2022 Corporate Report

Corporate Report for the year ended 30 June 2022

Introduction and overview

Business performance

Governance and risk

Directors’ report

Remuneration report

Financial statements

Sustainability supplement

Security holder information

Short Term Incentive (STI)—how does it work? (continued)

Performance measures (continued)

Financials (Proportional EBITDA and Proportional Net Costs) The Board utilises the annual budget as the primary input to determine appropriate financial targets. When approving the budget, the Board reviews the core principles and assumptions underpinning the budget. Specifically, for Proportional EBITDA, the budget incorporates base business growth derived from network-wide traffic performance, price growth and impacts of inflation and adjusts for events such as construction and project completion and the impact of acquisitions. Directly controllable initiatives including road safety, lane availability, operational efficiencies and the impact of development activity are also incorporated. Once the budget has been finalised, the Board determines the STI targets to ensure that sufficient stretch is incorporated Consideration is given to the quantifiable risks and opportunities that can influence the Group’s financial performance. In some instances, the Board may deem it appropriate to exclude significant items. The targets use a constant currency for operations within North America. HSE The Board reviews HSE targets each year with a view to continuously improving the HSE culture and performance of the Group. Individual KPIs Individual targets as set out in KPIs include consideration as to role-related accountabilities and responsibilities in the context of business strategic priorities. Executive KPIs consist of similar categories to those of the CEO (as disclosed on page 106) of this report) and reflect the individual’s role and areas of responsibility. The Board assesses performance against Group measures and the results of key elements are independently validated. The Board confirms final outcomes for individual and Group performance and has discretion to adjust the performance conditions and outcomes. These methods for assessing performance are used because they provide the Board with discretion as to assessment of conditions and outcomes, with the use of an independent overlay where considered appropriate. If employment ceases before performance is assessed, generally there is no entitlement to receive any STI award. If employment ceases due to resignation before the end of the two-year restriction period, any unvested deferred securities will lapse, unless the plan rules provide otherwise or the Board otherwise resolves. Grants prior to FY21: Fraudulent or dishonest behaviour will result in the forfeiture or clawback of any unvested awards. Further, at the discretion of the Board, awards are subject to forfeiture or clawback where there is a financial misstatement circumstance or the allocation of awards was made in error, on the basis of a misrepresentation or an omission, or on the basis of facts or circumstances that were later proven to be untrue or inaccurate (applicable to both STI and LTI plans). FY21 and future grants: In December 2019 Transurban adopted new Equity Incentive Plan Rules. Under the new Equity Plan Rules, in addition to the above, the Board has discretion to clawback vested securities or repay cash proceeds from the sale of vested securities. Circumstances for clawback have also been expanded to include: breach of duties or obligation to the Group, acts which have a negative impact on Transurban’s reputation, vesting is not justified or supportable and the possibility of an employee who departed as a “good leaver” but then behaves inappropriately.

Vesting

Cessation of employment

Clawback

Long Term Incentive (LTI)—how does it work?

Description

Participation in the LTI plan is offered to the CEO and other Executive KMP and a very limited number of other employees nominated by the CEO and approved by the Board. Grants are made in the form of performance awards at no cost to the recipient. Each performance award is an entitlement to receive a Transurban stapled security, or at the Board’s discretion, an equivalent cash payment, on terms and conditions determined by the Board, subject to the achievement of vesting conditions. Performance awards do not carry dividend, distribution or voting entitlements prior to vesting. Grants prior to FY22 have a three-year performance period commencing on 1 July in the year the grants are made. For example, the FY21 grant has a performance period commencing 1 July 2020 and ending 30 June 2023. The FY22 grant transitioned to a four-year performance period, consisting of two tranches. Tranche 1 (50% of awards granted) have a three-year performance period (1 July 2021 to 30 June 2024) and Tranche 2 (50% of awards granted) have a four-year performance period (1 July 2021 to 30 June 2025). FY23 and future grants will revert to a single award over the new four-year performance period. The CEO’s opportunity is 147% of TEC and the opportunity for all other Executive KMP is 80% of TEC. The minimum vesting outcome an individual can receive is 0% of the award (if the performance measures are not achieved) and the maximum vesting outcome an individual can receive is capped at 100% of the award (if performance measures are achieved). Two performance measures are ordinarily used to determine the number of awards that will vest at the end of the performance period; relative Total Shareholder Return (TSR) against a bespoke comparator group and FCF (each with an equal 50% weighting). The FY22 Plan (with the two performance periods, 1 July 2021 to 30 June 2024 and 1 July 2021 to 30 June 2025) have Relative TSR as a single performance measure. The Board decided that FCF was not a suitable measure for the FY22 Plan due to the challenges associated with predicting traffic and toll revenues and therefore the ability to accurately forecast FCF for the performance periods within the COVID-19 pandemic environment. From FY23, FCF will be reinstated as a second performance measure for the LTI Plan.

Instrument

Performance period

Opportunity

Performance measures

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