Working on tomorrow today The Epping to Chatswood rail line in is the most sophisticated underground rail link in . Transfield Services maintains the tunnel, underground systems and technologies for our client, RailCorp. Pictured are Transfield Services employees [from left] Development Manager Infrastructure, Steve Johnson, Contract Manager Rail, Simon Turner and Corporate Communications Manager, Felicity Pontoni.

Contents 2 004 Business snapshot 006 Financial highlights 008 Chairman’s report 010 Managing Director and CEO’s report 014 Board of Directors 016 Senior executive team 018 Review of operations 0 18 Australia and New Zealand 024 Americas 028 Middle East and 032 Transfield Services Infrastructure Fund 034 Business highlights Safety performance Innovation Training and development Sustainability Client testimonials 036 Working on tomorrow’s governance 043 Financial report 143 Corporate directory

All financials are in Australian dollars unless otherwise specified. The financial figures provided in the front section of the report (pages 1 to 42) have been rounded. In some cases, totals and percentages have been calculated from financial figures that have not been rounded, hence some financials and percentages may not add up exactly.

Notice of Annual General Meeting Shareholders are advised that the 2010 Annual General Meeting of Transfield Services will be held on Thursday, 21 October at 10.00am (AEDST), at the AGL Theatre, Museum of Sydney, Corner Phillip and Bridge Streets, Sydney, New South Wales. Transfield Services Sustainability Report Transfield Services also produces an annual Sustainability Report featuring case studies and images from around the world of how we work with our clients, partners and communities to achieve sustainable outcomes. The latest report is available under Publications in the News Centre section of our website: www.transfieldservices.com

Transfield Services Annual Report 2010 This year we… »» delivered on our 2010 full-year guidance »» strengthened our management team »» implemented a five-year Company strategy »» introduced global Mandatory Safety Rules, and 3 »» won 17 client, state, national and international awards.

We deliver long-term results for our clients, our employees and our investors.

Transfield Services Annual Report 2010 » Business snapshot

Our 28,000 employees provide: »» engineering »» operations and maintenance »» asset management »» construction management 4 »» project and program management, and »» shutdowns...

To 11 diverse industries:

IA S A & Z S T S Our Industry Coverage A & N ICA R E E UST M ID. A A M

Trans eld Services Group Companies

s Hydrocarbons e rc u

o es R

& Industrial Process Industries

Water e

r Roads & Rail s e c tu c Public vi r stru e a S r Power nf I Telco

Property Maintenance Defence & FM &

Property Social Infrastructure

Our Joint Ventures

Trans eld Services FT Services Services . . . Mannai Oil & Gas WLL Hydrocarbons

WorleyParsons JV Services LLC TRAGS

Trans eld Services WorleyParsons

Resources Mining

& Industrial Nouvelle Caledonie

Process Services

Trans eld Worley TGE Energy Services Power Power Services e r s e c tu PPS Partnership c Water vi r stru e a S r Roads TransLink Operations nf I TSL

Telco Sentinar

Property Trans eld Mannai Facilities Management

& FM & Maintenance Services WLL Property

Miami-Dade Expressway Authority, , . More than six million vehicles utilise this Transfield Services operated and maintained expressway every month.

Transfield Services Annual Report 2010 We secured more than 30 new and 15 renewed contracts in 2010 including:

Australia and New Zealand Clients Value American Clients Value

Western Australia Department of Housing A$300 million Sports Authority, Jo-Ann Fabric and US$188 million and Housing NSW Craft Stores, Regis Corporation, Rite Aid Corporation and Bed, Bath & Beyond Woodside A$700 million Florida Department of Transportation, US$72 million 5 Austin Health A$7.2 million District Department of Transportation, Washington DC and North Carolina Loy Yang Power* and Aurora Energy A$253 million Department of Transportation

Transpower NZ$58 million Ministry of Transportation C$150 million

NZ Transport Agency, NZ$137 million New Brunswick Highway Corporation* C$580 million Thames-Coromandel District Council and City Council

Middle East and Asia Clients Value

Shell Philippines Exploration* A$76 million

* The value indicated for joint venture contracts represents total contract value awarded to the joint venture.

Middle East & Asia »»Hydrocarbons »»Roads »»Mining »»Property & Maintenance

Americas »»Hydrocarbons »»Roads »»Mining »»Property & Maintenance

Australia & New Zealand »»Hydrocarbons »»Telecommunications »»Mining »»Roads & Rail »»Process Industries »»Public Transport »»Power »»Property & Maintenance »»Water »»Defence »»Social Infrastructure

Transfield Services Annual Report 2010 » Financial highlights

»» Revenue of $4.1 billion (including joint ventures) 6 »» NPAT of $73.0 million compared to $55.0 million loss last year »» Normalised NPAT of $96.0 million up 2.7 per cent and in-line with guidance »» Record operating cash flow at $225.0 million »» Record contracted revenue at A$11.6 billion »» Record low gearing of 25 per cent »» Strengthened balance sheet with significant capacity to achieve growth strategy »» Total FY10 dividend of 14 cents per share - up 17 per cent from last year »» Share Purchase Plan offered in FY11 (see page 8 for more details)

Transfield Services provides consolidated contract maintenance services to Santos’ oil and gas fields Santos, Moomba, Cooper Basin, South Australia.

Transfield Services Annual Report 2010 Group Revenue Pipeline of opportunities $29 billion A$0.9 bn $4.5 proportionately Infrastructure A$4.1 bn consolidated $4.0 revenue Services Power $3.5 Water 56% Telecommunications $3.0 Road & rail Public Transport $2.5 A$3.2 bn wholly-owned $2.0 operations Resources & revenue $1.5 17% Industrial Hydrocarbons $1.0 27% Mining Process Industries 7 $.5

$0.0 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 FY10 Property & FM Property Maintenance Defence Social Infrastructure

Earnings per share (cents per share) Dividend per share (cents per share)

FY09 normalised earnings per share of 26 cps Dividend per share of 14 cents equates to 36 (based on weighted average shares of 359 million) 61 per cent payout ratio - an increase of 17 per cent from FY09 FY10 normalised earnings per share of 23 cps (based on 414 million shares) 27 34 31 22 28 28 20 24 16 14 19 18 13 12 14 10

-15 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 FY10

‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 FY10

gearing* contracted revenue* * Net debt / Net debt + Equity $11.6 billion 61% 60% $12.0 57% * Pre non-recurring items 14% $10.0 49% 47% 33% $8.0 33% 33% $6.0 29% 53% 25% $4.0

$2.0

$0.0 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 FY10 ‘05 ‘06 ‘07 ‘08 ‘09 FY10

Cost reimbursable; KPI; alliance style

Schedule of rates

Fixed fee for service

Transfield Services Annual Report 2010 » Chairman’s report

8

Transfield Services has come increase in the payout ratio to 61 per In April 2010, the Transfield Services Professor Stephen Burdon retired through the global financial crisis cent, compared with the previous Mandatory Safety Rules were from the Board in July 2010. Steve as a better, stronger and more corresponding period of 53 per cent. launched with a global stand-down has been a director of the Company resilient company and importantly, to communicate the rules to every since December 2000 and has made better equipped to handle any The Dividend Reinvestment Plan employee around the world. an outstanding contribution over the continuation of the downturn. (DRP) raised A$1.9 million of additional past 10 years, particularly in the areas capital from the interim dividend. We have reduced our Lost-Time of strategy and client relationships. Our diversity of clients and services Due to the record cash result and Injury Frequency Rate from 4.04 for across different sectors, industries improved financial position, the Board every million hours worked in 2004 During the year, we strengthened and geographies has held us in good has suspended the DRP effective from to 1.55 in 2010. During this time, our governance processes with stead. With the Company’s renewed the 2010 final dividend. we increased our global workforce more emphasis on risk management investment in business development, from 8,500 employees to more than and the implementation of the a significant pipeline of opportunities In response to shareholder requests, 28,000 employees today. Code of Business Conduct. Peter is being identified and pursued. the Board has introduced a Share Goode has provided the leadership Purchase Plan (SPP), which offers Our Managing Director and Chief on the code and on putting more Your Company performed well eligible shareholders an opportunity Executive Officer, Peter Goode, has rigour into our management of risk. in tough trading conditions. to purchase shares in Transfield been with us since April last year and Transfield Services delivered on its Services to a value of $1,000, $5,000, is reinvigorating our management Our strategy and risk earnings guidance, achieved record $10,000 or $15,000 at a discount and team. We have a new Chief Financial management operating cash flow and now has free from brokerage and transaction Officer, Tiernan O’Rourke, a new Chief a strengthened balance sheet with costs. Executive, Marketing and Business During the year, the Board approved increased capacity to fund our growth Development, Nicholas Yates, as well a strategic plan with new initiatives strategy. The Board has absolute discretion as new chief executives, Larry Ames instigated, including a streamlined over the amount raised under the in the Americas and Philip Wratt in operational structure, a strengthened Net profit after tax (NPAT) was SPP. Funds raised through the SPP the Middle East and Asia. executive team and an increased $73.1 million for the period ending will be used initially to repay debt, focus on business development. 30 June 2010, compared with a which will further strengthen our Board and corporate The Company is focused on loss of $55 million the previous financial position. This also provides governance year. Excluding the impact of Transfield Services with greater broadening its capabilities to build non-recurring items, NPAT was $96 balance sheet flexibility and allows Board composition and skills are more work with clients across the million, an increase of 2.7 per cent us to continue to focus on organic critical to responsible governance. I value chain and to complement compared with the previous year. and acquisitive growth and other have been overseeing the process existing relationships with joint venture development opportunities. of Board renewal to ensure the partners. Our strategy is to enhance Including the contribution from Board remains independent and the range of technical services we joint ventures, total Group Revenue It will assist our strategy of providing experienced, and provides the currently provide. Your Company will declined by 6.2 per cent to consistency of earnings and the diversity and skills befitting a global continue to leverage its capabilities so $4.1 billion, as a stronger Australian generation of solid and reliable services company. that it becomes a premier provider of dollar reduced the contribution returns for shareholders. whole of asset life cycle operational from the Company’s international In December 2009, Douglas Snedden The secret of our success in and maintenance services and a operations. Despite the ongoing was appointed as a non-executive trusted advisor to its customers. adverse economic conditions, on a managing diverse sectors and clients director of the Company. Doug has constant currency basis we were able is the use of common processes and a wealth of global experience and The Board has reaffirmed our to maintain our revenue. systems across all our operations. In leadership in managing large-scale strategy of low-risk contracting and fact, sharing of skills and processes business programs, planning and carefully managing our exposure to The Board declared a fully franked across different business lines has executing corporate strategy and fixed-price, lump-sum contracting final dividend of 9 cents per share, been a major contributor to the industry and market reform, most work. This approach, which has payable on 20 October 2010. The total development of your Company. recently as Country Managing Director been in place since the Company dividend for the year will be 14 cents We continue to focus on improving of Accenture in Australia. was formed, ensures that Transfield per share, up 17 per cent on last year’s Services minimises the potential for a 12 cents per share, and represents an safety performance and using this priority as a competitive advantage. material loss on any of its contracts.

Transfield Services Annual Report 2010 “The total dividend for the year will be 14 cents per share, up 17 per cent on last year’s 12 cents per share, and represents an increase in the payout ratio to 61 per cent, compared with the previous 9 corresponding period of 53 per cent.”

The current order book of methane and liquefied natural gas is benefiting from the United The expertise within Transfield contracted revenue for Transfield plants in the north of Australia. States’ drive for self-sufficiency in oil Services and TSI Fund in gas Services is $11.6 billion, which has and gas. Our joint venture in Canada, power generation and our existing grown by five per cent from the There are ongoing opportunities in FT Services, continues to build its portfolio, positions us well to take same time last year. The Company the Infrastructure Services sector. presence in the oil sands industry advantage of the inevitable move is investing significantly in business Our presence in the North American and recently secured its fourth major towards the use of gas for base load development to ensure that we roads maintenance sector was client, Nexen. power generation. continue to grow our order book. boosted with US$750 million worth Importantly, a disciplined approach of work secured during the year. Our existing clients in the oil sands Sustainability business, Suncor Energy and Shell to tendering will also ensure future The Company will continue I am immensely proud of work is of a high quality. This will Canada, have recently signalled to leverage its presence in the their intent to start reinvesting in Transfield Services’ commitment to protect long-term margins and sector, which is set to benefit from sustainability. This is evident in our overall returns for shareholders. sustaining capital works from which promised government expenditure FT Services is set to benefit. safety performance, our training Most of our contracts are with on infrastructure. The power, record, environmental initiatives blue-chip companies, such as water, rail and social infrastructure In the Middle East, our business and in our work with Indigenous Woodside, Shell, BlueScope Steel industries continue to achieve robust in oil and gas and infrastructure is people and local communities to and BHP Billiton, or federal and state growth and the Company sees many being positoned to grow. We have achieve sustainable outcomes. government departments and more opportunities within reach. an expanding base in Abu Dhabi I am particularly proud of our authorities including Australian and with a new and experienced Chief Reconciliation Action Plan in Australia. We will also continue to pursue Executive, Philip Wratt. The two New Zealand defence forces, the opportunities in Australian Rail Track Corporation and United Arab Emirate states of Abu The future public private partnership market as Dhabi and Qatar, as well as Saudi New South Wales public housing Transfield Services has emerged an operator and maintainer. Arabia, are making significant and education departments. from the global financial crisis in investment in infrastructure, giving Another key element of our strategy better shape than before. Our underlying strategy is to become is to drive discipline across the us new opportunities in project an integral part of our clients’ teams, business. This encompasses a more management, operations and We have a strong balance sheet, with our outcomes aligned with efficient cost base and improved maintenance. a dynamic Chief Executive Officer their outcomes. For example, in productivity. This in turn means the and a strengthened management our contract with Suncor Energy costs to our clients are reduced, Transfield Services team driving all aspects of our in the oil sands of , Canada, we become more competitive and Infrastructure Fund performance. We are also well we are rewarded against a range of improve profitability. Transfield Services Infrastructure placed to take advantage of the new key performance indicators such as Fund’s capital structure review opportunities that are emerging in efficiency, safety and productivity. Our global footprint will continue the regions and sectors we service. to be: (TSI Fund) was successfully completed This aligns our goals with our client’s, during the year. As a result TSI Fund »» Australia and New Zealand I would like to thank the Board, Peter which are fundamentally to improve was able to significantly reduce debt. Goode and the Transfield Services the overall output of the asset. »» The Americas – Canada, the Transfield Services invested a further team for their energy, hard work and The quality of the work we do in United States, Chile, and $43.2 million into the TSI Fund commitment, and also shareholders Alberta supports Suncor Energy as it »» The Middle East and Asia. and maintains its role as manager, for your continuing support. continues to produce record levels operator and maintainer. of oil. There is significant growth potential in the United States in The ongoing national movement We will seek to build on our leading unconventional oil and gas, driven towards renewable energy leaves market position in the hydrocarbons by the country’s strategic intent to be TSI Fund in a good position to maintenance services sector to self-sufficient in both and the move benefit from Transfield Services’ secure high value work with existing Anthony Shepherd to onshore production following the portfolio of wind farm development clients. The Company is pursuing Chairman oil spill in the Gulf of . We also opportunities. opportunities arising from the see the shale gas market in North planned investment in coal seam America as promising.

Transfield Services Annual Report 2010 » Managing Director and CEO’s report

10

The Company produced a strong Our business development focus Despite the very challenging The successful completion of performance in 2010 in what has been revitalised and it is market, margins for the Company a placement in the US debt has been a challenging business clear that those companies that were relatively resilient. The market, raising US$170 million in environment and has delivered can respond more quickly and Australia and New Zealand December 2009 was particularly its net profit after tax (NPAT) effectively to customer needs business margins were stable. pleasing. We took this as a vote of guidance. and market demands will be Margins fell in our international confidence in our business by the best placed to benefit from the business, particularly in capital markets who continued to We continue to drive discipline at recovery. North America where one off support us during the second half all levels of the business, which operational issues and currency of the year. has enabled us to deliver a record The Company has a robust affected operating results. operating cash flow result for the pipeline of work developing in Dividend per share is 14 cents, full year, improving again on our power, defence, transport and The stability of overall margins up two cents on the previous strong half year result. social infrastructure, providing demonstrates our contract year and reflecting the stability of continuing diversification for the discipline and the positive effect earnings and cash flows and our Sustained capital management business. of transformational overhead positive outlook for the business. has strengthened the balance reductions throughout the sheet further, establishing a Transfield Services’ disciplined Company. Despite tough conditions, stable base from which to pursue approach has sustained its the business delivered its growth. strong order book of long-term NPAT, normalised to exclude guidance. This demonstrates the contracts that deliver consistency the one-off loss from the sale of effectiveness of the changes we Importantly, the growth we are of earnings, generating solid and the Mount Miller Wind Farm by are making and the improved targeting is underpinned by a reliable returns. Transfield Services Infrastructure discipline around forecasting and quality order book of contracted Fund, grew 2.7 per cent to operational delivery. revenue which grew by five We are well placed to pursue our $96 million. This result is even per cent this year, or eight per growth aspirations. stronger if the $10 million invested Our balance sheet remains strong cent if you exclude the impact in business efficiency initiatives is with record low levels of gearing of unfavourable currency Financial review taken into account. and this positions the business movements. Total segment revenue for the solidly for growth. Our record operating cash The Company is benefiting Company was $3.2 billion, down seven per cent on the last year, result was a highlight for the Operational review from the global experience of business and continues on from a strengthened executive team with Group EBITA also down, The Company has significant 13.7 per cent. the significant improvements capacity to pursue value creating and a streamlined operational achieved in previous periods. structure, which has delivered acquisition opportunities The main driver for the decline and will prudently assess any real savings and importantly, a in Australian dollar revenue was This strong cash conversion rate change in the way we approach was due to our ongoing working opportunities that arise. However, the impact of the strengthening we maintain a disciplined the market. Australian dollar that has capital management program and increased business discipline. approach that is consistent with decreased the contribution from the approved strategy. our international businesses, During the period the Company particularly from North America. continued to pay down debt, This intent was demonstrated with the acquisition of Industrial A strategic imperative for the resulting in another significant reduction in debt levels. Contract Designers (ICD) to boost Company is to maintain margins our engineering capabilities, and the quality of our order book. Net debt is now A$275 million, delivering engineering and resulting in gearing of 25 per cent, design of maintenance and down from 33 per cent at June brownfield capital projects to the 2009 on a net debt to net debt hydrocarbons, processing and plus equity basis. related industries.

Transfield Services Annual Report 2010 “We continue to drive discipline at all levels of the business which has enabled us to deliver a record operating cash flow result for the full year, 11 improving again on our strong half year result.”

Australia and New Zealand Our rail business saw growth in During the year, our project exterior facilities maintenance During the year, we integrated projects and also benefited from management subsidiary, APP, services to over 4,000 Walmart our Australia and New Zealand Australian Federal Government secured engineering project stores across America. businesses, sharing skills and stimulus spending. The business management services for is focused on delivering the Australian Grand Prix in Transfield Services North America knowledge, and producing great – Transportation Infrastructure results from close and productive rail maintenance, program for the next three management, engineering and years and project management (TSNA-TI) saw modest revenue teamwork, and a strong and growth in local currency terms. diverse presence in key industries. project delivery services and of Qantas’ new corporate offices maintains over 4,500 kilometres in Sydney and NAB’s offices in The business continues to hold its We continue to win work on the of track across Western Australia, Melbourne. market share within its traditional strength of our market leading South Australia and New South United States markets as well as presence in key sectors such Wales. Americas secure opportunities in Canada, where more than US$750 million as oil and gas maintenance. A Larry Ames took over as Chief highlight during the year was the The water group continued to of work was awarded to TSNA-TI deliver strong year on year organic Executive, Americas during during the year. extension of the Transfield Worley the year and is responsible for relationship with Woodside for growth from existing long-term contracts and new business wins. managing and growing our TIMEC secured renewals with the delivery of brownfield project North American business and its top three clients during the and maintenance services to Our roads business is a leading our Chilean joint venture, INSER second quarter of the financial Woodside’s Western Australian motorway and tunnel operator Transfield Services S.A. year. The subsidiary also secured offshore and onshore gas facilities across Australia and New a contract with ConocoPhilips for a further four years. Zealand. A highlight of the year Our Canadian oil sands joint to provide pipeline and terminal venture, FT Services, continues As a global liquefied natural was the renewal of the 10-year maintenance, outside of the PSMC006 contract, valued at to provide a portfolio of asset traditional refinery maintenance gas (LNG) operations and management services including maintenance service provider, NZ$103 million, covering the sector. maintenance for part of the State maintenance, turnarounds, we are well positioned to secure sustaining projects, subcontractor opportunities in the coal seam Highway Network in the Western Middle East and Asia North Island for the NZ Transport management and execution for gas and LNG sectors. clients including Suncor Energy, Transfield Services has Agency. established a new regional We are well placed to take Shell Canada and Canadian Our Property and Facilities Natural Resources Limited. headquarters in Abu Dhabi with advantage of investment in the a resident Chief Executive, mining sector with demonstrable Management business achieved strong growth compared to Our US subsidiary, USM, is a Philip Wratt, and boosted expertise and presence in whole- leading provider of outsourced business development of-life asset support services. the same period last year. It capitalised on successful contracts contractor management services capabilities. This will assist in In Infrastructure Services we are with long-term government in the United States with blue- establishing strong country benefitting from the continued customers, improved its pipeline chip retailers including Toys‘R’Us, specific partnerships providing growth momentum in social of opportunities and is providing Michaels, The Home Depot and the capabilities to pursue and infrastructure, as well as the services to new customers and Ross Dress for Less Stores. The secure a significant pipeline of water, power and rail sectors regions. business continues to build its opportunities. with an increase in investment order book with work secured in upgrading and maintaining since July 2009 exceeding existing assets. US$300 million despite subdued retail trading conditions. In July 2010, we expanded our services with Walmart to include

Transfield Services Annual Report 2010 » Managing Director and CEO’s report continued

12

A highlight for the region was Safety The Company’s future Our market continues to be very the commencement of the competitive – a challenge I know Shell Philippines Exploration B.V. As Managing Director and CEO, We are pursuing both organic and the Transfield Services spirit will contract, with the establishment the most important thing for me acquisitive growth to boost our rise to. By working together and of the Transfield Services- is to make sure everyone is safe. capabilities in key areas, enabling getting closer to our customers WorleyParsons team in Manilla. us to deliver our strategic plan. and our markets, we will meet this In the past 12 months, we have This seven-year contract at the challenge. reduced our Lost Time Injury A key focus will be on broadening client’s Malampaya gas facility Frequency Rate (LTIFR) by 20.1 per our skills to provide tailored asset is valued at approximately I would like to thank everyone cent, from 1.94 injuries per million services. By taking a smarter, more A$76 million, with a three-year in our global team for their hours worked the previous year to sophisticated approach to asset extension option, and has continuing hard work and 1.55 this year. We also reduced our management, Transfield Services exceeded expectations to date. contribution to our success. Total Recordable Injury Frequency will become a trusted advisor as Intergulf General Contracting LLC, Rate (TRIFR) from 7.49 injuries per well as a supplier of labour. which provides services in civil million hours worked the previous Cross selling opportunities construction, civil repair works and year to 6.78 in the past 12 months, and leveraging into adjacent concrete rehabilitation, continues a reduction of 9.5 per cent. asset types and sectors is to grow with new contract In April 2010, we introduced the most important focus for wins providing strong bottom Mandatory Safety Rules designed our strengthened business line contribution to the region to protect employees and development teams. Peter Goode from both oil and gas and civil contractors from serious injury Managing Director and Chief related sectors in the United Arab or death. The Rules apply to Our priority is to seek out and Executive Officer Emirates. everyone working in all Transfield grow a quality order book and secure long-term contracts that Our Transfield Mannai Facilities Services operations around the will ultimately result in sustainable Management Services WLL joint world, including our subsidiary returns. venture has consolidated its companies and contractors. position as the leading quality Following the launch, we trained provider of facilities management more than 1,400 of our business services in Qatar resulting in leaders in the implementation strong year-on-year growth. of the Rules. On 8 June 2010, every Transfield Services site and office around the world took part in a global safety stand down highlighting our safety imperatives.

Transfield Services Annual Report 2010 13

Managing Director and CEO, Peter Goode [front], tamping operator Matthew Madigan [back left], and Chief Executive, Australia and New Zealand, Bruce James, in South Australia with one of Transfield Services’ two new pieces of track surfacing equipment.

Transfield Services Annual Report 2010 » Board of Directors

14

1 2 3 4

1 ANTHONY SHEPHERD 2 DR PETER GOODE 3 LUCA BELGIORNO-NETTIS 4 GUIDO BELGIORNO-NETTIS Chairman Managing Director and Chief AM AM Bachelor of Commerce Executive Officer Non-Executive Director Non-Executive Director Doctor of Philosophy (PhD) in Bachelor of Architecture Master of Business Tony was appointed a Director and Petroleum Engineering Deputy Chairman on 6 March 2001 Graduate Diploma in Urban Estate Bachelor of Engineering (Civil) and Chairman in 2005. He was re- Bachelor of Science in Mathematics Management and Computing Science Guido was appointed a Director on elected at the 2009 Annual General Luca was appointed a Director on 14 January 1998 and was re-elected Meeting. Peter was appointed Managing 2 July 1999 and was re-elected at the at the 2007 Annual General Meeting. Tony has been Chairman of the Director and Chief Executive Officer 2009 Annual General Meeting. He Guido will retire as a Director at ConnectEast Group since 2004 and of Transfield Services in April 2009. is a member of the Risk, Audit and the 2010 Annual General Meeting. was a non-executive director of He is a member of Transfield Services’ Compliance Committee. Being eligible, he offers himself Health, Safety and Sustainability for re-election. He is a member of Transfield Services Infrastructure Luca is the joint Managing Director of Committee. Transfield Services’ Human Resources Fund since 2007 until early 2010. He Pty Ltd, a director Committee and Chairman of the is Chairman Elect of the Australian Peter has a strong track record of of its subsidiary companies and has Health, Safety and Sustainability Football League’s new club, Team successful leadership in outsourced held senior positions within Committee. GWS (Greater Western Sydney), a services globally and more than Transfield Holdings for more than director of the Australian Chamber 30 years’ experience at international 20 years. He is also a director of Guido’s involvement in developing Orchestra and a trustee of the Sydney companies, including Vetco Perisher Blue Pty Ltd. complex infrastructure projects as Cricket and Sports Ground Trust. International and Schlumberger. part of Transfield Holdings Pty Ltd in Luca is Chairman of the Biennale the 1990s saw him play a key role in Tony is a member of the Australian He has been a non-executive director of Sydney, Chairman of the art the development of an operations Institute of Company Directors and a of Transfield Services Infrastructure committees at the University of and maintenance division with patron of Infrastructure Partnerships Fund since April 2009. He is a director Technology, Sydney (UTS) and complementary asset ownership, Australia. He was responsible for the of Expro Group Limited and was the University of Western Sydney, which ultimately became Transfield development of many landmark a director of Oslo Stock Exchange a member of the Australian Services. projects, including the Sydney listed company, Ocean Rig, from International Cultural Committee Harbour Tunnel, Melbourne CityLink, July 2006 until March 2008. He is an and founder of the newDemocracy Guido is the joint Managing Director a number of other build-own- alumni of Columbia Business School Foundation, a not-for-profit of Transfield Holdings. He is Chairman operate-transfer projects and the where he completed an Executive organisation focused on political of the Novatec Biosol AG Supervisory redevelopment of Walsh Bay. Management Program and is also a reform. Board, Chairman of the Australian member of the Society of Petroleum Chamber Orchestra, a trustee of Resides in Sydney. Age: 66 Luca won the UTS Chancellor’s Engineers and of the Advisory Board the Art Gallery of NSW and was an Award for Excellence in 2007 for his of Herriot-Watt University in Scotland. inaugural director of Transurban contribution to Sydney’s culture and Limited. Resides in Sydney. Age: 53 was made a Member of the Order of Australia in 2009 for services to the Guido was awarded the AGSM

arts and the community. Distinguished Alumni Award for leadership and innovation in business Resides in Sydney. Age: 56 in 2005, he was made a Member of the Order of Australia in 2007 for services to the construction industry and the arts in executive and philanthropic roles, and in 2008 he received the University of New South Wales Alumni Award for outstanding contribution to profession and the community. Resides in Sydney. Age: 52

Transfield Services Annual Report 2010 15

5 6 7 8 9

5 JAGJEET BINDRA industry. In August 2008, Steven was consulting, strategic management and Australia (International) Limited, Independent Director appointed Chairman of the Risk, Audit outsourcing, largely gained through Chairman of the Major Performing Arts Master of Business Administration and Compliance Committee, and a distinguished career at Accenture Board of the Australian Council for the (Honours) he is also a member of the Human (formerly Andersen Consulting). Arts, and Chairman of the Australian Resources Committee. Ballet. He is a fellow of the Australian Doug retired from Accenture and Master of Science (Chemical Academy of Technological Sciences Steven is Chairman of Global Valve the position of Managing Director Engineering) and Engineering. Bachelor of Technology with Technology Limited and a director of Accenture’s Australian business in Distinction (Chemical Engineering) of The Sunnyfield Association and June 2008. He joined Arthur Andersen Resides in Melbourne. Age: 68 Taronga Conservation Society & Co in 1979, and during his time Jeet was appointed a Director on Australia. He has been a director of at Andersen Consulting (and then 24 July 2009. He has more than APA Ethane Limited since 10 July 2008 Accenture), held a number of senior 9 PROFESSOR STEPHEN 35 years’ international experience in and Bank of Queensland Limited since positions in the Company in Australia, BURDON all segments of the energy industry, December 2008. He is a senior fellow as well as the United Kingdom, South Independent Director including 32 years with Chevron. of the Financial Services Institute of Africa, United States and throughout Master of Business Administration Former roles include President of Australasia, a fellow of the Australian the Asia Pacific region. Chevron Global Manufacturing and Institute of Management and a fellow Bachelor of Science (Honours) Doug is an active member of the Managing Director and Chief Executive of the Australian Institute of Company community, serving on the boards Steve was appointed a Director on Officer of Caltex Australia Limited. Directors. of arts, medical and community 20 December 2000. Steve retired as Jeet currently serves as a board Steven was Chairman and non- organisations. Doug is currently a a Director on 14 July 2010. member to Indian-based Larsen & executive director of Investa Property director of the Black Dog Institute, St. Steve holds professorial positions at Toubro Limited (since December Group from August 2006 until James Ethics Centre and Accenture Cass Business School, . He is 2008), USA-based Edison International September 2007 and a non-executive Australia Foundation. a fellow of the Australian Institute of and Southern California Edison director of Adelaide Bank Limited Company Directors, the Australian Company, and the Indian Institute Resides in Sydney. Age: 52 from April 2005 until November 2007. Institute of Management (AIM) and of Technology, Kanpur Foundation. He has been Chairman of Adelaide the Institution of Engineers Australia. He was previously a director of Sriya Managed Funds Limited, Deputy Steve is a director of Campus Living Innovations, Inc. He is on the advisory 8 MEL WARD AO Chairman of the Australian Chamber Villages Pty Ltd, Criteria Research board of Hart Energy Consulting. Independent Director Orchestra, Foodland Associated Limited and Analysis Pty Ltd, VisAsia Ltd (Art and a trustee of Australian Reward Jeet is a graduate of the London Master of Engineering Science Gallery of NSW) and is Chairman of Investment Alliance. On his retirement Business School’s Senior Executive Bachelor of Engineering (Honours) the AIM Academic Advisory Board. as Chief Executive Officer at ABN Program, a Distinguished Alumnus AMRO Australia (now operating as RBS He has previously held a number of the Indian Institute of Technology, Mel was appointed a Director on Group) in 2003, Steven was appointed of private and public company Kanpur and the College of Engineering 6 March 2001 and was re-elected at a member of the RBS Group (Australia) directorships in Australia, New at the University of Washington, Seattle. the 2008 Annual General Meeting. Advisory Council. Mel is Chairman of the Human Zealand, India and Japan. Steve was Resides in Texas, United States. Age: 62 Resources Committee and for seven formerly the Managing Director of Resides in Sydney. Age: 57 years was Chairman of the Risk, Audit OTC, Group Managing Director of and Compliance Committee. Telstra and Managing Director of 6 STEVEN CRANE British Telecom, Asia Pacific. 7 DOUGLAS SNEDDEN He has been Chairman of Pro Medicus Independent Director Independent Director Limited since April 2000, and was a Resides in Sydney. Age: 67 Bachelor of Commerce director of Macquarie Communications Bachelor of Economics and Infrastructure Group from April 2003 Accounting Steven was appointed a Director on until July 2009, a director of Coca-Cola 12 February 2008. Steven will retire as Doug was appointed a Director on Amatil from February 1999 until August a Director at the 2010 Annual General 21 December 2009 and is a member 2008, and a director of West Australian Meeting. Being eligible, he offers of the Risk, Audit and Compliance Newspapers Holdings Limited from himself for re-election. Committee and the Human 2002 until December 2008. He was He has more than 30 years’ Resources Committee. He has more formerly Managing Director of Telecom experience in the financial services than 30 years’ experience in finance, Australia, Chairman of Telecom Transfield Services Annual Report 2010 » Senior executive team

16

1 2 3 4 5

1 Tiernan O’Rourke 2 Kate Munnings 3 Bruce James 4 Larry Ames Chief Financial Officer Chief Risk and Legal Officer/ Chief Executive, Australia and Chief Executive, Americas Master of Business Administration Company Secretary New Zealand Master of Business Administration (MBA) Bachelor of Laws Bachelor of Civil Engineering Bachelor of Science (Mechanical Chartered Accountant Engineering) Bachelor of Health Science Bruce has 35 years’ industry Bachelor of Commerce Kate leads the group responsible for experience. He commenced working Larry is responsible for the for Transfield Construction in 1975, Tiernan joined Transfield Services Transfield Services’ legal, company management and growth of the holding senior management roles in January 2010 and is responsible secretarial, risk management, audit Company’s North American business. including Chief Executive Officer for Transfield Services’ global and compliance functions. He has more than 30 years’ global (CEO) Transfield Construction, General financial strategy and policy, and the experience in senior roles in service Kate is also responsible for overseeing Manager Transfield Maintenance leadership of the finance team. His businesses across the operations, the Company’s health, safety and and CEO Transfield Operations responsibilities include financial and engineering, construction, facilities quality strategies and processes. Kate and Maintenance. In April 2006, he management reporting, treasury, management, security and logistics has extensive experience working was appointed Chief Executive of taxation and investor relations. industries. He was most recently with and advising companies in Transfield Services, Australia. This President of Day & Zimmermann’s Tiernan qualified as a Chartered the engineering, construction and position now incorporates Transfield Government Services business in the Accountant in Australia and received services sectors in relation to their Services’ New Zealand business. United States, and his experience his MBA from the University of corporate, contractual and other covers both the private and the Technology, Sydney in 1996. He is commercial requirements. Kate’s public sectors. a member of the Audit Advisory team is focused on establishing and Committee at the Institute of maintaining strategies designed to Chartered Accountants in Australia. enhance business outcomes. 5 Philip Wratt Tiernan previously held the Chief Executive, Middle East position of Chief Financial Officer at and Asia Australand Holdings Limited and has more than 20 years’ experience Philip joined the Company in January in financial, commercial and 2010 and is responsible for the management roles including senior strategic direction and management positions in companies such as AGL of Transfield Services in Qatar, Limited, Westfield Holdings Limited, United Arab Emirates, India and CSR Limited and Brambles Australia South East Asia. He has more than Limited. 32 years’ experience across the oil and gas, building and construction industries in Australia, New Zealand, Asia, Africa and the Middle East. His responsibilities have included managing strategic direction and assessing new market opportunities, maintaining a strong external focus on customer needs and delivering to budget, profit, health, safety and environmental targets.

Transfield Services Annual Report 2010 17

6 7 8 9 10

6 Elizabeth Hunter 8 Matthew Irwin 9 Joseph Sadatmehr 10 William Fazl Chief Executive, Human Chief Executive, Investments Chief Executive, Strategic Chief Executive, Business Resources Master of Commerce (Finance) Relationships Information Systems Master of Business Administration Bachelor of Agricultural Economics Master of Business Administration Master of Business Administration Bachelor of Business (Honours) Bachelor of Science (Petroleum Graduate Diploma in Technology Engineering) Management Elizabeth has 22 years’ experience Matthew is responsible for optimising in human resources in a range of the competitive position of the Joseph is a long-serving employee William has global responsibility industries, including financial services, Company’s portfolio of assets. of Transfield Services and has more for managing the information and health and semi-government Matthew was previously Chief than 41 years’ industry experience. technology systems that support organisations. Elizabeth is a member Financial Officer and has played Joseph was President of Transfield our business and our stakeholders. of the Chartered Institute of a pivotal role in the Company’s Services’ North American business With 30 years’ experience working Personnel and Development (UK). global growth and in the successful until November 2009, when he for major multinational corporations, public listing of Transfield Services returned to Australia as Chief William is focused on delivering Infrastructure Fund (TSI Fund) in Executive, Strategic Relationships. He innovative information technology 2007. Matthew is a director of TSI is responsible for leveraging existing solutions that grow the business. 7 Nicholas Yates Fund. He has 18 years’ experience and prospective major global client Chief Executive, Marketing and in senior positions in finance, relationships with a focus on winning Business Development administration and banking. new work and on retaining and Bachelor of Engineering growing existing key relationships. (Mechanical) Joseph works closely with the Chief Executives’ senior teams across all Nicholas is responsible for overseeing regions and industries in which the Transfield Services’ global market Company operates. positioning, business development activities and implementing the Company’s strategic plan. The marketing function covers market intelligence, client account management, brand management, marketing communication and stakeholder communications. He has more than 20 years’ experience across the construction and property industries in senior operational and strategic development roles and was formerly Chief Executive Officer of project management consultancy, APP Corporation, acquired by Transfield Services in 2006.

Transfield Services Annual Report 2010 18

Transfield Services rigger Chris Cronin delivering scaffold components to the Six Regenerator Tower at Santos’ Moomba Cooper Basin facility in South Australia.

Transfield Services Annual Report 2010 » Review of operations

19 Australia and New Zealand

During the period the Australian and New and maintenance services to Woodside’s Revenue overview Total Zealand businesses were combined, with all Western Australian offshore and onshore gas $3000 proportionately Company financial reports now reflecting this. facilities for a further four years. consolidated A$2.6bn A$2.5bn revenue The changes delivered operational and cost $2500 Transfield Services renewed its maintenance, A$0.5bn A$0.4bn efficiencies as part of the Company’s strategy capital works, shutdown execution, $2000 to streamline the business subcontractor management and support $1500 A$2.1bn Revenue from wholly owned entities saw services contract with Qenos and secured A$2.1bn modest growth of 0.5 per cent to $2.1 billion, project work with the same client. $1000 attributable to the increased work in services Transfield Services maintains a strong presence provided to the Infrastructure sector (including $500 in the oil and gas maintenance services sector, social infrastructure). Earnings before interest, with the Company seeking to leverage its $0 tax and amortisation (EBITA) margins were market leading position to secure higher value 2009 2010 stable at five per cent. asset management services. Our share of revenue from joint venture operations

Proportionately consolidated revenues (our Revenue from wholly-owned entities Our disciplined approach to tendering is share of revenue from joint venture operations) expected to result in sustainable growth of declined by 3.1 per cent to $2.5 billion. This was margins in the mid to longer term. We are actively mostly attributable to the conclusion of the Yarra pursuing significant long-term opportunities in Proportionately consolidated contract provided by the TransdevTSL joint the upstream oil and gas sectors as well as niche revenue by industry sector venture in November last year. EBITA margins services to blue-chip clients. on a proportionately consolidated basis grew 0.2 percentage points to 4.3 per cent despite an Services to the mining industry are seeing steady increasingly competitive and generally tough growth, particularly in iron ore. Opportunities 23% operating environment. for Transfield Services include both contracting 33% with the mine owners and original equipment Resources and Industrial manufacturers providing ‘in country’ construction $2.54 billion The Resources and Industrial sector saw and maintenance services. revenue decline compared with the same The Company is seeking to expand the scope period last year, driven largely by reduced and scale of mining activity with clients including 44% project activity. This was partially offset by the BHP Billiton, Rio Tinto, Dalrymple Bay Coal ramp-up of new contracts such as BHP Billiton Terminal, ThyssenKrupp and Worsley Alumina. Iron Ore and Origin Energy’s BassGas onshore Resources & Industrial and offshore maintenance contracts. We also boosted our engineering design capabilities when we acquired Industrial Contract Infrastructure Services The outlook for the sector has improved Designers (Asia Pacific) Pty Ltd (ICD) from Shell Property & Facilities Management following the upswing in economic conditions Australia in November 2009. ICD’s team of together with increased investment in high- 180 people deliver engineering and design of quality and targeted business development maintenance and brownfield projects to the activities. hydrocarbons, processing and related industries. Services to the oil and gas industry saw some improvement in margins following an increase in shutdown activity during the second half. Transfield Worley extended its relationship with Woodside for the delivery of brownfield project Transfield Services Annual Report 2010 » Australia and New Zealand continued

“ I have served in the Reserve for 45 years this month and I can honestly say that I have 20 never had better service than on this Base.” Ron Pease, J.P., Squadron Warrant Officer and Unit Welfare Officer, 25 Squadron at RAAF Base Pearce.

Regional well as securing more than $175 million employees: 12,400 worth of projects. A focus on retaining and growing core areas of substation, industrial Awards: Three employee Excellence Awards, New Zealand Electricity Supply Industry services and operations helped to improve Training Organisation 2009. volumes and continues to position the Starfish Hill Wind Farm team awarded Silver Award, Asset Management business in higher technical value areas and Council Awards 2010. margins. FutureFlow alliance won Infrastructure Projects over $20-million category, 2009 Our contract wins during the year included Engineers Australia Excellence Award, Victorian Division. a national grid reinforcement project with FutureFlow alliance awarded Infrastructure Project Innovation Award, Transpower at Brownhill valued at NZ$40 million Australian Water Association Victorian Division and Australian Water and a two-year NZ$18 million renewal to our Association National Water Awards 2010. main grid equipment operations contract with Airtrain Rail Link alliance announced as Queensland and National Small the same client. We also secured a new 10-year Business Categories Winner, Customer Service Institute of Australia’s Australian $68 million contract with Aurora Energy to Service Excellence Awards 2009. support its delivery of energy supply services to BlueScope Steel alliance secured Best Workplace Health and Safety five of Victoria’s major public hospitals. Management System – Private Sector Award, WorkCover NSW Safe Work Awards 2009. The water group continued to deliver strong TransdevTSL – Shorelink was Highly Commended in the NSW Medium year-on-year organic growth from existing Business division, Customer Service Institute of Australia’s Australian Service long-term contracts and new business wins. Excellence Awards 2009. Gippsland Water Factory began to treat TransdevTSL – Shorelink Buses won the Environmental/Innovative domestic wastewater in late November 2009 Operator of the Year award, Australian and Coach Show 2009. and we successfully completed Australia’s Brisbane Ferries received a Letter of Commendation: Best Practice in Customer largest irrigation project as part of the Service and Management, International Transport Forum 2010. FutureFlow alliance. Transfield Worley, with Woodside, JP Kenny, KBR and WorleyParsons The roads business provides asset awarded 2009 Australian Engineering Excellence Award. management services to Lane Cove Tunnel in Sydney, CityLink and EastLink toll roads in Melbourne, NZ Transport Agency in Auckland Infrastructure Services and surrounds, as well as road maintenance services in Victoria and Tasmania. The Infrastructure Services sector saw revenue decline compared with the same In 2010, Transfield Services secured an period last year. Growth in the power, water extension of our contract with ConnectEast and rail industries was offset by a decline until 2015, NZ Transport Agency for another 10 in revenue from the conclusion of the Yarra years and Thames-Coromandel District Council Trams contract and reduced volumes from the in New Zealand for a further three years. renegotiated Chorus contract in New Zealand. The power industry achieved increased volumes of work with long-term services contracts in Australia and New Zealand, as

Transfield Services Annual Report 2010 Benmore to Haywards High Voltage Direct Current line in Port Underwood, Marlborough Sounds, New Zealand. A two- man crew was dropped off by helicopter at the tower for work to be performed on conductive bolted joints.

21

Transfield Services Annual Report 2010 22

Gippsland Water Factory alliance Maintenance Coordinator Steve Kanara [left] with Gippsland Water Factory Site Operator Chris Davies during commissioning handover. The Factory began treating domestic wastewater in November 2009.

Transfield Services Annual Report 2010 » Australia and New Zealand continued

23

The rail business saw growth in the projects We also secured a continuation of a ten-year area and also benefited from Australian Federal relationship with Telstra, with a three-year contract Government stimulus spending. The business is to project manage upgrades to Telstra’s telephone focused on delivering rail maintenance, program exchange assets across Australia. management, engineering and project delivery services and maintains over 4,500 kilometres of Property and Facilities Management track across Western Australia, South Australia The business achieved strong growth compared and New South Wales. The pipeline is growing with the same period last year, by capitalising on with significant opportunities emerging beyond contracts with long-term government customers, stimulus spending. improving the pipeline of opportunities and providing services to new customers and regions. During the year, we completed several stimulus- funded projects for the Australian Rail Track During the period, we expanded our range of Corporation, including the Parkes to Cootamundra services to social infrastructure through building upgrade project. The project involved laying more and refurbishment upgrades as part of government than 300,000 concrete sleepers over 201 kilometres stimulus package works. in eight months, including mobilisation. We won a new $200 million contract with Western Services to the public transport industry include Australia Department of Housing and increased our the provision of operations and maintenance for scope of work with Housing NSW by $100 million, public transport through the Company’s joint which is in addition to the original $385 million venture TransdevTSL, comprising Brisbane Ferries contract awarded in August 2008 and $30 million of and TransdevTSL - Shorelink . project work awarded in May 2009. Brisbane Ferries increased its customer numbers by We secured an integrated asset management and 4.75 per cent to 6.5 million in 2009, while achieving property maintenance services contract for 190 zero lost-time injuries. Two new CityCats were of City of Melbourne’s properties until 2014. The launched during 2010 and three new express business was also awarded its first contract in the services were introduced. $104 billion Australian health sector with a $7.2 million three-year facilities management Our telecommunications business was selected by contract in November 2009 with Austin Health. NBN Co Limited to construct one of the first release sites at Minnamurra and Kiama Downs south of Our project management subsidiary, APP, continues Wollongong in New South Wales during July 2010. to grow organically. During the year, APP secured This followed input into the design process earlier engineering project management services for the in 2010. Australian Grand Prix in Melbourne for the next three years and project management of Qantas’ The renegotiated 10-year NZ$1 billion Chorus new corporate offices in Sydney and NAB’s in contract commenced during the first half of this Melbourne. financial year, positioning the Company well to benefit from infrastructure programs. The work involves maintenance and build services as well as the provision of fibre installation services.

Transfield Services Annual Report 2010 24

Miami-Dade Expressway Authority, Florida, United States. Transfield Services has provided asset management, toll operation, incident management and building maintenance services to the Authority since 2001.

Transfield Services Annual Report 2010 » Review of operations

25 Americas

A stronger Australian dollar resulted in TIMEC successfully renewed its top Revenue overview Total decreased contributions from the Americas three contracts with Chevron, BP and proportionately $1600 A$1.5bn consolidated region, reflected in revenue from wholly ConocoPhillips. It also signed a new contract A$1.4bn revenue $1400 owned entities reducing by 18.7 per cent to with United States Environmental Services A$0.36bn A$961.3 million. Proportionately consolidated LLC in June 2010 and secured a contract $1200 A$0.42bn revenue in local currency terms saw revenue with ConocoPhillips to provide pipeline and $1000 growth of 9.4 per cent to US$1.2 billion terminal maintenance, which is outside of the $800 A$1.2bn ($1.4 billion in Australian dollars). traditional refinery maintenance sector. $600 A$0.96bn Earnings before interest, tax and amortisation FT Services is actively pursuing opportunities $400

(EBITA) margins were impacted by ongoing beyond its existing client base across Canada. $200 constrained economic conditions, one-off Infrastructure Services $0 contract transition costs as well as costs 2009 2010 associated with business streamlining initiatives. Transfield Services North America – Transportation Infrastructure (TSNA-TI) Our share of revenue from joint venture operations The region will benefit from a strengthened saw modest revenue growth in local Revenue from wholly-owned entities executive team that included the appointment currency terms. The business continues to of a new chief executive, Larry Ames, during hold its market share within its traditional the period. United States markets as well as securing Proportionately consolidated revenue by industry sector Resources and Industrial opportunities in Canada. The Resources and Industrial business saw TSNA-TI provides state departments of strong revenue growth of approximately 15 transportation and other government per cent in local currency terms. This was agencies with outsourced road maintenance driven by increased activity for our Canadian solutions. The subsidiary has strong market 52% 39% oil sands joint venture, FT Services, with the positions in states where these activities are $1.38 billion successful completion of major outages for outsourced and expanding, including Florida, Suncor Energy and Shell. This was partially and Texas. offset by the continued tight trading In 2010, TSNA-TI secured contracts with conditions in the refinery industry, resulting existing clients Florida Department of 9% in revenues declining for subsidiary TIMEC Transportation and District Department of compared with the same period last year. Transportation, Washington DC and its first During the period, TIMEC implemented contract in North Carolina with the state’s Resources & Industrial significant streamlining initiatives to help department of transportation. Infrastructure Services mitigate margin pressure. The outlook for Property & Facilities Management turnaround activity has improved as the rate of scheduled outages is expected to increase on ageing plants. TIMEC has invested in further business development to pursue opportunities in adjacent industries.

Transfield Services Annual Report 2010 » Americas continued

“Saturday’s (8 May 2010) significant snow fall was a record event within this area and 26 your efforts in maintaining a safe condition on our highways is commendable.” Ontario Ministry of Transportation, North Bay Area Office, thanking TSNA-TI Project Manager, Bruce Sampson.

Regional The business grew revenue in local currency employees: 7,700 terms compared with last year, as it continued to secure organic growth through key Awards: TIMEC awarded 22 National Petrochemical and Refiners contract wins and expansion of work scope Association Meritorious Safety Awards. with the existing client base. Investment in FT Services received an Occupational Health and business streamlining initiatives, business Safety Award of the Year, Alberta Petro-Chemical development and one-off contract transition Safety Council. costs saw margins decline in local currency. Improved discipline and a renewed focus on The business also expanded into Canada, costs and margins are likely to mitigate the following up on a C$150 million contract win potential for other one-off transition issues. with the Ontario Ministry of Transportation in August 2009 with a C$580 million operations The business continues to drive cost and maintenance partnership with Dexter efficiencies to help mitigate ongoing margin Construction for the New Brunswick Highway pressure. Key initiatives involve centralising Corporation in April 2010. the USM head office and back office support functions to Norristown, Pennsylvania, and the In Canada, the key provinces continue ongoing consolidation of IT systems to further to tender projects under public private improve the service delivery model. The partnership structures. The spending on majority of the investments in these initiatives United States roads remains static as state were incurred by the business during the budgets continue to be restrained. Regional period. departments of transportation are seeking federal funding with decisions expected early The outlook is positive and the business in the next calendar year. continues to successfully gain traction with contract wins exceeding US$300 million since Property and Facilities Management July 2009, despite depressed retail trading Subsidiary, USM, is a leading provider of conditions. outsourced facilities management services to During the year, USM secured work with the retail industry. USM is represented in retailers Bed, Bath & Beyond, Jo-Ann Fabric 50 states in America and in Canada and Puerto and Craft Stores, Regis Corporation, Rite Aid Rico. The services provided by USM allow Corporation and Sports Authority. clients to reduce operating costs, standardise services and improve visibility of spend. By using a service partner to manage the day- to-day service delivery, clients can focus resources on long-term strategic initiatives.

Transfield Services Annual Report 2010 27

FT Services completed a major outage during 2010 in 18 days for Suncor Energy at its Fort McMurray, Alberta, Canada operations - two days ahead of schedule, under budget and with zero lost-time injuries.

Transfield Services Annual Report 2010 Transfield Services-WorleyParsons provides engineering, procurement, construction, maintenance and shutdown services to the Shell Philippines Exploration B.V.’s Malampaya gas facility. Photo courtesy of Shell Philippines Exploration B.V.

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Transfield Services Annual Report 2010 » Review of operations

29 Middle East and Asia

Transfield Services is committed to building Resources and Industrial Revenue overview Total a strong market presence in the Middle $160 During the year, the Transfield Services- A$149m proportionately East and Asia region. This is evidenced consolidated $140 WorleyParsons joint venture started a A$129m revenue by the establishment of a new regional A$39m seven-year contract with Shell Philippines headquarters in Abu Dhabi with a resident $120 Exploration B.V. at its Malampaya gas facility. Chief Executive, Philip Wratt, and a renewed $100 A$57m The contract, valued at approximately focus on business development. This will $80 A$76 million, includes a three-year extension A$110m assist in establishing strong country-specific option. $60 partnerships and provide the capabilities to $40 A$72m pursue and secure the significant pipeline of Intergulf General Contracting LLC, which $20 opportunities that exist in the region. provides services in civil construction, civil repair works and concrete rehabilitation, $0 Revenue from our wholly-owned operations 2009 2010 continues to grow with new contract decreased 34 per cent to $72.5 million, wins. This has provided strong bottom-line Our share of revenue from joint venture operations impacted by the absence of one-off contribution to the region from both oil and contracts that were performed during Revenue from wholly-owned entities gas, and civil-related industries in the the previous year. Including income from United Arab Emirates. our joint ventures, revenue decreased 13.5 per cent to $129 million. Continued Transfield Services developed a new Proportionately consolidated depressed economic conditions also cooperative agreement with industrial revenue by industry sector slowed investment by clients in sustaining services company Cape PLC to deliver capital works, such as shutdowns, limiting integrated maintenance services in the 9% opportunities to one-off contracts during Middle East. The agreement combines the period. Transfield Services’ expertise in asset management, shutdowns and integrated maintenance services and Cape PLC’s $129 million strength in industrial services. Together, the companies have the capability to deliver dependable, quality and cost- efficient services to the resources and 91% industrial sector in the United Arab Emirates,

Oman, Bahrain, Qatar, Kuwait and Resources & Industrial Saudi Arabia. Facilities Management

Transfield Services Annual Report 2010 » Middle East and Asia continued

“RasGas recognises the enormity of this task [Equipment Strategies Implementation project] and extends its deepest appreciation to you and your team, for the commitment, professionalism and flexibility you brought to this project to make it successful in all aspects.” 30 Omar Al-Misnad, Maintenance Manager, and William Chase, Operations Technical Manager, RasGas.

Regional Infrastructure Services employees: 7,450 The business has formed a cooperative agreement with Transdev that is focused on Awards: Subsidiary Intergulf General Contracting LLC (Intergulf) awarded 2009 HSE Best Performance Award by client a wide range of emerging public transport Zakum Development Company (ZADCO). operations and maintenance opportunities in the United Arab Emirates, including Abu Dhabi and Abu Dhabi Gas Liquefaction Company Ltd. (ADGAS) presented HSE award to Intergulf in Dubai. recognition of three years, or 10 million hours, Many of the emerging opportunities are part of without a lost-time injury in December 2009. the Abu Dhabi Department of Transport’s Surface Client, RasGas, awarded Transfield Services subsidiary Transport Master Plan. The Plan recommends an Hofincons a certificate of recognition for achieving integrated system of regional rail and metro rail, 10 million hours without a lost-time injury in June 2009. , bus and ferry transport be implemented by 2030. Hofincons awarded 2009 Best Contractor Safety Performance Award by Reliance Industries Property and Facilities Management Limited, Refinery Division, Jamnagar. The Transfield Mannai Facilities Management Transfield Mannai Facilities Management Services WLL awarded 2008 Contractor of the Year by client Qatar Services WLL joint venture has consolidated Petrochemical Co. (QAPCO) in July 2009. its position as the leading quality provider of facilities management services in Qatar, resulting in strong year-on-year growth. The joint venture’s performance was underpinned by the securing of contracts with customers who had previously opted for low-cost service providers and is evidence of the quality of services provided by the joint venture.

Transfield Services Annual Report 2010 We have a cooperative agreement with Transdev that is focused on emerging public transport opportunities in the United Arab Emirates, including Abu Dhabi [pictured].

31

Transfield Services Annual Report 2010 TSI Fund is a publicly listed entity owning a portfolio of interests in essential infrastructure assets including five power stations, two water filtration plants and three wind farms. Transfield Services owns a 44.5 per cent stake in TSI Fund and provides it with expertise in asset development, project management and operations and maintenance. Picture: Starfish Hill Wind Farm, Transfield Services Infrastructure Fund, South Australia.

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Transfield Services Annual Report 2010 » Review of operations

Windy Hill Wind Farm

Townsville Power Station

Collinsville Power Station

BP Kwinana Macarthur Cogeneration Plant Water Filtration Kemerton Power Plant Station

Starfish Hill Loy Yang A Wind Farm Power Station

Yan Yean Water Toora Wind Farm Filtration Plant 33 Transfield Services TSI Fund assets Infrastructure Fund

Transfield Services Infrastructure Fund’s (TSI Fund) Following the conclusion of the TSI Fund’s Highlights: assets performed to expectations as they continued recapitalisation: to benefit from Transfield Services’ engineering »» Capital structure review »» Transfield Services’ additional investment in expertise as the operations and maintenance successfully completed, TSI Fund totals $43.2 million, which represents provider. TSI Fund achieved net profit after tax (NPAT) significantly strengthening 61.8 million securities at 70 cents per security (excluding the impact of the capital structure review TSI Fund’s financial position. initiatives) of $18.4 million which was $3.7 million »» on this additional investment, Transfield »» Transfield Services team down on the comparable figure for FY09. Transfield Services expects to receive a forecast annualised achieved seven years’ lost- Services share of this underlying NPAT was $9.3 distribution yield of 11.7 per cent time injury free at Collinsville million and the Company received $17 million in »» Transfield Services’ share of the final distribution Power Station. cash distributions during the period. for the year ended 30 June 2010 from »» Starfish Hill Wind Farm TSI Fund’s capital structure review (review) was TSI Fund will be $7.7 million, and delivered availability of more completed during the second half of the financial »» Transfield Services’ holding decreased from than 90 per cent, a major year and resulted in three key initiatives that included 48.4 per cent at 30 June 2009 to 44.5 per cent. improvement from the the sale of Mt Millar Wind Farm for $191 million, a 76.6 per cent it averaged fully underwritten $110 million equity raising, and A FY10 final distribution of 4.0 cents per security was prior to Transfield Services refinancing and extending the maturity of TSI Fund’s declared, in-line with guidance given in the May taking over operation and corporate-level debt to June 2015. TSI Fund now 2010 Equity Offer document. This brings total maintenance of the farm. has a significantly improved balance sheet with net FY10 distributions to 10.0 cents per security and debt reduced to $462 million as at 30 June 2010 from will be payable on 20 September 2010. TSI Fund »» In June 2010, Australia’s $725 million as at 30 June 2009 and gearing reduced reaffirmed that in the medium-term, it expects to be Asset Management Council to 52 per cent from 66 per cent. able to maintain future distributions at least at recognised the outstanding 8.2 cents per security. performance by awarding As a result of the review outcomes, Transfield Services Transfield Services’ Starfish incurred a one-off after tax equity accounting cost Transfield Services invested further in TSI Fund Hill team with a Silver Award. totalling $22.9 million ($16 million non-cash) being because the review has provided TSI Fund with Transfield Services pro-rata share of TSI Fund’s sale a stable long-term capital structure, which will of the Mt Millar Wind Farm, interest rate swap break enable us to benefit from the ongoing provision costs and other transaction costs. of services and sustainable dividends. Transfield Services remains manager of TSI Fund and provides operations and maintenance services to its wholly- owned assets.

Transfield Services Annual Report 2010 » Business highlights

34

Safety performance »» Our TIMEC business was awarded »» Our FutureFlow alliance is highly 22 National Petrochemical and awarded for its sustainable and 08/09 09/10 % Refiners Association (NPRA) innovative approach to water Reduction Meritorious Safety Awards, management. The awards include 1.94 1.55 20.1% confirming its position in the top 2010 Australian Water Association LTIFR per million hours worked one per cent of contractors for Awards for Project Innovation, safety in the United States refining the 2009 Engineers Australia market. TIMEC was honoured by Excellence Award, Victorian 7.49 the NPRA for its exceptional focus Division for Infrastructure Projects 6.78 9.5% and performance in safety. over $20 million and a prestigious International Water Award for TRIFR per million hours worked Innovation Project Innovation. »» USM’s Project Transform has taken »» Our Chairman, Tony Shepherd, was significant recurring costs out of »» We reduced our Lost-Time Injury honoured with a special award for the business by consolidating Frequency Rate (LTIFR) by Services to Construction from the multiple legacy systems and 20.1 per cent, from 1.94 injuries per Australian Constructors Association processes into one standard million hours worked the previous (ACA). The award recognises people infrastructure platform. This fully year to 1.55 this year. We also considered to be pioneers in the integrated strategy has delivered reduced our Total Recordable Injury construction industry and whose many benefits to our customers Frequency Rate (TRIFR) from 7.49 business acumen, engineering including: injuries per million hours worked skills, perseverance, personal and the previous year to 6.78 in the past o single point of accountability corporate skills have contributed 12 months, a reduction of via a dedicated account greatly to the achievements of the 9.5 per cent. management team industry as a whole. »» We launched our Mandatory o standardised systems and Safety Rules, which are designed to processes to enhance service protect employees and contractors delivery from serious injury or death. The 10 rules apply to everyone working o improved reporting and in all Transfield Services operations visibility on their facilities around the world, including our maintenance (FM) spend, and subsidiary companies. o leveraged enterprise »» We trained more than 1,400 knowledge in the development of our business leaders in the and implementation of implementation of the Mandatory specific facilities management Safety Rules. strategies for their organisations. »» On 8 June 2010, every Transfield Services site and office around the world took part in a global safety stand down highlighting our safety imperatives.

Transfield Services Annual Report 2010 “I would not hesitate to work with Transfield Services again on any future opportunity.” 35 Ratna (Nanth) Nanthakumar - General Manager Wholesale, Aurora Energy, August 2010.

Training and development Sustainability “We are fortunate to have you working with »» In 2009, as a Registered Training »» For us, sustainability is about us, and thanks again for the great service.” Organisation, we trained 7,662 improving the strength and Principal, Tregear Public School, people including subcontractors performance of our Company, (NSW Department of Commerce in Australia. In New Zealand, protecting and developing our schools contract). as a registered Private Training people, contributing to the “We recently added significant additional Establishment, we trained 5,711 communities in which we work works at late notice to our agreed program. people. and minimising impacts on the It was pleasing that Transfield Services environment. For more information, »» By the end of 2009, more than accepted this challenging program and our 2010 Sustainability Report and 100 of our senior business leaders delivered the works in a timely manner and Sustainability Highlights brochure are participated in our Enterprise within the agreed budget.” available online at: Leaders Program. The year-long Steve Jenkins, A/General Manager, www.transfieldservices.com program develops our leaders so Coastal Infrastructure (Department of Transport, Metropolitan they can develop their people Client testimonials and the capacity of the Company Maritime Facilities Maintenance “Transfield Services’ highly professional to generate the best results for and Navigational Aids Maintenance and comprehensive transition planning our customers, shareholders and contract). process ensured a very smooth handover stakeholders. “KCT Tech Park thanks and appreciates from the previous operator. Early the significant and dedicated support of »» The Australian business reported operations at the individual health service Hofincons provided to our Tech Park since the outcomes from the first facilities have been faultless. I would not September 2009.” 12 months of its Reconciliation hesitate to work with Transfield Services Dr. A Setvakumar M.E., Ph.D., Project Action Plan (RAP) to members of again on any future opportunity.” Head, KCT Tech Park, July 2010. Reconciliation Australia’s Executive. Ratna (Nanth) Nanthakumar - We achieved approximately General Manager Wholesale, “Airtrain’s Board of Directors recognises 70 per cent of our targets. Aurora Energy. the importance of this key milestone and Significant achievements for our first is grateful for the commitment to safety “The [ExxonMobil Altona – Transfield year included: which both Transfield Services and Airtrains Services] alliance is underpinned by staff adopt in the operation of the Brisbane o improving our Indigenous agreements and processes that encourage Airport Rail Link.” supplier relationships, and a win-win situation for all concerned ... we Mike Pelly, Chairman, Airtain are linked together arm-in-arm to truly o reviewing and implementing Holdings Limited, on 10 years’ lost- deliver the value we need for this business.” Indigenous-related human time injury free on the contract. Glenn Henson, Refinery Manager, resources policies. ExxonMobil Altona. “Their work ethic [Transfield Services employees] is high and they are always open to any feedback and display a willingness to address even the most minor things. Basically, they do a great job.” Principal, Swansea High School (NSW Department of Commerce schools contract), May 2010.

Transfield Services Annual Report 2010 » Working on tomorrow’s governance

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Corporate governance is the system of Transfield Services continues to report on its »» Ensuring effective legal compliance, principles and processes governing the exercise compliance with the revised ASX Principles including monitoring compliance with law and control of authority within a company. Our and Recommendations in this annual report. and the Company’s contractual obligations, governance system aims to: We believe we have complied with the ASX ensuring that an appropriately informed Principles and Recommendations during this market exists at all times in respect of the »» ensure appropriate accountability reporting period, except as outlined and Company and ensuring that robust ethical »» minimise business risks explained in the following. standards are maintained by the Company and that the ‘tone at the top’ is set by the »» promote ethical conduct, and 1. BOARD OF DIRECTORS Board and senior executives. »» enhance investor confidence. 1.1 Role and responsibilities »» Ensuring effective governance, Transfield Services continuously monitors including ensuring that the Company governance developments to ensure Transfield Services’ Board of Directors (Board) maintains appropriate corporate appropriate and flexible practices are in place is responsible for the Company’s performance governance practices and overseeing to meet industry and market expectations – and strategic direction, with the aim of compliance with such practices, and today and tomorrow. protecting and enhancing shareholder value. monitoring compliance with major policies and the Code of Business Conduct. We believe there is no single model of good The Board Charter outlines the Board’s role, governance. Transfield Services, like any responsibilities and internal procedures. In »» Making key human resources and other listed entity, has its own history, values summary, specific responsibilities of the Board remuneration strategy decisions, and vision for the future, which are reflected include: including approving the appointment in our Board and corporate structure and »» Overseeing the Company’s financial and removal of the Managing Director our governance systems. These have been integrity, including approving statutory and Chief Executive Officer (MD/CEO) designed to encourage the success of Transfield accounts and directors’ reports, monitoring and senior executives, evaluating their Services and the creation of shareholder value financial performance, approving major performance, determining their fair now and in years to come. borrowings or giving security over assets, and responsible remuneration and monitoring their succession planning and This year, we strengthened our governance and approving the appointment of the monitoring the balance of skills, expertise systems through our work on crucial new internal and external auditor. and experience on the Board, and where policies including the Anti-Bribery and »» Reviewing and approving business appropriate, selecting new directors for the Corruption Policy and the Political Support strategy, including approving the approval of shareholders. and Involvement Policy. We implemented Company budget and strategic plans, international training initiatives to support the assessing performance against approved The Board has delegated specific authority Code of Business Conduct. Our Continuous strategies and continued suitability and to the MD/CEO. Transactions outside the Disclosure and Communications Policy and sustainability of strategies and considering delegated authority framework must be Share Trading Policy have been enhanced in management recommendations presented to the Board for approval. light of legal and regulatory developments and on proposed mergers, acquisitions, The delegated authority framework is reviews of best practice. divestments and capital management. embedded within the Board-approved risk Transfield Services has welcomed the ASX »» Monitoring the identification and appetite statement for the Company, which Corporate Governance Council’s position on management of business risks, sets the foundation for an appropriate risk diversity and measurable objectives relating to including approving material policies culture within the Company. A summary of the gender. We are currently reviewing our policies for management of business risks and delegated authority framework is available on and practices to reflect our commitment to oversight of management of these risks. the Transfield Services website. diversity in all its dimensions.

Transfield Services Annual Report 2010 37

The Board meets as frequently as required, but the arguments for and against each decision applicable, offer themselves for re-election not less than six times a year. This year, key and ultimately reaches a decision that he or she »» directors will not usually serve more than 10 activities for the Board included: believes is in the best interests of the Company. years except in special circumstances, as the To this end, the Charter facilitates directors »» considering and approving the Company’s Board may determine having access, where necessary, to independent, strategic plan and budget external and professional advice at the Company’s »» directors are expected to be available to »» reviewing and approving the Company’s expense. Directors also have access to the Chief fulfil their obligations as directors as and actions arising out of TSI Fund’s capital Risk and Legal Officer/Company Secretary and when required, and structure review senior executives for information and support to »» directors will comply with the powers and assist in making informed decisions. »» considering and approving a Share duties of directors set out in the Company’s Purchase Plan, following requests from retail As a guide, the Company considers that where constitution, Board and Committee shareholders a director’s interest or relationship exceeds a Charters and the Corporations Act. materiality threshold of 10 per cent of revenue, »» overseeing the issue of US$170 million in the New directors and new senior executives take it may be deemed material, depending on the US private debt market as part of ongoing part in an induction program as an introduction circumstances. The Company reviews directors’ prudent capital management initiatives, and to the Company’s vision, values and functions, independence on an ongoing basis. as well as its systems, processes and key »» overseeing continued Board renewal. The non-executive directors are all independent, contacts. The program provides resources 1.2 Board composition and except Guido Belgiorno-Nettis AM and Luca to allow directors and senior executives to participate in the Company’s operations at the independence Belgiorno-Nettis AM, who are directors of the founding shareholder Transfield (TSL) Pty Limited, earliest opportunity. The directors are profiled on pages 14 and 15 which is part of the Transfield Holdings Group. of this annual report. Their skills, knowledge, 1.4 Board performance review The Chairman, Anthony Shepherd, is continuing perspective and experience are appropriate to Board, committee and director performance is ensure the effective performance of Transfield his oversight of the Board renewal process to ensure that the composition of the Board reflects reviewed internally on an annual basis, with an Services and to address current and emerging external review undertaken every three years. industry issues. industry and market expectations of responsible governance. This financial year, Jagjeet Bindra The internal review process seeks anonymous The Board comprises eight directors – seven non- and Douglas Snedden were appointed as new responses from directors on elements of Board executive directors, five of whom are independent directors, and Professor Stephen Burdon retired effectiveness, including: and the MD/CEO. The roles of Chairman and MD/ from the Board in July 2010. »» Board composition and responsibilities CEO are separate. The Chairman is responsible for the leadership of the Board. The Company Anthony Shepherd is Chairman of ConnectEast »» Board meetings and decision-making Group, which has commercial relationships considers the Chairman to be independent in »» Board committees accordance with the definition of independence with the Company. However, this relationship is contained in the Board Charter. not considered material. »» Chairman’s role The Board Charter, guided by the characteristics 1.3 Directors’ terms of »» strategic planning and budgeting of independence promoted by the ASX Principles appointment and induction »» relationship with management, and and Recommendations, requires all directors to Directors are appointed to the Board on the exercise independent and informed judgment. »» evaluation and remuneration of directors following terms: A key factor in the assessment of independence and management. is whether the director brings an enquiring, »» the terms of appointment are agreed as part open and independent mind to Board meetings, of such appointment, although every three listens to the debate on each issue, considers years, a third of directors must retire and, if

Transfield Services Annual Report 2010 » Working on tomorrow’s governance

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Since the last external Board performance Responsibilities of the RACC include: Transfield Services’ procedures for the selection, review was undertaken in 2007, the Chairman appointment, removal and rotation of »» monitoring financial reporting and has commenced preparations for engaging external auditors follow the relevant statutory performance an independent advisory body to conduct a requirements. review in 2010. »» overseeing the external and internal audit The Company’s Non-Audit Services Policy functions The Chairman, on behalf of the Board, has also directs the engagement of Transfield Services’ recently completed a 360° review with the »» ensuring appropriate management of external auditor to supply non-audit services MD/CEO. This review has highlighted the business risks and to ensure that such services do not impair successful accession to the role of the MD/CEO »» monitoring compliance with the law and the objectivity and independence of the in the eyes of the Board, the senior executive responsible governance standards, and auditor’s opinion on Transfield Services. The team and investors. RACC monitors compliance with this policy. »» overseeing investigations of alleged conflicts 2. BOARD COMMITTEES of interest, major fraud or inappropriate 2.2 Health, Safety and The Board may refer its functions to committees conduct. Sustainability Committee formed to provide advice on specific matters. The RACC met four times this year and its key The Health, Safety and Sustainability Committee The committees regularly report to the Board activities during the year included: (HSSC) consists of two non-executive directors, and make recommendations to it. Each and the MD/CEO. It is chaired by Non-Executive committee has a charter governing its functions, »» reviewing the half-year and full-year accounts Director Guido Belgiorno-Nettis AM. composition and procedures. »» reviewing and recommending to the Board The HSSC oversees strategies in place to minimise The number of Board and committee the risk appetite statement and delegated risk in the areas of health, safety, sustainability and authority framework meetings held and director attendance is set environmental performance. Recommendations out in the directors’ report on page 47 of this »» considering and recommending to the and significant issues are reported to the Board. annual report. Board the adoption of three new policies – The HSSC met four times this year and its key the Anti Bribery and Corruption Policy, the activities during the year included: 2.1 Risk, Audit and Compliance Business Partners Policy and the Political Committee Involvement and Support Policy, and »» overseeing the development of the The Risk, Audit and Compliance Committee Mandatory Safety Rules and their »» monitoring the implementation of the (RACC) consists of four non-executive directors implementation across the organisation Code of Business Conduct across the (three of whom are independent). It is chaired organisation. »» overseeing the standardisation of health, by Steven Crane – an independent director safety and environment (HSE) reporting who is not the Chairman of the Board. from regional chief executives, and

Risk, Audit and Monitors the financial reporting process, and internal and external »» monitoring the Company’s response to HSE Compliance Committee audit functions. It oversees the management of risks and monitors incidents. compliance with laws and corporate governance principles. 2.3 Human Resources Health, Safety and Supports the Board in relation to health, safety and environmental Sustainability Committee matters. It ensures management has sound strategies to achieve Committee outstanding health, safety, environment and sustainability performance. The Human Resources (HR) Committee is Human Resources Assists the Board in considering remuneration policies, practices and composed of four non-executive directors Committee decisions, and ensuring key talent and critical workforces are managed (three of whom are independent). It is chaired to further corporate objectives. Board of DirectorsBoard by Independent Director Mel Ward AO, who is not the Chairman of the Board. The MD/CEO is Nomination Ensures the Board and the senior executive team have the necessary Committee range of skills, expertise and experience. an attendee by invitation and not a member of the Committee. Transfield Services Annual Report 2010 39

The MD/CEO does not participate in performance criteria of directors and senior »» a continuous review of performance and discussions regarding his own remuneration. management, and to oversee the recruitment development. and appointment of directors. The HR Committee’s responsibilities include: Senior executives also participate in a Short- The Nomination Committee met two times this Term Incentive Plan. Details about this plan are »» ensuring that human resources and year to consider changes to the Board, which set out in the remuneration report on pages 58 remuneration policies comply with the law, were implemented during the year. to 59 of this Annual Report. reflect current governance practices and mitigate against operational, financial and The PDR and Short-Term Incentive Plan reputational risk 3. MANAGEMENT evaluations were completed in July 2010 in accordance with the processes disclosed. »» developing and reviewing succession 3.1 Delegation of authority planning and talent management strategies The Board delegates operational authority to 4. BUSINESS CONDUCT »» overseeing recruitment, retention and the MD/CEO subject to specified limits set out Transfield Services is committed to ethical and termination policies for executives, and in a delegated authority framework. responsible corporate practices and decision- »» reviewing and approving the design of The MD/CEO then sub-delegates specific making. The Code of Business Conduct, related employee equity plans. authority to executives. Authority delegated training initiatives and a comprehensive policy to executives must, in certain circumstances, framework address appropriate practices The HR Committee met seven times this year be exercised with the approval of committees across the organisation. and its key activities during the year included: made up of senior executives, including »» monitoring the development of a medium- Strategic Review Committees (SRC) established 4.1 Code of Business Conduct in the geographical regions. All significant term incentive plan Transfield Services’ Code of Business Conduct new business, any new joint venture and any (Code) is a reference guide to ethical and »» overseeing succession planning initiatives acquisition and investment opportunities are responsible conduct. The Code is aimed at reviewed and approved by the Group Strategic »» considering and recommending to the Board building a workplace culture of integrity in all Review Committee (GSRC). an increase in fees paid to non-executive Transfield Services operations around the world. directors in light of market information and The function of both the GSRC and regional The Code applies to directors, executives and directors’ level of commitment SRCs is to ensure new business is aligned with employees as well as contractors, consultants the Company’s strategic objectives and to »» considering the introduction of a minimum and agents of Transfield Services. The Company’s ensure that key risks have been assessed and shareholding requirement policy for business partners (including clients, joint will be managed. directors and recommending this to the venture partners and Board, and 3.2 Performance evaluation of subcontractors) are expected to meet Vision »» considering incentive schemes to ensure senior executives retention of key management. the standards set The MD/CEO evaluates senior executives out in the Code. Values 2.4 Nomination Committee through the Performance Development Review (PDR) process, which is aimed at ensuring that The Nomination Committee (Committee) accountabilities, responsibilities and performance Conduct Principles comprises directors who are members of the HR are aligned with the future direction of the Committee, in addition to the Chairman of the Company. This process involves: Board who chairs the Committee. Policies »» a formal review for the current year The Committee has been established to ensure the Board is structured appropriately and to »» the setting of objectives and a development Programs & Training set and review selection, appointment and plan for the following year, and Transfield Services Annual Report 2010 » Working on tomorrow’s governance

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4.2 Training initiatives The Policy was also amended by the approval and will be available on the Company introduction of: website as soon as they are approved. Effective training is vital to successfully embed the Code within Transfield Services. In August »» a requirement for prior notification and 2009, Transfield Services commenced the first approval of intended trades by directors 5. MARKET DISCLOSURE stage of awareness training on the Code in and senior executives 5.1 Continuous disclosure and Australia, New Zealand, North America and the »» a prohibition on insider trading in respect shareholder communications Middle East. More in-depth training commenced of other entities’ securities, and in July 2010 and online training will be Transfield Services aims to support the introduced later in the year. Approximately 550 »» a prohibition on short-term speculative transparency and integrity of the market employees have attended training sessions so far. trading by directors and senior executives. through timely and accurate disclosure of material information to shareholders and Under the existing terms of the policy, directors 4.3 Core compliance policies the investment community in relation to our and employees are prohibited from buying or operations and performance. Ethical and responsible decision-making is further selling shares in the Company at any time they promoted through the following key policies: are in possession of price-sensitive information. The Company’s Continuous Disclosure and Communications Policy sets out obligations »» Share Trading Policy The Policy also prohibits directors and selected employees from using Transfield Services and guidelines for disclosure of material »» Conflicts of Interest Policy, and shares as collateral in any financial transaction, information, pursuant to the ASX Listing Rules. »» Related Party Transactions Policy. including margin loan arrangements. In light of legal and regulatory developments, the policy was reviewed and amended in The Share Trading Policy was amended The Conflicts of Interest Policy is aimed November 2009 to further improve the by the Board in November 2009 following a at protecting the integrity of the Company’s Company’s processes around disclosure. review of best practice amongst other listed decision-making processes by avoiding ethical, Legal developments arising out of the James entities. Previously, the Policy contained trading legal, financial or other conflicts of interest. Hardie case highlighted the need to establish restrictions based on trading windows following The Related Party Transactions Policy appropriate accountabilities for market the announcement of half-yearly and annual provides guidance on recognising and reporting disclosure at Board level. The revised policy results, and the Annual General Meeting. This related party transactions, and where necessary now clarifies this accountability. was replaced by the introduction of blackout submitting these for shareholder approval. periods, which restricts directors and designated The policy also outlines the role of the employees buying or selling shares in the During the year, the Board’s RACC considered Company’s Continuous Disclosure Committee Company in periods that run from the end of a the introduction of three new key policies to (Committee), which is responsible for reporting period (half-year and full-year) to the support the Code of Business Conduct, namely determining what information must be reporting date of results for that period. There is the Anti-Bribery and Corruption Policy, the disclosed and ensuring the Company complies also a blackout period for two-weeks prior to the Business Partners Policy and the Political with its disclosure obligations. Annual General Meeting. Involvement and Support Policy. These The Committee consists of the MD/CEO, Chief policies are currently before the Board for Financial Officer, Chief Risk and Legal Officer/

Share trading blackout periods

HY Results FY Results AGM

31 Dec 30 Jun 2 weeks pre AGM

Transfield Services Annual Report 2010 41

Company Secretary and other members invited »» economic volatility Transfield Services maintains a Risk Policy to join the Committee from time to time. It is which aims to make managing risk an integral »» foreign exchange and interest rates scheduled to meet on a weekly basis, but may part of good business practice. The Company meet on an impromptu basis where necessary. »» competition and contract retention utilises an enterprise-wide risk management framework reflecting the global positioning of This Committee, working with the Corporate »» contract execution the Company. This framework encompasses Affairs and Investor Relations teams, creates »» industrial incidents risk, compliance and internal audit elements communication plans to ensure Transfield as well as business resilience, a specialist Services’ messages are effectively delivered »» operating in foreign countries area covering security, crisis and emergency through various communication channels. »» recruitment and retention of personnel management, and business continuity. The Committee is guided by communications practices outlined in the Continuous Disclosure »» industrial relations, and Transfield Services’ approach to risk management and Communications Policy. is in accordance with internationally recognised »» government policies and regulations. Risk Management Standard ISO 31000:2009, ASX statements and media releases are Recognition and management of risk is one which outlines recommended risk management a primary source of material information of the core responsibilities of the Board, procedures and processes to implement within regarding the Company. These supporting the Company’s long-term goal of an organisation. The Company promotes announcements are immediately uploaded to sustainable growth. collaboration between the business by involving the Transfield Services website. employees in the identification and mitigation The Board, through the RACC, requires that The website also contains information about of risks, increasing the capability of all levels of management design and implement risk the Company’s operations, achievements and our organisation to respond to the changing management and internal control systems to awards, and features publications and investor business environment. manage Transfield Services’ material business presentations. Shareholders can also subscribe risks, and that management regularly reports The internal audit function plays a key to free RSS feeds – communicating the latest to the Board on whether the risks are being role in risk management by providing an ASX announcements via an RSS reader on their managed effectively. objective appraisal of the effectiveness of, computer. and compliance with, business processes and Annual General Meetings are a valuable controls across Transfield Services. opportunity to outline the Company’s recent developments and strategy, and for shareholders 6.2 Reporting on to comment on Transfield Services’ management risk management and performance. Shareholders also have the Strategic Operational The Chief Risk and Legal Risk Business opportunity to ask the Company’s external Risk Management Officer/Company Secretary Management Resilience auditor questions relevant to its audit function. is the head of the risk management function, and 6. RISK MANAGEMENT reports to the RACC and the Board on a quarterly basis as Compliance 6.1 Risk management to the effectiveness of the (Code of Internal Audit Project framework Business Risk Company’s management As an international business operating in Conduct) Management of its material business numerous industries, Transfield Services faces & Audit risks. Material findings a variety of risks that may adversely affect our and recommendations operations and performance. These include are communicated to the risks associated with: Enterprise Risk Management RACC, which then ensures Framework

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that management effectively responds to the in the non-executive directors’ fee pool, from 8. ASX PRINCIPLES recommendations. The Chairman of the $1,700,000 to $2,000,000. This increase is being AND RECOMMENDATIONS RACC reports key risks and their management sought in order to: to the Board. RECONCILIATION »» have greater flexibility and capacity to Recommendations References The Group General Manager, Compliance and increase the size of the Board, and Governance, who reports to the Chief Risk and 1.1 1.1, 3.1 »» attract and retain high-calibre directors. Legal Officer/Company Secretary, heads the 1.2 1.3, 3.2 internal audit function and separately reports The Company’s policy in relation to the 1.3 1.1, 1.3, 3.2, website significant findings to the RACC on a quarterly prohibition of hedging remuneration that has 2.1 1.2 basis. The Group General Manager, Compliance been disclosed as ‘at risk’ is contained in the 2.2 1.2 and Governance has independent access, if Company’s Share Trading Policy. 2.3 1.2 required, to the MD/CEO and the Board, 2.4 2.4 via the RACC. Corporate Governance at 2.5 1.4 The MD/CEO and the Chief Financial Officer www.transfieldservices.com 2.6 1.2, 1.4, 2.4, pages 14,15 and 47 provide signed letters to the Board, in respect The Corporate Governance section of the 3.1 4.1 of each full-year and half-year result that the Company’s website is a convenient way for 3.2 4.3 accounts constitute a true and fair view and are shareholders to access information about 3.3 Website based on an appropriate and effective system Transfield Services’ governance practices. of risk management and internal compliance The section is contained in the Investor 4.1 2.1 and control. Centre, clearly visible in the main selection 4.2 2.1 menu. It contains: 4.3 Section 2 introduction 7. FAIR AND RESPONSIBLE 4.4 pages 14,15 and 47 »» Company Constitution REMUNERATION 5.1 5.1 »» Board Charter Transfield Services aims to remunerate fairly 5.2 5.1, website »» Committee Charters and responsibly by ensuring reward for 6.1 5.1 performance is competitive in the markets »» MD/CEO Delegated Authority 6.2 5.1, website Framework Summary where the Company operates, and aligning 7.1 6.1 executive reward with shareholders’ interests. »» Code of Business Conduct 7.2 6.2 »» Share Trading Policy 7.3 6.2 The Company’s principles in relation to director »» Conflicts of Interest Policy and senior executive remuneration, and the level 7.4 6.2, website of remuneration, are set out in the remuneration »» Related Party Transactions Policy 8.1 2.3 report on pages 50 to 69 of this Annual Report. »» Continuous Disclosure and 8.2 Section 7, pages 50-69 Communications Policy 8.3 page 47, website Fees for non-executive directors are calculated »» Risk Policy, and on the extent of their involvement at Board and committee level. They are not »» Current and past remuneration reports. based on the Company’s performance. The http://www.transfieldservices.com/page/ remuneration report contains information Investor_Centre/Corporate_Governance/ about retirement allowances for non-executive directors on page 54. This year, the Company is seeking shareholder approval for an increase

Transfield Services Annual Report 2010 FINANCIAL REPORT – 30 june 2010

Transfield Services 43 Limited ACN 000 484 417

Directors’ report (including remuneration report) 44 Auditor’s independence declaration 71 Consolidated statement of comprehensive income 72 Consolidated statement of financial position 73 Consolidated statement of cash flows 74 Consolidated statement of changes in equity 75 Notes to and forming part of the financial statements 76 Directors’ declaration 139 Independent auditor’s report to the members 140

This financial report covers Transfield Services as a consolidated entity consisting of Transfield Services Limited and its controlled entities, aditional information about Transfield Services Limited as an individual entity is included in Note 43 to the financial statements. The financial report is presented in Australian currency. Transfield Services Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Transfield Services Limited Level 10, 111 Pacific Highway NORTH SYDNEY NSW 2060 The financial report was authorised for issue by the Directors on 26 August 2010. The Company has the power to amend and reissue the financial report. A description of the nature of the consolidated entity’s operations and its principal activities is included in the review of operations and in the Director’s Report. Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at minimum cost to the Company. All press releases, financial reports and other information are available at our News and Investor Centre on our website www.transfieldservices.com. For inquiries in relation to our reporting please contact David Slack-Smith (General Manager, Investor Relations) on +612 9464 1019 or e-mail [email protected]

Transfield Services Annual Report 2010 Directors’ report (including remuneration report)

Your Directors present their report on the consolidated entity consisting of Transfield Services Limited and the entities it controlled at the end of, or during, the year ended 30 June 2010 (the Group or the Company). Directors The following persons were Directors of Transfield Services Limited during the whole of the financial year and up to the date of this report: • Anthony Shepherd (Chairman) • Dr Peter Goode (Managing Director and Chief Executive Officer) • Guido Belgiorno-Nettis AM 44 • Luca Belgiorno-Nettis AM • Steven Crane • Mel Ward AO David Sutherland resigned as a Director on 24 July 2009, the same date upon which Jagjeet Bindra was appointed as Director. Douglas Snedden was appointed as Director on 21 December 2009. Professor Stephen Burdon retired as Director on 14 July 2010.

Principal activities During the year the principal continuing activities of the consolidated entity consisted of: (a) provision of operations and maintenance, asset management, project and capital management outsourcing and infrastructure development services, and (b) investment in and management of Transfield Services Infrastructure Fund (TSI Fund). Transfield Services operates in Australia and New Zealand, the Americas and the Middle East and Asia (comprising the United Arab Emirates, Qatar, , Malaysia, the Philippines and India) and its business units include resources and industrial, infrastructure services and property and facilities management.

Dividends Dividends paid to members during the financial year were as follows: 2010 2009 $’000 $’000 Final ordinary dividend for the previous financial year paid on 12 October 2009 (2009: 13 October 2008) 29,965 35,631 Interim ordinary dividend paid on 14 April 2010 (2009: 14 April 2009) 20,689 19,588

50,654 55,219

cents cents Final ordinary dividend 7.25 18.00 Interim ordinary dividend 5.00 4.75

Since the end of the financial year the Directors have recommended the payment of a final ordinary dividend of 9 cents per fully paid share, being $37,285,000 to be paid on 20 October 2010 out of retained profits at 30 June 2010. The Directors resolved on 19 August 2010 to suspend the dividend reinvestment plan for the 2010 final dividend.

Transfield Services Annual Report 2010 Review of operations A summary of consolidated revenues and results by significant segment is set out below: Australia and Middle East New Zealand Americas And AsiA total $’000 $’000 $’000 $’000 Segment Revenue Revenue from wholly-owned entities 2010 2,117,175 961,251 72,528 3,150,954 2009 2,106,829 1,182,018 109,730 3,398,577 45 Share of profits from joint ventures 2010 34,000 22,281 6,710 62,991 2009 36,972 19,494 3,612 60,078 Total Services segment revenue 2010 2,151,175 983,532 79,238 3,213,945 2009 2,143,801 1,201,512 113,342 3,458,655 TSI Fund 2010 9,269 2009 12,343 Consolidated Segment Revenue 2010 3,223,214 2009 3,470,998

Segment Result Services earnings before interest (net finance cost), taxation and amortisation (EBITA) 2010 107,365 48,101 4,735 160,201 2009 106,928 67,202 8,161 182,291 Unallocated corporate overheads 2010 (13,411) 2009 (13,843) Total Services EBITA 2010 146,790 2009 168,448 TSI Fund 2010 9,269 2009 12,343 Consolidated Segment EBITA 2010 156,059 2009 180,791

Refer page 132 for a reconciliation of segment revenue and segment result to statutory revenue and statutory net profit after taxation.

Earnings / (loss) per share 2010 2009 cents cents Basic and diluted earnings / (loss) per share 17.66 (15.34)

Transfield Services Annual Report 2010 Directors’ report (including remuneration report)

Review of operations (continued) The result for the year ended 30 June 2010 is commendable given the continued tough economic conditions. The Group continued its capital management initiatives that delivered a strong operating cash result, allowing further debt to be repaid. The Group has a strong balance sheet with the lowest level of gearing since listing. The 2010 financial year continued to be a year of transition for the business with ongoing investments in business transformation initiatives to remove redundancy and drive discipline across the business. Some of these initiatives will continue into the 2011 financial year, as the business continues to execute on a new strategy that will drive sustainable growth during 2011 and beyond. Significant changes in the state of affairs 46 There have been no significant changes in the state of affairs of Transfield Services Limited and its controlled entities. Matters subsequent to the end of the financial year No significant matters have arisen between statement of financial position date and the date of this report that have significantly affected, or may significantly affect: • the consolidated entity’s operations in future financial years, or • the results of those operations in future financial years, or • the consolidated entity’s state of affairs in future financial years. Likely developments and expected results of operations Subject to there being no further deterioration in economic conditions, the Group is targeting mid-single digit percentage growth for net profit after tax for the year ended 30 June 2011. This guidance is based on normalised net profit after tax of $96.0 million, assumes foreign exchange rates as at 30 June 2010; and an expected effective tax rate for the Group of 17 per cent for the year. It does not include any future restructuring or cost reduction initiatives. Environmental regulation and greenhouse gas and energy data reporting requirements The Group is subject to the reporting requirements of the National Greenhouse and Energy Reporting Act 2007, which requires the Group to report its annual greenhouse gas emissions, energy production and energy use. Transfield Services registered with the Greenhouse and Energy Data Officer (‘GEDO’) and submitted its report for the first measurement period of 1 July 2008 until 30 June 2009. The Group has implemented systems and processes for the collection and calculation of the data to enable it to prepare and submit a report annually. In 2010 the Group was granted an exemption from registration for the Energy Efficiency Opportunities Program, under the requirements of the Energy Efficiency Opportunities Act 2006. The Group will review its requirements under the Energy Efficiency Opportunities Act 2006 annually. The Group is not aware of any material breaches of environmental legislation.

Transfield Services Annual Report 2010 Meetings of directors meetings of committees extra- ordinary Board boARD Board sub- meetings Meetings committee RAcc hssc hr com nomc

No. of meetings held: 7 11 2 4 4 7 2 No. of meetings attended by: Anthony Shepherd 7 11 2 31 - - 2 47 Dr Peter Goode 7 11 2 33 3 63 22 Jagjeet Bindra (appointed 24 July 2009) 7 11 - 21,2 4 - 12 Guido Belgiorno-Nettis AM 7 7 - 11 3 5 2 Luca Belgiorno-Nettis AM 7 11 2 4 - - 12 Professor Stephen Burdon 7 9 - 4 4 - 12 (retired 14 July 2010) Steven Crane 7 11 2 4 - 5 2 Douglas Snedden 4 7 2 2 12 3 - (appointed 21 December 2009) David Sutherland ------(resigned 24 July 2009) Mel Ward AO 7 10 - 4 12 7 2

RACC: Risk, Audit and HSSC: Health, Safety and HR Com: Human Resources NOMC: Nomination Committee Compliance Committee Sustainability Committee Committee

1. Includes meetings attended in part. 2. Attended as guest as this Director is not a member of the committee. 3. Dr Peter Goode attended these meetings by invitation in his capacity as Chief Executive Officer.

Transfield Services Annual Report 2010 Directors’ report (including remuneration report)

Information on directors Details of the directors’ responsibilities and shareholding as at 30 June 2010 are set out below: Particulars of Indirect interest Directors’ interests in Transfield in shares and Services Limited Performance Awards of through Transfield DirectoR sPecial responsibilities Transfield Services Limited (TSL) Pty Ltd Ordinary Shares includes shares 48 that are held by Performance a related party Awards Anthony Shepherd Chairman of the Board of Directors and Chair 124,691 - - of the Nomination Committee. Dr Peter Goode Member of the Health, Safety and Sustainability 500,000 118,434* - Committee and attends the Risk, Audit and Compliance Committee, Human Resources Committee and Nomination Committee by invitation. Jagjeet Bindra Member of the Health, Safety and Sustainability 5,000 - - Committee and has North American advisory responsibilities to the Board. Guido Chair of the Health, Safety and Sustainability 410,252 - 57,845,095 shares Belgiorno-Nettis AM Committee, member of the Human Resources held by Transfield Committee and Nomination Committee. (TSL) Pty Ltd Luca Member of the Risk, Audit and 1,952,774 - 57,845,095 shares Belgiorno-Nettis AM Compliance Committee. held by Transfield (TSL) Pty Ltd Professor Member of the Risk, Audit and Compliance 188,509 - - Stephen Burdon Committee and the Health, Safety and (Retired 14 July 2010) Sustainability Committee. Steven Crane Chair of the Risk, Audit and Compliance Committee, 111,207 - - member of the Human Resources Committee and Nomination Committee. Douglas Snedden Member of the Risk, Audit and Compliance 48,000 - - Committee and the Human Resources Committee. David Sutherland David Sutherland was not a member of any committee. - - - (Resigned 24 July 2009) Mel Ward AO Chairman of the Human Resources Committee and 147,756 - - member of the Risk, Audit and Compliance Committee and the Nomination Committee.

* Estimate based on provisional determination of Medium-Term Incentive performance awards. Legal granting of awards will occur in September 2010.

Transfield Services Annual Report 2010 Directorships of other listed companies held in the last three years

Anthony Shepherd • ConnectEast Group (ASX) – appointed 28 September 2004 • Transfield Services Infrastructure Fund (ASX) – 12 June 2007-15 February 2010

Dr Peter Goode 49 • Transfield Services Infrastructure Fund (ASX) – appointed 1 April 2009 • Ocean Rig (Oslo Stock Exchange) – July 2006 - March 2008

Jagjeet Bindra • Larsen & Toubro Limited (Bombay Stock Exchange) – appointed 31 December 2008 • Edison International (NYSE:EIX) – appointed 22 April 2010

Steven Crane • APA Ethane Limited (ASX) as responsible entity for Ethane Pipeline Income Fund (EPX) – appointed 10 July 2008 • Adelaide Bank Limited (ASX) – 28 April 2005 - 16 November 2007 • Bank of Queensland Limited (ASX) – appointed 11 December 2008 • Investa Property Group (ASX) – 10 August 2006 - 6 September 2007

Mel Ward AO • Coca-Cola Amatil Limited (ASX) – 11 February 1999 - 19 August 2008 • Macquarie Communications Infrastructure Group (ASX) – appointed 7 April 2003 (de-listed 24 July 2009) • Pro Medicus Limited (ASX) – appointed 4 April 2000 • West Australia Newspapers Holdings Limited (ASX) – 6 September 2002 - 3 December 2008

Chief Risk and Legal Officer / Company Secretary Kate Munnings (LLB and Bachelor of Health Science) was appointed Chief Counsel and Company Secretary to Transfield Services in January 2006. Kate leads the group responsible for Transfield Services’ legal, company secretarial, risk management, global insurance and internal audit functions. Kate has more than 18 years experience working with and advising companies in the engineering, construction and services sectors in relation to their corporate, contractual and other commercial requirements.

The remuneration report is presented as part of the Directors’ report on pages 50 to 69.

Transfield Services Annual Report 2010 Directors’ report – remuneration report

Executive summary This Executive Summary outlines the Company’s remuneration principles, the key remuneration initiatives undertaken by the Company during the year, and discloses the actual value of remuneration earned by the Company’s Senior Executives in the 2009/2010 financial year (FY 2009/10). It should be read together with the full remuneration report on pages 50 to 69, which provides disclosure of the remuneration structure of the Company in accordance with statutory obligations and accounting standards.

The Company’s The Company’s objective around its executives is to attract, retain and motivate executives to focus on the business objectives of remuneration short and long-term success of the Company. This objective is achieved by aligning remuneration with annual operating 50 objectives performance and longer term shareholder returns. Consequently, we have structured our executive remuneration so that there is a significant proportion of remuneration, which is only earned if Board established targets for annual operating performance, and longer term shareholder return are achieved. Integrity of the Overall, the Company’s remuneration structure operates as intended, in that incentive remuneration outcomes directly reflect remuneration Company performance. As illustrated below, the Company’s historical and current short-term incentives (STI) and long-term structure incentives (LTI) outcomes are tied directly to the results delivered by the Company, thus assuring proper alignment of the interests of shareholders and executives.

Key management personnel short term incentive outcomes % of Long-term incentive vesting outcomes relative to Earnings Per Share Target relative to EBITA* and Share Price

200 100 12 120 180 90 160 80 10 100 140 70 8 80 120 60 58.16 6 60 100 50 4 33.9 40 80 40 27.64 EBITA A$mil EBITA 60 30 2 17.66 20 STI % of Target Paid Target STI % of 40 20 0 0

20 10 30 June. as at price Share 2006 2007 2008 2010 -2 -20 0 - -15.34 2006 2007 2008 2009 2010 and EPS Vested Awards % of LTI -4 -40 Year Year

% of Target TSE EBITA (normalised) EPS % of LTI Awards Vested Share price as at 30 June

Remuneration The integrity of the Company’s remuneration structure means wholesale changes have not been required but we have introduced initiatives remuneration initiatives to ‘fine tune’ certain aspects of the Company’s remuneration structure in the changing market. During FY 2009/10, the Company: 1. Introduced the mandatory deferral of a portion of Senior Executive’s STI outcome into performance rights in the Company that only deliver actual value to the individual if the Company maintains or improves its earnings performance over the next one to two-year period. This initiative aims to encourage executives to focus on medium-term impact of their short-term decisions and by comparison to market practice on STI deferral, is more demanding in requiring meeting performance hurdles in addition to service period. 2. Diversified its LTI hurdles by introducing a third hurdle aimed at rewarding returns from pursuing profitable projects and managing new and existing customers efficiently and effectively for long-term sustainability. 3. Lifted the remuneration freeze that was implemented during FY 2008/09 with a mid-year (1 January 2010) modest average increase of approximately two per cent since the last review on 1 July 2008. 4. Introduced a policy under which Senior Executives are encouraged to acquire and hold shares in the Company in addition to any at-risk shares to further align with shareholders. The Board also monitors ongoing market trends in all operating markets including regulatory and legislative developments in executive remuneration, including the recent inquiry into executive remuneration by the Productivity Commission, and changes to termination and share-based pay in Australia. One of the outcomes of this is that the Company suspended and subsequently ceased its fee-sacrifice Non-Executive Director share acquisition plan with effect from 19 May 2009 as a result of tax changes. In its place, the Company has adopted a policy under which all Non-Executive Directors are expected to acquire and hold shares in the Company with a value equal to one year’s Directors’ base fees over a five year period in order to align their interests with shareholders generally. The initiatives above are discussed in more detail in the full remuneration report.

Changes in During FY 2009/10, the Managing Director and Chief Executive Officer (MD/CEO) re-shaped the Senior Executive ranks to Senior establish a team well positioned to support the MD/CEO in driving the strategic direction of the Company, including new Executives appointments to the roles of Chief Executive, Americas, Chief Executive, Middle East and Asia, Chief Financial Officer and Chief Executive, Marketing and Business Development.

Remuneration Table 14 on page 64 of the remuneration report provides a breakdown of the Company’s Senior Executive remuneration in outcomes accordance with statutory obligations and accounting standards (this information sets out the cost to the Company).

Transfield Services Annual Report 2010 The following table sets out the actual value Senior Executives derived from the various components of their remuneration in FY 2009/10, from an individual perspective. The value of remuneration includes the FY 2009/10 STI payable in September 2010 and prior year LTI grants where the executive physically received shares from these in FY 2009/10: fixed remuneration lti (2) (including super) sti (1) (unaudited) other (3) total Dr Peter Goode 1,750,036 641,666 - 13,018 2,404,720 Larry Ames (from 4 January 2010) 297,071 540,319 - 3,635 841,025 Elizabeth Hunter 480,010 108,000 - 11,470 599,480 Matthew Irwin 660,013 168,050 42,164 23,857 894,084 51 Bruce James 909,019 266,367 - 23,933 1,199,319 Steve MacDonald 551,471 410,450 - 23,775 985,696 Paul McCarthy (up to 11 January 2010) 330,642 - 23,912 23,574 378,128 Kate Munnings 545,411 117,466 15,523 16,608 695,008 Tiernan O’Rourke (from 11 January 2010) 381,555 731,017 - 5,906 1,118,478 Joseph Sadatmehr 1,019,190 170,904 109,824 177,268 1,477,186 Philip Wratt (from 11 January 2010) 261,910 59,213 - 66,927 388,050 Nicholas Yates (from 14 September 2009) 341,938 86,850 - 12,914 441,702 Total current Senior Executives 7,528,266 3,300,302 191,423 402,885 11,422,876

(1) This figure includes sign-ons and the value of STI earned by the executive in FY 2009/10, excluding the value of the deferred component, which is subject to performance hurdles for a further one to two years before the executive receives any actual shares. For further details of the Company’s STI plan, please see pages 58 to 59 of the remuneration report. (2) This figure represents the value of LTI awards which vested during the year, worked out using the closing price of the Company’s shares on the vesting date. The value realised by the executive (if the vested LTI awards were exercised and sold) may be a different to this value. LTI awards that were granted during FY 2009/10 are NOT included in this table, as they are not eligible for vesting until after the release of the Company’s full year results for FY 2011/13. For further details of the Company’s LTI plan, please see pages 60 to 61 of the remuneration report. (3) This figure includes long service leave accruals and non-monetary benefits.

Looking The Company is confident that the remuneration initiatives which have been adopted during the year are robust, further forward achievement of its remuneration objectives, aim to address the complex issues which have emerged in the current economic, social and political climate, and support the creation of long-term value for shareholders. The Company will continue to assess its remuneration structures on an ongoing basis to ensure that they remain consistent with remuneration principles and are appropriate in light of market conditions and remain competitive in attracting and retaining staff in tough economic environments.

Terminology In this report, the term “Senior Executives” refer to: • the five most highly remunerated Company/Group executives, and • all other executives who fall within the definition of key management personnel of the Group (being those persons with authority and responsibility for planning, directing and controlling the activities of the Group) including the Managing Director and Chief Executive Officer (“MD/CEO”). The term “Non-Executive Directors” is used to refer to the non-executive directors of the Company. “STI” refers to short-term incentives. “MTI” refers to medium-term incentives. “LTI” refers to long-term incentives. “KPIs” refers to key performance indicators.

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Transfield Services Annual Report 2010 Directors’ report – remuneration report (audited)

The Directors of the Company present the remuneration report prepared in accordance with section 300A of the Corporations Act 2001 for the Company and the consolidated entity for the year ended 30 June 2010. The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. This remuneration report forms part of the Directors’ report. The remuneration report sets out the remuneration information pertaining to the Company’s Directors and Senior Executives who are the key management personnel (KMP) of the consolidated entity for the purposes of the Corporations Act 2001 and AASB124: Related Party Disclosures. They include the five highest remunerated executives of the Company and the Group for the year, and are listed in Table 1 below.

Table 1 – Directors and Senior Executives 52 Non-Executive Directors Anthony Shepherd Chairman Guido Belgiorno-Nettis AM Director Luca Belgiorno-Nettis AM Director Jagjeet Bindra Director Since 24 July 2009 Professor Stephen Burdon Director Retired 14 July 2010 Steven Crane Director Douglas Snedden Director Since 21 December 2009 David Sutherland Director Retired 24 July 2009 Mel Ward AO Director Senior Executives Current Dr Peter Goode Managing Director and Chief Executive Officer Larry Ames Chief Executive, Americas Since 4 January 2010 Elizabeth Hunter Chief Executive, Human Resources Matthew Irwin* Chief Financial Officer Until 16 November 2009 (current role: Chief Executive, Investments) Bruce James Chief Executive, Australia and New Zealand Steve MacDonald Chief Executive Officer, Transfield Services Infrastructure Fund (TSI Fund)** Paul McCarthy Chief Executive, International Until 11 January 2010 Kate Munnings Chief Risk and Legal Officer/Company Secretary Tiernan O’Rourke Chief Financial Officer Since 11 January 2010 Joseph Sadatmehr* Chief Executive and President, Americas Until 31 October 2009 (current role: Chief Executive, Strategic Relationships) Philip Wratt Chief Executive, Middle East and Asia Since 11 January 2010 Nicholas Yates Chief Executive, Marketing and Business Development Since 14 September 2009 Former Lee De Vryer Chief Executive, Strategy Departed 18 September 2009

* These executives met the definition of KMP for part of the year until the dates noted above and for the balance of the year are included on the basis of being among the five highest remunerated executives of the Company. ** As the Chief Executive Officer of TSI Fund, Steve MacDonald’s remuneration is paid by Transfield Services under the Management Services Agreement with TSI Fund. Steve MacDonald’s incentive structure under the terms of this agreement requires 100 per cent of his STI outcome and 50 per cent of his LTI outcome to be subject to his performance relative to TSI Fund performance. The remaining 50 per cent of his LTI is subject to Company performance.

Details on the Non-Executive Directors’ remuneration are set out on pages 53 to 55. Details on the remuneration structure and outcomes for Senior Executives are set out on pages 56 to 69.

Transfield Services Annual Report 2010 A. Human Resources (HR) Committee The Board’s key responsibilities can be summarised around overseeing financial integrity, business strategy, the management of business risks, legal compliance and governance and human resources and remuneration strategy. The purpose of the Board’s HR Committee is to: • assist the Board to consider remuneration issues more efficiently and fully and to provide recommendations on remuneration policies, practices and decisions to the Board for approval • assist the Board to ensure key talent and critical workforces are managed to support and further corporate objectives and to provide recommendations to the Board for approval • provide advice and support to the Board in fulfilling its responsibilities to shareholders by ensuring the Board has the necessary range of skills, expertise and experience and 53 • ensure that Transfield Services’ HR policies comply with laws, reflect current governance and mitigate against operational, financial and reputation risk. The Board has authorised the HR Committee to perform activities within the scope of its responsibilities including engaging independent advisors as it deems necessary, requiring the attendance of company officers at meetings and having unrestricted access to management, employees and information it considers relevant. The HR Committee does not have delegated power to make binding decisions on behalf of the Board. The composition of this Committee is as follows: • Mel Ward AO (Independent Chairman) • Guido Belgiorno-Nettis AM (Non-Executive Director) • Steven Crane (Independent Non-Executive Director) • Douglas Snedden (Independent Non-Executive Director since 22 December 2009) The HR Committee met seven times during the financial year. Further details regarding attendances are set out on page 47.

B. Non-Executive Directors’ remuneration

Table 2 – Key principles underpinning the remuneration policy for Non-Executive Directors

Principle Outcomes

Aggregate The current aggregate fee pool for Non-Executive Directors of $1,700,000 was approved by shareholders at the Annual General Board and Meeting held on 30 October 2006. Committee fees At the next annual general meeting scheduled for 21 October 2010, the Board will seek approval to increase the aggregate fee pool are approved to $2,000,000 to have greater flexibility and capacity to increase the size of the Board and attract and retain high-calibre directors. by shareholders

Remuneration is To preserve independence and impartiality, no element of Non-Executive Director remuneration is “at risk”. Non-Executive structured to Directors are remunerated by way of fixed fees in the form of cash, superannuation and equity in accordance with preserve Recommendation 8.2 of the ASX Corporate Governance Principles and Recommendations. independence Please refer to Table 3 on the next page for the remuneration components for Non-Executive Directors. whilst creating alignment

Fees are set by Board and Committee fees are set by reference to a number of relevant considerations including: reference to • the responsibilities and risks attached to the role of Non-Executive Director key considerations • the time commitment expected of Non-Executive Directors • the fees paid by peer companies to Non-Executive Directors, and • independent advice received from external advisers. The Chairman’s fees are determined independently of other Non-Executive Directors based on comparative roles in the external market. The Chairman is not present at any discussions relating to determination of his own remuneration.

No retirement No additional benefits are paid to Non-Executive Directors upon their retirement from office (ie in addition to their existing benefits superannuation entitlements).1

Reviews of The Board periodically reviews its approach to Non-Executive Director remuneration to ensure it remains in line with general remuneration industry practice and best practice principles of corporate governance and relies on independent expert advice. Board and Committee fees were reviewed during the year and an increase of 4 per cent applied from 1 January 2010. Prior to that, fees were last increased in January 2008. Please refer to Table 3 on the next page for current levels of Board and Committee fees.

1. Non-Executive Directors appointed prior to 30 June 2004 have accrued retirement benefits which were frozen as at this date, but are indexed against CPI until being paid out upon their retirement.

Transfield Services Annual Report 2010 Directors’ report – remuneration report (audited)

Table 3 – Components of Non-Executive Director Remuneration

Elements Details

Board fees/ Current fees are as follows: Committee fees Board fees per annum Committee fees per annum

• $372,320 for Chair1 • $15,600 for Chairs of Committees • $182,000 for Deputy Chair2 • $10,400 for members of Committees 54 • $140,400 for Board member

1. The Chair of the Board does not receive additional fees for service on Board Committee. 2. The office of Deputy Chairman is currently unoccupied.

The above fees are inclusive of superannuation contributions which are made on behalf of Non-Executive Directors and satisfies the Company’s statutory superannuation obligations. Board fees are not paid to the executive Director (Dr Peter Goode) as the responsibilities of Board membership are considered in determining the remuneration provided as part of his normal employment conditions.The annualised Board and Committee fees in aggregate for current Directors is $1,505,920 which is $194,080 below the current aggregate fee pool of $1,700,000.

Other fees/ Jagjeet Bindra receives additional fees of $10,400 per annum as the North American representative of the Board and for benefits providing support to the North American operations. 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 The Board resolved in 2004 to remove retirement allowances for Non-Executive Directors appointed after that date. In February benefits 2006, the Board further resolved to cease accruing retirement benefits for existing Directors with effect from 1 July 2006. Directors’ entitlements up to 30 June 2006 under the previous arrangements are preserved and the value maintained through indexation of amounts previously accrued. The accrued entitlement is paid on retirement of the Director.

Equity Prior to 19 May 2009, Non-Executive Directors based in Australia (excluding Messrs Guido and Luca Belgiorno-Nettis) received a arrangements minimum 20 per cent of their base Director’s fees (via fee sacrifice) in shares in the Company and held those shares in accordance with the rules of TransShare Deferred Plan. Shareholders approved this arrangement in May 2001.The participation of Non-Executive Directors in the TranShare Deferred Share Plan was suspended on 19 May 2009 following changes to employee share scheme taxation legislation which impacted the efficiency of this share acquisition mechanism. With the suspension of the Plan, the Board has adopted a policy under which all Non-Executive Directors are expected to acquire and hold shares in the Company with a value (based on cost) equal to one year’s Directors base fees in order to align their interests with shareholders generally. Directors have a period of up to five years from the later of the adoption of the policy and their appointment date to achieve the minimum shareholding target. All current Directors have achieved this minimum level of shareholding as at the date of this report. Under the Company’s shareholding policy, Non-Executive Directors are prohibited from using the Company’s securities as collateral in any financial transaction, including margin loan arrangements. This is consistent with the policy for Senior Executives (see page 61) and other select employees.

Transfield Services Annual Report 2010 Table 4 – Non-Executive Director remuneration for FY 2008/09 and FY 2009/10

Short term Post employment share based benefits benefits payments cAsh non- super- Deferred salary Monetary Annuation Retirement share Name And fees $ Benefits1 $ Benefits $ Purchase2 $ total $ Anthony Shepherd 2010 349,524 4,695 13,984 13,835 3 - 382,038 2009 272,664 - 13,745 9,232 82,028 377,669 Guido Belgiorno-Nettis AM 2010 163,453 - - - - 163,453 55 2009 155,633 - - - - 155,633 Luca Belgiornio-Nettis AM 2010 148,805 - - - - 148,805 2009 155,503 - - - - 155,503 Jagjeet Bindra 2010 141,329 - - - - 141,329 Professor Stephen Burdon 2010 146,736 - 11,130 (984)4 - 156,882 2009 127,167 - 8,950 9,232 24,842 170,191 Steven Crane 2010 151,621 - 11,345 - - 162,966 2009 131,750 - 8,950 - 24,841 165,541 Douglas Snedden 2010 79,529 - 7,158 - - 86,687 David Sutherland5 2010 8,066 - - - - 8,066 2009 118,686 - - - - 118,686 Mel Ward AO 2010 150,921 - 11,065 (984)4 - 161,002 2009 121,476 - 8,391 9,232 31,052 170,151 Total Non-Executive Directors 2010 1,339,984 4,695 54,682 11,867 - 1,411,228 2009 1,082,879 - 40,036 27,696 162,763 1,313,374 Total for each category 2010 1,344,679 66,549 - 1,411,228 2009 1,082,879 67,732 162,763 1,313,374

1 Provision of car-parking. 2 Non-Executive Directors ceased participation in the TranShare Deferred Share Plan on 19 May 2009 following changes to employee share scheme taxation legislation which impacted the efficiency of this share acquisition mechanism. Fees that had been sacrificed and held to purchase shares were paid in cash to the Directors during FY 2009/10. 3 This relates to the accrual for the indexation of Mr Shepherd’s preserved entitlement and the FY 2009/10 balance includes a catch up for prior years’ under-accrual. 4 The negative number is due the reversal of prior years’ over-accrual for the indexation of the Directors’ preserved entitlement. 5 Retired on 24 July 2009

Transfield Services Annual Report 2010 Directors’ report – remuneration report (audited)

C. Senior Executive remuneration policy and structure An overview of the structure of Senior Executive remuneration is set out in the table below, together with details of where each of those elements is discussed in more detail within the remuneration report.

Table 5 – Senior Executive remuneration overview

Issue Summary Detail in report 1. MD/CEO Dr Peter Goode’s remuneration structure comprises a fixed remuneration (inclusive of superannuation) and an Page 57 56 snapshot incentive structure that delivers cash and equity if he meets performance hurdles. 2. Fixed Fixed remuneration is set having regard to the market for comparable roles in companies of similar complexity Page 58 remuneration and size, targeted at market median (for local geographic market) using external benchmark data.

3. short-term Participation in the Company’s Short-Term Incentive (STI) Plan gives Senior Executives the opportunity to earn an Page 58 incentive (“at STI outcome, dependent upon performance over a one-year period against a combination of financial and risk”) non-financial key performance indicators (KPIs). A portion of the STI outcome is subject to further deferral (see Issue 4 below) and the balance is payable in cash.

4. Medium-term Effective from FY 2009/10, Senior Executives are required to defer up to 20 per cent of their earned STI outcome Page 59 incentive (“at (where their STI outcome exceeds the threshold of $100,000 for FY 2009/10) into performance rights in the risk”) Company. These performance rights vest over one and two years subject to the Company maintaining or improving on FY 2009/10 earnings. 5. long-term Participation in the Company’s Long-Term Incentive (LTI) Plan gives Senior Executives the opportunity to acquire Page 60 incentive (“at shares in the Company where they succeed in achieving outcomes linked to the creation of long term sustainable risk”) growth for shareholders. The LTI performance rights vest and become exercisable based on the performance of the Company over a three-four year period relative to its peer group of companies (based on total shareholder return) and internal financial measures of earnings per share and return on funds employed for LTI awards granted from September 2009 onwards. 6 shareholding Senior Executives are prohibited from hedging unvested MTI and LTI awards granted to them as part of their Page 61 policy remuneration. They are also prohibited from using the Company’s securities as collateral in any financial transaction, including margin loan arrangements. To further align with shareholders, Senior Executives are encouraged to acquire and hold shares in the Company in addition to any at-risk MTI and LTI participation. 7. legacy and The Company has other legacy and equity plans that some Senior Executives had participated in. Page 61 Other Equity Plans 8. service The remuneration and other terms of employment for Senior Executives are formalised in service agreements. Page 62 agreements These service agreements deal with termination rights, notice periods and entitlements upon termination for Senior Executives. 9. Remuneration The remuneration outcomes for Senior Executives for FY 2009/10 reflect the Company’s performance. Page 63 outcomes Refer to Charts 1 and 2 on page 63. 10. Statutory Full details of Senior Executives’ remuneration in accordance with statutory requirements for FY 2009/10 can be Page 64 tables found on page 64 onwards.

Transfield Services Annual Report 2010 C1. MD/CEO’s remuneration structure and components The MD/CEO’s remuneration structure and components are specified in his service agreement and is summarised in Table 6 below. The structure is biased towards ‘at risk’ remuneration with two-thirds of the target total remuneration being subject to performance against financial and non-financial KPIs which are set annually.

Table 6 – MD/CEO Remuneration Components

Remuneration Remuneration outcomes As % of MD/ components CEO’s Total Remuneration (at target) 57 Fixed remuneration Comprises base salary and superannuation. 33.3 Total Fixed Remuneration (TFR) ‘At risk’ The Total Incentive outcome for each financial year is to be determined based on performance against: 66.7 performance-based • financial KPIs (eg earnings and capital management); and remuneration • non-financial KPIs including safety, strategy development and succession planning. Total Incentive (based on target outcome) For financial year 2009/10, the earned Total Incentive outcome is delivered as follows: equal to 200 per cent of TFR* Proportion of earned Total Incentive Delivery form *If the MD/CEO out-performs on the One-third (1/3) Cash Total Incentive target Two-thirds (2/3) MD/CEO medium-term incentive – these are subject to further KPIs, he will be eligible performance hurdles (see below for details). The MTI contains LTI for an additional Total elements and as such the Company does not intend to introduce a Incentive equal to 30 separate LTI for the MD/CEO at this time. per cent of his TFR such that his Total Incentive is equal to 230 per cent of TFR. Total Remuneration Total Remuneration (at target) reflects the remuneration outcome assuming that the target financial and 100 (at target) non-financial KPIs are met.

MD/CEO Medium-term incentive Two-thirds of the MD/CEO’s earned Total Incentive outcome will be delivered to him in the form of medium-term incentives (MTI). The MD/CEO MTI will take the form of performance rights, being rights to acquire shares for nil consideration under the terms of the Transhare Executive Performance Award Plan (TEPAP). The TEPAP is the overall plan that delivers the Company’s LTI plan. The MD/CEO’s MTI are allocated from his earned incentive and are further tested against hurdles prior to the MD/CEO deriving any actual shares. Subject to achieving performance measures, these MD/CEO MTI performance rights will be available for vesting after two years in respect of half of the MTI’s granted and after three years for the other half. The performance measures which apply to these MTIs are: • 25 per cent based on earnings per share growth • 25 per cent based on relative total shareholder return • 25 per cent based on return on funds employed, and • 25 per cent based on margin improvement on earnings before interest, tax and amortisation (EBITA). The MD/CEO was not provided with upfront equity participation on his appointment and in accordance with his employment agreement any form of MTI or LTI would not be granted until post 30 June 2010. In this regard, it was recognised that the MD/CEO would have no equity incentive exposure in his remuneration until 15 months after his appointment and this reflects an inconsistency with shareholder interest alignment. Therefore, for FY 2009/10, a portion, 24.4 per cent, of the MD/CEO’s earned Total Incentive will be granted in MTI performance rights under similar terms to LTI grants to other Senior Executives in September 2009 including performance measures with baseline of 30 June 2009. This ensures that in substance the MD/CEO is exposed to the Company’s equity and also consistently aligned with his direct reports and other executives from a performance and reward perspective. The balance of his MTI allocation for FY 2009/10 from his earned Total Incentive will be granted to him consistent with the allocation price for annual LTI grants and 30 June 2010 performance baseline. Full details of the MD/CEO’s remuneration for FY 2009/10 can be found on page 64.

Transfield Services Annual Report 2010 Directors’ report – remuneration report (audited)

C2. Fixed remuneration

Table 7 – Summary of fixed remuneration

What is fixed The terms of employment of all Senior Executives contain a fixed remuneration component expressed as a dollar amount. remuneration? This amount is not ‘at risk’. Depending on the country in which the executive is employed, the fixed remuneration component is structured as a total employment cost package (which includes company superannuation contributions and benefits, including fringe benefits tax) or as a salary plus benefits package.

58 How is fixed Fixed remuneration for Senior Executives is set by the HR Committee to reflect the market for comparable roles in companies remuneration set? of similar complexity and size, targeted at market median (for local geographic market) using external benchmark data. The Company also uses a job evaluation methodology to manage internal pay relativities. Did the Company The Board placed a freeze on fixed remuneration for all Senior Executives during FY 2008/09. On 1 January 2010, the freeze review fixed was lifted and the Company implemented average salary increase of approximately two per cent. remuneration during While some Senior Executives received increases in their fixed remuneration on 1 January 2010, these increases were in line the year? with the average or were intended to keep the Company’s base salary rates in line with its stated market positioning. The MD/CEO did not receive an increase on 1 January 2010. From FY 2010/11 onwards, annual salary reviews will occur each 1 September (previously 1 July).

C3. Short-term incentive (STI)

Table 8 – Summary of STI Plan

What is the STI Plan The STI Plan is an “at risk” payment linked to achieving specific annual KPI targets. It is designed to put a significant and what is its proportion of Senior Executive remuneration at-risk against meeting: purpose? • financial targets linked to annual KPIs; and • non-financial targets linked to KPIs that drive long-term sustainability. Who participates in Executives and selected individuals who can materially impact the financial and operational performance of the Company, a the STI Plan? region or a business unit. Are both target and Yes, if financial performance exceeds targets, the STI Plan will deliver higher rewards to executives. stretch performance conditions imposed? What percentage of Senior Executives have target reward of 40 – 75 per cent of total fixed remuneration. The CEO of TSI Fund has a target fixed remuneration reward of 100 per cent of his total fixed remuneration. does the STI Plan represent? What are the STI performance measures vary depending on the individual executive’s position, and include both financial and non-financial performance measures: measures? Financial measures include: • earnings before interest, taxation and amortisation (EBITA) at group, regional and business unit levels • EBITA margins • capital management • leveraging ratios and • cost reduction. Non-financial measures include: • safety performance • project deliverables • succession planning, and • strategy development. Senior Executives’ KPIs are split 70 per cent into financial measures and 30 per cent non-financial measures. Why were these These STI performance measures have been selected because they are directly linked to the short-term financial performance measures chosen? and strategic direction of the Company and promote continued profitability that is sustainable over the long-term.

Transfield Services Annual Report 2010 How are the Performance against these measures is determined after the end of the financial year. STI amounts are payable following performance audit clearance of the annual financial statements each year. conditions measured?

Who assesses the The HR Committee has oversight of the outcomes against performance measures and confers with the MD/CEO in assessing performance of the performance of Senior Executives at the end of each financial year. Senior Executives and why were those methods chosen? In what form is the STI is paid in cash and if the STI exceeds a threshold of $100,000, up to 20 per cent is delivered in the form of medium-term 59 STI delivered? incentives (see section C4 below).

What if a Senior Where a Senior Executive ceases employment with the Company (other than due to redundancy) before STI targets are Executive ceases achieved, then the Senior Executive is generally not entitled to receive any STI outcome. employment? Where a Senior Executive ceases employment due to redundancy, the STI entitlement is tested in the ordinary course at the end of the performance year. In such circumstances, the Board may determine that the Senior Executive is entitled to a pro-rata proportion of their STI entitlement.

C4. Medium-term incentive

Table 9 – Summary of MTI Plan

What is the purpose The purpose of the MTI Plan is to encourage executives to focus on medium term impact of their short-term decisions by of the MTI Plan? placing at-risk a proportion of earned STI outcome. Who participates in STI participants who achieve a minimum STI outcome of A$100,000 (MTI threshold). No MTI right has been granted during the MTI Plan? FY 2009/10. The first grant is expected to occur in August / September 2010 in line with the Company’s annual grant timing. How is reward Senior Executives and other eligible executives are granted performance rights under the TranShare Executive Performance delivered under the Award Plan (TEPAP). The number of performance rights granted from the MTI allocation is calculated based on the market MTI Plan? value of the Company’s shares around the time the MTI grants are approved by the HR Committee. Each performance right is an entitlement to receive a fully-paid ordinary share in the Company on terms and conditions determined by the Board, including vesting conditions linked to service and performance. If these are satisfied, the performance rights vest and shares will be delivered to the Senior Executive. Subject to achieving the vesting conditions,: • 50 per cent of MTI rights granted (Tranche 1) will vest one year from grant, and • The other 50 per cent of MTI rights granted (Tranche 2) will vest two years from the grant. Do participants pay The performance rights are offered at no cost to the Senior Executive. for the Performance Rights? What rights are The performance rights do not carry voting or dividend rights, however shares delivered upon vesting of performance rights attached to the will carry the same rights as other ordinary shares. Performance Rights? Senior Executives are prohibited from hedging their unvested MTI awards (further discussed at page 61). What are the Participants in the MTI Plan will not derive any value from their MTI awards unless Company earnings is maintained or performance hurdles improved in the next one to two years and they complete a minimum service period. and how are they measured? What if a Senior Unvested MTI awards Executive ceases Where a Senior Executive ceases employment (other than due to redundancy or retirement), those rights will immediately employment? lapse on exit. Where redundancy or retirement applies, a pro-rata (based on service period) of the unvested rights may be retained and vest in the ordinary course. Vested MTI awards Following cessation of employment, Senior Executives will have a period of two months from exit to exercise prior to the awards lapsing. What happens in the In the event of a change of control, unvested MTI awards will vest. event of a change of control?

Transfield Services Annual Report 2010 Directors’ report – remuneration report (audited)

C5. Long- term incentive

Table 10 - Summary of LTI Plan

What is the purpose The purpose of the LTI Plan is to align Senior Executive reward with shareholder value, by tying this component of Senior of the LTI Plan? Executive remuneration to the achievement of performance conditions which underpin sustainable long-term growth. Who participates in Participation is restricted to executives who are employed to make decisions which materially impact organisational the LTI Plan? performance of the Company (the proxy being position seniority). Individuals are nominated by operational Chief Executives with the support of the MD/CEO within the framework approved by the HR Committee. 60 What is the value of The size of grants under the LTI plan is set as a percentage of total fixed remuneration; it ranges from 30 – 80 per cent of the LTI opportunity? total fixed remuneration for Senior Executives. The participation level for the CEO of TSI Fund is 100 per cent of his total fixed remuneration. Participants in the LTI plan will not derive any shares from their LTI grants unless performance hurdles are achieved and they complete a minimum service period. How is reward Senior Executives and other eligible executives are granted performance rights under the TranShare Executive Performance delivered under the Award Plan (TEPAP). The number of performance rights granted from the LTI allocation is calculated based on the market LTI Plan? value of the Company’s shares around the time the LTI grants are approved by the HR Committee. Each performance right is an entitlement to receive a fully-paid ordinary share in the Company on terms and conditions determined by the Board, including vesting conditions linked to service and performance over a three to four year period. If these conditions are satisfied, the performance rights vest and shares will be delivered to the Senior Executive upon exercise. The performance right may generally be exercised between three and six years after the date they are granted as long as the performance hurdles and service conditions are met. For executives based in the United States, the LTI is delivered under a sub-plan to TEPAP to satisfy United States regulatory requirements. The difference of this LTI arrangement is that on meeting vesting conditions, the performance rights (known as restricted share units in the United States) automatically result in shares being delivered to the participant without the further need for the participant to “exercise” his or her right. Do participants pay The performance rights are offered at no cost to the Senior Executive. for the Performance Rights? What rights are The performance rights do not carry voting or dividend rights, however shares delivered upon vesting of performance rights attached to the will carry the same rights as other ordinary shares. Senior Executives are prohibited from hedging their unvested Performance Rights? performance rights (further discussed at page 61). What are the The performance hurdles applicable to each grant of LTI awards are subject to Board review and assessed against the performance hurdles business plan and cycle. and how are they In FY 2009/10, performance rights were granted with three sets of independent performance hurdles, being earnings per measured? share (EPS), relative total shareholder return (“relative TSR”) and return on funds employed (ROFE). Prior to that and since April 2006, performance rights were granted with two sets of independent hurdles, being EPS and relative TSR performance hurdles. The performance hurdles for each grant of LTI awards are detailed Table 20. i. Earnings per share EPS is calculated by dividing the Company’s net profit by the weighted average number of ordinary shares on issue and is (EPS) expressed in cents per share. The EPS hurdle relates to the Company achieving a minimum average compound basic EPS growth per annum over a minimum three-year financial period. The EPS measure is based on earnings per share adjusted for capital raisings and normalised earnings. ii. Relative total TSR represents the change in the capital value of the Company’s share price over a period, plus reinvested dividends, shareholder return expressed as a percentage of the base value. The compound growth in the Company’s TSR over the performance (TSR) measurement period is compared with the TSR performance of all other companies in the S&P / ASX 200 Industrials Index which is the S&P / ASX 200 Index after excluding the Energy and Materials sectors. iii. Return on funds ROFE is calculated by dividing the Company’s earnings before interest, tax and amortisation (EBITA) by funds employed, employed (ROFE) calculated on an average basis over the performance period. The ROFE hurdle relates to the Company achieving a minimum return over a three-year financial period.

Transfield Services Annual Report 2010 Why were the The Board determined that these hurdles are appropriate as they, on balance, seek to reward: hurdles chosen? • when profit grows in real terms – EPS hurdle • when the Company achieves above average total shareholder returns relative to the performance of an appropriate peer group of companies – relative TSR and • when the business achieves returns from pursuing profitable projects and managing new and existing customers efficiently and effectively – ROFE hurdle. What if a Senior Where a Senior Executive ceases employment without cause (other than due to redundancy or retirement), those awards Executive ceases will lapse within two months from exit. 61 employment? Where redundancy or retirement applies, a pro-rata (based on service period) of the unvested awards may be retained and vest in the ordinary course. Performance rights will lapse immediately where a participant’s employment has been terminated by the Company with cause. What happens in the Prior to a takeover or change of control of the Company, the Board may exercise its discretion (having regard to relevant event of a change of executive and Company performance) and determine that part or all unvested awards vest. control?

C6. Shareholding policies

Minimum shareholding policy On 19 August 2010, the Company adopted a minimum shareholding policy for Senior Executives. Under this policy, Senior Executives are encouraged to acquire and maintain a shareholding in the Company equal in value (based on share acquisition cost) to 50 per cent (for the MD/CEO) and 30 per cent (for other Senior Executives) of their individual total fixed remuneration. The timeframe to achieve this is over a five year period from the later of the date of adoption of this policy and the appointment of the Senior Executive. The shareholding includes all the Company shares the Senior Executive and/or close members of the family of the Senior Executive holds; or has control over or has a benefit in (eg superannuation, beneficiary of a trust). This policy is not an enforced policy, however, Senior Executives are encouraged to comply.

Hedging and margin lending policies The Company also has a policy on the use of financial products by employees, including Senior Executives, to limit the risk attaching to equity instruments (commonly referred to as “hedging”) where those instruments are granted to them as part of their remuneration. Under this policy, Company securities must not be hedged prior to vesting (ie prior to the relevant performance and/or service conditions being met). In addition, the Company has a policy that prohibits Non-Executive Directors and Senior Executives from using the Company’s securities as collateral in any financial transaction, including margin loan arrangements. The Company treats compliance with these policies as a serious issue, and takes appropriate measures to ensure the policy is adhered to. Any employees found to have breached this policy will be subject to appropriate sanctions. C7. Other equity and legacy plans

TSI Fund Notional Securities Scheme Steve MacDonald, the Chief Executive Officer of TSI Fund also participates in the TSI Fund Notional Securities Scheme (Scheme). Steve MacDonald is seconded to TSI Fund by the Company and his remuneration is wholly paid by the Company. The Scheme offers a notional investment in the securities of TSI Fund and is offered by the Company (with agreement from the TSI Fund Board). The incentive provided under the Scheme can be delivered either in cash, TSI Fund securities or a combination of both, once vesting conditions have been met. The Scheme is used, because under current Australian tax law, TSI Fund securities issued under a TSI Fund executive remuneration regime can only be provided to TSI Fund employees, whereas Steve MacDonald is seconded from the Manager to TSI Fund. This notional investment in securities in TSI Fund is a structure that emulates the performance of total securityholder return of TSI Fund securities.The terms and conditions of Steve MacDonald’s grant of TSI Fund Notional Securities affecting remuneration in the previous, this or future reporting periods are set out below. The TSI Fund Notional Securities expire on the earlier of ceasing employment or 180 days after the Vesting Date. The performance hurdles were assessed on 30 June 2010 and as the threshold level of performance was not achieved, none of the notional securities under the Scheme vested or delivered any benefits. Accordingly, the value per notional security at 30 June 2010 is nil.

Transfield Services Annual Report 2010 Directors’ report – remuneration report (audited)

Table 11 - Steve MacDonald’s grant of TSIF Notional Securities and related vesting conditions Market value per notional First exercise security Perform- vesting Number gRAnt exercise Price At 30 June Ance of Performance Tranche gRAnted Date Date $ 2010 hurdles Awards conditions A 166,667 15 Nov 2007 30 Jun 2010 Nil $Nil TSI Fund 20%# TSI Fund Return* > Benchmark return Return by $350,000 (50%); 62 80% TSI Fund Return** > Benchmark Return by > $1,750,000 (500%); B 166,667 15 Nov 2007 30 Jun 2010 Nil $Nil TSI Fund 100% TSI Fund Market Capitalisation market doubles from listing to capitalisation 30 June 2010

# Pro- rata vesting will apply once the primary performance hurdle for Tranche A has been achieved. * TSI Fund Return is the cumulative return of TSI Fund for financial years ending 2008, 2009 and 2010. ** Benchmark return is the average market capitalisation of TSI Fund over the last 20 trading days of the previous financial year multiplied by the average daily closing value of the benchmark rate during the relevant financial year, plus the time weighted aggregate values of all new securities paid during the relevant financial year multiplied by a rate equivalent to the average daily closing value of the benchmark rate.

The employee share ownership plan – The TranShare Plan (TranShare) Since July 2005, the Company offered a general share purchase plan, available to all employees in its Australian and New Zealand subsidiary companies and Australian joint ventures. Under TranShare, employees may acquire up to $1,000 worth of Transfield Services shares annually, and the Company subsidises 10 per cent of the total cost of purchase. The shares are restricted and may not be traded by employees for three years from the date of purchase. Employee shareholders participate in dividend distributions and have full voting rights equal with all other shareholders. Senior Executives were eligible to participate in the Transhare and some did participate.The acquisition of shares under the Transhare Plan was suspended on 19 May 2009 following changes to equity plan taxation legislation and remains under review. C8. Service agreements The remuneration and other terms of employment for the MD/CEO and Senior Executives are formalised in Service Agreements. Each of these agreements provide for the provision of performance‑related cash bonuses, other benefits including executive health management, householder insurance, salary continuance insurance and participation, when eligible, in the Company’s LTI Plan (as discussed above).The material terms of the Service Agreements with Senior Executives are set out below.

Table 12 – Summary of Service Agreements termination benefit (amount of annual notice period salary) on early required for termination by a Continuous the employee the Company, otheR Restrictive agreement to terminate than for gross covenant Name Position commencing the contract Misconduct APPlies of: Dr Peter Goode Managing Director and Chief Executive Officer 30 March 2009 6 months 1 year 1 year Larry Ames Chief Executive – Americas 4 January 2010 90 days 1 year 2 years Matthew Irwin Chief Executive, Investments 13 December 2004 3 months 1 year 1 year Elizabeth Hunter Chief Executive, Human Resources 20 August 2007 3 months 1 year 6 months Bruce James Chief Executive, Australia and New Zealand 1 January 2008 3 months 1 year 6 months Steve MacDonald Chief Executive Officer, Transfield Services 1 April 2007 6 months 1 year 1 year Infrastructure Fund Paul McCarthy Chief Executive, Operations 1 January 2008 3 months 1 year 6 months Kate Munnings Chief Risk and Legal Officer / Company Secretary 1 January 2006 3 months 1 year 6 months Tiernan O’Rourke Chief Financial Officer 11 January 2010 6 months 1 year 6 months Joseph Sadatmehr Chief Executive, Strategic Relationships 1 July 2007 6 months 1 year 1 year Philip Wratt Chief Executive, Middle East and Asia 11 January 2010 6 months 1 year 6 months Nicholas Yates Chief Executive, Marketing and Business 14 September 2009 3 months 6 months 6 months Development

Transfield Services Annual Report 2010 C9. Remuneration Outcomes

Performance Snapshot The overall level of executive reward takes into account the performance of the Company over a number of years, with greater emphasis given to the current and immediately preceding year. Over the past five years, the Company’s profit from ordinary activities after income tax (NPAT) has increased by a compound rate of 7.3 per cent per annum. During the same period, average executive key management personnel remuneration has increased by a compound rate of 6.3 per cent per annum. Short term incentive bonus and long term incentives /share based payments as a percentage of total annual reward for key management personnel are presented in the following table for each year.

Table 13 – Five- year Company performance 2006 20071 2008 20092 20103 63 NPAT $’000 55,590 110,447 82.376 (54,490) 73,556 ROE 9.7% 11.5% 12.1% (7.6%) 9.3% Dividends per share paid 22.00c 26.00c 36.00c 22.75c 12.25c

STI as % of Senior Executive Total Annual Remuneration 19.6% 25.8% 15.3% 18.3% 17.9% LTI as % of Senior Executive Total Annual Remuneration 9.6% 19.7% 28.0% 1.3% 5.8%

1. The 2007 results included one-off profit after tax of $34,744,000 relating to the disposal of the infrastructure assets to Transfield Services Infrastructure Limited 2. Includes an impairment loss $148,443, 000 post tax 3. Includes $22,900,000 equity accounted share of losses associated with TSI Fund capital structure review

Incentives aligned to shareholder value The Company’s incentive remuneration arrangements operate as intended in that they directly reflect the Company performance. Chart 1 illustrates the STI per cent of target paid has tracked below EBITA from 2008 to 2010. Chart 2 illustrates the close alignment of the percentage of LTI performance rights vested, earnings per share and share price. Both STI and LTI are tied directly to the results delivered by the Company.

Chart 1

Key management personnel short term incentive outcomes % of Target relative to EBITA*

200 100 180 90 160 80 140 70 120 60 100 50 80 40 EBITA A$mil EBITA 60 30 STI % of Target Paid Target STI % of 40 20 20 10 0 - 2006 2007 2008 2009 2010 Year % of Target TSE EBITA (normalised)

Chart 2

Long-term incentive vesting outcomes relative to Earnings Per Share and Share Price

12 120 10 100 8 80 58.16 6 60

4 33.9 40 27.64 2 17.66 20 0 0

Share price as at 30 June. as at price Share 2006 2007 2008 2010 -2 -20 -15.34 % of LTI Awards Vested and EPS Vested Awards % of LTI -4 -40 Year

EPS % of LTI Awards Vested Share price as at 30 June

Transfield Services Annual Report 2010 Directors’ report – remuneration report (audited)

C10. Statutory tables The table set out below includes remuneration associated with LTI performance rights granted as part of the Senior Executives’ LTI payments. The value reflected is an accounting value and reflects the expense to the Company of the executives’ incentive arrangements. This value is not necessarily the same as the value to be realised by the executive. During FY 2009/10, the LTI performance rights relating to the relative TSR-based grants made in August 2005 and August 2006 did not vest (the final testing dates are 30 August 2010 and 30 May 2010 respectively); a portion of the April 2006 and February 2007 vested. The EPS based LTI grants in August 2006 and February 2007 did not vest. The Senior Executives will not benefit from unvested LTI performance rights. To the extent the LTI award is related to a market condition (for example relative TSR) the expense to the Company is unchanged. In addition where LTI vesting criteria relate to a non-market condition (in the case of the EPS hurdle) the expense to the Company is modified where vesting is forecast at less than 100 per cent probability of vesting. In such a case the amount reported as part of the Senior Executives’ remuneration is reduced to reflect the number 64 expected to vest, which may include reversals of amounts expensed in prior year.

Table 14 below sets out details of remuneration provided to Senior Executives (calculated in accordance with applicable Accounting Standards). Post long Short term employment teRM share based termin- benefits benefits Benefits PAyments Ation cAsh cAsh- non‑ long options Perfor- termin- salary BAseD Monetary superan‑ service And otheR MAnce Ation And fees sti Benefits nuation leave securities Rights Benefits total Name $ $ $ $ $ $ $ $ $

Dr Peter Goode 2010 1,735,575 641,666 5,982 14,461 7,036 - 335,024 - 2,739,744 20091 447,227 - 8,656 3,540 857 - - - 460,280 Larry Ames 2010 287,912 540,3192 3,635 9,159 - - - - 841,025 Lee De Vryer (former) 20103 109,482 - 2,261 11,353 - - (134,859) 626,3764 614,613 2009 504,598 154,688 2,176 45,414 2,375 - 110,685 - 819,936 Elizabeth Hunter 2010 465,549 108,000 6,949 14,461 4,521 - 26,589 - 626,069 2009 523,598 81,489 9,687 - 2,545 - 53,685 - 671,004 Matthew Irwin 2010 645,552 168,050 12,385 14,461 11,472 - 94,843 - 946,763 2009 656,491 169,950 20,284 13,745 12,502 - 148,306 - 1,021,278 Bruce James 2010 909,019 266,367 10,295 - 13,638 - 161,616 - 1,360,935 2009 900,018 318,094 14,983 - 12,540 - 196,348 - 1,441,983 Steve MacDonald 2010 537,010 410,450 15,820 14,461 7,955 (11,667) (19,945) - 954,084 2009 532,266 411,138 19,591 13,745 13,564 (45,000) 51,853 - 997,157 Paul McCarthy5 2010 297,028 - 4,571 33,614 19,003 - 49,773 - 403,989 2009 550,469 189,000 8,757 49,542 11,297 - 138,684 - 947,749 Kate Munnings 2010 500,377 117,466 7,528 45,034 9,080 - 63,203 - 742,688 2009 454,138 126,473 14,772 40,872 8,209 - 72,557 - 717,021 Tiernan O’Rourke 2010 369,055 731,0176 5,239 12,500 667 - 7,223 - 1,125,701 Joseph Sadatmehr 2010 1,009,549 170,904 133,0587 9,641 44,210 - 148,881 - 1,516,243 2009 1,201,123 296,853 80,291 - 27,349 - 102,005 - 1,707,621 Philip Wratt 2010 261,910 59,213 66,4697 - 458 - - - 388,050 Nicholas Yates 20108 313,705 86,850 4,617 28,233 8,297 - 19,209 - 460,911 Total for each 2010 7,441,723 3,300,302 278,809 207,378 126,337 (11,667) 751,557 626,376 12,720,815 component 2009 5,769,928 1,747,685 179,197 166,858 91,238 (45,000) 874,123 - 8,784,029 Total for each 2010 11,020,834 207,378 126,337 739,890 626,376 12,720.815 category 2009 7,696,810 166,858 91,238 829,123 - 8,784,029

1. Dr Peter Goode’s remuneration in FY 2008/09 was for the period 30 March 2009 to 30 June 2009. He was not eilgible for the FY 2009 STI. 2. Includes sign-on payment of $453,669. 3. Lee De Vryer’s remuneration disclosed for the period from 1 July 2009 to 18 September 2009 (date he ceased employment with the Company). 4. Comprised of accrued statutory entitlements and payment in lieu of notice. 5. Paul McCarthy’s remuneration disclosed for the period from 1 July 2009 to 11 January 2010 (date he ceased to be a key management personnel). 6. Includes sign-on payment of $575,000. 7. Includes expatriate benefits. 8. Nicholas Yates’ remuneration disclosed for the period from 14 September 2009 (from date of his appointment to KMP role) to 30 June 2010.

Transfield Services Annual Report 2010 Table 15 – Details of remuneration: fixed and at-risk remuneration as a percentage of actual remuneration Performance related remuneration FixeD cAsh-based Performance Remuneration STI Rights total total Name % % % % 100% Dr Peter Goode 65% 23% 12% 35% 100% Larry Ames 90% 10% 0% 10% 100% Lee De Vryer (former) 122% 0% -22% -22% 100% Elizabeth Hunter 79% 17% 4% 21% 100% Matthew Irwin 72% 18% 10% 28% 100% 65 Bruce James 68% 20% 12% 32% 100% Steve MacDonald 60% 43% -3% 40% 100% Paul McCarthy 88% 0% 12% 12% 100% Kate Munnings 75% 16% 9% 25% 100% Tiernan O’Rourke 85% 14% 1% 15% 100% Joseph Sadatmehr 79% 11% 10% 21% 100% Philip Wratt 85% 15% 0% 15% 100% Nicholas Yates 77% 19% 4% 23% 100%

Table 16 – Percentage of performance-based remuneration paid, forfeited and deferred for Senior Executives Performance-based remuneration - STI and MTI % of % of maximum STI paid in maximum sti sti deferreD sti deferred % of maximum Name cash $ paid in cash into MTI $1 into MTI STI forfeited Dr Peter Goode 641,666 18% 1,283,334 37% 45% Larry Ames 86,650 40% - 0% 60% Lee De Vryer (former) - 0% - 0% 100% Elizabeth Hunter 108,000 54% - 0% 46% Matthew Irwin 168,050 51% - 0% 49% Bruce James 266,367 45% 29,596 5% 50% Steve MacDonald 410,450 74% - 0% 26% Paul McCarthy - 0% - 0% 100% Kate Munnings 117,466 53% 13,052 6% 41% Tiernan O’Rourke 156,017 56% 17,335 6% 38% Joseph Sadatmehr 170,904 29% - 0% 71% Philip Wratt 59,213 38% - 0% 62% Nicholas Yates 86,850 39% - 0% 61%

1. The grant of the MTI performance rights in respect of FY 2009/10 is expected to occur in September 2010.

Table 17 – Remuneration subject to vesting Remuneration subject to vesting - MTI & LTI1 Name FY 2010/11 FY 2011/12 FY 2012/13 Dr Peter Goode 335,024 335,024 142,652 Larry Ames - - - Lee De Vryer (former) - - - Elizabeth Hunter 61,472 44,177 9,805 Matthew Irwin 176,299 126,584 28,094 Bruce James 327,554 235,171 51,103 Steve MacDonald - - - Paul McCarthy (resigned 19 July 2010)2 149,261 95,953 21,295 Kate Munnings 104,575 70,519 15,339 Tiernan O’Rourke 7,223 2,889 - Joseph Sadatmehr 47,147 47,276 11,238 Philip Wratt - - - Nicholas Yates 53,032 34,557 7,670

1. Remuneration amounts disclosed in the above table refer to the maximum value of MTI and LTI performance rights, where relevant. These amounts have been determined at grant date using an appropriate pricing model and amortised in accordance with AASB 2: Share Based Payment. The value of MTI performance rights are estimates only as the formal grant to the applicable participants in respect of FY 2009/10 is expected to occur in September 2010. The minimum value that may vest is $nil. No remuneration currently granted vests after 30 June 2013. 2. Paul McCarthy’s remuneration subject to vesting was forfeited on his resignation in July 2010.

Transfield Services Annual Report 2010 Directors’ report – remuneration report (audited)

Table 18 - details of LTI performance rights granted as remuneration, exercised and forfeited during the year. Fair value total First % vAlue of per right value Date % For- Rights Rights Rights gRAnt numbeR At grant At grant exercis- expiry vesteD Feited exercised exerciseD Forfeited Name series Date gRAnteD DAte DAte ABle Date in year in year in year1 in year $2 year $3 Dr Peter Goode 2009D4 Sep-10 29,608 2.87 $84,975 Sep-12 Sep-16 - - - - - 2009E4 Sep-10 29,608 2.87 $84,975 Sep-12 Sep-16 - - - - - 2009F4 Sep-10 29,609 2.76 $81,721 Sep-13 Sep-16 - - - - - 2009G4 Sep-10 29,609 2.76 $81,721 Sep-13 Sep-16 - - - - - 66 Larry Ames ------Lee de Vryer 2008A 28-Feb-08 12,000 $10.42 $125,040 28-Feb-11 28-Feb-14 - 100% - - $50,400 2008B 28-Feb-08 12,000 $7.71 $92,520 28-Feb-11 28-Feb-14 - 100% - - $50,400 2008C 31-Aug-08 17,800 $7.61 $135,458 31-Aug-11 31-Aug-14 - 100% - - $74,760 2008D 31-Aug-08 17,800 $5.78 $102,884 31-Aug-11 31-Aug-14 - 100% - - $74,760 Elizabeth Hunter 2007E 31-Aug-07 5,800 $12.18 $70,644 31-Aug-10 31-Aug-13 - - - - - 2007F 31-Aug-07 5,800 $9.60 $55,680 31-Aug-10 31-Aug-13 - - - - - 2008C 31-Aug-08 8,950 $7.61 $68,110 31-Aug-11 31-Aug-14 - - - - - 2008D 31-Aug-08 8,950 $5.78 $51,731 31-Aug-11 31-Aug-14 - - - - - 2009A 26-Sep-09 13,960 $3.77 $52,629 26-Sep-12 26-Sep-15 - - - - - 2009B 26-Sep-09 10,470 $2.99 $31,305 26-Sep-12 26-Sep-15 - - - - - 2009C 26-Sep-09 10,470 $3.77 $39,472 26-Sep-12 26-Sep-15 - - - - - Matthew Irwin 2006A 19-Apr-06 7,000 $6.93 $48,510 19-Apr-09 19-Apr-12 94% - 6,571 $24,970 - 2006B 19-Apr-06 7,000 $4.81 $33,670 19-Apr-09 19-Apr-12 56% - 3,898 $16,185 - 2006C 31-Aug-06 13,950 $7.62 $106,299 31-Aug-10 31-Aug-12 - - - - - 2006D 31-Aug-06 13,950 $5.06 $70,587 31-Aug-09 31-Aug-12 - - - - - 2007E 31-Aug-07 16,900 $12.18 $205,842 31-Aug-10 31-Aug-13 - - - - - 2007F 31-Aug-07 16,900 $9.60 $162,240 31-Aug-10 31-Aug-13 - - - - - 2008C 31-Aug-08 25,650 $7.61 $195,197 31-Aug-11 31-Aug-14 - - - - - 2008D 31-Aug-08 25,650 $5.78 $148,257 31-Aug-11 31-Aug-14 - - - - - 2009A 26-Sep-09 40,000 $3.77 $150,800 26-Sep-12 26-Sep-15 - - - - - 2009B 26-Sep-09 30,000 $2.99 $89,700 26-Sep-12 26-Sep-15 - - - - - 2009C 26-Sep-09 30,000 $3.77 $113,100 26-Sep-12 26-Sep-15 - - - - - Bruce James 2005A 31-Aug-05 11,322 $4.92 $55,704 30-Aug-08 30-Aug-12 - - - - - 2005B 31-Aug-05 1,652 $4.42 $7,302 30-Aug-08 30-Aug-12 - - - - - 2005C 31-Aug-05 2,326 $3.91 $9,095 30-Aug-08 30-Aug-12 - - - - - 2006C 31-Aug-06 20,350 $7.62 $155,067 31-Aug-10 31-Aug-12 - - - - - 2006D 31-Aug-06 20,350 $5.06 $102,971 31-Aug-09 31-Aug-12 - - - - - 2007E 31-Aug-07 20,700 $12.18 $252,126 31-Aug-10 31-Aug-13 - - - - - 2007F 31-Aug-07 20,700 $9.60 $198,720 31-Aug-10 31-Aug-13 - - - - - 2008C 31-Aug-08 46,600 $7.61 $354,626 31-Aug-11 31-Aug-14 - - - - - 2008D 31-Aug-08 46,600 $5.78 $269,348 31-Aug-11 31-Aug-14 - - - - - 2009A 26-Sep-09 72,760 $3.77 $274,305 26-Sep-12 26-Sep-15 - - - - - 2009B 26-Sep-09 54,570 $2.99 $163,164 26-Sep-12 26-Sep-15 - - - - - 2009C 26-Sep-09 54,570 $3.77 $205,729 26-Sep-12 26-Sep-15 - - - - - Steve MacDonald 2005A 31-Aug-05 19,832 $4.92 $97,573 30-Aug-08 30-Aug-12 - - - - - 2005B 31-Aug-05 2,894 $4.42 $12,791 30-Aug-08 30-Aug-12 - - - - - 2005C 31-Aug-05 4,074 $3.91 $15,929 30-Aug-08 30-Aug-12 - - - - - 2006C 31-Aug-06 18,350 $7.62 $139,827 31-Aug-10 31-Aug-12 - - - - - 2006D 31-Aug-06 18,350 $5.06 $92,851 31-Aug-09 31-Aug-12 - - - - - 2007C 31-May-07 28,750 $11.35 $326,313 31-May-10 31-May-13 - - - - - 2007D 31-May-07 28,750 $7.26 $208,725 31-May-10 31-May-13 - - - - - Paul McCarthy 2006A 19-Apr-06 5,950 $6.93 $41,234 19-Apr-09 19-Apr-12 94% - 5,585 $11,840 2006B 19-Apr-06 5,950 $4.81 $28,620 19-Apr-09 19-Apr-12 56% - 3,313 $22,864 2007A 28-Feb-07 8,100 $10.27 $83,187 28-Feb-10 28-Feb-13 - - - - 2007B 28-Feb-07 8,100 $8.10 $65,610 28-Feb-10 28-Feb-13 32% - - $10,444 - 2008A 28-Feb-08 13,100 $10.42 $136,502 28-Feb-11 28-Feb-14 - - - - - 2008B 28-Feb-08 13,100 $7.71 $101,001 28-Feb-11 28-Feb-14 - - - - - 2008C 31-Aug-08 19,450 $7.61 $148,015 31-Aug-11 31-Aug-14 - - - - - 2008D 31-Aug-08 19,450 $5.78 $112,421 31-Aug-11 31-Aug-14 - - - - - 2009A 26-Sep-09 30,320 $3.77 $114,306 26-Sep-12 26-Sep-15 - - - - - 2009B 26-Sep-09 22,740 $2.99 $67,993 26-Sep-12 26-Sep-15 - - - - - 2009C 26-Sep-09 22,740 $3.77 $85,730 26-Sep-12 26-Sep-15 - - - - -

Transfield Services Annual Report 2010 Fair value total First % vAlue of per right value Date % For- Rights Rights Rights gRAnt numbeR At grant At grant exercis- expiry vesteD Feited exercised exerciseD Forfeited Name series Date gRAnteD DAte DAte ABle Date in year in year in year1 in year $2 year $3 Kate Munnings 2006A 19-Apr-06 3,950 $6.93 $27,374 19-Apr-09 19-Apr-12 94% - - - - 2006B 19-Apr-06 3,950 $4.81 $19,000 19-Apr-09 19-Apr-12 56% - - - - 2007A 28-Feb-07 5,100 $10.27 $52,377 28-Feb-10 28-Feb-13 - - - - - 2007B 28-Feb-07 5,100 $8.10 $41,310 28-Feb-10 28-Feb-13 32% - - - - 2008A 28-Feb-08 7,200 $10.42 $75,024 28-Feb-11 28-Feb-14 - - - - - 2008B 28-Feb-08 7,200 $7.71 $55,512 28-Feb-11 28-Feb-14 - - - - - 67 2008C 31-Aug-08 11,650 $7.61 $88,657 31-Aug-11 31-Aug-14 - - - - - 2008D 31-Aug-08 11,650 $5.78 $67,337 31-Aug-11 31-Aug-14 - - - - - 2009A 26-Sep-09 21,840 $3.77 $82,337 26-Sep-12 26-Sep-15 - - - - - 2009B 26-Sep-09 16,380 $2.99 $48,976 26-Sep-12 26-Sep-15 - - - - - 2009C 26-Sep-09 16,380 $3.77 $61,753 26-Sep-12 26-Sep-15 - - - - - Joseph Sadatmehr 2005A 31-Aug-05 29,452 $4.92 $144,904 30-Aug-08 30-Aug-12 - - - - - 2005B 31-Aug-05 4,298 $4.42 $18,997 30-Aug-08 30-Aug-12 - - - - - 2005C 31-Aug-05 6,050 $3.91 $23,656 30-Aug-08 30-Aug-12 - - - - - 2006C 31-Aug-06 28,250 $7.62 $215,265 31-Aug-10 31-Aug-12 - - - - - 2006D 31-Aug-06 28,250 $5.06 $142,945 31-Aug-09 31-Aug-12 - - - - - 2007G 31-Aug-07 250,000 $12.18 $3,045,000 31-May-10 31-May-13 32% 68% 80,000 $298,400 $528,700 Nicholas Yates 2008A 28-Feb-08 4,300 $10.42 $44,806 28-Feb-11 28-Feb-14 - - - - - 2008B 28-Feb-08 4,300 $7.71 $33,153 28-Feb-11 28-Feb-14 - - - - - 2008C 31-Aug-08 7,000 $7.61 $53,270 31-Aug-11 31-Aug-14 - - - - - 2008D 31-Aug-08 7,000 $5.78 $40,460 31-Aug-11 31-Aug-14 - - - - - 2009A 26-Sep-09 10,920 $3.77 $41,168 26-Sep-12 26-Sep-15 - - - - - 2009B 26-Sep-09 8,190 $2.99 $24,488 26-Sep-12 26-Sep-15 - - - - - 2009C 26-Sep-09 8,190 $3.77 $30,876 26-Sep-12 26-Sep-15 - - - - -

1. On exercise of each performance right, the holder received one fully paid ordinary share in the Company. No exercise price was payable. 2. Value based on closing share price on exercise date. 3. Value based on closing share price on forfeit date. 4. These rights have not be granted to Dr Goode but are disclosed in accordance with the relevant accounting standard on the basis that on 26 March 2010, the Board confirmed that a portion of the MD/CEO’s Total Incentive will be granted in September 2010 under similar terms to LTI grants to other Senior Executives in September 2009. The First Date exercisable is expected to be two years (for 2009D and 2009E) and three years (for 2009F and 2009G) from the date when the rights are formally granted.The Expiry Date is expected to be six years from the date when the rights are formally granted. Refer to page 57 for further details.

The assessed fair value at grant date of performance rights granted to the individuals is allocated on a straight line basis over the period from grant date to final vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined. Generally for a performance right with EPS or ROFE hurdles, values are determined using a binomial option pricing model and for performance rights with TSR hurdles, the Monte-Carlo simulation method is used. These valuation techniques take into account the exercise price, the term of the performance right, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the performance right, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the performance right.

Table 19 - model inputs for the LTI performance rights granted during FY 2009/10 26 September 2009 Performance Rights and Restricted Share Units 2009A 2009B 2009C Exercise price n/a n/a n/a Consideration $nil $nil $nil Vesting conditions Compound EPS growth Relative TSR ROFE growth Expiry date 26 September 2015 26 September 2015 26 September 2015 Share price at grant date $4.13 $4.13 $4.13 Expected company share price volatility 55.0% 55.0% 55.0% Expected dividend yield 3.0% 3.0% 3.0% Risk-free interest rate 4.72% 4.73% 4.72% Fair value at grant date $3.77 $2.99 $3.77

Transfield Services Annual Report 2010 Directors’ report – remuneration report (audited)

Table 20 - vesting schedules and performance hurdles for LTI performance rights Vesting Schedule Grant Allocation Performance vesting of Date tRAnche series % hurdles Awards Performance conditions 31-Aug-05 1 2005A 75% TSR 100% Average cumulative TSR of 15% per annum over 3-5 years from Base Price1 2 2005B Additional 10% TSR 100% Average cumulative TSR of 17.5% per annum over 3-5 years from Base Price1 3 2005C Additional 15% TSR 100% Average cumulative TSR of 20% per annum over 3-5 years from Base Price1 19-Apr-06 1 2006A 50% EPS 0% If BEPSG2 < 10% 68 40% - 70% If average compound BEPSG is between 10% - 12.50% for 3 years from 2005 base year EPS 70% - 100% If average compound BEPSG is between 12.50% - 15% for 3 years from 2005 base year EPS 100% If average compound BEPSG is 15% for 3 years from 2005 base year EPS 2 2006B 50% TSR 0% If TSR < 50th percentile in the ASX 200 Industrials Index 30% If TSR = 50th percentile in the ASX 200 Industrials Index 100%3 If TSR = 75th percentile in the ASX 200 Industrials Index Proportional vesting of awards will apply for performance between 51st and 75th percentile 31-Aug-06 1 2006C 50% EPS 0% If BEPSG2 < 10% 40% - 70% If average compound BEPSG is between 10% - 12.50% for 3 years from 2006 base year EPS 70% - 100% If average compound BEPSG is between 12.50% - 15% for 3 years from 2006 base year EPS 100% If average compound BEPSG is 15% for 3 years from 2006 base year EPS 2 2006D 50% TSR 0% If TSR < 50th percentile in the ASX 200 Industrials Index 30% If TSR = 50th percentile in the ASX 200 Industrials Index 100%3 If TSR = 75th percentile in the ASX 200 Industrials Index Proportional vesting of awards will apply for performance between 51st and 75th percentile 28-Feb-07 1 2007A 50% EPS 0% If BEPSG2 < 10% 40% - 70% If average compound BEPSG is between 10% - 12.50% for 3 years from 2006 base year EPS 70% - 100% If average compound BEPSG is between 12.50% - 15% for 3 years from 2006 base year EPS 100% If average compound BEPSG is 15% for 3 years from 2006 base year EPS 2 2007B 50% TSR 0% If TSR < 50th percentile in the ASX 200 Industrials Index 30% If TSR = 50th percentile in the ASX 200 Industrials Index 100%3 If TSR = 75th percentile in the ASX 200 Industrials Index Proportional vesting of awards will apply for performance between 51st and 75th percentile 31-May-07 1 2007C 50% EPS 0% If BEPSG2 < 10% 40% - 70% If average compound BEPSG is between 10% - 12.50% for 3 years from 2007 base year EPS 70% - 100% If average compound BEPSG is between 12.50% - 15% for 3 years from 2007 base year EPS 100% If average compound BEPSG is 15% for 3 years from 2007 base year EPS 2 2007D 50% TSR 0% If TSR < 50th percentile in the ASX 200 Industrials Index 30% If TSR = 50th percentile in the ASX 200 Industrials Index 100%3 If TSR = 75th percentile in the ASX 200 Industrials Index Proportional vesting of awards will apply for performance between 51st and 75th percentile 31-Aug-07 1 2007E 50% EPS 0% If BEPSG2 < 10% 40% - 70% If average compound BEPSG is between 10% - 12.50% for 3 years from 2007 base year EPS 70% - 100% If average compound BEPSG is between 12.50% - 15% for 3 years from 2007 base year EPS 100% If average compound BEPSG is 15% for 3 years from 2007 base year EPS 2 2007F 50% TSR 0% If TSR < 50th percentile in the ASX 200 Industrials Index 30% If TSR = 50th percentile in the ASX 200 Industrials Index 100%3 If TSR = 75th percentile in the ASX 200 Industrials Index Proportional vesting of awards will apply for performance between 51st and 75th percentile

Transfield Services Annual Report 2010 Vesting Schedule Grant Allocation Performance vesting of Date tRAnche series % hurdles Awards Performance conditions 31-Aug-07 1 2007G 100% PBT 0% If aggregate PBT is <$US113.8M at the end of the 2010 fiscal year 50% If aggregate PBT is between $US113.8M and $US136.6M at the end of the 2010 fiscal year 90% If aggregate PBT is between $US136.6M and $US149.6M at the end of the 2010 fiscal year 100% If aggregate PBT is $US149.6M or higher at the end of the 2010 fiscal year 69 29-Feb-08 1 2008A 50% EPS 0% If BEPSG2 < 10% 40% - 70% If average compound BEPSG is between 10% - 12.50% for 3 years from 2007 base year EPS 70% - 100% If average compound BEPSG is between 12.50% - 15% for 3 years from 2007 base year EPS 100% If average compound BEPSG is 15% for 3 years from 2007 base year EPS 2 2008B 50% TSR 0% If TSR < 50th percentile in the ASX 200 Industrials Index 30% If TSR = 50th percentile in the ASX 200 Industrials Index 100%3 If TSR = 75th percentile in the ASX 200 Industrials Index Proportional vesting of awards will apply for performance between 51st and 75th percentile 31-Aug-08 1 2008C 50% EPS 0% If BEPSG2 < 10% 40% - 70% If average compound BEPSG is between 10% - 12.50% for 3 years from 2008 base year EPS 70% - 100% If average compound BEPSG is between 12.50% - 15% for 3 years from 2008 base year EPS 100% If average compound BEPSG is 15% for 3 years from 2008 base year EPS 2 2008D 50% TSR 0% If TSR < 50th percentile in the ASX 200 Industrials Index 30% If TSR = 50th percentile in the ASX 200 Industrials Index 100%3 If TSR = 75th percentile in the ASX 200 Industrials Index Proportional vesting of awards will apply for performance between 51st and 75th percentile 26-Sep-09 1 2009A 40% EPS 0% If BEPSG2 < 4% 40% - 70% If average compound BEPSG is between 4% - 6% for 3 years from 2009 base year EPS 70% - 100% If average compound BEPSG is between 6% - 8% for 3 years from 2009 base year EPS 100% If average compound BEPSG is 15% for 3 years from 2009 base year EPS 2 2009B 30% TSR 0% If TSR < 50th percentile in the ASX 200 Industrials Index 30% If TSR = 50th percentile in the ASX 200 Industrials Index 100%3 If TSR = 75th percentile in the ASX 200 Industrials Index Proportional vesting of awards will apply for performance between 51st and 75th percentile 3 2009C 30% ROFE 0% If ROFE is less than 25% 50% If ROFE is between 25% - 30% for the 3 year period from 2009 base year. 100% IF ROFE is 30% or more for the 3 year period from 2009 base year.

1. Base Price is the five day average closing price of shares one week prior to the date the HR Committee approved the offer. 2. Basic EPS growth. 3. TSR will initially be measured three years after the grant date. If the hurdles are not met, TSR will be measured three times more at a quarterly intervals. To qualify, the performance hurdles and vesting conditions must be met at any of four quarterly assessment times within a specified one year window commencing three years from the grant date. The remaining unvested awards will lapse after that.

The remuneration report ends here. The Directors’ Report continues on page 70.

Transfield Services Annual Report 2010 Directors’ report – (including remuneration report)

Insurance of officers During the financial year, Transfield Services Limited paid a premium for Directors’ and Officers’ Liability insurance. The policy covers the Directors and Secretary of the Company and its controlled entities, and the general managers of each of the divisions of the consolidated entity. The Directors have not included details of the nature of the liabilities covered and the amount of the premium paid in respect of the Directors’ and Officers’ Liability insurance policy as such disclosure is prohibited under the terms of the contract.

Proceedings on behalf of the Company No person has applied to a court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in 70 any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of a court under section 237 of the Corporations Act 2001.

Non-audit services During the year KPMG, the Company’s auditor, has performed certain other services in addition to their statutory duties. Details of the amounts paid or payable to the auditor for audit and non-audit services (comprising other assurance services and taxation services) provided during the year are set out in Note 36. The Board of Directors has considered the non-audit services provided during the year by the auditor and, in accordance with the advice received from the Risk, Audit and Compliance Committee is satisfied that the provision of those non-audit services, as set out in Note 36, during the year by the auditor is compatible with, and did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Risk, Audit and Compliance Committee to ensure they do not impact the integrity and objectivity of the auditor; and • the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards. Prior to its appointment as auditor KPMG provided taxation services to the Group in relation to research and development activities on a risk and reward sharing basis. Since its appointment as auditor this arrangement has been replaced with a time and cost fee arrangement.

Auditors’ 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 71.

Rounding of amounts The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.

Auditor KPMG continues in office in accordance with Section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of the Directors.

Anthony Shepherd Dr Peter Goode Chairman Managing Director and Chief Executive Officer

at Sydney 26 August 2010

Transfield Services Annual Report 2010 Auditor’s independence declaration

71

Transfield Services Annual Report 2010 Consolidated statement of comprehensive income for the year ended 30 June 2010

Consolidated note 2010 2009 $’000 $’000 Revenue from ordinary activities 4 3,136,677 3,387,981 Share of net profits of associates and joint venture entities and partnerships accounted for using the equity method 49,353 72,012 Other income 5 14,278 11,005 Subcontractors, raw materials and consumables (1,537,944) (1,561,888) Employee benefits expense (1,267,849) (1,441,994) 72 Depreciation, amortisation and impairment 6 (73,821) (247,808) Other expenses (215,306) (242,029) Net finance costs (26,133) (41,702)

Finance costs 6 (27,823) (44,920) Finance income 1,690 3,218

Profit / (loss) before income tax 79,255 (64,423) Income tax (expense) / benefit 7(a) (5,699) 9,933

Profit / (loss) from continuing operations after income tax 73,556 (54,490)

Other comprehensive income Exchange differences on translation of foreign operations (2,470) (22,105) Effective portion of changes in fair value of cash flow hedge (interest rate hedge) 1,046 (39,377) Income tax (expense) / benefit on other comprehensive income (298) 12,018

Other comprehensive income for the year, net of income tax (1,722) (49,464)

Total comprehensive income for the year 71,834 (103,954)

Profit / (loss) attributable to: Owners of the Company 73,045 (55,010) Non-controlling interest 511 520

Profit for the year 73,556 (54,490)

Total comprehensive income attributable to: Owners of the Company 71,323 (104,474) Non-controlling interest 511 520

Total comprehensive income for the year 71,834 (103,954)

Earnings per share for profit attributable to owners of the Company Basic and diluted earnings/(loss) per share – cents 35 17.66 (15.34)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Transfield Services Annual Report 2010 Consolidated statement of financial position as at 30 June 2010

Consolidated note 2010 2009 $’000 $’000 Current assets Cash and cash equivalents 8 112,716 97,979 Trade and other receivables 9 486,557 510,949 Income tax receivable 479 18,636 Inventories 10 58,529 70,978 Prepayments and other current assets 11 21,746 16,367 73 Total current assets 680,027 714,909

Non-current assets Receivables 12 477 1,556 Investments accounted for using the equity method 13 268,508 251,317 Property, plant and equipment 14 174,065 187,210 Deferred tax assets 15 47,349 55,654 Intangible assets 16 674,625 711,805 Prepayments and other non-current assets 17 5,624 5,056

Total non-current assets 1,170,648 1,212,598

Total assets 1,850,675 1,927,507

Current liabilities Trade and other payables 18 507,702 499,772 Loans and borrowings 19 27,129 27,389 Current tax liabilities 25,852 218 Provision for employee benefits 20 70,700 72,562 Deferred purchase consideration 21 625 3,662 Derivatives 22 826 3,073 Other provisions 23 3,006 3,372

Total current liabilities 635,840 610,048

Non-current liabilities Loans and borrowings 19 360,333 460,240 Deferred tax liabilities 24 19,553 54,125 Provision for employee benefits 20 26,830 21,987 Derivatives 22 - 29 Other provisions 23 4,077 3,782

Total non-current liabilities 410,793 540,163

Total liabilities 1,046,633 1,150,211

Net assets 804,042 777,296

Equity Contributed equity 25 808,048 802,491 Reserves 26(a) (76,155) (74,442) Retained profits 26(b) 70,891 48,500

Total equity attributable to equity holders of the Company 802,784 776,549 Non-controlling interest 27 1,258 747

Total equity 804,042 777,296

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Transfield Services Annual Report 2010 Consolidated statement of cash flows for the year ended 30 June 2010

Consolidated note 2010 2009 $’000 $’000 Cash flows from operating activities Receipts from customers1 3,324,818 3,578,999 Payments to suppliers, subcontractors and employees1 (3,167,027) (3,396,320)

157,791 182,679 Dividends, distributions and net cash contributions from associates and 74 joint venture entities and partnerships 80,427 67,098 Finance income 1,690 3,218 Finance costs (25,514) (47,429) Income taxes refunded/(paid) 10,641 (31,346)

Net cash inflow from operating activities 34 225,035 174,220

Cash flows from investing activities Payments for property, plant and equipment (36,677) (52,157) Proceeds from sale of property, plant and equipment 5,253 18,174 Acquisition of subsidiary, net of cash acquired (12,879) (928) Price adjustments in relation to prior periods’ business combinations - 849 Acquisition of intangible assets - (806) Payment for deferred consideration on prior period acquisitions (2,798) (2,984) Investment in TSI Fund (43,226) -

Net cash outflow from investing activities (90,327) (37,852)

Cash flows from financing activities Proceeds from borrowings 365,449 945,769 Repayment of borrowings (437,129) (1,249,364) Proceeds from share issue - 255,069 Payment for share acquisition and share issue costs (998) (977) Dividends paid (46,540) (52,702)

Net cash outflow from financing activities (119,218) (102,205)

Net increase in cash held 15,490 34,163 Cash at the beginning of the financial year 97,979 57,826 Net foreign exchange differences in opening cash (753) 5,990

Cash and cash equivalents at the end of the reporting period 8 112,716 97,979

1. Inclusive of goods and services tax.

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Transfield Services Annual Report 2010 Consolidated statement of changes in equity for the year ended 30 June 2010

total Foreign share Attributable currency BAseD to ordinary non- contributed translation hedging PAyments other Retained equity controlling total equity Reserve Reserve Reserve Reserves earnings holders interest equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance at 1 July 2009 802,491 (71,194) (14,332) 10,823 261 48,500 776,549 747 777,296 Profit for the year - - - - - 73,045 73,045 511 73,556 Exchange differences on translation of foreign operations - (2,470) - - - - (2,470) - (2,470) 75 Changes in fair value of cash flow hedge, net of tax - - 748 - - - 748 - 748 Total comprehensive income for the period - (2,470) 748 - - 73,045 71,323 511 71,834 Contributions of equity, net of transaction costs and taxes 4,114 - - - - - 4,114 - 4,114 Dividends paid (Note 28) - - - - - (50,654) (50,654) - (50,654) Employee share schemetransactions 1,443 - - 9 - - 1,452 - 1,452 Total contributions by and distributions to owners 5,557 - - 9 - (50,654) (45,088) - (45,088) Balance at 30 June 2010 808,048 (73,664) (13,584) 10,832 261 70,891 802,784 1,258 804,042 Balance at 1 July 2008 540,338 (49,089) 13,027 9,362 (527) 158,846 671,957 334 672,291 Profit / (loss) for the year - - - - - (55,010) (55,010) 520 (54,490) Exchange differences on translation of foreign operations - (22,105) - - - - (22,105) - (22,105) Changes in fair value of cash flow hedge, net of tax - - (27,359) - - - (27,359) - (27,359) Transfer to Abu Dhabi statutory reserve - - - - 117 (117) - - - Total comprehensive income for the period - (22,105) (27,359) - 117 (55,127) (104,474) 520 (103,954) Contributions of equity, net of transaction costs and taxes 262,757 - - - - - 262,757 - 262,757 Dividends paid (Note 28) - - - - - (55,219) (55,219) - (55,219) Employee share scheme transactions (604) - - 1,461 671 - 1,528 - 1,528 Total contributions by and distributions to owners 262,153 - - 1,461 671 (55,219) 209,066 - 209,066 Non-controlling interest on acquisition of subsidiary ------(107) (107) Balance at 30 June 2009 802,491 (71,194) (14,332) 10,823 261 48,500 776,549 747 777,296

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

NOTES Page number Note 1 Summary of significant accounting policies 77 Note 2 Financial, capital and other risk management 85 Note 3 Critical accounting estimates and judgements 91 Note 4 Revenue 91 Note 5 Other income 92 Note 6 Expenses 92 76 Note 7 Income taxes 93 Note 8 Current assets – Cash and cash equivalents 94 Note 9 Current assets – Trade and other receivables 94 Note 10 Current assets - Inventories 95 Note 11 Current assets – Prepayments and other current assets 96 Note 12 Non-current assets – Trade and other receivables 96 Note 13 Non-current assets – Investments accounted for using the equity method 96 Note 14 Non-current assets – Property, plant and equipment 97 Note 15 Non-current assets – Deferred tax assets 98 Note 16 Non-current assets – Intangible assets 99 Note 17 Non-current assets – Prepayments and other non-current assets 101 Note 18 Current liabilities – Trade and other payables 102 Note 19 Current and non-current liabilities – Loans and borrowings 102 Note 20 Current and non-current liabilities – Provision for employee benefits 104 Note 21 Current and non-current liabilities – Deferred purchase consideration 104 Note 22 Current and non-current liabilities – Derivatives 104 Note 23 Current and non-current liabilities – Other provisions 106 Note 24 Non-current liabilities – Deferred tax liabilities 107 Note 25 Contributed equity 108 Note 26 Reserves and retained profits 110 Note 27 Non-controlling interest 111 Note 28 Dividends 112 Note 29 Related party transactions 112 Note 30 Key management and top five remunerated personnel 116 Note 31 Business combinations 120 Note 32 Investments in associates 121 Note 33 Interests in joint ventures and partnerships 122 Note 34 Reconciliation of operating profit after income tax to net cash inflow from operating activities 124 Note 35 Earnings / (loss) per share 125 Note 36 Remuneration of auditors 126 Note 37 Events occurring after statement of financial position date 127 Note 38 Contingent liabilities 127 Note 39 Commitments for expenditure 128 Note 40 Share-based payments 128 Note 41 Operating segments 131 Note 42 Deed of cross guarantee 134 Note 43 Parent entity financial information 136

Transfield Services Annual Report 2010 Note 1. Summary of significant accounting Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that The principal accounting policies adopted in the preparation of this are currently exercisable or convertible are considered when assessing general purpose financial report are set out below. These policies have whether the Group controls another entity. been consistently applied to all the periods presented, unless otherwise stated. The financial report includes financial statements for the Subsidiaries are fully consolidated from the date on which control is consolidated entity consisting of Transfield Services Limited and its transferred to the Group. They are de-consolidated from the date that controlled entities (Transfield Services or the Group). control ceases. The acquisition method of accounting is used to account for business combinations by the Group (refer Note 1(h)). Presentation of financial statements 77 Intercompany transactions, balances and unrealised gains on The Group has applied revised AASB 101 Presentation of Financial transactions between Group companies are eliminated. Unrealised losses Statements (2007), which became effective for financial periods are also eliminated unless the transaction provides evidence of the commencing on or after 1 January 2009. The Group presents in the impairment of the asset transferred. Accounting policies of subsidiaries consolidated statement of changes in equity all owner related changes in have been changed where necessary to ensure consistency with the equity and all non-owner related changes in equity are presented in the policies adopted by the Group. consolidated statement of comprehensive income. Non-controlling interests in the results and equity of subsidiaries are The Group has also applied the revisions in the Corporations Act 2001 shown separately in the consolidated statement of comprehensive effective for financial years ending on or after 30 June 2010 and has income, statement of changes in equity and the statement of financial removed full parent entity financial statements in respect of Transfield position respectively. The Group applies a policy of treating transactions Services Limited as an individual entity. Additional financial information with non-controlling interests as transactions with parties external to the relating to Transfield Services Limited as an individual entity is set out in Group. Disposals to non-controlling interests result in gains and losses Note 43. for the Group that are recorded in the statement of comprehensive Comparative information in respect of these changes has been income. Purchases from non-controlling interests result in goodwill; being re-presented so as to conform with the revised standard and legislation. the difference between any consideration paid and the relevant share The changes only impact presentation and disclosure in the financial acquired of the carrying value of identifiable net assets of the subsidiary. report and therefore have no impact on earnings per share. Investments in subsidiaries are accounted for at cost in the summarised statement of financial position of Transfield Services Limited.

(a) Basis of preparation of the financial report Associates This general purpose financial report has been prepared in accordance Associates are all entities over which the Group has significant influence with Australian Accounting Standards, other authoritative but not control or joint control, generally accompanying a shareholding of pronouncements of the Australian Accounting Standards Board including between 20 per cent and 50 per cent of the voting rights. Investments in Interpretations and the Corporations Act 2001. associates are accounted for in the Parent entity’s summarised statement of financial position using the cost method and in the consolidated Compliance with International Financial Reporting Standards financial statements using the equity method of accounting, after initially (IFRS) being recognised at cost. The financial report of Transfield Services Limited also complies with IFRS The Group’s share of post-acquisition profits or losses from its associates as issued by the International Accounting Standards Board (IASB). are recognised in the statement of comprehensive income, and its share of post-acquisition movements in reserves is recognised in reserves. The Historical cost convention cumulative post-acquisition movements are adjusted against the carrying These financial statements have been prepared under the historical cost amount of the investment. Dividends and distributions receivable from convention as modified by the revaluation of certain financial assets and associates are recognised in the Parent entity’s statement of liabilities such as derivative instruments and cash settled share based comprehensive income, while in the consolidated financial statements payment arrangements which are recorded at fair value. they reduce the carrying amount of the investment. Critical accounting estimates When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the The preparation of financial statements in conformity with Australian Group does not recognise further losses, unless it has incurred Accounting Standards requires the use of certain critical accounting obligations or made payments on behalf of the associate. estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a Unrealised gains on transactions between the Group and its associates higher degree of judgement or complexity, or areas where assumptions are eliminated to the extent of the Group’s interest in the associates. and estimates are significant to the financial statements, are disclosed in Unrealised losses are also eliminated unless the transaction provides Note 3. evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. (b) Principles of consolidation Joint venture entities and partnerships Subsidiaries The interest in a joint venture entity or partnership is accounted for in the The consolidated financial statements incorporate the assets and consolidated financial statements using the equity method and is carried at liabilities of Transfield Services Limited (‘Company’ or ‘Parent entity’) as cost by the Parent entity. Under the equity method, the share of the profits at 30 June 2010 and the results of all subsidiaries for the year then or losses of the joint venture entity or partnership are recognised in the ended. Transfield Services Limited and its controlled entities together are statement of comprehensive income, and the share of movements in referred to in this financial report as the Group or the consolidated entity. reserves are recognised in reserves in the statement of financial position.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 1. Summary of significant accounting Group companies policies (continued) The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional Profits or losses on transactions establishing the joint venture entity or currency different from the presentation currency are translated into the partnership and transactions with the joint venture entity or partnership presentation currency as follows: are eliminated to the extent of the Group’s ownership interest until such • assets and liabilities for each statement of financial position time as they are realised by the joint venture entity or partnership on presented are translated at the closing rate at the date of that consumption or sale, unless they relate to an unrealised loss that statement of financial position; provides evidence of the impairment of an asset transferred. • income and expenses for each statement of comprehensive income are 78 Joint venture operations translated at average exchange rates (unless this is not a reasonable Where the Group conducts business through alliance contracts with other approximation of the cumulative effect of the rates prevailing on the service providers, the Group’s assets, liabilities, income and expenses transaction dates, in which case income and expenses are translated at relating to the activity are recorded in the records of the trading subsidiary the approximate dates of the transactions); and company and no further consolidation procedures are performed. • all resulting exchange differences are recognised as a separate component of equity. (c) segment reporting On consolidation, exchange differences arising from the translation of As of 1 July 2009 the Group determines and presents operating segments any net investment in foreign entities are taken to shareholder’s equity. based on the information that internally is provided to the Managing When a foreign operation is sold or borrowings repaid, a proportionate Director and Chief Executive Officer Dr Peter Goode, who is the Group’s share of such exchange differences is recognised in the statement of chief operating decision maker. This change in accounting policy is due to comprehensive income as part of the gain or loss on sale or repayment. the adoption of AASB 8 Operating Segments. Previously operating segments were determined and presented in accordance with AASB 114 Goodwill and fair value adjustments arising on the acquisition of a Segment Reporting. Comparative segment information has been foreign entity are treated as assets and liabilities of the foreign entity and re-presented in conformity with the transitional requirements of AASB 8. translated at the closing rate Since the change in accounting policy only impacts presentation and disclosure there is no impact on earnings per share. The new accounting (e) income tax policy in respect of segment operating disclosures is presented below. The income tax expense or benefit for the period is the tax payable or An operating segment is a component of the Group that engages in refundable on the current period’s taxable income based on the business activities from which it may earn revenue and incur expenses, applicable income tax rate for each jurisdiction adjusted by changes in including revenues and expenses that relate to transactions with any of deferred tax assets and liabilities attributable to temporary differences the Group’s other components. All operating segments are regularly and to unused tax losses. reviewed by the Group’s Managing Director and Chief Executive Officer to Deferred income tax is provided in full, using the liability method, on make decisions about resources to be allocated to the segment and temporary differences arising between the tax bases of assets and assess its performance and for which discrete financial information is liabilities and their carrying amounts in the consolidated financial available. statements. However, the deferred income tax is not accounted for if it Segment results that are reported to the Managing Director and Chief arises from initial recognition of an asset or liability in a transaction other Executive Officer include items directly attributable to a segment as well than a business combination that at the time of the transaction affects as those that can be allocated on a reasonable basis. neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or (d) Foreign currency transactions substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred Functional and presentation currency income tax liability is settled. Items included in the financial statements of each of the Group’s entities Deferred tax assets are recognised for deductible temporary differences are measured using the currency of the primary economic environment in and unused tax losses only if it is probable that future taxable amounts which the entity operates (‘the functional currency’). The consolidated will be available to utilise those temporary differences and losses. financial statements are presented in Australian dollars, which is Transfield Services Limited’s functional and presentation currency. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the Transactions and balances deferred tax balances relate to the same taxation authority. Current tax Foreign currency transactions are translated into the functional currency assets and tax liabilities are offset where the entity has a legally using the exchange rates prevailing at the approximate dates of the enforceable right to offset and intends either to settle on a net basis, or transactions. Foreign exchange gains and losses resulting from the to realise the asset and settle the liability simultaneously. settlement of such transactions and from the translation at year-end Deferred tax liabilities and assets are not recognised for temporary exchange rates of monetary assets and liabilities denominated in foreign differences between the carrying amount and tax bases of investments in currencies are recognised in the statement of comprehensive income, controlled entities where the Parent entity is able to control the timing of except when deferred in equity as qualifying cash flow hedges and the reversal of the temporary differences and it is probable that the qualifying net investment hedges. differences will not reverse in the foreseeable future. Translation differences on non-monetary financial assets and liabilities Current and deferred tax balances attributable to amounts recognised are reported as part of the fair value gain or loss. Translation differences directly in equity are also recognised directly in equity. on non-monetary financial assets and liabilities such as equities held at fair value through comprehensive income are recognised in (f) tax consolidation legislation comprehensive income as part of the fair value gain or loss. The head entity, Transfield Services Limited, and the controlled entities in the Australian tax consolidated group continue to account for their own

Transfield Services Annual Report 2010 current and deferred tax amounts. These tax amounts are measured as if Consideration transferred includes the fair values of the assets transferred, each entity in the tax consolidated group continues to be a stand-alone liabilities incurred by the Group to the previous owners of the acquiree, and taxpayer in its own right. equity interests issued by the Group. Consideration transferred also includes the fair value of any contingent consideration and share-based In addition to its own current and deferred tax amounts, Transfield payment awards of the acquiree that are replaced mandatorily in the Services Limited also recognises the current tax liabilities (or assets) and business combination. If a business combination results in the termination the deferred tax assets arising from unused tax losses and unused tax of previously existing relationships between the Group and the acquiree, credits assumed from controlled entities in the tax consolidated group. then the lower of the termination amount as contained in the agreement, Assets or liabilities arising under tax funding agreements with the and the value of the off-market element is deducted from the consideration tax-consolidated entities are recognised as amounts receivable from or transferred and recognised in other expenses. payable to other entities in the Group. Details about the tax funding 79 When share based payment awards exchanged (replacement awards) for agreement are disclosed in Note 7(e). awards held by the acquiree’s employees (acquiree’s awards) relate to A similar regime operates in the United States. The Group’s wholly- past services, then a part of the market-based measure of the awards owned subsidiaries have adopted the equivalent arrangement in that replaced is included in the consideration transferred. If they require future jurisdiction. services, then the difference between the amount included in consideration transferred and the market-based measure of the (g) leases replacement awards is treated as a post-combination compensation cost. Leases of property, plant and equipment, where the Group has A contingent liability of the acquiree is only assumed in a business substantially all the risks and rewards of ownership are classified as combination if such a liability represents a present obligation and arises finance leases. Finance leases are capitalised at the lease’s inception at from a past event and its fair value can be measured reliably. the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net The Group measures any non-monetary interest at its proportionate of finance charges, are included in loans and borrowings. interest in the identifiable net assets of the acquiree. Each lease payment is allocated between the liability and finance Transaction costs that the Group incurs in connection with the business charges so as to achieve a constant rate on the finance balance combination are expensed as incurred. outstanding. The interest element of the finance cost is charged to the The above accounting policy is applied prospectively and had no material statement of comprehensive income over the lease period so as to impact on earnings per share. Previously, business combinations were produce a constant periodic rate of interest on the remaining balance of accounted for using the purchase method. Transaction costs directly the liability for each period. The property, plant and equipment acquired attributable to the acquisition formed part of the acquisition costs. under finance lease are depreciated over the shorter of the asset’s useful life or the lease term where there is no certainty that ownership of the (i) impairment of assets asset will transfer. Lease assets held at reporting date are being Goodwill and intangible assets that have an indefinite useful life are not depreciated over periods ranging from three to eight years. subject to amortisation and are tested annually for impairment, or more Leases in which a significant portion of the risks and rewards of frequently if events or changes in circumstances indicate that they might be ownership are retained by the lessor are classified as operating leases. impaired. Assets that are subject to amortisation are reviewed for Payments made under operating leases (net of any incentives received impairment whenever events or changes in circumstances indicate that the from the lessor) are charged to the statement of comprehensive income carrying amount may not be recoverable. An impairment loss is recognised on a straight-line basis over the period of the lease. Lease income from for the amount by which the asset’s carrying amount exceeds its operating leases is recognised in income on a straight-line basis over the recoverable amount. The recoverable amount is the higher of an asset’s fair lease term. value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a (h) Business combinations pre-tax discount rate that reflects current market assessments of the time The Group has adopted revised AASB 3 Business Combinations (2008) value of money and the risks specific to the asset. For the purpose of and amended AASB 127 Consolidated and Separate Financial Statements assessing impairment, assets are grouped at the lowest levels for which (2008) for business combinations occurring in the financial year there are separately identifiable cash flows (cash generating units). commencing 1 July 2009. For the purposes of goodwill impairment testing, cash generating units to Business combinations are accounted for using the acquisition method. which goodwill has been allocated are aggregated so that the level at For every business combination the Group identifies the acquirer, which is which impairment is tested reflects the lowest level at which goodwill is the combining entity that obtains control of the combining entities or monitored for internal reporting purposes. businesses. Control is the power to govern the financial and operating Non-financial assets other than goodwill that have previously suffered policies of an entity so as to obtain benefit from its activities. In impairment are reviewed for possible reversal of the impairment at each assessing control, the Group takes into consideration potential voting reporting date. rights that currently are exerciseable. The acquisition date is the date on which control is transferred to the acquirer. Judgement is applied in Impairment policies in respect of financial assets are set out in Note 1(k) determining the acquisition date and determining whether control is and Note 1(o). transferred from one party to another. (j) Revenue recognition Goodwill arising in a business combination is measured at the fair value The Group recognises revenue when the amount of revenue can be of the consideration transferred including the recognised amount of any reliably measured, it is probable that future economic benefits will flow non-controlling interest in the acquiree, less the net recognised amount to the entity and specific criteria have been met for each of the Group’s (generally fair value) of the identifiable assets acquired and liabilities activities as described below. The amount of revenue is not considered to assumed, all measured as at acquisition date. be reliably measurable until all material contingencies relating to the sale or service have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 1. Summary of significant accounting Cash flows relating to short term receivables are not discounted if the policies (continued) effect of discounting is immaterial. The amount of the impairment loss is recognised in the statement of Amounts disclosed as revenue are net of returns, trade allowances and comprehensive income within other expenses. When a trade receivable for duties and taxes paid. Revenue is recognised for the major business which an impairment allowance had been recognised becomes activities as follows: uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are Operating revenue: credited against other expenses in the statement of comprehensive income. The Group has two categories of operating revenue: (l) inventories 80 • Operations and maintenance outsourcing service revenue comprising: Consumables and stores Maintenance services revenue Consumables and stores are stated at the lower of cost (assigned on the Maintenance service revenue is recognised when the service is first-in-first-out basis) and net realisable value and charged to specific completed in accordance with the terms of the maintenance contract, contracts when used. Net realisable value is the estimated selling price unless the contract is long-term or where service activity within a contract in the ordinary course of business less estimated costs of completion and period is expected to vary significantly year on year in which case revenue the estimated costs necessary to make the sale. is recognised in accordance with the percentage of completion method or when a significant act is executed; Work in progress Infrastructure management revenue Work in progress in respect of standard maintenance contracts represents unbilled contract expenditure on maintenance projects at the Infrastructure management revenue is recognised when the services are period end and is stated at the lower of cost and net realisable value. rendered and in accordance with individual contracts as appropriate; Work in progress in respect of long-term maintenance contracts is stated Key performance indicator (KPI) revenue at the aggregate of contract costs incurred to date plus recognised profit KPI revenue is revenue derived when contract performance hurdles are less recognised losses and progress billings. met and typically relate to safety performance on the contract. KPI Where progress billings exceed the aggregate costs incurred plus profits revenue is only recognised when it is probable that the economic benefits less losses, the resulting work in progress is included in liabilities. associated with the transaction will flow to the entity. The Group’s policy is to recognise KPI income on a pro-rata basis to the extent that the Group Contract costs include all costs directly related to specific contracts, costs is capable of achieving the desired outcomes under the terms of the that are specifically chargeable to the client under the terms of the contract and the value of the KPI revenue can be reliably estimated. When contract and an allocation of overhead expenses incurred in connection an uncertainty arises about the collectibility of an amount already with the Group’s maintenance activities in general. recognised as revenue, the uncollectible amount, or the amount in respect (m) cash and cash equivalents of which recovery has ceased to be probable, is recognised as an adjustment to the amount of revenue originally recognised; and Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments • Infrastructure development revenue with original maturities of three months or less that are readily Infrastructure development revenue relates to a range of activities from sale convertible to known amounts of cash and which are subject to an of infrastructure development equity opportunities to sale of completed insignificant risk of changes in value, net of bank overdrafts. Bank infrastructure assets and also includes revenues from the contracted overdrafts are shown within short-term borrowings in current liabilities in development of infrastructure assets on behalf of third parties. the statement of financial position. Infrastructure development revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of (n) Discontinued operations the consideration is probable, there is no continuing equity involvement A discontinued operation is a component of the entity that has been with the assets and the amount of revenue can be measured reliably. disposed of or is classified as held for sale and that represents a separate Other revenue: major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of Management fees operations, or is a subsidiary acquired exclusively with a view to resale. Management fees are recognised as income when the services are The results of discontinued operations are presented separately on the provided or in accordance with individual agreements. face of the statement of comprehensive income.

Dividends and distributions (o) investments and other financial assets Dividends and distributions are recognised as revenue in the Parent entity Classification when the right to receive payment is established. The Group classifies its financial assets as loans and receivables. The (k) Receivables classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at All trade debtors are recognised initially at fair value and subsequently initial recognition. measured at amortised cost, using the effective interest rate method, less provision for impairment. Loans and receivables: Collectibility of trade debtors is reviewed on an ongoing basis. Debts, Loans and receivables are non-derivative financial assets with fixed or which are known to be uncollectible, are written off. A provision for determinable payments that are not quoted in an active market. They impairment is raised when there is objective evidence that the Group will arise when the Group provides money, goods or services directly to a not be able to collect all amounts due according to the original terms of debtor with no intention of selling the receivable. They are included in the receivables. The amount of the provision is recognised in the current assets, except for those with maturities greater than 12 months statement of comprehensive income. after the statement of financial position date, which are classified as

Transfield Services Annual Report 2010 non-current assets. Loans and receivables are included in receivables in transactions is recognised in the statement of comprehensive income the statement of financial position. within ‘revenue’. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) Recognition and derecognition or a non-financial liability, the gains and losses previously deferred in Regular purchases and sales of financial assets are recognised on equity are transferred from equity and included in the measurement in trade‑date being the date on which the Group commits to purchase or sell the initial cost or carrying amount of the asset or liability. the asset. Investments are initially recognised at fair value plus When a hedging instrument expires or is sold or terminated, or when a hedge transaction costs for all financial assets not carried at fair value through no longer meets the criteria for hedge accounting, any cumulative gain or loss profit or loss. Financial assets carried at fair value through profit or loss existing in equity at that time remains in equity and is recognised when the are initially recognised at fair value and transaction costs are expensed in forecast transaction is ultimately recognised in the statement of 81 the statement of comprehensive income. Financial assets are comprehensive income. When a forecast transaction is no longer expected to derecognised when the rights to receive cash flows from the financial occur, the cumulative gain or loss that was reported in equity is immediately assets have expired or have been transferred and the Group has transferred to the statement of comprehensive income. transferred substantially all the risks and rewards of ownership. (q) Fair value estimation Subsequent measurement Loans and receivables are carried at amortised cost using the effective The fair value of financial assets and financial liabilities must be interest rate method. estimated for recognition and measurement and for disclosure purposes. The fair value of financial instruments that are not traded in an active Impairment market (for example, over-the-counter derivatives) is determined using The Group assesses at each statement of financial position date, whether valuation techniques. The fair value of interest rate swaps is calculated there is objective evidence that a financial asset or group of financial as the present value of the estimated future cash flows. The fair value of assets is impaired and if evidence of impairment exists recognises an forward exchange contracts is determined using forward exchange impairment loss in the statement of comprehensive income. market rates at the statement of financial position date. (p) Derivatives The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their Derivatives are initially recognised at fair value on the date a derivative short-term nature. The fair value of financial liabilities for disclosure contract is entered into and are subsequently remeasured to their fair purposes is estimated by discounting the future contractual cash flows at value. The method of recognising the resulting gain or loss depends on the current market interest rate that is available to the Group for similar whether the derivative is designated as a hedging instrument, and if so, financial instruments. the nature of the item being hedged. Fair values of financial assets and liabilities carried at fair value are The Group designates certain derivatives as either: analysed by valuation, defined as follows: • hedges of the fair value of recognised assets or liabilities or a firm Level 1: quoted prices (unadjusted) in active markets for identical assets commitment (fair value hedges), or or liabilities • hedges of highly probable forecast transactions (cash flow hedges), Level 2: inputs other than quoted process included within Level 1 that are other derivatives are not designated as hedges. observable for the asset or liability either directly (as prices) or indirectly The Group documents at the inception of the transaction, the relationship (derived from prices) between hedging instruments and hedged items, as well as its risk Level 3: inputs for the asset or liability that are not based on observable management objective and strategy for undertaking various hedge market data (unobservable inputs) transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used (r) Property, plant and equipment in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. Land and buildings are shown at cost, less depreciation for buildings. The full fair value of a hedging derivative is classified as a current asset All other property, plant and equipment are stated at cost less or liability when the remaining maturity of the hedged item is less than accumulated depreciation. Cost includes expenditure that is directly 12 months. attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges Gains and losses arising on derivative financial instruments that are not of foreign currency purchases of property, plant and equipment as well as designated as hedges are recognised in the statement of comprehensive finance costs capitalised on qualifying assets. income. Subsequent costs are included in the asset’s carrying amount or Cash flow hedge recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the The effective portion of changes in the fair value of derivatives that are Group and the cost of the item can be measured reliably. All repair and designated and qualify as cash flow hedges is recognised in equity in the maintenance expenses are charged to the statement of comprehensive hedging reserve. The gain or loss relating to the ineffective portion is income during the financial period in which they are incurred. recognised immediately in the statement of comprehensive income within other income or other expense. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost, net of their residual values, Amounts accumulated in equity are recycled in the statement of over their estimated useful lives, as follows: comprehensive income in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes - buildings 25 - 40 years place). The gain or loss relating to the effective portion of interest rate - leasehold improvements remaining lease term swaps hedging variable rate borrowings is recognised in the statement of comprehensive income within ‘finance costs’. The gain or loss relating to - plant and equipment 3 - 20 years the effective portion of forward foreign exchange contracts hedging

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 1. Summary of significant accounting Brand names, trademarks and licences policies (continued) Brand names, trademarks and licences acquired as part of business combinations have a finite useful life and are carried at cost less accumulated The asset’s residual values and useful lives are reviewed, and adjusted if amortisation and impairment losses. Amortisation is calculated using the appropriate, at each statement of financial position date. straight-line method to allocate the cost of brand names, trademarks and licences over their estimated useful lives of 15-22 years. An assets’ carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its Contract intangibles estimated recoverable amount – (refer Note 1(i)). Contract intangibles acquired as part of business combinations have a 82 Gains and losses on disposals are determined by comparing proceeds finite useful life and are carried at cost less accumulated amortisation with carrying amount. These are included in the statement of and impairment losses. Amortisation is calculated using the straight-line comprehensive income. method to allocate the cost of contract intangibles over their estimated useful lives of two-12 years. Capital work in progress Expenditure on development activities or other knowledge to a plan or Customer relationships design of the production of new or substantially improved products or Customer relationships acquired as part of business combinations have a services before the start of commercial production or use, is capitalised if finite useful life and are carried at cost less accumulated amortisation the product or service is technically and commercially feasible and and impairment losses. Amortisation is calculated using the straight-line adequate resources are available to complete development. The method to allocate the cost of customer relationships over their expenditure capitalised comprises all directly attributable costs, including estimated useful lives of six -22 years. costs of materials, services, direct labour, finance costs incurred and an appropriate proportion of overheads. Such assets are included in capital Supplier/contractor databases work in progress until completed at which time they are transferred into Supplier/contractor databases acquired as part of business combinations plant and equipment and depreciated in accordance with the policies set have a finite useful life and are carried at cost less accumulated out above. amortisation and impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of supplier/contractor databases Capital work in progress includes only those costs directly attributable to over their estimated useful lives of 15-22 years. the development phase and are only recognised following completion of technical feasibility and where the Group has an intention and ability to Vendor network use the asset. Other development expenditure is recognised in the Vendor networks acquired as part of business combinations have a finite statement of comprehensive income as an expense as incurred. useful life and are carried at cost less accumulated amortisation and Computer software impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of vendor networks over their estimated Costs incurred in developing products or systems and costs incurred in useful lives of 15-22 years. acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are Acquired technology and software capitalised to software and systems. Costs capitalised include external Technology and developed software acquired in business combinations direct costs of materials and service, direct payroll and payroll related have a finite useful life and are carried at cost less accumulated costs of employees’ time spent on the project. Amortisation is calculated amortisation and impairment losses. Amortisation is calculated using the on a straight line basis over periods generally ranging from three years straight-line method to allocate the cost of developed software and for application software to 10 years for licences and other items. technology over their estimated useful lives of three-five years. (s) leasehold improvements (u) Formation expenses and bid costs The cost of improvements to or on leasehold properties is amortised over Formation costs are capitalised when a new contract is won and are the unexpired period of the lease, or the estimated useful life of the amortised over the life of the contract. Bid costs are capitalised when the improvements to the consolidated entity. Group has reached preferred bidder status and there is a reasonable (t) intangible assets expectation that the cost will be recovered. Bid costs are recognised over the shorter of three years and the life of the contract. Where a bid is Goodwill subsequently unsuccessful the previously capitalised costs are Goodwill represents the excess of the cost of an acquisition over the fair immediately expensed. value of the Group’s share of the net identifiable assets of the acquired (v) trade and other payables subsidiary/associate at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of These amounts represent liabilities for goods and services provided to associates is included in investments in associates. Goodwill acquired in the Group prior to the end of the financial period, which are unpaid. The business combinations is not amortised. Instead, goodwill is tested for amounts are unsecured and are usually paid within 30-60 days of impairment annually or more frequently if events or changes in recognition. circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. An impairment loss is recognised for the (w) short-term and long-term loans and borrowings amount by which the asset’s carrying value exceeds its recoverable amount. Loans and borrowings are initially recognised at fair value, net of The recoverable amount is the higher of an asset’s fair value less costs to transaction costs incurred. Loans and borrowings are subsequently sell and value in use. Gains and losses on the disposal of an entity include measured at amortised cost. Any difference between the proceeds (net of the carrying amount of goodwill relating to the entity sold. transaction costs) and the redemption amount is recognised in the Goodwill is allocated to cash-generating units (CGU’s) for the purpose of statement of comprehensive income over the period of the borrowings impairment testing. Each of those CGU’s represents the lowest level using the effective interest rate method. Fees paid on the establishment within the Group at which goodwill is monitored for internal management of loan facilities, which are not an incremental cost relating to the actual purposes.

Transfield Services Annual Report 2010 draw-down of the facility, are recognised as capitalised costs and the amount or timing of the payments is uncertain, in which case they are amortised on a straight line basis over the term of the facility. recognised as provisions.

Loans and borrowings are removed from the statement of financial Equity-based compensation benefits position when the obligation specified in the contract is discharged, Equity-based compensation benefits are provided to employees through the cancelled or expired. The difference between the carrying amount of a TranShare Executive Performance Awards Plan, the Transfield Services financial liability that has been extinguished or transferred to another Executive Options Scheme and the Deferred Retention Incentive Scheme. party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or other (i) Share Options and Performance Awards granted before expenses. 7 November 2002 and/or vested before 1 January 2005. Loans and borrowings are classified as current liabilities unless the Group No expense is recognised in respect of these Options or 83 has an unconditional right to defer settlement of the liability for at least Performance Awards. The shares are recognised when the 12 months after the statement of financial position date. Options or Performance Awards are exercised and the proceeds received are allocated to share capital. (x) employee benefits (ii) Share Options and Performance Awards granted after Annual leave, sick leave and Directors’ retirement benefits 7 November 2002 and vested after 1 January 2005. Liabilities for annual leave, accumulating sick leave expected to be The fair value of Options and Performance Awards granted settled within 12 months and Directors’ retirement benefits (including under the Transfield Services Executive Options Scheme or the non-monetary benefits) are recognised in provision for employee benefits TranShare Executive Performance Awards Plan are recognised in respect of employees’ or Directors’ services up to the reporting date as an employee benefit expense with a corresponding increase and are measured at the amounts expected to be paid when the liabilities in equity. The fair value is measured at grant date and are settled. Liabilities for non-accumulating sick leave are recognised recognised over the period during which the employees become when the leave is taken and measured at the rates paid or payable. unconditionally entitled to the Options or Performance Awards. Long service leave (iii) Shares under the Deferred Retention Incentive Scheme The liability for long service leave is recognised in the provision for Shares acquired under the Deferred Retention Incentive Scheme employee benefits and measured at the present value of the expected are held by the TranShare PlanTrust and included in treasury future payments to be made in respect of services provided by employees shares as a reduction in equity until they are allocated to up to the reporting date. Consideration is given to expected future wage individual employees. The expense is recognised and liability and salary levels, experience of employee departures and periods of accrued over the vesting period. service. Expected future payments are discounted using market yields at the reporting date of national government bonds with terms to maturity The fair value at grant date of Options and Performance Awards is and currency that match, as closely as possible, the estimated future independently determined using a binomial and Monte Carlo model that cash outflows. takes into account the exercise price, the term of the Option or Performance Award, the vesting and performance criteria, the impact of Short-term incentive plans dilution, the non-tradable nature of the Option or Performance Award, the A liability for employee benefits in the form of short-term incentives is share price at grant date and expected price volatility of the underlying recognised in other payables when there is no realistic alternative but to share, the expected dividend yield and the risk-free interest rate for the settle the liability and at least one of the following conditions is met: term of the Option or Performance Award. • there are formal terms in the plan for determining the amount of the The fair value of the Options or Performance Awards granted excludes benefit, the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in • the amounts to be paid are determined before the time of completion assumptions about the number of Options or Performance Awards that of the financial report, or are expected to become exercisable. At each statement of financial • past practice gives clear evidence of the amount of the obligation. position date, the entity revises its estimate of the number of Options or Performance Awards that are expected to become exercisable. The Liabilities for short-term incentives are expected to be settled within 12 employee benefit expense recognised each period takes into account the months and are measured at the amounts expected to be paid when they most recent estimate. are settled. Upon the exercise of Options or Performance Awards, the balance of the Superannuation share-based payments reserve relating to those Options or Performance Awards is transferred to share capital. Contributions to defined contribution superannuation funds are charged as an expense as the contributions are paid or become payable. The difference between the market value of shares issued to employees and the employee’s consideration under the employee share scheme is Employee benefit on-costs recognised as an employee benefit expense with a corresponding Employee benefit on-costs, including payroll tax are recognised and increase in equity when the employee becomes entitled to the shares. included in provision for employee benefits and are measured at amounts expected to be paid when the liabilities are settled, discounted to net (y) Provisions present value. Provisions for legal claims, lease ‘make good’ and service warranties are recognised when: the Group has a present legal or constructive obligation Termination benefits as a result of past events; it is probable that an outflow of resources will Liabilities for termination benefits, not in connection with the acquisition be required to settle the obligation; and the amount has been reliably of any entity or operation, are recognised when a detailed plan for the estimated. Provisions are not recognised for future operating losses. termination has been developed and a valid expectation has been raised in those employees affected that terminations will be carried out. The liabilities for termination benefits are recognised in other payables unless

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 1. Summary of significant accounting Treasury shares policies (continued) Any amounts of unvested shares held by the TranShare Plan Trust are controlled by the Group until they vest and are recorded as a reduction Where there are a number of similar obligations, the likelihood that an in equity. outflow will be required on settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the (ad) Dividends likelihood of an outflow with respect to any one item included in the Provision is made for the amount of any dividend declared, being same class of obligations may be small. appropriately authorised and no longer at the discretion of the entity, on Provisions are measured at the present value of management’s best or before the end of the year but not distributed at statement of financial 84 estimate of the expenditure required to settle the present obligation at position date. the statement of financial position date. The discount rate used to (ae) Earnings / (loss) per share determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in Basic earnings / (loss) per share the provision due to the passage of time is recognised as interest Basic earnings / (loss) per share is calculated by dividing the profit or loss expense. attributable to equity holders of the Company, excluding any costs of (z) onerous contracts servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for A provision for onerous contracts is recognised when the expected benefits bonus elements in ordinary shares issued during the year. to be derived from a contract are less than the unavoidable costs of meeting the obligations under that contract, and only after any impairment Diluted earnings / (loss) per share losses to assets dedicated to that contract have been recognised. Diluted earnings / (loss) per share adjusts the figures used in the The provision recognised is based on the excess of the estimated cash determination of basic earnings / (loss) per share to take into account the flows to meet the unavoidable costs under the contract over the after income tax effect of interest and financing costs associated with estimated cash flows to be received in relation to the contract, having dilutive potential ordinary shares and the weighted average number of regard to the risks of the activities relating to the contract. The net shares assumed to have been issued for no consideration in relation to estimated cash flows are discounted using market yields at statement of dilutive potential ordinary shares. financial position date of national government guaranteed bonds with (af) Financial instrument transaction costs terms to maturity and currency that match, as closely as possible, the expected future payment, where the effect of discounting is material. Transaction costs that are directly attributable to the acquisition or issue of a financial asset or liability are included in the value of the financial (aa) Finance costs asset or liability on initial recognition. Finance costs are recognised as an expense in the period in which they (ag) Goods and Services Tax (GST) are incurred (except where they are incurred in the cost of qualifying assets – refer Note 1(r)) and include: Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the • interest on bank overdraft and short-term and long-term borrowings taxation authority. In this case it is recognised as part of the cost of • amortisation of discounts or premium relating to borrowings acquisition of the asset or as part of the expense. • amortisation of ancillary costs incurred in connection with the Receivables and payables are stated inclusive of the amount of GST arrangement of borrowings and receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority on the date of the statement of • finance lease charges. financial position is included with other receivables or payables in the Finance costs incurred for the construction of any qualifying asset are statement of financial position. capitalised during the period of time that is required to complete and Cash flows are presented on a gross basis. The GST components of cash prepare the asset for its intended use. The capitalisation rate used to flows arising from investing or financing activities, which are recoverable determine the amount of finance costs to be capitalised is the weighted from, or payable to the taxation authority, are presented as operating average interest rate applicable to the Group’s outstanding borrowings cash flow. during the year. (ah) Rounding of amounts (ab) Government Grants The Company is of a kind referred to in Class order 98/0100 issued by the Government grants are recognised initially as deferred income when there Australian Securities and Investments Commission, relating to the is reasonable assurance that they will be received and that the Group will ‘rounding off’ of amounts in the financial report. Amounts in the financial comply with the conditions attached. Grants that compensate the Group for report have been rounded in accordance with that Class Order to the expenses are recognised in the statement of comprehensive income as nearest thousand dollars or, in certain cases, the nearest dollar. other income in the same period as the expense that they compensate is recognised. Grants that compensate the Group for the cost of an asset are (ai) new accounting standards and interpretations recognised in the statement of comprehensive income on a systematic basis over the useful life of the asset. Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2010 reporting period. (ac) Contributed equity The Group’s assessment of the impact of these new standards and interpretations is set out below. Ordinary shares AASB 2009-8 Amendments to Australian Accounting Standards – Group Ordinary shares are classified as equity. Cash-Settled Share based Payment Transactions [AASB 2] (effective from Incremental costs directly attributable to the issue of new shares, 1 January 2010) Options or Performance Awards are shown in equity as a deduction, net of tax, from the proceeds. Transfield Services Annual Report 2010 The amendments made by the AASB to AASB 2 confirm that an entity (aj) Presentation of comparative information receiving goods or services in a group share-based payment arrangement Where applicable, comparative information has been restated or must recognise an expense for those goods or services regardless of repositioned to align with current year presentation. which entity in the group settles the transaction or whether the transaction is settled in shares or cash. They also clarify how the group share-based payment arrangement should be measured, that is, whether Note 2. Financial, capital and other risk it is measured as an equity or a cash-settled transaction. The Group will management apply these amendments retrospectively for the financial reporting period commencing on 1 July 2010. There will be no impact on the Group’s The ultimate goal of financial and capital risk management in Transfield financial statements. Services is to contribute to the creation of shareholder value. In order to 85 AASB 2009-10 Amendments to Australian Accounting Standards – achieve this goal, the Group applies the following principles in managing Classification of Rights Issues [AASB 132] its capital resources and position as well as in managing its risks. (effective from 1 February 2010) Financial risk management In October 2009 the AASB issued an amendment to AASB 132 Financial The Group’s activities expose it to a variety of financial risks; market risk Instruments: Presentation which addresses the accounting for rights (including currency risk, fair value interest rate risk and price risk), credit issues that are denominated in a currency other than the functional risk, liquidity risk and cash flow interest rate risk. The Group’s overall risk currency of the issuer. Provided certain conditions are met, such rights management program focuses on the unpredictability of financial markets issues are now classified as equity regardless of the currency in which and seeks to minimise potential adverse effects on the financial the exercise price is denominated. Previously, these issues had to be performance of the Group. From time to time the Group uses derivative accounted for as derivative liabilities. The amendment must be applied financial instruments such as foreign exchange contracts and interest retrospectively in accordance with AASB 108 Accounting Policies, rates swaps to hedge certain risk exposures. Changes in Accounting Estimates and Errors. The Group will apply the amended standard from 1 July 2010. As the Group has not made any Financial risk is managed by a central treasury department (Group such rights issues, the amendment will not have any effect on the Group’s Treasury) under policies approved by the Board of Directors. Group financial statements. Treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. Group Treasury provides AASB 9 Financial Instruments and AASB 2009-11 Amendments to written principles for overall risk management, endorsed by the Board, Australian Accounting Standards arising from AASB 9 covering areas such as mitigating foreign exchange, interest rate and (effective from 1 January 2013) credit risks, use of derivative financial instruments and investing excess liquidity. AASB 9 Financial Instruments addresses the classification and measurement of financial assets and is likely to affect the Group’s The Group has chosen not to acquire a credit rating from an accounting for its financial assets. The standard is not applicable until internationally accredited agency there being no immediate benefit from 1January 2013 but is available for early adoption. The Group is yet to doing so. In order to ensure good credit quality the Group monitors and assess its full impact. The Group has not yet decided when to adopt estimates its financial position with measurements such as equity ratio AASB 9. and gearing. Revised AASB 124 Related Party Disclosures and AASB 2009-12 (a) Market risk Amendments to Australian Accounting Standards Foreign exchange risk (effective from 1 January 2011) Foreign exchange risk arises when future commercial transactions and In December 2009 the AASB issued a revised AASB 124 Related Party recognised assets and liabilities are denominated in a currency that is not Disclosures. It is effective for accounting periods beginning on or after 1 the entity’s functional currency. January 2011 and must be applied retrospectively. The amendment Forward exchange contracts, transacted with Group Treasury, are used to removes the requirement for government-related entities to disclose manage foreign exchange risk. Group Treasury is responsible for details of all transactions with the government and other government- managing exposures in each foreign currency by using external forward related entities and clarifies and simplifies the definition of a related exchange contracts where economically viable. party. The Group will apply the amended standard from 1 July 2011. When the amendments are applied, the Group will need to disclose any The Group operates internationally and is exposed to foreign exchange transactions between its subsidiaries and its associates. This will result risk arising from currency exposures to the world currencies, principally in additional disclosure but have no fundamental impact on the Group’s United States dollars. Foreign exchange risk on borrowings not financial report denominated in Australian dollars is principally managed through “natural hedges” as borrowings are drawn in the currency of foreign operating AASB Interpretation 19 Extinguishing financial liabilities with equity subsidiaries. instruments and AASB 2009-13 Amendments to Australian Accounting Standards arising from Interpretation 19 (effective from 1 July 2010) Foreign exchange risk AASB Interpretation 19 clarifies the accounting when an entity Most Group financial assets and financial liabilities are denominated in renegotiates the terms of its debt with the result that the liability is the same currency as the functional currency of the particular country extinguished by the debtor issuing its own equity instruments to the where they are held. creditor (debt for equity swap). It requires a gain or loss to be recognised in profit or loss which is measured as the difference between the carrying The Group’s exposure to foreign exchange risk in respect of cash at bank amount of the financial liability and the fair value of the equity at 30 June was limited to: instruments issued. The Group will apply the interpretation from 1 July 2010. It is not expected to have any impact on the Group’s financial statements since it is only retrospectively applied from the beginning of the earliest period presented (1 July 2009) and the Group has not entered into any such debt for equity swaps since that date.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 2. Financial, capital and other risk management (continued)

2010 2009 $’000 $’000 United States dollars 6,158 2,814 Singapore dollars - 701 United Arab Emirates dirham - 263 Canadian dollars 34 33 New Zealand dollars - 4 86 6,192 3,815

The Group’s exposure to foreign exchange risk in respective of cash on deposit at 30 June was $Nil (2009: $Nil). The Group’s exposure to foreign exchange risk in respect of trade and other receivables at 30 June was: 2010 2009 $’000 $’000 United States dollars 440 3,084

The Group’s exposure to foreign exchange risk in respective of deferred consideration at 30 June was $Nil (2009: $Nil). The Group’s exposure to foreign exchange risk in respect of loans and borrowings at 30 June was $Nil (2009: $Nil). The Group had no material exposure to foreign exchange risk in respective of trade and other payables at 30 June 2010. (b) credit risk Credit risk arises from cash and cash equivalents, favourable derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. The Group aims to develop long-term relationships with its customers and has no significant concentrations of credit risk within the wholly-owned group. The Group’s customers are generally large companies or government authorities with established credit histories. The Group conducts checks for credit worthiness on new customers using independent agencies and industry references. The Group also operates through a significant number of joint ventures globally most of which have either a single or a dominant customer. The credit management policies of Transfield Services and the respective joint venture partner are applied to those customers. Derivative counterparties are limited to high credit quality financial institutions, predominantly banks with a minimum independent rating of ‘A’. The Group limits the amount of credit exposure to any one financial institution through its use of a consortium of banks. The Group’s maximum exposure to credit risk in respect of financial assets at 30 June was: 2010 2009 $’000 $’000 Cash and cash equivalents 112,716 97,979 Trade and other receivables (current and non-current before provision for impairment of receivables) 491,461 517,252 Income tax receivable 479 18,636

604,656 633,867

Transfield Services Annual Report 2010 The Group’s maximum exposure to credit risk for trade and other receivables by geographic region at 30 June was: 2010 2009 $’000 $’000 Australia and New Zealand 326,124 327,819 Americas 142,964 151,647 Middle East and Asia 22,373 37,786

491,461 517,252 87 The Group’s maximum exposure to credit risk for trade and other receivables by type of counterparty at 30 June was: 2010 2009 $’000 $’000 Trade debtors 465,673 457,155 Other debtors 25,788 60,097

491,461 517,252

The ageing of the Group’s trade and other receivables was: 2010 2009 Past due total (before Past due total (before iMPAired / But not PRovision for iMPAired / But not PRovision for Not due PRovided impaired impairment) not due PRovided impaired impairment) $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Not due 369,756 - - 369,756 315,484 - - 315,484 1-30 days overdue - - 77,998 77,998 - - 141,973 141,973 31-60 days overdue - 615 15,513 16,128 - - 22,720 22,720 61-90 days overdue - 693 4,664 5,357 - 210 9,645 9,855 91-120 days overdue - 397 4,480 4,877 - 1,033 6,726 7,759 > 121 days overdue - 2,722 14,146 16,868 - 3,504 14,401 17,905 Current receivables 369,756 4,427 116,801 490,984 315,484 4,747 195,465 515,696 Non current receivables 477 - - 477 1,556 - - 1,556 Total trade and other receivables 370,233 4,427 116,801 491,461 317,040 4,747 195,465 517,252

Trade receivables have been aged according to their original due date in the above ageing analysis, including where certain long outstanding trade receivables have been renegotiated as a result of the extended nature of some of the Group’s service provision. No collateral has been obtained for any amounts that have been identified as impaired or overdue but not impaired. The majority of the Group’s receivables are in the form of contracted agreements with customers. Most significant customers are government bodies, multinational corporations and large domestic businesses who are perceived as low risk. In general, the terms and conditions of these contracts require settlement of invoices between 14 and 60 days from invoice date. On occasion, the terms and conditions may differ as a result of the varied nature and timing of some of our operations and maintenance services. Impairment losses are mainly attributed to dispute resolutions as opposed to default of payments. (c) liquidity risk Liquidity risk is the risk of not being able to meet current or future financial obligations. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities. Group Treasury aims at maintaining flexibility in funding by keeping committed credit lines available for the business. At statement of financial position date the Group had sufficient headroom from its banking facility to meet its obligations.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 2. Financial, capital and other risk management (continued)

Liquidity risk, maturities, weighted average interest rate, contractual cash flows and fair values

More total Fair Interest 1 year 1 year to than contractual value rate or less 5 years 5 years cash flow* (level 2) % $’000 $’000 $’000 $’000 $’000 88 Consolidated 2010 Trade and other payables - 507,702 - - 507,702 507,702 Current tax liabilities - 25,852 - - 25,852 25,852 Deferred purchase consideration 625 625 625 Derivatives – interest rate swap - 933 - - 933 821 Derivatives - forward exchange contracts - 5 5 5 535,117 - - 535,117 535,005 Loans and borrowings Cash advances** 2.93 15,697 133,802 - 149,499 149,499 Mandatory Convertible Note 8.38 9,112 13,780 - 22,892 21,779 United States Private Placement 5.99 12,015 71,092 215,674 298,781 236,523 Finance lease liabilities 8.13 5,023 14,425 986 20,434 17,156 Total loans and borrowings 41,847 233,099 216,660 491,606 424,957

Total financial liabilities 576,964 233,099 216,660 1,026,723 959,962

Consolidated 2009 Trade and other payables - 499,772 - - 499,772 499,772 Current tax liabilities - 218 - - 218 218 Deferred purchase consideration - 3,662 - - 3,662 3,662 Derivatives - 3,073 246 - 3,319 3,102 506,725 246 - 506,971 506,754 Loans and borrowings Cash advances and bridge facility** 3.22 15,659 427,634 - 443,293 443,293 Mandatory Convertible Note 8.38 8,983 22,569 - 31,552 26,551 Finance lease liabilities 8.11 4,703 13,907 972 19,582 16,826 Other loans - 959 - - 959 959 Total loans and borrowings 30,304 464,110 972 495,386 487,629

Total financial liabilities 537,029 464,356 972 1,002,357 994,388

* Total contractual cash flows are undiscounted and include contractual interest payments. Carrying values exclude interest obligations ** Where interest rates are variable and /or there are no fixed repayments contractual cash flows and fair values are the same as the carrying value.

The impact of derivatives on profits is expected to coincide with the cash flow impact above.

Transfield Services Annual Report 2010 (d) cash flow and fair value interest rate risk The Group’s interest-rate risk arises from floating rate borrowings. Borrowings issued at variable rates expose the Group to cash flow interest-rate risk. The Group manages its long-term cash flow interest-rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. The Group evaluates a variety of factors before entering into interest rate swaps, these include but are not limited to market conditions and forecast borrowing requirements. Under the interest-rate swaps, the Group agrees with other parties to exchange, at specified intervals (quarterly or semi-annually), the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional principal amounts. As at 30 June 2010 the Group had one interest rate swap in place (refer Note 22). Capital risk management 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 89 shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt. Capital is managed in order to maintain a strong financial position and ensure that the Group’s funding needs can be optimised at all times in a cost-efficient means to support the goal of maximising shareholder wealth. Consolidated note 2010 2009 $’000 $’000 Cash advances and bridge facility 19 149,499 443,293 United States Private Placement 19 200,755 - Mandatory Convertible Note 19 20,052 26,551 Finance leases 19 17,156 16,826

Total financial institution borrowings 387,462 486,670 Less: cash and cash equivalents 8 (112,716) (97,979)

Net debt 274,746 388,691 Total equity 804,042 777,296

Total capital 1,078,788 1,165,987

Gearing ratio – net debt to total capital 25% 33% Gearing ratio – net debt to equity 34% 50% Gearing ratio – net debt to EBITDA 1.52x 1.73x (Earnings before interest (net finance cost), taxation, depreciation and amortisation/impairment)

Other risks

Translation risk The financial statements of each of the Group’s foreign subsidiaries are prepared in local currency. For the purposes of preparing the Group’s consolidated financial information, each foreign subsidiary’s financial statements are translated into Australian dollars using the applicable foreign exchange rates as at and for the period ended on the statement of financial position date. A translation risk therefore exists on translating the financial results and position of the foreign subsidiaries into Australian dollars for the purposes of presenting consolidated Group financial information. Volatility in foreign exchange rates can therefore impact the Group’s net profit, net assets and the foreign currency translation reserve.

Country risk The Group is exposed to country risk by the very nature of running a global business. Country risk is the risk that political, legal, security or economic developments in a single country could adversely impact performance. The country risk exposure is defined as the sum of the equity of all subsidiaries and associates and joint ventures in cross-jurisdictional transactions such as loans, guarantees and trading accounts. Country risk is continually monitored by the ‘Risk Group’ under the Chief Risk and Legal Officer / Company Secretary.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 2. Financial, capital and other risk management (continued)

Sensitivity analysis The sensitivity analysis has been prepared on the assumption that the Group’s significant risk exposures are limited to foreign exchange risk on the external debt arrangements attached to overseas acquisitions as well as the impact of interest rate movements.

Foreign exchange sensitivity At 30 June 2010 the Group had no borrowings drawn in a currency that is not the functional currency of the borrower.

90 Interest rate sensitivity The table below shows the Group’s sensitivity to interest rates on its floating rate Australian dollar, United States dollar and New Zealand dollar borrowings, being the currencies that the Group has historically issued debt and held investments. The Group has considered volatility in interest rates during the 2010 financial year and the historic low interest rates prevailing in the United States at 30 June 2010 and consider a one per cent upward and downward movement is a reasonable benchmark for interest rate sensitivity over the next 12 months given the portion of Group debt that is drawn in the United States. 2010 consolidated net profit Basis (after tax) equity points $’000 $’000 Bank borrowings +100 (1,058) (1,058) Bank borrowings -100 1,058 1,058

2009 consolidated net profit Basis (after tax) equity points $’000 $’000 Bank borrowings +100 (4,181) (4,181) Bank borrowings -100 4,181 4,181

An applicable tax rate of 37 per cent has been adopted which approximates the weighted average marginal tax rate across all jurisdictions. The table below shows the Group’s sensitivity to changes in the yield curve used in the valuation of the interest rate swap. 2010 consolidated net profit Basis (after tax) equity points $’000 $’000 Interest rate hedge +100 - 179 Interest rate hedge -100 - (179)

2009 consolidated net profit Basis (after tax) equity points $’000 $’000 Interest rate hedge +25 - 276 Interest rate hedge -25 - (276)

An applicable tax rate of 38 per cent (2009: 40 per cent) has been adopted which approximates the weighted average effective tax rate for the United States.

Transfield Services Annual Report 2010 Note 3. 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 consolidated entity and that are believed to be reasonable under the circumstances. (a) critical accounting estimates and assumptions 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 significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Estimated impairment of goodwill, other intangible assets and equity accounted investments 91 The recoverable amounts of cash-generating units and equity accounted investments have been determined based on the higher of fair value and value-in-use. These calculations require the use of assumptions relating to future cashflows, discount rates and growth rates. Refer to Note 16 for details of these assumptions in relation to goodwill and the potential impact of changes to the assumptions.

Income taxes The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required in determining the consolidated entity 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 and on which professional judgement, based on relevant tax law, is exercised. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

Rehabilitation and ‘make-good’ costs The Group recognises provisions for estimated resources required to rehabilitate and ‘make-good’ leasehold properties, in which it operates under contracts with third parties. The timeframe may vary between 2-30 years and the terminal liability requires management estimates of future costs based on current and future considerations, including environmental considerations. The Group records these provisions using discounted cash flows and reassesses them annually. Refer to Note 23 for further details of these provisions.

Workers’ compensation provisions The Group is self-insured for workers’ compensation in certain States in Australia and manages the risks associated with this through the use of actuarial techniques and engaging external experts however these estimates by their nature are complex and are revised annually. (b) critical judgements in applying the entity’s accounting polices

Status of debt refinancing and going concern Tranche B of the Group’s multi-currency corporate debt facility with a facility limit of $60,000,000 matured on 12 July 2010. This facility was undrawn at 30 June 2010. This debt facility was replaced by facilities totalling $65,000,000 with the following banks: Bank of Tokyo-Mitsubishi UFJ, Ltd and JP Morgan Chase Bank, N.A. along with a facility extension with Westpac Banking Corporation.

Revenue recognition The Group engages in performance-related contracts with its customers. Under the terms of these contracts the Group is entitled to receive Key Performance Indicator (KPI) income. The Group’s policy is to recognise KPI income on a pro-rata basis to the extent that the Group is capable of achieving the desired outcomes under the terms of the contract and the value of the KPI revenue can be reliably estimated.

Note 4. Revenue

2010 2009 $’000 $’000 Operating revenue Operations and maintenance outsourcing services 3,135,424 3,376,901 Wind farm infrastructure development revenue - 9,000

3,135,424 3,385,901 Other revenue Management and other fees 1,253 2,080

Total revenue 3,136,677 3,387,981

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 5. Other income

2010 2009 $’000 $’000 Advisory and other fees – TSI Fund capital structure review 4,108 - Profit on sale of equipment and scrap 827 1,216 Commercial settlement and sundry gains 1,361 2,035 Gain on partial disposal of investment in TSI Fund 2,027 408 Insurance claim recovery - 2,485 92 Rental income 378 - Profit on sale of joint venture investment 1,056 - Realised foreign exchange gain 2,418 3,701 Unrealised foreign exchange gain 330 1,160 Supplier rebates 1,773 -

14,278 11,005

Note 6. Expenses

Profit from continuing operations before income tax includes the following specific expenses: Depreciation: Property, plant and equipment 46,056 44,296

Amortisation: Intangible assets 27,694 30,128 Formation costs 71 1,692

27,765 31,820 Impairment of goodwill (Note 16) - 171,692

Total depreciation, amortisation and impairment 73,821 247,808

Finance costs: Interest paid / payable 24,588 42,588 Amortisation of establishment fees 3,235 2,332

27,823 44,920

Other charges against assets Impairment of trade receivables 4,471 4,862 Net loss on disposal of plant and equipment 822 883

Superannuation contributions 51,632 45,738

Foreign exchange losses 3,578 9,800

Rental expense relating to operating leases Minimum lease payments and related costs 70,232 65,991

Transfield Services Annual Report 2010 Note 7. Income taxes

2010 2009 $’000 $’000

(a) income tax expense / (benefit) attributable to continuing operations Current tax 36,158 21,665 Deferred tax (27,697) (27,831) Adjustments for current tax of prior periods (2,762) (3,767) 93 5,699 (9,933)

(b) Movements in deferred tax Deferred income tax expense/(benefit) included in income tax expense comprises: Decrease/(increase) in deferred tax assets (Note 15) (18,770) (7,947) (Decrease)/increase in deferred tax liabilities (Note 24) (8,927) (19,884)

(27,697) (27,831)

(c) numerical reconciliation of income tax expense to prima facie tax Profit /(loss) from continuing operations before income tax expense 79,255 (64,423)

Income tax calculated at 30% (2009: 30%) 23,777 (19,327) Tax effects of amounts which are not taxable /deductible in calculating taxable income Non-taxable income (799) (749) Non-deductible finance costs - 2,700 Non-deductible impairment write-down - 57,409 Share of net profits of associates and joint venture entities and partnerships (10,803) (14,892) Taxable trust distributions net of tax deferrals 2,330 2,351 Share based payments and equity related costs 2,116 (1,085) Research and development expenditure (1,923) - Deferred taxes on investments in joint venture entities and partnerships and associates 668 - Non-deductible expenses 1,132 -

16,498 26,407 Income tax expense adjusted for other non taxable items: Effect of higher tax rate and treatment on overseas income and expenses (7,528) (32,573) Effect of changes in tax rates (509) - Adjustments for current tax of prior periods (2,762) (3,767)

Income tax expense / (benefit) 5,699 (9,933)

(d) unrecognised temporary differences A deferred tax liability has not been recognised in respect of temporary differences arising as a result of the translation of the financial statements of the consolidated entity’s subsidiaries. The deferred tax liability will only arise in the event of disposal of the subsidiary, and no such disposal is expected in the foreseeable future. (e) tax consolidation legislation Transfield Services Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July 2003. The accounting policy in relation to this legislation is set out in Note 1(f). On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement, which, 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, Transfield Services Limited. The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Transfield Services Limited for any current tax payable assumed and are compensated by Transfield Services Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Transfield Services Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial statements. The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of the financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. A similar regime operates in the United States. The Group’s United States domiciled wholly-owned subsidiaries have adopted the equivalent arrangement in that jurisdiction.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 8. Current assets – Cash and cash equivalents

2010 2009 $’000 $’000 Cash at bank and on hand 109,985 95,873 Cash on deposit – at call 2,731 2,106

Balance per statement of cash flows 112,716 97,979 94 Fair value The fair value is considered to be the same as the carrying value. Deposits at call The deposits bear floating interest rates ranging from 0.05 per cent to 4.45 per cent (2009: 0.05 per cent to 8.20 per cent) per annum. Cash at bank Cash at bank bears floating interest rates ranging from 0.0 per cent to 4.15 per cent (2009: 0.00 per cent to 7.75 per cent) per annum.

Note 9. Current assets – Trade and other receivables

2010 2009 $’000 $’000 Trade and other receivables 481,898 503,506 Less: Provision for impairment of receivables (4,427) (4,747)

477,471 498,759 Loans to joint ventures and partnerships 8,900 11,343 Loans to employees 186 847

486,557 510,949

Risk management Information on financial risk management policies is included in Note 2. Fair value Due to the short-term nature of current trade and other receivables, the fair value is considered to be the same as the carrying value.

Transfield Services Annual Report 2010 Impaired trade and other receivables The Group has recognised a loss of $4,471,000 (2009: $4,862,000) in respect of impaired trade receivables during the year ended 30 June 2010. The loss has been included in ‘other expenses’ in the statement of comprehensive income. All credit and recovery risk associated with trade receivables has been provided for in the statement of financial position. Management analyses each debt on a case by case basis in assessing impairment of the receivable. Movements in the provision for impaired receivables are as follows: Other Trade current ` debtors Receivables 95 provision PRovision Total 2010 $’000 $’000 $’000 At 1 July 2009 4,747 - 4,747 Increase in provision* 2,199 - 2,199 Reduction in provision through cash recovery* (226) - (226) Provision utilised to write-off debts (2,527) - (2,527) Provision utilised to write-off debts relating to disposal of joint venture investment (345) - (345) Foreign currency exchange differences 579 - 579 At 30 June 2010 4,427 - 4,427

Other Trade current ` debtors Receivables provision PRovision Total 2009 $’000 $’000 $’000 At 1 July 2008 3,718 - 3,718 Increase in provision* 4,319 - 4,319 Reduction in provision through cash recovery* (112) - (112) Provision utilised to write-off debts (3,902) - (3,902) Foreign currency exchange differences 724 - 724 At 30 June 2009 4,747 - 4,747

* These items are included in “Other expenses” in the statement of comprehensive incomes.

Note 10. Current assets – Inventories

2010 2009 $’000 $’000 Raw materials 4,798 5,295 Work in progress 53,731 65,683

58,529 70,978

Inventories recognised as an expense during the year ended 30 June 2010 amounted to $281,552,000 (2009: $303,032,000).

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 11. Current assets – Prepayments and other current assets

2010 2009 $’000 $’000 Insurance and other prepayments 17,696 12,550 Establishment fees 935 1,734 Tender and security deposits 1,699 2,083 Unamortised formation expenses and bid costs 1,416 - 96 21,746 16,367

Note 12. Non-current assets – Trade and other receivables

Security margins and supplier deposits 477 1,556

Risk management Information on financial risk management policies is included in Note 2. Fair value Due to the nature of the non-current trade and other receivables (primarily refundable deposits), the fair value is considered to be the same as the carrying value.

Note 13. Non-current assets – Investments accounted for using the equity method

Investments in associates 32 179,200 164,819 Equity interest in joint ventures and partnerships 33 89,308 86,498

268,508 251,317

Transfield Services Annual Report 2010 Note 14. Non-current assets – Property, plant and equipment

Land and Plant leaseD cAPital leaseholD AnD Plant & work in improvements equipment equipment PRogress total $’000 $’000 $’000 $’000 $’000 At 1 July 2008 Cost 18,277 264,726 5,305 21,512 309,820 Accumulated depreciation (4,621) (122,386) (2,051) - (129,058) 13,656 142,340 3,254 21,512 180,762 97

Year ended 30 June 2009 At 1 July 2008 13,656 142,340 3,254 21,512 180,762 Exchange differences 308 3,379 297 (1,062) 2,922 Additions 2,333 32,414 14,163 16,665 65,575 Transfers / reclassifications in/(out) 5,708 (488) 4,577 (9,797) - Additions through business combinations - 88 - - 88 Disposals and write-offs (248) (16,206) (12) (1,375) (17,841) Depreciation (2,265) (41,053) (978) - (44,296) At 30 June 2009 19,492 120,474 21,301 25,943 187,210

At 30 June 2009 Cost 26,519 273,178 24,391 25,943 350,031 Accumulated depreciation (7,027) (152,704) (3,090) - (162,821) 19,492 120,474 21,301 25,943 187,210

Year ended 30 June 2010 At 1 July 2009 19,492 120,474 21,301 25,943 187,210 Exchange differences 7 (1,551) 75 (1,747) (3,216) Additions 1,104 17,493 6,023 16,427 41,047 Transfers /reclassifications in/(out) (5,751) 19,906 (368) (13,787) - Additions through business combinations 242 505 - - 747 Disposals and write-offs (417) (3,945) - (1,305) (5,667) Depreciation (2,195) (39,808) (4,053) - (46,056) At 30 June 2010 12,482 113,074 22,978 25,531 174,065

At 30 June 2010 Cost 21,075 296,472 30,537 25,531 373,615 Accumulated depreciation (8,593) (183,398) (7,559) - (199,550) 12,482 113,074 22,978 25,531 174,065

At 30 June 2010, there are no secured items of property, plant and equipment other than items under finance lease and no finance costs had been capitalised (2009: $Nil).

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 15. Non-current assets – Deferred tax assets

2010 2009 $’000 $’000 Gross deferred tax assets 101,469 84,302 Set off deferred tax liabilities within common jurisdictions (54,120) (28,648)

Net deferred tax assets 47,349 55,654

98 Gross deferred tax assets comprises temporary differences attributable to: Doubtful debts 1,275 1,588 Employee benefits 33,931 31,988 Rental obligations 1,394 1,288 Creditors and accruals 16,491 13,506 Share-based payments 2,974 5,089 Tax losses* 21,619 17,929 Other 20,848 8,231

98,532 79,619 Amounts recognised directly in equity Capital raising costs Revaluation of cash flow hedges 2,625 3,710 312 973

101,469 84,302

Gross deferred tax assets to be recovered after more than 12 months 34,049 28,633 Gross deferred tax assets to be recovered within 12 months 67,420 55,669

101,469 84,302

* The deferred tax asset attributable to tax losses does not exceed taxable amounts arising from the reversal of existing assessable temporary differences.

cReditors/ cAPital share Movements in Doubtful eMPloyee Rental DeferreD RAising BAseD tAx gross deferred debts Benefits obligations income costs Derivatives PAyments losses otheR total tax assets $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

At 1July 2008 1,327 26,218 1,044 17,262 - - 3,319 16,042 2,752 67,964 (Charged)/credited to the statement of comprehensive income 2 7,189 271 (2,778) - - 1,730 (1,241) 2,774 7,947 Fair value and other opening adjustments - (2,691) - - - 1,092 - - - (1,599) Acquisition of subsidiary - 29 ------29 Capital raising costs - - - - 3,710 - - - - 3,710 Effect of changes in foreign exchange rates 259 1,243 (27) (978) - (119) 40 3,128 2,705 6,251 At 30 June 2009 1,588 31,988 1,288 13,506 3,710 973 5,089 17,929 8,231 84,302 (Charged)/credited to the statement of comprehensive income (276) 2,017 100 3,011 (1,085) (591) (2,041) 4,215 13,420 18,770 Effect of changes in foreign exchange rates (37) (74) 6 (26) - (70) (74) (525) (803) (1,603) At 30 June 2010 1,275 33,931 1,394 16,491 2,625 312 2,974 21,619 20,848 101,469

Transfield Services Annual Report 2010 Note 16. Non-current assets – Intangible assets

Developed technology^ customer/ and contract tRADemarks customer supplieR Development Goodwill intangibles And brands Relationships DAtabases Rights total $’000 $’000 $’000 $’000 $’000 $’000 $’000 2009 Cost 621,009 41,455 37,081 210,510 42,924 4,995 957,974 99 Accumulated amortisation and impairment (171,692) (19,653) (4,932) (37,069) (9,419) (3,404) (246,169)

At 30 June 2009 449,317 21,802 32,149 173,441 33,505 1,591 711,805

Year ended 30 June 2009 At 1 July 2008 557,892 25,320 29,285 159,894 31,272 4,599 808,262 Exchange differences 68,941 1,555 4,872 29,199 6,152 429 111,148 Additions 1,686 - - 813 - - 2,499 Disposals and transfers - - - - - (774) (774) Fair value adjustments and reversal of earn-out amounts on prior period acquisitions (7,510) - - - - - (7,510) Amortisation charge - (5,073) (2,008) (16,465) (3,919) (2,663) (30,128) Impairment loss (171,692) - - - - - (171,692)

At 30 June 2009 449,317 21,802 32,149 173,441 33,505 1,591 711,805

2010 Cost 607,073 44,903 35,588 204,637 40,972 5,424 938,597 Accumulated amortisation and impairment (163,612) (25,242) (6,487) (52,069) (12,328) (4,234) (263,972)

At 30 June 2010 443,461 19,661 29,101 152,568 28,644 1,190 674,625

Year ended 30 June 2010 At 1 July 2009 449,317 21,802 32,149 173,441 33,505 1,591 711,805 Exchange differences (10,659) (136) (1,361) (7,954) (1,652) 1,137 (20,625) Additions 4,803 3,429 - 2,907 - - 11,139 Amortisation charge - (5,434) (1,687) (15,826) (3,209) (1,538) (27,694) At 30 June 2010 443,461 19,661 29,101 152,568 28,644 1,190 674,625

^ Developed technology represents the fair value of acquired technology through business combinations. Amortisation expenses of $27,694,000 (2009: $30,128,000) and an impairment charge of $Nil (2009: $171,692,000 (post-tax $148,443,000)) over intangible assets are included in depreciation, amortisation and impairment expenses in the statement of comprehensive income.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 16. Non-current assets – Intangible assets (continued)

Impairment testing for cash generating units containing goodwill For the purpose of impairment testing, goodwill is allocated to the Group’s operating business units and geographic location which represent the lowest level within the Group at which goodwill is monitored for internal management purposes. The aggregate carrying amounts of goodwill allocated to each unit(s) are as follows: 2010 2009 100 $’000 $’000 Australia1 79,568 74,764

North America United States facilities management 332,656 350,556 United States other2 86,685 88,961

419,341 439,517

New Zealand 102,810 101,374 Middle East and Asia3 5,354 5,354

Gross carrying value 607,073 621,009 Accumulated impairment write-down (163,612)4 (171,692)4

Net carrying value 443,461 449,317

1. Australian CGUs consisting of facilities management (services), resources and energy, infrastructure , project management and consultancy have been aggregated as goodwill is individually insignificant in proportion to the Group’s total goodwill 2. Consists of United States resources and industrial and transportation infrastructure services whose goodwill is individually insignificant in proportion to the Group’s total goodwill 3. Consists of Hofincons Infotech and Industrial Services Pvt Ltd, Transfield Emdad Services LLC and Intergulf Gerneral Contracting LLC whose goodwill is individually insignificant n proportion to the Group’s total goodwill. 4. At 30 June 2009, the carrying amount of the United States facilities management (USM) CGU was determined to be higher than its recoverable amount and an impairment loss of $171,692,000 (post-tax $148,443,000) was recognised. The impairment loss was recorded as a result of the USM business not achieving the growth and cash flow targets anticipated in the acquisition pricing models.

The recoverable amounts of all the cash generating units (CGUs) were based on value in use and were determined with the assistance of independent valuers. No impairment loss was recognised at 30 June 2010.

Transfield Services Annual Report 2010 Key assumptions used for value in use calculations Cash flows were projected based on actual operating results, the Board approved budget and five-year business plan. Cash flows for a further five-year period were extrapolated using a declining growth rate such that the long term average growth rate was determined at three per cent, which does not exceed the long-term average growth rate for the industry and economy. Management believes that this forecast period is justified as the businesses of Transfield Services are still in a growth phase in their life cycle. A 10-year forecast period correctly reflects the growth structure to maturity. The assumptions below have been used for the analysis of each CGU within the business. Management determined budgeted gross margin based on past performance and its expectations for the future. The discount rates used reflect specific risks relating to the relevant CGUs and countries in which they operate these have been evaluated using input from independent experts. Value in use was determined by discounting the future cash flows generated from the continuing use of the units and was based on the following key assumptions: 101

Cash Generating Unit Growth rate1 Discount rate2 Discount rate Pre-tax Post-tax 2010 2009 2010 2009 2010 2009 % % % % % % Australia 2.0-4.2 2.0-4.2 11.4-14.9 13.4-14.6 11.2 10.5 United States facilities management 4.0 4.2 17.5 16.1 11.9 11.6 United States other 3.6-4.0 3.6-4.0 17.0-17.2 18.1-18.8 11.7 12.3 New Zealand 3.6 3.4 14.3 15.5 11.2 11.7 Other 4.0 4.0 14.2-22.9 17.2 14.2 15.3

1 The average growth rate represents the average rate used to extrapolate cash flows beyond the one-year budget period and the five-year business plan period that were approved by the Board and management respectively. 2 In calculating the value in use for each CGU, the Group has applied post- tax discount rates to discount the forecast future attributable post-tax cash flows. The movements in discount rates are in line with the general economic environments in which Transfield Services operates.

Impact of possible changes in key assumptions • If the pre-tax discount rate applied to the cash flow projections of USM is increased to 17.7 per cent, headroom decreases by $4,072,000, resulting in headroom of $6,889,000. If revenue is decreased by 1 per cent (with no other underlying changes), an impairment of $39,255,000 would be recognised. The decrease in revenue results in lower effective margins as direct costs are held constant. Should the pre-tax discount rate increase to 18.1 per cent, the carrying value of the CGU would equal its recoverable amount. Management believes that the budgeted cash flows in USM will be achieved and that no impairment is required to be recognised. Management does not consider a change in any of the other key assumptions to be reasonably possible. • If the pre-tax discount rate applied to the cash flow projections of TIMEC is increased to 17.4 per cent, headroom decreases by $2,018,000 resulting in headroom of $10,975,000. If revenue in TIMEC is decreased by one per cent (with no other underlying changes), an impairment of $12,974,000 would be recognised. The decrease in revenue results in lower effective margins as direct costs are held constant. Should the pre-tax discount rate increase to 18.6 per cent, the carrying value of the CGU would equal its recoverable amount. Management believes that the budgeted cash flows in TIMEC will be achieved and that no impairment is required to be recognised. Management does not consider a change in any of the other key assumptions to be reasonably possible.

Note 17. Non-current assets – Prepayments and other non-current assets

2010 2009 $’000 $’000 Insurance and other prepayments 2,090 2,423 Establishment fees 2,530 2,633 Formation expenses and bid costs 1,004 -

5,624 5,056

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 18. Current liabilities – Trade and other payables

2010 2009 $’000 $’000 Trade payables 272,475 326,235 Other payables 235,227 173,537

507,702 499,772 102 Risk management Information on financial risk management policies is included in Note 2. Fair value Due to the short-term nature of current trade and other payables, the fair value is considered to be the same as the carrying value.

Note 19. Current and non-current liabilities - Loans and borrowings

2010 2009 current non-current current non-current $’000 $’000 $’000 $’000 Unsecured Cash advances and bridge facility 15,697 133,802 15,659 427,634 United States Private Placement - 200,755 - - Mandatory Convertible Note 7,476 12,576 6,782 19,769 Other loans - - 959 - Secured Lease liabilities 3,956 13,200 3,989 12,837 27,129 360,333 27,389 460,240

Risk management and fair values Information on financial risk management policies and fair values is included in Note 2.

Transfield Services Annual Report 2010 Terms of the facilities 2010 2009 $’000 $’000 Unrestricted access was available at statement of financial position date to the following: Bank and loan facilities Used 370,306 469,844 Unused 393,971 247,510 Total facility 764,277 717,354 103

Cash advances

Multi-currency corporate debt facility As at 30 June 2010, the Group has a multi-currency corporate debt facility totalling $239,000,000 with Australia and New Zealand Banking Group Limited, Westpac Banking Corporation, The Hongkong & Shanghai Banking Corporation Limited, New Zealand Branch, Calyon Australia Limited, Mizuho Corporate Bank Limited, WestLB AG, Sydney Branch, Bank of America, National Association, JPMorgan Chase Bank, N.A. and the Bank of Tokyo-Mitsubishi UFJ, Ltd. During the year ended 30 June 2010 the Group negotiated a US$25,000,000 facility with Bank of America, National Association maturing in December 2011, A$25,000,000 facility with the Bank of Tokyo-Mitsubishi UFJ, Ltd. maturing in December 2011 and an A$30,000,000 facility with JPMorgan Chase Bank, N.A maturing in May 2013. The facility with The Hongkong & Shanghai Banking Corporation Limited, New Zealand Branch for NZ$12,000,000 matures in July 2011. Tranche B for A$60,000,000 matured in July 2010 and Tranche C for A$84,800,000 matures in July 2012.

United States dollar corporate debt facility As at 30 June 2010, the Group has a US$215,950,000 corporate debt facility with Australia and New Zealand Banking Group Limited, Westpac Banking Corporation, HSBC Bank Australia Limited, Calyon Australia Limited, Mizuho Corporate Bank Limited and the Royal Bank of Scotland plc, Australian Branch. This facility matures in January 2012. This was reduced from US$367,500,000 following the completion of the Issue of the Loan Notes under the United States Private Placement.

Bank overdraft and money market lines These facilities total $20,000,000 for the Australia and New Zealand and US$12,189,966 for United States are used for the day-to-day working capital requirements of the business.

Chilean Peso revolving facility agreement This facility is for the Chilean peso equivalent of US$12,000,000 with HSBC on a floating rate basis. United States Private Placement (USPP) As at 30 June 2010, the Group had US$170,000,000 of long-term senior unsecured notes (Senior Notes) to institutional investors in the US private placement (USPP) debt market. The Issue was completed on 29 December 2009 (United States time) at a weighted average coupon rate of 5.99 per cent. US$20,000,000 at an all-in rate of 5.00 per cent was issued for 5 years, US$50,000,000 at an all-in rate of 5.77 per cent was issued for 7 years and US$100,000,000 at an all-in interest rate of 6.29 per cent was issued for 10 years. Mandatory Convertible Note (MCN) In September 2005, Transfield Services (New Zealand) Limited (TSNZ) issued a MCN to ANZ National Bank (ANZ) for NZ$160,000,000. The term of the MCN is seven years with fixed-interest coupons of 6.97 per cent payable by TSNZ semi-annually in arrears. The funds raised by TSNZ from the issue of the MCN were applied to repay the short-term bridging facility taken out at the time of the AREVA acquisition. At the same time, Transfield Services (International) Pty Limited (TSIPL) entered into (and paid for) a forward-purchase agreement for NZ$101,800,000 with ANZ under which TSIPL will acquire the MCN from ANZ shortly before the MCN is due to convert to equity. Security Consolidated 2010 2009 $’000 $’000 Total secured liabilities (current and non-current) are: Lease liabilities 17,156 16,826

Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the event of default.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 20. Current and non-current liabilities – Provision for employee benefits

2010 2009 current non-current current non-current $’000 $’000 $’000 $’000 Annual leave 42,596 7,910 44,968 8,610 Long service leave 16,325 16,001 16,469 12,706 Other employee related provisions 11,779 2,919 11,125 671 104 70,700 26,830 72,562 21,987 .

Note 21. Current and non-current liabilities – Deferred purchase consideration

2010 2009 current non-current current non-current $’000 $’000 $’000 $’000 Consideration due to the vendors of: The Planning Group 625 - 564 - USM Inc. - - 2,542 - HRI (High Temperature Repair and Inspection) - - 556 - 625 - 3,662 -

Risk Management Information on financial risk management policies is included in Note 2.

Note 22. Current and non-current liabilities – Derivatives

2010 2009 current non-current current non-current $’000 $’000 $’000 $’000 Interest rate swap contracts 821 - 2,533 29 Forward exchange contracts* 5 - 540 - 826 - 3,073 29

* Hedge accounting is not applied to these derivatives.

Transfield Services Annual Report 2010 Instruments used by the Group and fair values The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to interest rates in accordance with the Group’s financial risk management policies (refer to Note 2). (i) Interest rate swap contracts – cash flow hedges It is policy to protect the Group’s loans from exposure to increasing interest rates. Accordingly, the Group has entered into an interest rate swap contract under which it receives interest at variable rates to pay interest at fixed rates. The contract is settled on a net basis and the net amount receivable or payable at the reporting date is separately disclosed on the face of the statement of financial position. The contract requires settlement of net interest receivable or payable every three months. The settlement dates coincide with the dates on which interest is payable on the underlying debt. 105 As at 30 June 2010, there was one interest rate swap in place over US$100,000,000 (2009: US$200,000,000) at 2.15 per cent maturing in December 2010. The average contracted fixed interest swap rate is 2.15 per cent per annum (2009: 2.15 per cent per annum). The variable rate is US$ LIBOR based on 90 day rollovers. As at statement of financial position date the average variable rate was 0.54 per cent per annum (2009: 0.65 per cent per annum). The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding as at reporting date:

Outstanding floating Average contracteD notional principal for fixed contracts fixed interest rate amount 2010 2009 2010 2009 % % $’000 $’000 Less than 1 year 2.15 2.15 118,091 123,916 1 to 5 years - 2.15 - 123,816

The gain or loss from re-measuring the hedging instruments at fair value is deferred in equity in the hedging reserve, to the extent that the hedge is effective, and re-classified into profit and loss when the hedging interest expense or income is recognised. Any ineffective portion is recognised in the statement of comprehensive income immediately. In the year ended 30 June 2010 there was no impact to comprehensive income (2009: $Nil).

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 23. Current and non-current liabilities – Other provisions

2010 2009 Current non-current current non-current $’000 $’000 $’000 $’000 Lease “make-good” provision 570 4,077 137 3,782 Provision for onerous contracts 1,113 - 1,926 - Warranty provision 1,323 - 1,309 - 106 3,006 4,077 3,372 3,782

Movements in provisions Movements in each class of provision during the financial year, other than employee benefits, are set out below: onerous lease Warranty contracts ‘make-good’ total 2010 $’000 $’000 $’000 $’000 At 1 July 2009 1,309 1,926 3,919 7,154 Effects of changes in exchange rates (993) (490) 312 (1,171) Provision incurred and finance costs 1,007 759 416 2,182 Provision utilised - (1,082) - (1,082) At 30 June 2010 1,323 1,113 4,647 7,083

onerous lease Warranty contracts ‘make-good’ total 2009 $’000 $’000 $’000 $’000 At 1 July 2008 1,148 2,932 3,435 7,515 Effects of changes in exchange rates 225 1,167 - 1,392 Provision incurred and finance costs 980 - 954 1,934 Provision acquired in business combinations - - 138 138 Provision utilised (1,044) (2,173) (608) (3,825) At 30 June 2009 1,309 1,926 3,919 7,154

Make-good Provision is made for estimated ‘make-good’ expenses for the Group’s operating leases, namely lease premises and motor vehicles. Reasonable estimates based on historical data have been used to calculate terminal value, which has been subjected to discounted cash flows. Management reassesses this provision semi-annually. Payments are expected to be made at the end of the remaining lease term typically between one and 10 years.

Warranty Provision is made for estimated warranty claims against the Group for claims incurred but not received principally for insurance and workers’ compensation. Management estimates the provision based on historical claims and recent trends.

Onerous contracts Provision is made for onerous contracts where the expected benefits to be derived from the contract are less than the unavoidable costs of meeting the obligations under that contract. The above provision relates to: • a loss making contract in Waco, Texas that was identified at acquisition of Transfield Services North America Transportation Infrastructure (formerly known as VMS Inc) this provision is released as services continue to be performed under the contract and • two loss making contracts in the resources and energy and infrastructure businesses within the Australian and New Zealand operating segment.

Transfield Services Annual Report 2010 Note 24. Non-current liabilities – Deferred tax liabilities

2010 2009 $’000 $’000 Gross deferred tax liabilities 73,673 82,773 Set off deferred tax assets within common jurisdictions (54,120) (28,648)

Net deferred tax liabilities 19,553 54,125

Gross deferred tax liabilities comprise temporary differences attributable to: 107 Inventories and work in progress 13,862 20,492 Depreciation differences on plant and equipment 5,321 4,771 Receivables 1,155 1,167 Intangible assets 51,123 54,765 Timing difference on partnership taxable income 1,377 - Other 835 1,578

Gross deferred tax liabilities 73,673 82,773

Gross deferred tax liabilities to be settled after more than 12 months 46,752 59,802 Gross deferred tax liabilities to be settled within 12 months 26,921 22,971

73,673 82,773

Inventory Plant Partnership and work and intangible income / Movements in progress equipment Receivables assets other total $’000 $’000 $’000 $’000 $’000 $’000 At 1 July 2008 10,943 1,688 1,123 68,814 5,620 88,188 Charged/(credited) to the statement of comprehensive income 9,044 3,374 (3) (27,785) (4,514) (19,884) Effect of changes in foreign exchange rates 505 (291) 47 13,736 472 14,469

At 30 June 2009 20,492 4,771 1,167 54,765 1,578 82,773 Charged/(credited) to the statement of comprehensive income (6,682) 682 (14) (3,491) 578 (8,927) Increase due to business combination - - - 1,901 - 1,901 Effect of changes in foreign exchange rates 52 (132) 2 (2,052) 56 (2,074) At 30 June 2010 13,862 5,321 1,155 51,123 2,212 73,673

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 25. Contributed equity

2010 2009 $’000 $’000 Ordinary shares – fully paid 808,048 803,095 Shares held by equity compensation plans (Treasury shares) - (604)

808,048 802,491 108 Movements in ordinary share capital: number of number shares exercise of shares AcquireD PRice date details issued on market $ $’000 At 1 July 2008 Balance 198,063,552 1,906,753 - 540,338 8 December 2008 Institutional placement and entitlement offer 163,460,8161 - 1.25 204,326 31 December 2008 Retail entitlement offer 50,425,7211 - 1.25 63,032 December 2008 Transaction costs (net of taxation) - - - (8,717) 8 April 2009 Shares issued on dividend reinvestment plan 1,331,294 - - 2,517 Proceeds from exercise of options (Nov 2002) - 15,000 2.62 39 September and December 2008 and March 2009 Acquisition of shares on market - 33,575 - (190) June 2009 Adjustment for difference between fair value of Awards expensed and exercise price of Awards - - - 1,750 At 30 June 2009 413,281,383 1,955,328 - 803,095 14 October 2009 Shares issued on dividend reinvestment plan 445,848 - 4.23 1,886 14 April 2010 Shares issued on dividend reinvestment plan 551,673 - 4.04 2,228 Various dates Proceeds from exercise of options (Nov 2002) - 67,600 2.62 177 Various dates Adjustment for difference between fair value of Awards expensed and exercise price of Awards - - - 662 At 30 June 2010 414,278,904 2,022,928 - 808,048

1. During November and December 2008 the Group invited institutional investors to participate in a placement, and its existing institutional and private shareholders to participate in a 1:1 rights issue at an issue price of $1.25 per share. The maximum number of shares on offer was 245,200,000.

Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Employee share plans and schemes Information relating to the Company’s employee share plans and schemes are set out in Note 40.

Transfield Services Annual Report 2010 Acquisition of shares on market It is the Company’s intention to settle the vesting of employee Options and Performance Awards by way of on-market acquisition of the requisite number of shares. Consequently, at the date of granting of Performance Awards a corresponding deferred tax asset is recognised which represents the temporary difference, which will crystallise when the underlying shares are acquired on market. Following the introduction of the TranShare Plan Trust, the Company has the ability to purchase shares in advance of vesting. Dividend Reinvestment Plan (DRP) Transfield Services Limited introduced a DRP effective from the interim dividend for the year ending 30 June 2009. The DRP shares are issued at the Average Market Price which is the average of the daily volume weighted average sale price per share of shares sold on the ASX during the 10 day trading period that commences on the second trading day after the record date for the relevant dividend, minus any discount the Board may declare. 109 The DRP has a potential dilutive effect on the weighted average number of shares used for calculating the diluted earnings per share as disclosed in Note 35. No adjustment has been made to the diluted earnings per share for the impact of the DRP as the number of shares resulting from the DRP is dependant on the participation rate which is at the discretion of shareholders and the number of shares resulting from the DRP is also dependant on future market prices of shares. On 19 August 2010 the Board resolved to suspend the DRP for the 2010 final dividend. Shares held by equity compensation plans (Treasury shares) Treasury shares are shares in Transfield Services Limited held by TranShare Plan Trust for the purpose of awarding shares under the TranShare deferred retention incentive scheme, TEPAP and to facilitate the employee share plan (TranShare Plan) (refer Note 40). Movements in Treasury Shares: Number of Date Details shares acquired $’000 16 October 2008 Acquisition of shares on market 52,000 263 15 December 2008 Acquisition of shares on market 19,828 32 22 May 2009 Acquisition of shares from Peter Watson* 117,905 309 At 30 June 2009 189,733 604 18 September 2009 Acquisition of shares on market 50,000 211 5 November 2009 Acquisition of shares on market 150,000 617 9 March 2010 Acquisition of shares on market 40,000 170 21 April 2010 Acquisition of shares on market 50,000 199 20 May 2010 Acquisition of shares on market 15,000 63 Various dates Shares transferred to employees (504,385) (1,864) Various dates Shares recovered from employees on resignation 14,661 - At 30 June 2010 5,009 -

* Peter Watson had been awarded shares under the ST-DRI plan and these shares were held in his name, on termination of his contract with the Company, the Board elected to pay Peter Watson the market value of his ST-DRI shares. The shares were consequently released to Peter Watson , re-acquired by the TranShare Plan Trust and allocated to different participants in the ST-DRI plan.

Share Purchase Plan (SPP) During the year, the Board approved a Share Purchase Plan which was announced to shareholders on 26 August 2010. Under the SPP, eligible shareholders will have an opportunity to purchase shares in Transfield Services to a value of A$1,000, A$5,000, A$10,000 or A$15,000 at a discount and free from brokerage and transaction costs. The new shares issued under the SPP will be offered at a five per cent discount to the average of the daily volume weighed average price of Transfield Services shares over the five trading days immediately preceding the announcement of the SPP, namely 19 August 2010 to 25 August 2010 inclusive. Funds raised through the SPP will be used initially to repay debt which will further strengthen our financial metrics. This provides Transfield Services with greater balance sheet flexibility and facilitates the continued focus on organic and acquisitive growth and other development opportunities. The SPP will assist our strategy of providing consistency of earnings and the generation of solid and reliable returns for all shareholders.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 26. Reserves and retained profits

2010 2009 $’000 $’000

(a) Reserves Share based payments reserve 10,832 10,823 Foreign currency translation reserve (73,664) (71,194) Hedging reserve – cash flow hedges (13,584) (14,332) 110 Share capital contribution reserve 108 108 Statutory reserve 153 153

(76,155) (74,442)

Movements: Share-based payments reserve At 1 July 10,823 9,362 Value of Performance Awards granted 1,845 3,211 Transfer to share capital / Options exercised (1,836) (1,750)

At 30 June 10,832 10,823

Foreign currency translation reserve At 1 July (71,194) (49,089) Net exchange differences on translation of foreign controlled entities (2,470) (22,105)

At 30 June (73,664) (71,194)

Hedging reserve - cash flow hedges At 1 July (14,332) 13,027 Revaluation (gross) 1,046 (39,377) Deferred tax at 30% (298) 12,018

At 30 June (13,584) (14,332)

Share capital contribution reserve At 1 July 108 108 Movement for the year - -

At 30 June 108 108

Statutory Reserve At 1 July 153 36 Transfer from retained income - 117

At 30 June 153 153

Deferred retention incentive reserve At 1 July - (671) Movement for the year1 - 671

At 30 June - -

1. This reserve is no longer required following the introduction of the TranShare Plan Trust

Transfield Services Annual Report 2010 2010 2009 $’000 $’000

(b) Retained profits At 1 July 48,500 158,846 Net (loss) /profit attributable to members of Transfield Services Limited 73,045 (55,010) Less: Dividends paid (50,654) (55,219) Less: Transfer to statutory reserve - (117) At 30 June 70,891 48,500 111

Nature and purpose of reserves

Share-based payments reserve The share-based payments reserve is used to recognise the fair value of Options and Performance Awards granted but not exercised. The share-based payments reserve is tax-effected as a result of the intention to acquire shares to fulfil vested Awards on market (refer to Note 40).

Foreign currency translation reserve Exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency translation reserve, as described in Note 1(d). The reserve is recognised in profit and loss when the net investment is disposed of.

Hedging reserve – cash flow hedges (interest rate swaps) The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised directly in equity, as described in Note 1(p). Amounts are recognised in profit and loss when the associated hedged transaction affects profit and loss.

Share capital contribution reserve The share capital contribution reserve is used to recognise the post-acquisition capital contributions by the vendors to equity of subsidiaries.

Statutory reserve The statutory reserve is a requirement of Abu Dhabi law to maintain a percentage of profits in reserves.

Deferred retention incentive reserve This reserve was for the fair value of benefits (shares to be awarded) under the short-term incentive deferred retention incentive plan (refer Note 40).

Note 27. Non-controlling interest

2010 2009 $’000 $’000 At 1 July 747 334 Buy-out of non-controlling interest holders - (107) Profit attributable to non-controlling interest holders 511 520

At 30 June 1,258 747

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 28. Dividends

2010 2009 $’000 $’000 Ordinary shares – fully franked at 30% 2009 final dividend of 7.25c per fully paid share (2008: 18c) 29,965 35,631 2010 interim, dividend of 5c per fully paid share (2009: 4.75c) 20,689 19,588

Total dividends provided for or paid 50,654 55,219 112

Since the end of the financial year the Directors have resolved to pay a final dividend of 9 cents per fully paid ordinary share, fully-franked based on tax paid at 30 per cent. The dividend will be paid on 20 October 2010. The aggregate amount of the proposed dividend expected to be paid out of retained earnings at 30 June 2010, but not recognised as a liability is $37,285,000 (2009: $29,963,000). Franking credits Franking credits available for subsequent financial years based on a tax rate of 30 per cent (2009: 30 per cent) 11,930 48,346

The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: • franking credits/debits that will arise from the payment/refund of current tax liabilities • franking debits that will arise from payment of dividends recognised as a liability at the reporting date • franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date, and • franking credits that may be prevented from being distributed in subsequent financial years. The consolidated amounts include franking credits that would be available to the Parent entity if distributable profits of controlled entities were paid as dividends. The impact on the franking account of the dividend recommended by the Directors since year end, but not recognised as a liability at year end, will be a reduction in the franking account of $15,979,000 (2009: $12,841,000). The 2010 final dividend declared on 26 August 2010 will be franked out of existing franking credits and out of franking credits arising from the payment of income tax prior to the dividend payment date.

Note 29. Related party transactions

(a) Parent entity The Parent entity within the Group is Transfield Services Limited. (b) controlled entities Interests in controlled entities are set out in Note 43. (c) key management personnel Disclosures relating to key management personnel are set out in Note 30. (d) Remuneration and retirement benefits Disclosures relating to remuneration and retirement benefits are set out in the Remuneration Report on pages 50-69. (e) Directors and Director related entities The following were Directors and shareholders of Transfield Holdings Pty Limited and Transfield (TSL) Pty Limited, related parties and beneficial owners of the shareholding in Transfield Services Limited. • Guido Belgiorno-Nettis AM, and • Luca Belgiorno-Nettis AM Guido Belgiorno-Nettis AM and Luca Belgiorno-Nettis AM each beneficially hold 42.9 per cent (2009: 42.9 per cent) in Transfield (TSL) Pty Limited which itself owns 13.96 per cent (2009: 14 per cent) of the share capital of Transfield Services Limited. They are also joint Managing Directors of Transfield Holdings Pty Limited. This means they each indirectly control 57,845,095 (2009: 57,845,095) shares in Transfield Services Limited.

Transfield Services Annual Report 2010 The following agreements were in existence during the year: • Continuation of an agreement for Corporate and IT Services dated 14 February 2001 on normal commercial terms and conditions whereby Transfield Holdings Pty Limited group companies, of which Guido Belgiorno-Nettis AM and Luca Belgiorno-Nettis AM are shareholders, acquire information technology services from Transfield Services (Australia) Pty Limited and Transfield Holdings Pty Limited companies provide corporate services to Transfield Services (Australia) Pty Limited. • Trademark licence between Transfield Pty Limited (a related company of Transfield Holdings Pty Limited) dated 29 September 2008 and various consequential sub-licence arrangements. The following were Directors and security holders of Transfield Services Infrastructure Fund (TSI Fund), an equity accounted associate of Transfield Services Limited: 113 • Anthony Shepherd (retired 15 February 2010), • Dr Peter Goode Transfield Services paid Anthony Shepherd a pro-rata annual fee to sit on the Board of TSI Fund. The amount paid for the year ending 30 June 2010 was $55,000 (2009: $88,000). Dr Peter Goode is not paid for serving on the Board of TSI Fund. TSI Fund is managed under a Management Services Agreement (MSA) with Transfield Services (Australia) Pty Limited, a subsidiary of Transfield Services Limited. The wholly owned power stations within TSI Fund are also operated and maintained by Transfield Services (Australia) Pty Limited under a separate agreement on normal commercial terms. (f) loans to executives and executive-related entities Loans to executives are disclosed in Note 30. (g) transactions of Directors and Director-related entities concerning shares or Performance Awards Aggregate numbers of shares, share Options and Performance Awards of Transfield Services Limited acquired or disposed of by the Directors or their Director-related entities from the Company: 2010 2009 number number Acquisitions Ordinary shares 816,156 2,094,505

Aggregate acquisition of ordinary shares includes: Acquired as part of the Directors’ remuneration arrangements - 31,163 Acquired through 1:1 pro rata capital raising offer December 2008 - 1,042,786 Acquired by normal on-market means 816,156 150,000 Acquired through off-market transactions - 870,556

816,156 2,094,505

Disposals Ordinary shares - 11,093,918

Aggregate disposal of ordinary shares includes: Disposal through off-market transactions - 1,546,959 Disposed indirectly by Guido Belgiorno-Nettis AM and Luca Belgiorno-Nettis AM Directors of Transfield (TSL) Pty Ltd by way of participation through 1:1 pro rata capital raising offer December 2008 - 9,546,959

- 11,093,918

Aggregate numbers of shares and Performance Awards of Transfield Services Limited held directly, indirectly or beneficially by Directors of the Company or the consolidated entity or their Director-related entities at statement of financial position date: Ordinary shares 119,178,379 115,690,019

Performance Awards over ordinary shares 118,434* -

* Estimate based on provisional determination of MTI performance awards, legal granting of awards will occur in September 2010.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 29. Related party transactions (continued)

(h) transactions with Directors and Director-related entities Aggregate amounts of transactions with Directors and their Director-related entities recognised as income or (expenses): 2010 2009 $ $

Director related entities of Anthony Shepherd, Dr Peter Goode 114 (and in 2009: Peter Watson) (TSI Fund) Management services fee 9,191,120 8,085,581 Operations and maintenance services fee 25,709,749 46,208,875 Success, advisory, development and major works fees 3,600,000 185,703

Cash distribution received 16,979,008 18,285,086

Director related entities of Peter Watson Commercial rent paid to a relative of the former Managing Director and Chief Executive Officer for the use of an apartment whist undertaking business related activities in Sydney - (66,252)

Director related entities of Guido and Luca Belgiorno-Nettis Corporate services provided by Transfield Corporate Pty Limited (358,232)* (604,624)* Information technology services provided to Transfield Corporate Pty Limited 192 193,944

Transactions with Anthony Shepherd Consulting fee for representing Transfield Services Limited on the Board of Transfield Services Infrastructure Fund (55,000) (88,000)

The unpaid amounts at 30 June owing by / (to) Director related entities are: Transfield Services Infrastructure Fund 1,760,000 5,796,803 Transfield Services Infrastructure Fund (107,778) (64,598) Transfield Corporate Pty Limited 212 175,010

1,652,434 5,907,215

* Inclusive of Director’s fees Guido and Luca Belgiorno-Nettis, trademark registration fee reimbursements and other corporate costs.

Directors and director related entities that are shareholders have received dividends and had the right to participate in the rights offer on the same terms and conditions that apply to other shareholders. Dividends 7,401,483 14,364,792

In addition the Group provides car parking and secretarial facilities and services to Anthony Shepherd as required to perform his duties. The estimated value of these benefits is $135,000 (2009: $130,000). (i) other related parties Transactions with joint venture entities and partnerships and associates were made on normal commercial terms and conditions and at market rates, except that there are no fixed terms for the repayment of loans between the parties. 2010 2009 $’000 $’000 Conversion of loan to joint ventures and partnerships to / (from) equity investment. (3,600) 1,758

Proceeds from / (repayments of) borrowings – joint ventures and partnerships 6,103 (2,275)

Loans (to) / from joint ventures and partnerships (3,660) (2,382)

Transfield Services Annual Report 2010 note 2010 2009 $’000 $’000 Current receivables (loans) Joint ventures and partnerships 9 8,900 11,343

No provision for impaired receivables has been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or doubtful debts due from related parties, except for $345,000, in relation to trade receivables, incurred as part of the disposal of a joint venture. Reconciliation of loans to/from related parties 115 Loans from joint ventures At 1 July - 2,275 Loans received 3,600 - Loan transferred to equity investment (3,600) - Loan repayments made - (2,275)

At 30 June - -

Loans to joint ventures At 1 July 11,343 10,719 Loans advanced 3,660 2,382 Loan transferred (to) / from equity investment - (1,758) Loan repayments received (6,103) -

At 30 June 9 8,900 11,343

(j) guarantees The Parent entity provides performance guarantees from time to time on behalf of wholly owned subsidiaries, associates, related parties and joint venture entities and partnerships. These guarantees will only crystallise if the respective parties fail to meet their performance obligations. There are also cross guarantees given by Transfield Services Limited, Transfield Services (Australia) Pty Limited, APP Corporation Pty Limited, Broadspectrum Australia Pty Limited, Broadspectrum (WA) Australia Pty Limited, Broadspectrum (Qld) Australia Pty Limited and Transfield Services Engineering Group Pty Limited as described in Note 42. No deficiencies of assets exist in any of these companies. No liability has been recognised by the Parent entity or the Group in relation to these guarantees, as the fair value of the guarantee is immaterial. (k) ownership interests in related parties Interest held in the following classes of related parties are set out in the following Notes: Note Investments in associates 32 Interests in joint ventures and partnerships 33

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 30. Key management and top five remunerated personnel

(a) key management personnel and top five remunerated personnel 2010 2009 $’000 $’000 Short-term employee benefits (cash salary and fees, cash bonuses and non-monetary benefits) 12,366 10,532 Long-term employee benefits 126 91 Post-employment benefits 273 253 116 Share-based payments 740 318 Termination benefits 626 2,413

14,131 13,607

Detailed remuneration disclosures in respect of key management personnel can be found in the remuneration report on pages 50-69. (b) equity instrument disclosures relating to key management and top five remunerated personnel and Performance Awards

Options and Performance Awards provided as remuneration and shares issued on exercise of such Options and Performance Awards. Details of Options and Performance Awards provided as remuneration and shares issued on the exercise of such Options and Performance Awards, together with terms and conditions of the Options and Performance Awards, can be found in the remuneration report on pages 50-69.

Options and Performance Awards holdings The number of Options and Performance Awards over ordinary shares in the Company held during the financial year by each director of Transfield Services Limited and other key management personnel of the Group, including their personally related parties, are set out below.

2010 Balance exercised Balance at vested at the start gRAnted as During the end oF And name of the year compensation the year Forfeited1 the year** exercisable unvested** Directors Dr Peter Goode - 118,434* - - 118,434 - 118,434

Other key management and top five remunerated personnel of the Group Lee de Vryer 59,600 - - (59,600) - - - Elizabeth Hunter 29,500 34,900 - - 64,400 - 64,400 Matthew Irwin 126,573 100,000 (10,469) (19,428) 196,676 - 196,676 Bruce James 190,600 181,900 - (20,350) 352,150 - 352,150 Steve MacDonald 121,000 - - (18,350) 102,650 - 102,650 Paul McCarthy*** 92,837 75,800 (5,832) (12,756) 150,049 - 150,049 Kate Munnings 55,559 54,600 - (3,091) 107,068 (7,552) 99,516 Joseph Sadatmehr 346,300 40,000 (80,000) (266,300) 40,000 - 40,000 1,021,969 487,200 (96,301) (399,875) 1,012,993 (7,552) 1,005,441

* Estimate based on provisional determination of MTI performance awards, legal granting of awards will occur in September 2010. ** Total number of Performance Awards, not modified for estimates of vesting probability. *** Resigned 19 July 2010. 1. Performance awards reflected as forfeited in these tables are those that have failed to meet vesting conditions under the terms of the grant and are not subject to any further retesting. Legal forfeiture of the performance award under the Plan rules takes place at the expiry date of the grant or on resignation.

Transfield Services Annual Report 2010 2009 Balance exercised Balance at vested at the start gRAnted as During the end oF And name of the year compensation the year Forfeited1 the year exercisable unvested Directors Dr Peter Goode ------Peter Watson 709,000 - - (409,000) 300,00 - 300,000

Other key management and top five remunerated personnel of the Group 117 Lee de Vryer 24,000 35,600 - - 59,600 - 59,600 Elizabeth Hunter 11,600 17,900 - - 29,500 - 29,500 Matthew Irwin 75,700 51,300 - (427) 126,573 (6,572) 120,001 Bruce James 97,400 93,200 - - 190,600 - 190,600 Steve MacDonald 121,000 - - - 121,000 - 121,000 Paul McCarthy 54,300 38,900 - (363) 92,837 (5,586) 87,251 Kate Munnings 32,500 23,300 - (241) 55,559 (3,709) 51,850 Joseph Sadatmehr 346,300 - - - 346,300 - 346,300 Graeme Sumner 55,400 29,600 - (52,039) 32,961 (6,624) 26,337 818,200 289,800 - (53,070) 1,054,930 (22,491) 1,032,439

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 30. Key management and top five remunerated personnel (continued)

Shareholdings The number of shares in the Company held during the financial year by each Director of Transfield Services Limited and other key management personnel of the Group, including their personally related parties, are set out below. Received during other changes Balance at the year on During the year Balance at the start of the exercise oF Acquisitions/ the end of 118 2010 the yeAR oPtions / Awards (disposals) the year Directors Anthony Shepherd 100,000 - 24,691 124,691 Dr Peter Goode - 500,000 500,000 Jagjeet Bindra - 5,000 5,000 Guido Belgiorno-Nettis AM 58,158,547 - 96,800 58,255,347 Luca Belgiorno-Nettis AM 59,680,469 - 117,400 59,797,869 Professor Stephen Burdon 188,509 - - 188,509 Steven Crane 91,207 - 20,000 111,207 Douglas Snedden - - 48,000 48,000 David Sutherland –resigned 24 July 2009 25,000 - - 25,000 Mel Ward AO 143,491 - 4,265 147,756 Other key management and top five remunerated personnel of the Group Larry Ames - - - - Elizabeth Hunter - - - - Matthew Irwin 74,811 10,469 (10,000) 75,280 Bruce James 32,020 - - 32,020 Steve MacDonald 267,931 - (267,792) 139 Paul McCarthy 29,139 5,924 (29,139) 5,924 Kate Munnings - - - - Tiernan O’Rourke - - - - Joseph Sadatmehr 1,129,638 80,000 (386,231) 823,407 Philip Wratt - - - - Nicholas Yates 25,712 - 30,000 55,712 119,946,474 96,393 152,994 120,195,861 2009 Directors Anthony Shepherd 1,546,959 - (1,446,959) 100,000 Dr Peter Goode - - - Peter Watson 1,862,843 - 53,925 1,916,768 Guido Belgiorno-Nettis AM* 22,105,448 - 36,053,099 58,158,547 Luca Belgiorno-Nettis AM* 22,281,686 - 37,398,783 59,680,469 Professor Stephen Burdon 63,651 - 124,858 188,509 Steven Crane 40,000 - 51,207 91,207 David Sutherland 25,000 - - 25,000 Mel Ward AO 64,603 - 78,888 143,491 Other key management and top five remunerated personnel of the Group Lee de Vryer - - - - Elizabeth Hunter - - - - Matthew Irwin 32,485 - 42,326 74,811 Bruce James 16,010 16,010 32,020 Steve MacDonald 901,315 - (633,384) 267,931 Paul McCarthy 14,693 14,446 29,139 Joseph Sadatmehr 1,148,853 (19,215) 1,129,638 Kate Munnings - - - - Graeme Sumner - - - - 50,103,546 71,733,984 121,837,530

* Refer to Note 30 (e),29,234,136 shares included in the changes during the year for each of Guido and Luca Belgiornio-Nettis reflects a change in presentation to include shares under their control by virtue of being Co-Managing Directors of Transfield Holdings Pty Ltd

Transfield Services Annual Report 2010 (c) other transactions with Directors and key management and the top five remunerated personnel Dividends received by directors and key management and top five remunerated personnel during the year ended 30 June 2010 amounted to $7,401,483 (2009: $14,818,040). Loans to executives The executives listed below have commercial loan arrangements with the Group as set out below: Steve MacDonald: Effective date 20 October 2008 Amount $470,000 119 Term Earlier of 30 September 2009 or ceasing to be an employee Interest rate 9.0% from inception to 31 March 2009, plus 1% margin 5.83% from 1 April 2009 to 30 September 2009, plus 1% margin Interest payments Interest is payable together with principal at end of loan term The loan and interest were paid in full on 2 September 2009. There had been no principal or interest repayments made between the date of inception and 30 June 2009. Steve MacDonald’s maximum indebtedness during the year was $504,316.

Paul McCarthy: Effective date 26 November 2008 Amount $108,430 Term Earlier of 30 June 2011 or ceasing to be an employee Interest rate 9.0% from inception to 31 March 2009 5.83% from 1 April to 30 June 2011, plus 1% margin Interest payments Interest is payable together with principal at end of loan term Paul McCarthy repaid $65,282 in January 2010 and $55,440 on his resignation in July 2010 in full settlement of his interest and principal obligations. Paul McCarthy’s maximum indebtedness during the year was $116,828. There had been no principal or interest repayments made between the date of inception and 30 June 2009.

Joseph Sadatmehr: Effective date 6 February 2009 Amount US$160,746 Term Earlier of 30 June 2010 or ceasing to be an employee Interest rate 9.0% from inception to 31 March 2009 5.83% from 1 April to 30 June 2010, plus 1% margin Interest payments Interest is payable together with principal at end of loan term The principal of the loan was repaid in September 2009. 50 per cent of the interest on this loan was waived and the balance was paid in March 2010. $Nil is unpaid at 30 June 2010. There had been no principal or interest repayments made between the date of inception and 30 June 2009. Joseph Sadatmehr’s maximum indebtedness during the year was US$165,103.

On 24 August 2009 the Board resolved that the Company prohibit the granting of loans to executives with effect from that date the loans described above remain in place for their stated term.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 31. Business combinations

On 11 November 2009, the Group acquired 100 per cent of the issued share capital of Industrial Contract Designers (Asia Pacific) Pty Limited (ICD). ICD delivers engineering and design of maintenance and brownfields capital projects to the hydrocarbons, processing and related industries. The cash consideration was $16,504,581. The carrying amounts and fair values of the assets and liabilities acquired were: Acquiree’s Provisional Carrying Amount Fair Value 120 $’000 $’000 Cash and cash equivalents 3,626 3,626 Trade and other receivables 5,462 5,462 Contract intangibles - 3,429 Customer relationships - 2,907 Property, plant and equipment 747 747 Trade and other payables (1,834) (1,834) Employee benefits provisions (688) (688) Provision for income tax (46) (46) Deferred tax liability - (1,901) Net carrying value 7,267 11,702 Cash consideration 16,505 Goodwill recognised 4,803

Acquisition accounting has been prepared on a provisional basis. Goodwill is attributable to the technical skill and engineering capability of the workforce and key management of ICD. ICD contributed $15,787,000 to revenue and $1,254,000 to net profit for the Group for the period 11 November 2009 to 30 June 2010. Had the acquisition taken place on 1 July 2009 the contribution to consolidated revenue and net profit would have increased by $9,123,000 and $828,000 respectively. Changes to provisional fair values of previous acquisitions The Planning Group (TPG) $’000 Goodwill provisionally recognised at 30 June 2009 1,685 Increase in purchase price- working capital adjustment 47 Adjustment to fair values: Property, plant and equipment (3) Inventory and work in progress (45) Final goodwill balance 1,684

Summary of acquisitions - 2009 On 9 July 2008, the Group acquired the assets and liabilities of The Planning Group (TPG). TPG is involved in town planning consultancy business in Victoria. The cash consideration was $892,000, the earn-out amount is $1,251,000 and there were direct costs of $35,000 giving a total purchase consideration of $2,178,000. The carrying amounts and fair values of the assets and liabilities acquired were: 2009 $’000 Property, plant and equipment 88 Receivables 407 Work in progress 65 Deferred tax asset 29 Employee entitlements (95) Fair value of net identifiable assets 494

Resulting in goodwill recognised of $1,685,000. Goodwill is attributable to the expected contribution from the key personnel of the TPG business in further developing the Groups’ project management and consultancy business.

Transfield Services Annual Report 2010 The acquired business contributed revenues of $2,173,000 and net profit of $305,000 to the Group for the period 9 July 2008 to 30 June 2009. If the acquisition had occurred on 1 July 2008, the contribution to consolidated revenue and profit for the year ended 30 June 2009 would not have significantly changed as compared to the reported results.

Changes to provisional fair values VMs horizon whelan McBreen hRI $’000 $’000 $’000 $’000 $’000 Goodwill provisionally recognised at 30 June 2008 23,360 59,375 42,118 1,144 4,791 121 Reduction in purchase price- working capital adjustment - - (916) - - Additional transaction costs 36 31 - - - Adjustment to fair values: Trade and other receivables (net of provision for impairment) - - - (43) 305 Inventory and work in progress - - - 887 - Trade payables - - 7 (77) 7 Final goodwill balance 23,396 59,406 41,209 1,911 5,103

Note 32. Investments in associates

Name Country of Principal OwnershiP cARRying incorporation activity interest amount 2010 2009 2010 2009 % % $’000 $’000 Transfield Services Australia Infrastructure ownership 44.51 48.41 179,2001 164,8191 Infrastructure Fund

Movements in carrying amounts of investments in associates Carrying amount at the beginning of the financial year 164,819 196,542 Share of operating (losses)/ profits after income tax (13,637) 11,9342

Normalised share of profits after income tax 9,269 11,934 Share of one-off losses associated with the TSI Fund capital structure review (22,906) -

Additional capital contribution 43,227 - Share of hedging reserve (Note 26a) (256) (25,780) Gain on partial dilution through dividend reinvestment plan 2,026 408 Distribution received (16,979) (18,285)

Carrying amount at the end of the financial year 179,200 164,819

Share of (losses) / profits of associates Operating (losses) / profits before income tax 2 (19,911) 11,959 Income tax benefit /(expense) 6,274 (25)

Operating (losses) / profits after income tax (13,637) 11,934 Less: distributions received (16,979) (18,285)

(30,616) (6,351)

Retained profits attributable to associates at the beginning of the financial year (9,426) (3,075)

Retained profits attributable to associates at the end of the financial year (40,042) (9,426)

Share of associates’ expenditure commitments Lease commitments 370 3,782 Other commitments 1,758 -

Total expenditure commitments 2,128 3,782

1. Market value $119,263,000 (2009:$126,690,000). The recoverable amount on a value-in-use basis on the underlying cash flows of TSI Fund exceeds the carrying value. 2. After elimination of related party transactions.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 32. Investments in associates (continued)

Summarised financial information of associates Group’s share of: Assets3 liabilities Revenues Profit $’000 $’000 $’000 $’000 2010 452,462 273,262 77,032 (13,637) 122 2009 625,282 460,463 84,255 11,9342

2. After elimination of related party transactions. 3. Group’s share of assets reflects exclusion of fair value uplifts in TSI Fund, reflecting the initial recognition of TSI Fund as an associate at historic cost and the elimination of urealised profits on the disposal of TSI Fund and on certain subsequent related party transactions.

Note 33. Interests in joint ventures and partnerships

Name of joint venture Country of Principal OwnershiP cARRying or partnership incorporation Activity interest amount 2010 2009 2010 2009 % % $’000 $’000 Incorporated joint ventures Translink Investments Pty Limited Australia Electronic tolling equipment 50 50 1,239 1,215 Metrolink Victoria Pty Limited Australia Tram franchise operator 50 50 - 10,000 Five D Holdings Pty Limited Australia Operations and maintenance 50 50 - (296) (sold 26 February 2010) Transfield Worley Power Australia Operations and maintenance 50 50 2,255 1,000 Services Pty Limited Transdev NSW Pty Limited Australia Public transport 50 50 4,905 4,845 Transdev – TSL Pty Limited Australia Public transport 50 50 - - Flint Transfield Services Limited Canada Operations and Maintenance 50 50 16,316 10,862 Inser – Transfield Services SA# Chile Operations and Maintenance 50 50 17,597 18,133 TGE Energy Services (NZ) Ltd New Zealand Operations and Maintenance 50 50 - - Transfield Worley Limited New Zealand Operations and maintenance 50 50 9,438 8,445 Transfield Services – Malaysia Operations and Maintenance 50 - 443 - Worley Parsons JV (M) Sdn Bhd Transfield - Mannai Facilities Qatar Operations and Maintenance 49 49 3,813 2,904 Management Services WLL Transfield WorleyParsons New Caledonia Operations and maintenance 50 50 4,376 1,579 Nouvelle Caledonie Transfield Worley TRAGS Qatar Operations and maintenance 27.5 27.5 1,478 1,608 Unincorporated joint ventures Transfield Worley Services Australia Operations and maintenance 50 50 48 - Transfield Worley (Woodside) Alliance Australia Operations and maintenance 50 50 13,649 12,443 TGE Energy Services JV# Australia Operations and maintenance 49 49 8,526 8,662 JV Australia Operations and maintenance 50 50 101 3,104 Transfield Worley Solutions JV Australia Operations and maintenance 50 50 957 1,015 Sentinar JV Australia Operations and maintenance 50 50 13 (144) TRAX (MVM) Australia Operations and maintenance 50 50 (58) (58) Transfield Services Worley Malaysia Operations and Maintenance 50 - 489 - Parsons Malaysia Linkwater Australia Operations and maintenance 50 1,541 BT JV Australia Operations and Maintenance 50 - 880 - Transfield Lucas Worley JV Australia Operations and Maintenance 33.34 - - - Partnerships Metrolink Queensland Partnership – Australia Operations and maintenance 50 50 422 333 trading as Brisbane Ferries PPS Partnership Australia Operations and maintenance 50 50 880 848 89,308 86,498

# Reporting date 31 December

Transfield Services Annual Report 2010 2010 2009 $’000 $’000

Retained profits attributable to the joint venture entities and partnerships At 1 July 27,545 20,939 Current year profit before tax 76,343 70,643 Income tax expense (13,353) (10,565) Distributions / dividends received (50,719) (53,472) At 30 June 39,816 27,545 123 Movements in carrying value of investment in joint venture entities and partnerships At 1 July 86,498 76,230 Effect of changes in foreign exchange rates (377) 1,904 Transfer from / (to) loan account (3,600) 1,758 Additions 969 - Return of capital (10,000) - Disposals –sale of Five D Holdings Pty Limited 3,547 - Distributions/dividends received (50,719) (53,472) Share of operating profits after tax 62,990 60,078

At 30 June 89,308 86,498

IncorporateD unincorporated joint ventures Joint ventures Partnerships total 2010 2009 2010 2009 2010 2009 2010 2009 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Share of joint venture entities and partnerships’ revenues, expenses and results Revenues 587,973 549,783 274,869 346,413 38,556 32,514 901,398 928,710 Operating expenses (540,693) (507,607) (245,547) (317,584) (35,354) (29,684) (821,594) (854,875) Earnings before interest, taxation, 47,280 42,176 29,322 28,829 3,202 2,830 79,804 73,835 depreciation and amortisation Depreciation (2,161) (2,439) (341) (725) (97) (97) (2,599) (3,261) Earnings before interest, taxation 45,119 39,737 28,981 28,104 3,105 2,733 77,205 70,574 and amortisation Amortisation - - - - (72) (72) (72) (72) Earnings before interest and taxation 45,119 39,737 28,981 28,104 3,033 2,661 77,133 70,502 Net finance income / (expense) (1,052) (1,114) 538 1,526 (276) (271) (790) 141 Net profit before income tax 44,067 38,623 29,519 29,630 2,757 2,390 76,343 70,643 Taxation (13,353) (10,565) - - - - (13,353) (10,565) Net profit after tax 30,714 28,058 29,519 29,630 2,757 2,390 62,990 60,078

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 33. Interests in joint ventures and partnerships (continued)

2010 2009 $’000 $’000 Share of joint ventures and partnerships’ assets and liabilities Cash 26,154 36,124 Other current assets 172,254 164,902 Non current assets 30,927 34,340 124 Total assets 229,335 235,366 Current borrowings 21,631 9,517 Other current liabilities 131,988 128,134 Non-current borrowings 12,247 11,992 Other non-current liabilities 6,891 30,691

Total liabilities 172,757 180,334

Net assets 56,578 55,032

Share of joint ventures and partnerships’ commitments Lease commitments 9,406 10,241 Other commitments - 32

Total expenditure commitments 9,406 10,273

Note 34. Reconciliation of operating profit after income tax to net cash inflow from operating activities

2010 2009 $’000 $’000 Total operating profit / (loss) after income tax 73,556 (54,490) Deficit / (excess) of net cash finance costs over accounting cost 2,309 (3,712) Share based payments 1,845 3,130 Depreciation 46,056 44,296 Amortisation of intangible assets and formation costs 27,765 31,820 Impairment - 171,692 Gain on disposal of investment (3,082) (408) Unrealised foreign exchange loss/(gain) (7,170) 7,620 Make-good and other expenses (72) 1,788 Loss on disposal of fixed assets 245 440 Excess of cash distributions over profits of associates and joint ventures / (share of profits of joint ventures and associates not received as dividends or distributions) 31,074 (4,914) Provision for doubtful debts 4,471 4,862 Lease repayments classified as operating activities (5,127) (531) Change in operating assets and liabilities, net of effects from purchase of controlled entity Decrease / (increase) in trade and other receivables 19,242 (21,618) Decrease / (increase) in inventories 12,449 (24,536) Decrease / (increase) in deferred tax assets 6,635 (30,584) Decrease / (increase) in loans to associates and joint ventures - (7,227) Increase in other operating assets (582) (6,185) Increase in trade and other payables 5,899 63,451 Increase / (decrease) in provision for income tax payable 43,744 (13,849) (Decrease) / increase in provision for deferred tax liabilities (34,314) 7,252 Increase in employee and other provisions 92 5,923

Net cash inflow from operating activities 225,035 174,220

Transfield Services Annual Report 2010 Note 35. Earnings / (loss) per share

2010 2009 cents cents

(a) Basic earnings / (loss) per share Profit / (loss) per share attributable to the ordinary equity holders of the Company 17.66 (15.34)

(b) Diluted earnings / (loss) per share Profit / (loss) per share attributable to the ordinary equity holders of the Company 17.66 (15.34) 125

2010 2009 $’000 $’000

(c) Reconciliations of earnings used in calculating earnings per share

Basic earnings/ (loss) per share Profit / (loss) from continuing operations 73,556 (54,490) (Profit) from continuing operations attributable to non-controlling interests (511) (520)

Profit / (loss) attributable to the ordinary equity holders of the Company used in calculating basic earnings per share 73,045 (55,010)

Diluted earnings / (loss) per share Profit / (loss) attributable to the ordinary equity holders of the Company used in calculating basic and diluted earnings per share 73,045 (55,010)

numbeR number

(d) weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic earnings / (loss) per share 413,716,575 358,623,714 Adjustments for calculation of diluted earnings / (loss) per share: Options and Performance Awards* - -

Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings / (loss) per share 413,716,575 358,623,714

* Only Options and Performance Awards which have vested but remain unexercised are used in the calculation of diluted earnings per share. The Group’s current policy is to acquire vested Options and Performance Awards on-market rather than by issuing new shares.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 36. Remuneration of auditors 2010 $ During the year the following amounts were paid to the auditor of the Parent entity, its related practices and non-related audit firms. 1. Audit services Fees paid to KPMG Australian firm: Audit and review of financial reports and other work under the Corporations Act 2001 1,318,467 Fees paid to related practices of KPMG Australian firm 40,725 126 1,359,192 Fees paid to non KPMG audit firms for the audit or review of financial reports of any entity in the Group 107,4241 Total remuneration for audit services 1,466,616 2. Other assurance services Fees paid to KPMG Australian firm: Other services 54,100 Fees paid to related practices of KPMG Australian firm for accounting and due diligence services - Total remuneration for other assurance services 54,100 3. Taxation services Fees paid to KPMG Australian firm: Advice on research and development 500,000 Advice on national payroll tax project work 125,888 Fees paid to related practices of KPMG Australian firm for taxation services - Total remuneration for taxation services 625,888 Total remuneration of auditors 2,146,604

1 Fees paid to PricewaterhouseCoopers for the 2009 audit fee under provision and costs incurred in relation to KPMG’s review of audit working papers.

KPMG were appointed as auditor on 4 November 2009 at the Company’s Annual General Meeting. During the year ended 30 June 2010 an amount of $3,219,599 was paid / payable to the KPMG Australian firm relating to taxation services in relation to advice on research and development provided prior to 30 June 2009 and KPMG’s appointment as auditor. The previous year’s audit was conducted by PricewaterhouseCoopers and auditor’s remuneration for that period is reported below. 2009 $ During the year the following amounts were paid to the auditor of the Parent entity, its related practices and non-related audit firms. 1. Audit services Fees paid to PricewaterhouseCoopers Australian firm Audit and review of financial reports and other work under the Corporations Act 2001 1,042,652 Fees paid to related practices of PricewaterhouseCoopers Australian firm 1,443,202 Fees paid to non PricewaterhouseCoopers audit firms for the audit or review of financial reports of any entity in the Group 114,575 Total remuneration for audit services 2,600,429 2. Other assurance services Fees paid to PricewaterhouseCoopers Australian firm Due diligence services 817,100 External service charge reviews 45,000 Other services 353,378 Fees paid to related practices of PricewaterhouseCoopers Australian firm for accounting and due diligence services 131,374 Total remuneration for other assurance services 1,346,852 3. Taxation services Fees paid to PricewaterhouseCoopers Australian firm Tax compliance and tax consolidation matters 166,148 Advice in respect of GST audit 29,627 Advice re employee taxation 7,661 Advice on transfer pricing 73,782 Other tax advisory services 454,951 Fees paid to related practices of PricewaterhouseCoopers Australian firm 698,064 Total remuneration for taxation services 1,430,233 Total remuneration of auditors 5,377,514

Transfield Services Annual Report 2010 Note 37. Events occurring after statement of financial position date

The following significant events have occurred since statement of financial position date and prior to signing the financial statements. Dividend declared and suspension of dividend reinvestment plan On 26 August 2010, the Directors resolved to pay a fully-franked dividend of 9 cents per share on 20 October 2010. On 19 August 2010 the Board resolved to suspend the operation of the dividend reinvestment plan for the 2010 final dividend. Debt refinancing Tranche B of the Group’s multi-currency corporate debt facility with a facility limit of $60,000,000 matured on 12 July 2010. This facility was undrawn at 30 127 June 2010. This debt facility was replaced by facilities totalling $65,000,000 with the following banks: Bank of Tokyo-Mitsubishi and JP Morgan Chase along with a facility extension with Westpac Banking Corporation. Share purchase plan On 26 August 2010 the Board announced a share purchase plan for eligible shareholders. Refer Note 25.

Note 38. Contingent liabilities

Details and estimates of maximum amounts of contingent liabilities are as follows: 2010 2009 $’000 $’000) Bank guarantees in respect of contracts of wholly owned companies 118,902 92,480 Insurance bonds in respect of contracts of wholly owned companies 146,281 164,592

265,183 257,072

Transfield Services’ share of bank guarantees in respect of contracts of joint ventures 29,351 26,919

294,534 283,991

The Group has entered into an unsecured Multi Option Bilateral Facility agreement under which bank guarantees and letters of credit are provided. Bank guarantees and insurance bonds (excluding joint ventures and non-wholly owned companies) Used 265,183 257,072 Unused 165,950 192,789

Total facility 431,133 449,861

The Directors are not aware of any material claims on the consolidated entity except as follows: A controlled entity in the Group is involved in an action relating to disputed employee benefits. Should the outcome of the action be unfavourable to the entity, costs for the disputed employment benefits may be incurred. The information usually required by AASB 137 Provisions, Contingent Liabilities and Contingent Assets is not disclosed on the grounds that it can be expected to seriously prejudice the outcome of the process. The entity is defending its position and the Directors continue to review the situation as it unfolds. The Directors are of the opinion that the dispute can be successfully resolved by the Group. No material losses are anticipated in respect of any of the above contingent liabilities.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 39. Commitments for expenditure 2010 2009 $’000 $’000) Operating leases Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year 41,196 42,854 Later than one year but not later than five years 87,903 78,480 Later than five years 10,694 9,421

128 Commitments not recognised in the financial statements 139,793 130,755

Finance leases Commitments in relation to finance leases are payable as follows: Within one year 5,023 4,703 Later than one year but not later than five years 14,425 13,907 Later than five years 986 972

Minimum lease charges 20,434 19,582 Future finance charges (3,278) (2,756)

Total lease liabilities recognised as a liability 17,156 16,826

The average interest rate implicit in the leases is 8.13 per cent (2009: 8.11 per cent). Capital commitments Commitments in relation to non-contracted capital expenditure is as follows: Within one year 210 -

Note 40. Share-based payments

(a) tranShare Executive Performance Awards Plan A detailed analysis of the conditions of the TranShare Executive Performance Awards Plan is set out in the Remuneration Report on pages 50-69. Set out below are summaries of Options and Performance Awards granted under the Plan:

Balance at gRAnteD exercised Forfeited Balance at exercisable Grant Expiry exercise the start During During During the end oF At the end Date Date Price of the year the year the year the year the year of the year numbeR numbeR numbeR numbeR numbeR number Options 28 November 2002 28 November 2009 $2.62 67,600 - (67,600) - - - Weighted average exercise price $2.62 ------

Performance Awards 25 February 2004 25 February 2011 $Nil 17,624 - (17,624) - - - 30 August 2004 30 August 2011 $Nil 25,293 - (25,293) - - - 28 February 2005 28 February 2012 $Nil 23,019 - (9,042) - 13,977 13,977 30 August 2005 30 August 2012 $Nil 200,000* - - - 200,000 - 16 November 2005 16 November 2012 $Nil 59,000 - - (59,000) - - 19 April 2006 19 April 2012 $Nil 190,9031 - (107,152) - 83,751 31,260 31 August 2006 31 August 2012 $Nil 356,700 - - (186,000) 170,700 - 31 October 2006 31 December 2012 $Nil 300,000 - - (300,000) - - 28 February 2007 28 February 2013 $Nil 353,812 - (34,795) (194,290) 124,727 18,073 31 May 2007 31 May 2013 $Nil 43,125 - - (14,375) 28,750 - 31 August 2007 31 August 2013 $Nil 366,652 - (80,000) (142,002) 144,650 - 28 February 2008 28 February 2013 $Nil 326,337 - - (143,787) 182,550 - 31 August 2008 31 August 2014 $Nil 1,272,900 - - (725,516) 547,384 - 26 September 2009 26 September 2015 $Nil - 2,509,800 - (200,500) 2,309,300 - 3,535,365 2,509,800 (273,906) (1,965,470) 3,805,789 63,310

Weighted average exercise price $Nil $Nil $Nil $Nil $Nil $Nil

* 100 per cent of these Performance Awards failed to vest at the 30 August 2008 testing date. The final testing date is 30 August 2010. 1. 98,450 of these Performance Awards failed to vest at the 30 April 2009 testing date. The final testing date is 30 April 2010.

Transfield Services Annual Report 2010 The range of the share price at the various dates of the Options exercised during the year was $2.12 - $4.73. The weighted average remaining contractual life of the Performance Awards outstanding at the end of the period was between two-three years.

Fair value of Performance Awards granted The assessed fair value at grant date of Performance Awards granted during the year ended 30 June 2010 is set out in the following table. The fair value at grant date is independently determined using a Binomial and Monte Carlo options pricing model that takes into account the exercise price, the term of the Performance Award, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the Performance Award. The model inputs for Performance Awards granted during the year ended 30 June 2010 included: 129 26 September 2009 Award type Performance rights Restricted share units Tranche 1 tRAnche 2 tRAnche 3 tRAnche 1 tRAnche 2 tRAnche 3 Exercise price $Nil $Nil $Nil $Nil $Nil $Nil Consideration $Nil $Nil $Nil $Nil $Nil $Nil Vesting conditions EPS growth TSR growth ROFE growth EPS growth TSR growth ROFE growth Expiry date 26 September 26 September 26 September 26 September 26 September 26 September 2015 2015 2015 2015 2015 2015 Share price at grant date $4.13 $4.13 $4.13 $4.13 $4.13 $4.13 Expected company share price volatility 55% 55% 55% 55% 55% 55% Expected dividend yield 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Risk free interest rate 4.72% 4.73% 4.72% 4.72% 4.73% 4.72% Fair value at grant date $3.77 $2.99 $3.77 $3.77 $2.99 $3.77

The expected price volatility is based on the historic volatility (based on the remaining life of the Performance Awards), adjusted for any expected changes to future volatility due to publicly available information. (b) Deferred Retention Incentive Plans

Short-term deferred retention incentive (ST-DRI) The Company delivers the ST-DRI component of its remuneration structure to Australian participants by providing a maximum opportunity equivalent in value to the STI target in the form of Company equity. The TranShare Deferred Plan (TDP) is used for this purpose. Participation in the ST-DRI is made available to selected high-performing managers who participate in the STI program but are not eligible to participate in the Company’s LTI program based on the eligibility criteria used for that component of remuneration. Individuals are nominated by the operational Chief Executive Officers with the support of the Managing Director and Chief Executive Officer within the framework approved by the HR Committee. The number of shares to be offered to the participant under the ST-DRI is calculated by dividing the ST-DRI amount by the ten-day average closing price of Transfield Services shares on the date the ST-DRI amount is approved. Shares are subject to forfeiture in the event that employment with the Group is terminated within two years from the date the ST-DRI payment which gave rise to the allocation of shares was approved.

Short-term deferred incentive (ST-DI) The Company delivers the ST-DI component of its remuneration structure for North American participants by providing a specific value of their STI outcome in the form of deferred cash. Participation in the ST-DI is available in North America to the senior managers and selected high-performing managers who participate in the STI Plan but are not eligible to participate in the Company’s LTI Plan based on the eligibility criteria used for that component of remuneration. Individuals are nominated by Operational Chief Executive Officers for consideration by the Managing Director and Chief Executive Officer. The deferred payment under the ST-DI is subject to annual adjustment in accordance with a nominated US or where relevant the Canadian long term bond rate, and is subject to forfeiture in the event that employment within the Group is terminated within two years from the date the ST- DI payment determination date, or as per the contracted term.

MD/CEO Medium-term Incentive Two-thirds of the MD/CEO’s earned Total Incentive outcome will be delivered to him in the form of medium-term incentives (MTI). The MD/CEO MTI will take the form of performance rights, being rights to acquire shares for nil consideration under the terms of the Transhare Executive Performance Award Plan (TEPAP). The TEPAP is the overall plan that delivers the Company’s LTI plan. The MD/CEO’s MTI are allocated from his earned incentive and are further tested against hurdles prior to the MD/CEO deriving any actual shares. Subject to achieving performance measures, these MD/CEO MTI performance rights will be available for vesting after two years in respect of half of the MTI’s granted and after three years for the other half. The performance measures which apply to these MTIs are: • 25 per cent based on earnings per share growth • 25 per cent based on relative total shareholder return • 25 per cent based on return on funds employed and • 25 per cent based on margin improvement on earnings before interest, tax and amortisation (EBITA).

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 40. Share-based payments (continued) The MD/CEO was not provided with upfront equity participation on his appointment and in accordance with his employment agreement any form of MTI or LTI would not be granted until post 30 June 2010. In this regard, it was recognised that the MD/CEO would have no equity incentive exposure in his remuneration until 15 months after his appointment and this reflects an inconsistency with shareholder interest alignment. Therefore, for FY 2009/10, a portion (24.4 per cent) of the MD/CEO’s earned Total Incentive will be granted in MTI performance rights under similar terms to LTI grants to other Senior Executives in September 2009 including performance measures with baseline of 30 June 2009. This ensures that in substance the MD/CEO is exposed to the Company’s equity and also consistently aligned with his direct reports and other executives from a performance and reward perspective. The balance of his MTI allocation for FY 2009/10 from his earned Total Incentive will be granted to him consistent with the allocation price for annual LTI grants and 30 130 June 2010 performance baseline. (c) employee share plan (TranShare Plan) A scheme, for which shares are acquired on-market on behalf of employees, was approved by shareholders at the 2004 annual general meeting. All Australian and New Zealand permanent full time and part time employees (excluding executive Directors) are eligible to participate in the scheme. Employees may elect not to participate in the scheme. Under the scheme, eligible employees may be granted up to $1,000 worth of fully-paid ordinary shares in Transfield Services Limited annually, for consideration of $900. The market value of shares acquired under the scheme, measured as the market price on the day of acquisition of the shares, is recognised in the statement of financial position as share capital. The net shortfall of $100 per employee is expensed as part of the employee benefit costs in the period the shares are acquired. Shares acquired on market under the scheme may not be sold until the earlier of three years after acquisition or cessation of employment from the respective Group company or joint venture. In all other respects the shares rank equally with other fully-paid ordinary shares on issue. The number of shares acquired on behalf of participants in the scheme is the offer amount of $1,000 divided by the market price at which the Company’s shares are traded on the Australian Securities Exchange on the day of acquisition on market. 2010 2009 $’000 $’000) Shares acquired under the Plan to participating employees - 1901

1 Each participant was issued with shares worth $1,000 based on market prices of between $1.25 and $8.68.

Other conditions applicable to the scheme are identified in the remuneration report on page 62. The acquisition of shares under the TranShare Plan was suspended on 19 May 2009 following changes to the equity plan taxation legislation. (d) tsiF Notional Securities The TSIF Notional Securities Scheme aims to provide a suitable long term incentive to executive employees who are fully seconded to TSI Fund by linking 50 per cent of their long term incentive to the outcomes of TSI Fund. The incentive provided under the TSIF Notional Securities Scheme can be delivered either in cash or in TSI Fund Securities – to be purchased by Transfield Services should the vesting conditions be met. (e) expenses arising from share-based payment transactions Total expenses before tax arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows: 2010 2009 $’000 $’000) Performance Awards expensed under TranShare Executive Performance Awards Plan 1,845 3,211 Short-term DRI’s granted 98 154 TSIF Notional Securites awarded (12) (45) Shares under TranShare Plan acquired on market - 190

1,931 3,510

Transfield Services Annual Report 2010 (f) shares under Award / Option Unissued ordinary shares of Transfield Services Limited under Award at 30 June 2010 are as follows: Date Awards Issue price Number granted Expiry date of shares under Awards 26 September 2009 26 September 2015 $Nil 2,309,300 31 August 2008 31 August 2010 $Nil 547,384 28 February 2008 28 February 2014 $Nil 182,550 31 August 2007 31 August 2013 $Nil 144,650 31 May 2007 31 May 2013 $Nil 28,750 131 28 February 2007 28 February 2013 $Nil 124,727 31 August 2006 31 August 2012 $Nil 170,700 19 April 2006 19 April 2012 $Nil 83,751 30 August 2005 30 August 2012 $Nil 200,000 28 February 2005 28 February 2012 $Nil 13,977 3,805,789

No Award holder has any right under the Awards Plan rules to participate in any other share issue of the Company or any other entity. Shares issued on the exercise of Options The following ordinary shares of Transfield Services Limited were acquired on-market during the year ended 30 June 2009 on the exercise of Options granted under the TranShare Executive Performance Awards Plan. No further shares have been issued since that date. No amounts are unpaid on any of the shares. Date Awards Issue price Number of granted of shares shares acquired 28 November 2002 $2.62 67,600

Note 41. Operating segments

(a) notes to and forming part of the segment information Accounting policies and identification of segments Segment information is prepared in conformity with the accounting polices of the Group as disclosed in Note 1 and the accounting standard, AASB 8 Operating Segments. Comparative segment information has been represented in conformity with the requirements of AASB 8 Operating Segments. Effective from 8 December 2008, the Group is managed as Services comprising three main geographical regions: • Australia and New Zealand • Americas and • Middle East and Asia, and • an equity accounted investment in Transfield Services Infrastructure Fund (TSI Fund). Each Services operating segment derives revenue from the provision of operations and maintenance services in the: • Resources and Industrials • Infrastructure Services, and • Property and Facilities Management business sectors. Information regarding the results of each reportable segment is included below. Performance (Segment result) is measured based on segment earnings before interest (net finance cost), tax and amortisation (EBITA) as included in the internal management reports that are reviewed by the Group’s Managing Director and Chief Executive Officer on a monthly basis, these reports do not include a statement of financial position on a segmented basis. The segment report is presented on pages 132 and 133.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 41. Operating segments (continued) Australia Middle And New eAst and Zealand Americas AsiA total Segment Revenue $’000 $’000 $’000 $’000 Revenue from wholly-owned entities 2010 2,117,175 961,251 72,528 3,150,954 2009 2,106,829 1,182,018 109,730 3,398,577 Share of profits from joint ventures 132 2010 34,000 22,281 6,710 62,991 2009 36,972 19,494 3,612 60,078 Total Services segment revenue 2010 2,151,175 983,532 79,238 3,213,945 2009 2,143,801 1,201,512 113,342 3,458,655 TSI Fund 2010 9,269 2009 12,3431 Consolidated Segment Revenue 2010 3,223,214 2009 3,470,998 Segment Result (EBITA) 2010 107,365 48,101 4,735 160,201 2009 106,928 67,202 8,161 182,291 Unallocated corporate overheads 2010 (13,411) 2009 (13,843) Total Services EBITA 2010 146,790 2009 168,448 TSI Fund 2010 9,269 2009 12,3431 Consolidated Segment EBITA 2010 156,059 2009 180,791

2010 2009 $’000 $’000) Reconciliation to statutory revenue Segment revenue 3,223,214 3,470,998 Less: normalisation adjustment to TSI Fund share of profits (losses associated with TSI Fund capital structure review) (22,906) - Less: share of net profits of associates and joint venture entities and partnerships (49,353) (72,012) Less: other income (14,278) (11,005)

Revenue from ordinary activities 3,136,677 3,387,981

Reconciliation to statutory net profit Segment result 156,059 180,791 Less: normalisation adjustment to TSI Fund share of profits (losses associated with TSI Fund capital structure review) (22,906) - Less: impairment loss - (171,692) Amortisation (27,765) (31,820) Finance cost (27,823) (44,920) Finance income 1,690 3,218

Profit before income tax 79,255 (64,423) Income tax (expense) / benefit (5,699) 9,933

Profit / (loss) from continuing operations after income tax expense 73,556 (54,490)

1. Includes share of profits from TSI Fund and dilution gain.

Transfield Services Annual Report 2010 (c) Information about products and services 2010 2009 $’000 $’000 Revenues from sales to external customers Resources and industrials 789,630 1,000,864 Infrastructure services 1,047,137 1,158,945 Property and facilities management 1,299,910 1,228,162 3,136,677 3,387,981 133

(d) information about geographical areas Australia Middle and New eAst and Zealand Americas Asia tsi funD total 2010 $’000 $’000 $’000 $’000 $’000 Revenue from external customers 2,103,336 960,716 72,625 3,136,677 Revenue from foreign countries - - - - - Depreciation 37,921 7,586 549 - 46,056 Non-current assets:- Trade and other receivables 56 - 421 - 477 Investments accounted for using the equity method 44,895 33,913 10,500 179,200 268,508 Property, plant and equipment 145,183 25,934 2,948 - 174,065 Intangible assets 212,532 454,106 7,987 - 674,625 Prepayments and other non-current assets 2,630 2,562 432 - 5,624

Australia Middle and New eAst and Zealand Americas Asia tsi funD total 2009 $’000 $’000 $’000 $’000 $’000 Revenue from external customers 2,101,927 1,177,703 108,351 - 3,387,981 Revenue from foreign countries - - - - - Depreciation 35,879 7,847 570 - 44,296 Non-current assets:- Trade and other receivables - - 1,556 - 1,556 Investments accounted for using the equity method 53,054 28,996 4,448 164,819 251,317 Property, plant and equipment 157,195 27,953 2,062 - 187,210 Intangible assets 207,791 495,582 8,432 - 711,805 Prepayments and other non-current assets 2,714 2,196 146 - 5,056

(e) information about major customers The Group aims to develop long-term relationships with its customers and has no significant concentrations of credit risk within the wholly-owned group. The Group’s customers are generally large companies or government authorities with established credit histories. The Group conducts checks for credit worthiness on new customers using independent agencies and industry references. The Group also operates through a significant number of joint ventures globally most of which have either a single or a dominant customer the credit management policies of Transfield Services and the respective joint venture partner are applied to those customers.

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 42. Deed of cross guarantee

Transfield Services Limited and its wholly owned subsidiaries Transfield Services (Holdings) Pty Limited, Transfield Services (Australia) Pty Limited, APP Corporation Pty Limited, Broadspectrum Australia Pty Limited, Broadspectrum Australia (WA) Pty Limited, Broadspectrum Australia (Qld) Pty Limited and Transfield Services Engineering Group Pty Limited are parties 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 and lodge a financial report and a director’s report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investment Commission. (a) consolidated statement of comprehensive income and summary of movements in consolidated retained profits 134 The above companies represent a Closed Group for the purposes of the Class Order. As there are no other parties to the Deed of Cross Guarantee that are controlled by Transfield Services Limited, they also represent the Extended Closed Group. Set out below is a consolidated statement of comprehensive income and summary of movements in consolidated retained profits for the year ended 30 June 2010 and the Closed Group consisting of Transfield Services Limited, Transfield Services (Holdings) Pty Limited, Transfield Services (Australia) Pty Limited, APP Corporation Pty Limited, Broadspectrum Australia Pty Limited, Broadspectrum Australia (WA) Pty Limited, Broadspectrum Australia (Qld) Pty Limited and Transfield Services Engineering Group Pty Limited.

2010 2009 $’000 $’000 Revenue from continuing operations 1,774,540 1,640,086 Other income 7,227 20,634 Share of net profits of associates and joint venture entities and partnerships accounted for using the equity method 25,702 21,197 Subcontractors, raw materials and consumables used (786,505) (653,690) Employee benefits expense (750,808) (796,987) Depreciation, amortisation and impairment (30,087) (27,298) Finance costs (8,009) (12,656) Other expenses (119,956) (174,483)

Profit before income tax 112,104 16,803 Income tax (expense)/benefit (30,516) 1,966

Profit from continuing operations after income tax expense 81,588 18,769

Net profit 81,588 18,769

Retained profits Retained profits at the beginning of the financial year 97,939 134,389 Net profit/ (loss) 81,588 18,769 Correction of 2009 TSI Fund distribution deducted in error 18,285 - Less: Dividends paid (50,654) (55,219)

Retained profits at the end of the financial year 147,158 97,939

Transfield Services Annual Report 2010 (b) statement of financial position Set out below is a consolidated statement of financial position as at 30 June 2010 of the Closed Group consisting of Transfield Services Limited, Transfield Services (Holdings) Pty Limited, Transfield Services (Australia) Pty Limited, APP Corporation Pty Limited, Broadspectrum Australia Pty Limited, Broadspectrum Australia (WA) Pty Limited, Broadspectrum Australia (Qld) Pty Limited and Transfield Services Engineering Group Pty Limited. 2010 2009 $’000 $’000 Current assets Cash and cash equivalents 72,107 52,297 Trade and other receivables 835,494 822,696 135 Inventories 22,398 35,699 Prepayments and other current assets 4,621 4,303 Current tax receivable - 13,497

Total current assets 934,620 928,492

Non-current assets Investments accounted for using the equity method 314,581 259,899 Other financial assets 88,829 8,473 Property, plant and equipment 97,705 103,541 Deferred tax assets 49,449 43,138 Intangible assets 81,150 84,451 Other 2,264 2,670

Total non-current assets 633,978 502,172

Total assets 1,568,598 1,430,664

Current liabilities Trade and other payables 307,815 294,805 Short-term borrowings 171,219 130,768 Provision for employee benefits 52,222 53,813 Other provisions 512 - Current tax liabilities 11,568 - Deferred consideration 625 564 Derivative financial instruments 6 540

Total current liabilities 543,967 480,490

Non-current liabilities Long-term borrowings 12,826 12,445 Deferred tax liabilities 18,941 2,670 Provision for employee benefits 23,518 20,338 Other provisions 3,208 2,864

Total non-current liabilities 58,493 38,317

Total liabilities 602,460 518,807

Net assets 966,138 911,857

Equity Contributed equity 808,048 803,095 Reserves 10,932 10,823 Retained profits 147,158 97,939

Parent equity interest 966,138 911,857

Total equity 966,138 911,857

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 43. Parent entity financial information

(a) summarised statement of financial position Parent entity 2010 2009 $’000 $’000 Current assets 628,508 587,120 Non current assets 358,544 265,115 136 Total assets 987,052 852,235 Current liabilities 43,636 1,791 Non current liabilities 17,081 -

Total liabilities 60,717 1,791

Net assets 926,335 850,444

Equity Contributed equity 808,048 803,095 Reserves 10,830 10,823 Retained profits 107,457 36,526

Total equity attributable to equity holders of the Company 926,335 850,444

(b) summarised statement of comprehensive income Parent entity 2010 2009 $’000 $’000 Revenue from ordinary activities 141,216 37,893 Other income 2,225 275 Depreciation, amortisation and impairment - - Net finance costs (4,750) (12,906)

Interest paid/payable (3,903) (11,378) Amortisation of establishment fees (1,135) (1,536) Finance income 288 8

Other expenses (627) (1,492)

Profit before income tax 138,064 23,770 Income tax (expense) / benefit (16,479) 5,937

Profit from continuing operations after income tax 121,585 29,707

Other comprehensive income - - Total comprehensive income for the period 121,585 29,707

Profit and total comprehensive income attributable to: Owners of the Company 121,585 29,707

c) guarantees and contingent liabilities The Parent entity provides performance guarantees from time to time on behalf of wholly owned subsidiaries, associates, related parties and joint venture entities and partnerships. These guarantees will only crystallise if the respective parties fail to meet their performance obligations. There are also cross guarantees given by Transfield Services Limited, Transfield Services (Australia) Pty Limited, APP Corporation Pty Limited, Broadspectrum Australia Pty Limited, Broadspectrum (WA) Australia Pty Limited, Broadspectrum (Qld) Australia Pty Limited and Transfield Services Engineering Group Pty Limited as described in Note 42. No deficiencies of assets exist in any of these companies. No liability has been recognised by the Parent entity or the Group in relation to these guarantees, as the fair value of the guarantee is immaterial.

Transfield Services Annual Report 2010 Details and estimates of maximum amounts of contingent liabilities are as follows: Parent entity 2010 2009 $’000 $’000 Bank guarantees in respect of contracts of wholly owned companies 118,902 92,480 Insurance bonds in respect of contracts of wholly owned companies 146,281 164,592

265,183 257,072 Transfield Services’ share of bank guarantees in respect of contracts of joint ventures 29,351 26,919 137 294,534 283,991

The Parent entity has entered into an unsecured Multi Option Bilateral Facility agreement under which bank guarantees and letters of credit are provided. Bank guarantees and insurance bonds (excluding joint ventures and non-wholly owned companies) Used 265,183 257,072 Unused 165,950 192,789

Total facility 431,133 449,861

The Parent entity is, in the normal course of business, called upon to give guarantees and indemnities in respect of the performance by controlled entities, associates, related parties and joint venture entities and partnerships of their contractual and financial obligations. These guarantees and indemnities only give rise to a liability where the respective entity fails to perform its contractual obligations and the guarantee is called upon. The Parent entity has a formal deed of guarantee to these entities. The directors are not aware of any material claims on the Parent entity. d) capital commitments The Parent entity has no capital commitments at 30 June 2010. e) investments in controlled entities Class of Ultimate cost of Parent Country of shares as equity entity’s incorporation APPlicable holding investment 2010 2009 2010 2009 % % $ 000 $ 000 Transfield Services (Holdings) Pty Limited Australia Ordinary 100 100 63,175 - Transfield Services (Australia) Pty Limited Australia Ordinary 100 100 9,002+ 7,704+ Transfield Services (International) Pty Limited Australia Ordinary 100 100 - Transfield Services (New Zealand) Limited New Zealand Ordinary 100 100 442+ 442+ Transfield Metrolink Pty Limited Australia Ordinary 100 100 - - Transfield Services Engineering Group Pty Limited Australia Ordinary 100 100 - - Collinsville Operations Pty Limited Australia Ordinary 100 100 - - Transhare Plan Company Pty Limited Australia Ordinary 100 100 - - Transfield Services (Asia) Sdn Bhd Malaysia Ordinary 100 100 - - Transfield Services (Malaysia) Sdn Bhd Malaysia Ordinary 100 100 - - (In Members Voluntary Liquidation) Transfield Services (Brisbane Ferries) Pty Limited Australia Ordinary 100 100 - - Broadspectrum Resources Pty Limited (In Liquidation) Australia Ordinary 100 100 - - Broadspectrum Australia Pty Limited Australia Ordinary 100 100 - - Broadspectrum Australia (WA) Pty Limited Australia Ordinary 100 100 - - Broadspectrum Australia (QLD) Pty Limited Australia Ordinary 100 100 - - Global Broadspectrum Sdn Bhd Malaysia Ordinary 100 100 - - Transfield Services Mauritius Limited Mauritius Ordinary 100 100 - - (formerly Global Broadspectrum CCM Limited ) Broadspectrum Pte Limited Singapore Ordinary 100 100 - - APP Corporation Pty Limited Australia Ordinary 100 100 - - APP Corporation (NZ) Limited New Zealand Ordinary 100 100 - - APP Corporation (North America) Limited USA Ordinary 100 100 - - Transfield Services North America Transportation USA Ordinary 100 100 227+ 175+ Infrastructure (formerly VMS, Inc.) Transfield Services Canada (Holdings) Ltd Canada Ordinary 100 100 - - Transfield Services Canada Ltd Canada Ordinary 100 100 532+ 344+ Canadian Services & Maintenance Ltd Canada Ordinary 100 100 - -

Transfield Services Annual Report 2010 Notes to and forming part of the consolidated financial statements for the year ended 30 June 2010

Note 43. Parent entity financial information (continued)

Class of Ultimate cost of Parent Country of shares as equity entity’s incorporation APPlicable holding investment 2010 2009 2010 2009 % % $ 000 $ 000 Transfield Services Holdings (Delaware) Australia Ordinary 100 100 - - Pty Limited LLC 138 Aquas Holdings Pty Limited Australia Ordinary 66 66 - - Australian Quality Assurance Superintendence Australia Ordinary 66 66 - - Pty Limited Transfield Emdad Services LLC** UAE Ordinary 49** 49** - - Intergulf General Contracting LLC** UAE Ordinary 49** 49** - - USM Inc (formerly US Maintenance Inc) USA Ordinary 100 100 738+ 545+ Transfield Services (Chile) Pty Limited Australia Ordinary 100 100 - - Transfield Services (Delaware) General Partnership Australia N/A 100 100 - - Transfield Services (North America) Inc USA Ordinary 100 100 1,764+ 1,878+ (formerly USM Holdings Corp) Transfield Services (USM) Holdings Pty Limited Australia Ordinary 100 100 - - USM (Delaware) Inc USA Ordinary 100 100 - - TIMEC Holdings LLC. USA Ordinary 100 100 - - TIMEC Company Inc. USA Ordinary 100 100 874+ 651+ TIMEC Operating Company, Inc USA Ordinary 100 100 - - James TIMEC International , Inc USA Ordinary 100 100 - - TIMEC Specialty Services, Inc USA Ordinary 100 - - - Welltech National Training Systems Inc. USA Ordinary 100 100 - - Worldwide Welding Inc. USA Ordinary 100 100 - - Tianjian Broadspectrum Electrical and Mechanical Ordinary 100 100 - - Commissioning Services Ltd. Transfield Services (India) Pty Limited Australia Ordinary 100 100 - - Hofincons Infotech Industrial Services Limited India Ordinary 100 100 - - TSNZ Pulp and Paper Maintenance Services Limited New Zealand Ordinary 100 100 - - Whelan’s International Co, Inc. USA Ordinary - - - - (acquired 17 October 2007, liquidated in to USM, Inc. September 2008) Inversions Transfield Services (Chile Holdings) Chile Ordinary 100 100 - - Limitada Inversions Transfield Services (Chile) Limitada Chile Ordinary 100 100 - - Transfield Services Wind Developments Pty Limited Australia Ordinary 100 100 - - (formerly known as Transfield Services (Renewables) Pty Ltd) Wind Project Developments Pty Ltd Australia Ordinary 100 100 - - Transfield Services Mannai Oil and Gas Services WLL Qatar Ordinary 49** 49** - - Transfield Services Qatar LLC Qatar Ordinary 49** 49** - - Barn Hill Wind Farm Pty Ltd *** Australia Ordinary - 100 - - Industrial Contract Designers (Asia Pacific) Pty Limited Australia Ordinary 100 - - - High Road Wind Farm Pty Limited Australia Ordinary 100 - - - Transfield Emdad LLC UAE Ordinary 49** - - - Transfield Services (Ontario) Ltd Canada Ordinary 100 - - - Transfield Services (Alberta) Ltd Canada Ordinary 100 - - - 76,754 11,739

** Legal ownership is 49 per cent however commercial ownership is 75 per cent-100 per cent. These entities are consolidated for Group reporting purposes. *** Sold 17 June 2009 + Represents impact of share based payment expenses borne by subsidiaries, eliminated on consolidation.

Transfield Services Annual Report 2010 Directors’ declaration for the year ended 30 June 2010

In the Directors’ opinion: (a) the financial statements and notes set out on pages 72 to 138 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of their performance, as represented by the results of their operations, changes in equity and their cash flows, for the financial year ended on that date; and (b) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable; (c) at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group identified in Note 42 will be able to meet any obligations or liabilities which they are, or may become, subject by virtue of the deed of cross guarantee described in Note 42. 139

The Directors draw attention to Note 1(a) to the financial statements, which includes a statement of compliance with International Financial Reporting Standards. The Directors have been given the declaration by the Managing Director 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.

Anthony Shepherd Dr Peter Goode Chairman Managing Director and Chief Executive Officer at Sydney 26 August 2010

Transfield Services Annual Report 2010 Independent Auditor’s Report to the Members of Transfield Services Limited

140

Transfield Services Annual Report 2010 141

Transfield Services Annual Report 2010 Shareholder Information

SHAREHOLDER INFORMATION SET OUT BELOW WAS APPLICABLE AS AT 1 SEPTEMBER 2010

(a) Distribution of equity securities TOTAL % OF ISSUED RANGE HOLDERS UNITS CAPITAL 1 – 1,000 8,319 4,071,695 0.99 1,001 – 10,000 12,968 47,657,257 11.50 10,001 – 100,000 2,050 45,144,122 10.90 142 100,001 and over 112 317,405,830 76.61 Total 23,449 414,278,904 100

There were 1,504 shareholders with non-marketable parcels of Transfield Services’ shares (113,791 shares)

(b) equity security holders Top 20 holders of quoted equity securities:

UNITS At % OF ISSUED NAME 1 September 2010 CAPITAL RANK J P Morgan Nominees Australia Limited 65,676,336 15.85 1 HSBC Custody Nominees (Australia) Limited 65,510,050 15.81 2 Transfield (TSL) Pty Limited 57,845,095 13.96 3 National Nominees Limited 34,007,062 8.21 4 Cogent Nominees Pty Limited 15,669,718 3.78 5 Citicorp Nominees Pty Limited 15,258,253 3.68 6 ANZ Nominees Limited 7,347,851 1.77 7 Frami Pty Limited 4,460,513 1.08 8 Cogent Nominees Pty Limited (SMP Accounts) 4,087,341 0.99 9 Australian Reward Investment Alliance 4,009,073 0.97 10 Argo Investments Limited 3,638,487 0.88 11 AMP Life Limited 2,587,675 0.62 12 Equity Trustees Limited 2,520,000 0.61 13 UBS Nominees Pty Ltd (Prime Booking Segment Account) 2,249,178 0.54 14 Custodial Services Limited 2,176,661 0.53 15 Queensland Investment Corporation 2,065,610 0.50 16 Bond Street Custodians Limited 1,373,544 0.33 17 Netwealth Investments Limited 1,172,522 0.28 18 UBS Nominees Pty Ltd 1,144,709 0.28 19 RBC Dexia Investor Services Australia Nominees Pty Limited 1,056,686 0.26 20 Total shares 293,856,364 70.93

(c) substantial holders Substantial shareholders in the Company are set out below:

units At % OF ISSUED NAME 1 September 2010 cAPITAL J P Morgan Nominees Australia Limited 65,676,336 15.85 HSBC Custody Nominees (Australia) Limited 65,510,050 15.81 Transfield (TSL) Pty Limited 57,845,095 13.96 National Nominees Limited 34,007,062 8.21

(d) Voting rights The voting rights attached to each class of share are as follows: (a) Ordinary shares On a show of hands, every member present at a meeting in person or by proxy shall have one vote, and upon a poll, each share shall have one vote. (b) Options and Performance Awards No voting rights.

Transfield Services Annual Report 2010 Corporate Directory

Directors Bankers Anthony Shepherd Australia and New Zealand Banking Group Limited Chairman Level 1, 20 Martin Place Dr Peter Goode Sydney NSW 2000 Managing Director and Chief Executive Officer Guido Belgiorno-Nettis AM Bank of America Luca Belgiorno-Nettis AM Level 38, Governor Phillip Tower, Steven Crane 1 Farrer Place Mel Ward AO Sydney NSW 2000 Jagjeet (Jeet) Bindra (Appointed 24 July 2009) Professor Stephen Burdon (Retired 14 July 2010) The Bank of Tokyo-Mitsubishi UFJ, Ltd. Douglas Snedden (Appointed 21 December 2009) Level 25, 1 Macquarie Place David Sutherland (Resigned 24 July 2009) Sydney NSW 2000

Chief Risk and Legal Officer/Company Secretary Calyon Australia Limited Kate Munnings Level 22, Grosvenor Place, 225 George Street Sydney NSW 2000 Senior Management Tiernan O’Rourke HSBC Bank Australia Limited Chief Financial Officer Level 32, HSBC Centre, 580 George Street Bruce James Sydney NSW 2000 Chief Executive, Australia and New Zealand Larry Ames J.P. Morgan Chief Executive, Americas Level 32 Grosvenor Place, 225 George Street Philip Wratt Sydney NSW 2000 Chief Executive, Middle East and Asia Elizabeth Hunter Mizuho Corporate Bank Ltd Chief Executive, Human Resources Level 33, 60 Margaret Street Matthew Irwin Sydney NSW 2000 Chief Executive, Investments Joseph Sadatmehr Royal Bank of Scotland Chief Executive, Strategic Relations Level 27, Aurora Place, 88 Phillip Street Nicholas Yates Sydney, NSW 2000 Chief Executive, Marketing and Business Development William Fazl Standard Chartered Bank Chief Executive, Business Information Systems 345 George Street Sydney NSW 2000 Principal registered office in Australia Level 10, 111 Pacific Highway WestLB North Sydney NSW 2060 Level 5, 7 Macquarie Place Sydney NSW 2000 Share and debenture registers Computershare Investor Services Pty Limited Westpac Institutional Bank Level 4, 60 Carrington Street Level 3, Westpac Place, 275 Kent Street Sydney NSW 2000 Sydney NSW 2000

Auditors Securities exchange listing KPMG Transfield Services Limited shares are listed on the Australian Securities 10 Shelley Street Exchange, stock code: TSE. Sydney NSW 2000 Website address www.transfieldservices.com

Annual Report Production The Annual Report was produced in-house by Transfield Services.

This report was printed with an accredited ISO14001 Environmental Management System, using vegetable based inks and FSC certified Monza Recycled paper. As part of our commitment to the environment the C02 emission associated with production of this publication have been Carbon Offset using Climate Friendly certified carbon offset credits. Australia Canada United States of America Head Office FT Services Transfield Services Level 10, 111 Pacific Highway Suite 3000, 715 5th Avenue SW Suite 3310, 1818 Market Street North Sydney NSW 2060 Calgary Alberta Philadelphia PA 19103 Locked Bag 917 Canada T2P 2X6 United States of America Telephone: +1 403 265 9033 Telephone: + 215 832 3700 North Sydney NSW 2059 Facsimile: +1 403 265 9063 Facsimile: + 215 832 3701 Telephone: +61 2 9464 1000 Facsimile: +61 2 9464 1111 India TIMEC Company Inc. 311 Glenferrie Road 6th Flr. Gee Gee Universal, Mc. 16941 Keegan Avenue Malvern VIC 3144 Nichols Road, Carson, CA 90746-1307 Telephone: +61 3 8823 7500 Chetpet, 600 031 United States Facsimile: +61 3 8823 7763 Chennai, India Telephone: +1 310 885 4710 Telephone: +91 44 2836 4684 Ground Floor USM 16 Altona Street Qatar 1880 Markley Street West WA 6005 Mannai Corporation Building (Al Norristown Pennsylvania 19401 Telephone: +61 8 9422 3100 Emadi Complex) United States of America Facsimile: +61 8 9422 3111 1st Floor Salwa Road, Ramada Telephone: +1 610 278 9000 Junction, New Salata, Doha Facsimile: +1 610 275 8023 446 South Road State of Qatar Marleston South Australia 5033 PO Box 76 Transportation Infrastructure PO Box 522 Marleston BC SA Telephone: +974 455 8231 203 East Cary Street, Suite 200 5033 Richmond Virginia 23219 Telephone: +61 8 8292 5100 New Zealand United States of America Facsimile: +61 8 8297 4399 Level 3, 277 Broadway Telephone: +1 888 547 4404 Newmarket 1149 Facsimile: +1 804 264 1808 Level 4 Auckland 52 Merivale Street PO Box 99964 South Brisbane QLD 4101 Telephone: +64 9 523 9900 Telephone: +61 (0) 7 3248 8700 Facsimile: +64 9 523 9999 Facsimile: +61 (0) 7 3248 8790 United Arab Emirates Marina Office Park Compound Villa No. A31 Waves Breaker Behind Marina Mall Abu Dhabi, United Arab Emirates PO Box 514 Telephone: +971 2 499 7666 Facsimile: +971 2 658 1617