award matured on 1 November 2010. 84.44 per cent of awards subject to the TSR performance measure
vested based on the Group’s ranking against the constituents of the S&P/ASX 100. 15.56 per cent of the TSR awards
were forfeited. None of the awards subject to the statutory EBITDA growth or DRIVe management fee growth measures
vested as the prescribed performance targets were not met. Therefore, 100 per cent of the EBITDA/DRIVe awards were
forfeited.
The following Transurban securities and Performance Rights lapsed and vested during the year ended 30 June 2011 for
the following KMP:
Name
B Bourke
K Daley
M Fletcher
A Head
M Kulper
Lapsed
Vested
Number
Value ($)
Number
Value ($)
53,653
45,398
6,438
8,584
44,362
301,999
255,536
36,237
48,319
249,705
39,204
33,173
4,704
6,273
32,416
137,215
116,104
16,465
21,954
113,455
190 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
FY2009 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 received a grant of Performance Rights at no cost which entitles participants to receive
Transurban securities which vest at the end of a three year vesting period.
Performance targets
Vesting is based on service during the three year performance period.
Movements in plan for the year ended 30 June 2011
The Board exercised its discretion in awarding 19,146 securities to Brendan Bourke, and 19,146 securities to Megan
Fletcher. The value of these securities under the Plan was $81,753 and $81,753 respectively.
FY2009 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:
Details of plan
$5.22
Participants were granted Performance Awards 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 measures.
Each Performance Award entitles the participant to one fully paid Transurban security. Performance Awards which do not
vest after testing of the performance measures will lapse.
The Board has discretion to award cash payments of equivalent value upon vesting.
Performance targets
The PAP has two performance measures, proportional EBITDA and relative TSR against the constituents of the S&P/ASX
100, each applying to 50 per cent of the award.
The awards are tested at the end of each year 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. A retest is applied at the end of each
subsequent year for each tranche, up to year three. At the end of the three years a cumulative test of the performance
measures is applied to any unvested awards.
191 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
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 vesting schedule
% compound proportional EBITDA annual growth
% of Performance Awards that vest
5%
Between 5% and 9%
9% or more
50%
Straight line vesting between 50-100%
100%
Movements in plan for the year ended 30 June 2011
The table below sets out the performance targets achieved over the testing period, banked awards and unvested awards
from each tranche which vested in the period.
Performance
measure
Number of
awards banked
in tranche 1
Number of
awards banked
in tranche 2
Number of
unvested
awards from
tranches 1 & 2
which vested
in the year
Number of
awards banked
in tranche 3
Number of
unvested
awards from
tranche 3 which
vested in the
year
Number of
awards for
testing
1 Nov 2011
TSR
-
207,475
-
To be calculated
To be calculated
1 Nov 2011
1 Nov 2011
422,582
Proportional
EBITDA
181,810
182,785
6,956
185,690
19,192
-
During the year ended 30 June 2011, 9,713 performance awards were forfeited by Brendan Bourke. The value of the
forfeited awards was $36,764. 3,964 performance awards were forfeited by Megan Fletcher. The value of the forfeited
awards was $15,004. The Board exercised its discretion to allow pro-rata amounts of outstanding Performance Awards to
continue subject to the terms and conditions of the plan (75,752 awards for Brendan Bourke at a grant value of $286,721;
30,920 awards for Megan Fletcher and a grant value of $117,032).
192 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
FY2010 Performance Awards Plan (PAP) (Performance Awards for Australian and overseas participants)
Plan terms and conditions
Grant date:
Vesting date:
11 Dec 2009
11 Dec 2012
Fair value per right at grant date:
TSR $3.33, Proportional EBITDA $4.97
Spot price at grant date:
Details of plan
$5.55
Participants were granted Performance Awards that entitle them to receive Transurban securities at no cost at the end of a
three year performance period, subject to the achievement of performance measures.
Each Performance Award entitles the participant to one fully paid Transurban security. Performance Awards which do not
vest after testing of the performance measures will lapse.
The Board has discretion to award cash payments of equivalent value upon vesting.
Performance targets
The PAP has two performance measures, proportional EBITDA and relative TSR against the constituents of the S&P/ASX
100, each applying to 50 per cent of the award.
The awards are tested at the end of the three year performance period only.
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 vesting schedule
% compound proportional EBITDA annual growth
% of Performance Awards that vest
6%
Between 6% and 9%
9% or more
50%
Straight line vesting between 50-100%
100%
Movements in plan for the year ended 30 June 2011
During the year ended 30 June 2011, 64,814 Performance Awards were forfeited by Brendan Bourke. The value of the
forfeited awards was $268,980. 28,218 Performance Awards were forfeited by Megan Fletcher. The value of the forfeited
awards was $117,105.
The Board exercised its discretion to allow pro-rata amounts of outstanding Performance Awards to continue subject to the
terms and conditions of the plan (44,236 awards for Brendan Bourke at a grant value of $183,579; 19,260 awards for
Megan Fletcher at a grant value of $79,929).
193 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
G REMUNERATION PAID TO THE CEO AND OTHER SENIOR EXECUTIVES
Remuneration for the years ended 30 June 2011 and 30 June 2010
Short-term employee benefits
Non-
Cash
monetary
salary and
benefits2
fees
Cash
Bonus1
Post-
employment
benefits
Superann-
uation
Long
term
benefits
Long
service
leave
Termina-
tion
benefits
Share based benefits3
Total
2008 PRP
2009,2010 &
2011 PAP
2009 EEP
227,968
296,196
702,287
706,407
456,860
687,093
-
157,544
2,033,360
2,030,860
Executive director, CEO
C Lynch
2011
2010
Other KMP
B Bourke4,5
2011
2010
D Cardiff
2011
2010
K Daley
2011
2010
M Fletcher4
2011
2010
A Head
2011
2010
S Hogg
2011
2010
T Honan
2011
2010
M Kulper
2011
2010
E Mildwater
2011
2010
Total
2011
2010
Notes:
1
6,930,103
6,902,285
1,017,385
1,126,355
540,797
410,093
541,554
376,772
433,494
134,569
976,398
976,396
2,461,680
2,740,000
18,557
6,049
47,500
50,000
21,309
-
-
-
-
-
2,054,484
1,079,488
113,261
113,261
6,750,151
6,019,658
254,163
432,400
9,097
6,049
58,333
49,107
-
13,148
958,759
-
(227,067)
24,800
132,745
346,315
36,476
132,046
1,679,366
1,690,958
-
-
-
-
-
10,420
-
4,443
-
268,637
-
5,425
-
(65,233)
-
(29,389)
-
351,847
431,438
1,271,200
123,596
53,677
48,995
49,004
11,627
14,168
-
-
(192,133)
-
110,656
185,050
323,640
271,300
241,285
49,500
3,114
-
6,232
-
5,882
-
587,250
648,250
8,178
-
573,750
725,390
319,633
273,750
8,199
-
6,311
-
22,917
24,481
-
11,697
402,234
-
(27,246)
-
(36,330)
3,488
-
-
-
-
24,243
24,330
25,662
15,080
25,000
11,292
25,000
25,000
3,342
-
-
-
9,800
8,729
19,690
52,446
25,000
24,330
5,419
-
-
-
-
-
-
-
-
-
-
-
345,116
280,674
55,612
95,895
218,883
127,201
151,828
65,449
27,226
27,226
36,476
27,226
27,226
27,226
21,780
21,780
1,498,152
2,402,356
831,731
640,545
1,131,110
845,397
882,611
282,590
640,437
406,064
121,547
121,547
2,358,810
2,177,257
(187,748)
-
-
-
554,433
415,367
207,150
87,458
34,049
34,049
27,226
27,226
2,029,558
2,362,336
1,131,536
822,857
5,303,495
6,596,840
189,166
65,775
286,788
276,693
87,049
110,982
1,360,993
268,637
(670,524)
33,713
4,360,688
2,838,678
445,267
502,198
18,293,025
17,595,801
2
3
4
5
The amount represents cash STI payments to the Senior Executive for the year ended 30 June 2011, which will be paid in August
2011.
Non-monetary benefits include Group insurance, vehicle allowance and expatriate allowances (where relevant).
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 independently determined in accordance with
AASB 2. The TSR component of the Performance Awards has been valued applying a Monte-Carlo simulation to model
Transurban’s security price and TSR performance against the comparator group performance. The assumptions underpinning
these valuations are set out in Note 35 to the financial statements.
As part of the Group’s organisational restructure announced on 27 January 2011, Brendan Bourke and Megan Fletcher exited the
business. Their STI payments for the year ended 30 June 2011 are detailed on page 18(cid:24). The Board exercised its discretion to
allow pro-rata amounts of outstanding LTI awards to continue subject to post-employment vesting, as detailed in the legacy LTI
plan information at sections E and F. Their termination benefits include accrued annual leave, long service leave, payment in lieu
of notice and ex-gratia payment.
Brendan Bourke participated in the ShareLink Investment Tax Exempt Plan (receiving securities to the value of $250) and the
ShareLink Tax Deferred Plan (receiving securities to the value of $1,500) for the year ended 30 June 2011.
194 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
H
ADDITIONAL REMUNERATION INFORMATION
(I) EMPLOYEE SECURITY 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 23 February 2011. 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 prior year performance and is not intended to serve
as a future incentive, there are no performance measures attached to grants of securities or cash payments under the
plan.
ShareLink Investment Tax Exempt Plan and ShareLink Investment Tax Deferred Plan
The ShareLink Investment Tax Exempt Plan provides eligible employees the opportunity to invest up to $1,000 per annum
in Transurban securities, on a tax-exempt basis. Participants contribute up to $500 by way of salary sacrifice, which is
matched by the Group dollar for dollar. Acquisitions are made quarterly in September, December, March and June each
year.
The ShareLink Investment Tax Deferred Plan provides eligible employees with the opportunity to contribute up to $5,000
per annum by way of salary sacrifice to be invested in Transurban securities. The Group matches participants’
contributions dollar for dollar up to $3,000. The plan has a maximum disposal restriction period of three years from the
date of acquisition, including a 12 month forfeiture period.
Grants under both of these plans are designed to encourage employee security holdings and to align the interests of
employees with the Group and are therefore not subject to performance measures.
(II) DEALINGS IN SECURITIES
In accordance with the Group's Dealing in Securities Policy, employees who have awards under an LTI plan may not
hedge against those awards.
Employees and Directors are not permitted to obtain margin loans using Transurban securities (either solely or as part of a
portfolio) as security for loans.
195 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
(III) 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.
The CEO’s contract includes an entitlement to participate in an LTI plan (or equivalent cash plan). 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 in place in the year ended 30 June 2011 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.
5 LINK BETWEEN COMPANY PERFORMANCE, SECURITY HOLDER WEALTH AND
REMUNERATION
The remuneration of the CEO and other Senior Executives is linked to the Group’s performance through the use of targets
based on the operating performance of the business for both short and long term incentives.
A
GROUP PERFORMANCE AND STI
For the year ended 30 June 2011, 25 per cent of Senior Executive STIs were determined with reference to proportional
EBITDA and 25 per cent with reference to proportional net costs as discussed on page 18(cid:22).
Proportional EBITDA
The underlying proportional EBITDA result for the year ended 30 June 2011 was $718.7 million, a 13.1 per cent increase
from the prior year result. This result exceeded the Group’s budget by 1.4 per cent, allowing the payment of 116.9 per
cent 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.
Refer to the graph over the following page which outlines the Group’s proportional EBITDA results over the five-year
period from 1 July 2006 to 30 June 2011.
Proportional net costs
The underlying proportional net costs result for the year ended 30 June 2011 was $172.3 million, a 1.2 per cent
improvement from the prior year result. This result was below the Group’s budget by 9.3 per cent, resulting in the payment
of 128.6 per cent 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 also contributed to the cost reductions.
Safety
For the year ended 30 June 2011, the safety performance measure resulted in the payment of 150 per cent of the eligible
STI for Senior Executives based in Australia, and 133 per cent for the eligible STI for Senior Executives based in the US.
The safety KPI target included several components as discussed on page 18(cid:22) of which a reduction in lost time injury
frequency rates was one element. In the year ended 30 June 2011, lost time injury frequency rates decreased from 3.64
to 1.17.
196 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
B
GROUP PERFORMANCE AND LTI
For the year ended 30 June 2011, LTIs were linked to proportional EBITDA and relative TSR. The performance targets for
the current plans are outlined on pages 18(cid:25) - 1(cid:27)(cid:28).
Proportional EBITDA
The performance target for proportional EBITDA of between 7 per cent and 11 per cent compound growth was 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, LTI targets have been based on cumulative performance in relation to proportional EBITDA over preceding
years. The following graph shows the growth in proportional EBITDA from 1 July 2006. 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
and includes Lane Cove Tunnel from 10 August 2010.
The table below illustrates the Group's annual compound growth for the relevant non market measure of each plan:
LTI plan
Performance Awards Plan 2009
Performance Awards Plan 2010
Performance Awards Plan 2011
TSR performance
Group compound growth as at 30 June 2011
8.2%
10.2%
15.2%
The table below summarises the relative TSR performance over the performance period to date in respect of unvested
LTIs:
LTI plan
Group TSR growth from start of
performance period to 30 June 2011
Transurban's indicative percentile
ranking compared to comparator
group
Performance Awards Plan 2009
Performance Awards Plan 2010
Performance Awards Plan 2011
13.87%
3.12%
2.81%
50.00%
48.84%
60.44%
197 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
Distributions paid over the past five financial years are summarised in the table below:
Amount (cents)
14.00
13.00
12.00
12.00
11.00
11.00
29.00
28.00
27.50
26.50
25.50
Ex date
24 Jun 2011
23 Dec 2010
24 Jun 2010
23 Dec 2009
24 Jun 2009
23 Dec 2008
24 Jun 2008 *
21 Dec 2007 *
29 Jun 2007 *
22 Dec 2006 *
26 Jun 2006 *
Payment date
11 Aug 2011
15 Feb 2011
27 Aug 2010
26 Feb 2010
28 Aug 2009
27 Feb 2009
29 Aug 2008
27 Feb 2008
27 Aug 2007
28 Feb 2007
25 Aug 2006
* Distributions made under previous distribution policy no longer applied by the Group.
6 NON-EXECUTIVE DIRECTOR REMUNERATION FOR THE YEAR ENDED 30 JUNE 2011
A
REMUNERATION POLICY
The diagram below sets out the key objectives of the Group’s Non-Executive Director policy and how they are
implemented through the Group’s remuneration framework:
Securing and retaining talented,
qualified Directors
Non-Executive Director fee levels are
set with regard to:
the responsibilities and risks
attached to the role;
the time commitment expected
and the workload;
Director experience and
expertise; and
market benchmark data
provided by independent
remuneration consultants.
Preserve independence and
impartiality
Aligning Non-Executive Director and
security holder interests
Non-Executive Directors are
encouraged to hold
Transurban securities.
Non-Executive Director
remuneration consists of base
(Director) fees and Committee
fees.
No element of Non-Executive
Director remuneration is ‘at
risk’ – that is, fees are not
based on the performance of
the Group or individual
Directors from year to year.
198 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
B
REMUNERATION ARRANGEMENTS
Maximum aggregate remuneration
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 of $2,400,000 per year (inclusive of superannuation
contributions) was approved by security holders at the 2010 AGM. No change to this amount is proposed for the year
ending 30 June 2012.
The aggregate fee pool and the manner in which it is apportioned amongst Non-Executive Directors is reviewed annually.
The Remuneration Committee undertakes this review and makes recommendations to the Board. In conducting the
review, the Remuneration Committee takes market benchmarking advice from independent remuneration consultants.
2011 Non-Executive Director fees
There was no increase in Non-Executive Directors fees during the year end 30 June 2011. Non-executive director fees
were last increased in January 2010.
Current base (Director) fees and Committee1 fees per year are set out below:
Board
Audit and Risk Committee
Nomination Committee
Remuneration Committee
Chair fee $
455,000
40,000
10,000
25,000
Member fee $
170,000
20,000
10,000
20,000
The Sustainability Committee was disbanded on 11 August 2010 and is no longer a separate Committee of the Board. The Chair
1
fee of $25,000 per year and the member fee of $15,000 per year ceased on 11 August 2010.
The Chairman of the Board does not receive any additional fees for his Committee responsibilities.
Non-Executive Directors are permitted to be paid additional fees for special duties or exertions. No such fees were paid
during the year ended 30 June 2011.
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.
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 Non-Executive Directors are entitled to any retirement benefits
The following table details the retirement benefit amounts provided and expensed in the years ended 30 June 2011 and 30
June 2010:
2011 financial year $
2010 financial year $
Accrued – Geoff Cosgriff
Accrued – Jeremy Davis
16,301
27,155
No retirement benefits were paid out in the current year (2010: $nil).
ShareLink Investment Tax Deferred Plan
15,210
25,338
Under the ShareLink Investment Tax Deferred Plan, Non-Executive Directors are able to sacrifice up to 50 per cent of their
pre-tax fees to acquire up to $5,000 of Transurban securities per annum through a tax deferred arrangement.
199 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
C
REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS
Details of Non-Executive Directors’ remuneration for the years ended 30 June 2011 and 30 June 2010 are set out below:
Short-term benefits
Post-employment benefits
Total
Fees
Superannuation
Contributions1
Retirement benefits2
199,828
167,818
201,920
175,084
394,593
194,826
196,552
155,739
188,153
171,880
Current Non-Executive Directors
Lindsay Maxsted (Appointed Chairman 12 August 2010)
2011
2010
Neil Chatfield
2011
2010
Geoff Cosgriff
2011
2010
Jeremy Davis
2011
2010
Bob Edgar
2011
2010
Rodney Slater
155,268
2011
2010
125,975
Bob Officer (Appointed 20 August 2010)
141,066
2011
2010
-
Samantha Mostyn (Appointed 8 December 2010)
2011
2010
Jennifer Eve
2011
2010
James Keyes
2011
2010
Former Non-Executive Directors
David Ryan (Resigned 12 August 2010)
49,199
2011
401,546
2010
1,747,043
Total 2011
1,509,780
Total 2010
93,996
-
91,484
77,315
34,984
39,597
35,513
17,534
17,985
15,104
16,934
15,469
27,750
22,500
17,690
14,016
-
10,932
12,696
-
8,460
-
-
-
-
-
4,428
36,139
141,456
131,694
-
-
-
-
16,301
15,210
27,155
25,338
-
-
-
-
-
-
-
-
-
-
-
-
430,106
212,360
217,813
182,922
221,388
202,559
256,825
222,922
214,242
169,755
155,268
136,907
153,762
-
102,456
-
91,484
77,315
34,984
39,597
-
-
43,456
40,548
53,627
437,685
1,931,955
1,682,022
1
2
Superannuation contributions are made on behalf of Non-Executive Directors at a rate of 9% 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 the Board.
200 TRANSURBAN ANNUAL REPORT 2011
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2011
(continued)
38 Key management personnel disclosures (continued)
7 GLOSSARY OF TERMS
Term
EBITDA
Definition
Earnings before interest, tax, depreciation and amortisation.
Free Cash Flow (FCF) per security
Within Transurban, FCF per security is defined as:
Key Management Personnel (KMP)
Long term incentive (LTI)
Proportional EBITDA
Proportional net costs
Relative total shareholder return (TSR)
Senior Executives
Short term incentive (STI)
Statutory EBITDA
Group’s cash flow from operating activities
Less: Cash flows from operating activities of non-100% owned
controlled assets
Add Back: Maintenance Capital Expenditure for 100% owned assets
Less: Accounting charge for maintenance provision for the year
Less: Actual tag expenditure in 100% owned assets
Add: Dividends received from non-100% owned assets
Divided by: Weighted average of securities issued.
Those persons having authority and responsibility for planning, directing and
controlling the major activities of the Group and Transurban Holdings
Limited, directly or indirectly, including any Director (whether executive or
otherwise), as listed on page 17(cid:26).
An 'at risk' component of executive remuneration under which an equity
reward may be provided to participants based on achievement of specific
performance measures over a performance period of three years.
EBITDA calculated based on percentage of Transurban asset ownership as
follows: CityLink (100%), Hills M2 (100%), LCT (100%), Roam (100%),
Tollaust (100%), M1 Eastern Distributor (75.1%), 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.
Net costs include the operating, corporate and business development costs
of the Group less non-toll revenues (fees and other).
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.
The executives who are the KMP of the Group (including the CEO), as listed
on page 1(cid:26)(cid:27).
An “at’ risk component of executive remuneration under which a cash
reward may be payable based on achievement of individual and Group
performance measures.
100% of the EBITDA from controlled entities (CityLink, Hills M2, LCT, M1
Eastern Distributor, Roam, Tollaust) regardless of Transurban’s ownership
percentage. It excludes the EBITDA contribution from non-controlled
interests (M5 Motorway, Westlink M7 and DRIVe).
Total employment cost (TEC)
Base salary and other benefits including superannuation paid to an
executive.
201 TRANSURBAN ANNUAL REPORT 2011
In the directors' opinion:
Transurban Holding Trust
Directors' declaration
30 June 2011
(a)
(b)
the financial statements and notes set out on pages 132 to 201 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 2011 and of its performance for
the financial year ended on that date.
(ii)
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.
Lindsay P Maxsted
Director
Christopher J Lynch
Director
Melbourne
3 August 2011
202 TRANSURBAN ANNUAL REPORT 2011
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 2011, 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 Group). The Group
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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Liability limited by a scheme approved under Professional Standards Legislation
203 TRANSURBAN ANNUAL REPORT 2011
Independent audit report to the members of
Transurban Holding Trust (continued)
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
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 Group’s financial position as at 30 June 2011 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
3 August 2011
204 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited and
Controlled Entities
ARBN 121 746 825
Annual financial report
for the year ended 30 June 2011
205 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited ARBN 121 746 825
Annual financial report - 30 June 2011
Directors' report
Auditor's Independence Declaration
Financial statements
Directors' declaration
Independent auditor's report to the members
Page
20(cid:26)
23(cid:25)
23(cid:26)
28(cid:23)
28(cid:24)
206 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
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 or the Company) and the entities it controlled at the end of, or
during, the year ended 30 June 2011.
Transurban International Limited 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 Holding 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 the Company during the whole of
the financial year and up to the date of this report.
Non-executive directors
Lindsay P Maxsted (Appointed 12 August 2010)
David J Ryan AO (Resigned 12 August 2010)
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. The Group 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 $28,448,000 (2010: $34,112,000).
Key highlights for the Group during the period were as follows:
Pocahontas 895 (Virginia USA)
Toll revenue for the year ended 30 June 2011 for Pocahontas 895 increased 2.4 per cent to $14.1 million. Average
daily trips increased 1.8 per cent.
On 13 January 2011 the Richmond Airport Connector, linking Richmond International Airport with Pocahontas 895, was
opened for traffic. This completed a two year construction of the connector.
Capital Beltway Express (Virginia USA)
Construction on the Capital Beltway (I-495) High Occupancy Toll (HOT) lane project is now more than 70 per cent
complete after a very strong construction period. The construction project remains on budget and on track for
completion in late 2012, with first tolls expected in 2013.
Other corporate activities
Organisational restructure
On 27 January 2011 Transurban announced a restructured Executive Committee. The amended organisational
structure is aligned with Transurban’s focus to ensure clear market based accountability at the senior executive level,
and concentrate efforts around regional and market based relationships with the respective Government customers
and communities Transurban serves.
207 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
Review of operations (continued)
Cost Control
Cost control and efficiency continues to be a strong focus of the Group for year ended 30 June 2011. The Group has a
long term target of flat nominal costs.
Significant changes in the state of affairs
There were no significant changes to the state of affairs of the Group 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 2011 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 assets.
Information on directors
Lindsay P Maxsted Dip Bus, FCA.
Chairman and independent non-executive director
Term of office
Director and Chairman since 12 August 2010.
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 BHP Billiton
Limited and BHP Billiton plc, 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 interests in 30,000 Stapled Securities.
Transurban Board Committee membership
Chairman of the Nomination Committee and a member of the Audit and Risk Committee.
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 resourcing 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, CFO Europe, and Managing Director of KAAL Australia Limited.
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 an AFL Commissioner.
Chris holds interests in 255,401 Stapled Securities and 1,100,932 Performance Awards.
208 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
Information on directors (continued)
Jennifer S Eve BA, LLB (Hons), LLM in Corporate Law.
Independent non-executive director
Term of office
Director 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 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 secretaries
Amanda Street LLB (Hons), BComm.
Amanda joined Transurban in September 2008 and was appointed as Company Secretary in February 2011. Before
joining Transurban, Amanda was Assistant Company Secretary at SP Ausnet and Senior Corporate Counsel at
National Australia Bank. She has over 10 years of legal, company secretarial and other relevant experience. Prior to
her in-house work, Amanda was a solicitor specialising in M&A work with Australian law firm Mallesons.
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.
Appleby Services (Bermuda) Ltd
Appleby Services (Bermuda) Ltd is a wholly owned subsidiary of the global law firm Appleby and is licensed to conduct
trust business by the Bermudan Monetary Authority. Appleby Services (Bermuda) Ltd, through its corporate
administration and trust services divisions, provides company secretarial services to TIL.
209 TRANSURBAN ANNUAL REPORT 2011
Meetings of directors
The number of meetings of the Board held during the year ended 30 June 2011, and the numbers of meetings attended by
each director are set out in the following table:
Transurban International Limited
Directors' report
30 June 2011
(continued)
Lindsay P Maxsted (Appointed 12 August 2010)
David J Ryan (Resigned 12 August 2010)
James M Keyes
Jennifer S Eve
Christopher J Lynch
# = Number of meetings held during the time the director held office
Attended Held#
3
1
4
4
4
3
1
4
4
4
The number of meetings of each board committee held during the year ended 30 June 2011, 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)
Attended Held# Attended Held# Attended Held# Attended Held#
Lindsay P Maxsted (Appointed 12 August 2010)
David J Ryan (Resigned 12 August 2010)
James M Keyes
Jennifer S Eve
Christopher J Lynch
7
2
*
*
7
7
2
*
*
*
5
2
*
*
11
*
2
*
*
*
3
*
*
*
3
3
*
*
*
*
1
1
*
*
1
1
1
*
*
*
# = Number of meetings held during the time the director held office or was a member of the committee
* = 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 and Lindsay Maxsted 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 meetings during the year.
(4)The Sustainability Committee was disbanded on 10 August 2010 and is no longer a separate committee of the Board.
Chris Lynch was not a member of the Sustainability Committee but attended the meeting during the year.
210 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
2011 REMUNERATION REPORT
INTRODUCTION
The Remuneration Report, prepared in accordance with section 300A of the Corporations Act 2001, 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 and
Transurban Holdings Limited for the year ended 30 June 2011, and are listed in the tables below:
Senior Executives
Name and position
Chris Lynch, Executive Director, Chief Executive Officer (CEO)
Brendan Bourke,1 Chief Operating Officer
Ken Daley, President, International Development
Megan Fletcher,1 Group General Manager, Public Affairs
Andrew Head,1 Group General Manager, NSW
Samantha Hogg,1 Group General Manager, Corporate Services
Tom Honan, Chief Financial Officer
Michael Kulper, President, North America
Elizabeth Mildwater,1 Group General Manager, Victoria
Non-Executive Directors
Name
Lindsay Maxsted (appointed as Chairman on 12 August 2010)
David Ryan (resigned as Chairman on 12 August 2010)
Jennifer Eve
James Keyes
1
As part of the Group’s organisational restructure announced on 27 January 2011, Brendan Bourke ceased as Chief Operating
Officer with effect from 28 February 2011 and Megan Fletcher ceased as Group General Manager, Public Affairs with effect from
4 February 2011. Andrew Head changed role from Group General Manager, Strategy and Development to Group General
Manager, NSW, Samantha Hogg (previously Acting Group General Manager, People, Legal and Governance) was appointed as
Group General Manager, Corporate Services, and Elizabeth Mildwater changed role from Group General Manager, People Legal
and Governance to Group General Manager, Victoria, all with effect from 1 February 2011. Elizabeth Mildwater resigned as
Company Secretary on 9 February 2011.
A comprehensive review of the Group’s remuneration framework has been undertaken in light of feedback received from
security holders and other stakeholders on the Group’s remuneration arrangements, market expectations and regulatory
developments. As a result, the Board has approved a new remuneration framework for the year ending 30 June 2012,
details of which are summarised on page 21(cid:21) and will be disclosed in detail in next year’s Remuneration Report.
CONTENTS
The remuneration information contained in the Remuneration Report is presented as follows:
1
2
3
4
5
6
7
Changes to the remuneration framework for the year ending 30 June 2012
Remuneration governance
Remuneration in context
CEO and Senior Executive remuneration for the year ended 30 June 2011
Link between Group performance, security holder wealth and remuneration
Non-Executive Director remuneration for the year ended 30 June 2011
Glossary of terms
All values in this Remuneration Report are in Australian dollars, unless otherwise stated.
Page 21(cid:21)
Page 21(cid:22)
Page 21(cid:22)
Page 21(cid:23)
Page 2(cid:21)(cid:28)
Page 23(cid:20)
Page 23(cid:22)
211 TRANSURBAN ANNUAL REPORT 2011
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Directors' report
30 June 2011
(continued)
1 CHANGES TO THE REMUNERATION FRAMEWORK FOR THE YEAR ENDING 30 JUNE 2012
A NEW REMUNERATION FRAMEWORK
Following the 2010 Annual General Meeting (AGM), the Remuneration Committee on behalf of the Board undertook a
comprehensive review of the Group’s remuneration framework for Senior Executives and senior managers, with
assistance from independent advisers Ernst & Young. Feedback received from security holders and other stakeholders,
market expectations and regulatory developments were all considered as part of the review.
In undertaking the review, the Remuneration Committee sought to balance the needs and expectations of security holders
and other stakeholders with business strategy considerations and the need to remunerate Senior Executives and Senior
Managers appropriately in a competitive marketplace, and to focus on linking performance and reward whilst taking into
account the particular challenges facing the Group.
The review led to the Remuneration Committee recommending, and the Board approving, the adoption of a new
remuneration framework for Senior Executives and Senior Managers effective 1 July 2011. An overview of the new
framework for Senior Executives is set out below.
OVERVIEW OF THE NEW REMUNERATION FRAMEWORK FOR SENIOR EXECUTIVES
Remuneration mix
To more closely align Senior Executives’ remuneration packages with security holder return and business strategy,
variable and equity based components of total target remuneration will increase in the year ending 30 June 2012. With the
introduction of STI deferral (see below), Senior Executives’ equity exposure will increase as a percentage of total target
remuneration.
CEO
Other Senior Executives
*With 30% STI deferral (see below).
% of total Senior Executive remuneration (annualised) (at
target) - 2012
Fixed (TEC)
Variable (performance based)
33.3
45
STI
33.3*
30*
LTI
33.3
25
The transition to the desired remuneration mix will be achieved over a maximum period of three years. Any remuneration
package increases will be directed to STI/STI deferral.
Short term incentive (STI)
In the year ending 30 June 2012, a mandatory 30 per cent STI deferral into securities will be introduced for Senior
Executives (including the CEO). The deferral period will be three years (including a one year performance period). This
component of remuneration will be subject to clawback. An example of a clawback event is misconduct or misstatement of
financial results. These changes reflect security holder expectations. They will also act as a positive retention tool.
Long term incentive (LTI)
The performance measures for the LTI plan for the year ending 30 June 2012 will change to the following:
50 per cent relative Total Shareholder Return (TSR) measured against a bespoke comparator group comprising
companies in the transport, utilities, real estate, construction and infrastructure Global Industry Classification
Standards (GICS) sectors of the ASX150; and
50 per cent Free Cash Flow (FCF) per security which reflects the Company’s focus on the maximisation of free
cash to drive security holder return. The definition of FCF per security is outlined in the glossary of terms on
page 23(cid:22). The FCF calculation is included in Note 21 Distributions in the Transurban Holdings Limited financial
statements.
These measures have been selected as they are meaningful for Senior Executives and reflect security holder
expectations.
The treatment of unvested LTI awards (granted in the year ending 30 June 2012) on a change of control will now be
subject to Board discretion.
212 TRANSURBAN ANNUAL REPORT 2011
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Directors' report
30 June 2011
(continued)
2 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 may seek and consider advice from independent remuneration consultants where appropriate. Any advice
from consultants is used to guide the Remuneration Committee and the Board, but does 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 2011, the Hay Group, an independent external consultant, were engaged to provide market
remuneration data to assist the Remuneration Committee in making decisions regarding Senior Executive remuneration.
In addition, the Remuneration Committee engaged Ernst & Young to provide market remuneration data and conduct an
independent review of the Group’s new remuneration framework for the year ending 30 June 2012.
3 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 for quality assets 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 100 per cent 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 per cent), the M5 (50 per cent), and the M7 (50 per cent).
In North America, the Group has interests in two assets, Pocahontas 895 (75 per cent) and the Capital Beltway Express
(67.5 per cent), 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 Group’s 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 Group’s remuneration framework is determined having regard to this.
213 TRANSURBAN ANNUAL REPORT 2011
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Directors' report
30 June 2011
(continued)
4 CEO AND SENIOR EXECUTIVE REMUNERATION FOR THE YEAR ENDED 30 JUNE 2011
A
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
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 remuneration
Total Employment Cost:
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' remuneration
Short Term Incentive:
Rewards tied to pre-determined annual individual and Group 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 achievement of internal and external performance targets.
Encourages sustainable performance in the medium to longer term, and provides a retention element.
214 TRANSURBAN ANNUAL REPORT 2011
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Directors' report
30 June 2011
(continued)
B
REMUNERATION MIX
For the year ended 30 June 2011, the remuneration of the CEO and other Senior Executives was 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 were determined
by the Board (on the recommendation of the Remuneration Committee) and are set out in the table below:
Relative weightings of remuneration components1
% of total remuneration (annualised) (at target) - 2011
Fixed (TEC)
Variable (performance based)
CEO
Other Senior Executives
34
50
STI
33
25
LTI
33
25
1
These figures do not necessarily reflect the relative value derived from each of the components, which depends on actual
performance against targets for the variable components (refer below). The above STI percentages are based on achieving the
relevant performance targets. The above LTI percentages are based on the maximum LTI available at the time of grant to each
Senior Executive if the awards granted vest at the end of the performance period. The table above reflects the percentage value
of remuneration which consists of awards for each Senior Executive, apart from the CEO’s LTI granted in the year ended 30 June
2011 which was granted in cash, subject to the same terms and conditions as the LTI plan offered to other Senior Executive. The
CEO’s LTI grant for all other years has consisted of awards.
C
FIXED REMUNERATION - TOTAL EMPLOYMENT COST (TEC)
What is TEC?
Fixed remuneration is represented by total employment cost (TEC) comprising base salary, superannuation contributions
and benefits such as salary continuance, death and disability insurance.
Fixed 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.
The Board instituted a salary freeze for the CEO and other Senior Executives for the year ended 30 June 2010. The
Board determined that this freeze should continue in the year ended 30 June 2011, with three exceptions. TEC increases
were given to three Senior Executives during the year. These executives changed roles as a result of the Group’s
organisational restructure announced on 27 January 2011. The revised remuneration was based on market remuneration
data provided by the Hay Group.
How is TEC determined?
TEC levels are reviewed annually by the Remuneration Committee at the beginning of each financial year with reference to
an individual’s role, experience and performance, as well as relevant comparative market data. Independent remuneration
consultants and surveys, internal considerations and market conditions also provide guidance. TEC is also reviewed on a
change in role.
D
SHORT TERM INCENTIVE (STI)
How did the STI plan operate?
The STI plan was an annual cash incentive plan linked to the attainment of specific pre-determined Group, team and
individual performance measures. All permanent Group employees, including the CEO and other Senior Executives,
participated in the STI plan.
For the year ended 30 June 2011, the CEO had a target STI opportunity of 100 per cent of his annualised TEC. Other
Senior Executives had a target STI opportunity of 50 per cent of their annualised TEC.
The STI plan put a significant proportion of remuneration 'at risk' subject to meeting specific targets linked to the Group's
business objectives. The STI plan focused participants on achieving performance targets and provided an incentive for
high performance. This aligned executive interests with the Group's financial performance, as well as management
principles and the Group’s cultural values.
215 TRANSURBAN ANNUAL REPORT 2011
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Directors' report
30 June 2011
(continued)
What were the STI 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 2011. They were chosen to provide a balance between corporate, individual, operational, strategic, financial and non
financial aspects of performance and are described below:
STI performance measures for the year ended 30 June 2011
Performance measure and %
of target award measure
applies to
Group performance targets
50%
Target(s) for performance measure
To ensure that STI payments were aligned with business performance and the creation
of security holder value, there were two Group performance targets:
growth in proportional EBITDA; and
cost management based on proportional net costs.
Each accounted for 50% of the Group performance targets.
Shared Senior Executive Safety
KPI
To achieve the business objective of creating and maintaining a safety culture, the
Senior Executive team shared a safety KPI.
10%
For Senior Executives based in Australia, outcomes were required in relation to:
a reduction in lost time injury frequency rates; and
achievement of AS4801 certification.
For Senior Executives based in the US, outcomes were required in relation to:
maintaining zero lost time injury occurrence;
development of appropriate OHS plans; and
the completion of risk assessments.
Individual key performance
indicators (KPIs)
40%
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 outcomes
through their actions.
Who sets the STI performance measures?
The CEO's individual KPIs are set by the Board. All other Senior Executives’ individual KPIs and the shared Senior
Executive safety KPI are set by the CEO and approved by the Board. The Board sets the Group performance targets.
216 TRANSURBAN ANNUAL REPORT 2011
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Directors' report
30 June 2011
(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 one of the primary measures that the Board uses to assess the operating performance of the
Group, with an aim to maintain a focus on the Group’s operating results and associated cash generation. 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.
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 provides a better reflection of the underlying
performance of the Group’s assets than statutory EBITDA. The EBITDA calculation from the statutory accounts would not
include the EBITDA contribution of the M5, M7 or DRIVe (equity accounted in the statutory results), which are meaningful
contributors to the Group’s performance. Proportional EBITDA figures used to assess performance are included in Note 2
Segment information in the Transurban Holdings Limited financial statements.
The Board can decide to exclude specific items from proportional EBITDA to provide an underlying result when
determining performance incentives. These items reflect one-off, non recurring items, both revenue and expenses, that will
not contribute to the Group’s performance in future periods. For the year ended 30 June 2011, the Board has excluded
the release of the M4 maintenance provision, which would have increased the proportional EBITDA growth outcome.
Since 2009, proportional EBITDA has been used by the Group as a performance measure for STIs.
What is proportional net costs and why does Transurban use it as a performance measure?
The STI cost management performance 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 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-related performance measure 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. Proportional net costs was first used by the Group as an STI
performance measure in the year ended 30 June 2010.
What were the proportional EBITDA and proportional net costs targets for the year ended 30 June 2011?
The proportional EBITDA and proportional net costs targets for the year ended 30 June 2011 were set against the
previous year’s results and the Group’s 30 June 2011 budget.
The targets for the year ended 30 June 2011 are set out in the table below:
Proportional EBITDA result
% of STI that vests*
Proportional net costs result
Result is less than 7% above the
underlying result for the year ended 30
June 2010
Result is 7% above the underlying result
for the year ended 30 June 2010
Budgeted proportional EBITDA is
achieved for the year ended 30 June
2011 (which was 11.4% growth on 30
June 2010 result)
Result is 17% above the underlying
result for the year ended 30 June 2010
0%
50%
100%
150%
* straight line vesting applies between 50-100% and 100-150%
Actual underlying proportional net costs are over
budget for the year ended 30 June 2011
Actual underlying proportional net costs on budget
for the year ended 30 June 2011
Actual underlying proportional net costs are 5%
below the budgeted underlying proportional net
costs for the year ended 30 June 2011
Actual underlying proportional net costs are 15%
below budgeted underlying proportional net costs
for the year ended 30 June 2011
217 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
How are the varying levels of performance achievement rewarded?
STI targets are designed to differentiate and reward high performance.
50 per cent of the available STI vests for threshold performance, 100 per cent vests for on-target performance and up to
an additional 50 per cent can be earned for outperformance. These targets are consistent for all of the Group's eligible
employees.
Given that STI awards are contingent on performance across a range of measures, maximum STI awards can only be
achieved for performance that is strong on all measures.
How is performance assessed?
Group performance targets: The performance of Senior Executives against the Group performance targets is assessed by
the Board. The results are independently reviewed.
Shared Senior Executive Safety KPI: 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 independently
reviewed.
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 assessment.
Once KPIs have been assessed, the Board approves STI awards. STI awards for the year ended 30 June 2011 will be
paid in August 2011.
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 ceased employment?
Under the CEO’s employment contract in place for the year ended 30 June 2011, if the CEO's employment was terminated
by the Group other than for cause, the CEO would receive a pro-rata payment of the greater of target STI or actual
performance.
Under the employment contracts in place for the year ended 30 June 2011, if a Senior Executive (excluding the CEO)
ceased employment with the Group before STI targets were achieved, the Senior Executive would generally not have been
entitled to receive any STI payment, unless otherwise determined by the Board.
218 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
STI performance outcomes for the year ended 30 June 2011
Group performance in respect of the proportional EBITDA and proportional net costs performance measures for the year
ended 30 June 2011 was assessed by the Board as 122.7 per cent.
STI payments for the CEO and other Senior Executives for the year ended 30 June 2011 are set out in the table below:
Actual STI awarded 2
Target STI paid
Target STI forfeited
Name
Chris Lynch
Brendan Bourke1
Ken Daley
Megan Fletcher1
Andrew Head
Samantha Hogg
Tom Honan
Michael Kulper
Elizabeth Mildwater
$
2,461,680
254,163
431,438
110,656
323,640
241,285
587,250
573,750
319,633
%
118
104
115
104
117
117
117
115
115
%
-
-
-
-
-
-
-
-
-
1
2
As part of the Group’s organisational restructure announced on 27 January 2011, Brendan Bourke and Megan Fletcher exited the
business. Their STI awards for the year ended 30 June 2011 were pro-rated and awarded based on individual performance and
Group performance which was forecasted to the end of the STI performance period.
The threshold level of performance must be achieved before any STI is awarded. Therefore, the minimum potential value of the
STI in respect of the year ended 30 June 2011 was nil. The maximum potential value of the STI was $6,435,000 (awarded for
outperformance), excluding the exited employees. The STI payments in respect of the year ended 30 June 2011 will be paid in
August 2011.
E
LONG TERM INCENTIVE (LTI)
How did the LTI plan operate?
The LTI plan aligns reward with security holder value by tying this component of executive remuneration to the
achievement of performance measures that underpin sustainable long term growth.
Participation in the LTI plan is only offered to Senior Executives, and certain other Senior Managers approved by the
Board. For the year ended 30 June 2011, the CEO was offered an LTI grant equivalent to 100 per cent of his annualised
TEC. Other Senior Executives were offered grants representing 50 per cent of their annualised TEC.
LTI grants are delivered in the form of Performance Awards under the Group’s Performance Awards Plan (PAP). 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
performance measures are satisfied, the Performance Awards vest and Transurban securities will be delivered to the
participant. 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. Overseas
participants were granted Performance Awards which provided for cash payments upon vesting, subject to the
achievement of performance measures.
Performance Awards that do not vest after testing of the performance measures lapse.
Performance Awards are not transferable and do not carry voting or distribution rights. However securities allocated upon
vesting of Performance Awards carry the same rights as other Transurban securities.
Security holder approval was not obtained at the 2010 AGM for the proposed grant of Performance Awards to the CEO.
The CEO was therefore entitled under his employment agreement to receive, and did receive, a cash-based award in
December 2010 subject to the terms and conditions of the LTI plan as outlined in this section.
219 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
What were the LTI performance measures?
Participants do not derive actual value from their LTI grants unless performance targets are achieved.
Performance Awards granted during the year ended 30 June 2011 are subject to the following dual performance measures
over a three year performance period:
relative TSR ranked against the S&P/ASX100 group of companies; and
growth in proportional EBITDA.
Each measure applies to 50 per cent of the available LTI award.
What were the performance targets?
Relative TSR
For Performance Awards granted during the year ended 30 June 2011, the relative TSR component of the award 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
For Performance Awards granted during the year ended 30 June 2011, the proportional EBITDA component of the award
that will vest will depend on the Group's percentage compound proportional EBITDA growth over the three financial year
performance period (including on a part-year basis), as set out below:
Proportional EBITDA vesting schedule
% compound proportional EBITDA annual growth
% of Performance Awards that vest
7%
Between 7% and 11%
11% or more
50%
Straight line vesting between 50-100%
100%
Why were these performance measures selected?
The TSR target 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 target provides evidence of the Group's growth in earnings and is linked to its overall strategic
objectives. The movement in proportional EBITDA reflects Transurban's underlying business performance and its goal of
long term sustainable growth in earnings from existing operations.
How will be the performance targets be 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.
220 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
Proportional EBITDA
The Group's proportional EBITDA percentage growth rate will be calculated based on EBITDA results included in the
Group's audited financial statements.
The measure may be adjusted to include or exclude the relevant EBITDA from acquisitions and divestments that may
occur during the performance period, in order to ring fence performance based on the known asset portfolio at the start of
the performance period. In addition, the Board may decide to exclude specific items from proportional EBITDA to provide
an underlying result when determining performance incentives. These adjustments reflect one-off, non recurring items,
both revenue and expenses, that will not contribute to the Group’s performance in future periods. The result will be subject
to Board approval.
The Board believes the above methods of assessment are rigorous and provide an appropriate assessment of the Group’s
performance against the performance measures.
For further proportional EBITDA information see Note 2 Segment information in the Transurban Holdings Limited financial
statements.
What if a Senior Executive ceases employment?
Under the CEO’s employment contract in place for the year ended 30 June 2011, if the CEO's employment was terminated
by the Company other than for cause, the CEO would receive a pro-rated Performance Award calculated from his
appointment anniversary date to his termination date, vesting in accordance with the performance measures under LTI
plan as at the time of grant. If the CEO ceased employment with the Group before the performance measures are tested,
then he would be entitled to retain any unvested Performance Awards or cash-based awards, which would vest in
accordance with the performance measures under the LTI plan as at the time of grant.
Under the terms of the employment contracts in place for the year ended 30 June 2011, if Senior Executives cease
employment with the Group before the performance measures are tested, their unvested Performance Awards will
generally lapse, unless the Board determines otherwise.
What will happen 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 granted before 30 June 2011 will automatically vest. Performance Awards that
vest following a change of control will not generally be subject to restrictions on dealing.
What was the grant, movement in the number and value of Performance Awards by Senior Executives during the
year ended 30 June 2011?
These are summarised in tables below.
Performance Awards granted in the year ended 30 June 2011
Performance criteria
Grant date
Vesting date
Fair value of awards
at grant date1 ($)
VWAP at grant date
($)
TSR
EBITDA
1-Nov-10
1-Nov-10
1-Nov-13
1-Nov-13
3.23
4.62
5.31
5.31
1
The fair value was calculated as at the grant date of 1 November 2010. An explanation of the pricing model used to calculate
these values is set out in Note 28 to the financial statements.
221 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
Performance Awards granted in the year ended 30 June 2011
Number of performance
awards granted 2
Value at grant date
Maximum total value of
grant yet to vest 3
Name
Chris Lynch1
Brendan Bourke4
Ken Daley
Megan Fletcher4
Andrew Head
Samantha Hogg
Tom Honan
Michael Kulper
Elizabeth Mildwater
-
120,972
123,441
52,668
90,523
65,835
164,587
170,433
90,523
$
-
474,815
484,506
206,722
355,303
258,402
646,004
668,950
355,303
$
-
51,940
484,506
22,612
355,303
258,402
646,004
668,950
355,303
Performance Awards lapse where the performance measures 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
The CEO was granted a cash-based award of 684,683 units, linked to Transurban’s security price, on 23
December 2010 subject to the terms and conditions of the LTI plan offered for the year ended 30 June 2011.
The vesting date, fair value at grant date and VWAP at grant date are equivalent to the information outlined in
the table above. The value of this award at the grant date was $2,687,381 and the maximum total value of the
grant yet to vest is $2,687,381.
The grants made to Senior Executives constituted their full LTI entitlement for the year ended 30 June 2011
and were made on 1 November 2010 on the terms summarised above. Performance Awards vest subject to
performance over the period from 1 November 2010 through to 1 November 2013.
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 measures are not met, is nil.
As part of the Group’s organisational restructure, Brendan Bourke and Megan Fletcher exited the business.
The Board exercised its discretion to allow Brendan Bourke and Megan Fletcher to retain a pro-rated
proportion of their year ended 30 June 2011 Performance Awards (13,233 Performance Awards retained by
Brendan Bourke and 5,761 Performance Awards retained by Megan Fletcher). These awards are subject to
post-employment vesting, to be tested at the normal vesting date based on achievement of the performance
measures. Brendan Bourke forfeited 107,739 Performance Awards. The value of the forfeited awards at the
grant date was $422,876. Megan Fletcher forfeited 46,907 Performance Awards. The value of the forfeited
awards at the grant date was $184,110.
222 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
F
LEGACY LTI PLANS
The Group has a number of legacy LTI plans that are no longer offered but which have existing participants. Details of
these plans are set out below:
FY2008 Performance Rights Plan (PRP) (Performance Rights for Australian and overseas participants)
Plan terms and conditions
Grant date:
Vesting date:
Fair value per right at grant date:
Spot price at grant date:
Details of plan
1 Nov 2007
1 Nov 2010
TSR: $3.50, Statutory EBITDA and DRIVe
management fee $5.96
$7.29
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 measures. Each Performance Right entitled
the participant to one fully paid Transurban security. Performance Rights which did not vest after testing of the
performance measures lapsed.
Overseas participants were granted Performance Rights which provided for cash payments upon vesting, subject to the
achievement of performance measures.
Performance measures and targets
For Australian participants, the PRP had two performance measures, statutory EBITDA and relative TSR against the
constituents of the S&P/ASX 100, each applying to 50 per cent of the award.
For overseas participants, the PRP had two performance measures, DRIVe management fee growth and relative TSR
against the constituents of the S&P/ASX 100, each applying to 50 per cent of the award.
TSR vesting schedule
The Group's relative TSR ranking in the S&P/ASX100 Index
% of Performance Rights 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%
Statutory EBITDA and DRIVe management fee vesting schedule
% compound statutory EBITDA annual growth
% of Performance Rights that vest
10%
Between 10% and 15%
15% or more
50%
Straight line vesting between 50-100%
100%
% compound growth of DRIVe management fee
% of Performance Rights that vest
20%
Between 20% and 25%
25% or more
50%
Straight line vesting between 50-100%
100%
223 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
Result - movements in plan for the year ended 30 June 2011
The 2008 award matured on 1 November 2010. 84.44 per cent of awards subject to the TSR performance measure
vested based on the Group’s ranking against the constituents of the S&P/ASX 100. 15.56 per cent of the TSR awards
were forfeited. None of the awards subject to the statutory EBITDA growth or DRIVe management fee growth measures
vested as the prescribed performance targets were not met. Therefore, 100 per cent of the EBITDA/DRIVe awards were
forfeited.
The following Transurban securities and Performance Rights lapsed and vested during the year ended 30 June 2011 for
the following KMP:
Name
B Bourke
K Daley
M Fletcher
A Head
M Kulper
Lapsed
Vested
Number
Value ($)
Number
Value ($)
53,653
45,398
6,438
8,584
44,362
301,999
255,536
36,237
48,319
249,705
39,204
33,173
4,704
6,273
32,416
137,215
116,104
16,465
21,954
113,455
FY2009 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 received a grant of Performance Rights at no cost which entitles participants to receive
Transurban securities which vest at the end of a three year vesting period.
Performance targets
Vesting is based on service during the three year performance period.
Movements in plan for the year ended 30 June 2011
The Board exercised its discretion in awarding 19,146 securities to Brendan Bourke, and 19,146 securities to Megan
Fletcher. The value of these securities under the Plan was $81,753 and $81,753 respectively.
FY2009 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
224 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
Details of plan
Participants were granted Performance Awards 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 measures.
Each Performance Award entitles the participant to one fully paid Transurban security. Performance Awards which do not
vest after testing of the performance measures will lapse.
The Board has discretion to award cash payments of equivalent value upon vesting.
Performance targets
The PAP has two performance measures, proportional EBITDA and relative TSR against the constituents of the S&P/ASX
100, each applying to 50 per cent of the award.
The awards are tested at the end of each year 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. A retest is applied at the end of each
subsequent year for each tranche, up to year three. At the end of the three years a cumulative test of the performance
measures is applied to any unvested awards.
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 vesting schedule
% compound proportional EBITDA annual growth
% of Performance Awards that vest
5%
Between 5% and 9%
9% or more
50%
Straight line vesting between 50-100%
100%
Movements in plan for the year ended 30 June 2011
The table below sets out the performance targets achieved over the testing period, banked awards and unvested awards
from each tranche which vested in the period.
Performance
measure
Number of
awards
banked in
tranche 1
Number of
awards banked
in tranche 2
Number of
unvested
awards from
tranches 1 & 2
which vested
in the year
Number of
awards banked
in tranche 3
Number of
unvested
awards from
tranche 3 which
vested in the
year
Number of
awards for
testing 1 Nov
2011
TSR
-
207,475
-
To be calculated
To be calculated
on 1 Nov 2011
on 1 Nov 2011
422,582
Proportional
EBITDA
181,810
182,785
6,956
185,690
19,192
-
During the year ended 30 June 2011, 9,713 performance awards were forfeited by Brendan Bourke. The value of the
forfeited awards was $36,764. 3,964 performance awards were forfeited by Megan Fletcher. The value of the forfeited
awards was $15,004. The Board exercised its discretion to allow pro-rata amounts of outstanding Performance Awards to
continue subject to the terms and conditions of the plan (75,752 awards for Brendan Bourke at a grant value of $286,721;
30,920 awards for Megan Fletcher and a grant value of $117,032).
225 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
FY2010 Performance Awards Plan (PAP) (Performance Awards for Australian and overseas participants)
Plan terms and conditions
Grant date:
Vesting date:
11 Dec 2009
11 Dec 2012
Fair value per right at grant date:
TSR $3.33, Proportional EBITDA $4.97
Spot price at grant date:
Details of plan
$5.55
Participants were granted Performance Awards that entitle them to receive Transurban securities at no cost at the end of a
three year performance period, subject to the achievement of performance measures.
Each Performance Award entitles the participant to one fully paid Transurban security. Performance Awards which do not
vest after testing of the performance measures will lapse.
The Board has discretion to award cash payments of equivalent value upon vesting.
Performance targets
The PAP has two performance measures, proportional EBITDA and relative TSR against the constituents of the S&P/ASX
100, each applying to 50 per cent of the award.
The awards are tested at the end of the three year performance period only.
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 vesting schedule
% compound statutory EBITDA annual growth
% of Performance Awards that vest
6%
Between 6% and 9%
9% or more
50%
Straight line vesting between 50-100%
100%
Movements in plan for the year ended 30 June 2011
During the year ended 30 June 2011, 64,814 Performance Awards were forfeited by Brendan Bourke. The value of the
forfeited awards was $268,980. 28,218 Performance Awards were forfeited by Megan Fletcher. The value of the forfeited
awards was $117,105.
The Board exercised its discretion to allow pro-rata amounts of outstanding Performance Awards to continue subject to the
terms and conditions of the plan (44,236 awards for Brendan Bourke at a grant value of $183,579; 19,260 awards for
Megan Fletcher at a grant value of $79,929).
226 TRANSURBAN ANNUAL REPORT 2011
G REMUNERATION PAID TO THE CEO AND OTHER SENIOR EXECUTIVES
Remuneration for the years ended 30 June 2011 and 30 June 2010
Transurban International Limited
Directors' report
30 June 2011
(continued)
Short-term employee benefits
Non-
monetary
benefits2
Cash
Bonus1
Post-
employment
benefits
Super-
annuation
Long term
benefits
Long
service
leave
Termi-
nation
benefits
Share based benefits3
Total
2009,2010 &
2008 PRP
2011 PAP 2009 EEP
702,287
706,407
-
157,544
456,860
687,093
2,033,360
2,030,860
Cash salary
and fees
Executive director, CEO
C Lynch
2011
2010
Other KMP
B Bourke4, 5
2011
2010
D Cardiff
2011
2010
K Daley
2011
2010
M Fletcher4
2011
2010
A Head
2011
2010
S Hogg
2011
2010
T Honan
2011
2010
M Kulper
2011
2010
E Mildwater
2011
2010
Total
2011
2010
1,017,385
1,126,355
6,930,103
6,902,285
540,797
410,093
433,494
134,569
227,968
296,196
541,554
376,772
976,398
976,396
2,461,680
2,740,000
18,557
6,049
47,500
50,000
21,309
-
-
-
-
-
2,054,484
1,079,488
113,261
113,261
6,750,151
6,019,658
254,163
432,400
9,097
6,049
-
-
-
-
431,438
1,271,200
123,596
53,677
110,656
185,050
323,640
271,300
241,285
49,500
587,250
648,250
573,750
725,390
319,633
273,750
3,114
-
6,232
-
5,882
-
8,178
-
8,199
-
6,311
-
58,333
49,107
-
10,420
48,995
49,004
22,917
24,481
24,243
24,330
25,000
11,292
25,000
25,000
25,662
15,080
3,342
-
-
-
9,800
8,729
19,690
52,446
25,000
24,330
5,419
-
-
13,148
958,759
-
(227,067)
24,800
132,745
346,315
36,476
132,046
1,679,366
1,690,958
-
4,443
-
268,637
-
5,425
-
(65,233)
-
(29,389)
-
351,847
11,627
14,168
-
-
(192,133)
-
345,116
280,674
27,226
27,226
1,498,152
2,402,356
-
11,697
402,234
-
(27,246)
-
55,612
95,895
36,476
27,226
831,731
640,545
-
-
-
-
-
-
-
-
-
-
(36,330)
3,488
218,883
127,201
27,226
27,226
1,131,110
845,397
-
-
-
-
151,828
65,449
21,780
21,780
882,611
282,590
640,437
406,064
121,547
121,547
2,358,810
2,177,257
(187,748)
-
554,433
415,367
34,049
34,049
2,029,558
2,362,336
-
-
207,150
87,458
27,226
27,226
1,131,536
822,857
5,303,495
6,596,840
189,166
65,775
286,788
276,693
87,049 1,360,993
268,637
110,982
(670,524)
33,713
4,360,688
2,838,678
445,267
502,198
18,293,025
17,595,801
Notes:
1
2
3
4
5
The amount represents cash STI payments to the Senior Executive for the year ended 30 June 2011, which will be paid in August
2011.
Non-monetary benefits include Group insurance, vehicle allowance and expatriate allowances (where relevant).
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 independently determined in accordance with
AASB 2. The TSR component of the Performance Awards has been valued applying a Monte-Carlo simulation to model
Transurban’s security price and TSR performance against the comparator group performance. The assumptions underpinning
these valuations are set out in Note 35 to the financial statements.
As part of the Group’s organisational restructure announced on 27 January 2011, Brendan Bourke and Megan Fletcher exited the
business. Their STI payments for the year ended 30 June 2011 are detailed on page 219. The Board exercised its discretion to
allow pro-rata amounts of outstanding LTI awards to continue subject to post-employment vesting, as detailed in the legacy LTI
plan information at sections E and F. Their termination benefits include accrued annual leave, long service leave, payment in lieu
of notice and ex-gratia payment.
Brendan Bourke participated in the ShareLink Investment Tax Exempt Plan (receiving securities to the value of $250) and the
ShareLink Tax Deferred Plan (receiving securities to the value of $1,500) for the year ended 30 June 2011.
227 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
H
ADDITIONAL REMUNERATION INFORMATION
(I) EMPLOYEE SECURITY 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 23 February 2011. 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 prior year performance and is not intended to serve
as a future incentive, there are no performance measures attached to grants of securities or cash payments under the
plan.
ShareLink Investment Tax Exempt Plan and ShareLink Investment Tax Deferred Plan
The ShareLink Investment Tax Exempt Plan provides eligible employees the opportunity to invest up to $1,000 per annum
in Transurban securities, on a tax-exempt basis. Participants contribute up to $500 by way of salary sacrifice, which is
matched by the Group dollar for dollar. Acquisitions are made quarterly in September, December, March and June each
year.
The ShareLink Investment Tax Deferred Plan provides eligible employees with the opportunity to contribute up to $5,000
per annum by way of salary sacrifice to be invested in Transurban securities. The Group matches participants’
contributions dollar for dollar up to $3,000. The plan has a maximum disposal restriction period of three years from the
date of acquisition, including a 12 month forfeiture period.
Grants under both of these plans are designed to encourage employee security holdings and to align the interests of
employees with the Group and are therefore not subject to performance measures.
(II) DEALINGS IN SECURITIES
In accordance with the Group’s Dealing in Securities Policy, employees who have awards under an LTI plan may not
hedge against those awards.
Employees and Directors are not permitted to obtain margin loans using Transurban securities (either solely or as part of a
portfolio) as security for loans.
(III) 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.
The CEO’s contract includes an entitlement to participate in an LTI plan (or equivalent cash plan). 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 in place in the year ended 30 June 2011 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.
228 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
5 LINK BETWEEN GROUP PERFORMANCE, SECURITY HOLDER WEALTH AND
REMUNERATION
The remuneration of the CEO and other Senior Executives is linked to the Group's performance through the use of targets
based on the operating performance of the business for both short and long term incentives.
A
GROUP PERFORMANCE AND STI
For the year ended 30 June 2011, 25 per cent of Senior Executive STIs were determined with reference to proportional
EBITDA and 25 per cent with reference to proportional net costs as discussed on page 21(cid:25).
Proportional EBITDA
The underlying proportional EBITDA result for the year ended 30 June 2011 was $718.7 million, a 13.1 per cent increase
from the prior year result. This result exceeded the Group’s budget by 1.4 per cent, allowing the payment of 116.9 per
cent 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.
Refer to the graph over the following page which outlines the Group’s proportional EBITDA results over the five-year
period from 1 July 2006 to 30 June 2011.
Proportional net costs
The underlying proportional net costs result for the year ended 30 June 2011 was $172.3 million, a 1.2 per cent
improvement from the prior year result. This result was below the Group’s budget by 9.3 per cent, resulting in the payment
of 128.6 per cent 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 also contributed to the cost reductions.
Safety
For the year ended 30 June 2011, the safety performance measure resulted in the payment of 150 per cent of the eligible
STI for Senior Executives based in Australia, and 133 per cent for the eligible STI for Senior Executives based in the US.
The safety KPI target included several components as discussed on page 21(cid:25) of which a reduction in lost time injury
frequency rates was one element. In the year ended 30 June 2011, lost time injury frequency rates decreased from 3.64
to 1.17.
229 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
B
GROUP PERFORMANCE AND LTI
For the year ended 30 June 2011, LTIs were linked to proportional EBITDA and relative TSR. The performance targets for
the current plans are outlined on page 2(cid:20)(cid:28) - 22(cid:21).
Proportional EBITDA
The performance target for proportional EBITDA of between 7 per cent and 11 per cent compound growth was 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, LTI targets have been based on cumulative performance in relation to proportional EBITDA over preceding
years. The following graph shows the growth in proportional EBITDA from 1 July 2006. 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
and includes Lane Cove Tunnel from 10 August 2010.
The table below illustrates the Group's annual compound growth for the relevant non-market measure of each plan:
Long term incentive plan
Performance Awards Plan 2009
Performance Awards Plan 2010
Performance Awards Plan 2011
TSR performance
Group Compound growth as at 30 June 2011
8.2%
10.2%
15.2%
The table below summarises the relative TSR performance over the performance period to date in respect of unvested
LTIs:
LTI plan
Group TSR growth from start of
performance period to 30 June 2011
Transurban's indicative percentile
ranking compared to comparator
group
Performance Awards Plan 2009
Performance Awards Plan 2010
Performance Awards Plan 2011
13.87%
3.12%
2.81%
50.00%
48.84%
60.44%
230 TRANSURBAN ANNUAL REPORT 2011
Distributions paid over the past five financial years are summarised in the table below:
Amount (cents)
14.00
13.00
12.00
12.00
11.00
11.00
29.00
28.00
27.50
26.50
25.50
Ex date
24 Jun 2011
23 Dec 2010
24 Jun 2010
23 Dec 2009
24 Jun 2009
23 Dec 2008
24 Jun 2008 *
21 Dec 2007 *
29 Jun 2007 *
22 Dec 2006 *
26 Jun 2006 *
Transurban International Limited
Directors' report
30 June 2011
(continued)
Payment date
11 Aug 2011
15 Feb 2011
27 Aug 2010
26 Feb 2010
28 Aug 2009
27 Feb 2009
29 Aug 2008
27 Feb 2008
27 Aug 2007
28 Feb 2007
25 Aug 2006
* Distributions made under a previous distribution policy no longer applied by the Group.
6 NON-EXECUTIVE DIRECTOR REMUNERATION FOR THE YEAR ENDED 30 JUNE 2011
A
REMUNERATION POLICY
The diagram below sets out the key objectives of the Group’s Non-Executive Director policy and how they are
implemented through the Group’s remuneration framework:
Securing and retaining talented,
qualified Directors
Non-Executive Director fee levels are
set with regard to:
the responsibilities and risks
attached to the role;
the time commitment expected
and the workload;
Director experience and
expertise; and
market benchmark data
provided by independent
remuneration consultants.
Preserve independence and
impartiality
Aligning Non-Executive Director and
security holder interests
Non-Executive Directors are
encouraged to hold
Transurban securities.
Non-Executive Director
remuneration consists of base
(Director) fees and Committee
fees.
No element of Non-Executive
Director remuneration is ‘at
risk’ – that is, fees are not
based on the performance of
the Group or individual
Directors from year to year.
B
REMUNERATION ARRANGEMENTS
Maximum aggregate remuneration
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 of $2,400,000 per year (inclusive of superannuation
contributions) was approved by security holders at the 2010 AGM. No change to this amount is proposed for the year
ending 30 June 2012.
231 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
The aggregate fee pool and the manner in which it is apportioned amongst Non-Executive Directors is reviewed annually.
The Remuneration Committee undertakes this review and makes recommendations to the Board. In conducting the
review, the Remuneration Committee takes market benchmarking advice from independent remuneration consultants.
2011 Non-Executive Director fees
There was no increase in Non-Executive Directors fees during the year end 30 June 2011. Non-Executive Director fees
were last increased in January 2010.
Current base (Director) fees and Committee1 fees per year are set out below:
Board
Audit and Risk Committee
Nomination Committee
Remuneration Committee
Chair fee $
455,000
40,000
10,000
25,000
Member fee $
170,000
20,000
10,000
20,000
The Sustainability Committee was disbanded on 11 August 2010 and is no longer a separate Committee of the Board. The Chair
1
fee of $25,000 per year and the member fee of $15,000 per year ceased on 11 August 2010.
The Chairman of the Board does not receive any additional fees for his Committee responsibilities.
Non-Executive Directors are permitted to be paid additional fees for special duties or exertions. No such fees were paid
during the year ended 30 June 2011.
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.
ShareLink Investment Tax Deferred Plan
Under the ShareLink Investment Tax Deferred Plan, Non-Executive Directors are able to sacrifice up to 50 per cent of their
pre-tax fees to acquire up to $5,000 of Transurban securities per annum through a tax deferred arrangement.
C
REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS
Details of Non-Executive Directors’ remuneration for the years ended 30 June 2011 and 30 June 2010 are set out below:
Short-term benefits
Post-employment benefits
Total
Fees
Superannuation
Contributions1
Retirement benefits2
394,593
194,826
Current Non-Executive Directors
Lindsay Maxsted (Appointed Chairman 12 August 2010)
2011
2010
Jennifer Eve
2011
2010
James Keyes
2011
2010
Former Non-Executive Directors
David Ryan (Resigned 12 August 2010)
49,199
2011
401,546
2010
570,260
Total 2011
713,284
Total 2010
91,484
77,315
34,984
39,597
35,513
17,534
-
-
-
-
4,428
36,139
39,941
53,673
-
-
-
-
-
-
-
-
-
-
430,106
212,360
91,484
77,315
34,984
39,597
53,627
437,685
610,201
766,957
1
2
Superannuation contributions are made on behalf of Non-Executive Directors at a rate of 9% 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 the Board.
232 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(continued)
7 GLOSSARY OF TERMS
Term
EBITDA
Definition
Earnings before interest, tax, depreciation and amortisation.
Free Cash Flow (FCF) per security
Within Transurban, FCF per security is defined as:
Company’s cash flow from operating activities
Less: Cash flows from operating activities of non-100% owned
controlled assets
Add Back: Maintenance Capital Expenditure for 100% owned assets
Less: Accounting charge for maintenance provision for the year
Less: Actual tag expenditure in 100% owned assets
Add: Dividends received from non-100% owned assets
Divided by: Weighted average of securities issued.
Those persons having authority and responsibility for planning, directing and
controlling the major activities of the Group and Transurban Holdings Limited,
directly or indirectly, including any Director (whether executive or otherwise),
as listed on page 27(cid:25).
An 'at risk' component of executive remuneration under which an equity
reward may be provided to participants based on achievement of specific
performance measures over a performance period of three years.
EBITDA calculated based on percentage of Transurban asset ownership as
follows: CityLink (100%), Hills M2 (100%), LCT (100%), Roam (100%),
Tollaust (100%), M1 Eastern Distributor (75.1%), 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.
Net costs include the operating, corporate and business development costs of
the Company less non-toll revenues (fees and other).
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.
The executives who are the KMP of the Group (including the CEO), as listed
on page 21(cid:20).
An "at risk" component of executive remuneration under which a cash reward
may be payable based on achievement of individual and Company
performance measures.
100% of the EBITDA from controlled entities (CityLink, Hills M2, LCT, M1
Eastern Distributor, Roam, Tollaust) regardless of Transurban’s ownership
percentage. It excludes the EBITDA contribution from non-controlled
interests (M5 Motorway, Westlink M7 and DRIVe).
Key Management Personnel (KMP)
Long term incentive (LTI)
Proportional EBITDA
Proportional net costs
Relative total shareholder return (TSR)
Senior Executives
Short term incentive (STI)
Statutory EBITDA
Total employment cost (TEC)
Base salary and other benefits including superannuation paid to an executive
233 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(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 $5,000) 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 TIL, its
related practices and non-related audit firms:
Audit services
Audit and review of financial reports
Total remuneration for audit services
30 June
2011
$
30 June
2010
$
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.
234 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Directors' report
30 June 2011
(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 236.
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.
Lindsay P Maxsted
Director
Christopher J Lynch
Director
Melbourne
3 August 2011
235 TRANSURBAN ANNUAL REPORT 2011
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 2011, 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
3 August 2011
Liability limited by a scheme approved under Professional Standards Legislation
236 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited ARBN 121 746 825
Annual financial report - 30 June 2011
Financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members
Page
2(cid:22)(cid:27)
2(cid:22)(cid:28)
24(cid:19)
24(cid:20)
24(cid:21)
24(cid:22)
28(cid:23)
28(cid:24)
This financial report covers the consolidated financial statements for the consolidated entity consisting of Transurban
International Limited and its subsidiaries. The financial report is presented in the Australian currency.
Transurban International Limited is domiciled and incorporated in Bermuda. Its registered office and principal place of
business is:
22 Victoria Street
Hamilton
Bermuda
The financial report was authorised for issue by the directors on 3 August 2011. The directors have 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
237 TRANSURBAN ANNUAL REPORT 2011
Revenue
Construction revenue
Business development revenue and other 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
Share of net losses of equity accounted investments
Loss before income tax
Income tax benefit
Loss for the year
Loss is attributable to:
Owners of Transurban International Limited
Transurban International Limited
Consolidated income statement
For the year ended 30 June 2011
30 June
2011
$'000
30 June
2010
$'000
Notes
3
3
4
5
9
6
7,356
16,915
24,271
(7,062)
(12,177)
(7,356)
(26,595)
9,952
18,378
28,330
(6,816)
(16,976)
(9,952)
(33,744)
(2,324)
(5,414)
(140)
(332)
-
(13,268)
(13,268)
(17,785)
(33,517)
5,069
(28,448)
445
(13,999)
(13,554)
(19,438)
(38,738)
4,626
(34,112)
(28,448)
(28,448)
(34,112)
(34,112)
Cents
Cents
Loss per share for loss attributable to the ordinary equity holders of the
company:
Basic earnings per share
Diluted earnings per share
27
27
(2.0)
(2.0)
(2.6)
(2.6)
The above consolidated income statement should be read in conjunction with the accompanying notes.
238 TRANSURBAN ANNUAL REPORT 2011
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 (loss) for the year, net of tax
Total comprehensive income (loss) for the year
Total comprehensive income for the year is attributable to:
Owners of Transurban International Limited
Transurban International Limited
Consolidated statement of comprehensive income
For the year ended 30 June 2011
30 June
2011
$'000
30 June
2010
$'000
(28,448)
(34,112)
11,427
(6,461)
4,966
(20,163)
1,337
(18,826)
(23,482)
(52,938)
(23,482)
(23,482)
(52,938)
(52,938)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
239 TRANSURBAN ANNUAL REPORT 2011
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
Current tax liabilities
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
Consolidated balance sheet
As at 30 June 2011
30 June
2011
$'000
30 June
2010
$'000
Notes
7
8
9
10
11
12
13
14
13
15
16
16
6,574
6,345
12,919
212,197
969
12,899
226,065
13,743
9,905
23,648
242,321
681
8,615
251,617
238,984
275,265
201,721
954
4,903
13,581
221,159
227,467
-
6,831
8,962
243,260
-
-
23
23
221,159
243,283
17,825
31,982
201,661
(44,289)
(139,547)
17,825
192,977
(49,896)
(111,099)
31,982
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
240 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Consolidated statement of changes in equity
For the year ended 30 June 2011
Attributable to members of Transurban
International Limited
Contributed
equity
$'000
Reserves
$'000
Accumulated
losses
$'000
Total
equity
$'000
Notes
Balance at 1 July 2009
138,983
(31,568)
(76,987)
30,428
Comprehensive income
Loss for the year
Other comprehensive income
Total comprehensive income
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
Balance at 30 June 2010
Balance at 1 July 2010
Comprehensive income
Loss for the year
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity
as owners:
Distribution reinvestment plan
Treasury securities
Changes in fair value of share based payment
reserve
16
16
15
15
15
16
16
16
15
15
16
-
-
-
-
(18,826)
(18,826)
(34,112)
-
(34,112)
(34,112)
(18,826)
(52,938)
47,647
5,885
462
-
53,994
-
-
-
498
498
-
-
-
-
-
47,647
5,885
462
498
54,492
192,977
(49,896)
(111,099)
31,982
192,977
(49,896)
(111,099)
31,982
-
-
-
-
4,966
4,966
(28,448)
-
(28,448)
(28,448)
4,966
(23,482)
8,719
(35)
-
8,684
-
-
641
641
-
-
-
-
8,719
(35)
641
9,325
Balance at 30 June 2011
201,661
(44,289)
(139,547)
17,825
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
241 TRANSURBAN ANNUAL REPORT 2011
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest paid
Tax refunds / (income taxes paid)
Net cash inflow 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 (decrease) increase 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
Consolidated statement of cash flows
For the year ended 30 June 2011
30 June
2011
$'000
30 June
2010
$'000
Notes
33,322
(29,007)
(427)
88
3,976
40,074
(30,336)
(172)
1,796
11,362
(577)
(29,356)
(29,933)
(151)
(24,804)
(24,955)
-
(35)
31,879
(10,814)
21,030
(4,927)
13,743
(2,242)
6,574
47,647
462
33,688
(54,623)
27,174
13,581
400
(238)
13,743
26
7
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
242 TRANSURBAN ANNUAL REPORT 2011
Contents of the notes to the financial statements
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
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
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 - 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
Commitments
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
24(cid:23)
25(cid:21)
25(cid:24)
25(cid:25)
25(cid:25)
25(cid:25)
25(cid:26)
25(cid:26)
2(cid:24)(cid:27)
2(cid:24)(cid:28)
26(cid:19)
26(cid:19)
26(cid:20)
26(cid:20)
26(cid:21)
26(cid:22)
26(cid:23)
26(cid:23)
26(cid:24)
26(cid:24)
26(cid:25)
26(cid:26)
26(cid:26)
2(cid:25)(cid:27)
2(cid:25)(cid:27)
2(cid:25)(cid:28)
2(cid:25)(cid:28)
27(cid:20)
27(cid:25)
28(cid:20)
28(cid:20)
243 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
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
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 financial report includes the consolidated 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 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.
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.
(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).
244 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(d) Foreign currency translation
Functional and presentation currency
The Group's functional currency is United States Dollars and its presentation currency is Australian Dollars, being
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.
(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.
245 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(f)
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.
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 Group 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. (note 21). 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.
(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.
246 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(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 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
247 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(k)
Investments and other financial assets (continued)
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.
Impairment
The Group assesses 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.
248 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(n) Borrowings (continued)
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.
(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.
249 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
1 Summary of significant accounting policies (continued)
(q) Employee benefits (continued)
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 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 24 has been prepared on
the same basis as the consolidated financial statements, except as set out below.
Investments in subsidiaries and associates
Investments in subsidiaries and associates 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 consolidated
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 2011 the Group has a working capital deficiency represented by net current liabilities of $208.2 million
(2010: $219.6 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.
250 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(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.
(i)
AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9
and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from
1 January 2013)
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and
liabilities. The standard is not applicable until 1 July 2013 but is available for early adoption. Management are in the
process of assessing the impact on financial assets but do not believe this will be significant.
There will be no impact on the Group's accounting for financial liabilities, as the new requirements only affect the
accounting for financial liabilities that are designated as at fair value through profit or loss and the Group does not have
any such liabilities. The Group has not yet decided when to adopt AASB 9.
(ii) Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards
(effective from 1 July 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 July 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. The Group will apply the amended standard from
1 January 2011. When the amendments are applied, the Group will need to disclose any transactions between its
subsidiaries and its associates. However, there will be no impact on any of the amounts recognised in the financial
statements.
(iii) 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.
(iv) 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 2011/1 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 2011. 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.
(v) AASB 2010-6 Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets
(effective for annual reporting periods beginning on or after 1 July 2011)
In November 2010, the AASB made amendments to AASB 7 Financial Instruments: Disclosures which introduce
additional disclosures in respect of risk exposures arising from transferred financial assets. The amendments will affect
particularly entities that sell, factor, securitise, lend or otherwise transfer financial assets to other parties. They are not
expected to have any significant impact on the Company's disclosures.
251 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(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 2011 and 30 June 2010 is as follows:
30 June 2011
$'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 (loss)
Pocahontas
895
75.0%
Transurban DRIVe
Other
Transurban
DRIVe
75.0%
Capital
Beltway
67.5%
Total
Transurban
DRIVe
10,818
19
10,837
6,321
6,321
59
(18,775)
(9,194)
-
-
-
-
-
-
1,595
-
-
-
-
-
-
(4,114)
(4,114)
-
-
-
-
10,818
19
10,837
2,207
2,207
1,654
(18,775)
(9,194)
-
Corporate
Total
100.0%
-
199
199
(2,324)
(2,324)
-
(12,524)
(140)
(744)
10,818
218
11,036
(117)
(117)
1,654
(31,299)
(9,334)
(744)
Proportional profit (loss) before tax
(21,589)
1,595
(4,114)
(24,108)
(15,732)
(39,840)
Income tax benefit (expense)
Proportional net profit (loss)
10,097
(11,492)
-
1,595
(3,774)
(7,888)
6,323
(17,785)
5,069
(10,663)
11,392
(28,448)
252 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
2 Segment information (continued)
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)
421
3,624
(34,491)
(10,408)
421
Proportional profit (loss) before tax
(25,628)
3,513
(4,373)
(26,488)
(19,300)
(45,788)
Income tax benefit (expense)
Proportional net profit (loss)
8,330
(17,298)
-
3,513
(1,280)
(5,653)
7,050
(19,438)
4,626
(14,674)
11,676
(34,112)
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.
253 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(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:
Total segment revenue (proportional)
Less: Revenue of non-controlled assets
Construction revenue
Business development revenue
Other
Total 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)
Add: Foreign exchange gain
Less: Interest revenue of non-controlled assets
Total finance income (note 5)
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
30 June
2011
$'000
30 June
2010
$'000
11,036
(10,837)
7,356
16,716
-
24,271
12,069
(11,807)
9,952
18,116
-
28,330
30 June
2011
$'000
30 June
2010
$'000
1,654
-
(1,654)
-
3,624
421
(3,600)
445
30 June
2011
$'000
30 June
2010
$'000
(117)
(6,321)
4,114
(2,324)
(13,268)
(140)
(17,785)
5,069
(28,448)
(4,934)
(4,853)
4,373
(5,414)
(13,554)
(332)
(19,438)
4,626
(34,112)
254 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(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 2011 and 30 June 2010 are as
follows:
30 June 2011
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 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)
3 Revenue
Construction revenue
Business development revenue
Other revenue
Total revenue
(a) Construction revenue
Transurban
DRIVe
$'000
Corporate
$'000
Total
$'000
212,197
26,787
238,984
212,197
-
212,197
-
560
560
Transurban
DRIVe
$'000
Corporate
$'000
Total
$'000
242,321
32,944 275,265
242,321
- 242,321
-
156
156
Notes
(a)
(b)
30 June
2011
$'000
30 June
2010
$'000
7,356
16,716
199
24,271
9,952
18,116
262
28,330
Construction revenue is recognised during the development of assets for sale to third parties.
(b) Business development revenue
Business development revenue relates to the provision of development services to third parties.
255 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
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 (2011: loss)
Total finance income
Finance costs
Interest and finance charges paid/payable
Foreign exchange losses (2010: gain)
Total finance costs
Net finance income/(costs)
6 Income tax benefit
Income tax benefit
Current tax
Deferred tax
Under/(Over) provided in prior years
Deferred income tax (benefit) expense included in income tax benefit comprises:
(Increase) in deferred tax assets (note 11)
Increase in deferred tax liabilities
30 June
2011
$'000
30 June
2010
$'000
11,451
756
12,927
1,424
30 June
2011
$'000
30 June
2010
$'000
-
-
-
24
421
445
(12,524)
(744)
(13,268)
(13,999)
-
(13,999)
(13,268)
(13,554)
30 June
2011
$'000
30 June
2010
$'000
1,435
(6,784)
280
(5,069)
(9,847)
3,063
(6,784)
(949)
(2,517)
(1,160)
(4,626)
(4,716)
2,199
(2,517)
256 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
6 Income tax benefit (continued)
Numerical reconciliation of income tax benefit to prima facie tax payable
Loss before income tax benefit
Tax at the Australian tax rate of 30% (2010 - 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
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
2011
$'000
30 June
2010
$'000
(33,517)
(10,055)
(38,738)
(11,621)
(1,372)
5,335
146
597
280
(5,069)
(2,481)
7,581
3,351
(296)
(1,160)
(4,626)
30 June
2011
$'000
30 June
2010
$'000
6,574
6,574
13,743
13,743
30 June
2011
$'000
30 June
2010
$'000
3,864
2,456
-
25
6,345
6,248
2,683
945
29
9,905
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.
257 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
Ownership
interest
30
June
2011
%
30
June
2010
%
75
75
Carrying amount
30 June
2011
$'000
30 June
2010
$'000
212,197
212,197
242,321
242,321
9 Equity accounted investments
Transurban DRIVe Holdings LLC
Summarised financial information of associates
2011
Transurban DRIVe Holdings LLC
2010
Transurban DRIVe Holdings LLC
Ownership
Interest
%
75
75
Company's share of:
Assets
$'000
Liabilities
$'000
Revenues
$'000
Profit/(loss)
$'000
1,371,454
1,371,454
(1,159,257)
(1,159,257)
10,837
10,837
(17,785)
(17,785)
2,105,467
2,105,467
(1,863,146)
(1,863,146)
11,807
11,807
(19,438)
(19,438)
DRIVe
30 June
2011
$'000
30 June
2010
$'000
242,321
28,103
(17,785)
(51,869)
11,427
212,197
(24,108)
6,323
(17,785)
325,835
143,657
469,492
269,315
24,452
(19,438)
(11,845)
(20,163)
242,321
(26,488)
7,050
(19,438)
780,440
134,782
915,222
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 profits or losses
Loss before income tax
Income tax benefit
Share of expenditure commitments
Capital commitments
Operating commitments
Contingent liabilities of associates
As at the reporting date there are no contingent liabilities.
258 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
9 Equity accounted investments (continued)
Transurban DRIVe Holdings LLC
Transurban owns 75 per cent of Transurban DRIVe Holdings LLC (DRIVe). Whilst Transurban ownership represents
greater than half of the voting rights of DRIVe, it does not have power to govern its financial, investing and operating
policies and accordingly accounts for DRIVe as an associate.
A Meeting of Members of DRIVe is required to make decisions in relation to such areas as the legal and financial structure
of DRIVe, including distribution policies. 80 per cent or more of the membership interests of those voting is required to
pass a decision of the Meeting of Members. Key decisions relating to the operations and financing of DRIVe, such as
approval to bid for or dispose of an investment and approval of budgets, are made by the Investment and Management
Review Committee (IMRC). IMRC decisions also require an affirmative vote by all current members.
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. 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 - Property, plant and equipment
Equipment,
fittings and
operating
systems
$'000
4,786
(3,868)
918
918
156
(332)
(61)
681
4,712
(4,031)
681
681
560
(140)
(132)
969
4,276
(3,307)
969
At 1 July 2009
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2010
Opening net book amount
Additions
Depreciation charge
Movement in foreign exchange rates
Closing net book amount
At 30 June 2010
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2011
Opening net book amount
Additions
Depreciation charge
Movement in foreign exchange rates
Closing net book amount
30 June 2011
Cost
Accumulated depreciation
Net book amount
Included in property, plant and equipment is operating systems, equipment and fittings.
259 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
11 Deferred tax assets and liabilities
Assets
Liabilities
Net
30 June
2011
$'000
30 June
2010
$'000
30 June
2011
$'000
30 June
2010
$'000
30 June
2011
$'000
30 June
2010
$'000
The balance comprises
temporary differences
attributable to:
Accrued expenses
Provisions
Unearned income
Fixed Assets/ Intangibles
Unrealised fx
Other
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
Movements:
Opening balance at 1 July
Credited/(charged) to the
consolidated income statement
Foreign exchange movements
Closing balance at 30 June
Deferred tax assets/(liabilities) to
be recovered after more than 12
months
219
1,038
14,577
-
2,818
-
18,652
(5,753)
12,899
70
1,772
10,209
-
-
-
12,051
(3,436)
8,615
-
-
-
(5,753)
-
-
(5,753)
5,753
-
(60)
-
(8)
(3,368)
-
-
(3,436)
3,436
-
219
1,038
14,577
(5,753)
2,818
-
12,899
-
12,899
12,051
7,726
(3,436)
(1,309)
8,615
9,847
(3,246)
18,652
4,716
(391)
12,051
(3,063)
746
(5,753)
(2,199)
72
(3,436)
6,784
(2,500)
12,899
10
1,772
10,201
(3,368)
-
-
8,615
-
8,615
6,417
2,517
(319)
8,615
18,652
18,652
12,051
12,051
(5,753)
(5,753)
(3,436)
(3,436)
12,899
12,899
8,615
8,615
12 Current liabilities - Trade and other payables
Trade payables and accruals
Loans from related parties (note 22)
30 June
2011
$'000
30 June
2010
$'000
4,960
196,761
201,721
3,904
223,563
227,467
260 TRANSURBAN ANNUAL REPORT 2011
13 Provisions
Current
Employee benefits
Onerous lease provision
Non-current
Employee benefits
Total provisions
Movements in provisions
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
Notes
(a)
(b)
(a)
3,165
1,738
4,903
-
-
4,318
2,513
6,831
23
23
4,903
6,854
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Onerous lease
provision
$'000
2,513
(324)
(451)
1,738
Consolidated - 2011
Carrying amount at start of year
Amounts paid/utilised during the year
Movements in foreign exchange rates
Carrying amount at end of year
(a) Employee benefits
Employee benefits relate to the provision for annual leave, bonuses and long service leave.
(b) Onerous lease provision
An onerous lease is recognised when the Group has lease commitments on property no longer used.
14 Current liabilities - Other liabilities
Unearned income
(a) Unearned income
Notes
(a)
30 June
2011
$'000
30 June
2010
$'000
13,581
13,581
8,962
8,962
Unearned income represents amounts received in advance and will be recognised when the income is earned.
261 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
201,661
201,661
192,977
192,977
Number
'000
Number
'000
1,443,193
1,443,193
1,414,295
1,414,295
15 Contributed equity
Share capital
Fully paid ordinary shares
Fully paid ordinary shares
Movements in ordinary share capital:
Notes
Number of securities
'000
$'000
Opening balance at 1 July 2009
Distribution Reinvestment Plan
Purchase, disposal and vesting of treasury securities
Rights issue, net of transaction costs
Closing balance at 30 June 2010
Opening balance at 1 July 2010
Distribution Reinvestment Plan
Purchase, disposal and vesting of treasury securities
Closing balance at 30 June 2011
(a)
(b)
(c)
(a)
(b)
1,281,363
14,069
946
117,917
1,414,295
1,414,295
28,876
22
1,443,193
138,983
5,885
462
47,647
192,977
192,977
8,719
(35)
201,661
(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.
(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) Rights Issue
On 10 June 2010, the Transurban Group raised $542.4 million via an equity raising, issuing 117.9 million stapled
securities. The Group's share was $47.6 million, net of costs.
262 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
15 Contributed equity (continued)
Ordinary shares
The number of shares on issue is 1,443,543,731 (2010: 1,414,667,986). The difference of 351,075 (2010: 373,804)
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 its 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
30 June
2011
$'000
30 June
2010
$'000
(64,338)
1,304
27,970
(9,225)
(44,289)
(75,765)
663
34,431
(9,225)
(49,896)
(75,765)
11,427
(64,338)
(55,602)
(20,163)
(75,765)
663
641
1,304
34,431
(6,461)
27,970
165
498
663
33,094
1,337
34,431
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
263 TRANSURBAN ANNUAL REPORT 2011
16 Reserves and accumulated losses (continued)
Common control reserve
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 consolidated financial statements
30 June 2011
(continued)
30 June
2011
$'000
30 June
2010
$'000
(9,225)
(9,225)
(9,225)
(9,225)
(111,099)
(28,448)
(139,547)
(76,987)
(34,112)
(111,099)
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:
Amounts received or due and receivable by PricewaterhouseCoopers
Audit services
Audit and review of financial reports
Total remuneration for audit and other assurance services
30 June
2011
$
30 June
2010
$
50,000
50,000
50,000
50,000
264 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
19 Contingencies
Contingent liabilities
The parent entity and the Group had contingent liabilities at 30 June 2011 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 be complete in late 2012 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$159,690,077 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 2011, 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.
265 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
21 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
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
2011
$'000
30 June
2010
$'000
10,635
2,414
-
13,049
-
-
-
-
30 June
2011
$'000
30 June
2010
$'000
952
3,416
1,138
5,506
812
812
1,594
3,973
1,584
7,151
1,592
1,592
266 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
$
30 June
2010
$
16,719,309
198,663
16,917,972
18,079,638
297,821
18,377,459
6,247,973
25,088,416
(26,298,488)
(1,173,774)
3,864,127
7,124,659
15,177,946
(16,055,556)
924
6,247,973
223,562,646
70,515,117
(52,361,651)
(44,954,743)
196,761,369
253,755,701
316,571,583
(346,278,973)
(485,665)
223,562,646
22 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
Mr Lynch and Mr Maxsted 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 the Appleby law firm. During the year Transurban International Limited utilised Appleby for
various legal services. These services are based on normal commercial terms.
23 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.
Bermuda
USA
USA
USA
USA
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
The proportion of ownership interest is equal to the proportion of voting power held.
2011
%
2010
%
100
100
100
100
100
100
100
100
100
100
267 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
24 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
Profit or loss for the year
Total comprehensive income
30 June
2011
$'000
30 June
2010
$'000
172,442
207,204
1
1
172,443
207,205
61
-
61
201,658
(28,369)
(905)
172,384
94
94
71
-
71
192,977
15,157
(1,000)
207,134
(34)
(4,247)
Contingent liabilities and guarantees of the parent entity
For details of contingent liabilities and guarantees of the parent entity, refer to note 19.
25 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.
268 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
26 Reconciliation of profit after income tax to net cash inflow from operating activities
Loss for the year
Depreciation and amortisation
Share of net losses of equity accounted investments
Change in operating assets and liabilities
Decrease in prepayments
Decrease in trade and other receivables
Increase in related party loans
Increase in trade payables and accruals
(Decrease) increase in provisions
Increase in unearned income
Movement in current taxes and deferred taxes
Net cash inflow from operating activities
27 Loss per share
Basic earnings per share
Loss attributable to the ordinary equity holders of the company
Total basic earnings 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 earnings per share attributable to the ordinary equity holders of the
company
Reconciliations of losses used in calculating loss per share
Basic and diluted earnings per share
Loss for the year
30 June
2011
$'000
30 June
2010
$'000
(28,448)
140
17,785
4
227
12,929
1,056
(1,951)
4,619
(2,385)
3,976
(34,112)
332
19,438
22
11,252
11,829
613
714
3,613
(2,339)
11,362
30 June
2011
Cents
30 June
2010
Cents
(2.0)
(2.0)
(2.0)
(2.0)
(2.6)
(2.6)
(2.6)
(2.6)
30 June
2011
$'000
30 June
2010
$'000
(28,448)
(28,448)
(34,112)
(34,112)
269 TRANSURBAN ANNUAL REPORT 2011
27 Loss per share (continued)
Weighted average number of shares used as the denominator
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
30 June
2011
Number
30 June
2010
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted loss per share
1,437,820,619
1,301,035,941
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.
270 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
28 Share-based payments
The disclosure below represents the Share based payment plans offered by the Transurban Group.
Performance Awards Plan
Under the Performance Awards Plan (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 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 and future grants, the awards are tested at the
end of the three year vesting period only.
Grant Date
2011
1 Nov 2008
11 Dec 2009
1 Nov 2010
23 Dec 2010
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
1 Nov 2013
1 Nov 2013
3.30
3.33
3.23
3.33
4.27
4.97
4.62
4.97
1,277,630
1,990,913
-
-
3,268,543
-
-
1,658,614
684,683
2,343,297
-
-
-
-
-
(17,517)
(214,330)
(257,039)
-
(488,886)
1,260,113
1,776,583
1,401,575
684,683
5,122,954
Weighted average exercise price
$4.01
$3.99
$-
$4.02
$4.00
Grant Date
2010
1 Nov 2008
11 Dec 2009
Total
Vesting /
Expiry date
Fair value at grant date
($)
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
271 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
28 Share-based payments (continued)
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
2011
1 Nov 2008
Total
Expiry date
Exercise
price
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
$4.27
548,650
548,650
-
-
(72,334)
(72,334)
(42,594)
(42,594)
433,722
433,722
Weighted average exercise price
$4.27
$-
$4.27
$4.27
$4.27
Grant Date
2010
1 Nov 2008
Total
Expiry date
Exercise
price
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
$4.27
611,692
611,692
-
-
(2,953)
(2,953)
(60,089)
(60,089)
548,650
548,650
Weighted average exercise price
$4.27
$-
$4.27
$4.27
$4.27
272 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
28 Share-based payments (continued)
Performance rights plan
The Performance Rights Plan (PRP) enabled eligible executives to receive a grant of Performance Rights that entitled
participants to receive stapled securities in the Transurban Group (Securities) at no cost at the end of a three year
performance period, subject to the achievement of performance conditions. No dividends or distributions on Securities
were payable to participants prior to vesting. The Plan has two performance measures, EBITDA and relative TSR against
the S&P/ASX 100 Industrials, each applied to 50 per cent of the PRP award. For US participants of the plan, they will be
awarded a cash amount instead of stapled securities at the end of the three year performance period, subject to
performance conditions. There is only one testing date at the end of the performance hurdles at the vesting date.
Awards were last made under the PRP in November 2007. This award matured on 1 November 2010. 84.44% of awards
subject to the TSR performance condition vested based on Transurban's ranking against the constituents of the S&P/ASX
100. None of the awards subject to the statutory EBITDA growth or DRIVe management fee growth conditions vested as
the prescribed performance conditions were not met.
Australian based plan
Grant Date
Vesting /
Expiry date
Fair value at grant date
($)
TSR
EBIDTA
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Lapsed
during the
year
Number
Balance at
end of the
year
Number
2011
1 Nov 2007
Total
1 Nov 2010
3.50
5.96
331,594
331,594
-
-
(143,060)
(143,060)
(188,534)
(188,534)
-
-
Weighted average exercise price
$4.73
$-
$4.73
$4.73
$-
Grant Date
Vesting /
Expiry date
Fair value at grant date
($)
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 2007
Total
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
$4.73
273 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
28 Share-based payments (continued)
Overseas based plan
Grant Date
2011
1 Nov 2007
Total
Vesting /
Expiry date
Fair value at grant date
($)
TSR
DRIVe mgt
fee
Balance at
start of the
year
Vested
during the
year
Lapsed
during the
year
Balance at
end of the
year
Number
Number
Number
Number
1 Nov 2010
3.50
5.96
247,561
247,561
(107,007)
(107,007)
(140,554)
(140,554)
-
-
Weighted average exercise price
$4.26
$4.26
$4.26
$-
Grant Date
2010
1 Nov 2007
Total
Vesting /
Expiry date
Fair value at grant date
($)
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
Assessed fair value
The assessed fair value at grant date of the plans above has been independently determined in accordance with AASB 2.
The TSR component of the Performance Awards has been valued applying a Monte-Carlo simulation (of geometric
Brownian motion process, as used in the Black-Scholes framework) to model Transurban's future security price and TSR
performance against the comparator group performance at vesting date. The valuation model takes into account the term
of the award, 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 award.
274 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
28 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 2010 to 30 June 2011, the cost of company matches was
$304.375 (2010: $125,517) for the Investment Tax Exempt Plan and $89,885 (2010: $nil) 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.
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 2011, each
participant was allocated 100 stapled securities at a value of $5.26 per security. Stapled securities provided under the
Plan were acquired on the open market.
2011
Number
2010
Number
Shares purchased on the market under the plan and provided to participating employees
42,200
44,800
275 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
29 Key management personnel disclosures
Directors
The following persons were directors of Transurban International Limited during the financial year:
Executive directors
Christopher J Lynch
Non-executive directors
Lindsay P Maxsted (Chairman) (Appointed 12 August 2010)
David J Ryan (Resigned 12 August 2010)
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:
B Bourke (resigned 28 February 2011)
K Daley
M Fletcher (resigned 28 February 2011)
A Head
S Hogg
T Honan
M Kulper
E Mildwater
Key management personnel compensation
Chief Operating Officer
President, International Development
Group General Manager Public Affairs
Group General Manager, New South Wales
Group General Manager, Corporate Services
Chief Financial Officer
President, Transurban North America
Group General Manager, Victoria
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
2011
$
30 June
2010
$
12,993,024
326,729
87,049
1,360,993
4,135,431
18,903,226
14,083,358
312,832
110,982
268,637
3,374,589
18,150,398
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.
276 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
29 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.
2011
Name
Directors of the Group
C Lynch
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
1,100,932
684,683
-
-
1,785,615
Other key management personnel of the Group
194,515
B Bourke
178,427
K Daley
82,362
M Fletcher
105,859
A Head
70,734
S Hogg
380,926
T Honan
307,378
M Kulper
95,836
E Mildwater
13,233
123,441
5,761
90,523
65,835
164,587
170,433
90,523
(39,204)
(33,173)
(4,704)
(6,273)
-
-
(32,416)
-
(168,544)
(45,398)
(83,419)
(8,584)
-
-
(44,362)
-
-
223,297
-
181,525
136,569
545,513
401,033
186,359
-
-
-
-
-
-
-
-
-
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
-
(46,512)
-
-
-
-
-
-
-
194,515
-
178,427
82,362
105,859
70,734
380,926
307,378
95,836
-
-
-
-
-
-
-
-
-
-
277 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
29 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.
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
* These individuals are not Key Management Personnel at 30 June 2011, therefore their opening balance has been
reduced to zero through "other changes during the year" in the table above.
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,000
(66,486)
-
-
435
(460,251)
-
(34,491)
(2,730)
100
1,246
-
1,902
30,000
-
-
-
255,401
-
384,678
-
21,112
15,616
94,820
103,944
27,098
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
Other key management personnel of the Group
460,251
B Bourke *
384,678
K Daley
34,491
M Fletcher *
23,842
A Head
15,516
S Hogg
93,574
T Honan
103,944
M Kulper
25,196
E Mildwater
Stapled Securities
2011
Name
Directors of the Group
L P Maxsted
D J Ryan *
J S Eve
J M Keyes
C Lynch
2010
Name
Directors of the Group
D J Ryan
J S Eve
J M Keyes
C Lynch
12,000
66,486
-
-
254,966
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
278 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
29 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.
2011
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
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
-
-
-
-
-
-
-
-
-
-
(19,146)
-
(19,146)
-
-
-
-
-
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
-
-
-
-
-
-
-
-
-
-
79,647
-
19,146
-
19,146
15,316
85,474
23,944
19,146
-
-
-
-
-
-
-
-
-
Balance at
end of the
year
Matured and
payable at
the end of
the year
79,647
19,146
-
19,146
19,146
19,146
15,316
85,474
23,944
19,146
-
-
-
-
-
-
-
-
-
-
-
(19,146)
-
-
-
-
-
-
-
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
279 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
29 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.
2011
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
Vested and
exercisable
at the end of
the year
Other key management personnel of the Group
92,857
B Bourke
78,571
K Daley
11,142
M Fletcher
14,857
A Head
76,778
M Kulper
-
-
-
-
-
(39,204)
(33,173)
(4,704)
(6,273)
(32,416)
(53,653)
(45,398)
(6,438)
(8,584)
(44,362)
-
-
-
-
-
-
-
-
-
-
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
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
Other transactions with key management personnel
-
-
-
-
-
-
-
-
-
-
-
-
-
(27,428)
-
-
-
-
92,857
-
78,571
11,142
14,857
76,778
-
-
-
-
-
-
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.
280 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
30 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 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).
31 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
Net exposure
30 June
2011
AUD
$'000
30 June
2010
AUD
$'000
-
319
(2,625)
(2,306)
68
1,953
(5,229)
(3,208)
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 loss for the year would have been
$146,000 lower (2010: $131,000 lower) or $182,000 higher (2010: $155,000 higher), as a result of foreign exchange
gains/losses on translation of Australian dollar denominated financial instruments as detailed in the above table.
281 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
31 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 2011
30 June 2010
Weighted
average
interest rate
%
-%
Weighted
average
interest rate
%
Balance
$'000
Balance
$'000
(6,574)
(6,574)
-%
(13,743)
(13,743)
Sensitivity
At 30 June 2011, if interest rates had changed by +100 basis points from the year-end rates with all other variables held
constant, post-tax loss for the year would have been $40,000 lower (2010: $84,000 lower).
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 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.
282 TRANSURBAN ANNUAL REPORT 2011
Transurban International Limited
Notes to the consolidated financial statements
30 June 2011
(continued)
31 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 2011
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Carrying
Amount
(assets)/
liabilities
$'000
Non-derivatives
Non-interest bearing
Fixed rate
Total non-derivatives
6,882
206,335
213,217
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,882
206,335
213,217
6,882
194,839
201,721
At 30 June 2010
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
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
There is no liquidity risk exposure to the Group in the current or prior periods other than as shown above.
283 TRANSURBAN ANNUAL REPORT 2011
In the directors' opinion:
Transurban International Limited
Directors' declaration
30 June 2011
(a)
(b)
the financial statements and notes set out on pages 237 to 283 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 2011 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.
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.
Lindsay P Maxsted
Director
Christopher J Lynch
Director
Melbourne
3 August 2011
284 TRANSURBAN ANNUAL REPORT 2011
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 2011, 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 Group). The
Group 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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Liability limited by a scheme approved under Professional Standards Legislation
285 TRANSURBAN ANNUAL REPORT 2011
Independent auditor's report to the members of
Transurban International Limited (continued)
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
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 Group’s financial position as at 30 June 2011 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 211 to 233 of the directors' report for the year ended 30
June 2011. 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 2011, complies with
section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
John Yeoman
Partner
Melbourne
3 August 2011
286 TRANSURBAN ANNUAL REPORT 2011
Security holder information
The security holder information set out below was applicable as at 25 August 2011.
Distribution of stapled securities
The number of holders of stapled securities, which comprise one share in Transurban Holdings Limited, one share in
Transurban International Limited and one unit in Transurban Holding Trust, was 62,666.
The voting rights are one vote per staped security.
The percentage of total holdings held by or on behalf of the 20 largest holders of these securities was 79.43 per cent.
The distribution of holders was as follows:
Security grouping
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 999,999,999
Total holders
Stapled
securities
% of issued
stapled
securities
22,716
29,009
6,855
3,865
221
62,666
8,947,313
73,332,896
49,346,810
83,521,513
1,235,682,893
1,450,831,425
0.62
5.05
3.40
5.76
85.17
100
There were 5,118 holders of less than a marketable parcel of stapled securities.
There were 1,450,831,425 stapled securities on issue.
20 largest holders of stapled securities
Name
NATIONAL NOMINEES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
COGENT NOMINEES PTY LIMITED
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
QUEENSLAND INVESTMENT CORPORATION
AMP LIFE LIMITED
UBS WEALTH MANAGEMENT AUSTRALIA PTY LTD
CITICORP NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
AUSTRALIAN REWARD INVESTMENT ALLIANCE
CS THIRD NOMINEES PTY LIMITED
COGENT NOMINEES PTY LIMITED
RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
ARGO INVESTMENTS LIMITED
Substantial holders
Substantial security holders as at 25 August 2011 were as follows:
Name
CP2 Limited
287 TRANSURBAN ANNUAL REPORT 2011
Number of
stapled
securities held
371,138,161
344,361,368
225,861,688
68,501,767
22,807,750
20,378,817
15,395,598
11,559,366
10,469,581
9,867,748
9,093,320
6,975,000
6,304,713
5,061,246
4,497,531
4,456,126
4,270,000
4,242,542
3,857,858
3,311,375
1,152,411,555
% of issued
stapled
securities
25.58
23.74
15.57
4.72
1.57
1.40
1.06
0.80
0.72
0.68
0.63
0.48
0.43
0.35
0.31
0.31
0.29
0.29
0.27
0.23
79.43
Number of
stapled
securities held
183,319,045
% of issued
stapled
securities
12.60
288 TRANSURBAN ANNUAL REPORT 2011
eNqUiries
ANd iNforMAtioN
eNqUiries AboUt yoUr
trANsUrbAN stApLed secUrities
The stapled securities register is
maintained by Computershare Investor
Services Pty Ltd.
If you have a question about your Tran-
surban securities or distributions please
contact:
Computershare
Yarra Falls
452 Johnston Street
Abbotsford Victoria 3067
Australia
MAiL
The Registrar
Computershare Investor Services
Pty Limited
GPO Box 2975
Melbourne VIC 3001
Australia
(Australia) 1300 555 159
(Overseas) +61 3 9415 4062
trANsUrbAN GroUp
australia
melbourne (head office)
Level 3, 505 Little Collins Street
Melbourne Victoria
Phone +61 (0) 3 8656 8900
sydney
Level 5, 50 Pitt Street
Sydney NSW 2000
Australia
united states
new York
589 Eighth Avenue, 21st Floor
New York, NY 10018
Phone: +1 646 278 0870
Washington dC area
Prince Street Plaza
1421 Prince Street, Suite 200
Alexandria, VA 22314
Phone: +1 571 527 2050
www.transurban.com.au