FORM 6-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
September 25, 2006
BHP Billiton Plc
(Translation of registrants name into English)
Neathouse Place London SW1V 1BH United Kingdom
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F: þ Form 20-F
o Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): o
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934: o Yes þ No
If Yes is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): n/a
TABLE OF CONTENTS
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
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BHP Billiton Plc
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Date: 25 September 2006
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By:
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Karen Wood |
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Name:
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Karen Wood |
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Title:
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Group Company Secretary |
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TheStrategicDrivers thatdeliver the Essential Elements |
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Contents |
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IBC |
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The BHP Billiton Strategic Framework comprises seven
strategic drivers: People, our Licence to Operate,
World-class Assets, the BHP Billiton Way, Financial
Strength and Discipline, our Project Pipeline and Growth
Options. These drivers encompass our whole business and set
the benchmarks against which we measure our performance.
Annual General Meetings
The Annual General Meeting of BHP Billiton Plc will be held at the Royal
Horticultural Halls, Lindley Hall, Elverton Street, London, SW1P 2PE, UK, on Thursday
26 October 2006, commencing at 10.30 am. The Annual General Meeting of BHP Billiton
Limited will be held at the Brisbane Convention and Exhibition Centre, Plaza
Ballroom, corner Merivale and Glenelg Streets, South Bank, Brisbane, Queensland,
Australia, on Wednesday 29 November 2006, commencing at 10.30 am.
BHP Billiton Limited. ABN 49 004 028 077. Registered in Australia. Registered
office: 180 Lonsdale Street, Melbourne, Victoria 3000, Australia BHP Billiton Plc.
Registration number 3196209. Registered in England and Wales. Registered office:
Neathouse Place, London SW1V 1BH, UK
We are BHP Billiton, a leading global resources company. |
Our purpose is to create long-term value through the discovery,
development and conversion of natural resources, and the provision of
innovative customer and market-focused solutions. |
Our seven strategic drivers assist us in achieving our objectives. These
drivers are our people; our licence to operate; our world-class assets; the
way we do business; our financial strength and discipline; our project
pipeline; and growth options. |
Underpinning our strategic drivers are the values that guide us. They
are: |
· An overriding commitment to health, safety, environmental
responsibility and sustainable development. |
· Integrity and doing what we say we will do. |
· A commitment to achieving superior business results and stretching our
capabilities. |
· Having the courage to lead change in the face of adversity. |
· The embracing of diversity and showing respect for and trust in each
other. |
With these elements as our foundation, BHP Billiton brings you
the essential elements of everyday life. |
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BHP BILLITON ANNUAL REVIEW 2006 5
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1 |
Group highlights 2006
4 |
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Records for all key earnings measures including underlying EBITDA up 50 per
cent to US$18.1 billion and underlying EBIT up 54 per cent to US$15.3 billion. |
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Attributable profit up 63 per cent to US$10.5 billion, including exceptionals, and up 58
per cent to US$10.2 billion, excluding exceptionals. |
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EPS up 66 per cent, including exceptionals, and up 60 per cent, excluding exceptionals,
benefiting from recent buy-backs. |
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Underlying EBIT margin and Return on Capital Employed increased to 44 per cent and
35 per cent respectively. |
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Final dividend of 18.5 US cents per share, an increase of 27.6 per cent on last years
final dividend. This brings the full year dividend to 36.0 US cents per share, up 28.6 per
cent. |
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Further capital return of US$3.0 billion, bringing total for financial year 2006 to
US$5.0 billion. |
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Five Year Summary |
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US$ million |
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2006 (a) |
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2005 (a) |
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2004 (b) |
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2003 (b) |
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2002 (b) |
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Revenue together with share of jointly controlled entities
revenue (Turnover) |
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39,099 |
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31,150 |
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24,943 |
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17,506 |
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17,778 |
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Underlying EBIT (c) |
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15,277 |
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9,921 |
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5,488 |
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3,481 |
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3,102 |
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Attributable profit excluding exceptional items |
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10,154 |
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6,426 |
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3,510 |
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1,920 |
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1,934 |
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Attributable profit including exceptional items |
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10,450 |
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6,396 |
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3,379 |
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1,901 |
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1,690 |
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Net operating cash flow including dividends from jointly
controlled
entities and after net interest and taxation |
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10,476 |
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8,374 |
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5,100 |
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3,631 |
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3,882 |
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Basic EPS including exceptional items (US cents per share) |
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173.2 |
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104.4 |
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56.4 |
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30.9 |
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28.0 |
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Basic EPS excluding exceptional items (US cents per share) |
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168.2 |
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104.9 |
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54.3 |
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30.6 |
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32.1 |
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Dividend per share (d) |
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BHP Billiton Plc (US cents) |
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36.0 |
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28.0 |
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26.0 |
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14.5 |
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13.0 |
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BHP Billiton Limited (US cents) |
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36.0 |
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28.0 |
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26.0 |
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14.5 |
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13.0 |
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Underlying EBITDA interest coverage (c) (times) |
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44.3 |
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51.7 |
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21.1 |
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13.3 |
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10.9 |
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Underlying gearing (per cent) |
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27.2 |
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35.8 |
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25.7 |
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31.7 |
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35.0 |
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(a) |
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Information for the years 2005 and 2006 is stated under IFRS. The Group implemented
IAS 39 Financial Instruments: Recognition and Measurement on 1 July 2005 without
restatement of comparative periods. |
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Information for the years 2002 to 2004 is prepared and presented in accordance with
UK GAAP and has not been restated. |
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Underlying EBIT is earnings before net finance costs and taxation, and jointly
controlled entities net finance costs and taxation and any exceptional items.
Underlying EBITDA is underlying EBIT before depreciation, impairments and amortisation. We believe
that underlying EBIT and underlying EBITDA provide useful information, but should not be
considered as an indication of, or alternative to, attributable profit as an indicator of
operating performance or as an alternative to cash flow as a measure of liquidity. |
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(d) |
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Three dividends were declared for the year ended 30 June 2004 as a result of the
Groups decision to realign dividend declarations to coincide with the announcements of interim and
full year results. |
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5 BHP BILLITON ANNUAL REVIEW 2006 |
Attributable profit
excluding exceptional
items |
Returns to
shareholders since
2001 |
Market
capitalisation at
30 June |
Relative share price performance index 5 year (US$) |
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BHP BILLITON ANNUAL REVIEW 2006 5
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3 |
Chairmans Review
The continuation of a strong global commodities
market has resulted in another outstanding set of
results for BHP Billiton. |
The continuation of a strong
global commodities market has
resulted in another
outstanding set of results
for BHP Billiton.
Our underlying earnings before
interest, tax, depreciation and
amortisation (EBITDA) were US$18.1
billion, our net operating cash
flows increased to US$10.5 billion
and our total dividend payment for
the year was 36 US cents a share,
reflecting the ninth consecutive
increase in our dividend.
Our
strongest earnings contributor was
the Base Metals business, which
generated a record US$5.4 billion
in underlying earnings before
interest and tax (underlying
EBIT). The price of copper was a
major influence on this result.
While labour and other input costs
continued to rise due to the tight
supply and strong demand
environment, our operating margins
increased.
BHP Billitons market
capitalisation increased further,
to around US$118 billion, compared
with US$95 billion this time last
year. High spot commodity prices,
particularly for the London Metal
Exchange (LME)-linked commodities,
resulted in strong cash flows
during the year. This increased
our ability to return capital to
shareholders. However, we do not
run the business based on
short-term commodity prices, which
can be highly volatile. We will
continue to make disciplined
decisions that we believe will
increase the underlying value of
the Company based on the long-term
cash generation potential of our
businesses and opportunities.
International Financial Reporting
Standards (IFRS) became effective
for BHP Billiton from 1 July 2005.
This change has had limited impact
on our reported profit and balance
sheet, however, it has simplified
the reporting of our financial
results by enabling a single set
of combined accounts to be
produced for both BHP Billiton
Limited and BHP Billiton Plc.
On the cover of this Review is a
pyramid that contains the seven
drivers that underpin BHP
Billitons strategy. These
strategic drivers combine to
ensure that every decision made
by the Board and the management
team contributes to the delivery
of shareholder value over the
long term.
BHP Billiton has achieved the
goals set at the time of the
merger, including generating
outstanding returns to
shareholders, and we are now in a
position to raise the bar by
resetting our aspirations.
We are striving to improve our
strong competitive position in
all of our chosen commodities. We
strengthened our portfolio of
assets with the integration of
WMC Resources into our businesses
during the year, and we believe
we have unique opportunities and
challenges as a result of the new
industry environment, most
importantly the potential for a
multi-decade of high demand
growth driven by China, India,
Russia and the developing South
American economies.
While the ultimate purpose of BHP
Billiton is to maximise total
return to shareholders over an
extended time frame, our
aspirations should also address
and resonate with other
stakeholder groups: customers,
resource owners, communities and
governments, partners, suppliers
and our employees.
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5 BHP BILLITON ANNUAL REVIEW 2006 |
Corporate Governance
As we have reported in
previous years, we believe
that the right approach to
corporate governance at BHP
Billiton is to draw on best
practice from all the
jurisdictions in which we
operate and are regulated.
We have developed our own
framework of compliance to ensure
that corporate governance does not
simply become synonymous with a
mandated system of rules based on
a tick a box system where
shareholders, creditors and other
corporate stakeholders might lower
their guard to their own
detriment.
No mandated system will address
the fact that a fully compliant
but dysfunctional board can
create as much havoc as one that
does not comply at all.
We believe that a board must find
the right balance between
monitoring the performance of the
company and advising on strategy.
That objective has led to the
Board defining its role and what
it expects of management in a
Board Governance Document, which
moves the emphasis from mere
compliance to a practice of
informed corporate governance in
a modern business environment.
That said, irrespective of how
well a board defines its role and
its expectations, corporate
behaviour is dictated above
anything else by the tone at the
top.
That tone at the top is
set by the Board and senior
management, in particular the
Chief Executive Officer. The tone
forms the culture of the
corporation and permeates the
corporations relationships not
only with investors, but also
employees, customers, suppliers,
local communities and
governments.
Our Corporate Governance
Statement starts on page 28 of
this Review. A summary of our
compliance with our
multi-jurisdictional
obligations and our own
internal control mechanisms is
published on our website.
Our program of Board renewal
continues, with Jacques Nasser
and Paul Anderson having joined
the Board in June. We are
delighted to have secured the
services of such highly
respected, independent and
experienced former executives.
My Board colleagues have again
this year made a substantial
contribution to the oversight of
the Groups business, strategy and
people development, and I thank
them for their commitment.
Corporate Responsibility
One of the seven strategic
drivers for the Group, second
only in the pyramid to People,
is our Licence to Operate. Our
Sustainability Report outlines
in detail the programs and
initiatives that support our
commitment to positively
impacting the communities and
environments in which we
operate.
At BHP Billiton, we believe that
engaging with society as an active
and self-motivated corporate
citizen is sound business
practice. Integrating sound
principles governing safety,
business conduct, social,
environmental and economic
activities is good both for
competitive advantage and for
developing a reputation as the
partner of choice.
Outlook
The short-term global economic
outlook remains positive. Growth
in Asia will help drive the
global economy, with Japans
expansion now well-established
and Chinas economic growth
expected to remain strong. The
US economy is likely to remain
solid.
However, while the short-term
outlook is encouraging, it is not
without risk. Escalating
political tensions, contributing
to a tight oil market, are adding
to increased uncertainty in all
markets.
Forward prices of LME
metals and oil remain above
long-term historical averages,
indicating that large-scale
supply surpluses are not being
anticipated in these markets.
Similarly, there is no sign of an
imminent retreat in oil and bulk
commodity prices.
Once again, I commend Chip
Goodyear, his management team
and all of BHP Billitons many
thousands of employees and
contractors for their continued
commitment, which has enabled
the Company to turn in another
outstanding performance for the
2006 financial year.
Don Argus
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BHP BILLITON ANNUAL REVIEW 2006 5
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5 |
Chief Executive Officers Report
BHP Billiton is a major producer and supplier of the raw
materials that are essential for the development of economies around
the world. Understanding the forces impacting societies around the
world is essential if we are to remain well positioned to play our role
to support communities and economies as they develop. |
Chip Goodyear, Chief Executive Officer |
The business strategy put in
place five years ago has served
the Company well in enabling us
to take advantage of the upswing
in demand for the commodities we
produce. However, during the year
we recognised a need to build on
our strategy to ensure it could
take us forward over the next
decades.
We have been talking for the last
three or four years about the
processes of urbanisation and
industrialisation across the
developing world leading to a
secular change in commodity demand
that is different from the
traditional business cycle.
We needed to ensure that our business
strategy recognised this
probability and could evolve to
encapsulate everything needed to
realise the potential benefits
from a multi-decade secular change
in demand for commodities.
The result has been a refinement
of our original strategy. We
have chosen to represent this
refined strategy in a simple
form, via a seven-layered
pyramid, that I believe assists
our constituencies in
understanding the critical
drivers to our success: our
seven strategic value drivers.
This Report provides an overview
of our business against each of
these seven strategic drivers
and provides some examples of
achievements during the year
that reflect how we put these
drivers into action.
People
People will always be fundamental
to our success and they form the
foundation of our business
strategy. Our people find resources, develop
projects, operate world-class
facilities and deliver our
products reliably and efficiently
to customers all over the world.
Our strong performance during
this year was the result of the
commitment and hard work of our
38,000 employees and the large
number of contractors who support
them. This is a very busy time in
the resources industry and our
continued success will rely on
our people and their
determination to outperform.
Licence to Operate
While we have recognised for some
time the need to earn our right to
be part of the various communities
impacted by our presence, the way
in which we behave as a Company
has never been more important,
particularly as we compete for
access to resources in regions
whose communities need to be
convinced of the benefits we bring
to them.
The health and safety of our
people continue to be paramount to
our success, our licence to
operate and our sustainability as
a business and industry. We
continue to strive towards a state
of Zero Harm to our people. Yet
three people lost their lives at
our operations during the year and
we were seriously concerned by
some increasing injury trends in
the first half of the year. While
the trend improved in the second
half through a concerted
management focus, the statistics
reinforce our belief that that we
must never take the safety of our
people for granted.
World-class Assets
Our strong and diverse asset
base, giving us exposure to the
production and sale of more than
20 individual commodities
throughout the world, will
continue to underpin the success
of the Company. This year, in
response to record demand, we
stretched production from these
assets to new levels, with annual
production records set for
aluminium, copper, iron ore,
nickel and natural gas.
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5 BHP BILLITON ANNUAL REVIEW 2006 |
The BHP Billiton Way
In an extremely challenging
industry environment, with the
cost and availability of both
people and essential materials
under enormous pressure, the
knowledge-sharing, systems and
processes we can apply throughout
our global operations give us a
significant competitive
advantage. This year we expanded
our Operating Excellence program
and commenced Business Excellence
across BHP Billiton. In addition
to established programs such as
Six Sigma and networks and
knowledge sharing activities, we
have expanded the function to
include a whole of business focus
on excellence.
Financial Strength and Discipline
US$5.0 billion dollars were
invested in growth projects during
the year and a further US$1.9
billion on capital expenditure
that goes to improve our existing
assets we were able to maintain
our strong A credit rating, reduce
debt further and return
significant funds to shareholders.
Excess capital was returned to
shareholders through share
buy-backs and dividends totalling
US$5.0 billion and US$2.2 billion
respectively. Since 2001, we have
returned a total of US$15.5
billion to our shareholders.
Project Pipeline
Four new projects came online
during the year. They were:
Escondida Norte and Escondida
Sulphide Leach in Chile and
Worsley DCP and RGP2 in Western
Australia. Another seven
projects: Shenzi, Stybarrow, NWS
Angel, Alumar Refinery Expansion,
RGP3, Samarco and Koala
Underground were approved to be
developed and come online over
the next three to four years. Our
development pipeline currently
shows 23 projects in either
execution or feasibility,
representing a total investment
of US$13.8 billion.
Growth Projects
The integration of WMC Resources
assets into our businesses and
the sale of its fertiliser
business were successfully
completed during the year with
the result of significantly
boosting nickel and copper
production during a year of
strong prices, adding uranium to
our
product range and providing
growth options for the future
while continuing to optimise our
portfolio.
Perhaps more quietly, our global exploration activities continued to increase as we search for the
next set of options for growth, many of which will be in regions that will create their own set of
challenges. However, we have demonstrated our capabilities for developing projects and operating in
new environments. As we focus more intently on opportunities in sub-Saharan Africa, for example, we
do so knowing we have already developed and now successfully operate one of the worlds most
cost-efficient aluminium smelters in Mozambique and own and operate a world-class nickel asset in
Colombia and deliver oil and gas from our operations in Pakistan and Algeria.
The drivers outlined above show our commitment to meeting the opportunities presented by what we
expect to be the extensive urbanisation and industrialisation of the developing world. We do not
suggest that this growth will be uninterrupted, constant or predictable. However, we are confident
that as well as positioning us for ongoing growth, BHP Billitons strategy will enable us to
provide value to shareholders and sustain our business throughout any downturns.
Let me leave you,
however, with a simple proposition: that China is determined to become a knowledge economy by 2050.
To achieve its vision, hundreds of millions of people will need to move from rural to urban areas.
That will require residential dwellings, industrial facilities and associated infrastructure. All
the raw materials that we produce and sell are essential elements of these infrastructure
requirements. We believe the world may be witnessing just the beginning of a whole new period of
change and BHP Billiton is an essential element of that change.
Chip Goodyear
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BHP BILLITON ANNUAL REVIEW 2006 5
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7 |
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8
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BHP BILLITON ANNUAL REVIEW 2006 5 |
At BHP Billiton, people are the foundation of our strategy. It
is our people who find and develop our mineral and energy resources,
maintain and operate our assets and ensure that our products reliably
reach customers. But while people are key to our business success,
they are also one of our scarcest assets. |
Todays strong demand for minerals and energy means that the industrys
requirements for skilled technical and professional people is high. At
the same time, the number of people entering the industry has been
declining for many years. This has resulted in a shortage of people
across the industry, particularly for developing new projects. |
Our pipeline of new projects is the largest in the industry.
Staffing these projects with people who meet our high standards is
a considerable challenge. To meet this need, we have a strong focus
on graduate recruitment, employee development and creating a
distinctly BHP Billiton work culture. We want our employees to
enjoy coming to work for a Company that is demanding of performance
but also a challenging and fun place to work. |
Business
Improvement
Specialist HSE,
Mozal, Mozambique
Rajan has an
outstanding track
record in the area
of reduction,
maintenance and
general process. He
joined the HSE team
in July 2005 and
has already
delivered
exceptional
results. Indeed,
every day someone
just like Rajan is
putting the extra
effort into their
day-to-day work
that makes this
Company a success. |
we see it for its
copper, nickel and silver
components, but jacqueline sees
it as her mobile link world; to
the a dinner invitation from
mum; an update from a colleague |
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BHP BILLITON ANNUAL REVIEW 2006 5 |
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9 |
Licence to operate
BHP Billiton is determined to achieve the highest standards in the way we do
business. Our commitment to ethical conduct, the health and safety of our people, the
quality of life of the communities where we operate, and the health of the environment
is how we earn our licence to operate a licence that is critical to the success and
sustainability of our business.
Through our performance in these areas, we seek to
become a partner of choice for local communities, governments, resource owners and
other stakeholders. These partnerships can provide us with competitive advantages in
accessing new resources and in attracting and retaining the best employees.
Our commitment to sustainable development is supported by our aspirational goal of
Zero Harm, our Guide to Business Conduct, the way we approach our relationships with
stakeholders, and transparent corporate governance. We have an ongoing commitment to
spend at least 1 per cent of our pre-tax profit on a three-year rolling average on
programs to support the communities in which we operate thereby ensuring that they
also directly benefit from our success.
Community Development
Manager, Pakistan
Humera is one of our
most experienced
community development
practitioners. She and
her team have worked
with community members
adjacent to the Zamzama
Gas Plant to establish
a range of programs in
female education, small
business development
and health, improving
the lives of the
communities surrounding
our operation. |
Rewarding a successful partnership
BHP Billiton is the Diversified Minerals and Medals Sponsor of the Beijing 2008 Olympic Games and
Paralympic Games. Our sponsorship will provide financial support to the Beijing Olympic and
Paralympic Games, as well as the raw materials for the gold, silver and bronze medals, and
recognises the importance of China and the Chinese people to our Groups success.
Understanding our environment
BHP Billiton has undertaken a
two-year exploration program to
define bauxite resources in its
Bakhuis concession in western
Suriname. As part of this program,
a camera trapping program was
established in conjunction with
Conservation International to
record the diverse and abundant
fauna of the concession area. The
program has added significantly to
our understanding of the Bakhuis
fauna and expands existing
ecological knowledge in Suriname.
The study also allows us to
compare Bakhuis
exploration with other locations
in the Guianas and Amazonia and
provides a sound basis for the
prediction of potential impacts of
any future mining at Bakhuis,
together with responsible
management of those operations.
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5 BHP BILLITON ANNUAL REVIEW 2006 |
Pioneering technology at
Hay Point alleviates employee
health issues
Improvements to the coal
unloading process at the Hay
Point terminal, Australia, has
increased unloading efficiency
while reducing the risk of
hearing damage and other
injuries to the operator. The
BHP Billiton design may have
broader applications for the
bulk materials transport
industry.
Supporting communities
In Pakistan, we joined with the
Government and local and
international non-government
organisations to support relief
efforts following their
devastating earthquake. Our
donations reached more than
US$600,000 and will go towards
urgent humanitarian programs,
the reconstruction of houses,
medical supplies and mobile
medical units.
wesee thestrength
ofaluminiumbut sammy
three-year-old shop
seesanicecream ofhis
straightahead chauffeur-driven
chariot... |
Promoting better outcomes |
Escondida (Chile) and Antamina
(Peru) participated in an
International Council on Mining &
Metals study to understand how
large-scale mining activity can
enhance the socio-economic
development of host countries. In
both cases, there was evidence
that our mining operations have
contributed to both economic and
social improvements. The study
provides lessons on how to
promote better socio-economic
outcomes in natural resource
development projects. |
Read more about our Sustainable Development
Policy, practices and performance in our
detailed Sustainability Report at
http://sustainability.bhpbilliton.com/2006/. |
Dinas Mashamaite, Project Manager, JET Education Services, South Africa |
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World-class assets
Aboriginal Employment
Coordinator EKATI,
Canada Robert is EKATIs
senior Aboriginal
Affairs officer and has
been with the Company
since May 1998. He is a
tremendous ambassador
for our Company and has
helped us build many
bridges with Aboriginal
communities in the
region. |
BHP Billiton has around 100 operating assets across the globe
producing a range of commodities. Our portfolio of assets and the spread
of our businesses are a fundamental strength of our Group. Not only do
our operations underpin our consistent performance, they generate the
cash flow we use to pay our employees, build new projects and fund our
consistent returns to shareholders.
Maintaining and maximising the value of these world-class assets is
critical. We run our operations with efficiency and excellence in mind,
and are always on the look-out for opportunities to reliably improve
our practices and procedures. We set benchmarks for our operations and
continuously search for opportunities to safely and sustainably drive
more from them. Our portfolio of assets is carefully managed through
divestment, development and acquisition.
Record annual production was achieved at North West Shelf (Australia),
Hillside (South Africa), Mozal (Mozambique), Paranam (Suriname),
Escondida (Chile), Antamina (Peru), Western Australian Iron ore and
GEMCO (both Australia), New Mexico Coal (US), Cerrejon Coal and Cerro
Matoso (both Colombia).
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5 BHP BILLITON ANNUAL REVIEW 2006 |
Targeting excellence
We continued to improve our
already low-cost aluminium
portfolio during the year. In
alumina, the 250,000 tonnes per
annum (tpa) Worsley alumina
refinery expansion (of which BHP
Billitons share is 215,000 tpa)
from 3.25 million tpa to 3.5
million tpa was completed and
commissioned in financial year
2006. Worsleys Berth 6 shiploader
program was also completed, with
over one million tonnes of alumina
having been loaded at the new
berth since March 2006. These
investments will help Worsley
maintain its position as one of
the worlds lowest cost alumina
refineries and positions BHP
Billiton to benefit from strong
global demand for alumina.
Driving more from our operations
Our Cerro Matoso operation in Colombia boosted nickel production by nearly six million pounds. This
strong performance was the result of Operating Excellence initiatives, which led to an increase in
the quality of feedstock to the smelter, better performance from equipment critical to production,
and strong recovery in demand for nickel.
Western Australia iron ore
production was a record 89.6
million wet tonnes (BHP Billiton
share) over the 2006 financial
year. This increase reflects
strong customer demand for iron
ore products along with
production from additional
capacity at Area C and the
Products and Capacity Expansion
(PACE) projects. |
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The BHP Billiton way
When it comes to applying the best possible solutions to common problems and
gaining the economies of scale so essential to a Company as large as ours, sharing
knowledge, expertise and ideas across our operations is vital. With more than 100
operations and offices spanning 25 countries around the globe, that requires good
communication, shared values and common goals.
At BHP Billiton, we have developed a series of best practice processes that govern
the way we work at all of our operations and offices worldwide, be it a copper mine
in Chile, an aluminium smelter in southern Africa or a metropolitan office in
Australia. These processes extend to policies such as our Zero Harm and Business
Excellence policies, as well as to the processes we employ when undertaking
investment approvals, the way we manage our people and how we work with our
customers.
Knowledge-sharing networks help to identify and disseminate successful practices
across every part of the Company. This culture of information-sharing ensures that
all parts of the Company can benefit from the lessons learned and experience gained
by our vast network of colleagues around the globe.
Project Leader
Democratic Republic of
Congo (DRC) The
difficult circumstances
and environments often
faced by exploration
teams in Africa have
been no match for
Serges can do
attitude. Originally
from Burkina Faso, Serge
has led the discovery of
a number of strategic
mineral deposits for BHP
Billiton and his teams
achieve consistently
strong HSEC performance. |
Forward thinking
The 500 kilometre Tibbitt to Contwoyto winter road is the essential lifeline of the diamond
industry in Arctic Canada. It carries the highest volume of traffic and freight of any ice road in
the world, but provides only a 10-week window each winter for mines operating in Canadas Northwest
Territories and Nunavut diamond fields to transport as much freight as possible. In 2006, unusually
poor ice conditions meant that the road was late opening and then shut down early, significantly
impacting many of the regions mines.
But our EKATI supply team had
planned ahead. EKATI prepared for
a shorter duration winter road by
expediting supplies and equipment
to Yellowknife in advance of the
road opening, so these materials
were ready to haul as light loads
as soon as the road was available.
Thanks to their understanding of
local conditions and forward
thinking, all critical supplies
were received and adverse business
impacts were successfully
mitigated when the premature
closure of the road occurred.
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5 BHP BILLITON ANNUAL REVIEW 2006 |
we see nickel matt and aluminium;the isvisualising he,s presentation at his about to give
8.30 am meeting |
Cabrillo Port is our innovative
proposal to meeting Californias
growing energy needs. It will be a
floating regasification and storage
unit positioned at a distant
offshore location, which will
receive liquefied natural gas (LNG)
from specially designed tankers and
then convert the LNG into natural
gas for sale through the existing
onshore natural gas system.
Cabrillo Port is a safe, secure and
environmentally benign solution
capable of meeting more than 10 per
cent of Californias current daily
natural gas need. |
Advancing technology
The Orion Operations group was
formed during the year to manage
the deployment of BHP Billitons
exclusive exploration technologies
FALCON,
GEOFERRET and
SOLIDEARTH. Orion
Operations is involved in projects
in both established areas and new
areas in emerging countries where
its technologies are used to gain
a competitive advantage.
Our FALCON technology
was key to our ability to negotiate
joint ventures to explore for
copper and coal in Mongolia and we
concluded agreements with three
companies that hold licences in the
South Gobi region. One of our
FALCON systems
successfully completed over 60,000
km of survey flying over winter in
the Gobi Desert. These surveys have
greatly increased the speed at
which BHP Billiton can explore this
difficult terrain.
Continuous improvement
From the beginning of its
operations, Minera Escondida, the
worlds largest copper mine, has
not stopped growing. After the
successful completion of seven
major expansion projects,
Escondida, operated by BHP
Billiton and located in Chiles
Atacama Desert, has gone from
producing 320,000 tonnes per year
to 1.3 million tonnes per year.
Behind this growth is a decision
taken during the first months of
operation 15 years ago to
continuously add value through
superior performance in safety,
production and unit costs,
ensuring its place for many more
years as the worlds largest
single
copper producer. The application
of continuous improvement
programs, business risk management
and control, and business cost
controls have been crucial to our
success.
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BHP BILLITON ANNUAL REVIEW 2006 5
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15 |
Diversified across products, markets and regions, our asset
base provides relatively stable cash flows regardless of variations
and risks in areas such as commodity prices, currency exchange rates
and geopolitical conditions. This affords us the certainty to fund our
long-term business plan, the ability to develop projects to meet
demand and the scope to make opportunistic and counter-cyclical
investments. It is a foundation further strengthened by our strong A
credit rating and the low-cost position of our asset portfolio. Our
investment approvals process targets investments that are aligned with
our own values, priorities, strategies and policies. Investments must
have a high probability of success and must be capable of achieving
optimal shareholder value with an acceptable degree of risk. Our goal
is to invest in opportunities that achieve returns in excess of the
cost of capital. |
Our capital management priorities are to reinvest in projects with
attractive rates of return, ensure a solid balance sheet, and return
capital to shareholders. We maintained our progressive dividend policy
with an increase of 29 per cent over the previous financial year,
bringing the 2006 dividend payment to 36 cents per share. We announced a
further return to shareholders of US$5.0 billion through a combination
of off and on-market share buy-backs. |
Robin Bordie has been
working with BHP
Billiton since 2004.
She has extensive
experience in
econometrics and
economics research,
and an in-depth
understanding of the
Chinese economy and
the developmental
issues relating to
Chinas growth. With
more than 20 years
professional work
experience, Robin
brings to us the
invaluable ability to
analyse the complex
economic situation and
rapid changes in China
our largest
single-country market. |
Financial strength and discipline |
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BHP BILLITON ANNUAL REVIEW 2006 5
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17 |
Project pipeline
Expansion projects on track
Since 2001, through a program of staged
expansions, BHP Billiton has increased
production at its Western Australian iron
ore operations from around 68 million
tonnes per annum to 105 million tonnes in
2006. The next phase, Rapid Growth Project
2 (RGP2) was recently completed on time
and on budget and RGP3 is under way with
construction activities progressing well.
Looking further afield, RGP4 is in
feasibility phase. This will take us to a
nominal 152 million tonnes per annum.
These projects build on our outstanding
track record of bringing new production
capacity online and ensure that we
continue to meet our customers needs over
the coming decades.
Underground Supervisor
Cannington, Australia
Dennis has demonstrated
considerable skill,
initiative and
leadership in his
capacity as an
underground operator
and acting in
supervisory positions
since he began at
Cannington in 2000.
Dennis was one of a
group of excellent
performers who BHP
Billiton rewarded with
a trip to the Melbourne
Commonwealth Games this
year. |
BHP Billiton has an unparalleled set of growth options. The
number of projects that are either in the development or feasibility
stage in our project pipeline reflects the significant range of
opportunities ready to take us into the next decade.
We have demonstrated our ability to identify and develop both
greenfield and brownfield opportunities, with 30 projects completed in
the past five years. We continue to aim to deliver projects on time and
on budget, notwithstanding the cost and time pressures affecting our
industry in todays high-demand environment.
Our emphasis on developing and implementing leading-edge technology and
innovative customer solutions is demonstrated not just across our
operations, but in the approval of several new projects, in our customer
collaborations and in the development of new products and markets.
Central to BHP Billitons success is our competitive ability to plan,
prioritise and execute the development of the projects in our pipeline.
During the year, seven major growth projects were approved. We now have
23 projects in execution or feasibility phase representing US$13.8
billion of investment. In addition, we are assessing numerous
opportunities in readiness for their progression within the pipeline,
thereby ensuring a continual flow in the coming years.
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5 BHP BILLITON ANNUAL REVIEW 2006 |
Petroleum projects move to completion
Our pipeline of petroleum development
projects is strong. We are expanding our
gas plant at Zamzama in Pakistan; Train 5
at Australias North West Shelf LNG plant
is progressing, as is the new Angel
production platform, which will supply
gas to the facility; and the Stybarrow
development is making strong progress
towards commercialising reserves in an
increasingly important oil province in
Western Australian waters. Construction is
under way for production facilities at the
Neptune Development, our first operated,
stand-alone development in the deepwater
Gulf of Mexico; and the first steel has been
cut for the Shenzi development, also in
the Gulf of Mexico. The Atlantis South
Development in the Gulf of Mexico, due
to ramp-up in the next 12 months, will
be a key feature in terms of our Petroleum
volumes. When it ultimately reaches its
full capacity, Atlantis will produce in the
order of 26 million barrels per year
(BHP Billiton share).
we see the
titanium dioxide
in the toothpaste,
but naomi sees one
last task before
her bedtime
story . . . |
Opening the door to future development |
The Panda Underground Project at EKATI, the
first underground diamond mine in Canada, successfully reached full capacity in February 2006.
The project presented many significant and diverse challenges and, by virtue of its success, has resulted in the
establishment of solid underground mining capability at EKATI. Completed on time and under budget, project
production has exceeded the feasibility study targets to date. Safety performance was also excellent. Indeed,
the success of this project has opened the door to future underground development work at EKATI. |
BHP BILLITON ANNUAL REVIEW 2006 5
19
5 BHP BILLITON ANNUAL REVIEW 2006
20
As the worlds demand for resources continues to increase, it is
essential that we identify and capture what may become the next
generation of large, low-cost assets for development beyond those
already in our project pipeline. |
Many of these assets will be in regions of the world where we have
limited operations and where political or geographic factors make
the identification, retention and development of resources more
challenging. At BHP Billiton, we take advantage of our global reach
to explore new parts of the world where we can work. |
By integrating our technological know-how, our exploration
experience and our business development expertise we are wellpositioned
to develop new opportunities as they arise in a way that is
responsive to market conditions, as well as to future needs, to
replenish our current asset portfolio. |
Mt Arthur Coal, Australia |
Narelle Wolfe
Community Relations
Coordinator, Hunter Valley
Energy Coal, Australia |
Narelle is committed to
Mt Arthur Coal and its
local community. She
works tirelessly to develop
goodwill and successful
relationships within the
workforce and community,
in a manner that
represents the values
associated with our
Charter and that positions
Hunter Valley Energy Coal
well for long-term growth. |
we see a
useful application for
the lightweight and
durable qualities of
aluminium or steel; jo
sees her kids running
barefoot through
puddles . . . |
BHP BILLITON ANNUAL REVIEW 2006 5
21
Customer
Sector Group highlights
Customer Sector Group highlights |
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Commodity markets remain strong, underpinned by supply
restrictions and a generally constructive global economy. |
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4
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Record annual production volumes at 14 of our assets right across
our commodity range, including record production in five key
commodities: aluminium, copper, iron ore, nickel and natural gas at
a time of high prices and tight demand. |
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We continue to approve new projects in line with market demand.
This year, four major growth projects were completed and seven
major growth projects approved, resulting in volume growth in high
margin operations and representing a forecast total capital spend of
just over US$5 billion. This together with new projects added in the
feasibility phase brings our project pipeline to 23 projects with
investment approaching US$13.8 billion. |
Our Petroleum Customer Sector Groups
principal activities are oil and natural gas
exploration, production and development.
We produce and market crude oil and
condensates, natural gas, liquefied natural
gas (LNG), liquefied petroleum gas (LPG)
and ethane.
We market a range of mostly premium light sweet crude oils and condensates
to refining and petrochemical customers in the Asia Pacific and Atlantic regions.
We sell gas via pipelines into local markets in Australia, the UK, Pakistan and the
US. The markets for LNG from our North West Shelf operations are Japan, Korea
and China.
Results
Underlying earnings before interest and tax (EBIT) were US$3 billion, compared
with US$2.4 billion in 2005, an increase of US$573 million. This increase was mainly
attributable to higher average realised prices for all petroleum products. Aside
from price, volumes from new operations were a significant contributor with
full year contributions from ROD, Mad Dog, Angostura and Minerva adding
US$360 million to EBIT.
Highlights
Three major projects were sanctioned during the year,
Stybarrow, Angel and Shenzi, bringing the total Petroleum
pipeline to nine projects in development or feasibility at a
capital cost of US$5.2 billion. Pyrenees advanced into
feasibility during the period. We produced record annual
volumes of natural gas due to the commissioning of Minerva
and North West Shelf Train 4.
5 BHP BILLITON ANNUAL REVIEW 2006
22
Our Aluminium Customer Sector Group
mines bauxite, refines bauxite into alumina
and smelts alumina into aluminium metal.
We are the worlds sixth largest producer of
primary aluminium, with a total operating
capacity of approximately 1.3 million
tonnes of aluminium. We sell aluminium
metal to customers around the world,
generally at prices linked to the London
Metal Exchange (LME) price.
Results
Underlying earnings before interest and tax (EBIT) were US$1.2 billion,
compared with US$959 million in 2005, an increase of US$232 million. This
increase was mainly attributable to higher prices for aluminium and alumina,
adding US$591 million to EBIT.
Highlights
The benefits of our technical expertise are clearly evident at the Mozal and
Hillside smelters where consecutive production records were again achieved from
the same number of pots. Commissioning has been successfully completed at our
Worsley expansion and we will see the benefits of increased alumina production
in future periods.
Our Base Metals Customer Sector Group
mines copper, silver, lead, zinc, uranium,
molybdenum and gold. We provide base
metal concentrates to smelters worldwide,
copper cathodes to rod and brass mills and
casting plants, and uranium oxide to power
utilities. Our portfolio of large, low-cost
mining operations includes the Escondida
mine in Chile, the worlds largest source of
copper, and the Olympic Dam copper,
uranium and gold mine in South Australia.
Results
Underlying earnings before interest and tax (EBIT) were US$5.4 billion, compared
with US$2.2 billion in 2005, an increase of US$3.2 billion. This increase was mainly
attributable to higher prices for copper, silver, zinc and lead.
Highlights
We had record copper production during the period with the highest ever
production from both Escondida and Antamina. The integration of Olympic Dam
was successfully completed, also making a significant contribution to the higher
result. During the year the Escondida Sulphide Leach and Norte
projects were completed on schedule.
BHP BILLITON ANNUAL REVIEW 2006 5
23
Customer Sector Group highlights continued
Our Carbon Steel Materials Customer
Sector Group is a leading supplier of
core raw materials and services to the
global steel industry, producing and
marketing a full range of steelmaking
raw materials iron ore, coking
coal and manganese ore and alloys.
BHP Billiton is the worlds largest
supplier of seaborne metallurgical
coal, marketing almost 50 per cent
of global production.
Results
Underlying earnings before interest and tax (EBIT) were US$4.5 billion, compared
with US$2.8 billion in 2005, an increase of US$1.7 billion. This increase was mainly
driven by higher prices and record sales volumes for iron ore as well as increased
prices for metallurgical coal.
Highlights
With seven Carbon Steel Materials projects in our pipeline, volume growth will
continue to be delivered in all three commodities (iron ore, metallurgical coal
and manganese). Returns for this business continue to be excellent and margins
were outstanding at both WA Iron Ore and Queensland Coal. These were the
highest year-on-year margin expansions at any of our operations. With continued
strong demand and prices for these key
commodities largely locked in until April
next year, the outlook continues to be
very positive.
The Diamonds and Specialty Products
Customer Sector Group encompasses
our diamonds and titanium minerals
businesses. The cornerstone of our
diamonds business is the EKATI
Diamond Mine. Annual sales
represent around 3 per cent of
current world rough diamond
supply by weight and 6 per cent
by value.
Our interest in titanium minerals consists of a 50 per cent effective interest in
Richards Bay Minerals (RBM) in South Africa, a leading producer of titanium slag,
high purity pig iron, rutile and zircon from mineral sands, and the Corridor Sands
and TiGen minerals sands projects in Mozambique. The zircon, rutile and pig iron
are sold as end products. Approximately 90 per cent of the titanium dioxide slag is
sold internationally.
Results
Underlying earnings before interest and tax (EBIT) were
US$345 million, compared with US$560 million in 2005,
a decrease of US$215 million. This decrease was mainly
impacted by the processing of lower grade and lower
value material at our EKATI Diamond Mine. Diamond
revenues were positively impacted by sales from
inventories carried over from 2005.
Highlights
EBIT for EKATI in this current financial year will
continue to be impacted by the processing
of lower grade and lower value material and
will not benefit from sale of back stocks.
In the medium term, however, increasing
underground production from Panda and
Koala will help restore profitability to
historical levels.
5 BHP BILLITON ANNUAL REVIEW 2006
24
Our Energy Coal Customer Sector
Group is one of the worlds largest
producers and marketers of export
thermal coal. We mine energy coal in
South Africa, Australia, Colombia and
the US. Most of our energy coal sales
are under medium and long-term
contracts with power generation
companies and utilities in domestic
markets and export markets in Europe,
Asia and the US.
Results
Underlying earnings before interest and tax (EBIT) were US$327 million, compared
with US$587 million in 2005, a decrease of US$260 million. Prices and volumes
were largely flat but cost pressures experienced across the industry also affected
all Energy Coal assets.
Highlights
Annual production records were achieved at both Cerrejon Coal and New Mexico
operations. A recovery plan at Ingwe is starting to take hold and we are looking
for an improved result in the medium term.
Our Stainless Steel Materials Customer
Sector Group is the worlds third largest
nickel producer. The group primarily
services the stainless steel industry through
its wide range of high-quality nickel
products. In addition, we supply nickel
and cobalt to other markets including
the specialty alloy, foundry, chemicals,
and refractory material industries. For
the year, approximately 80 per cent of
our sales were to the stainless steel
industry under a mix of long-term and
medium-term contracts with prices
linked to the relevant LME prices.
We produce nickel in the form of compacts, high purity nickel briquettes and
powders, high purity ferronickel granules and chemical-grade nickel oxide; and
cobalt in the form of Chemgrade cobalt oxide hydroxide and electrolytic cobalt
cathodes. We also market chrome and ferrochrome produced by the chrome
business we owned until June 2005.
Results
Underlying earnings before interest and tax (EBIT) were US$901 million, compared
with US$712 million in 2005, an increase of US$189 million. This increase was
mainly attributable to the inclusion of a full year of results from the Nickel West
operations (Australia), acquired in June 2005.
Highlights
The successful integration of Nickel West has been
completed and we are now looking to optimise this
business. Cerro Matoso had record annual production
and we are looking to further increase production in the
medium term from improved recoveries of metal from slag.
The Yabulu expansion is on track for delivery early next
year and the gas conversion project at this refinery is now
completed and is expected to have a positive impact on
costs for the 2007 year. While it is disappointing that
the budget and schedule for Ravensthorpe are
under review, this project will enable us to
deliver increased nickel volumes into a
structurally tight nickel market.
BHP BILLITON ANNUAL REVIEW 2006 5
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Offices
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Location |
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1
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Australia
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Adelaide t l
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t Corporate Centres |
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l Marketing Offices |
2
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Australia
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Brisbane l5
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5 Minerals Exploration |
3
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Australia
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Melbourne
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Offices |
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(Global Headquarters)
tl5
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n Technology Centres |
4
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Australia
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Newcastle n |
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5
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Australia
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Perth t l
5 n
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6
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Belgium
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Antwerp l
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7
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Brazil
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Rio de Janeiro l 5
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8
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Canada
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Vancouver 5
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9
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Chile
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Santiago t l
5 |
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10
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China
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Beijing l 5 |
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11
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China
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Shanghai l
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12
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Germany
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Essen l |
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13
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India
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New Delhi l 5
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14
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Indonesia
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Jakarta l
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15
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Japan
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Tokyo l
|
|
|
16
|
|
Korea
|
|
Seoul l
|
|
|
17
|
|
Mongolia
|
|
Ulaanbaatar 5
|
|
|
18
|
|
Netherlands
|
|
The Hague l
|
|
|
19
|
|
Peru
|
|
Lima 5
|
|
|
20
|
|
Russia
|
|
Moscow l 5
|
|
|
21
|
|
Singapore
|
|
Singapore l |
|
|
22
|
|
South Africa
|
|
Johannesburg t l
5n |
|
|
23
|
|
Switzerland
|
|
Baar l |
|
|
24
|
|
UK
|
|
London t |
|
|
25
|
|
UK
|
|
Sheffield l |
|
|
26
|
|
US
|
|
Houston t l |
|
|
27
|
|
US
|
|
Pittsburgh l |
|
|
Petroleum
|
|
|
|
|
|
|
|
|
Ref Country |
|
Site/Asset |
|
Description |
|
Ownership |
28 Algeria
|
|
Ohanet
|
|
Joint operator with Sonatrach
of wet gas development
|
|
|
45 |
% |
29 Algeria
|
|
ROD Integrated
Development
|
|
Onshore oil development
|
|
|
36.04 |
% |
30 Australia
|
|
Bass Strait
|
|
The Bass Strait operations produce oil,
condensate, LPG, natural gas and ethane
|
|
|
50 |
% |
31 Australia
|
|
Griffin
|
|
Operator of oil and gas project
offshore WA
|
|
|
45 |
% |
32 Australia
|
|
Minerva
|
|
Operator of Minerva gas field
development in the Otway Basin
|
|
|
90 |
% |
33 Australia
|
|
North West Shelf
|
|
One of Australias largest
resource projects, producing
liquids, LNG and domestic gas
|
|
|
8.3316.67 |
% |
34 Pakistan
|
|
Zamzama
|
|
Operator of onshore gas development
|
|
|
38.5 |
% |
35 Trinidad and Tobago
|
|
Angostura
|
|
Operator of oil field
|
|
|
45 |
% |
36 UK
|
|
Bruce/Keith
|
|
Oil and gas production in the
UK North Sea (sold in August 2006)
|
|
|
1631.83 |
% |
37 UK
|
|
Liverpool Bay
|
|
Operator of oil and gas development
in the Irish Sea
|
|
|
46.1 |
% |
38 US
|
|
Gulf of Mexico
|
|
Interests in several producing assets,
the Atlantis, Neptune and Shenzi
developments, and a significant
exploration acreage position
|
|
|
4.95100 |
% |
Various
|
|
Exploration
|
|
Exploration interests in Algeria,
Australia, Brunei, Maritime Canada, Colombia,
Namibia, Pakistan, South Africa,
Trinidad and Tobago, UK, US
|
|
|
|
|
5 BHP BILLITON ANNUAL REVIEW 2006
26
Aluminium
|
|
|
|
|
|
|
|
|
Ref Country |
|
Site/Asset |
|
Description |
|
Ownership |
39 Australia
|
|
Worsley
|
|
Integrated alumina refinery/bauxite
mine
|
|
|
86 |
% |
40 Brazil
|
|
Alumar
|
|
Alumina refinery and aluminium
smelter
|
|
|
3640 |
% |
41 Brazil
|
|
MRN
|
|
Bauxite mine
|
|
|
14.8 |
% |
42 Mozambique
|
|
Mozal
|
|
Aluminium smelter
|
|
|
47.1 |
% |
43 South Africa
|
|
Hillside/Bayside
|
|
Two aluminium smelters
|
|
|
100 |
% |
44 Suriname
|
|
Paranam
|
|
Alumina refinery and bauxite mines
|
|
|
45 |
% |
Base Metals
|
|
|
|
|
|
|
|
|
Ref Country |
|
Site/Asset |
|
Description |
|
Ownership |
45 Australia
|
|
Cannington
|
|
Silver, lead and zinc mine in
north-west Queensland
|
|
|
100 |
% |
46 Australia
|
|
Olympic Dam
|
|
Large underground copper/uranium
mine in South Australia
|
|
|
100 |
% |
47 Chile
|
|
Cerro Colorado
|
|
Copper mine in northern Chile,
producing cathode copper through
a SX-EW leach operation
|
|
|
100 |
% |
48 Chile
|
|
Escondida
|
|
The worlds largest copper
mine, located in northern Chile
|
|
|
57.5 |
% |
49 Chile
|
|
Spence
|
|
Open cut copper mine under
development
|
|
|
100 |
% |
50 Peru
|
|
Antamina
|
|
Large copper-zinc mine
|
|
|
33.75 |
% |
Carbon Steel Materials
|
|
|
|
|
|
|
|
|
Ref Country |
|
Site/Asset |
|
Description |
|
Ownership |
51 Australia
|
|
GEMCO
|
|
Producer of manganese ore
|
|
|
60 |
% |
52 Australia
|
|
Illawarra
Coal
|
|
Three underground coal mines
|
|
|
100 |
% |
53 Australia
|
|
Queensland
Coal
|
|
Worlds largest supplier of
high-quality metallurgical coal for
steel production
|
|
|
5080 |
% |
54 Australia
|
|
TEMCO
|
|
Producer of manganese alloys l
|
|
|
60 |
% |
55 Australia
|
|
WA Iron Ore
|
|
Pilbara iron ore mine, rail and port
operations
|
|
|
85100 |
% |
56 Brazil
|
|
Samarco
|
|
An efficient low-cost producer of iron
ore pellets
|
|
|
50 |
% |
57 South Africa
|
|
Samancor
Manganese
|
|
Integrated producer of manganese ore
(Hotazel Manganese Mines) and alloys
(Metalloys)
|
|
|
60 |
% |
Diamonds and Specialty Products
|
|
|
|
|
|
|
|
|
Ref Country |
|
Site/Asset |
|
Description |
|
Ownership |
58 Canada
|
|
Yellowknife
|
|
EKATI Diamond Mine in the
Northwest Territories of Canada
|
|
|
80 |
% |
59 Mozambique
|
|
Corridor Sands
|
|
Titanium minerals project
|
|
|
90 |
% |
60 South Africa
|
|
Richards Bay
Minerals
|
|
Worlds largest producer of
titanium slag
|
|
|
50 |
% |
Energy Coal
|
|
|
|
|
|
|
|
|
Ref Country |
|
Site/Asset |
|
Description |
|
Ownership |
61 Australia
|
|
Hunter Valley
Energy Coal
|
|
Mt Arthur Coal
|
|
|
100 |
% |
62 Australia
|
|
Illawarra Coal
|
|
Marketing agent for energy coal output
|
|
|
|
|
63 Australia
|
|
Queensland Coal
|
|
Marketing agent for energy coal output
|
|
|
|
|
64 Colombia
|
|
Cerrejon
|
|
Largest coal producer in Colombia
|
|
|
33.3 |
% |
65 South Africa
|
|
Ingwe
|
|
Largest coal producer in South Africa
|
|
|
100 |
% |
66 US
|
|
New Mexico
Coal
|
|
Mine-mouth operations
|
|
|
100 |
% |
Stainless Steel Materials
|
|
|
|
|
|
|
|
|
Ref Country |
|
Site/Asset |
|
Description |
|
Ownership |
67 Australia
|
|
Nickel West
|
|
Nickel assets including Mt Keith and
Leinster operations, Kalgoorlie nickel
smelter and concentrator and Kwinana
nickel refinery
|
|
|
100 |
% |
68 Australia
|
|
QNI Yabulu
Refinery
|
|
The Yabulu refinery is one of the
worlds
major laterite nickel-cobalt processing plants
|
|
|
100 |
% |
69 Australia
|
|
Ravensthorpe
Nickel Project
|
|
Ravensthorpe nickel mine and
processing
facility (currently in development)
|
|
|
100 |
% |
70 Colombia
|
|
Cerro Matoso
|
|
Integrated ferronickel mining and
smelting complex in north Colombia
|
|
|
99.8 |
% |
BHP BILLITON ANNUAL REVIEW 2006 5
27
Corporate Governance Statement |
Corporate Governance at a glance |
page
1. Governance at BHP Billiton 29 |
3. Board of Directors role and responsibilities
and key activities in 2006 29 |
4. Board of Directors composition, structure
and process 30 |
4.2 Skills, knowledge, experience and attributes
of Directors 31 |
4.4 Terms of appointment 35 |
4.5 Induction and training 35 |
4.6 Independent advice 35 |
4.8 Share ownership and dealing 35 |
4.10 Senior Independent Director 35 |
4.11 Company Secretary 35 |
5. Board of Directors review, re-election
and renewal 35 |
6.1 Office of the Chief Executive 36 |
6.2 Other management committees 37 |
8.1 Risk and Audit Committee report 40 |
8.2 Remuneration Committee report 43 |
8.3 Nomination Committee report 43 |
8.4 Sustainability Committee report 43 |
9. Conformance with corporate
governance standards 43 |
5 BHP BILLITON ANNUAL REVIEW 2006
28
1. Governance at BHP Billiton
BHP Billitons corporate objective is: to create long-term value
through the discovery, development and conversion of natural
resources and the provision of innovative customer and market-focused
solutions.
In pursuing the Corporate Objective, we have committed to the
highest level of governance and strive to foster a culture that
values and rewards exemplary ethical standards, personal and
corporate integrity and respect for others.
A copy of the Guide
can be found at
www.bhpbilliton.com/
aboutus/governance.
Our approach to governance is predicated
on the belief that there is a link between
high-quality governance and the creation
of shareholder value. Our expectations of
our employees and those to whom we
contract business are set out in our Guide to
Business Conduct.
This Statement outlines BHP Billitons system of governance.
Shareholders are reminded that BHP Billiton operates as a single
economic entity under a Dual Listed Company (DLC) structure with a
unified Board and management. It has primary listings in Australia
and the UK and is registered in the US and listed on the New York
Stock Exchange (NYSE). In formulating our governance framework,
the regulatory requirements in Australia, the UK and the US have
been taken into account, together with prevailing standards of best
practice. Where governance principles vary across these jurisdictions,
as they inevitably do, the Directors have resolved to adopt what they
consider to be the better of the prevailing standards.
2. Shareholders
The Board of BHP Billiton represents the shareholders who, in turn,
elect its members. Shareholders vote on important matters affecting
the Group, including changes to the Groups constitutional
documents, the receipt of annual financial statements and
incentive arrangements for executive Directors.
The Board recognises that in order to vote in an informed
manner, shareholders must receive high-quality, relevant
information in a timely manner.
A copy of this Policy
is available at
www.bhpbilliton.com/
aboutus/governance.
To safeguard the effective dissemination
of information, BHP Billiton has developed
a Market Disclosure and Communications
Policy. The Policy outlines how BHP Billiton
identifies and distributes information to
shareholders and market participants.
Announcements
and other relevant
information can
be found at
www.bhpbilliton.com.
Copies of announcements to the stock
exchanges on which BHP Billiton is listed,
investor briefings, half yearly financial
statements, the Annual Report and other
relevant information are posted to the
Groups website.
Any person wishing to
receive advice by email
of Group news releases
can subscribe at
www.bhpbilliton.com.
Shareholders are encouraged to make
their views known to the Group and to
raise directly any matters of concern.
The Chairman has regular meetings with
shareholders to discuss governance
matters and keeps the Board informed
of the views and concerns that have been
raised. From time to time the Group will
enter into dialogue with shareholders to
share views on matters of interest.
Questions can be
registered prior to the
meeting by completing
the relevant form
accompanying the
notice of meeting or by
emailing the Group at
investor.relations@
bhpbilliton.com.
Shareholders are encouraged to attend
Annual General Meetings and to use this
opportunity to ask questions. Questions
that have been lodged ahead of the
meeting, and the answers to them, are
posted to the website. The External Auditor
attends the Annual
General Meetings and is available to answer questions.
Shareholders may appoint proxies electronically through the
website. The notice of meeting describes how this can be done.
Proceedings at shareholder meetings and important Group
briefings are broadcast live from the Groups website. Copies of
the speeches delivered by the Chairman and Chief Executive
Officer (CEO) to the Annual General Meeting, a summary of the
proceedings of the meeting and the outcome of voting on the
items of business are posted to the website following the meeting.
3. Board of Directors role and responsibilities and key
activities in 2006
3.1 Role and responsibilities
The role of the Board is to represent the shareholders and to
promote and protect the interests of BHP Billiton. It does so by
governing the Group.
The Board Governance
Document can be
found at
www.bhpbilliton.com/
aboutus/governance.
The Board has published a Board
Governance Document, which is a
statement of the practices and processes
the Board has adopted to discharge its
responsibilities. It includes the processes
the Board has implemented to undertake
its own tasks and activities; the matters it
has reserved for its own consideration and decision-making; the
authority it has delegated to the CEO, including the limits on the
way in which the CEO can execute that authority; and provides
guidance on the relationship between the Board and the CEO.
The Board has specifically reserved the following matters for
its decision:
|
|
appointments to the position of CEO and approval of
appointments of executives reporting to the CEO |
|
|
|
approval of strategy and annual budgets |
|
|
|
determination of matters in accordance with the approvals
framework |
|
|
|
formal determinations that are required by the Groups
constitutional documents, by statute or by other external
regulation. |
The Board is free to alter the matters reserved for its decision,
subject to the limitations imposed by the constitutional documents
and the law.
Beyond those matters, the Board has delegated all authority to
achieve the Corporate Objective to the CEO, who is free to take all
decisions and actions which, in the CEOs judgement, are reasonable
having regard to the limits imposed by the Board. The limits are
published in the Board Governance Document. The CEO remains
accountable to the Board for the authority that is delegated to him,
and for the performance of the Group. The Board monitors the
decisions and actions of the CEO and the performance of the
Group to gain assurance that progress is being made towards the
Corporate Objective, within the limits it has imposed. The Board also
monitors the performance of the Group through its Committees.
Reports from each of the Committees are set out in section 8.
The CEO is required to report systematically in a spirit of openness
and trust on the progress being made by the Groups businesses.
The Board (and its Committees) determines the information
required from the CEO, any employee of the Group or any external
party including the auditor. Open dialogue between individual
members of the Board and the CEO and other employees is
encouraged to enable Directors to gain a better understanding of
the Groups businesses. Directors are encouraged to participate in
debate and to bring independent judgement to bear on matters
being considered. The Board believes that constructive differences
of opinion lead to more robust evaluation of the issues and,
ultimately, better outcomes.
3.2 Key activities during the year
During the course of the year the Board arranged for an independent
external review of its performance, structure and membership, the
restructuring of the Sustainability Committee and the adoption of
revised terms of reference for Board Committees. The Board
considered major business decisions, including capital projects and
capital management strategies. Its regular skills review and process
of renewal led to the appointment of three new non-executive
Directors and two new executive Directors. The Board is satisfied
that it has discharged its obligations as set out in the Board
Governance Document.
BHP BILLITON ANNUAL REVIEW 2006 5
29
Board of Directors
Don Argus Paul Anderson David Brink Charles Goodyear |
Carlos Cordeiro David Crawford John Buchanan Gail de Planque |
David Jenkins Chris Lynch Marius Kloppers Jacques Nasser |
John Schubert Miklos Salamon |
Karen Wood
Company Secretary |
5 BHP BILLITON ANNUAL REVIEW 2006
30
4. Board of Directors composition, structure and process
This section outlines how the Board has structured itself to best fulfil its role.
4.1 Membership
The Board currently has 14 members. Of these, 10, including the Chairman, are non-executive
Directors. All of the 10 non-executive
Directors are considered by the Board to be independent of management and free from any business
relationship or other circumstance
that could materially interfere with the exercise of objective, unfettered or independent
judgement. Further information on the process
for assessing independence is provided in section 4.3 below. The names and biographical details of
the Directors are set out below.
4.2 Skills, knowledge, experience and attributes of Directors
Don Argus AO, SFFIN, FCPA, 68
Term of office: Director of BHP Limited since November 1996 and
Chairman since April 1999. Chairman of BHP Billiton Limited and BHP
Billiton Plc since June 2001. Mr Argus was last re-elected in 2004 and is
standing for re-election in 2006.
Independent: Yes
Skills and experience: Don Argus has considerable experience in
international business and a strong management background. He has
more than 40 years experience in the banking industry and is a former
Managing Director and CEO of the National Australia Bank Limited.
Other directorships and offices (current and recent):
|
|
Chairman of Brambles Industries Ltd (since September 1999) and a
Director (since May 1999) |
|
|
|
Chairman of Brambles Industries Plc and a Director (since August 2001) |
|
|
|
Director of Australian Foundation Investment Company Ltd (since May
1999) |
|
|
|
Former Director of Southcorp Limited (from May 1999 until August 2003) |
|
|
|
Member of the International Advisory Council of Allianz
Aktiengesellschaft (since April 2000) |
|
|
|
Member of International Advisory Committee to the New York Stock
Exchange Board of Directors (since November 2005) |
Board Committee membership:
|
|
Chairman of the Nomination Committee |
Charles Goodyear BSc, MBA, FCPA, 48
Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since
November 2001. Appointed Chief Executive Officer (CEO) in January 2003.
Mr Goodyear was last re-elected in 2004 and is not retiring or subject to
re-election in 2006.
Independent: No
Skills and experience: Charles Goodyear has extensive experience in
finance, corporate restructuring and mergers and acquisitions. He joined
the Group as Chief Financial Officer (CFO) in 1999. He was previously
President of Goodyear Capital Corporation and Executive Vice President
and CFO of Freeport-McMoRan Inc.
Other directorships and offices (current and recent):
|
|
Member of the International Council of Mining and Metals |
|
|
|
Member of the United States National Petroleum Council |
Board Committee membership:
Paul Anderson B S (Mech Eng), MBA, 61
Term of office: Appointed a non-executive Director of BHP Billiton Limited
and BHP Billiton Plc on 26 April 2006 with effect from 6 June 2006. Mr
Anderson will seek election at the 2006 Annual General Meetings. He was
the CEO and Managing Director of BHP Limited from December 1998 until
June 2001 and of BHP Billiton Limited and BHP Billiton Plc from June 2001
until July 2002. He was a non-executive Director of BHP Billiton Limited
and BHP Billiton Plc from July to November 2002.
Independent: Yes. Refer to comments in section 4.3.
Skills and experience: Paul Anderson has an extensive background in
natural resources and energy and, as one of the architects of the merger
that created BHP Billiton, has a deep understanding of the strategy behind
the Groups success. He is Chairman of the Board of Duke Energy
Corporation and has more than 20 years experience at Duke Energy and
its predecessors.
Other directorships and offices (current and recent):
|
|
Chairman of Duke Energy Corporation (since November 2003) and
former CEO (from November 2003 to April 2006) |
|
|
|
Director of Qantas Airways Limited (since September 2002) |
|
|
|
Former Director of Temple Inland Inc (from February 2002 to May 2004) |
|
|
|
Former Director of Fluor Corporation (from March to October 2003) |
|
|
|
Member of the US Presidents Council of Advisors on Science and
Technology |
Board Committee membership:
|
|
Member of the Sustainability Committee |
David Brink MSc Eng (Mining), D Com (hc), 67
Term
of office: Director of Billiton Plc since June 1997. Director of
BHP Billiton Limited and BHP Billiton Plc since June 2001. Dr Brink was
last re-elected in 2003 and is standing for re-election in 2006.
Independent: Yes
Skills and experience: David Brink brings considerable mining and
finance experience to the Group. He has over 20 years experience in the
mining industry, in particular shaft sinking, tunnelling and exploration
contracting, followed by 12 years as the CEO of a major listed
construction, engineering and manufacturing conglomerate.
Other directorships and offices (current and recent):
|
|
Chairman of Unitrans Limited (since November 1997) |
|
|
|
Deputy Chairman of ABSA Bank Limited and ABSA Group Limited
(since April 1992) |
|
|
|
Director of Sanlam Limited (from January 1994 until June 2006) |
|
|
|
Director of Sappi Limited (since March 1994) |
|
|
|
Former Director of Murray & Roberts Holdings Ltd (from July 1984 until
December 2003) |
|
|
|
Vice President of the South African Institute of Directors |
Board Committee membership:
|
|
Chairman of the Sustainability Committee |
|
|
|
Member of the Risk and Audit Committee |
John Buchanan BSc, MSc (Hons 1), PhD, 63
Term of office: Director of BHP Billiton Limited and BHP Billiton Plc
since February 2003. Dr Buchanan has been designated as the Senior
Independent Director of BHP Billiton Plc since his appointment. He was
last re-elected by shareholders in 2003 and is standing for re-election in
2006.
Independent: Yes
Skills and experience: John Buchanan has had a wide international
business career gained in large and complex international businesses.
He has substantial experience in the petroleum industry and knowledge
of the UK and international investor community. He has held various
leadership roles in strategic, financial, operational and marketing
positions, including executive experience in different countries.
He is a former executive Director and Group CFO of BP, Treasurer and
Chief Executive of BP Finance, and Chief Operating Officer of BP Chemicals.
Other directorships and offices (current and recent):
|
|
Chairman of Smith & Nephew Plc (since April 2006) and Deputy
Chairman (from February 2005 to April 2006) |
|
|
|
Director of AstraZeneca Plc (since April 2002) |
|
|
|
Senior Independent Director and Deputy Chairman of Vodafone Group
Plc (since July 2006) and Director (since April 2003) |
|
|
|
Former Director of Boots Plc (from December 1997 until July 2003) |
Board Committee membership:
|
|
Chairman of the Remuneration Committee |
|
|
|
Member of the Nomination Committee |
BHP BILLITON ANNUAL REVIEW 2006 5
31
Board of Directors continued
Carlos Cordeiro AB, MBA, 50
Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since
February 2005. Mr Cordeiro was elected in 2005 and is not
subject to re-election in 2006.
Independent: Yes
Skills and experience: Carlos Cordeiro brings to the Board more than
20 years experience in providing strategic and financial advice to
corporations, financial institutions and governments around the world.
He was previously Partner and Managing Director of Goldman Sachs
Group Inc.
Other directorships and offices (current and recent):
|
|
Advisory Director of The Goldman Sachs Group Inc (since December
2001) |
|
|
|
Vice Chairman of Goldman Sachs (Asia) (since June 2000) |
Board Committee membership:
|
|
Member of the Remuneration Committee |
David Crawford BComm, LLB, FCA, FCPA, FAICD, 62
Term of office: Director of BHP Limited since May 1994. Director of
BHP Billiton Limited and BHP Billiton Plc since June 2001. Mr Crawford
was last re-elected in 2005 and, in accordance with the Groups policy
described under Tenure in section 4.3 below, is retiring and standing for
re-election in 2006.
Independent: Yes
Skills and experience: David Crawford has extensive experience in risk
management and business reorganisation. He has acted as a consultant,
scheme manager, receiver and manager and liquidator to very large and
complex groups of companies. He was previously Australian National
Chairman of KPMG, Chartered Accountants. The Board has nominated
Mr Crawford as the financial expert of the Risk and Audit Committee for
the purposes of the US Securities and Exchange Commission Rules and is
satisfied that he has recent and relevant financial experience for the
purposes of the UK Listing Authoritys Combined Code.
Other directorships and offices (current and recent):
|
|
Chairman of Lend Lease Corporation Limited (since May 2003) and
Director (since July 2001) |
|
|
|
Director of Fosters Group Limited (since August 2001) |
|
|
|
Director of Westpac Banking Corporation (since May 2002) |
|
|
|
Former Chairman of National Foods Limited (Director from November
2001 until June 2005) |
Board Committee membership:
|
|
Chairman of the Risk and Audit Committee |
Gail de Planque AB Mathematics, MS (Physics), PhD (Env Health Sciences), 61
Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since
19 October 2005. The Hon E G de Planque was elected in 2005 and is not
retiring or subject to re-election in 2006.
Independent: Yes
Skills and experience: Gail de Planque is an expert in nuclear technology
and has over 30 years experience as a physicist, adviser and regulator in
the field of nuclear energy. She also has significant experience as a
non-executive
Director of global energy companies and is a consultant on
atomic energy matters. She is a former Commissioner of the United States
Nuclear Regulatory Commission, a former Director of the Environmental
Measurements Laboratory of the US Department of Energy and a Fellow
and former President of the American Nuclear Society.
Other directorships and offices (current and recent):
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Director of TXU Corp (since February 2004) |
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Director of Northeast Utilities (since October 1995) |
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Director of Landauer Inc (since December 2001) |
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President of Strategy Matters Inc (since March 2000) |
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Director of Energy Strategists Consultancy Ltd (since May 1999) |
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Former Director of BNFL Plc (from November 2000 to March 2005) and
of BNG America Inc (from March 1995 to March 2006) |
Board Committee membership:
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Member of the Sustainability Committee |
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Member of the Remuneration Committee |
David Jenkins BA, PhD (Geology), 67
Term of office: Director of BHP Limited since March 2000. Director of
BHP Billiton Limited and BHP Billiton Plc since June 2001. Dr Jenkins
was last re-elected in 2005 and is not subject to re-election in 2006.
Independent: Yes
Skills and experience: David Jenkins is a recognised authority on oil and
gas technology. He was previously Chief Geologist, Director Technology
and Chief Technology Advisor to BP Plc. He was also a member of the
Technology Advisory Committee of the Halliburton Company and the
Advisory Council of Consort Resources and Chairman of the Energy
Advisory Panel of Science Applications International Corporation.
Other directorships and offices (current and recent):
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Director of Chartwood Resources Ltd (since November 1998) |
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Director of Orion International (Oil & Gas) Ltd (since March 2005) |
Board Committee membership:
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Member of the Remuneration Committee |
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Member of the Risk and Audit Committee |
Marius Kloppers BE (Chem), MBA, PhD (Materials Science), 44
Term of office: Director of BHP Billiton Limited and
BHP Billiton Plc since
January 2006. Appointed Group President Non-Ferrous Materials and
executive Director in January 2006 and was previously Chief Commercial
Officer. Mr Kloppers will seek election at the 2006 Annual General
Meetings.
Independent: No
Skills and experience: Marius Kloppers has extensive knowledge of the
mining industry and of BHP Billitons operations. Active in the mining and
resources industry since 1993, he was appointed Chief Commercial Officer
in December 2003. He was previously Chief Marketing Officer, Group
Executive of Billiton Plc, Chief Executive of Samancor Manganese and held
various positions at Billiton Aluminium, including Chief Operating Officer
and General Manager of Hillside Aluminium.
Other directorships and offices (current and recent):
Board Committee membership:
Chris Lynch BComm, MBA, FCPA, 52
Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since
January 2006. Appointed Group President Carbon Steel Materials in April
2006. Mr Lynch will seek election at the 2006 Annual General Meetings.
Independent: No
Skills and experience: Chris Lynch has extensive experience in finance
and knowledge of the mining industry. He joined the Group as Chief
Financial Officer of the Minerals Group in 2000 and was appointed Chief
Financial Officer in September 2001. Prior to that he held various positions
at Alcoa, including Vice President and Chief Information Officer for Alcoa
Inc and Chief Financial Officer, Alcoa Europe.
Other directorships and offices (current and recent):
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Director of Minerals Council of Australia |
Board Committee membership:
5 BHP BILLITON ANNUAL REVIEW 2006
32
Jacques Nasser AO, BBus, Hon DT, 58
Term of office: Appointed a non-executive Director of BHP Billiton Limited
and BHP Billiton Plc on 26 April 2006 with effect from 6 June 2006.
Mr Nasser will seek election at the 2006 Annual General Meetings.
Independent: Yes
Skills and experience: Following a 33 year career with Ford in various
leadership positions in Europe, Australia, Asia, South America and the
US, Jacques Nasser served as a member of the Board of Directors and as
President and Chief Executive Officer of Ford Motor Company from 1998
to 2001. He has more than 30 years experience in large-scale global
businesses.
Other directorships and offices (current and recent):
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Director of British Sky Broadcasting Ltd (since November 2002) |
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Director of Brambles Industries Limited and Brambles Industries Plc
(since March 2004) |
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Director of Quintiles Transnational Corporation (since March 2004) |
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Partner of One Equity Partners (since November 2002) |
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Member of the International Advisory Council of Allianz
Aktiengesellschaft (since February 2001) |
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Former Chairman of Polaroid Corporation (from 2002 to 2005) |
Board Committee membership:
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Member of the Risk and Audit Committee |
Miklos (Mike) Salamon BSc Mining Eng, MBA, 51
Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since
February 2003. Mr Salamon was last re-elected by shareholders in 2005
and is not subject to re-election in 2006.
Independent: No
Skills and experience: Mike Salamon has extensive knowledge of the
mining industry and of BHP Billitons operations. He was previously
Executive Chairman of Samancor, Managing Director of Trans-Natal Coal
Corporation and Chairman of Columbus. He was previously an executive
Director of Billiton Plc with responsibilities for nickel, chrome, manganese,
stainless steel and titanium, and Group President Non-Ferrous Materials.
He was appointed Executive President in January 2006 with responsibility
for health, safety, the environment and communities, marketing, strategy
and business development, exploration and technology.
Other directorships and offices (current and recent):
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Chairman of Samancor Limited (since October 1993) |
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Director of Cerro Matoso SA (since March 1996) |
Board Committee membership:
John Schubert BC Eng, PhD (Chem Eng), FIEAust, FTSE, 63
Term of office: Director of BHP Limited since June 2000 and a Director of
BHP Billiton Limited and BHP Billiton Plc since June 2001. Dr Schubert was
last re-elected in 2004 and is seeking re-election in 2006.
Independent: Yes
Skills and experience: John Schubert has considerable experience in the
international oil industry including at CEO level. He has had executive
mining and financial responsibilities and was CEO of Pioneer International
Limited for six years, where he operated in the building materials industry
in 16 countries. He has experience in mergers, acquisitions and
divestments, project analysis and management. He was previously
Chairman and Managing Director of Esso Australia Limited and President
of the Business Council of Australia.
Other directorships and offices (current and recent):
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Chairman of Commonwealth Bank of Australia (since November 2004)
and Director (since October 1991) |
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Director of Qantas Airways Limited (since October 2000) |
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Chairman of G2 Therapies Limited (since November 2000) |
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Former Director of Hanson Plc (from May 2000 until May 2003) |
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Former Chairman and Director of Worley Parsons Limited (from
November 2002 until February 2005) |
Board Committee membership:
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Member of the Nomination Committee |
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Member of the Sustainability Committee |
Group Company Secretary
Karen Wood BEd, LLB (Hons), FCIS, 50
Term of office: Company Secretary of BHP Billiton Limited and
BHP Billiton Plc since June 2001. Appointed Special Advisor and Head
of Group Secretariat and a member of the Office of Chief Executive in
December 2005.
Skills and experience: Karen Wood is a member of the Takeovers Panel
(Australia), the Business Regulatory Advisory Group (Australia) and the
JD (Juris Doctor) Advisory Board of the University of Melbourne. She is a
Fellow of the Institute of Chartered Secretaries and a member of the Law
Council of Australia and the Law Institute of Victoria. She chairs the
Global Ethics Panel, the Disclosure Committee and the US Disclosure
Controls Committee of BHP Billiton. She was previously the General
Counsel and Company Secretary of Bonlac Foods Limited.
The Board considers that the executive and non-executive
Directors together have the range of skills, knowledge and
experience necessary to govern the Group. The non-executive
Directors contribute international and operational experience;
understanding of the economics of the sectors in which the
Group operates; knowledge of world capital markets; and an
understanding of the health, safety, environmental and community
challenges that the Group faces. Executive Directors bring
additional perspectives to the Boards work through a deep
understanding of the Groups business.
Directors must demonstrate unquestioned honesty and integrity;
a preparedness to question, challenge and critique; and a
willingness to understand and commit to the highest standards of
governance. Each Director must ensure that no decision or action
is taken that places his or her interests in front of the interests of
the Group.
Directors commit to the collective decision-making processes of
the Board. Individual Directors are required to debate issues
openly and constructively and be free to question or challenge the
opinions of others.
The Nomination Committee assists the Board in ensuring that the
Board is comprised of high calibre individuals whose background,
skills, experience and personal characteristics will augment the
present Board and meet its future needs.
4.3 Independence
The Board considers that an appropriate balance between
executive and non-executive Directors is necessary to promote
shareholder interests and to govern the Group effectively. It is
committed to ensuring a majority of Directors are independent.
Process to determine independence
A copy of the
Independence Policy
is available at:
www.bhpbilliton.com/
aboutus/governance.
The Board has developed a policy that it
uses to determine the independence of its
Directors. This determination is carried out
annually or at any other time where the
circumstances of a Director change such
as to warrant reconsideration.
The Independence Policy provides that to be independent a
Director must be:
independent of management and any business or other
relationship that could materially interfere with the exercise of
objective, unfettered or independent judgement by the Director
or the Directors ability to act in the best interests of the BHP
Billiton Group.
BHP BILLITON ANNUAL REVIEW 2006 5
33
Corporate Governance Statement continued
Where a Director is considered by the Board to be independent but is affected by circumstances
that may give rise to a perception that
the Director is not independent, the Board has undertaken to explain the reasons why it reached its
conclusion. In applying the
independence test, the Board considers relationships with management, major shareholders,
subsidiary and associated companies and
other parties with whom the Group transacts business against predetermined materiality thresholds,
all of which are set out in the Policy.
A summary of the factors that may be perceived to impact the independence of Directors of BHP
Billiton is set out below.
Factors that may be perceived to affect independence
Tenure
The Board has a policy requiring non-executive Directors who have
served on the Board for more than nine years to stand for annual
re-election. All Directors seeking re-election must undergo a formal
performance assessment, irrespective of the period they have
served on the Board. For further information on the re-election
and review process, refer to section 5 of this Statement.
At the conclusion of the 2006 Annual General Meetings, Mr Don
Argus, Mr David Crawford and Dr David Brink will each have
served on the Board for more than nine years. Notwithstanding
those periods of service, the Board does not believe that any of
those Directors has served for a period that could materially
interfere with their ability to act in the best interests of the Group.
All are considered to have retained independence of character and
judgement and have not formed associations with management
(or others) that might compromise their ability to exercise
independent judgement or act in the best interests of the Group.
Retirement plan
The former Directors of BHP Limited (Mr Don Argus, Mr David
Crawford, Dr David Jenkins and Dr John Schubert) participated in
a retirement plan approved by shareholders in 1989. The plan was
closed on 24 October 2003 and benefits accrued to that date,
together with interest earned on the benefits, are held by the
Company and will be paid on retirement. The Board does not
believe that the independence of any participating Director is
compromised as a result of this plan.
Relationships and associations
Mr David Crawford was the National Chairman of KPMG in
Australia. He retired in June 2001 and has no ongoing relationship
with KPMG. KPMG was a joint auditor of Billiton Plc prior to the
merger with BHP Limited and of BHP Billiton up to 2003 and the
sole auditor of BHP Billiton from December 2003. The Board has
considered this matter annually since the time of the merger, and
again revisited it prior to the publication of this Statement and
does not consider Mr Crawfords independence to be
compromised. The Board considers Mr Crawfords financial acumen
to be important in the discharge of the Boards responsibilities.
Accordingly, his membership of the Board and Chairmanship of the
Risk and Audit Committee are considered by the Board to be
appropriate and desirable.
In June 2006, the Board reappointed Mr Paul Anderson a
non-executive Director. The Board considers Mr Anderson to
be independent.
In reaching this conclusion, the Board considered the terms of
its own Independence Policy, the principles on independence
contained in the UK Combined Code, the Principles of Good
Corporate Governance published by the Australian Stock Exchange
Corporate Governance Council and the helpful guidance offered
by a number of shareholder voting agencies.
Those principles and guidance include a range of considerations
regarded as relevant in determining independence, including that
the Director in question has not been an executive in the past five
years. This specific consideration is included in BHP Billitons own
Independence Policy. That Policy, like most of the principles and
guidance that inform the issue, also makes clear that a Director
may be considered independent, notwithstanding the presence
of one or more of the stated relevant considerations. This reflects
the Boards view that a Directors independence is determined
more by his or her character and integrity than by past
relationships or associations.
The key issue for the Board in assessing Mr Andersons
independence was whether the fact that he had served as Chief
Executive Officer until July 2002 and a non-executive Director until
November 2002, on its own, was sufficient reason to classify him
as not independent. The Board concluded that given the elapse
of time since Mr Anderson was employed by BHP Billiton, the fact
that he was so employed did not interfere with his objective,
unfettered or independent judgement or his ability to act in the
best interests of the Group. In reaching its decision, the Board
determined that it could not form the view that the mere elapse of
a further (relatively short) period of time until the expiration of five
years from his departure as an executive would make any
difference to its assessment.
The Board considers Mr Anderson a Director of the highest calibre,
bringing to its deliberations a broad range of skills derived from a
long history in the energy sector, specific understanding and
knowledge of the mining industry and BHP Billitons role in that
industry, and the particular risks associated with a diversified
mining business.
Some of the Directors hold or previously held positions in
companies with which BHP Billiton has commercial relationships.
Those positions and companies are set out in section 4.2 of this
Governance Statement. All transactions between each of these
companies and BHP Billiton have been assessed in accordance
with the Independence Policy and are not material. All of these
transactions were entered into in the usual course of BHP Billitons
business and were within the scope of managements authority
under the terms of the Board Governance Document. The Board
was not required to consider, or approve, any of these
transactions. If Board approval was required for a transaction
between BHP Billiton and any company with which a Director has
an association, then BHP Billitons protocols would apply and the
Director concerned would excuse himself or herself from
participating in the decision.
The only
transactions during the year that amounted to related-party
transactions with Director-related entities under International
Financial Reporting Standards (IFRS) are the transactions between
BHP Billiton and the Wesfarmers Group, of which Mr Michael
Chaney was the Managing Director until July 2005. Details are
set out in note 31 to the financial statements in the Annual Report.
The Board has assessed all of the relationships between BHP
Billiton and the companies in which the Directors hold or held
positions and concluded that in all cases the relationships do not
interfere with the Directors exercise of objective, unfettered or
independent judgement or their ability to act in the best interests
of the BHP Billiton Group.
Some of the Directors hold cross-directorships. Mr Don Argus
and Mr Jacques Nasser are both directors of Brambles Industries
Limited and Brambles Industries Plc, and are both members of
the International Advisory Council of Allianz Aktiengesellschaft.
Dr John Schubert and Mr Paul Anderson are both directors of
Qantas Airways Limited. The Board has assessed each of these
relationships and in all cases concluded that the relationships do
not interfere with the Directors exercise of objective, unfettered or
independent judgement or the Directors ability to act in the best
interests of the BHP Billiton Group.
5 BHP BILLITON ANNUAL REVIEW 2006
34
Executive Directors
The four executive Directors, Mr Charles Goodyear, Mr Marius
Kloppers, Mr Chris Lynch and Mr Miklos (Mike) Salamon, are not
considered independent because of their executive responsibilities.
None of the executive Directors hold directorships in any other
company included in the ASX 100 or FTSE 100.
4.4 Terms of appointment
A copy of the letter
is available at
www.bhpbilliton.com/
aboutus/governance.
The Board has adopted a letter of
appointment that contains the terms on
which non-executive Directors will be
appointed, including the basis upon
which they will be indemnified.
4.5 Induction and training
A copy of the
induction program
is available at
www.bhpbilliton.com/
aboutus/governance.
Each new non-executive Director
undertakes an induction program
specifically tailored to their needs.
Non-executive Directors participate in the Boards Training and
Development Program, which has been designed to ensure that
non-executive Directors update their skills and knowledge to
maximise their effectiveness as Directors throughout their tenure.
4.6 Independent advice
The Board and its Committees may seek advice from independent
experts whenever it is considered appropriate. Individual Directors,
with the consent of the Chairman, may seek independent
professional advice on any matter connected with the discharge of
their responsibilities, at the Groups expense. No Director availed
him or herself of this right during the year.
4.7 Remuneration
Details of the remuneration policies and practices of the Group
and the remuneration paid to the Directors (executive and
non-executive) are set out in the Remuneration Report on pages
45 to 61. Shareholders will be invited to consider and to approve
the Remuneration Report at the 2006 Annual General Meetings.
4.8 Share ownership and dealing
Non-executive Directors have agreed to apply at least 25 per cent
of their remuneration to the purchase of BHP Billiton Shares until
they achieve a shareholding equivalent in value to one years
remuneration. Thereafter, they must maintain at least that level
of shareholding throughout their tenure.
Details of the Shares held by Directors are set out on pages 65 and
66 of this Annual Review. As at the date of this Annual Review, all
of the Directors had met this requirement.
A copy of the
Securities Dealing
Code can be viewed at
www.bhpbilliton.com/
aboutus/governance.
BHP Billiton has a Securities Dealing
Code that covers dealings in securities by
Directors and senior executives. Directors
and senior executives must not deal in
Shares or other securities of BHP Billiton
during designated prohibited periods and
at any time that they have unpublished
price sensitive information.
All dealings by Directors in BHP Billiton securities are reported to
the Board and to the stock exchanges.
4.9 Chairman
The Chairman, Mr Don Argus, is considered by the Board to be
independent. He was appointed Chairman of BHP Limited in 1999
and has been Chairman of the Group since 2001.
The Chairman leads the Board and facilitates its work. He is
responsible for ensuring that the principles and processes of the
Board are maintained, including the provision of accurate, timely
and clear information. He encourages debate and constructive
criticism. The Chairman, in conjunction with the CEO and Company
Secretary, sets agendas for meetings of the Board that focus on
the strategic direction and performance of the Group. He commits
to and leads Board and individual Director performance
assessments. The Chairman has authority to speak and act for the
Board and to represent the Board to shareholders. He also
presents shareholders views to the Board and facilitates the
relationship between the Board and the CEO.
Mr Argus is Chairman of Brambles Industries, a company listed on
the Australian and London Stock Exchanges. The Board considers
that neither his Chairmanship of Brambles, nor any of his other
commitments (set out on page 31 of this Annual Review), interfere
with the discharge of his responsibilities to BHP Billiton. The Board
is satisfied that he makes sufficient time available to serve BHP
Billiton effectively.
The Group does not have a Deputy Chairman but has identified
Dr John Schubert to act as Chairman should the need arise at short
notice.
4.10 Senior Independent Director
The Board has appointed Dr John Buchanan as the Senior
Independent Director of BHP Billiton Plc. Dr Buchanan is available
to shareholders who have concerns that cannot be addressed
through the Chairman, CEO or CFO.
4.11 Company Secretary
Ms Karen Wood is Group Company Secretary of BHP Billiton.
Ms Wood is responsible for developing and maintaining the
information systems and processes that enable the Board to fulfil
its role. She is also responsible to the Board for ensuring that Board
procedures are complied with and advises the Board on governance
matters. All Directors have access to her advice and services.
Independent advisory services are retained by her office at the
request of the Board or Board Committees. Ms Wood is supported
by Mr Robert Franklin, who is Company Secretary of BHP Billiton Plc,
and Ms Jane McAloon, who is Company Secretary of BHP Billiton
Limited. The Board appoints and removes the Company Secretaries.
4.12 Meetings
The Board met seven times during the year. Generally, meetings
run for two days. Four of those meetings were held in Australia
and three in the UK.
Attendance by Directors at Board and Board Committee meetings
is set out in the table in section 5.1. The non-executive Directors
met three times during the year in the absence of executive
Directors and other executives except the Company Secretary.
Members of the Office of the Chief Executive (OCE) and other
members of senior management attend meetings of the Board by
invitation.
5. Board of Directors review, re-election and renewal
5.1 Review
The Board is committed to transparency in determining Board
membership and in assessing the performance of Directors.
Contemporary performance measures are considered an important
part of this process.
The Board regularly evaluates the performance of the Board as a
whole, its Committees, the Chairman, individual Directors and the
governance processes that support Board work.
The performance of the Board is reviewed each year. That review
focuses on individual Directors and the Board as a whole in
alternate years. The Board assesses the performance of the
Committees on an annual basis.
Performance of individual Directors is assessed against a range of
dimensions including the ability of the Director to consistently take
the perspective of creating shareholder value; to contribute to the
development of strategy, to understand the major risks affecting
the Group; to provide clear direction to management; to contribute
to Board cohesion; to commit the time required to fulfil the role;
and to listen to and respect the ideas of fellow Directors and
members of management.
The process is managed by the Chairman, but feedback on the
Chairmans performance is provided to him by Dr Schubert.
BHP BILLITON ANNUAL REVIEW 2006 5
35
Corporate Governance Statement continued
Attendance at Board and Board Committee meetings during the year ended 30 June 2006
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Board |
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Risk and Audit |
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Nomination |
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Remuneration |
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Sustainability |
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A* |
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B |
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A |
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B |
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A |
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B |
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A |
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B |
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A |
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B |
Paul Anderson (1)
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1 |
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1 |
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Don Argus
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7 |
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7 |
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6 |
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6 |
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David Brink
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7 |
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7 |
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8 |
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7 |
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4 |
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4 |
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John Buchanan
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7 |
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7 |
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6 |
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5 |
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6 |
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6 |
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Michael Chaney (2)
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4 |
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4 |
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Carlos Cordeiro (3)
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7 |
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7 |
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3 |
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3 |
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David Crawford
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7 |
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7 |
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8 |
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8 |
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E Gail de Planque (4)
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5 |
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4 |
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1 |
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2 |
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Charles Goodyear
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7 |
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6 |
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1 |
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1 |
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David Jenkins
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7 |
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7 |
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8 |
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8 |
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6 |
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6 |
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Marius Kloppers (5)
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3 |
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3 |
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Chris Lynch (5)
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3 |
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3 |
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Jacques Nasser (1)
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1 |
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1 |
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1 |
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0 |
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Lord Renwick of Clifton (2)
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4 |
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3 |
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2 |
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2 |
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3 |
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3 |
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Mike Salamon
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7 |
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6 |
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1 |
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1 |
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John Schubert
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7 |
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7 |
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6 |
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6 |
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4 |
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4 |
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2 |
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2 |
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Column A indicates the number of meetings held during the period the Director was
a member of the Board and/or Committee.
Column B indicates the number of meetings attended during the period the Director was a
member of the Board and/or Committee.
|
(1) Paul Anderson and Jacques Nasser
appointed 6 June 2006. |
(2) Michael Chaney and Lord Renwick of Clifton retired 25 November 2005. |
(3) Carlos Cordeiro attended all meetings during the
period, including one meeting by invitation. |
(4) Gail de Planque appointed 19 October 2005. |
(5) Marius Kloppers and Chris Lynch appointed 1 January 2006. |
* Includes two meetings held by teleconference. |
5.2 Re-election
The Board has determined that non-executive Directors who have
served on the Board for more than nine years from the date of
their first election must stand for re-election annually from the first
Annual General Meeting after the expiration of their current term.
At least one third of the remaining Directors retire at each Annual
General Meeting. Directors are not appointed for a fixed term but
must submit themselves to shareholders for re-election after three
years. The period that Directors have served on the Board and the
years in which they were first appointed and last elected are set
out in section 4.2.
Re-appointment is not automatic. Retiring Directors who are
seeking re-election are subject to a performance appraisal
overseen by the Nomination Committee.
Following that appraisal, the Board, on the recommendation of the
Nomination Committee, makes a determination as to whether it
will endorse a retiring Director for re-election. The Board will not
endorse a Director for re-election if his or her performance is not
considered satisfactory. The Board will advise shareholders in the
notice of meeting whether or not re-election is supported.
Directors cannot be reappointed if they have reached the age of
70 years, unless that appointment is approved by shareholders in
the form of a special resolution. A Director so appointed must
retire at the next Annual General Meeting.
5.3 Renewal
The Board plans for its own succession with the assistance of the
Nomination Committee. In so doing, the Board:
|
|
considers the skills, knowledge and experience necessary to
allow it to meet the strategic vision for the Group |
|
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assesses the skills, knowledge and experience currently
represented |
|
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identifies any skills, knowledge and experience not adequately
represented and agrees the process necessary to ensure a
candidate is selected that brings those traits |
|
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reviews how Board performance might be enhanced, both at an
individual Director level and for the Board as a whole. |
When considering new appointments to the Board, the
Nomination Committee oversees the preparation of a position
specification that is provided to an independent recruitment
organisation retained to conduct a global search. In addition to the
specific skills, knowledge and experience deemed necessary, the
specification contains criteria such as a proven track record of
creating shareholder value; unquestioned integrity; a commitment
to the highest standards of governance; having the required time
available to devote to the job; a clear grasp of strategic thinking;
an awareness of market leadership; outstanding monitoring skills;
a preparedness to question, challenge and critique; and an
independent point of view.
Newly appointed Directors must submit themselves to
shareholders for election at the first Annual General Meeting
following their appointment.
6. Management
The CEO holds delegated authority from the Board to achieve the
Corporate Objective, save for those matters the Board has retained
for its own decision-making (set out in section 3). In devolving that
authority, the CEO has developed an Approvals Framework that
delegates authority to Committees and individual members of
management. Notwithstanding those further delegations, the
CEO remains accountable to the Board for the authority delegated
to him.
6.1 Office of the Chief Executive
The CEO has established the Office of the Chief Executive (OCE) to
assist him in exercising his authority.
The role of the OCE is to provide advice to the CEO on matters
that are strategic and long term in nature or have the potential
to significantly impact the Group.
It determines key Group-wide policies including the Charter, Guide
to Business Conduct, the Sustainable Development Policy, the
Human Resources Strategy and the Enterprise-Wide Risk
Management Policy.
5 BHP BILLITON ANNUAL REVIEW 2006
36
The members of the OCE are:
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Chip Goodyear, Chief Executive Officer and executive Director
(Chair) |
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John Fast, Chief Legal Counsel and Head of External Affairs |
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Robert Kirkby, Executive President |
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Marius Kloppers, Group President, Non-Ferrous Materials and
executive Director |
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Chris Lynch, Group President Carbon Steel Materials and
executive Director |
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Marcus Randolph, Chief Organisation Development Officer |
|
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Mike Salamon, Executive President and executive Director |
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Alex Vanselow, Chief Financial Officer |
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Karen Wood, Special Advisor and Head of Group Secretariat |
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J Michael Yeager, Group President Energy |
Mr Mike Salamon will retire from the Group on 26 October 2006
and Mr Bob Kirkby on 31 December 2006. Mr Philip Aiken,
President UK, has retired from the OCE and will retire from the
Group on 31 December 2006.
6.2 Other management committees
The CEO draws on the work of other Committees, including the
Executive Committee, Financial Risk Management Committee
(FRMC) and the Investment Risk Committee (IRC). During the year
the roles of the Executive and Operating Committees were
reviewed and a single new Executive Committee was formed.
The purpose of the Executive Committee is to assist the CEO to
increase the value of the Group by achieving agreed operational
outcomes consistent with the Corporate Objective.
The Committees role is to provide feedback and advice to the
CEO on operational issues, provide leadership by identifying and
addressing Group-wide operating issues, prioritise Group
improvement activities, implement Group-wide policy as
determined by the OCE, provide direction and priorities for the
Groups support functions and participate in strategy development.
The FRMC monitors the Groups financial risk management policies
and exposures and approves financial transactions within the
scope of its authority. The IRC oversees the management approval
processes for major investments, which are designed to ensure
that investments are aligned to the Groups agreed strategies and
values; risks are identified and evaluated; investments are fully
optimised to produce the maximum shareholder value within an
acceptable risk framework; and appropriate risk management
strategies are pursued.
The members of the Executive Committee are:
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Robert Kirkby, Executive President (Chair) |
|
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Ian Ashby, President and Chief Operating Officer, WA Iron Ore |
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Peter Beaven, President Manganese |
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Alberto Calderon, President Diamonds and Specialty Products |
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Diego Hernandez, President Base Metals |
|
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Graeme Hunt, President Aluminium |
|
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Marius Kloppers, Group President, Non-Ferrous Materials and
executive Director |
|
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Chris Lynch, Group President Carbon Steel Materials and
executive Director |
|
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Rebecca McDonald, President Gas and Power |
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David Murray, President Metallurgical Coal |
|
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Chris Pointon, President Stainless Steel Materials |
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Tom Schutte, President Marketing |
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Mahomed Seedat, President Energy Coal |
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J Michael Yeager, Group President Energy |
The names and biographical details of members of the OCE and
Executive Committee are set out below.
Charles Goodyear BSc, MBA, FCPA, 48
Chief Executive Officer and executive Director
Chairman of the OCE
Charles Goodyear joined the Group as Chief Financial Officer in 1999.
He was appointed to the Boards of BHP Billiton Limited and BHP Billiton
Plc in November 2001 and as Chief Executive Officer in January 2003.
He previously held positions of Chief Development Officer and of Chief
Financial Officer. He is a former President of Goodyear Capital Corporation
and former Executive Vice President and Chief Financial Officer of
Freeport-McMoRan Inc, and has extensive financial, corporate
restructuring and merger and acquisition experience. He is a Member
of ICMM and the National Petroleum Council.
Ian R Ashby BEng Mining (Melbourne University), 48
President and Chief Operating Officer, WA Iron Ore
Member of the Executive Committee
Ian Ashby joined the group in 1987. He was appointed President and
Chief Operating Officer WA Iron Ore in March 2005 and a member of the
Executive Committee in April 2006 . Prior to that he had worked in
numerous roles in the Base Metals group including Vice President and
Chief Operating Officer 2003-04, Vice President Joint Ventures and Work
Out Assets 2002-03, and Project Director Escondida Phase 4 Expansion
2001-02. He has worked in broad range of operating and project roles
across the Group. He is a Vice President of the Chamber of Minerals and
Energy of Western Australia.
Peter Beaven BAcc, Chartered Accountant (South Africa), 39
President Manganese
Member of the Executive Committee
Peter Beaven joined the Group in 2002. He was appointed President
Manganese in October 2005 and appointed a member of the Executive
Committee in December 2005. He was previously Vice President Strategy
and Business Development for Carbon Steel Materials. Prior to this he was
executive Director in the Investment Banking division at UBS. Previously,
he worked at BHP being responsible for various disposals, mergers and
acquisition projects, having joined BHP from Dresdner Kleinwort Bensons
Investment Banking Division in London.
Alberto Calderon PhD Econ, M Phil Econ Yale University, JD Law,
BA Econ Andes University, 46
President Diamonds and Specialty Products
Member of the Executive Committee
Alberto Calderon joined the Group as President Diamonds and Specialty
Products in February 2006. Prior to this, he was President of Cerrejón Coal
Company from July 2002. His previous positions include President of
Ecopetrol, General Manager of the Power Company of Bogota and various
senior roles in investment banking and in the Colombian Government.
John Fast BEc (Hons), LLB (Hons), FFin, 56
Chief Legal Counsel and Head of External Affairs
Member of the OCE, Investment Risk Committee and Disclosure Committee
John Fast joined the Group as Vice President and Chief Legal Counsel in
December 1999 and was appointed Head of Asset Protection in July 2001
and Head of External Affairs (Government Relations) in January 2003.
He is a Director of the Medical Research Foundation for Women and Babies
(Australia), Chairman of the Rotary Indigenous Australian Tertiary
Scholarship Advisory Board, a member of the Takeovers Panel (Australia),
a member of the Strategic Advisory Board to The University of Melbourne
Law Schools Graduate Program, Fellow of the Financial Services Institute of
Australasia, a member of the Markets Policy Group of that Institute, and a
member of the Law Institute of Victoria, a member of the General Counsel
100 (UK) and a member of the Corporate Counsel Advisory Committee of
the Metropolitan Corporate Counsel (USA). Before joining BHP Billiton, he
was the Senior Commercial Partner at the law firm Arnold Bloch Leibler.
Diego Hernandez Civil Mining Engineer, Ecole Nationale Supérieure des
Mines de Paris, 57
President Base Metals
Member of the Executive Committee
Diego Hernandez joined the Group as President Base Metals in April 2004.
Chairman of Escondida, he was previously executive Director, CVRD Non
Ferrous Division and has extensive experience in the resources sector in
South America. His previous positions include President and Chief
Executive Officer Compañía Minera Collahuasi, Technical Director Rio Tinto
Brazil, Chief Executive Officer Minera Mantos Blancos, and a number of
management roles in Anglo American South America.
BHP BILLITON ANNUAL REVIEW 2006 5
37
Corporate Governance Statement continued
Charles Goodyear Ian R Ashby Peter Beaven Alberto Calderon John Fast |
Diego Hernandez Graeme Hunt Robert Kirkby Marius Kloppers Chris Lynch |
Tom Schutte Mahomed Seedat Alex Vanselow Karen Wood J Michael Yeager |
Graeme Hunt BMet, MBA, FAusIMM, London Business School Senior Executive
Programme, 49
President Aluminium
Member of the Executive Committee
Graeme Hunt joined the Group in 1975 and was appointed President
Aluminium in April 2006. He was previously President Iron Ore, President
Western Australia Iron Ore, Vice President Portfolio Restructuring Strategy
BHP Corporate, Group General Manager BHP Manganese, and General
Manager Port Kembla Coal Terminal Ltd. Prior to this he held roles in the
Transport and Steel divisions of the Group.
Robert
Kirkby BE Civil (Hons), Harvard Business School Advanced Management Program, 59
Executive President
Chairman of the Executive Committee and member of the OCE
Robert Kirkby joined the Group in 1978 and was appointed Group
President Carbon Steel Materials in March 2004 and Executive President in
April 2006. He was previously President Carbon Steel Materials, Chief
Operating Officer, BHP Minerals, President BHP Steelmaking and Energy,
Group General Manager and Chief Executive Officer BHP Coal, Group
General Manager and Chief Operating Officer of various divisions in BHP
Steel, and General Manager Newman-BHP Minerals.
Marius Kloppers BE (Chem), MBA, PhD (Materials Science), 44
Group President Non-Ferrous Materials and executive Director
Member of the OCE, Executive Committee, Financial Risk Management
Committee and Investment Risk Committee
Marius Kloppers has been active in the mining and resources industry
since 1993 and was appointed Chief Commercial Officer in December
2003. He was previously Chief Marketing Officer, Group Executive of
Billiton Plc, Chief Executive of Samancor Manganese and held various
positions at Billiton Aluminium, among them Chief Operating Officer
and General Manager of Hillside Aluminium. His previous career was
as a consultant with McKinsey Inc.
Chris Lynch BComm, MBA, FCPA, 52
Group President Carbon Steel Materials and executive Director
Member of the OCE and Executive Committee
Chris Lynch joined the Group in 2000 as Chief Financial Officer of the
Minerals Group and was appointed Chief Financial Officer in September
2001, executive Director in January 2006 and Group President Carbon
Steel Materials in April 2006. He was Vice President and Chief Information
Officer for Alcoa Inc based in Pittsburgh, US, and Chief Financial Officer,
Alcoa Europe located in Lausanne, Switzerland. He was also Managing
Director KAAL Australia Ltd, a joint venture company formed by Alcoa Inc
and Kobe Steel, Manager Financial Risk and Treasury Operations for Alcoa
Inc in Pittsburgh, US, and Corporate Accounting Manager at Alcoa of
Australia Ltd.
5 BHP BILLITON ANNUAL REVIEW 2006
38
Rebecca McDonald BSc, 54
President Gas and Power
Member of the Executive Committee
Rebecca McDonald joined the Group as President Gas and Power in March
2004. She was previously President of the Houston Museum of Natural
Science, Chairman and Chief Executive Officer of Enron Global Assets after
a long career at Amoco, where her last role was President and Chief
Executive Officer of Amoco Energy Development Company. She is an
independent Director of Granite Construction and BOC Group.
David (Dave) Murray BSc (Civil Engineering) University of Natal, South Africa;
Post Grad Dip (Mining), University of Pretoria, South Africa; Advanced Executive
Program UNISA, 51
President Metallurgical Coal
Member of the Executive Committee
From 1978 until 1999 David Murray worked for the Trans-Natal Coal
Corporation/Ingwe Coal Corporation, progressing through various
operational, project and managerial positions. In 1993 he was appointed
Managing Director Trans-Natal Coal Corporation then appointed Chief
Executive of Billiton Coal in 1999. He moved to Australia in 2001 as CEO of
the newly formed BHP Billiton Mitsubishi Alliance. In 2005, he moved into
his current role as President Metallurgical Coal within Carbon Steel
Materials.
Chris Pointon BSc (Chemistry & Earth Sciences), PhD (Geology), 58
President Stainless Steel Materials
Member of the Executive Committee
Chris Pointon was appointed President Stainless Steel Materials in June
2001. He was previously Chief Executive Officer, Nickel and Chrome for
Billiton Plc and Managing Director of QNI Ltd. He has over 20 years of
global experience as a mining executive, in particular in senior
management in Nickel since 1996.
Marcus Randolph BSc, MBA Harvard Business School, 50
Chief Organisation Development Officer
Member of the OCE
Marcus Randolph was previously President, Diamonds and Specialty
Products, Chief Development Officer Minerals and Chief Strategic Officer
Minerals for BHP Billiton. His prior career includes Chief Executive Officer,
First Dynasty Mines, Mining and Minerals Executive, Rio Tinto Plc, Director
of Acquisitions and Strategy, Kennecott Inc, General Manager Corporacion
Minera Nor Peru. Asarco Inc, and various mine operating positions in the
US with Asarco Inc.
Miklos (Mike) Salamon BSc Mining Engineering, MBA, 51
Executive President and executive Director
Member of the OCE and Investment Risk Committee
Mike Salamon was appointed an executive Director in February 2003 and
Executive President in January 2006. He was Group President Non-Ferrous
Materials (consisting of Aluminium, Base Metals and Stainless Steel
Materials). He is Chairman of Samancor and a Director of Cerro Matoso.
From July 1997 to June 2001 he was an executive Director of Billiton Plc
with responsibilities for nickel, chrome, manganese, stainless steel and
titanium and is a former Executive Chairman of Samancor, Managing
Director of Trans-Natal Coal Corporation and Chairman of Columbus.
Tom Schutte CA (SA) (CAISA), Certificate in the Theory of Accountancy, BComm
(Hons), Accountancy, BComm Accounting, 41
President Marketing
Member of the Executive Committee
Tom Schutte has worked in the mining and resources industry since June
1990. Appointed President Marketing in December 2005, he was
previously Chief Financial Officer Commercial, BHP Billiton Marketing,
Marketing Director Billiton Manganese, Commercial and Development
Manager, Samancor Manganese, and Financial Consultant, Gencor
Corporate Finance. He started his career with Coopers and Lybrand.
Mahomed Seedat BEc (Electrical), MDP Harvard, PMD UNISA, 50
President Energy Coal
Member of the Executive Committee
Mahomed Seedat was appointed President Energy Coal in January 2005.
He previously held the positions of President and Chief Operating Officer
Ingwe Collieries, President and Chief Operating Officer Aluminium
Southern Africa with responsibility for the operations at the Hillside and
Bayside aluminium smelters in Richards Bay, South Africa and the Mozal
aluminium smelter in Maputo, Mozambique. His former roles in the
Aluminium Customer Sector Group include Engineering Manager,
Maintenance Manager and General Manager of the Hillside Aluminium
Smelter in Richards Bay. His previous career was in the coal industry with
Amcoal, where he held various positions at its collieries.
Alex Vanselow BComm, Wharton AMP, 43
Chief Financial Officer
Member of the OCE and Chairman of the Investment Risk Committee and
Financial Risk Management Committee and member of the Disclosure
Committee
Alex Vanselow joined the Group in 1989 and was appointed President
Aluminium in March 2004. He was previously Chief Financial Officer of
Aluminium, Vice President Finance and Chief Financial Officer of Orinoco
Iron CA and Manager Accounting and Control BHP Iron Ore. His prior
career was with Arthur Andersen.
Karen Wood BEd, LLB (Hons), FCIS, 50
Special Advisor and Head of Group Secretariat
Member of the OCE and Chairman of the Global Ethics Panel, the
Disclosure Committee and the US Disclosure Controls Committee
Karen Wood was appointed Company Secretary of BHP Billiton Limited
and BHP Billiton Plc in June 2001 and was appointed Special Advisor and
Head of Group Secretariat in December 2005. She is a member of the
Takeovers Panel (Australia), the Business Regulatory Advisory Group (Australia) and the JD (Juris Doctor) Advisory Board of the University of
Melbourne, a Fellow of the Institute of Chartered Secretaries and a
member of the Law Council of Australia and the Law Institute of Victoria.
Before joining BHP Billiton, she was General Counsel and Company
Secretary for Bonlac Foods Limited.
J Michael Yeager BSc, MSc, 53
Group President Energy
Member of the OCE and Executive Committee
J Michael Yeager joined the Group in April 2006 as Group President
Energy. He was previously Vice President, ExxonMobil Development
Company with responsibility for major joint venture projects. Other
previous roles include Senior Vice President, Imperial Oil Ltd and Chief
Executive Officer, Imperial Oil Resources, Vice President Africa, ExxonMobil
Production Company, Vice President Europe, ExxonMobil Production
Company and President, Mobil Exploration and Production in the US.
BHP BILLITON ANNUAL REVIEW 2006 5
39
Corporate Governance Statement continued
7. Business conduct
The BHP Billiton Group has published a Guide to Business
Conduct, which is available in eight languages. The Guide reflects
the Charter values of integrity, respect, trust and openness.
It provides clear direction and advice on conducting business
internationally; interacting with communities, governments
and business partners; and general workplace behaviour.
The Guide can be
found at the
Groups website at
www.bhpbilliton.com/aboutus/governance.
The Guide outlines BHP Billitons position
on a wide range of ethical and legal issues
including conflicts of interest, financial
inducements, bribery, trading in securities
and political contributions. The Guide
applies to Directors and to all employees,
regardless of their position or location. Consultants, contractors
and business partners are also expected to act in accordance with
the Guide.
BHP Billiton has established regional helplines so that employees
can seek guidance or express concerns on Group related issues.
Reports can be made anonymously and without fear of retaliation.
A fraud hotline facility is available for reporting cases of suspected
misappropriations, fraud, bribery or corruption. Arrangements are
in place to investigate such matters. Where appropriate,
investigations are conducted independently. Further information
on the Business Conduct Helpline and fraud hotline can be found
in the BHP Billiton Guide to Business Conduct.
The BHP Billiton Group maintains a position of impartiality with
respect to party politics. Accordingly, it does not contribute funds
to any political party, politician or candidate for public office.
It does, however, contribute to the public debate of policy issues
that may affect it in the countries in which it operates.
8. Board Committees
The Board has established Committees to assist it in exercising
its authority, including monitoring the performance of the Group
to gain assurance that progress is being made towards the
Corporate Objective within the limits imposed by the Board.
The permanent Committees of the Board are the Risk and
Audit Committee, the Sustainability Committee, the Nomination
Committee and the Remuneration Committee. Ad-hoc Committees
are formed from time to time to deal with specific matters.
The terms of reference
for each Committee
can be found at
www.bhpbilliton.com/
aboutus/governance.
Each of the permanent Committees has
terms of reference under which authority
is delegated by the Board.
The office of the Company Secretary
provides secretariat services for each
of the Committees. Committee meeting
agendas, papers and minutes are made available to all members
of the Board. Subject to appropriate controls and the overriding
scrutiny of the Board, Committee Chairmen are free to use
whatever resources they consider necessary to discharge their
responsibilities.
Reports from each of the Committees appear below.
8.1 Risk and Audit Committee Report
The Risk and Audit Committee (RAC) met eight times during
the year. Its members are Mr D A Crawford (Chairman),
Dr D C Brink, Dr D A L Jenkins and Mr J Nasser. Mr Nasser
joined the Committee during the year following his
appointment as a Director. The Board has nominated
Mr D A Crawford as the Committees financial expert.
Role and focus
The role of the RAC is to assist the Board in monitoring the
decisions and actions of the CEO and the Group through its
oversight of the integrity of the financial statements and the
effectiveness of the system of internal controls and risk
management. In performing this role the RAC focuses on the
appointment, remuneration, qualifications, performance and
independence of the External Auditor, and the integrity of the
audit process as a whole; the effectiveness of the systems of
internal control and risk management; the performance and
leadership of the role of the Vice President Risk Management
and Assurance and of the internal audit function; compliance
with legal and statutory requirements; and compliance by
management with constraints imposed by the Board.
Activities undertaken during the year
Integrity of financial statements
The RAC assists the Board in assuring the integrity of the
financial statements. The RAC evaluates and makes
recommendations to the Board about the appropriateness of,
and changes to, accounting policies and practices, areas of
judgement, compliance with Accounting Standards, stock
exchange and legal requirements and the results of the external
audit. It reviews the half yearly and annual financial statements
and makes recommendations on specific actions or decisions
(including formal adoption of the financial statements and
reports) the Board should consider in order to maintain the
integrity of the financial statements. From time to time the
Board may delegate authority to the RAC to approve the
release of the statements to the stock exchanges, shareholders
and the financial community.
The CEO and CFO have certified that the 2006 financial
statements present a true and fair view, in all material respects,
of BHP Billitons financial condition and operating results and
are in accordance with applicable regulatory requirements.
Managing the relationship with the External Auditor
The RAC manages the relationship between the Group and the
External Auditor on behalf of the Board. It recommends to the
Board potential auditors for appointment and the terms of
engagement, including remuneration. In December 2003, the
Board, on the recommendation of the RAC, approved the
appointment of KPMG. Shareholders are asked to approve
reappointment of the auditors each year in the UK.
The RAC evaluates the performance of the External Auditor
during its term of appointment against specified criteria
including delivering value to shareholders and the Group.
BHP Billiton is committed to auditor independence and the
RAC reviews the integrity, independence and objectivity of
the External Auditor. This review includes:
|
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confirming that the External Auditor is, in its professional
judgement, independent of the Group |
|
|
|
obtaining from the External Auditor an account of all
relationships between the External Auditor and the Group |
|
|
|
monitoring the number of former employees of the External
Auditor currently employed in senior positions in the Group
and assessing whether those appointments impair, or appear
to impair, the External Auditors judgement or independence |
|
|
|
considering whether the various relationships between the
Group and the External Auditor collectively impair, or appear
to impair, the External Auditors judgement or independence |
|
|
|
determining whether the compensation of individuals
employed by the External Auditor who conduct the audit is
tied to the provision of non-audit services and, if so, whether
this impairs, or appears to impair, the External Auditors
judgement or independence |
|
|
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reviewing the economic importance of the Group to the
External Auditor and assessing whether that importance
impairs, or appears to impair, the External Auditors
judgement or independence. |
5 BHP BILLITON ANNUAL REVIEW 2006
40
8.1
Risk and Audit Committee report continued
The Group audit engagement partner will rotate every five years.
This Policy can
be viewed at
www.bhpbilliton.com/aboutus/governance.
The Group has a policy governing the
conduct of non-audit work by the
auditors. Under the non-audit services
Policy the External Auditor cannot
provide services where the External
Auditor:
|
|
may be required to audit its own work |
|
|
|
participates in activities that would normally be undertaken
by management |
|
|
|
is remunerated through a success fee structure |
|
|
|
acts in an advocacy role for BHP Billiton. |
Fees paid to the External Auditor during the year for audit
and other services were US$14.71 million, of which 75 per cent
comprised audit fees, 14 per cent audit-related fees and 11 per
cent taxation and other services. Details of the fees paid are set
out in note 5 to the summary financial statements and note 4
to the financial statements.
Based on the review by the RAC, the Board is satisfied that the
External Auditor is independent.
Effectiveness of systems of internal control and risk management
In delegating authority to the CEO to make the decisions
necessary to run the business, the Board has established limits
on the manner in which that authority can be exercised. One of
the limits is to ensure that there is a system of control in place
for identifying and managing risk. The Directors, through the
RAC, review the systems that have been established for this
purpose and regularly review their effectiveness.
Business risks
The scope of BHP Billitons operations and the number of
industries in which the Group is engaged mean that a range of
factors may impact Group results. Material risks that could
negatively affect the Groups results and performance include:
|
|
fluctuations in commodity prices and currency exchange
rates |
|
|
|
failure to discover new reserves or enhance existing reserves |
|
|
|
fewer mineral, oil or gas reserves than our estimates indicate |
|
|
|
compliance with health, safety and environmental exposures
and related regulations |
|
|
|
land tenure disputes |
|
|
|
actions by governments in the countries in which we operate |
|
|
|
risks associated with emerging markets |
|
|
|
inability to successfully integrate our acquired businesses or
recover our investments in exploration and new mining and
oil and gas projects |
|
|
|
increased reliance upon the Chinese market in the event of a
slow down in consumption |
|
|
|
shortages of skilled labour that could negatively impact our
operations and expansion plans |
|
|
|
costs that may increase due to inflationary pressures. |
Management of business risks
The principal aim of the system of internal control is to manage
business risks, with a view to enhancing the value of
shareholders investments and safeguarding assets. Although
no system of internal control can provide absolute assurance
that the business risks will be fully mitigated, the internal
control systems are designed to meet the Groups specific
needs and the risks to which it is exposed.
The RAC is responsible for reviewing the internal controls and
risk management systems, including:
|
|
the procedure for identifying business risks and controlling
their financial impact on the Group and the operational
effectiveness of the policies and procedures related to risk
and control |
|
|
|
the budgeting and forecasting systems, financial reporting
systems and controls |
|
|
|
policies and practices put in place by the CEO for detecting,
reporting and preventing fraud, serious breaches of business
conduct and whistle-blowing procedures |
|
|
|
the policies for ensuring compliance with relevant regulatory
and legal requirements |
|
|
|
arrangements for protecting the Groups ownership of
intellectual property and other non-physical assets |
|
|
|
the operational effectiveness of the Customer Sector Groups
(CSG) RAC structures |
|
|
|
the application of the principles of the Turnbull Guidance
within the Group, including the adequacy of the internal
control systems and allocation of responsibilities for
monitoring internal financial controls |
|
|
|
policies, information systems and procedures for preparation
and dissemination of information to shareholders, stock
exchanges and the financial community. |
Management has put in place a number of key policies,
processes and independent controls to provide assurance to the
Board and the RAC as to the integrity of the Groups reporting
and effectiveness of its systems of internal control and risk
management. The governance assurance diagram on page 42
highlights the relationship between the Board and the various
controls in the assurance process. Some of the more significant
internal control systems include Board and management
committees, CSG Risk and Audit Committees, the Enterprise-
Wide Risk Management System (EWRM) and Internal Audit.
CSG Risk and Audit Committees
To assist management in providing the information necessary to
allow the RAC to discharge its responsibilities, separate Risk
and Audit Committees have been established for each of the
CSGs and key functional areas. These Committees have been
established and operate as Committees of management but are
chaired by members of the Boards RAC or by other external
appointees with appropriate skills and experience. They
perform an important monitoring function in the overall
governance of the Group.
Management reports on significant matters raised at CSG RAC
meetings to the Boards RAC.
Each half year, the President and CFOs of each CSG and each
of the Marketing, Shared Services Centres and Treasury functions
must review internal controls and provide formal representations
to the Vice President Group Accounting and Controller, which
are noted by the applicable CSG RAC, assuring compliance with
Group policies and procedures and confirming that internal
control systems are adequate. These representations are
summarised and provided to the Boards RAC.
Board Committees
The Sustainability Committee of the Board reviews the
effectiveness of the internal controls covering health, safety,
environment and community risks. Directors also monitor
risks and controls through the RAC and the Remuneration
Committee.
Management Committees
Management Committees also perform roles in relation to
risk and control. Strategic risks and opportunities arising from
changes in the Groups business environment are regularly
reviewed by the OCE and discussed by the Board. The FRMC
reviews the effectiveness of internal controls relating to
commodity price risk, counterparty credit risk, currency risk,
financing risk and interest rate risk. Minutes of the OCE and the
FRMC are provided to the Board. The IRC provides oversight for
investment processes across the Group and coordinates the
investment toll-gating process for major investments. Reports
are made to the Board on findings by the IRC in relation to
major capital projects.
BHP BILLITON ANNUAL REVIEW 2006 5
41
Corporate Governance Statement continued
8.1 Risk and Audit Committee report continued
CEO and CFO certification
The CEO and CFO have certified to the Board that the financial
statements are founded on a sound system of risk management
and internal compliance and that the system is operating
efficiently and effectively in all material respects.
During the year the RAC reviewed the Groups response to the
obligations imposed by the US Sarbanes-Oxley Act, and in
particular progress in evaluating and documenting internal
controls as required by section 404 of the Act, which will apply
to the Group in the year ended 30 June 2007.
Enterprise-Wide Risk Management
The Group operates an Enterprise-Wide Risk Management
System (EWRM) that forms the cornerstone of the Groups risk
management activities. Its aim is to meet the obligations of the
CEO in ensuring a system is in place for identifying and
managing risk. Its existence provides the RAC with the
assurance that the major risks facing the Group have been
identified and assessed, and that there
are controls either in place or planned
to address these risks. Independent
validation is undertaken by Internal
Audit.
The Groups EWRM
Policy can be found at
www.bhpbilliton.com/aboutus/governance.
Internal Audit
BHP Billiton has an Internal Audit function known as Group
Audit Services (GAS), which assists with the identification and
control of Group business risks. The Boards RAC reviews the
mission and charter of GAS, ensures that it is adequately staffed
and that its scope of work is appropriate in light of the key risks
facing the Group and the other monitoring functions in place.
It also reviews and approves an annual Internal Audit plan.
The role of the Vice President Risk Management and Assurance
includes:
|
|
achievement of GAS objectives, which are: |
|
|
|
assessment of the design and operating effectiveness
of controls governing key operational processes and
business risks |
|
|
|
|
assessment, independent of management, of the adequacy
of the Groups internal operating and financial controls,
systems and practices |
|
|
|
|
assisting the Board in meeting its corporate governance
and regulatory responsibilities |
|
|
|
|
provision of advisory services to management to enhance
the control environment and improve business performance |
|
|
enterprise-wide risk management |
|
|
|
risk management information systems |
|
|
|
insurance strategy. |
The RAC approves the appointment and dismissal of the Vice
President Risk Management and Assurance and assesses his or
her independence and objectivity. The Vice President Risk
Management and Assurance is Mr Stefano Giorgini. He has
unfettered access to management and the Boards RAC.
Review of effectiveness
During the year, the Board conducted reviews of the
effectiveness of the Groups system of internal controls for the
financial year and up to the date of this Report in accordance
with the Turnbull Guidance and the Principles of Good
Corporate Governance published by the Australian Stock
Exchange Corporate Governance Council. These reviews,
which were overseen by the Boards RAC, covered financial,
operational and compliance controls and risk assessment.
Findings and recommendations were reported to the Board.
In addition to considering the key risks facing the Group, the
Board reviewed an assessment of the effectiveness of internal
controls over the key risks identified through the work of the
Board Committees and management Committees described
above.
Assessment of RAC performance
During the year the Committee assessed its performance.
As a result of that assessment the Board revised the
Committees terms of reference and increased the number
of members.
Governance Assurance Diagram
Board
(Board Governance Document) |
Risk and Audit Committee (RAC) |
Sustainability Committee (HSEC) |
Peer ReviewsMajor Projects |
Ore/Oil/GasReserves Review |
Management Governance and Assurance |
Key Policies
Charter
Guide to Business Conduct
Anti Trust Protocols
Approvals Framework
Contracts and Commitments
Risk Management
Sustainable Development
Portfolio Risk Management |
Securities Dealing Code
Market Disclosure and Communications
Non-Audit Services
Tax
Information Management
Financial Accounting |
Key Processes
Office of the Chief Executive
Financial Risk Management Committee
CSG and Asset Appraisals
CSG RACs
Enterprise-Wide Risk Management
Stewardship Reviews
Management Representation Letters
Market Risk Management Committee
Disclosure Committee
Investment Risk Committee
Investment Evaluation Standard
Financial and Management Reporting
HSEC Management Standards |
5 BHP BILLITON ANNUAL REVIEW 2006
42
8.2 Remuneration Committee report
The Remuneration Committee met six times during the year.
Its members are Dr J G Buchanan (Chairman), Dr D A L Jenkins,
the Hon E G de Planque and Mr C A S Cordeiro. Dr de Planque
and Mr Cordeiro were appointed to the Committee during the
year succeeding Lord Renwick and Dr J M Schubert. All of the
Committee members are independent non-executive Directors.
Mr Gordon Clark of Kepler Associates acts as an independent
advisor to the Committee. Following a review of its performance
conducted during the year, the Committee revised its terms of
reference.
Role and focus
The role of the Committee is to assist the Board in its
oversight of:
|
|
the remuneration policy and its specific application to the
CEO, the executive Directors and the CEOs direct reports,
and its general application to all Group employees |
|
|
the adoption of annual and longer-term incentive plans |
|
|
|
the determination of levels of reward to the CEO and
approval of reward to the CEOs direct reports |
|
|
|
the annual evaluation of the performance of the CEO, by
giving guidance to the Group Chairman |
|
|
|
the communication to shareholders on remuneration policy
and the Committees work on behalf of the Board |
|
|
|
the Groups compliance with applicable legal and regulatory
requirements associated with remuneration matters |
|
|
|
the preparation of the Remuneration Report to be included
in the Groups Annual Report. |
Activities undertaken during the year
Full details of the Committees work on behalf of the Board are
set out in the Remuneration Report on pages 45 to 61.
8.3 Nomination Committee report
The Nomination Committee met six times during the year.
The members of the Committee are Mr D R Argus (Chairman),
Dr J G Buchanan and Dr J M Schubert. All members of the
Committee are independent non-executive Directors.
Role and focus
The role of the Committee is to assist in ensuring that the
Board is comprised of individuals who are best able to
discharge the responsibilities of a Director, having regard to the
highest standards of governance. It does so by focusing on:
|
|
reviewing the skills represented on the Board and identifying
skills that might be required |
|
|
|
retaining the services of independent search firms and
identifying suitable candidates for the Board (refer to sections
4.2 and 5.3 of this Statement) |
|
|
|
overseeing the review of the assessment of the performance
of individual Directors and making recommendations to the
Board on the endorsement of retiring Directors seeking
re-election (refer to section 5 of this Statement) |
|
|
|
communication to shareholders on the work of the
Committee on behalf of the Board. |
Activities undertaken during the year
There were significant changes to the composition of the Board
during the year. Lord Renwick and Mr Michael Chaney retired
following the 2005 Annual General Meetings, and the
Committee recommended the appointment and election of the
Hon Gail de Planque, Mr Paul Anderson and Mr Jacques Nasser
as non-executive Directors, and Mr Marius Kloppers and Mr
Chris Lynch as executive Directors. The Committee retained the
services of Heidrick and Struggles and Egon Zehnder to assist in
the identification of potential candidates.
8.4 Sustainability Committee report
Following a review of its effectiveness, the Sustainability
Committee was restructured during the year and the
Committees terms of reference were revised. The Committees
members now comprise only non-executive Directors:
Dr D C Brink (Chairman), Mr P M Anderson, Dr E G de Planque
and Dr J M Schubert. Prof Jim Galvin acted as an adviser to the
Committee. The Committee met four times during the year.
Role and focus
The role of the Sustainability Committee is to assist the Board
in its oversight of:
|
|
health, safety, environment and community risks |
|
|
|
the Groups compliance with applicable legal and regulatory
requirements associated with health, safety, environment and
community matters |
|
|
|
the Groups performance in relation to health, safety,
environment and community matters |
|
|
|
the performance and leadership of the health, safety and
environment function and the sustainable development
function |
|
|
|
the Groups Annual Sustainability Summary Report |
|
|
|
the preparation of a report by the Committee to be included
in the Annual Report. |
Activities undertaken during the year
The Sustainability
Report is published
at the same time as
the Annual Report
and can be found at
http://sustainability.
bhpbilliton.com/2006/.
A comprehensive Sustainability
Report and a Sustainability Summary
Report are published each year.
The Sustainability Summary Report
identifies BHP Billitons targets for
health, safety, environment and
community matters and its
performance against those targets.
For an overview of BHP Billitons approach to sustainable
development, refer to page 10 of this Annual Review.
9. Conformance with corporate governance standards
BHP Billitons compliance with the governance standards in each
of the jurisdictions in which it operates is summarised in this
Corporate Governance Statement, the Remuneration Report,
the Directors Report and the financial statements.
The Listing Rules of the UK Listing Authority require UK-listed
companies to report on the extent to which they comply with the
Principles of Good Governance and Code of Best Practice, which
are contained in Section 1 of the Combined Code, and explain
the reasons for any non-compliance.
The Listing Rules of the Australian Stock Exchange require
Australian-listed companies to report on the extent to which
they meet the Best Practice Recommendations published by the
Australian Stock Exchange Corporate Governance Council as part
of its Principles of Good Corporate Governance (Best Practice
Recommendations) and explain the reasons for any non-compliance.
A checklist summarising
BHP Billitons compliance
with the UK Combined
Code and the Best Practice
Recommendations has been
posted to the website at
www.bhpbilliton.com/aboutus/governance.
Both the Combined Code and the Best
Practice Recommendations require the
Board to consider the application of
the relevant corporate governance
principles, while recognising that
departures from those principles are
appropriate in some circumstances.
BHP Billiton has complied with the
provisions set out in Section 1 of the
Combined Code.
BHP Billiton has complied with the Best Practice
Recommendations throughout the financial period and has
continued to comply up to the date of this Annual Review.
BHP BILLITON ANNUAL REVIEW 2006 5
43
Corporate Governance Statement continued
BHP Billiton Limited and BHP Billiton Plc are registrants of the
Securities and Exchange Commission in the US. Both companies
are classified as foreign private issuers and both have American
Depositary Receipts listed on the New York Stock Exchange (NYSE).
BHP Billiton has reviewed the governance requirements currently
applicable to foreign private issuers under the Sarbanes-Oxley
Act (US) including the rules promulgated by the Securities and
Exchange Commission and the rules of the NYSE and is satisfied
that it complies with those requirements.
Section 303A of the NYSE Listed Company Manual has instituted
a broad regime of new corporate governance requirements for
NYSE-listed companies. Under the NYSE rules foreign private
issuers, such as BHP Billiton Limited and BHP Billiton Plc, are
permitted to follow home country practice in lieu of the
requirements of Section 303A, except for the rule relating to
compliance with Rule 10A-3 of the Securities Exchange Act of
1934 (Rule 10A-3) and certain notification provisions contained in
Section 303A of the Listed Company Manual. Section 303A.11 of
the Listed Company Manual, however, requires BHP Billiton to
disclose any significant ways in which its corporate governance
practices differ from those followed by US-listed companies under
the NYSE corporate governance standards. Following a comparison
of BHP Billitons corporate governance practices with the
requirements of Section 303A of the NYSE Listed Company Manual
that would otherwise currently apply to foreign private issuers,
the following differences were identified:
|
|
Our Nomination Committee Charter does not include the purpose
of developing and recommending to the Board a set of corporate
governance principles applicable to the corporation. At BHP
Billiton we believe that this task is integral to the governance
of the Group and is therefore best dealt with by the Board as
a whole. |
|
|
|
Rule 10A-3 of the Securities Exchange Act of 1934 requires
NYSE-listed companies to ensure that their audit committees
are directly responsible for the appointment, compensation,
retention and oversight of the work of the external auditors
unless the companys governing law or documents or other
home country legal requirements require or permit shareholders
to ultimately vote on or approve these matters. While BHP
Billitons Risk and Audit Committee (RAC) is directly responsible
for remuneration and oversight of External Auditors, the ultimate
responsibility for appointment and retention of External Auditors
rests with BHP Billitons shareholders, in accordance with
Australian and UK law and BHP Billitons constitutional
documents. The RAC does, however, make recommendations
to the Board on these matters, which are in turn reported to
shareholders. |
While the Board of BHP Billiton is satisfied with its level of
compliance with the governance requirements in Australia, the
UK and the US, it recognises that practices and procedures can
always be improved, and that there is merit in continuously
reviewing its own standards against those in a variety of
jurisdictions. The Boards program of review will continue
throughout the year ahead.
5 BHP BILLITON ANNUAL REVIEW 2006
44
Remuneration Report at a Glance |
Introductory Letter from Committee |
1. The Remuneration Committee 46 No |
1.2 Advisers to the Committee 46 No |
1.3 Review of effectiveness 46 No |
1.4 Terms of reference 46 No |
2. Remuneration Policy and Structure 47 Yes |
2.1 Key principles of the Groups
remuneration policy 47 Yes |
2.2 Fixed remuneration 47 Yes |
2.3 At risk remuneration 47 Yes |
3. Group Performance and Key |
Performance Indicators 48 No |
4. Executive Directors 49 Yes |
4.1 Summary of remuneration arrangements 49 Yes |
4.2 Short-term incentives 49 Yes |
4.3 Long-term incentives 50 Yes |
4.4 Retirement benefits 50 Yes |
4.5 Service contracts and termination
provisions 50 Yes |
5. Key Management Personnel 52 Yes |
5.2 Short and long-term incentives 52 Yes |
5.3 Retirement benefits 53 Yes |
5.4 Service contracts 53 Yes |
6. Non-executive Directors 54 Yes |
6.1 Remuneration policy 54 Yes |
7. Aggregate Directors Remuneration 54 Yes |
8. Remuneration Tables 54 Yes |
8.1 Estimated value range of awards 59 No |
Summary of long-term incentive plans 60 Yes |
Web references used in this Report |
The Groups website
www.bhpbilliton.com
Terms of reference, list of consultants
www.bhpbilliton.com/aboutus/governance
The rules of the GIS and LTIP
www.bhpbilliton.com/aboutus/governance
Standard engagement letter for non-executive Directors
www.bhpbilliton.com/bbContentRepository/AboutUs/Governance/
lt_AppointmentasnonexecutiveDirector.pdf |
Key abbreviations used in this Report |
BHP Billiton BHP Billiton Limited and BHP Billiton Plc |
Board The Boards of Directors of BHP Billiton |
CEO Chief Executive Officer |
Committee The Remuneration Committee of BHP Billiton |
Group BHP Billiton and its subsidiaries |
Key Executives having authority and responsibility |
Management for planning, directing and controlling the |
Personnel activities of the Group, directly or indirectly
(including executive Directors), and nonexecutive
Directors |
GIS Group Incentive Scheme |
LTIP Long Term Incentive Plan |
CIP 2001 Co-Investment Plan 2001 |
ESP 1999/2000 Employee Share Plan 1999 and 2000 |
MTI 2001 Medium Term Incentive Plan 2001 |
PSP 2000/2001 Performance Share Plan 2000 and 2001 |
RSS 2001 Restricted Share Scheme 2001 |
A fully paid ordinary share in the capital of BHP Billiton |
Deferred A nil-priced option or a conditional right to |
Share acquire a share issued under the rules of the GIS |
Option A right to acquire a share on payment of an
exercise price issued under the rules of the GIS |
Performance A nil-priced option or a conditional right to |
Share acquire a share, subject to Performance
Hurdles, issued under the rules of the LTIP |
Expected Value Expected value of a share incentive the
average outcome weighted by probability. |
This measure takes into account the difficulty
of achieving performance conditions and the
correlation between these and share price
appreciation. The valuation methodology also
takes into account factors such as volatility,
forfeiture risk, etc. |
KPI Key performance indicator used to measure
the performance of the Group, individual
businesses and executives in any one year |
Market Value The market value based on closing prices, or,
in instances when an executive exercises and
sells shares, the actual sale price achieved |
Specified targets against which the Groups performance is
measured to determine the extent to which long-term incentives
might vest |
TSR Total shareholder return the change in share |
price plus dividends reinvested |
FY 2006 1 July 2005 to 30 June 2006 |
FY 2007 1 July 2006 to 30 June 2007 |
BHP BILLITON ANNUAL REVIEW 2006 5
45
Remuneration Report continued
Dear Shareholder
Welcome to the Remuneration Report for the 2006 financial year. As in previous years, our approach
has been to meet the highest standards of disclosure while aiming to produce a clear and
comprehensible document.
New remuneration arrangements were put in place in 2004 and the Committee remains satisfied that
these continue to achieve its aim of delivering superior shareholder value by driving
outperformance against the sector. However, the Committee is particularly mindful of the need to
balance the fostering of a performance culture with ensuring that we keep our best people. With
commodity prices at record levels, retention of executive talent will become an increasing
challenge. The Committee intends to review current arrangements over the course of the 2007
financial year to determine how better to promote retention. We have an open dialogue on
remuneration issues with our major investors and representative bodies.
I am very pleased to be able to report that a proposal to introduce an all-employee share plan will
be put to this years Annual General Meeting. The plan will allow all our people to share in the
success of the Group and thus help to align their objectives with those of investors.
On behalf of the Committee I thank you for your interest in our Report.
![-s- John Buchanan](y25422y2542244.gif)
John Buchanan
Chairman, Remuneration Committee
11 September 2006
1. The Remuneration Committee
1.1 Role
The Committee is committed to the principles of accountability
and transparency and to ensuring that remuneration
arrangements demonstrate a clear link between reward and
performance. Operating under delegated authority from the
Board, its activities are governed by terms of reference available
on BHP Billitons website. The Committee focuses on:
|
|
remuneration policy and its specific application to the CEO,
the executive Directors and other executives reporting to the
CEO and its general application to all Group employees |
|
|
|
the formulation and adoption of incentive plans |
|
|
|
the determination of levels of reward to the CEO, the executive
Directors and other executives reporting to the CEO |
|
|
|
providing guidance to the Chairman on evaluating the
performance of the CEO and |
|
|
|
effective communication with shareholders on the
remuneration policy and the Committees work on behalf of
the Board. |
Committee members in 2006
|
|
John Buchanan, Chairman |
|
|
|
Carlos Cordeiro (appointed 25 November 2005) |
|
|
|
David Jenkins |
|
|
|
Gail de Planque (appointed 26 April 2006) |
|
|
|
Lord Renwick and John Schubert retired as members of the
Committee on 25 November 2005 |
Attendees
The Group Chairman, the CEO and the Chief Organisation
Development Officer attended meetings by invitation except where
matters associated with their own remuneration were considered.
Meetings
The Committee met six times in FY 2006. Attendance at those
meetings is set out on page 36.
1.2 Advisers to the Committee
From within the Group, the Committee has access to the advice
and views of the CEO (Charles Goodyear), the Chief Organisation
Development Officer (Marcus Randolph) and the Special Adviser
and Head of Group Secretariat (Karen Wood). The Committee
also draws on services from a range of external sources including
remuneration consultants. A list of consultants, together with
the type of services supplied and whether services are supplied
elsewhere in the Group, is available on the Groups website.
Independent advisers to the Committee
Kepler Associates LLP. Kepler does not provide any other services
to the Group.
1.3 Review of effectiveness
The Board appointed consultants Oppeus Pty Limited during
the year to conduct an independent review of all committees,
including the Remuneration Committee. Their review of the
Committees effectiveness was completed in November 2005.
It concluded that the Committee is well governed and executes
its responsibilities effectively. In light of the increasing complexity
in remuneration practices, a number of small changes for
improvement in the processes and procedures of the Committee
were identified. These have been addressed by the Committee and
included the enhancement of:
|
|
information available to the Committee, through better use of
information sourced from remuneration reports, industry trends,
analyst reports, etc. to keep members abreast of the latest issues
and trends |
|
|
|
channels of communications with internal stakeholders
through the Chief Organisation Development Officer and
the CEO |
|
|
|
the effectiveness of the Committees meetings, by introducing a
pre or post-meeting session without executives and making
better use of videoconferencing. |
The Committees size, at four non-executive Directors, was
considered optimal.
1.4 Terms of reference
As part of the review of effectiveness, the Committees terms of
reference were also evaluated to ensure they remained relevant.
As a result, revised terms of reference for the Committee were
adopted by the Board at its meeting in June 2006 and are available
on the Groups website. The scope of the revisions mainly related
to form rather than substance.
5 BHP BILLITON ANNUAL REVIEW 2006
46
2. Remuneration Policy and Structure
The Committee recognises that the Group operates in a global environment and that its performance
depends on the quality of its people. It keeps the remuneration policy under constant review to
ensure its ongoing appropriateness.
2.1 Key principles of the Groups remuneration policy
The key principles of the Groups remuneration policy are to:
|
|
provide competitive rewards to attract, motivate and retain
highly-skilled executives willing to work around the world |
|
|
|
apply demanding key performance indicators (KPIs), including
financial and non-financial measures of performance |
|
|
|
link rewards to the creation of value to shareholders |
|
|
|
ensure remuneration arrangements are equitable and facilitate
the deployment of human resources around the Group and |
|
|
|
limit severance payments on termination to pre-established
contractual arrangements that do not commit the Group to
making unjustified payments in the event of non-performance. |
The Committee is confident that these principles, which were
applied in the year under review and will continue to be applied
for FY 2007 and beyond, continue to meet the Groups objectives.
The Group is committed to a performance-based culture, with a large
component of pay linked to performance and a high correlation
between Group performance and levels of executive compensation.
The compensation paid and payable to the executive Directors
and other Key Management Personnel is disclosed in this Report.
It comprises fixed and, apart from non-executive Directors,
at risk components. The manner in which these components are
determined is outlined in sections 2.2 and 2.3. The actual
compensation paid and payable is set out in the tables in section 8.
Service contracts for Key Management Personnel excluding
non-executive Directors
It is the Groups policy that service contracts have no fixed term
but are capable of termination on 12 months notice and that the
Group retains the right to terminate the contract immediately, by
making a payment equal to 12 months base salary and retirement
benefit contributions in lieu of notice. All Key Management
Personnel, with the exception of non-executive Directors, have
service contracts. These contracts typically outline the components
of remuneration paid but do not prescribe how remuneration levels
are to be modified from year to year.
2.2 Fixed remuneration
Fixed remuneration is made up of base salary, retirement and other
benefits.
Base salary is targeted at industry average levels for comparable
roles in global companies of similar complexity and size. Market
data are used to benchmark salary levels on a global scale,
adjusted for local conditions.
Base salaries are set by reference to the scope and nature of the
individuals performance and experience and are reviewed each
year. The review takes into account any change in the scope of the
role performed by the individual, any changes required to meet the
principles of the remuneration policy and our market
competitiveness.
Retirement benefits to new entrants are delivered under defined
contribution plans. All defined benefit plans have now been closed
to new entrants. Employees who participate in these legacy
defined benefit plans continue to accrue benefits in such plans for
both past and future service unless they have opted to transfer to
a defined contribution plan.
Other benefits include health insurance, relocation costs, life
assurance, car allowances and tax advisory services as applicable.
No element of remuneration, other than base salary, is
pensionable.
2.3 At risk remuneration
The at risk remuneration is geared to Group performance and is
made up of short and long-term incentives.
Short-term incentives are delivered under the Group Incentive
Scheme (GIS), which rewards individuals for meeting or exceeding
KPIs that are set at the beginning of each financial year and are
aligned to BHP Billitons strategic framework. KPIs include Group
and personal objectives and measures. The Committee believes
that the setting of KPIs and the relative weightings given to the
different categories of KPI effectively incentivises short-term
performance.
Executive Directors and Key Management Personnel who are not
Directors each have a target cash award of 70 per cent of base
salary, which is paid annually.
The performance level achieved against each KPI is measured and
awards are calculated and paid according to the level of
performance. Details of the Group KPIs for FY 2006 and the
performance level achieved are set out on page 49.
To encourage employee retention and share ownership, the Group
matches the cash amount awarded in Deferred Shares and/or
Options, which are subject to a two-year vesting period before
they can be exercised. If, during the two-year vesting period, an
individual resigns without the Committees consent or is dismissed
for cause, the right to the Deferred Shares and/or Options is
forfeited.
Long-term incentives are delivered under the Long Term Incentive
Plan (LTIP), which is designed to reward sustainable, long-term
performance in a transparent manner. Under the LTIP, individuals
are granted Performance Shares, which have a five-year
performance period. The number of Performance Shares granted
is determined by the Committee.
The number of Performance Shares that an individual will be
entitled to at the end of the five years will depend on the extent to
which the Performance Hurdle has been met. The Performance
Hurdle is described below.
The diversified natural resources industry is capital intensive,
cyclical and long term. Outstanding performance comes from
accessing high-quality resources, successfully developing new
projects and maintaining efficient and safe operations. The
Committee believes that, in this environment, success can best
be measured by the Groups total shareholder return (TSR) relative
to the TSR of an index of a peer group of companies, weighted
75 per cent to mining and 25 per cent to oil and gas, over a long
(five-year) period.
The Performance Hurdle requires BHP Billitons TSR over the fiveyear
period to be greater than the weighted average TSR of the
index. If BHP Billitons TSR is equal to or less than the weighted
average TSR of the index, the Performance Hurdle will not be met
and no Performance Shares will vest.
For all the Performance Shares to vest, BHP Billitons TSR must
exceed the weighted average TSR of the index by a specified
percentage. The Committee determines the percentage each year.
For the 2004, 2005 and 2006 financial years this percentage has
been set at 5.5 per cent per annum. This is an annual amount and
equates to exceeding the weighted average TSR of the index over
the five-year performance period by more than 30 per cent. The
Committee and the Board believe that this equates to outstanding
(or top decile) performance.
For performance between the weighted average TSR of the index
and 5.5 per cent per annum above the index, vesting occurs on a
sliding scale. In the event that the Committee does not believe
that BHP Billitons TSR properly reflects the financial performance
BHP BILLITON ANNUAL REVIEW 2006 5
47
Remuneration Report continued
2. Remuneration Policy and Structure continued
of the Group, the Committee retains the discretion to lapse the
Performance Shares. It is anticipated that such discretion would
only be used in exceptional circumstances.
In any one financial year, a participant cannot be granted
Performance Shares that have an Expected Value that exceeds
twice their annual base salary. Expected Value is used because,
relative to typical peer group incentive arrangements, the LTIP is
long-term (with performance measured over five years), has high
performance requirements (top decile ranking for full vesting) and
offers no payout at median performance. Kepler Associates LLP
have verified that the Expected Value calculation is accurate and
appropriate.
Where the Committee retains discretion in relation to the award of
any short or long-term incentives, the rules of the GIS and the LTIP
require the Committee to exercise that discretion in good faith and
acting reasonably.
Participation in the GIS and the LTIP is approved by the Committee
and participants are required to hold a minimum number of BHP
Billiton shares (Minimum Shareholding Requirement) throughout
their period of participation in the schemes. This Minimum
Shareholding Requirement is equal to 50 per cent of one years
base salary, on an after-tax basis.
It is intended that shareholders will be asked at the 2006 Annual
General Meetings to approve the introduction of an all-employee
share plan. This is viewed as an important tool to enable
employees to participate as shareholders in the Groups success.
It will allow employees to purchase BHP Billiton shares at a Market
Value of up to US$5,000 per year. Shares held for three years will
be matched at no additional cost to the employee. The principal
components of the plan, if this authority is granted, are set out in
the Notice of Meeting.
3. Group Performance and Key Performance Indicators
Group performance
The performance of the Group relative to the markets in which it operates over the past five
years is illustrated by the two charts below.
The first compares BHP Billitons TSR performance with that of the ASX 100 and the FTSE 100, both
of which are broadly-based indices. The second illustrates performance against an index of a peer
group of companies, weighted 75 per cent to mining and 25 per cent to oil and gas. The relevant
companies are listed in the table on page 61 of this Report (see note (7) to the table on that
page). The Committee
believes that the broadly-based indices and the index of peer group companies are the most
appropriate benchmarks for measuring the Groups performance. For FY 2006, the total return to BHP
Billiton Limited shareholders (as measured by the change in share price plus dividends reinvested)
was 68 per cent. Over the same period, the total return to BHP Billiton Plc shareholders (measured
on the same basis) was 60 per cent.(1)
Five-year TSR performance of BHP Billiton measured against the
ASX 100 and FTSE 100 rebased in US$
Five-year TSR performance of BHP Billiton measured against the
median of the comparator group rebased in US$
The earnings performance of the Group over the last five years is
represented by profit attributable to members of BHP Billiton and
is detailed in the table below.(2)
|
|
|
US$M |
|
Profit attributable to members(3) |
FY 2006 |
|
10,154 |
FY 2005 |
|
6,426 |
FY 2004 |
|
3,510 |
FY 2003 |
|
1,920 |
FY 2002 |
|
1,934 |
Market price of shares
|
|
|
|
|
|
|
BHP Billiton Plc |
|
BHP Billiton Limited |
At 30 June 2006 |
|
£10.49 |
|
A$29.00 |
Highest price in FY 2006 |
|
£12.11
|
|
A$32.00
|
|
|
11 May 2006 |
|
5 May 2006 |
Lowest price in FY 2006 |
|
£7.22 |
|
A$18.09 |
|
|
1 July 2005 |
|
1 July 2005 |
|
|
|
Notes: |
|
|
|
(1) |
|
The TSR performance for BHP Billiton Limited is inclusive of the bonus share awards
relating to BHP Limited (pre-merger) and is adjusted for the demerger of OneSteel Limited, and for
both BHP Billiton Limited and BHP Billiton Plc is adjusted for the demerger of BHP Steel Limited
(now known as BlueScope Steel Limited). |
|
(2) |
|
The impact on TSR and earnings of the share buy-back program was considered when
assessing the relative performance of the Group. |
|
(3) |
|
2006 and 2005 are IFRS. 20042002 are UK GAAP. Amounts are stated before
exceptional items. |
5 BHP BILLITON ANNUAL REVIEW 2006
48
3. Group Performance and Key Performance Indicators continued
Group Key Performance Indicators
The Group KPIs measure performance in delivering against
specific health, safety, environment and community targets and
achieving specified levels of performance against financial
targets. The KPIs for FY 2006 were based on Group, individual
business and personal measures and the levels of performance
achieved were as follows:
Levels of performance against each KPI
|
|
|
Threshold
|
|
the minimum necessary to qualify for any reward |
Target
|
|
where the performance requirements are met |
Stretch
|
|
where the performance requirements are exceeded |
|
|
|
Group KPIs |
|
Level of performance achieved as determined by the Committee |
Health, Safety, Environment and Community(1)
|
|
Between threshold and target |
Shareholder value added
|
|
Between threshold and target |
Net Present Value added
|
|
Below threshold |
|
|
|
Notes: |
|
(1) |
|
Health, Safety, Environment and Community (HSEC) measures include: Total Recordable
Injury Frequency Rate (TRIFR ); HSEC standards; Group HSEC targets; and behavioural-based systems. |
Supplemental bonus
When the Committee assessed performance for FY 2006, it was felt that there was a gap between
the GIS awards as calculated and BHP Billitons share price performance. It therefore recommended
to the Board that an additional cash bonus be paid to executives, which the Board approved. The
amount of the additional bonus was capped, in aggregate as a 14 per cent increase to the cost of
the Groups short-term incentive program, and a 20 per cent maximum increase for individual
executives. The CEO was given discretion as to the application. In applying the bonus the CEO took
account of the performance of the individual businesses to which the executive was attached. The
Board determined the additional bonus amount payable to the CEO and approved an additional bonus
equal to 14 per cent of the CEOs GIS incentive award. The amounts payable to the executive
Directors and Key Management Personnel who are not Directors are contained in the remuneration
tables on pages 54 to 55 of this Report.
4. Executive Directors
This section contains information relating to the Groups four
executive Directors.
Their detailed remuneration is set out in tabular form on pages
54 to 55.
Executive Directors serving at the date of this Report
and during the year:
1. |
|
Charles Goodyear, Chief Executive Officer |
|
2. |
|
Marius Kloppers, Group President Non-Ferrous Materials
(appointed 1 January 2006) |
|
3. |
|
Chris Lynch, Group President Carbon Steel Materials
(appointed 1 January 2006) |
|
4. |
|
Mike Salamon, Executive President (see note (4) below) |
4.1 Summary of remuneration arrangements
This chart illustrates the split between fixed and at risk
remuneration for the year ended 30 June 2006. The data on
which the chart is based are taken from the remuneration tables
on pages 54 to 55.
4.2 Short-term incentives (at risk)(1)
Executive
Directors remuneration for the year ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June 2006 |
|
Year ending 30 June 2007 |
|
|
|
|
|
|
|
|
Weighting split |
|
|
|
Weighting split |
|
|
Cash bonus range |
|
Actual cash bonus |
|
Group and personal |
|
Cash bonus range |
|
Group and personal |
|
|
(% of base salary) |
|
(% of base salary)(2) |
|
(%) |
|
(% of base salary) |
|
(%) (3) |
Charles Goodyear
|
|
0105
|
|
|
74.2 |
|
|
70/30
|
|
0105
|
|
40/60 |
Marius Kloppers
|
|
0105
|
|
|
74.0 |
|
|
50/50
|
|
0105
|
|
40/60 |
Chris Lynch
|
|
0105
|
|
|
69.5 |
|
|
49/51
|
|
0105
|
|
40/60 |
Mike Salamon
|
|
0105
|
|
|
69.0 |
|
|
70/30
|
|
n/a (4)
|
|
n/a (4) |
|
|
|
Notes: |
|
(1) |
|
This section relates to short-term incentives under the GIS and does not include
the supplemental cash bonus to be paid in September 2006. |
|
(2) |
|
Cash bonuses are paid in September following the release of the Groups annual
results. The value is matched with the grant of Deferred Shares and/or Options after shareholder
approval at the Annual General Meetings. |
|
(3) |
|
Group measures include KPIs for Financial Performance. Personal measures include
KPIs for Operations and Business Processes/Strategy and Growth/People and Leadership/Zero Harm and
Sustainable Development. |
|
(4) |
|
Mr Salamon retired as an employee on 1 September 2006 and will be retiring as a
Director on 26 October 2006. No bonus will be paid to him in respect of any part of FY 2007. |
BHP BILLITON ANNUAL REVIEW 2006 5
49
Remuneration Report continued
4. Executive Directors continued
4.3 Long-term incentives (at risk)
All shares under award form part of the executive Directors at risk remuneration. The extent to
which Performance Shares will vest is dependent on the extent to which the Performance Hurdles are
met and continuing employment with the Group. A summary of interests in incentive plans including
the number of shares awarded in FY 2006 is shown on pages 57 and 58.
4.4 Retirement benefits
Charles Goodyears remuneration includes a payment in lieu of a contribution by the Group to a
superannuation or pension fund fixed at an annual rate of 48 per cent of base salary. Mr Goodyear
may elect to have this paid into a superannuation or pension fund or, instead, to defer receipt,
subject to the rules of a Retirement Savings Plan established for this purpose. It allows him to
accumulate these annual payments and to defer receipt until after he retires from the Group. It
also allows Mr Goodyear to establish retirement savings arrangements that best meet his needs.
If Mr Goodyear dies while still employed, a benefit of four times base salary will be payable to
his estate. A spouses pension equal to two thirds of one thirtieth of Mr Goodyears pensionable
salary at date of death for each year of service from 1 January 2003 to his normal retirement date
will be payable for the duration of his spouses lifetime. Periods of service where Mr Goodyear
received his retirement benefit in the form of the cash gratuity will be disregarded for the
purpose of calculating any pension amount.
If Mr Goodyear leaves due to incapacity, an ill-health pension of one thirtieth for each year of
service from 1 January 2003 to age 60 will be payable for the duration of Mr Goodyears lifetime.
In the event of death during ill-health retirement, a spouses pension of two thirds of the
ill-health pension will be payable for the duration of the spouses lifetime. Additionally, a
childrens pension equal to 20 per cent of the ill-health pension will be payable for the first
child or 33 per cent if there are two or more children, with the resultant pension amounts to be
shared equally between the children until each child ceases being in full-time education or
reaches the age of 23, whichever occurs first.
Marius Kloppers and Chris Lynch are entitled to participate in the retirement arrangements
detailed below for Key Management Personnel, save for Mr Kloppers retaining his previous pension
promise of one thirtieth of base salary for each year of service. In lieu of this pension promise,
Mr Kloppers has an option for a defined contribution or cash gratuity alternative.
Mike Salamon completed 20 years of service with the Group (and its predecessor companies) on 1
April 2005 and consequently no further pension benefits accrued thereafter, other than to reflect
changes in his pensionable salary. Mr Salamon retired as an employee on 1 September 2006 and will
retire as a Director on 26 October 2006. On retirement, he became entitled to a pension under
non-contributory defined benefit pension arrangements set up by BHP Billiton Plc and BHP Billiton
Services Jersey Limited. The pension payable equates to two thirds of base salary and has been
reduced because payment will commence before the normal retirement age of 60. The reduction
penalty is normally 4 per cent per annum where retirement is without consent of the Group and 2
per cent per annum where retirement is with consent of the Group. Mr Salamons retirement is with
Group consent and at the date of retirement he was 51 years of age. In accordance with the rules
of the scheme, all pensions in payment will be indexed in line with the UK Retail Price Index. On
death in retirement, a spouses pension equal to two thirds of
the pension in payment will be payable. Where legislation allows, Mr Salamon has opted to commute
the pension described for a cash lump sum as final settlement of the Groups obligations to him. A
summary of his retirement benefits assuming retirement at age 60 (as required by the applicable
regulations) is shown on page 59.
4.5 Service contracts and termination provisions
It is the Groups policy that service contracts for executive Directors have no fixed term but are
capable of termination on 12 months notice and that the Group retains the right to terminate the
contract immediately by making a payment equal to 12 months pay in lieu of notice. The service
contracts typically outline the components of remuneration paid to the individual, but do not
prescribe how remuneration levels are to be modified from year to year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notice period |
|
|
|
|
|
|
|
|
|
|
Employing |
|
Notice period |
|
|
Name |
|
Employing company |
|
Date of contract |
|
company |
|
Employee |
|
Termination provisions |
Charles Goodyear
|
|
BHP Billiton Limited
BHP Billiton Plc
|
|
21 August 2003
|
|
12 months
|
|
3 months
|
|
On termination, employing company may
make a payment in lieu of notice equal to
12 months base salary plus retirement
benefit contributions for that period. |
Marius Kloppers
|
|
BHP Billiton Plc
|
|
19 February 2001,
as amended by
31 August 2004
|
|
12 months
|
|
6 months
|
|
On termination, employing company may
make a payment in lieu of notice equal to
12 months base salary retirement benefit
contributions for that period. |
Chris Lynch
|
|
BHP Billiton Limited
|
|
16 August 2006
|
|
12 months
|
|
6 months
|
|
On termination, employing company may
make a payment in lieu of notice equal to
12 months base salary plus retirement
benefit contributions for that period. |
Mike Salamon (1)
|
|
BHP Billiton Plc
BHP Billiton Services
Jersey Limited (2)
|
|
1 September 2003
1 September 2003
|
|
12 months
|
|
12 months
|
|
On termination, employing company may
make a payment in lieu of notice of
12 months, equal to 150 per cent of annual
base salary. This reflects market practice at
the time the terms were agreed. |
|
|
|
Notes: |
|
(1) |
|
Mr Salamon retired as an employee on 1 September 2006 and will be retiring as a
Director on 26 October 2006. |
|
(2) |
|
A wholly-owned subsidiary of BHP Billiton Plc. |
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
BHP BILLITON ANNUAL REVIEW
2006 5
|
4. Executive Directors continued
Entitlements under the GIS, the LTIP and Retirement Plans on ceasing employment
The rules of the GIS and the LTIP (1) cover any entitlements the executive Directors
might have on termination in relation to short and long-term incentives. They outline the
circumstances in which the executive Directors (and any other participant) would be entitled to
receive any Deferred Shares, Options or Performance Shares that had been granted but which had not
vested at the date of termination. The rules of the GIS also outline the circumstances in which the
executive Directors would be entitled to a cash bonus payment for the performance year in which
they leave the Group. Such circumstances depend on the reason for leaving the Group.
The Committee regards it as an important principle that, where an individual resigns without the
Committees consent or their employment is terminated for cause, they forfeit the right to both
their unvested Deferred Shares and Options and Performance Shares.
|
|
|
|
|
Name |
|
GIS and LTIP |
|
Retirement Plans |
Charles Goodyear
|
|
The rules of the GIS and the LTIP provide that should Mr Goodyear
leave the Group for any reason other than resignation or termination
for cause, the following would apply:
|
|
Any entitlements accrued under the rules of the
Retirement Savings Plan at the date of termination. |
|
|
|
|
|
|
|
|
|
|
|
Deferred Shares and Options already granted would vest in full.
He would have a right to retain entitlements to Performance Shares
that have been granted but that are not yet exercisable. The
number of such Performance Shares would be pro-rated to reflect
the period of service from the commencement of the relevant
performance period and would only become exercisable once the
Performance Hurdles have been met.
|
|
|
|
|
|
|
|
|
|
|
|
In addition, the Committee has determined that a cash bonus
would be paid for the year of departure, calculated according to
Mr Goodyears performance measured against KPIs and pro-rated to
reflect the proportion of the year served. |
|
|
|
|
|
|
|
Marius Kloppers
|
|
Entitlements to Deferred Shares and Performance Shares as per
Mr Goodyear above.
The Committee has not considered the circumstances in which it
would exercise its discretion to allow Mr Kloppers to receive any cash
bonus in the event of his departure. That entitlement, if any, will be
governed by the rules of the schemes at the date of departure.
|
|
Entitlements as per contractual arrangements.
Entitled to a defined benefit pension of one-
thirtieth of pensionable salary per year of service
following 1 July 2001 to date of leaving. This
defined benefit is payable for each year of service
other than for periods where Mr Kloppers has
elected to take the defined contribution option or
cash equivalent payment in lieu. |
|
|
|
|
|
Chris Lynch
|
|
Entitlements to Deferred Shares and Performance Shares as per
Mr Goodyear above.
The Committee has not considered the circumstances in which it
would exercise its discretion to allow Mr Lynch to receive any cash
bonus in the event of his departure. That entitlement, if any, will be
governed by the rules of the schemes at the date of departure.
|
|
Any entitlements accrued under the rules of the
Retirement Savings Plan and the Australian
Superannuation Fund at the date of termination. |
|
|
|
|
|
Mike Salamon (2)
|
|
At retirement Mr Salamons entitlements to Deferred Shares and
Performance Shares were the same as for Mr Goodyear above.
Accordingly, his Deferred Shares vested on 1 September 2006.
In respect of Mr Salamons GIS participation for FY 2006, an amount
equal to his GIS cash award will be paid in lieu of the award of
Deferred Shares.
|
|
Entitlements as per contractual arrangements.
The accrued defined benefit pension entitlement
will be reduced by 2 per cent per annum for each
year until Mr Salamon reaches age 60.
Where legislation allows, Mr Salamon has opted
to commute his retirement pension as a lump sum.
The lump sum commutation terms were determined
by the Group and are based on market conditions
as at 31 August 2006. |
|
|
|
Notes: |
|
(1) |
|
The GIS and the LTIP rules are available on the Groups website. |
|
(2) |
|
Mr Salamons contractual agreements provide for a 2 per cent reduction in his
pension benefit for each year that he retires before age 60 where the retirement is with Group
consent. |
|
|
|
|
|
|
|
|
|
|
BHP BILLITON ANNUAL REVIEW
2006 5
|
|
|
|
51 |
Remuneration Report continued
5. Key Management Personnel (other than Directors)
The Key Management Personnel of the Group, other than Directors, are those executives who have the
authority and responsibility for planning, directing and controlling the activities of the Group.
The five highest paid executives in the Group are represented amongst the executive Directors and
other Key Management Personnel. This section contains information relating to the Groups Key
Management Personnel other than Directors (referred to as executives in this section).
|
|
|
|
|
Key Management Personnel (other than Directors) (1) |
|
Date of appointment to Office of the Chief Executive (OCE) if during the year |
Philip Aiken (2)
|
|
President UK |
|
|
John Fast
|
|
Chief Legal Counsel and Head of External
Affairs |
|
|
Robert Kirkby (3)
|
|
Executive President |
|
|
Marcus Randolph
|
|
Chief Organisation Development Officer
|
|
2 September 2005 |
Alex Vanselow
|
|
Chief Financial Officer
|
|
1 April 2006 |
Karen Wood
|
|
Special Adviser and Head of Group Secretariat
|
|
8 December 2005 |
Mike Yeager
|
|
Group President Energy
|
|
26 April 2006 |
|
|
|
Notes: |
|
(1) |
|
Mr Kloppers and Mr Lynch were Key Management Personnel prior to their
appointment as executive Directors on 1 January 2006. |
|
(2) |
|
Mr Aiken has stepped down from the OCE and will retire from the Group on
31 December 2006. |
|
(3) |
|
Mr Kirkby will retire from the Group on 31 December 2006. |
5.1 Remuneration
Total
remuneration is divided into two components fixed and at risk. The at risk component is
derived only in circumstances where the individual has met challenging KPIs and Performance Hurdles
that contribute to the Groups overall profitability and performance.
5.2 Short and long-term incentives
Short and long-term incentives form part of the executives at risk remuneration.
Short-term
incentives (at risk) (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June 2006 |
|
Year ending 30 June 2007 |
|
|
|
|
|
|
|
|
|
|
Weighting split |
|
|
|
|
|
Weighting split |
|
|
Cash bonus range |
|
Actual cash bonus |
|
Group and personal |
|
Cash bonus range |
|
Group and personal |
|
|
(% of base salary) |
|
(% of base salary) (2) |
|
(%) |
|
(% of base salary) |
|
(%)(3) |
Philip Aiken |
|
|
0105 |
|
|
|
53.3 |
|
|
|
25/75 |
|
|
|
0105 |
|
|
|
30/70 |
|
John Fast |
|
|
0105 |
|
|
|
68.7 |
|
|
|
40/60 |
|
|
|
0105 |
|
|
|
30/70 |
|
Robert Kirkby |
|
|
0105 |
|
|
|
67.1 |
|
|
|
29/71 |
|
|
|
0105 |
|
|
|
40/60 |
|
Marcus Randolph |
|
|
0105 |
|
|
|
73.7 |
|
|
|
37/63 |
|
|
|
0105 |
|
|
|
30/70 |
|
Alex Vanselow |
|
|
0105 |
|
|
|
67.5 |
|
|
|
50/50 |
|
|
|
0105 |
|
|
|
30/70 |
|
Karen Wood |
|
|
0105 |
|
|
|
70.1 |
|
|
|
45/55 |
|
|
|
0105 |
|
|
|
30/70 |
|
Mike Yeager |
|
|
0105 |
|
|
|
83.2 |
|
|
|
35/65 |
|
|
|
0105 |
|
|
|
40/60 |
|
|
|
|
Notes: |
(1) |
|
This table relates to short-term incentives under the GIS and does not include
the supplemental cash bonus to be paid in September 2006. |
|
(2) |
|
Cash bonuses are paid in September following the release of the Groups annual
results. The value is matched with the grant of Deferred Shares and/or Options after shareholder
approval at the Annual General Meetings. |
|
(3) |
|
Group measures include KPIs for Financial Performance. Personal measures include
KPIs for Operations and Business Processes/Strategy and Growth/People and Leadership/Zero Harm and
Sustainable Development. |
Long-term
incentives (at risk)
All shares under award form part of the executives at risk remuneration. The extent to which
shares under award will vest is dependent on the extent to which the Performance Hurdles are met
and continuing employment within the Group. A summary of executives interests in incentive plans,
including the number of shares awarded in FY 2006, is shown on page 58.
Hedge arrangements
During the year the Committee implemented a policy governing the use of hedge arrangements for
executives. If any executive has a permitted hedge arrangement in place, that arrangement must be
disclosed in this Report. Under that policy, it is confirmed that no executive has any hedge
arrangement in place. Executives are prohibited from entering into hedge arrangements in relation
to unvested shares and options, and shares forming part of an executives minimum shareholding
requirement. A hedge arrangement constitutes a dealing under the Groups Securities Dealing Code.
All dealings require advance clearance from specified officers.
|
|
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|
|
|
|
|
|
|
52
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|
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|
5 BHP BILLITON ANNUAL REVIEW 2006 |
5. Key Management Personnel (other than executive Directors) continued
5.3 Retirement benefits
For
service following 1 January 2003, retirement, death and disability benefits were aligned, where
possible, for the executives as set out below.
A defined contribution rate was calculated to target a pension accrual of 2.2 per cent of base
salary for each year of service from 1 January 2003 to age 60. Allowance for a two-thirds spouses
pension in retirement plus inflation indexation in payment was also incorporated into the
calculations. To deliver the retirement promise, the executive is given a choice of funding
vehicles, including the executives current retirement arrangement, an unfunded Retirement Savings
Plan, an International Retirement Plan or a cash gratuity in lieu. The aggregate cost to the Group
of exercising these funding choices will not exceed the calculated contribution rate for each
executive.
Death-in-service and ill-health benefits
A lump sum of four times base salary and a spouses pension of two thirds of 2.2 per cent of base
salary at death for each year of service from 1 January 2003 to age 60 will be payable. In
addition, dependants benefits are payable. If the executive leaves due to incapacity, an
ill-health pension of 2.2 per cent of base salary for each year of service from 1 January 2003 to
age 60 will be payable for the duration of the executives life. In both cases, periods of service
where the executive elects to receive a cash gratuity are excluded.
In the event of death during ill-health retirement, a spouses pension of two thirds of the
ill-health pension will be payable for the duration of the spouses lifetime. Additionally, a
childrens pension equal to 20 per cent of the ill-health pension will be payable for the first
child or 33 per cent if there are two or more children, with the resultant pension amounts to be
shared equally between the children until each child ceases being in full-time education or reaches
the age of 23, whichever occurs first.
Benefits accrued by the executive in retirement arrangements before 1 January 2003 will be payable
in addition to those described above.
Retirements
Philip Aiken and Robert Kirkby will retire from the Group with effect from 31 December 2006. The
terms of their retirement have yet to be finalised. These will be reported in the FY 2007
Remuneration Report.
5.4 Service contracts
It is the Groups policy that service contracts for executives have no fixed term but be capable of
termination on 12 months notice and that the Group retains the right to terminate the contract
immediately by making a payment equal to 12 months pay in lieu of notice. The service contracts
typically outline the components of remuneration paid to the executive, but do not prescribe how
remuneration levels are to be modified from year to year.
|
|
|
|
|
|
|
|
|
|
|
|
|
Notice period |
|
|
|
|
|
|
|
|
Employing |
|
Notice period |
|
|
Name |
|
Employing company |
|
company |
|
Employee |
|
Termination provisions (1) |
Philip Aiken (2)
|
|
BHP Billiton Limited
|
|
12 months
|
|
6 months
|
|
On termination, the employing company |
Robert Kirkby (2)
|
|
BHP Billiton Limited
|
|
12 months
|
|
6 months
|
|
may make a payment in lieu of notice equal |
Marcus Randolph
|
|
BHP Billiton Limited
|
|
12 months
|
|
6 months
|
|
to 12 months base salary plus the |
Alex Vanselow
|
|
BHP Billiton Mineral Service
Company Limited
|
|
12 months
|
|
6 months
|
|
superannuation and retirement
benefit contributions for that period. |
Karen Wood
|
|
BHP Billiton Limited
|
|
12 months
|
|
6 months
|
|
|
Mike Yeager
|
|
BHP Billiton Petroleum (Americas) Inc
|
|
12 months
|
|
6 months |
|
|
John Fast
|
|
BHP Billiton Limited
|
|
3 months
|
|
3 months
|
|
On termination, the employing company
may make a payment in lieu of notice equal
to three months base salary plus a
termination payment of 21 months base
salary. |
|
|
|
Notes: |
|
(1) |
|
The Committee has not considered the circumstances in which it would exercise its
discretion to allow current executives to maintain any ongoing participation in relation to the
long-term incentive schemes in which they participate in the event of their departure. Such
entitlements, if any, will be governed by the rules of the schemes at the date of departure. |
|
(2) |
|
Mr Aiken and Mr Kirkby will retire from the Group on 31 December 2006. |
|
|
|
|
|
|
|
|
|
|
BHP BILLITON ANNUAL REVIEW
2006 5
|
|
|
|
53 |
Remuneration Report continued
6. Non-executive Directors
6.1 Remuneration policy
The aggregate sum available to remunerate non-executive Directors is currently A$3 million.
Shareholder approval will be sought at the 2006 Annual General Meetings to redenominate this sum
into US dollars to align it with the reporting currency of the Group and to eliminate any
inadvertent breach of the limit due to currency exchange fluctuations.
The remuneration rates reflect the size and complexity of the Group, the multi-jurisdictional
environment arising from the Dual Listed Companies structure, the multiple stock exchange listings,
the extent of the geographic regions in which the Group operates and the enhanced responsibilities
associated with membership of Board Committees. They also reflect the considerable travel burden
imposed on members of the Board.
The Board is conscious that just as the Group must set remuneration levels to attract and retain
talented executives, so it must ensure that remuneration rates for non-executive Directors are set
at a level that will attract the calibre of Director necessary to contribute effectively to a
high-performing Board. Fees for the Chairman and the non-executive Directors were reviewed in July
2006 in accordance with the policy of conducting annual reviews. The Committee took advice from
Kepler Associates LLP on fees for the Chairman. The Board took advice from Deloitte & Touche LLP on
non-executive Directors fees. The accompanying table sets out the fees before and after the 2006
review.
Levels
of fees and travel allowances for non-executive Directors
|
|
|
|
|
|
|
|
|
|
|
At 1 July |
|
|
At 1 September |
|
US dollars |
|
2006 |
|
|
2005 |
|
Base fee |
|
|
110,000 |
|
|
|
100,000 |
|
Plus additional fees for: |
|
|
|
|
|
|
|
|
Senior Independent Director of
BHP Billiton Plc |
|
|
25,000 |
|
|
|
20,000 |
|
Committee Chair: |
|
|
|
|
|
|
|
|
Risk & Audit |
|
|
45,000 |
|
|
|
40,000 |
|
Sustainability |
|
|
30,000 |
|
|
|
25,000 |
|
Remuneration |
|
|
30,000 |
|
|
|
25,000 |
|
Nomination |
|
No additional fees
|
Committee membership: |
|
|
|
|
|
|
|
|
Risk & Audit |
|
|
25,000 |
|
|
|
20,000 |
|
Remuneration |
|
|
20,000 |
|
|
|
15,000 |
|
Sustainability |
|
|
17,000 |
|
|
|
15,000 |
|
Nomination |
|
No additional fees
|
Travel allowance: |
|
|
|
|
|
|
|
|
Greater than 3 but less than 12 hours |
|
|
5,000 |
|
|
|
3,000 |
|
Greater than 12 hours |
|
|
10,000 |
|
|
|
7,500 |
|
Chairmans remuneration |
|
|
750,000 |
|
|
|
700,000 |
|
Non-executive Directors are not eligible to participate in any of the Groups incentive
arrangements.
A standard letter of engagement has been developed for non-executive Directors and is available on
the Groups website.
Each non-executive Director is appointed subject to periodic re-election by the shareholders (see
page 36 of the Corporate Governance Statement for an explanation of the reappointment
process). There are no provisions in any of the non-executive Directors appointment arrangements
for compensation payable on early termination of their directorship.
Dates of appointment of Directors appear on pages 31 to 33 of the Corporate Governance Statement.
7. Aggregate Directors Remuneration
This table sets out the aggregate remuneration of executive and non-executive Directors of BHP
Billiton in accordance with the requirements of the UK Companies Act 1985.
|
|
|
|
|
|
|
|
|
US dollars (million) |
|
2006 |
|
|
2005 |
|
Emoluments |
|
|
13 |
|
|
|
10 |
|
Termination payments |
|
|
|
|
|
|
|
|
Awards vesting under long-term
incentive plans |
|
|
17 |
|
|
|
4 |
|
Gains on exercise of Options |
|
|
|
|
|
|
|
|
Total |
|
|
30 |
|
|
|
14 |
|
8. Remuneration Tables
The tables that appear in this section have been prepared in accordance with the requirements of
the UK Companies Act 1985 and include adjustments to reflect Australian Corporations Act 2001
requirements and relevant accounting standards. The tables contain the amounts paid and payable to
the executive Directors and other Key Management Personnel during the year.
Remuneration for the year ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalent |
|
Value of |
|
|
|
|
|
|
|
|
|
Long-term |
|
Adjustment for |
|
Total |
who served throughout |
|
|
|
|
|
|
|
|
|
Other |
|
benefits |
|
Annual cash |
|
Payment |
|
Deferred |
|
Subtotal: UK |
|
Retirement |
|
share-based |
|
Australian |
|
Australian |
the year |
|
|
|
|
|
Base salary |
|
benefits |
|
Retirement |
|
bonus |
|
value (1) |
|
Shares (1) |
|
requirements (2) |
|
benefits |
|
compensation (1) |
|
requirements (2) |
|
requirements (2) |
US dollars |
|
|
|
|
|
FIXED |
|
FIXED |
|
FIXED |
|
AT RISK |
|
AT RISK |
|
AT RISK |
|
|
|
|
|
FIXED |
|
AT RISK |
|
AT RISK |
|
|
|
|
Charles |
|
|
2006 |
|
|
|
1,580,000 |
|
|
|
65,930 |
|
|
|
758,400 |
|
|
|
1,501,187 |
|
|
|
53,478 |
|
|
|
1,010,943 |
|
|
|
4,969,938 |
|
|
|
|
|
|
|
1,107,821 |
|
|
|
433,948 |
|
|
|
6,511,707 |
|
Goodyear
|
|
|
2005 |
|
|
|
1,312,500 |
|
|
|
60,801 |
|
|
|
630,000 |
|
|
|
1,240,313 |
|
|
|
291,201 |
|
|
|
1,060,302 |
|
|
|
4,595,117 |
|
|
|
|
|
|
|
552,711 |
|
|
|
(212,304 |
) |
|
|
4,935,524 |
|
Mike Salamon |
|
|
2006 |
|
|
|
1,311,001 |
|
|
|
39,031 |
|
|
|
|
|
|
|
2,063,695 |
|
|
|
|
|
|
|
|
|
|
|
3,413,727 |
|
|
|
|
|
|
|
634,771 |
|
|
|
855,477 |
|
|
|
4,903,975 |
|
|
|
|
2005 |
|
|
|
1,329,998 |
|
|
|
148,751 |
|
|
|
|
|
|
|
1,207,599 |
|
|
|
150,956 |
|
|
|
1,044,711 |
|
|
|
3,882,015 |
|
|
|
700,243 |
|
|
|
439,554 |
|
|
|
(282,732 |
) |
|
|
4,739,080 |
|
|
|
|
|
|
|
|
|
|
|
54
|
|
|
|
5 BHP BILLITON ANNUAL REVIEW 2006 |
8. Remuneration Tables continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend |
|
Value of |
|
|
|
|
|
|
|
|
|
Long-term |
|
Adjustment |
|
Total |
who were appointed |
|
|
|
|
|
Other |
|
Annual cash |
|
Equivalent |
|
Deferred |
|
Subtotal: UK |
|
Retirement |
|
share-based |
|
for Australian |
|
Australian |
during the year |
|
Base salary |
|
benefits |
|
bonus |
|
Payment value(1) |
|
Shares(1) |
|
requirements(2) |
|
benefits |
|
compensation(1) |
|
requirements(2) |
|
requirements(2) |
US dollars |
|
FIXED |
|
FIXED |
|
AT RISK |
|
AT RISK |
|
AT RISK |
|
|
|
|
|
FIXED |
|
AT RISK |
|
AT RISK |
|
|
|
|
Marius |
|
|
2006 |
(3) |
|
|
457,679 |
|
|
|
|
|
|
|
433,799 |
|
|
|
17,967 |
|
|
|
300,490 |
|
|
|
1,209,935 |
|
|
|
180,675 |
|
|
|
235,683 |
|
|
|
96,181 |
|
|
|
1,722,474 |
|
Kloppers |
|
|
2005 |
|
|
See remuneration table below
|
Chris Lynch |
|
|
2006 |
(3) |
|
|
442,653 |
|
|
|
23,582 |
|
|
|
407,281 |
|
|
|
14,509 |
|
|
|
274,275 |
|
|
|
1,162,300 |
|
|
|
153,601 |
|
|
|
234,319 |
|
|
|
90,510 |
|
|
|
1,640,730 |
|
|
|
|
2005 |
|
|
See remuneration table below
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term |
|
|
Adjustment for |
|
|
Total |
Personnel |
|
|
|
|
|
|
Other |
|
|
Annual cash |
|
|
Equivalent |
|
|
Value of Deferred |
|
|
|
|
|
|
Retirement |
|
|
share-based |
|
|
Australian |
|
|
Australian |
(excluding Directors) |
|
|
Base salary |
|
|
benefits |
|
|
bonus |
|
|
Payment value(1) |
|
|
Shares(1) |
|
|
Subtotal |
|
|
benefits |
|
|
compensation(1) |
|
|
requirements(2) |
|
|
requirements(2) |
US dollars |
|
FIXED |
|
FIXED |
|
AT RISK |
|
AT RISK |
|
AT RISK |
|
|
|
|
|
FIXED |
|
AT RISK |
|
AT RISK |
|
|
|
|
Philip Aiken |
|
|
2006 |
|
|
|
1,036,996 |
|
|
|
654,459 |
|
|
|
662,976 |
|
|
|
30,231 |
|
|
|
476,232 |
|
|
|
2,860,894 |
|
|
|
374,355 |
|
|
|
472,885 |
|
|
|
241,398 |
|
|
|
3,949,532 |
|
|
|
|
2005 |
|
|
|
1,012,656 |
|
|
|
920,606 |
|
|
|
731,330 |
|
|
|
110,279 |
|
|
|
625,190 |
|
|
|
3,400,061 |
|
|
|
365,569 |
|
|
|
328,088 |
|
|
|
(96,682 |
) |
|
|
3,997,036 |
|
John Fast |
|
|
2006 |
|
|
|
738,079 |
|
|
|
|
|
|
|
649,283 |
|
|
|
29,606 |
|
|
|
437,246 |
|
|
|
1,854,214 |
|
|
|
264,970 |
|
|
|
369,787 |
|
|
|
194,214 |
|
|
|
2,683,185 |
|
|
|
|
2005 |
|
|
|
707,053 |
|
|
|
|
|
|
|
651,832 |
|
|
|
101,530 |
|
|
|
557,230 |
|
|
|
2,017,645 |
|
|
|
253,832 |
|
|
|
259,287 |
|
|
|
(103,939 |
) |
|
|
2,426,825 |
|
Robert Kirkby |
|
|
2006 |
|
|
|
894,021 |
|
|
|
5,042 |
|
|
|
768,734 |
|
|
|
35,053 |
|
|
|
517,688 |
|
|
|
2,220,538 |
|
|
|
327,212 |
|
|
|
468,298 |
|
|
|
222,353 |
|
|
|
3,238,401 |
|
|
|
|
2005 |
|
|
|
828,823 |
|
|
|
1,296 |
|
|
|
781,497 |
|
|
|
108,201 |
|
|
|
668,076 |
|
|
|
2,387,893 |
|
|
|
303,349 |
|
|
|
281,608 |
|
|
|
(154,121 |
) |
|
|
2,818,729 |
|
Marius Kloppers |
|
|
2006 |
(4) |
|
|
915,359 |
|
|
|
151,645 |
|
|
|
867,597 |
|
|
|
35,934 |
|
|
|
600,980 |
|
|
|
2,571,515 |
|
|
|
361,351 |
|
|
|
471,367 |
|
|
|
192,362 |
|
|
|
3,596,595 |
|
|
|
|
2005 |
|
|
|
864,532 |
|
|
|
157,585 |
|
|
|
815,409 |
|
|
|
114,036 |
|
|
|
705,422 |
|
|
|
2,656,984 |
|
|
|
357,244 |
|
|
|
294,075 |
|
|
|
(182,713 |
) |
|
|
3,125,590 |
|
Chris Lynch |
|
|
2006 |
(4) |
|
|
870,280 |
|
|
|
23,582 |
|
|
|
814,562 |
|
|
|
29,018 |
|
|
|
548,550 |
|
|
|
2,285,992 |
|
|
|
301,987 |
|
|
|
468,638 |
|
|
|
181,021 |
|
|
|
3,237,638 |
|
|
|
|
2005 |
|
|
|
792,855 |
|
|
|
24,268 |
|
|
|
719,278 |
|
|
|
105,297 |
|
|
|
614,887 |
|
|
|
2,256,585 |
|
|
|
275,121 |
|
|
|
291,075 |
|
|
|
(115,137 |
) |
|
|
2,707,644 |
|
Marcus Randolph |
|
|
2006 |
(5) |
|
|
629,048 |
|
|
|
178,390 |
|
|
|
617,122 |
|
|
|
27,939 |
|
|
|
412,627 |
|
|
|
1,865,126 |
|
|
|
213,876 |
|
|
|
191,336 |
|
|
|
37,142 |
|
|
|
2,307,480 |
|
|
|
|
2005 |
|
|
Not applicable
|
Alex Vanselow |
|
|
2006 |
(5) |
|
|
186,846 |
|
|
|
178,216 |
|
|
|
144,749 |
|
|
|
6,582 |
|
|
|
97,211 |
|
|
|
613,604 |
|
|
|
71,001 |
|
|
|
55,200 |
|
|
|
7,296 |
|
|
|
747,101 |
|
|
|
|
2005 |
|
|
Not applicable
|
Karen Wood |
|
|
2006 |
(5) |
|
|
348,779 |
|
|
|
1,962 |
|
|
|
267,896 |
|
|
|
11,819 |
|
|
|
174,549 |
|
|
|
805,005 |
|
|
|
119,980 |
|
|
|
93,767 |
|
|
|
18,203 |
|
|
|
1,036,955 |
|
|
|
|
2005 |
|
|
Not applicable
|
Mike Yeager |
|
|
2006 |
(6) |
|
|
151,667 |
|
|
|
3,002,928 |
|
|
|
175,153 |
|
|
|
1,444 |
|
|
|
21,328 |
|
|
|
3,352,520 |
|
|
|
54,297 |
|
|
|
45,603 |
|
|
|
3,451 |
|
|
|
3,455,871 |
|
|
|
|
2005 |
|
|
Not applicable
|
|
|
|
Notes: |
|
(1) |
|
For these categories actual values cannot be calculated at the time of the
preparation of this report and accordingly estimated values have been used. |
|
(2) |
|
UK Requirements: UK Companies Act 1985. Australian Requirements: Australian
Corporations Act 2001 and relevant accounting standards. |
|
(3) |
|
Fixed remuneration shown is the actual remuneration paid or payable after Mr
Kloppers and Mr Lynchs appointment as executive Directors on 1 January 2006. |
|
|
|
At risk remuneration elements have been pro-rated to reflect the proportion of the year served as
executive Directors. |
|
(4) |
|
For Mr Kloppers and Mr Lynch, remuneration shown in this table is the total for
FY2006. Their total remuneration for the proportion of the year before their appointment as
executive Directors was US$1,874,121 for Mr Kloppers and US$1,596,908 for Mr Lynch. |
|
(5) |
|
For Messrs Randolph and Vanselow and Ms Wood, fixed remuneration is the actual
remuneration paid or payable after their appointment to the OCE. The at risk remuneration has been
pro-rated to reflect the proportion of the year served on the OCE. Their total remuneration for the
year is: Mr Randolph US$2,734,752, Mr Vanselow US$2,309,375 and Ms Wood US$1,732,127. |
|
(6) |
|
Mr Yeagers Other benefits includes reimbursement of the value of forfeited options
from previous employment. Mr Yeager was appointed to the OCE on joining the Group in April 2006.
Fixed remuneration is the actual remuneration paid and payable after his appointment to the OCE; at
risk remuneration reflects the proportion of the year served on the OCE. |
|
|
|
|
|
|
|
|
|
|
BHP BILLITON ANNUAL REVIEW 2006 5
|
|
|
|
55 |
Remuneration Report continued
8. Remuneration Tables continued
Further explanation of components of remuneration
Annual cash bonus
The amounts reported include the GIS cash bonus achieved for FY 2006 and the supplemental cash
bonus approved by the Board. Mr Salamon was also paid an amount equal to his GIS cash bonus in lieu
of Deferred Shares in respect of FY 2006.
Dividend Equivalent Payment value
Participants who are awarded shares under the GIS and the LTIP are entitled to a payment in lieu of
dividends. The Dividend Equivalent Payment is equal to the amount that would have been earned over
the retention or performance period and will be made on the transfer of shares to the participant.
In accordance with the requirements of the UK Companies Act 1985, 100 per cent of the estimated
value of Dividend Equivalent Payment in respect of awards of 2006 Deferred Shares has been included
in remuneration under the heading Dividend Equivalent Payment value. Under the requirements of
the Australian Corporations Act 2001 and relevant accounting standards the value is included in
remuneration over the relevant vesting period of the underlying awards. The difference between the
measurement methods is included under the heading Adjustment for Australian requirements.
Other benefits
Includes medical insurance, professional fees, payout of unused leave entitlements, life
assurance-related benefits, reimbursement of loss of options from previous employment, car
allowance, relocation allowance and expenses where applicable.
Retirement benefits
Mr Goodyear is entitled to receive 48 per cent of his base salary in the form of retirement
benefits. He has elected to defer receipt and participate in the Groups Retirement Savings Plan.
The estimated benefit in respect of pensions includes contributions payable in respect of defined
benefit and defined contribution arrangements and actual/notional contributions (for Mr Salamon and
Key Management Personnel other than Directors) that would have been required to secure the defined
benefit promises earned in the year. Details of the defined benefit pension entitlements earned by
Mr Salamon are set out on page 59.
Value of Deferred Shares
The amounts shown represent the estimated fair value of Deferred Shares earned in the year. The
fair value of the Deferred Shares is estimated at grant date by discounting the total value of the
shares that will be issued in the future using the risk-free interest rate for the term of the
vesting period. The actual Deferred Shares will be awarded to Mr Goodyear, Mr Kloppers and Mr Lynch
subject to approval by shareholders at the Annual General Meetings in 2006. Participants in the GIS
scheme can elect to receive Options instead of Deferred Shares or a combination of both. In respect
of FY 2006 all Key Management Personnel who were eligible to participate elected to receive
Deferred Shares. Once awarded (subsequent to meeting KPIs and approval at the Annual General
Meetings), the only vesting condition is for participants to remain in the employment of the Group
for two further years. Accordingly, the number of shares (if any) that will ultimately vest cannot
be determined until the service period has been completed. The estimated
value of the Deferred Shares forms part of the at risk remuneration appearing throughout the
Report.
Long-term share-based compensation
The amount in respect of long-term share-based compensation represents the estimated value of
Performance Shares granted under the LTIP and, prior to 2004, the GIS. The estimated fair value has
been independently determined using a Monte Carlo simulation methodology taking account of
Performance Hurdles, the exercise price, the term of the award, the impact of dilution, the
non-tradeable nature of the award, the share price at grant date and expected price volatility of
the underlying share and the risk-free interest rate for the term of the award. Details of
outstanding awards and awards vesting in the year are set out in the tables on pages 57 and 58. The
estimated fair value of the award made in any year is allocated in equal amounts to each of the
years during the vesting period.
The proportion of total remuneration for FY 2006 consisting of Options awarded under the GIS to Mr
Goodyear is 2.4 per cent.
Adjustment for Deferred Share vesting period
In accordance with UK Companies Act 1985 requirements, 100 per cent of the estimated fair value of
Deferred Shares earned during FY 2006 is included in the remuneration in the column headed Value
of Deferred Shares. Under the requirements of the Australian Corporations Act 2001 and relevant
accounting standards, the estimated fair value of the awards for the current and earlier years is
to be included in remuneration over the vesting period. The difference between the measurement
methods is included in the column headed Adjustment for Australian requirements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-executive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
|
|
|
Total: Australian |
Directors |
|
|
|
|
|
Committee |
|
Committee |
|
Travel |
|
Other |
|
UK requirements (2) |
|
Retirement |
|
requirements (2) |
US dollars |
|
Fees |
|
Chair fees |
|
membership fees |
|
allowances |
|
benefits(1) |
|
2006 |
|
2005 |
|
benefits(3) |
|
2006 |
|
2005 |
Paul Anderson (4) |
|
|
6,944 |
|
|
|
|
|
|
|
1,042 |
|
|
|
3,000 |
|
|
|
|
|
|
|
10,986 |
|
|
|
|
|
|
|
|
|
|
|
10,986 |
|
|
|
|
|
Don Argus |
|
|
658,333 |
|
|
|
|
|
|
|
|
|
|
|
25,500 |
|
|
|
35,545 |
|
|
|
719,378 |
|
|
|
466,847 |
|
|
|
33,299 |
|
|
|
752,677 |
|
|
|
490,235 |
|
David Brink |
|
|
97,500 |
|
|
|
25,000 |
|
|
|
20,000 |
|
|
|
24,500 |
|
|
|
7,125 |
|
|
|
174,125 |
|
|
|
162,924 |
|
|
|
|
|
|
|
174,125 |
|
|
|
162,924 |
|
John Buchanan |
|
|
117,500 |
|
|
|
25,000 |
|
|
|
|
|
|
|
18,500 |
|
|
|
9,071 |
|
|
|
170,071 |
|
|
|
156,547 |
|
|
|
|
|
|
|
170,071 |
|
|
|
156,547 |
|
Michael Chaney (5) |
|
|
38,141 |
|
|
|
|
|
|
|
|
|
|
|
9,500 |
|
|
|
|
|
|
|
47,641 |
|
|
|
103,087 |
|
|
|
1,977 |
|
|
|
49,618 |
|
|
|
107,508 |
|
Carlos Cordeiro |
|
|
97,500 |
|
|
|
|
|
|
|
8,997 |
|
|
|
45,500 |
|
|
|
|
|
|
|
151,997 |
|
|
|
21,369 |
|
|
|
|
|
|
|
151,997 |
|
|
|
21,369 |
|
David Crawford |
|
|
97,500 |
|
|
|
40,000 |
|
|
|
|
|
|
|
33,000 |
|
|
|
8,920 |
|
|
|
179,420 |
|
|
|
143,769 |
|
|
|
7,109 |
|
|
|
186,529 |
|
|
|
150,266 |
|
David Jenkins |
|
|
97,506 |
|
|
|
|
|
|
|
35,000 |
|
|
|
35,000 |
|
|
|
13,426 |
|
|
|
180,932 |
|
|
|
142,000 |
|
|
|
|
|
|
|
180,932 |
|
|
|
142,000 |
|
Jacques Nasser (4) |
|
|
6,944 |
|
|
|
|
|
|
|
1,389 |
|
|
|
3,000 |
|
|
|
|
|
|
|
11,333 |
|
|
|
|
|
|
|
|
|
|
|
11,333 |
|
|
|
|
|
Gail de Planque |
|
|
70,125 |
|
|
|
|
|
|
|
10,042 |
|
|
|
19,500 |
|
|
|
194 |
|
|
|
99,861 |
|
|
|
|
|
|
|
|
|
|
|
99,861 |
|
|
|
|
|
Lord Renwick (5) |
|
|
38,141 |
|
|
|
|
|
|
|
6,096 |
|
|
|
12,500 |
|
|
|
11,607 |
|
|
|
68,344 |
|
|
|
107,000 |
|
|
|
|
|
|
|
68,344 |
|
|
|
107,000 |
|
John Schubert |
|
|
97,500 |
|
|
|
|
|
|
|
15,000 |
|
|
|
25,500 |
|
|
|
7,434 |
|
|
|
145,434 |
|
|
|
116,651 |
|
|
|
5,805 |
|
|
|
151,239 |
|
|
|
121,850 |
|
|
|
|
Notes: |
|
(1) |
|
Other benefits include professional fees and reimbursements of the cost of travel,
accommodation and subsistence for the Director and, where applicable, their spouse. |
|
(2) |
|
UK Requirements: UK Companies Act 1985. Australian Requirements: Australian
Corporations Act 2001 and relevant accounting standards |
|
(3) |
|
BHP Billiton Limited makes superannuation contributions of 9 per cent of fees paid
in accordance with Australian superannuation legislation. |
|
(4) |
|
Appointed 6 June 2006. |
|
(5) |
|
Retired 25 November 2005. |
|
|
|
|
|
|
|
|
|
|
56
|
|
|
|
5 BHP BILLITON ANNUAL REVIEW 2006 |
8. Remuneration Tables continued
Interests in incentive plans including the number of shares and options awarded in the
financial year ended 30 June 2006
Executive Directors
Charles Goodyear
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BHP Billiton Limited ordinary shares under option |
|
|
Exercise |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
price (1) |
|
|
First exercise |
|
|
|
|
Scheme |
|
At 1 July 2005 |
|
|
Granted |
|
|
Exercised |
|
|
Lapsed |
|
|
At 30 June 2006 |
|
|
(A$) |
|
|
date |
|
|
Expiry date |
|
GIS 2004 Options |
|
|
180,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180,613 |
|
|
|
15.39 |
|
|
August 2006 |
|
August 2009 |
GIS 2003 Options (2) |
|
|
320,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
320,725 |
|
|
|
11.11 |
|
|
24 August 2005 |
|
23 August 2008 |
ESP
2000 (3) |
|
|
722,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
722,785 |
|
|
|
7.60 |
|
|
3 April 2003 |
|
2 April 2010 |
ESP
1999 (3) |
|
|
351,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
351,065 |
|
|
|
6.92 |
|
|
23 April 2002 |
|
22 April 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BHP Billiton Limited ordinary shares under award |
|
|
|
|
Scheme |
|
At 1 July 2005 |
|
|
Granted (3) |
|
|
Vested (4) |
|
|
Lapsed |
|
|
At 30 June 2006 |
|
|
Vesting date |
LTIP 2005 Performance |
|
|
|
|
|
|
600,000 |
|
|
|
|
|
|
|
|
|
|
|
600,000 |
|
|
August 2010 |
LTIP 2004 Performance |
|
|
500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000 |
|
|
August 2009 |
GIS 2005 Deferred |
|
|
|
|
|
|
76,569 |
|
|
|
|
|
|
|
|
|
|
|
76,569 |
|
|
August 2007 |
GIS 2004 Deferred |
|
|
44,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,601 |
|
|
August 2006 |
GIS 2003 Deferred (5) |
|
|
28,093 |
|
|
|
|
|
|
|
28,093 |
|
|
|
|
|
|
|
|
|
|
24 August 2005 |
GIS 2003 Performance |
|
|
112,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112,375 |
|
|
August 2006 |
GIS 2002 Performance (6) |
|
|
180,154 |
|
|
|
|
|
|
|
180,154 |
|
|
|
|
|
|
|
|
|
|
24 August 2005 |
Total |
|
|
865,223 |
|
|
|
676,569 |
|
|
|
208,247 |
|
|
|
|
|
|
|
1,333,545 |
|
|
|
|
|
Marius Kloppers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BHP Billiton Plc ordinary shares under award |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At date of |
|
|
|
|
|
|
|
|
|
At 1 July |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
appointment as |
|
|
At 30 June |
|
|
|
|
Scheme |
|
2005 |
|
|
Granted (1) |
|
|
Vested (4) |
|
|
Lapsed |
|
|
executive Director |
|
|
2006 |
|
|
Vesting date |
LTIP 2005 Performance |
|
|
|
|
|
|
225,000 |
|
|
|
|
|
|
|
|
|
|
|
225,000 |
|
|
|
225,000 |
|
|
August 2010 |
LTIP 2004 Performance |
|
|
225,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225,000 |
|
|
|
225,000 |
|
|
August 2009 |
GIS 2005 Deferred |
|
|
|
|
|
|
52,771 |
|
|
|
|
|
|
|
|
|
|
|
52,771 |
|
|
|
52,771 |
|
|
August 2007 |
GIS 2004 Deferred |
|
|
60,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,548 |
|
|
|
60,548 |
|
|
August 2006 |
GIS 2003 Deferred (5) |
|
|
55,378 |
|
|
|
|
|
|
|
55,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24 August 2005 |
GIS 2003 Performance |
|
|
55,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,378 |
|
|
|
55,378 |
|
|
August 2006 |
GIS 2002 Performance (6) |
|
|
119,485 |
|
|
|
|
|
|
|
119,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24 August 2005 |
CIP 2001 (7) |
|
|
95,295 |
(8) |
|
|
|
|
|
|
84,706 |
|
|
|
10,589 |
|
|
|
|
|
|
|
|
|
|
1 October 2005 |
Total |
|
|
611,084 |
|
|
|
277,771 |
|
|
|
259,569 |
|
|
|
10,589 |
|
|
|
618,697 |
|
|
|
618,697 |
|
|
|
|
|
Chris Lynch
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BHP Billiton Limited ordinary shares under award |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At date of |
|
|
|
|
|
|
|
|
|
At 1 July |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
appointment as |
|
|
At 30 June |
|
|
|
|
Scheme |
|
2005 |
|
|
Granted (1) |
|
|
Vested (4) |
|
|
Lapsed |
|
|
executive Director |
|
|
2006 |
|
|
Vesting date |
LTIP 2005 Performance |
|
|
|
|
|
|
225,000 |
|
|
|
|
|
|
|
|
|
|
|
225,000 |
|
|
|
225,000 |
|
|
August 2010 |
LTIP 2004 Performance |
|
|
225,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225,000 |
|
|
|
225,000 |
|
|
August 2009 |
GIS 2005 Deferred |
|
|
|
|
|
|
43,670 |
|
|
|
|
|
|
|
|
|
|
|
43,670 |
|
|
|
43,670 |
|
|
August 2007 |
GIS 2004 Deferred |
|
|
55,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,908 |
|
|
|
55,908 |
|
|
August 2006 |
GIS 2003 Deferred (5) |
|
|
61,010 |
|
|
|
|
|
|
|
61,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24 August 2005 |
GIS 2003 Performance |
|
|
61,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,010 |
|
|
|
61,010 |
|
|
August 2006 |
GIS 2002 Performance (6) |
|
|
117,117 |
|
|
|
|
|
|
|
117,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24 August 2005 |
Total |
|
|
520,045 |
|
|
|
268,670 |
|
|
|
178,127 |
|
|
|
|
|
|
|
610,588 |
|
|
|
610,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BHP BILLITON ANNUAL REVIEW 2006 5
|
|
|
|
57 |
Remuneration Report continued
8. Remuneration Tables continued
Interests in incentive plans including the number of shares and options awarded in the financial
year ended 30 June 2006 continued
Mike Salamon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BHP Billiton Plc ordinary shares under award |
|
|
|
|
Scheme |
|
At 1 July 2005 |
|
|
Granted (1) |
|
|
Vested (4) |
|
|
Lapsed |
|
|
At 30 June 2006 |
|
|
Vesting date |
|
LTIP 2005 Performance |
|
|
|
|
|
|
300,000 |
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
|
August 2010 |
LTIP 2004 Performance |
|
|
300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
|
August 2009 |
GIS 2005 Deferred |
|
|
|
|
|
|
73,743 |
|
|
|
|
|
|
|
|
|
|
|
73,743 |
|
|
August 2007 |
GIS 2004 Deferred |
|
|
80,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,151 |
|
|
August 2006 |
GIS 2003 Deferred (5) |
|
|
89,056 |
|
|
|
|
|
|
|
89,056 |
|
|
|
|
|
|
|
|
|
|
24 August 2005 |
GIS 2003 Performance |
|
|
89,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89,056 |
|
|
August 2006 |
GIS 2002 Performance (6) |
|
|
193,706 |
|
|
|
|
|
|
|
193,706 |
|
|
|
|
|
|
|
|
|
|
24 August 2005 |
CIP 2001 (7) |
|
|
95,295 |
(8) |
|
|
|
|
|
|
84,706 |
|
|
|
10,589 |
|
|
|
|
|
|
1 October 2005 |
Total |
|
|
847,264 |
|
|
|
373,743 |
|
|
|
367,468 |
|
|
|
10,589 |
|
|
|
842,950 |
|
|
|
|
|
|
|
|
Notes: |
|
(1) |
|
Represents the exercise price payable on Options. |
|
(2) |
|
All of the Options issued pursuant to these awards are exercisable. |
|
(3) |
|
The market prices of BHP Billiton
Limited and
BHP Billiton Plc shares on date of grant (5 December 2005) were A$22.03 and £8.90 respectively. The
fair values per Performance Share and Deferred Share were A$6.21/£2.79 and A$18.83/£7.70
respectively. Fair value per Performance Share and Deferred Share was estimated using Monte Carlo
simulation and Net Present Value models respectively. |
|
(4) |
|
All vested awards are exercisable. Mr Goodyear has not yet exercised an award over
15,716 shares issued under the 2001 Performance Share Plan, which vested prior to 1 July 2005. The
market price of BHP Billiton Limited shares on date of grant, 1 November 2001, was A$8.26. Mr Lynch
has not yet exercised an award over 43,592 shares issued under the 2000 Performance Share Plan
(market price of BHP Billiton Limited shares on date of grant, 1 November 2000, was A$8.55); an
award of 98,603 shares issued under the 2001 Performance Share Plan (market price of BHP Billiton
Limited shares on date of grant, 1 November 2001, was A$8.26); an award over 117,117 Performance
Shares issued under the 2002 GIS (market price of BHP Billiton Limited shares on date of grant, 12
November 2002, was A$9.37); and an award of 61,010 Deferred Shares issued under the 2003 GIS
(market price of BHP Billiton Limited shares on date of grant, 21 November 2003, was A$10.76). All
these awards vested prior to 1 July 2005. |
|
(5) |
|
100 per cent of the Deferred Shares vested on 24 August 2005 at the end of the
holding period. The BHP Billiton Limited and BHP Billiton Plc market prices were A$20.56 and £8.04
per share respectively. |
|
|
|
Mr Goodyear exercised an award over 28,093 shares on 2 September 2005 at a
market price of A$20.83. The aggregate gain was A$585,177. |
|
|
|
Mr Salamon exercised an award over
48,981 shares on 26 August 2005 at a market price of £8.15; and 40,075 on 1 September 2005 at a
market price of £8.465. The aggregate gains were £399,195 and £339,235 respectively. Mr Kloppers
exercised an award over 55,378 shares on 1 September 2005 at a market price of £8.465. The
aggregate gain was £468,775. Mr Lynch had not exercised any of the Deferred Shares as at 30 June
2006. |
|
(6) |
|
The performance period ended on 30 June 2005. Based on the performance measured at
the end of the performance period, 100 per cent of the Performance Shares vested on 24 August 2005.
The BHP Billiton Limited and BHP Billiton Plc market prices were A$20.56 and £8.04 per
share respectively. Mr Goodyear exercised an award over 180,154 shares on 2 September 2005 at a
market price of A$20.83. The aggregate gain was A$3,752,608. Mr Salamon exercised an award over
106,538 shares on 26 August 2005 at a market price of £8.15; and 87,168 on 1 September 2005 at a
market price of £8.465. The aggregate gains were £868,285 and £737,877 respectively. Mr Kloppers
exercised an award over 119,485 shares on 1 September 2005 at a market price of £8.465. The
aggregate gain was £1,011,440. Mr Lynch had not exercised any of his Performance Share awards as at
30 June 2006. |
|
(7) |
|
The second performance period ended on 30 September 2005. The BHP Billiton Limited
and BHP Billiton Plc market prices were A$22.25 and £9.16 respectively. Based on performance
measured at the end of this performance period, 100 per cent out of a maximum 125 per cent matching
shares vested. The remaining 25 per cent lapsed with immediate effect. Mr Kloppers exercised an
award over 84,706 shares on 19 October 2005 at a market price of £7.855. The aggregate gain was
£665,366. Mr Salamon exercised an award over 84,706 shares on 9 December 2005 at a market price of
£8.94. The aggregate gain was £757,272. |
|
(8) |
|
Includes 26,471 shares invested by each of Mr Salamon and Mr Kloppers. |
Key Management Personnel other than Directors (1)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At Date of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appointment |
|
|
|
|
|
|
At 1 July |
|
|
|
|
|
|
Options |
|
|
|
|
|
|
|
|
|
|
as KMP if |
|
|
At 30 June |
|
|
|
2005 |
|
|
Granted |
|
|
Exercised |
|
|
Shares Vested |
|
|
Lapsed |
|
|
during FY 2006 |
|
|
2006 |
|
Philip Aiken
Shares under award |
|
|
581,301 |
|
|
|
269,403 |
|
|
|
|
|
|
|
227,933 |
|
|
|
|
|
|
|
|
|
|
|
622,771 |
|
John Fast
Shares under award (3) |
|
|
490,548 |
|
|
|
214,575 |
|
|
|
|
|
|
|
202,839 |
|
|
|
4,019 |
|
|
|
|
|
|
|
498,265 |
|
Robert Kirkby
Shares under award |
|
|
531,500 |
|
|
|
272,448 |
|
|
|
|
|
|
|
188,507 |
|
|
|
2,512 |
|
|
|
|
|
|
|
612,929 |
|
Partly paid shares |
|
|
180,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180,534 |
|
Marcus Randolph
Shares under award |
|
|
313,192 |
|
|
|
142,199 |
|
|
|
|
|
|
|
124,697 |
|
|
|
|
|
|
|
188,495 |
|
|
|
330,694 |
|
Alex Vanselow
Shares under award |
|
|
193,651 |
|
|
|
135,633 |
|
|
|
|
|
|
|
42,445 |
|
|
|
|
|
|
|
286,839 |
|
|
|
286,839 |
|
Karen Wood
Shares under award (3) |
|
|
190,218 |
|
|
|
100,462 |
|
|
|
|
|
|
|
62,903 |
|
|
|
|
|
|
|
227,777 |
|
|
|
227,777 |
|
Michael Yeager
Shares under award |
|
|
|
|
|
|
325,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
325,000 |
|
|
|
|
Notes: |
|
(1) |
|
Detailed information on the interests of Key Management Personnel other than
Directors in incentive plans is set out in note 31 to the financial statements contained in the BHP
Billiton Annual Report. |
|
(2) |
|
Key Management Personnel other than Directors have been granted rights over BHP
Billiton Limited ordinary shares. |
|
(3) |
|
Mr Fast and Ms Wood have not yet exercised their awards of 96,384 and 25,846 shares
respectively under the 2001 Performance Share Plan, which vested prior to 1 July 2005. |
|
|
|
|
|
|
|
|
|
|
58
|
|
|
5 BHP BILLITON ANNUAL REVIEW 2006 |
8. Remuneration Tables continued
Retirement benefits
Executive Directors
Mike Salamon Defined benefit pension
US dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount by which the |
|
|
|
|
|
|
|
|
annual pension entitlement |
|
Total annual pension |
|
|
|
|
|
Estimated capital value (transfer value) |
has increased during the |
|
entitlement as at 30 June |
|
Difference in transfer |
|
of total accrued pension |
year ended 30 June 2006 (1) |
|
2006 |
|
values (2)(3) |
|
30 June 2006 |
|
30 June 2005 |
25,488
|
|
|
874,000 |
|
|
|
4,805,850 |
|
|
|
14,197,869 |
|
|
|
9,392,019 |
|
|
|
|
Notes: |
|
(1) |
|
The increase in accrued pension is the difference between the accrued pension at the
end of the previous year and the accrued pension at the end of the year without any allowance for
inflation. |
|
(2) |
|
Retirement benefits for Mike Salamon are non-contributory. |
|
(3) |
|
The increase in accrued pension after making an allowance for inflation of 3.3 per
cent was (US$2,532) and the transfer value of that increase was (US$41,149). For FY 2005, the
increase in accrued pension after making an allowance for inflation of 2.9 per cent was US$42,275
and the transfer value of that increase was US$447,798. |
Non-executive Directors
The following table sets out the accrued retirement benefits under the now-closed Retirement Plan
of BHP Billiton Limited, together with any entitlements obtained by the compulsory Group
contributions to the BHP Billiton Superannuation Fund. The Retirement Plan was closed on 24 October
2003 and entitlements that had accumulated in respect of each of the participants were frozen.
These will be paid on retirement. An earnings rate equal to the five-year Australian Government
Bond Rate is being applied to the frozen entitlements from that date.
US dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in lump sum |
|
|
Lump sum entitlement at |
|
|
|
Completed service at |
|
|
entitlement during |
|
|
|
|
|
|
|
Name |
|
30 June 2006 (years) |
|
|
the year (1) |
|
|
30 June 2006 |
|
|
30 June 2005 |
|
Don Argus |
|
|
9 |
|
|
|
69,686 |
|
|
|
1,356,447 |
|
|
|
1,286,761 |
|
Michael Chaney |
|
see note (2) below |
|
|
4,978 |
|
|
see note (2) below |
|
|
339,742 |
|
David Crawford |
|
|
12 |
|
|
|
58,705 |
|
|
|
419,937 |
|
|
|
361,232 |
|
David Jenkins |
|
|
6 |
|
|
|
4,382 |
|
|
|
224,057 |
|
|
|
219,675 |
|
John Schubert |
|
|
6 |
|
|
|
10,529 |
|
|
|
183,955 |
|
|
|
173,426 |
|
|
|
|
Notes: |
|
(1) |
|
On closure of the Retirement Plan, no further entitlements have accrued. The
increase reflects the accrual at the date of closure, together with application of the earnings
rate and foreign exchange impact. |
|
(2) |
|
Mr Chaney retired on 25 November 2005. Following his retirement Mr Chaney received
entitlement payments totalling US$344,720. |
8.1 Estimated value range of awards
The maximum possible value of awards yet to vest to be disclosed under the Australian Corporations
Act 2001 is not determinable as it is dependent on, and therefore fluctuates with, the share prices
of BHP Billiton Limited and BHP Billiton Plc at a date that any award is exercised. An estimate of
a maximum possible value of awards for Key Management Personnel can be made using the highest share
price during FY 2006, which is A$32.00 and £12.11 respectively, multiplied by the number of awards
for each scheme. For Options granted to Mr Goodyear, the value is reduced by the exercise price
multiplied by the number of Options. The minimum value of awards yet to vest is nil.
|
|
|
|
|
|
|
|
|
|
BHP BILLITON ANNUAL REVIEW
2006 5
|
|
|
59 |
Remuneration Report continued
9. Appendix
Summary of long-term incentive plans
The long-term incentive plans in which the executive Directors have unvested or
unexercised (1) awards at the date of this Report are summarised in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GIS 2002 |
|
|
|
|
|
|
|
|
LTIP 2005 |
|
LTIP 2004 |
|
GIS 2003 |
|
Performance |
|
|
|
|
|
|
|
|
Performance |
|
Performance |
|
Performance |
|
Shares |
|
MTI 2001 and |
|
PSP 2001 and |
|
|
|
|
Shares |
|
Shares |
|
Shares |
|
(transition year) (2) |
|
CIP 2001 |
|
RSS 2001 (2) |
|
ESP 2000 (2) |
|
Performance
measurement
From To
|
|
1 July 2005
30 June 2010
|
|
1 July 2004
30 June 2009
|
|
1 July 2003
30 June 2006
|
|
1 July 2002
30 June 2005 (3)
|
|
1 October 2001
30 September
2005 (3)
|
|
1 October 2001
30 September
2004
|
|
3 April 2000
2 April 2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan status
|
|
Performance
period not yet
concluded
|
|
Performance
period not yet
concluded
|
|
Performance
period concluded
on 30 June 2006
and will vest in
August 2006
|
|
Awards have met
Performance
Hurdles and are
capable of being
exercised
|
|
Legacy plan.
Awards have met
Performance
Hurdles and have
all been
exercised
|
|
Legacy plan.
Awards have met
Performance
Hurdles and are
capable of being
exercised
|
|
Legacy plan.
Awards have met
Performance
Hurdles and are
capable of being
exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSR performance
condition
|
|
BHP Billiton TSR
compared to
global
comparator
group
|
|
BHP Billiton TSR
compared to
global
comparator
group
|
|
BHP Billiton TSR
compared to
global
comparator
group
|
|
BHP Billiton TSR
compared to
global
comparator
group
|
|
BHP Billiton TSR
compared to
global
comparator
group
|
|
BHP Billiton TSR
compared to
global
comparator
group
|
|
BHP Billiton
Limited TSR
compared to ASX
100 and global
comparator
group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inflationary
performance
condition
|
|
No
|
|
No
|
|
Yes (4)
|
|
Yes
|
|
Yes
|
|
Yes
|
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting schedule
(upper and lower
range)
|
|
<Index: 0%
Index +5.5% p.a:
100%
Between Index
and Index +5.5%
p.a: Straight-line
pro-rata vesting
|
|
<Index: 0%
Index +5.5% p.a:
100%
Between Index
and Index +5.5%
p.a: Straight-line
pro-rata vesting
|
|
<50th percentile
0%
85th100th
percentile 100%
|
|
<50th percentile
0%
85th100th
percentile 100%
|
|
<10th position
0% >4th position
125%
|
|
<10th position
0% >4th position
100%
|
|
<41st percentile
0% >60th percentile
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expiry date if
exercisable
|
|
August 2015
|
|
August 2014
|
|
August 2009
|
|
August 2008
|
|
April 2006
|
|
September 2011 (5)
|
|
April 2010 (5) |
|
|
|
|
|
|
60
|
|
5BHP BILLITON ANNUAL REVIEW 2006 |
9. Appendix continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GIS 2002 |
|
|
|
|
|
|
|
|
LTIP 2005 |
|
LTIP 2004 |
|
GIS 2003 |
|
Performance |
|
|
|
|
|
|
|
|
Performance |
|
Performance |
|
Performance |
|
Shares |
|
MTI 2001 and |
|
PSP 2001 and |
|
|
|
|
Shares |
|
Shares |
|
Shares |
|
(transition year)(2) |
|
CIP 2001 |
|
RSS 2001 (2) |
|
ESP 2000 (2) |
Comparator
group: (6) |
|
see note (7) |
|
see note (7) |
|
|
|
|
|
|
|
|
|
|
ASX 100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
Alcan |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
|
|
Alcoa |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
|
|
Alumina |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
|
|
Anglo American |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
|
|
Arcelor |
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
Barrick Gold |
|
|
|
|
|
X |
|
X |
|
X |
|
X |
|
|
BG Group |
|
X |
|
X |
|
|
|
|
|
|
|
|
|
|
BP |
|
X |
|
X |
|
|
|
|
|
|
|
|
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Companhia Vale |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
|
|
do Rio Doce |
|
|
|
|
|
|
|
|
|
|
|
|
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ConocoPhillips |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Corus Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
Exxon Mobil |
|
X |
|
X |
|
|
|
|
|
|
|
|
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Falconbridge |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Freeport- McMoRan |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Impala |
|
X |
|
X |
|
|
|
|
|
|
|
|
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Inco |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
|
|
LTV |
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
Marathon Oil |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Newmont Mining |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
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|
Norilsk |
|
X |
|
X |
|
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|
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Nucor |
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
Phelps Dodge |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Placer Dome |
|
|
|
|
|
X |
|
X |
|
X |
|
X |
|
|
Rio Tinto |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Shell |
|
X |
|
X |
|
|
|
|
|
|
|
|
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Total |
|
X |
|
X |
|
|
|
|
|
|
|
|
|
X |
Unocal |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
US Steel |
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
Woodside Petroleum |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Xstrata |
|
X |
|
X |
|
X |
|
X |
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|
Further details of all incentive plans, including the number of participants in those plans,
are contained in note 23 to the financial statements contained in the BHP Billiton Annual Report.
Notes:
(1) |
|
Awards under the MTI 2001 and CIP 2001 vested and were exercised during the year
ended 30 June 2006. No executive Director retains an interest in the plans. |
|
(2) |
|
Although
the awards under this plan have vested, some executive Directors have not yet exercised their
awards and still retain an interest in the plan. |
|
(3) |
|
The performance period ended 30 June 2005. 100 per cent of the shares vested. |
|
(4) |
|
The inflationary performance condition will be satisfied if the compound EPS growth
for BHP Billiton during the performance period is at least equal to the greater of the increase in
the Australian Consumer Price Index and the increase in the UK Retail Price Index, plus two
percentage points per annum, over the performance period. |
|
(5) |
|
Expiry date will be earlier if employment ceases. |
|
(6) |
|
From publicly available data. |
|
(7) |
|
The peer group of companies forming the weighted index used for the second relative
performance chart on page 48 is the same as the comparator group in respect of the 2004 and 2005
LTIP. |
This Report was approved by the Board on 11 September 2006 and signed on its behalf by:
John Buchanan
Chairman, Remuneration Committee
11 September 2006
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BHP BILLITON ANNUAL REVIEW 20065
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61 |
Directors Report
The information presented by the Directors in this Directors Report relates to BHP Billiton
Limited and BHP Billiton Plc and their subsidiaries.
Principal activities, state of affairs and business review
A review of the operations of the Group during the financial year, and the expected results of
those operations in future financial years, is set out in the Chairmans Review on pages 4 and 5,
the Chief Executive Officers Report on pages 6 and 7, the Customer Sector Group Highlights on
pages 22 to 25 and other material in this Annual Review. Information on the development of the
Group and likely developments in future years also appears in those sections of this Annual Review.
The Directors believe that to include further information on those matters in this Annual Review
would be likely to result in unreasonable prejudice to the Group.
The principal activities of the
Group during the 2006 financial year were minerals exploration, development, production and
processing (in respect of alumina, aluminium, copper, iron ore, metallurgical coal, energy coal,
nickel, manganese ores and alloys, diamonds, titanium minerals and uranium), and oil and gas
exploration, development and production.
Significant changes in the state of affairs of the Group that occurred during the 2006 financial
year and significant post balance date events are set out below and in the Chief Executive
Officers Report and Customer Sector Group Highlights:
|
|
BHP Billiton completed a US$2 billion capital management program during financial
year 2006. As detailed below, US$1.6 billion was returned to shareholders via an
off-market buy-back of BHP Billiton Limited shares at a discount to the market price,
with the balance being returned via on-market purchases of BHP Billiton Plc shares. |
|
|
On 24 August 2005, BHP Billiton confirmed a prior announcement that it would
permanently close the hot briquetted iron facilities at the Boodarie Iron plant in
Western Australia. A charge of US$266 million was made in the accounts for the year
ended 30 June 2005, primarily relating to settlement of existing contractual
arrangements, plant decommissioning, site rehabilitation, redundancy and other
associated costs. Following a review of the provision and estimated future closure costs
at 30 June 2006, the provision has been reduced by US$10.0 million. |
|
|
In September 2005 during Hurricane Rita, the Chevron-operated Typhoon tension-leg
platform was severed from its mooring and suffered severe damage. The facility could not
be recovered. BHP Billiton holds a 50 per cent interest in Typhoon and a 50 per cent
interest in the Boris oil and gas field, which was also produced through the Typhoon
facility. As a result no further production was realised from these fields. |
|
|
In October 2005, the Wheelarra Joint Venture commenced. This joint venture with
four Chinese steel mills secured long-term sales commitments for BHP Billitons iron ore
products over 25 years. It is comprised of BHP Billiton and wholly-owned subsidiaries of
Maanshan Iron and Steel Company Limited; Jiangsu Shagang Group Co. Ltd; Tangshan Iron
and Steel (Group) Co. Ltd; Wuhan Iron and Steel (Group) Corporation; ITOCHU Minerals &
Energy of Australia; and Mitsui Iron Ore Corporation. |
|
|
In April 2006, BHP Billiton commenced the JFE Western 4 Joint Venture with JFE
Steel and BHP Billitons existing Yandi joint venture partners, ITOCHU Minerals & Energy
of Australia and Mitsui Iron Ore Corporation. The JFE Western 4 Joint Venture involves a
sub-lease over the Western 4 deposit within BHP Billitons Yandi mine in Western
Australia, and aims to combine the partners respective areas of expertise to carry out
research and development in order to prove the commercial viability of lower channel
deposit iron ore. |
|
|
On 26 April 2006, BHP Billiton announced that, following an assessment of ground
conditions, it would accelerate a program of decline and stope access rehabilitation at
the Cannington silver-lead-zinc mine in Australia from May to November 2006. This
impacts production in the southern zone of the mine, while northern zone mining
activities remain unaffected. The primary reason for the program is to ensure the safety
of employees and contractors, consistent with BHP Billitons commitment to Zero Harm.
Production is expected to return to normal levels by early 2007 and the program will
predominantly impact sales in the first half of the 2007 financial year. |
|
|
On 12 June 2006, BHP Billiton and MMC Norilsk Nickel entered into an alliance to
explore and develop mineral resources in the Russian Federation. The formal agreement
governing their cooperation provides for joint identification of attractive mineral
exploration and development prospects in Russia, to be followed by the establishment of
joint local companies to pursue and develop specific projects. These companies will be
owned 50 per cent plus one share by MMC Norilsk Nickel and 50 per cent minus one share by
BHP Billiton. |
No other matter or circumstance has arisen since the end of the 2006 financial year that has
significantly affected or may significantly affect the operations, the results of operations or
state of affairs of the Group in future years.
The material risks and uncertainties that could affect the Group are described in section 8.1 of
the Corporate Governance Statement.
Share capital and buy-back programs
As part of its capital management program, BHP Billiton completed an off-market buy-back of US$1.6
billion of BHP Billiton Limited shares during the 2006 financial year. BHP Billiton Limited
repurchased 96 million shares, representing 1.6 per cent of the issued share capital of the BHP
Billiton Group. These shares were acquired at a price of A$23.45 per share, which represented a
discount of 14 per cent to the volume weighted average price of BHP Billiton Limited shares over
the five days up to and including the closing date of the buy-back (being 31 March 2006). The
shares purchased were cancelled.
In addition, BHP Billiton Limited has in place an on-market share buy-back program under which up
to 349 million shares of BHP Billiton Limited can be purchased on-market and cancelled, which
represents less than 10 per cent of BHP Billiton Limiteds issued share capital. BHP Billiton
Limited did not make any on-market share purchases during the 2006 financial year.
At the Annual General Meetings held during 2005, shareholders authorised BHP Billiton Plc to make
on-market purchases of up to 246,814,700 of its ordinary shares, representing approximately 10 per
cent of BHP Billiton Plcs issued share capital at that time. Shareholders will be asked at the
2006 Annual General Meetings to renew this authority.
During the 2006 financial year, 18.8 million ordinary shares in BHP Billiton Plc, with a nominal
value of US$0.50 per share and representing 0.76 per cent of BHP Billiton Plcs issued share
capital, were purchased by BHP Billiton Plc. These shares were bought back at an average price of
1,153.56 pence for an aggregate consideration of US$409 million to return value to shareholders
under BHP Billitons capital management program. This represented a discount to the average BHP
Billiton Limited share price over the buy-back period (being 27 April 2006 to 16 May 2006) of 8.8
per cent. The shares purchased are held as treasury shares.
In August 2006, the Group announced a further capital return of US$3 billion to shareholders over
the following 18 months through a series of share buy-backs, and it is yet to be decided the extent
to which these will be on or off market. This has commenced with an on-market buy-back in BHP
Billiton Plc.
Some executives of BHP Billiton are entitled to options as part of their remuneration arrangements.
The Group can satisfy these entitlements either by the acquisition of shares on-market or by the
issue of new shares that have been granted during, or since the end of, the financial year. The
table entitled Directors and other Key Management Personnel vested Performance and Deferred
Shares and Options at the end of this Directors Report lists those entitlements.
|
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62
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5BHP BILLITON ANNUAL REVIEW 2006 |
|
|
|
|
Results, financial information and going concern
Information about the financial position of the Group is included
in the summary financial report of
this Annual Review. The income statement set out in this Annual Review shows profit attributable to
BHP Billiton members of US$10,450 million compared to US$6,396 million in 2005.
Details of the Groups financial risk management objectives and policies are set out in section 8.1
of the Corporate Governance Statement.
The Directors, having made appropriate enquiries, consider that the Group has adequate resources to
continue in the operational business for the foreseeable future and have therefore continued to
adopt the going-concern basis in preparing the summary financial report.
Directors
The Directors who served during the 2006 financial year were Mr Don Argus, Mr Charles Goodyear, Mr
Paul Anderson, Dr David Brink, Dr John Buchanan, Mr Michael Chaney, Lord Renwick of Clifton, Mr
Carlos Cordeiro, Mr David Crawford, Dr Gail de Planque, Dr David Jenkins, Mr Marius Kloppers, Mr
Chris Lynch, Mr Jacques Nasser, Mr Miklos Salamon and Dr John Schubert. Further details of the
Directors of BHP Billiton Limited and BHP Billiton Plc are set out in section 4 of the Corporate
Governance Statement. These details include the period for which each Director held office up to
the date of this Annual Review, their qualifications, experience and particular responsibilities,
the directorships held in other listed companies since 1 July 2003, and the period for which each
directorship has been held.
Lord Renwick and Mr Michael Chaney both retired as Directors of BHP Billiton Limited and BHP
Billiton Plc with effect from the close of BHP Billiton Limiteds Annual General Meeting on 25
November 2005.
During financial year 2006, the Board appointed the following new Directors of BHP Billiton Limited
and BHP Billiton Plc: The Hon. Gail de Planque with effect on 19 October 2005, Mr Marius Kloppers
and Mr Chris Lynch with effect on 1 January 2006 and Mr Paul Anderson and Mr Jacques Nasser with
effect on 6 June 2006.
The number of meetings of the Board and its Committees held during the year
and each Directors attendance at those meetings are set out in sections 4.12 and 5.1 of the
Corporate Governance Statement.
Remuneration and share interests
Remuneration
The policy for determining the nature and amount of emoluments of Directors and senior
executives of the Group and information about the relationship between that policy and the Groups
performance are set out in sections 2 and 6 of the Remuneration Report.
The remuneration tables contained in section 8 of the Remuneration Report set out the remuneration
of each Director of BHP Billiton Limited and BHP Billiton Plc and other Key Management Personnel of
the Group (being those executives with authority and responsibility for planning, directing and
controlling the activities of the Group, including the five highest paid executives of the Group).
Directors
The table entitled Directors share holdings at the end of this Directors Report sets out
the relevant interests in shares in BHP Billiton Limited and BHP Billiton Plc of the Directors who
held office at 30 June 2006, at the beginning and end of the financial year, and at the date of
this Annual Review. No rights or options over shares in BHP Billiton Limited and BHP Billiton Plc
are held by any of the non-executive Directors. The rights or options held by executive Directors
over shares in BHP Billiton Limited and BHP Billiton Plc are set out in the tables showing
interests in incentive plans in section 8 of the Remuneration Report and the table entitled
Directors and other Key Management Personnel vested Performance and Deferred Shares and Options
at the end of this Directors Report.
The Group has not made available to any Director any interest in a registered scheme.
The former Directors of BHP Limited participated in a retirement plan under which they were
entitled to receive a payment on retirement calculated by reference to years of service. This plan
was closed on 24 October 2003 and benefits accrued to that date are held by BHP Billiton Limited
and will be paid on
retirement. Further information about this plan and its closure are set out under the heading
Retirement benefits in section 8 of the Remuneration Report.
Key Management Personnel (other than Directors)
The table entitled Key Management Personnels share holdings at the end of this Directors
Report sets out the relevant interests held by the Key Management Personnel (other than Directors)
in shares of BHP Billiton Limited and BHP Billiton Plc at the beginning and end of the 2006
financial year, and at the date of this Annual Review. Interests held by the Key Management
Personnel (other than Directors) under share and option plans are set out in the table showing Key
Management Personnels (other than Directors) interests in incentive plans in section 8 of the
Remuneration Report. Further details of all options and rights held as at the date of this Report
(including those issued during or since the end of the financial year), and of shares issued during
or since the end of the financial year upon exercise of options and rights, are set out in note 31
to the financial statements contained in the BHP Billiton Annual Report.
Secretaries
Details of the qualifications and experience of Ms Karen Wood, Group Company Secretary and Special
Adviser and Head of Group Secretariat, are set out in section 4.2 of the Corporate Governance
Statement. Mr Robert Franklin, MA, ACIS, was appointed as Company Secretary of BHP Billiton Plc
with effect from 17 July 2006 and the Board will be asked to appoint Ms Jane McAloon, BEc (Hons)
LLB FCIS as Company Secretary of BHP Billiton Limited on 24 October 2006. Each of these Company
Secretaries reports to Ms Karen Wood. The following people also act as the company secretaries of
either BHP Billiton Limited or BHP Billiton Plc, and report to either Ms Jane McAloon or Mr Robert
Franklin in this capacity: Mr Sam Butcher, BEc LLB (Hons) FCIS and Mr Ross Mallett, JD BBus FCIS
FCPA, Joint Deputy Company Secretaries BHP Billiton Limited; Ms Elizabeth Hobley, BA (Hons) ACIS,
Deputy Company Secretary BHP Billiton Plc; and Mrs Ines Watson, ACIS, Assistant Company Secretary
BHP Billiton Plc. Each such individual has experience in a company secretariat role arising from
time spent in such roles within BHP Billiton or other large listed companies.
Indemnities and insurance
Rule 146 of the BHP Billiton Limited Constitution and Article 146 of the BHP Billiton Plc Articles
of Association require each Company to indemnify to the extent permitted by law, each Director,
secretary or executive officer of BHP Billiton Limited and BHP Billiton Plc respectively against
liability incurred in, or arising out of, the conduct of the business of the Company or the
discharge of the duties of the Director, secretary or executive officer. The Directors named in
section 4.2 of the Corporate Governance Statement, the executive officers and the company
secretaries of BHP Billiton Limited and BHP Billiton Plc have the benefit of this requirement, as
do individuals who formerly held one of those positions.
In accordance with this requirement, BHP Billiton Limited and BHP Billiton Plc have entered into
Deeds of Indemnity, Access and Insurance (Deeds of Indemnity) with each of their respective
Directors. The Deeds of Indemnity are qualifying third party indemnity provisions for the purposes
of the Companies Act 1985 (UK).
At the 2005 Annual General Meetings, shareholders approved certain amendments to the BHP Billiton
Limited Constitution and the BHP Billiton Plc Articles of Association. These included amendments to
the indemnity provisions contained in Rule 146 of the BHP Billiton Limited Constitution and Article
146 of the BHP Billiton Plc Articles of Association. The terms of the Deeds of Indemnity were also
amended to reflect changes in the law in the United Kingdom.
|
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BHP BILLITON ANNUAL REVIEW 20065
|
|
63 |
Directors Report continued
The Group has a policy that it will, as a general rule, support and hold harmless an employee
who, while acting in good faith, incurs personal liability to others as a result of working for the
Group. In addition, where a person chairs a Customer Sector Group Risk and Audit Committee and that
person is not already indemnified as an officer or a Director of BHP Billiton, a policy is in place
to indemnify that chairperson in the same manner as officers of BHP Billiton are indemnified. This
policy has been approved by the Board.
From time to time the Group engages its External Auditor, KPMG, to conduct non-statutory audit work
and provide other services in accordance with the Groups policy on the provision of other services
by the External Auditor. The terms of engagement include an indemnity in favour of KPMG:
|
|
against all losses, claims, costs, expenses, actions, demands, damages, liabilities or any
proceedings (liabilities) incurred by KPMG in respect of third party claims arising from a breach
by the Group under the engagement terms, and |
|
|
for all liabilities KPMG has to the Group or any third party as a result of reliance on
information provided by the Group that is false, misleading or incomplete. |
The Group has insured against amounts that it may be liable to pay to Directors, company
secretaries or certain employees pursuant to Rule 146 of the Constitution of BHP Billiton Limited
and Article 146 of the Articles of Association of BHP Billiton Plc, or that it otherwise agrees to
pay by way of indemnity. The insurance policy also insures Directors, company secretaries and some
Group employees against certain liabilities (including legal costs) they may incur in carrying out
their duties for the Group.
The Group has paid premiums for this Directors and Officers insurance of US$2,988,500 during the
year ended 30 June 2006. Some Directors, secretaries and employees contribute to the premium for
this insurance.
Employee policies and involvement
The Groups policy is to encourage and maintain effective communication and consultation between
employees and management. To facilitate the Groups global communications policy, BHP Billiton has
a dedicated internal communications division, which manages the release of information to employees
across the world. In addition to the regular production and communication of operational and global
newsletters, bulletins and staff news releases employees are also regularly invited to briefings by
senior management on important issues such as the Groups strategy and results and health, safety
and environmental matters.
BHP Billiton also provides information about issues of importance to
employees via its intranet and email facilities. These are important tools for inviting employee
feedback and increasing awareness of corporate and financial performance.
In addition, all BHP Billiton employees can access the Groups Annual Reports and other key
publications via the intranet.
All businesses have in place a range of newsletters and other
communications activities to ensure that information is shared with employees and feedback is
obtained. In addition, some businesses have dedicated intranet sites accessible by the employees
working at that business. These intranet sites contain information specific to the business. Staff
briefings are conducted regularly. Other consultative mechanisms are also in place to address
issues impacting employees, and in addition grievance or disputes procedures apply in all
businesses.
BHP Billiton aims to align the interests of employees with those of shareholders. To achieve this
alignment nominated employees are invited to participate in employee share schemes. At the 2006
Annual General Meetings shareholders will be asked to approve the introduction of a share scheme in
which all employees will be able to participate.
Incentive and bonus schemes operate throughout the Group, which include key performance indicators
relating to the Companys overall financial and other performance. Employee share schemes are
described in sections 2.3, 4.3, 5.2 and 9 of the Remuneration Report.
The means by which the Group communicates with shareholders are described in section 2 of the
Corporate Governance Statement.
BHP Billiton has published its commitment to equality in employment
in the Equality in Employment Policy and the Guide to Business Conduct. The Group gives full and
fair consideration to applications for employment made by all people. Decisions are based on
aptitudes and abilities and not on
attributes unrelated to job performance (including disability). Should employees become disabled
during employment, they will be considered for available work within their capabilities and, where
necessary, retraining. For the purpose of training, career development and promotion, disabled
employees are treated in the same way as other employees although reasonable modifications will be
made to the physical work environment and other arrangements made as appropriate to meet particular
needs arising from a disability.
Environmental performance
Particulars in relation to environmental performance are referred to in the section entitled
Performance in relation to environmental regulation at the end of this Directors Report and in
the Sustainability Report available at http://sustainability.bhpbilliton.com/2006/.
Dividends
A final dividend of 18.5 US cents per share will be paid on 27 September 2006. Details of the
dividends paid and the dividend policy are set out on page 16 of this Annual Review.
No dividends or distributions were recommended or declared for payment to shareholders but not paid
during financial year 2006.
Auditors
A resolution to reappoint KPMG Audit Plc as the auditor of BHP Billiton Plc will be proposed at the
2006 Annual General Meetings in accordance with section 385 of the United Kingdom Companies Act
1985.
A copy of the declaration given by the Groups External Auditors to the Directors in relation to
the auditors compliance with the independence requirements of the Australian Corporations Act 2001
and the professional code of conduct for external auditors is set out on page 81 of this Annual
Review.
No person who was an officer of BHP Billiton during the financial year was a director or partner of
the Groups External Auditors at a time when the Groups External Auditors conducted an audit of
the Group.
Each person who held the office of Director at the date the Board resolved to approve this
Directors Report and makes the following statements:
|
|
so far as the Director is aware, there is no relevant audit information of which the Groups
External Auditors are unaware, and |
|
|
the Director has taken all steps that he or she ought to have taken as a Director to make him or
herself aware of any relevant audit information and to establish that the External Auditors are
aware of that information. |
Non-audit services
Details of the non-audit services undertaken by the Groups External Auditors, including the
amounts paid for non-audit services, are set out in note 5 to the summary financial statements.
Based on advice provided by the Risk and Audit Committee, the Directors have formed the view that
the provision of non-audit services is compatible with the general standard of independence for
auditors, and that the immaterial nature of non-audit services means that auditor independence was
not compromised. Further information about BHP Billitons policy in relation to the provision of
non-audit services by the auditor is set out in section 8.1 of the Corporate Governance Statement.
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64
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|
5BHP BILLITON ANNUAL REVIEW 2006 |
Value of land
Much of the Groups interest in land consists of leases and other rights that permit the working of
such land and the erection of buildings and equipment thereon for the purpose of extracting and
treating minerals. Such land is mainly carried in the accounts at cost and it is not possible to
estimate the market value as this depends on product prices over the long term, which will vary
with market conditions.
Political and charitable donations
No political contributions or donations for political purposes were made during the 2006 financial
year. The Group made charitable donations in the United Kingdom of US$1,137,333 (cash) (2005:
US$1,050,280) and worldwide including in-kind support and administrative cost totalling
US$81,286,299 (2005: US$57,383,466).
Exploration, research and development
Companies within the Group carry out exploration and research and development necessary to support
their activities.
Creditor payment policy
When BHP Billiton enters into a contract with a supplier, payment terms will be agreed when the
contract begins and the supplier will be made aware of these terms. BHP Billiton does not have a
specific policy towards its suppliers and does not follow any code or standard practice. However,
BHP Billiton settles terms of payment with suppliers when agreeing overall terms of business and
seeks to abide by the terms of the contracts to which it is bound. As at 30 June 2006, BHP Billiton
Plc (the unconsolidated parent entity) had no trade creditors outstanding and therefore had zero
days purchases outstanding in respect of costs, based on the total invoiced by suppliers during the
financial year.
Class Order
BHP Billiton Limited is a company of a kind referred to in Australian Securities and Investments
Commission Class Order No 98/100, dated 10 July 1998. Amounts in this Directors Report and the
summary financial report, except estimates of future expenditure or where otherwise indicated, have
been rounded to the nearest million dollars in accordance with that Class Order.
Proceedings on behalf of BHP Billiton Limited
No proceedings have been brought on behalf of BHP Billiton Limited, nor any application made under
section 237 of the Australian Corporations Act 2001.
Annual General Meeting
The 2006 Annual General Meeting for BHP Billiton Limited will be held at the Brisbane Convention
Exhibition Centre, corner Merivale and Glenelg Streets, South Bank, Brisbane, Queensland, Australia
on Wednesday, 29 November 2006 commencing at 10.30 am. The 2006 Annual General Meeting for BHP
Billiton Plc will be held at Royal Horticultural Halls, Lindley Hall, Elverton Street, London,
United Kingdom on Thursday, 26 October 2006 commencing at 10.30 am. The notices convening the
meetings have been sent to shareholders separately with this Annual Review, together with an
explanation of the items of special business to be considered at the meetings.
The Directors Report is made in accordance with a resolution of the Board.
|
|
|
|
|
![-s- C W Goodyear](y25422y2542250.gif) |
D R Argus
|
|
C W Goodyear |
Chairman
|
|
Chief Executive Officer |
Dated: 11 September 2006 |
|
|
Directors shareholdings
The tables below set out information pertaining to the shares held by Directors in BHP Billiton
Limited and BHP Billiton Plc:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at date |
|
|
|
|
|
|
|
BHP Billiton |
|
of Directors |
|
|
As at |
|
|
As at |
|
Limited shares |
|
Report |
|
|
30 June 2006 |
|
|
30 June 2005 |
|
|
Paul Anderson (1) |
|
|
60,000 |
|
|
|
60,000 |
|
|
|
101,922 |
|
Don Argus (2) |
|
|
295,995 |
|
|
|
278,195 |
|
|
|
203,495 |
|
Charles Goodyear (2)(3) |
|
|
998,755 |
|
|
|
954,254 |
|
|
|
746,007 |
|
David Brink |
|
|
|
|
|
|
|
|
|
|
|
|
John Buchanan |
|
|
|
|
|
|
|
|
|
|
|
|
Carlos Cordeiro (4) |
|
|
6,550 |
|
|
|
6,550 |
|
|
|
|
|
David Crawford (2) |
|
|
29,127 |
|
|
|
29,127 |
|
|
|
29,127 |
|
Gail de Planque (5) |
|
|
1,800 |
|
|
|
1,800 |
|
|
|
|
|
David Jenkins |
|
|
2,066 |
|
|
|
2,066 |
|
|
|
2,066 |
|
Marius Kloppers |
|
|
|
|
|
|
|
|
|
|
|
|
Chris Lynch |
|
|
293,198 |
|
|
|
80,679 |
|
|
|
80,679 |
|
Jacques Nasser (6) |
|
|
5,600 |
|
|
|
5,600 |
|
|
|
|
|
Miklos Salamon |
|
|
|
|
|
|
|
|
|
|
|
|
John Schubert |
|
|
23,675 |
|
|
|
23,675 |
|
|
|
23,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at date |
|
|
|
|
|
|
|
BHP Billiton |
|
of Directors |
|
|
As at |
|
|
As at |
|
Plc shares |
|
Report |
|
|
30 June 2006 |
|
|
30 June 2005 |
|
|
Paul Anderson |
|
|
|
|
|
|
|
|
|
|
|
|
Don Argus |
|
|
|
|
|
|
|
|
|
|
|
|
Charles Goodyear (2)(3) |
|
|
2,000 |
|
|
|
2,000 |
|
|
|
2,000 |
|
David Brink |
|
|
50,000 |
|
|
|
50,000 |
|
|
|
39,377 |
|
John Buchanan |
|
|
20,000 |
|
|
|
20,000 |
|
|
|
4,000 |
|
Carlos Cordeiro |
|
|
|
|
|
|
|
|
|
|
|
|
David Crawford |
|
|
|
|
|
|
|
|
|
|
|
|
Gail de Planque |
|
|
|
|
|
|
|
|
|
|
|
|
David Jenkins |
|
|
10,000 |
|
|
|
10,000 |
|
|
|
10,000 |
|
Marius Kloppers |
|
|
440,183 |
|
|
|
335,333 |
|
|
|
75,764 |
|
Chris Lynch |
|
|
|
|
|
|
|
|
|
|
|
|
Jacques Nasser |
|
|
|
|
|
|
|
|
|
|
|
|
Miklos Salamon (2) |
|
|
1,434,686 |
|
|
|
1,302,085 |
|
|
|
1,082,324 |
|
John Schubert |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
20,000 are held in the form of 10,000 American Depositary Shares. |
|
(2) |
|
Includes shares held in the name of spouse and/or nominee. |
|
(3) |
|
82,604 BHP Billiton Limited shares are held in the form of 41,302 American
Depositary Shares and 2,000 BHP Billiton Plc shares are held in the form of 1,000 American
Depositary Shares. |
|
(4) |
|
Held in the form of 3,275 American Depositary Shares. |
|
(5) |
|
Held in the form of 900 American Depositary Shares. |
|
(6) |
|
Held in the form of 2,800 American Depositary Shares. |
Key Management Personnels shareholdings
(other than Directors)
|
|
|
|
|
|
|
|
|
|
|
|
|
BHP Billiton Limited |
|
As at date |
|
|
As at |
|
|
As at |
|
shares |
|
of Report |
|
|
30 June 2006 |
|
|
30 June 2005 |
|
|
Philip Aiken (1) |
|
|
611,846 |
|
|
|
544,907 |
|
|
|
475,092 |
|
John Fast (1)(2) |
|
|
3,595 |
|
|
|
3,595 |
|
|
|
3,459 |
|
Robert Kirkby (1) |
|
|
770,102 |
|
|
|
666,227 |
|
|
|
640,740 |
|
Marcus Randolph |
|
|
225,437 |
|
|
|
153,794 |
|
|
|
74,097 |
|
Alex Vanselow |
|
|
11,466 |
|
|
|
11,466 |
|
|
|
2,000 |
|
Karen Wood |
|
|
74,656 |
|
|
|
11,753 |
|
|
|
1,033 |
|
Mike Yeager |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes shares held in the name of spouse and/or nominee. |
|
(2) |
|
Includes 929 shares held by nominee in the form of endowment warrants. |
|
|
|
|
|
|
BHP BILLITON ANNUAL REVIEW 20065
|
|
65 |
Directors Report continued
Directors and other Key Management Personnel vested Performance and Deferred Shares and
Options
The table below shows GIS Performance Shares, Deferred Shares and Options held by Directors and
other Key Management Personnel that have vested since the end of the financial year but have not
been exercised.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance |
|
|
Deferred |
|
|
|
|
|
|
Shares |
|
|
Shares |
|
|
Options |
|
|
Charles Goodyear |
|
|
|
|
|
|
|
|
|
|
180,613 |
|
Philip Aiken |
|
|
|
|
|
|
|
|
|
|
|
|
John Fast |
|
|
43,826 |
|
|
|
53,908 |
|
|
|
|
|
Robert Kirkby |
|
|
|
|
|
|
|
|
|
|
|
|
Marius Kloppers |
|
|
|
|
|
|
|
|
|
|
|
|
Chris Lynch |
|
|
|
|
|
|
|
|
|
|
|
|
Marcus Randolph |
|
|
|
|
|
|
|
|
|
|
|
|
Miklos Salamon |
|
|
|
|
|
|
|
|
|
|
|
|
Alex Vanselow |
|
|
11,087 |
|
|
|
27,347 |
|
|
|
|
|
Karen Wood |
|
|
16,547 |
|
|
|
26,631 |
|
|
|
|
|
Mike Yeager |
|
|
|
|
|
|
|
|
|
|
|
|
Performance in relation to environmental regulation
The Groups performance in relation to environmental regulation is measured by:
|
|
the number of prosecutions against, and the quantum of fines incurred by, the Groups global
operations during the financial year, and |
|
|
|
the number of environmentally significant incidents (including non-compliances) that occurred in
the Groups global operations. |
Environmentally significant incidents
An environmentally significant incident is one with a severity rating of 3 or above based on
the Groups internal severity rating scale (tiered from 1 to 5 by increasing severity). The
following three significant incidents occurred during the reporting period:
|
|
|
|
|
|
|
BHP Billiton |
|
|
|
Severity |
business |
|
Description of incident |
|
rating |
|
Energy Coal Optimum Colliery
|
|
At the Optimum Colliery,
approximately 4,500 ML of
mine-impacted water
overflowed from a
containment dam into the
Klein Olifant River and
ultimately into the
Middelburg Dam.
Corrective measures
include the installation
of berm walls, early
warning devices on pumps
and an irrigation system.
Improvements are being
made to the water
management system and
changes have been made to
risk assessment and
inspection programs.
|
|
|
3 |
|
|
|
|
|
|
|
|
Petroleum
Liverpool Bay
|
|
At the Liverpool Bay
Lennox Platform an
environmental incident
occurred that resulted in
a small spill of
approximately 0.8 cubic
metres of oil. The
incident is currently
under investigation.
|
|
|
3 |
|
|
|
|
|
|
|
|
Base Metals
- Tintaya Mine
|
|
An environmental incident
occurred at the Tintaya
copper mine on 9 December
2005, when a decrease in
the pH of a small creek
caused the death of fish
in a local trout farm
connected with the creek.
The creek is a tributary
of the Tintaya River and
the fish farm is used as
a bioindicator of the
quality of the local
waterways.
|
|
|
3 |
|
|
|
|
The source of
the acidity that led to
the decrease in pH was
found to be drainage from
Tintayas oxide plant
facilities that had
reached the rainwater
diversion system.
|
|
|
|
|
Fines and prosecutions
The following fine was imposed during financial year 2006:
|
|
|
BHP Billiton |
|
|
business |
|
Description of fine or prosecution |
|
Base Metals
Cerro Colorado
|
|
As a result of a leach solution incident, Cerro Colorado
received a fine by the regional authority (COREMA) of
US$91,070. The fine was based on: |
|
|
|
|
|
Lack of timely notification of the environmental
excursion. |
|
|
|
|
|
Lack of timely submission of an action plan. |
|
|
|
|
|
Non-compliance with EIA commitments for
management of leaks or spills of process solution. |
|
|
|
Base Metals
Tintaya Mine
|
|
As a result of the environmental incident at the
Tintaya copper mine described in the previous table,
the regulating authority imposed a fine of 170,000
Peruvian soles (US$50,990). The fine was based on: |
|
|
|
|
|
Inadequate control of rainfall runoff; and |
|
|
|
|
|
Affecting the quality of water in the Yanamayo Creek. |
Further information about the Groups performance in relation to environmental regulation can
be found in the Sustainability Report, which can be viewed on the Groups website at
http://sustainability.bhpbilliton.com/2006/.
|
|
|
|
|
|
66
|
|
5BHP BILLITON ANNUAL REVIEW 2006 |
page
Consolidated Income Statement 68 |
Consolidated Statement of Recognised Income
and Expense 69 |
Consolidated Balance Sheet 70 |
Consolidated Cash Flow Statement 71 |
Notes to the Summary Financial Statements 72 |
Directors Declaration 81 |
Lead Auditors Independence Declaration 82 |
Independent Auditors Reports 83 |
The financial statements and specific disclosures included in the summary financial report are
extracts of, and have been derived from, the full financial report of the BHP Billiton Group for
the year ended 30 June 2006, which has been reported on by the auditors and which will be filed
with the UK Registrar of Companies and the Australian Securities and Investments Commission. The
auditors report on the full financial report is unqualified and does not contain a statement under
either S237(2) or S237(3) of the UK Companies Act 1985. |
The summary financial report does not and cannot be expected to provide as full an understanding of
the financial performance, financial position and financing and investing activities of the BHP
Billiton Group as is provided in full financial report contained in the BHP Billiton Annual Report
2006. A copy of the BHP Billiton Annual Report 2006, including the independent auditors report, is
available to all shareholders and will be sent to shareholders without charge upon request. The BHP
Billiton Annual Report 2006 can be requested by telephoning 1300 656 780 (within Australia) or (61
3) 9649 5020 (from elsewhere). |
This summary financial report represents a concise financial report for the purposes of the
requirements of the Australian Corporations Act 2001 and, together with the relevant information in
the Remuneration Report on pages 4561, represents the summary financial statement for the purposes
of the UK Companies Act 1985. |
|
|
|
|
|
|
BHP BILLITON ANNUAL REVIEW 20065
|
|
67 |
Consolidated Income Statement for the year ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
Notes |
|
|
US$M |
|
|
US$M |
|
|
Revenue together with share of jointly controlled entities revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Group production |
|
|
|
|
|
|
34,139 |
|
|
|
24,759 |
|
Third party products |
|
|
|
|
|
|
4,960 |
|
|
|
6,391 |
|
|
|
|
|
|
|
|
|
39,099 |
|
|
|
31,150 |
|
Less: share of jointly controlled entities external revenue included above |
|
|
|
|
|
|
(6,946 |
) |
|
|
(4,428 |
) |
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
32,153 |
|
|
|
26,722 |
|
Other income |
|
|
|
|
|
|
1,227 |
|
|
|
757 |
|
Expenses excluding finance costs |
|
|
|
|
|
|
(22,403 |
) |
|
|
(19,995 |
) |
Share of profits from jointly controlled entities |
|
|
|
|
|
|
3,694 |
|
|
|
1,787 |
|
|
Profit from operations |
|
|
|
|
|
|
14,671 |
|
|
|
9,271 |
|
|
Comprising: |
|
|
|
|
|
|
|
|
|
|
|
|
Group production |
|
|
|
|
|
|
14,560 |
|
|
|
9,157 |
|
Third party products |
|
|
|
|
|
|
111 |
|
|
|
114 |
|
|
|
|
|
|
|
|
|
14,671 |
|
|
|
9,271 |
|
|
Financial income |
|
|
|
|
|
|
226 |
|
|
|
216 |
|
Financial expenses |
|
|
|
|
|
|
(731 |
) |
|
|
(547 |
) |
|
Net finance costs |
|
|
|
|
|
|
(505 |
) |
|
|
(331 |
) |
|
Profit before taxation |
|
|
|
|
|
|
14,166 |
|
|
|
8,940 |
|
|
Income tax expense |
|
|
|
|
|
|
(3,207 |
) |
|
|
(1,876 |
) |
Royalty related taxation (net of income tax benefit) |
|
|
|
|
|
|
(425 |
) |
|
|
(436 |
) |
|
Total taxation expense |
|
|
|
|
|
|
(3,632 |
) |
|
|
(2,312 |
) |
|
Profit after taxation |
|
|
|
|
|
|
10,534 |
|
|
|
6,628 |
|
|
Profit attributable to minority interests |
|
|
|
|
|
|
84 |
|
|
|
232 |
|
Profit attributable to members of BHP Billiton Group |
|
|
|
|
|
|
10,450 |
|
|
|
6,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per ordinary share (basic) (US cents) |
|
|
|
|
|
|
173.2 |
|
|
|
104.4 |
|
Earnings per ordinary share (diluted) (US cents) |
|
|
|
|
|
|
172.4 |
|
|
|
104.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per ordinary share paid during the period (US cents) |
|
|
4 |
|
|
|
32.0 |
|
|
|
23.0 |
|
Dividends per ordinary share declared in respect of the period (US cents) |
|
|
4 |
|
|
|
36.0 |
|
|
|
28.0 |
|
|
The accompanying notes form part of these financial statements.
|
|
|
|
|
|
68
|
|
5BHP BILLITON ANNUAL REVIEW 2006 |
Consolidated Statement of Recognised Income and Expense for the year ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
US$M |
|
|
US$M |
|
|
Profit after taxation |
|
|
10,534 |
|
|
|
6,628 |
|
Amounts recognised directly in equity |
|
|
|
|
|
|
|
|
Actuarial gains/(losses) on pension and medical schemes |
|
|
111 |
|
|
|
(149 |
) |
Available for sale investments: |
|
|
|
|
|
|
|
|
Valuation gains/(losses) taken to equity |
|
|
(1 |
) |
|
|
|
|
Cash flow hedges: |
|
|
|
|
|
|
|
|
Gains/(losses) taken to equity |
|
|
(27 |
) |
|
|
|
|
(Gains)/losses transferred to the initial carrying amount of hedged items |
|
|
(25 |
) |
|
|
|
|
Exchange fluctuations on translation of foreign operations |
|
|
(1 |
) |
|
|
7 |
|
Tax on items recognised directly in, or transferred from, equity |
|
|
4 |
|
|
|
52 |
|
|
Total amounts recognised directly in equity |
|
|
61 |
|
|
|
(90 |
) |
|
Total recognised income and expense for the year |
|
|
10,595 |
|
|
|
6,538 |
|
|
Attributable to minority interests |
|
|
84 |
|
|
|
232 |
|
Attributable to members of BHP Billiton Group |
|
|
10,511 |
|
|
|
6,306 |
|
|
|
|
|
|
|
|
|
|
|
Effect of change in accounting policy |
|
|
|
|
|
|
|
|
Impact of adoption of IAS 39/AASB 139 (net of tax) to: |
|
|
|
|
|
|
|
|
retained earnings |
|
|
55 |
|
|
|
|
|
hedging reserve |
|
|
30 |
|
|
|
|
|
financial assets reserve |
|
|
116 |
|
|
|
|
|
|
Total effect of change in accounting policy |
|
|
201 |
|
|
|
|
|
|
Attributable to minority interests |
|
|
|
|
|
|
|
|
Attributable to members of BHP Billiton Group |
|
|
201 |
|
|
|
|
|
|
The accompanying notes form part of these financial statements.
|
|
|
|
|
|
BHP BILLITON ANNUAL REVIEW 20065
|
|
69 |
Consolidated Balance Sheet as at 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
US$M |
|
|
US$M |
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
776 |
|
|
|
1,222 |
|
Trade and other receivables |
|
|
3,831 |
|
|
|
3,175 |
|
Other financial assets |
|
|
808 |
|
|
|
69 |
|
Inventories |
|
|
2,732 |
|
|
|
2,422 |
|
Assets held for sale |
|
|
469 |
|
|
|
|
|
Other |
|
|
160 |
|
|
|
148 |
|
|
Total current assets |
|
|
8,776 |
|
|
|
7,036 |
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
813 |
|
|
|
786 |
|
Other financial assets |
|
|
950 |
|
|
|
257 |
|
Inventories |
|
|
93 |
|
|
|
101 |
|
Investments in jointly controlled entities |
|
|
4,299 |
|
|
|
3,254 |
|
Property, plant and equipment |
|
|
30,985 |
|
|
|
27,764 |
|
Intangible assets |
|
|
683 |
|
|
|
667 |
|
Deferred tax assets |
|
|
1,829 |
|
|
|
1,906 |
|
Other |
|
|
88 |
|
|
|
72 |
|
|
Total non-current assets |
|
|
39,740 |
|
|
|
34,807 |
|
|
Total assets |
|
|
48,516 |
|
|
|
41,843 |
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
4,053 |
|
|
|
3,856 |
|
Interest bearing liabilities |
|
|
1,368 |
|
|
|
1,298 |
|
Liabilities held for sale |
|
|
192 |
|
|
|
|
|
Other financial liabilities |
|
|
544 |
|
|
|
|
|
Current tax payable |
|
|
1,358 |
|
|
|
936 |
|
Provisions |
|
|
1,067 |
|
|
|
1,097 |
|
Deferred income |
|
|
279 |
|
|
|
262 |
|
|
Total current liabilities |
|
|
8,861 |
|
|
|
7,449 |
|
|
Non-current liabilities |
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
169 |
|
|
|
156 |
|
Interest bearing liabilities |
|
|
7,648 |
|
|
|
8,651 |
|
Other financial liabilities |
|
|
289 |
|
|
|
|
|
Deferred tax liabilities |
|
|
1,592 |
|
|
|
2,351 |
|
Provisions |
|
|
4,853 |
|
|
|
4,613 |
|
Deferred income |
|
|
649 |
|
|
|
707 |
|
|
Total non-current liabilities |
|
|
15,200 |
|
|
|
16,478 |
|
|
Total liabilities |
|
|
24,061 |
|
|
|
23,927 |
|
|
Net assets |
|
|
24,455 |
|
|
|
17,916 |
|
|
EQUITY |
|
|
|
|
|
|
|
|
Share capital BHP Billiton Limited |
|
|
1,490 |
|
|
|
1,611 |
|
Share capital BHP Billiton Plc |
|
|
1,234 |
|
|
|
1,234 |
|
Share premium account |
|
|
518 |
|
|
|
518 |
|
Treasury shares held |
|
|
(418 |
) |
|
|
(8 |
) |
Reserves |
|
|
306 |
|
|
|
161 |
|
Retained earnings |
|
|
21,088 |
|
|
|
14,059 |
|
|
Total equity attributable to members of BHP Billiton Group |
|
|
24,218 |
|
|
|
17,575 |
|
Minority interests |
|
|
237 |
|
|
|
341 |
|
|
Total equity |
|
|
24,455 |
|
|
|
17,916 |
|
|
The accompanying notes form part of these financial statements.
The financial statements were approved by the Board of Directors on 11 September 2006 and
signed on its behalf by:
|
|
|
|
|
![-s- Charles Goodyear](y25422y2542253.gif) |
Don Argus
|
|
Charles Goodyear |
Chairman
|
|
Chief Executive Officer |
|
|
|
|
|
|
70
|
|
5BHP BILLITON ANNUAL REVIEW 2006 |
Consolidated Cash Flow Statement for the year ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
US$M |
|
|
US$M |
|
|
Operating activities |
|
|
|
|
|
|
|
|
Receipts from customers |
|
|
32,938 |
|
|
|
28,425 |
|
Payments to suppliers and employees |
|
|
(20,944 |
) |
|
|
(18,801 |
) |
|
Cash generated from operations |
|
|
11,994 |
|
|
|
9,624 |
|
Dividends received |
|
|
2,671 |
|
|
|
1,002 |
|
Interest received |
|
|
121 |
|
|
|
90 |
|
Interest paid |
|
|
(499 |
) |
|
|
(315 |
) |
Income tax paid |
|
|
(3,152 |
) |
|
|
(1,476 |
) |
Royalty related taxation paid |
|
|
(659 |
) |
|
|
(551 |
) |
|
Net operating cash flows |
|
|
10,476 |
|
|
|
8,374 |
|
|
Investing activities |
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(5,239 |
) |
|
|
(3,450 |
) |
Exploration expenditure (including amounts capitalised) |
|
|
(766 |
) |
|
|
(531 |
) |
Purchases of investments and funding of jointly controlled entities |
|
|
(65 |
) |
|
|
(42 |
) |
Purchases of, or increased investment in, subsidiaries, operations and jointly controlled entities,
net of their cash |
|
|
(531 |
) |
|
|
(6,198 |
) |
|
Cash outflows from investing activities |
|
|
(6,601 |
) |
|
|
(10,221 |
) |
Proceeds from sale of property, plant and equipment |
|
|
92 |
|
|
|
153 |
|
Proceeds from sale or redemption of investments |
|
|
153 |
|
|
|
227 |
|
Proceeds from sale or partial sale of subsidiaries, operations and jointly controlled entities,
net of their cash |
|
|
844 |
|
|
|
675 |
|
|
Net investing cash flows |
|
|
(5,512 |
) |
|
|
(9,166 |
) |
|
Financing activities |
|
|
|
|
|
|
|
|
Proceeds from ordinary share issues |
|
|
34 |
|
|
|
66 |
|
Proceeds from interest bearing liabilities |
|
|
5,912 |
|
|
|
5,668 |
|
Repayment of interest bearing liabilities |
|
|
(7,013 |
) |
|
|
(1,735 |
) |
Purchase of shares by Employee Share Ownership Plan Trusts |
|
|
(187 |
) |
|
|
(47 |
) |
Share buy-back BHP Billiton Limited |
|
|
(1,619 |
) |
|
|
(1,792 |
) |
Share buy-back BHP Billiton Plc |
|
|
(409 |
) |
|
|
|
|
Dividends paid |
|
|
(1,936 |
) |
|
|
(1,404 |
) |
Dividends paid to minority interests |
|
|
(190 |
) |
|
|
(238 |
) |
Repayment of finance leases |
|
|
(4 |
) |
|
|
(22 |
) |
|
Net financing cash flows |
|
|
(5,412 |
) |
|
|
496 |
|
|
Net decrease in cash and cash equivalents |
|
|
(448 |
) |
|
|
(296 |
) |
Cash and cash equivalents, net of overdrafts, at beginning of year |
|
|
1,207 |
|
|
|
1,509 |
|
Effect of foreign currency exchange rate changes on cash and cash equivalents |
|
|
1 |
|
|
|
(6 |
) |
|
Cash and cash equivalents, net of overdrafts, at end of year |
|
|
760 |
|
|
|
1,207 |
|
|
The accompanying notes form part of these financial statements.
|
|
|
|
|
|
BHP BILLITON ANNUAL REVIEW 20065
|
|
71 |
Notes to the Summary Financial Statements
1. Accounting Policies
Basis of preparation
This summary financial report for the year ended 30 June 2006 has been prepared in accordance with
the requirements of the UK Companies Act 1985 and Australian Corporations Act 2001 and with:
|
|
Australian equivalents to International Financial Reporting Standards as issued by the
Australian Accounting Standards Board and interpretations effective as of 30 June 2006 |
|
|
|
International Financial Reporting Standards and interpretations as adopted by the European Union
(EU) as of 30 June 2006 |
|
|
|
those standards and interpretations adopted early as described in the
full financial statements. |
The above standards and interpretations are collectively referred to as IFRS in this Report.
The comparative information has also been prepared on this basis with the exception of certain
items, details of which are given below, for which comparative information has not been restated.
The comparative figures for the financial year ended 30 June 2005 are not the statutory accounts of
BHP Billiton Plc for that financial year. Those accounts, which were prepared under UK Generally
Accepted Accounting Principles (GAAP), have been reported on by the Companys auditors and
delivered to the registrar of companies. The report of the auditors was unqualified and did not
contain statements under Section 235(3), or 237(2) or (3) of the Companies Act 1985.
This is a summary of BHP Billiton Groups first IFRS financial report. The basis of preparation is
different to that of the most recent comparative years annual financial report due to the first
time adoption of IFRS. An explanation of how the transition to IFRS has affected the reported
financial position and financial performance of the BHP Billiton Group is provided in note 7. This
note includes reconciliations of equity and profit for comparative periods previously reported
under UK GAAP and Australian GAAP to those amounts reported under IFRS.
IFRS 1/AASB 1 First time adoption of International Financial Reporting Standards in general
requires accounting policies to be applied retrospectively in order to determine the opening
balance sheet at the BHP Billiton Groups IFRS transition date of 1 July 2004, and allows certain
exemptions on the transition to IFRS, which the BHP Billiton Group has elected to apply. Those
elections considered significant to the BHP Billiton Group include decisions to:
|
|
not restate previous mergers or acquisitions and the accounting thereof |
|
|
|
measure property, plant and equipment at deemed cost, being the carrying value of property, plant
and equipment immediately prior to the date of transition, with no adjustment made to fair value |
|
|
|
not apply the recognition and measurement requirements of IFRS 2/AASB 2 Share-based Payment to
equity instruments granted before 7 November 2002 |
|
|
|
recognise the cumulative effect of actuarial gains and losses on defined benefit employee schemes
in retained earnings as at the transition date |
|
|
|
transfer all foreign currency translation differences previously held in reserves to retained
earnings at the transition date. |
In addition, as described below, BHP Billiton has applied the exemption available under IFRS 1/AASB
1 whereby IAS 32/AASB 132 Financial Instruments: Disclosure and Presentation and IAS 39/AASB 139
Financial Instruments: Recognition and Measurement have been applied from 1 July 2005 and not for
the year ended 30 June 2005.
A full description of the accounting policies adopted by the BHP Billiton Group may be found in the
BHP Billiton Annual Report 2006.
All amounts are expressed in US dollars unless otherwise stated. The BHP Billiton Groups
presentation currency and the functional currency of the majority of its operations is US dollars
as this is the principal currency of the economic environment in which it operates.
Amounts in this summary financial report have, unless otherwise indicated, been rounded to the
nearest million dollars.
Change in accounting policy
The accounting policies have been consistently applied by all entities included in the BHP Billiton
Group consolidated financial report and are consistent with those applied in the prior year, except
for:
Financial instruments
In the current year, the Group adopted IAS 32/AASB 132 Financial Instruments: Disclosure and
Presentation and IAS 39/AASB 139 Financial Instruments: Recognition and Measurement from 1 July
2005. Prior to 1 July 2005, the principal accounting policies affecting financial instruments were
as follows:
|
|
Available for sale investments were classified as fixed asset investments and, other than for
joint ventures and associates, were stated individually at cost less provisions for
impairment. |
|
|
Trading investments were classified as current asset investments and valued at the lower of
cost and net realisable value. In determining net realisable values, market values were used
in the case of listed investments and Directors estimates were used in the case of unlisted
investments. |
|
|
Derivative financial instruments were accounted for using Australian GAAP and UK GAAP hedge
accounting principles whereby derivatives were matched to specifically identified commercial
risks being hedged. These matching principles were applied using accrual accounting methods to
both realised and unrealised transactions. Derivatives undertaken as hedges of anticipated
transactions were recognised when such transactions were recognised. Upon recognition of the
underlying transaction, derivatives were valued at the appropriate market spot rate. When an
underlying transaction could no longer be identified, gains or losses on a derivative
previously designated as a hedge of that transaction were taken to the income statement,
whether or not the derivative was terminated. When a hedge was terminated, the deferred gain
or loss that arose prior to termination was: |
|
|
deferred and included in the measurement of the anticipated transaction when it occurred; or |
|
|
|
taken to the income statement when the anticipated transaction was no longer expected to
occur. |
|
|
The premiums paid on interest rate options and foreign currency put and call options were
included in debtors and were deferred and included in the settlement of the underlying
transaction. |
The adoption of IAS 32/AASB 132 Financial Instruments: Disclosure and Presentation and IAS
39/AASB 139 Financial Instruments: Recognition and Measurement has resulted in the Group
recognising available for sale investments and all derivative financial instruments as assets or
liabilities at fair value. Accordingly, transitional adjustments in respect of IAS 32/AASB 132 and
IAS 39/AASB 139 have been recorded in the opening balance sheet and against retained profits and
reserves, as applicable, at 1 July 2005. The impacts of adopting those standards at 1 July 2005
were as follows:
Equity attributable to BHP Billiton Group shareholders increased US$201 million as set out in the
consolidated statement of recognised income and expense. This was net of consequential increases in
deferred tax liabilities of US$37 million. This represents the net gain on measuring at fair value
qualifying hedges, embedded derivatives, available for sale investments and certain derivatives
that do not qualify as hedges, which were not recognised on a fair value basis prior to 1 July
2005. The major balance sheet items affected were financial assets: increase of US$1,279 million;
financial liabilities: increase of US$634 million; and borrowings: increase of US$411 million. The
net impact on other balance sheet items was a debit of US$3 million.
|
|
|
|
|
|
|
|
|
72
|
|
5BHP BILLITON ANNUAL REVIEW 2006 |
2. Business segments
The BHP Billiton Group has grouped its major operating assets into the following Customer
Sector Groups (CSGs):
|
|
Petroleum (exploration for and production, processing and marketing of hydrocarbons including oil, gas and LNG) |
|
|
Aluminium (exploration for and mining of bauxite, processing and marketing of aluminium and alumina) |
|
|
Base Metals (exploration for and mining, processing and marketing of copper, silver, zinc,
lead, uranium and copper by-products including gold) |
|
|
Carbon Steel Materials (exploration for and mining, processing and marketing of coking coal,
iron ore and manganese) |
|
|
Diamonds and Specialty Products (exploration for and mining of diamonds and titanium
minerals, and fertiliser operations) |
|
|
Energy Coal (exploration for and mining, processing and marketing of energy coal) |
|
|
Stainless Steel Materials (exploration for and mining, processing and marketing of nickel and,
prior to divestment in June 2005, chrome) |
Group and unallocated items represent Group centre functions and certain comparative data for
divested assets and investments and exploration and technology activities. It is the Groups policy
that inter-segment sales are made on a commercial basis.
Industry segment information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diamonds |
|
|
|
|
|
|
|
|
|
|
Group and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carbon |
|
|
and |
|
|
|
|
|
|
Stainless |
|
|
unallocated |
|
|
BHP |
|
|
|
|
|
|
|
|
|
|
|
Base |
|
|
Steel |
|
|
Specialty |
|
|
Energy |
|
|
Steel |
|
|
items/ |
|
|
Billiton |
|
US$ million |
|
Petroleum |
|
|
Aluminium |
|
|
Metals |
|
|
Materials |
|
|
Products |
|
|
Coal |
|
|
Materials |
|
|
eliminations |
|
|
Group |
|
|
Year ended 30
June 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue together with
share of jointly
controlled
entities revenue from
external customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of group production |
|
|
4,797 |
|
|
|
3,704 |
|
|
|
9,034 |
|
|
|
9,626 |
|
|
|
1,263 |
|
|
|
2,713 |
|
|
|
2,916 |
|
|
|
5 |
|
|
|
34,058 |
|
Sale of third party
product |
|
|
967 |
|
|
|
1,374 |
|
|
|
1,259 |
|
|
|
88 |
|
|
|
|
|
|
|
606 |
|
|
|
37 |
|
|
|
629 |
|
|
|
4,960 |
|
Rendering of services |
|
|
3 |
|
|
|
6 |
|
|
|
1 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33 |
|
|
|
81 |
|
Inter-segment revenue |
|
|
109 |
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
(119 |
) |
|
|
|
|
|
|
|
|
5,876 |
|
|
|
5,084 |
|
|
|
10,294 |
|
|
|
9,760 |
|
|
|
1,263 |
|
|
|
3,319 |
|
|
|
2,955 |
|
|
|
548 |
|
|
|
39,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: share of jointly
controlled entities
external
revenue included above |
|
|
(5 |
) |
|
|
(107 |
) |
|
|
(5,393 |
) |
|
|
(626 |
) |
|
|
(377 |
) |
|
|
(438 |
) |
|
|
|
|
|
|
|
|
|
|
(6,946 |
) |
|
Segment revenue |
|
|
5,871 |
|
|
|
4,977 |
|
|
|
4,901 |
|
|
|
9,134 |
|
|
|
886 |
|
|
|
2,881 |
|
|
|
2,955 |
|
|
|
548 |
|
|
|
32,153 |
|
|
Segment result |
|
|
2,963 |
|
|
|
917 |
|
|
|
1,998 |
|
|
|
4,159 |
|
|
|
209 |
|
|
|
131 |
|
|
|
901 |
|
|
|
(301 |
) |
|
|
10,977 |
|
Other attributable
income (1) |
|
|
5 |
|
|
|
37 |
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51 |
) |
|
|
|
|
Share of profits from
jointly controlled
entities |
|
|
|
|
|
|
193 |
|
|
|
3,015 |
|
|
|
262 |
|
|
|
91 |
|
|
|
139 |
|
|
|
|
|
|
|
(6 |
) |
|
|
3,694 |
|
|
Profit from operations |
|
|
2,968 |
|
|
|
1,147 |
|
|
|
5,013 |
|
|
|
4,430 |
|
|
|
300 |
|
|
|
270 |
|
|
|
901 |
|
|
|
(358 |
) |
|
|
14,671 |
|
|
Net finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(505 |
) |
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,207 |
) |
Royalty related taxation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(425 |
) |
|
Profit after taxation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,534 |
|
|
EBITDA before
non-cash items |
|
|
3,798 |
|
|
|
1,468 |
|
|
|
5,093 |
|
|
|
4,772 |
|
|
|
396 |
|
|
|
500 |
|
|
|
1,185 |
|
|
|
(242 |
) |
|
|
16,970 |
|
Other significant
non-cash items |
|
|
(7 |
) |
|
|
(44 |
) |
|
|
267 |
|
|
|
15 |
|
|
|
(3 |
) |
|
|
17 |
|
|
|
(41 |
) |
|
|
(76 |
) |
|
|
128 |
|
|
EBITDA |
|
|
3,791 |
|
|
|
1,424 |
|
|
|
5,360 |
|
|
|
4,787 |
|
|
|
393 |
|
|
|
517 |
|
|
|
1,144 |
|
|
|
(318 |
) |
|
|
17,098 |
|
Depreciation and
amortisation |
|
|
(720 |
) |
|
|
(227 |
) |
|
|
(339 |
) |
|
|
(356 |
) |
|
|
(93 |
) |
|
|
(247 |
) |
|
|
(243 |
) |
|
|
(39 |
) |
|
|
(2,264 |
) |
Impairment losses |
|
|
(113 |
) |
|
|
(50 |
) |
|
|
(8 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
(173 |
) |
Reversals of previous
impairment losses |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
Profit from operations |
|
|
2,968 |
|
|
|
1,147 |
|
|
|
5,013 |
|
|
|
4,430 |
|
|
|
300 |
|
|
|
270 |
|
|
|
901 |
|
|
|
(358 |
) |
|
|
14,671 |
|
|
Profit from group
production |
|
|
2,963 |
|
|
|
1,071 |
|
|
|
5,017 |
|
|
|
4,433 |
|
|
|
300 |
|
|
|
233 |
|
|
|
901 |
|
|
|
(358 |
) |
|
|
14,560 |
|
Profit from third party
product |
|
|
5 |
|
|
|
76 |
|
|
|
(4 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure |
|
|
1,124 |
|
|
|
366 |
|
|
|
861 |
|
|
|
1,606 |
|
|
|
202 |
|
|
|
131 |
|
|
|
1,423 |
|
|
|
41 |
|
|
|
5,754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
7,420 |
|
|
|
6,061 |
|
|
|
9,419 |
|
|
|
6,905 |
|
|
|
1,630 |
|
|
|
3,018 |
|
|
|
5,692 |
|
|
|
4,050 |
|
|
|
44,195 |
|
Investments in jointly
controlled entities |
|
|
112 |
|
|
|
551 |
|
|
|
2,511 |
|
|
|
410 |
|
|
|
115 |
|
|
|
622 |
|
|
|
|
|
|
|
|
|
|
|
4,321 |
|
|
Total assets |
|
|
7,532 |
|
|
|
6,612 |
|
|
|
11,930 |
|
|
|
7,315 |
|
|
|
1,745 |
|
|
|
3,640 |
|
|
|
5,692 |
|
|
|
4,050 |
|
|
|
48,516 |
|
|
Segment liabilities |
|
|
2,208 |
|
|
|
1,048 |
|
|
|
2,617 |
|
|
|
2,136 |
|
|
|
178 |
|
|
|
1,759 |
|
|
|
898 |
|
|
|
13,217 |
|
|
|
24,061 |
|
|
|
|
|
|
|
|
BHP BILLITON ANNUAL REVIEW 20065
|
|
73 |
Notes to the Summary Financial Statements continued
2. Business segments continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diamonds |
|
|
|
|
|
|
|
|
|
|
Group and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carbon |
|
|
and |
|
|
|
|
|
|
Stainless |
|
|
unallocated |
|
|
BHP |
|
|
|
|
|
|
|
|
|
|
|
Base |
|
|
Steel |
|
|
Specialty |
|
|
Energy |
|
|
Steel |
|
|
items/ |
|
|
Billiton |
|
US$ million |
|
Petroleum |
|
|
Aluminium |
|
|
Metals |
|
|
Materials |
|
|
Products |
|
|
Coal |
|
|
Materials |
|
|
eliminations |
|
|
Group |
|
|
Year ended 30
June 2005
Revenue together with
share of jointly
controlled
entities revenue from
external customers
|
|
Sale of group production |
|
|
3,953 |
|
|
|
3,103 |
|
|
|
4,372 |
|
|
|
7,298 |
|
|
|
986 |
|
|
|
2,718 |
|
|
|
2,265 |
|
|
|
3 |
|
|
|
24,698 |
|
Sale of third party
product |
|
|
1,955 |
|
|
|
1,543 |
|
|
|
670 |
|
|
|
238 |
|
|
|
523 |
|
|
|
669 |
|
|
|
9 |
|
|
|
784 |
|
|
|
6,391 |
|
Rendering of services |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 |
|
|
|
61 |
|
Inter-segment revenue |
|
|
62 |
|
|
|
5 |
|
|
|
|
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(94 |
) |
|
|
|
|
|
|
|
|
5,970 |
|
|
|
4,651 |
|
|
|
5,043 |
|
|
|
7,597 |
|
|
|
1,509 |
|
|
|
3,387 |
|
|
|
2,274 |
|
|
|
719 |
|
|
|
31,150 |
|
Less: share of jointly
controlled entities
revenue included above |
|
|
(3 |
) |
|
|
(80 |
) |
|
|
(2,714 |
) |
|
|
(429 |
) |
|
|
(778 |
) |
|
|
(416 |
) |
|
|
(8 |
) |
|
|
|
|
|
|
(4,428 |
) |
|
Segment revenue |
|
|
5,967 |
|
|
|
4,571 |
|
|
|
2,329 |
|
|
|
7,168 |
|
|
|
731 |
|
|
|
2,971 |
|
|
|
2,266 |
|
|
|
719 |
|
|
|
26,722 |
|
|
Segment result |
|
|
2,523 |
|
|
|
758 |
|
|
|
481 |
|
|
|
2,330 |
|
|
|
429 |
|
|
|
319 |
|
|
|
828 |
|
|
|
(184 |
) |
|
|
7,484 |
|
Other attributable
income (1) |
|
|
6 |
|
|
|
26 |
|
|
|
|
|
|
|
2 |
|
|
|
19 |
|
|
|
1 |
|
|
|
25 |
|
|
|
(79 |
) |
|
|
|
|
Share of profits from
jointly controlled
entities |
|
|
|
|
|
|
139 |
|
|
|
1,285 |
|
|
|
148 |
|
|
|
77 |
|
|
|
137 |
|
|
|
1 |
|
|
|
|
|
|
|
1,787 |
|
|
Profit from operations |
|
|
2,529 |
|
|
|
923 |
|
|
|
1,766 |
|
|
|
2,480 |
|
|
|
525 |
|
|
|
457 |
|
|
|
854 |
|
|
|
(263 |
) |
|
|
9,271 |
|
|
Net finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(331 |
) |
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,876 |
) |
Royalty related taxation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(436 |
) |
|
Profit after taxation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,628 |
|
|
EBITDA before
non-cash items |
|
|
3,151 |
|
|
|
1,122 |
|
|
|
1,952 |
|
|
|
3,098 |
|
|
|
710 |
|
|
|
740 |
|
|
|
1,014 |
|
|
|
(65 |
) |
|
|
11,722 |
|
Other significant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
non-cash items |
|
|
|
|
|
|
15 |
|
|
|
(33 |
) |
|
|
(318 |
) |
|
|
(14 |
) |
|
|
(95 |
) |
|
|
(19 |
) |
|
|
(169 |
) |
|
|
(633 |
) |
EBITDA |
|
|
3,151 |
|
|
|
1,137 |
|
|
|
1,919 |
|
|
|
2,780 |
|
|
|
696 |
|
|
|
645 |
|
|
|
995 |
|
|
|
(234 |
) |
|
|
11,089 |
|
Depreciation and
amortisation |
|
|
(616 |
) |
|
|
(214 |
) |
|
|
(153 |
) |
|
|
(300 |
) |
|
|
(171 |
) |
|
|
(179 |
) |
|
|
(141 |
) |
|
|
(27 |
) |
|
|
(1,801 |
) |
Impairment losses |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
(17 |
) |
Reversals of previous
impairment losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit from operations |
|
|
2,529 |
|
|
|
923 |
|
|
|
1,766 |
|
|
|
2,480 |
|
|
|
525 |
|
|
|
457 |
|
|
|
854 |
|
|
|
(263 |
) |
|
|
9,271 |
|
|
Profit from group
production |
|
|
2,515 |
|
|
|
902 |
|
|
|
1,777 |
|
|
|
2,466 |
|
|
|
503 |
|
|
|
403 |
|
|
|
854 |
|
|
|
(263 |
) |
|
|
9,157 |
|
Profit from third party
product |
|
|
14 |
|
|
|
21 |
|
|
|
(11 |
) |
|
|
14 |
|
|
|
22 |
|
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
114 |
|
|
Capital expenditure |
|
|
898 |
|
|
|
268 |
|
|
|
345 |
|
|
|
1,063 |
|
|
|
239 |
|
|
|
164 |
|
|
|
475 |
|
|
|
31 |
|
|
|
3,483 |
|
|
Segment assets |
|
|
6,448 |
|
|
|
5,398 |
|
|
|
7,880 |
|
|
|
4,885 |
|
|
|
1,429 |
|
|
|
2,359 |
|
|
|
4,377 |
|
|
|
5,813 |
|
|
|
38,589 |
|
Investments in jointly
controlled entities |
|
|
112 |
|
|
|
509 |
|
|
|
1,633 |
|
|
|
336 |
|
|
|
115 |
|
|
|
549 |
|
|
|
|
|
|
|
|
|
|
|
3,254 |
|
|
Total assets |
|
|
6,560 |
|
|
|
5,907 |
|
|
|
9,513 |
|
|
|
5,221 |
|
|
|
1,544 |
|
|
|
2,908 |
|
|
|
4,377 |
|
|
|
5,813 |
|
|
|
41,843 |
|
|
Segment liabilities |
|
|
1,955 |
|
|
|
745 |
|
|
|
2,240 |
|
|
|
1,903 |
|
|
|
162 |
|
|
|
1,558 |
|
|
|
612 |
|
|
|
14,752 |
|
|
|
23,927 |
|
|
(1) |
|
Other attributable income represents the re-allocation of certain items
recorded in the segment result of Group and unallocated/eliminations to the applicable CSG/business
segment. |
On 3 June 2005 the Group acquired WMC Resources Ltd for US$7,178 million. The fair values at
the date of acquisition and results from that date have been recorded in the Base Metals, Stainless
Steel Materials and Diamonds and Specialty Products CSGs, and in Group and unallocated items.
|
|
|
|
|
|
74
|
|
5BHP BILLITON ANNUAL REVIEW 2006 |
3. Exceptional items
Exceptional items are those items where their nature and amount is considered material and
require separate disclosure. Such items included within the BHP Billiton Group profit for the
period are detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
Tax |
|
|
Net |
|
Year ended 30 June 2006 |
|
US$M |
|
|
US$M |
|
|
US$M |
|
|
Exceptional items by category |
|
|
|
|
|
|
|
|
|
|
|
|
Sale of Tintaya copper mine |
|
|
439 |
|
|
|
(143 |
) |
|
|
296 |
|
Exceptional items by Customer Sector Group |
|
|
|
|
|
|
|
|
|
|
|
|
Base Metals |
|
|
439 |
|
|
|
(143 |
) |
|
|
296 |
|
Sale of Tintaya copper mine
Effective 1 June 2006, BHP Billiton sold its interests in the Tintaya copper mine in Peru. Gross
consideration received was US$853 million, before deducting intercompany trade balances. The net
consideration of US$717 million (net of transaction costs) included US$634 million for shares plus
the assumption of US$116 million of debt, working capital adjustments and deferred payments
contingent upon future copper prices and production volumes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
Tax |
|
|
Net |
|
Year ended 30 June 2005 |
|
US$M |
|
|
US$M |
|
|
US$M |
|
|
Exceptional items by category
|
|
Sale of Laminaria and Corallina |
|
|
134 |
|
|
|
(10 |
) |
|
|
124 |
|
Disposal of Chrome operations |
|
|
142 |
|
|
|
(6 |
) |
|
|
136 |
|
Termination of operations |
|
|
(266 |
) |
|
|
80 |
|
|
|
(186 |
) |
Closure plans |
|
|
(121 |
) |
|
|
17 |
|
|
|
(104 |
) |
|
Total by category |
|
|
(111 |
) |
|
|
81 |
|
|
|
(30 |
) |
|
Exceptional items by Customer Sector Group |
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum |
|
|
134 |
|
|
|
(10 |
) |
|
|
124 |
|
Base Metals |
|
|
(29 |
) |
|
|
(4 |
) |
|
|
(33 |
) |
Carbon Steel Materials |
|
|
(285 |
) |
|
|
80 |
|
|
|
(205 |
) |
Energy Coal |
|
|
(73 |
) |
|
|
21 |
|
|
|
(52 |
) |
Stainless Steel Materials |
|
|
142 |
|
|
|
(6 |
) |
|
|
136 |
|
|
Total by Customer Sector Group |
|
|
(111 |
) |
|
|
81 |
|
|
|
(30 |
) |
|
Sale of Laminaria and Corallina
In January 2005, the Group disposed of its interest in the Laminaria and Corallina oil fields.
Proceeds on the sale were US$130 million resulting in a profit before tax of US$134 million (US$10
million tax expense).
Disposal of Chrome operations
Effective 1 June 2005, BHP Billiton disposed of its economic interest in the majority of its South
African chrome business. The total proceeds on the sale were US$421 million, resulting in a profit
of US$127 million (US$1 million tax expense). In addition, the Group sold its interest in the
Palmiet chrome business in May 2005 for proceeds of US$12 million, resulting in a profit of US$15
million (US$5 million tax expense).
Provision for termination of operations
The Group decided to decommission the Boodarie Iron operations and a charge of US$266 million
(US$80 million tax benefit) relating to termination of the operation was recognised. The charge
primarily relates to settlement of existing contractual arrangements, plant decommissioning, site
rehabilitation, redundancy and other closure related costs/charges associated with the closure.
Closure plans
As part of the Groups regular review of decommissioning and site restoration plans, the Group
reassessed plans in respect of certain closed operations. A total charge of US$121 million (US$104
million after tax) was recorded and included a charge of US$73 million (US$21 million tax benefit)
for closed mines at Ingwe in relation to revision of the Groups assessed rehabilitation
obligation, predominantly resulting from revised water management plans and a charge of US$48
million (US$4 million tax expense) in relation to other closed mining operations.
|
|
|
|
|
|
BHP BILLITON ANNUAL REVIEW 20065
|
|
75 |
Notes to the Summary Financial Statements continued
4. Dividends
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
US$M |
|
|
US$M |
|
|
Dividends paid during the period |
|
|
|
|
|
|
|
|
BHP Billiton Limited |
|
|
1,148 |
|
|
|
842 |
|
BHP Billiton Plc |
|
|
|
|
|
|
|
|
Ordinary shares |
|
|
790 |
|
|
|
567 |
|
Preference shares (a) |
|
|
|
|
|
|
|
|
|
|
|
|
1,938 |
|
|
|
1,409 |
|
|
Dividends declared in respect of the period |
|
|
|
|
|
|
|
|
BHP Billiton Limited |
|
|
1,275 |
|
|
|
1,004 |
|
BHP Billiton Plc |
|
|
|
|
|
|
|
|
Ordinary shares |
|
|
885 |
|
|
|
691 |
|
Preference shares (a) |
|
|
|
|
|
|
|
|
|
|
|
|
2,160 |
|
|
|
1,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
US cents |
|
|
US cents |
|
|
Dividends paid during the period (per share) |
|
|
|
|
|
|
|
|
Prior year final dividend |
|
|
14.5 |
|
|
|
9.5 |
|
Interim dividend |
|
|
17.5 |
|
|
|
13.5 |
|
|
|
|
|
32.0 |
|
|
|
23.0 |
|
|
Dividends declared in respect of the period (per share) |
|
|
|
|
|
|
|
|
Interim dividend |
|
|
17.5 |
|
|
|
13.5 |
|
Final dividend |
|
|
18.5 |
|
|
|
14.5 |
|
|
|
|
|
36.0 |
|
|
|
28.0 |
|
|
(a) |
|
5.5 per cent dividend on 50,000 preference shares of £1 each (2005: 5.5 per
cent). |
Dividends are declared after period end in the announcement of the results for the period.
Interim dividends are declared in February and paid in March. Final dividends are declared in
August and paid in September. Dividends declared are not recorded as a liability at the end of the
period to which they relate. Subsequent to year end, on 23 August 2006, BHP Billiton declared a
final dividend of 18.5 US cents per share (US$1,100 million), which will be paid on 27 September
2006 (2005: 14.5 US cents per share US$878 million).
Each American Depositary Share (ADS)
represents two ordinary shares of BHP Billiton Limited or BHP Billiton Plc. Dividends declared on
each ADS represent twice the dividend declared on BHP Billiton shares.
BHP Billiton Limited dividends for all periods presented are, or will be, fully franked based on a
tax rate of 30 per cent.
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
US$M |
|
|
US$M |
|
|
Franking credits at 30 June |
|
|
20 |
|
|
|
115 |
|
Franking credits arising from the payment of the amount of the current tax payable |
|
|
811 |
|
|
|
213 |
|
|
Total credits available (i) |
|
|
831 |
|
|
|
328 |
|
|
(i) The payment of the final 2006 dividend declared post reporting date will
reduce the franking account balance by US$285 million.
|
|
|
|
|
|
76
|
|
5BHP BILLITON ANNUAL REVIEW 2006 |
5. Remuneration of auditors
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
US$M |
|
|
US$M |
|
|
Audit fees payable by the BHP Billiton Group to: |
|
|
|
|
|
|
|
|
Auditors of the BHP Billiton Group |
|
|
|
|
|
|
|
|
KPMG |
|
|
11.023 |
|
|
|
10.087 |
|
PricewaterhouseCoopers (a) |
|
|
|
|
|
|
0.577 |
|
|
Total audit fees |
|
|
11.023 |
|
|
|
10.664 |
|
|
Fees payable by the BHP Billiton Group to auditors for other services: |
|
|
|
|
|
|
|
|
Auditors of the BHP Billiton Group |
|
|
|
|
|
|
|
|
Audit related services (c) |
|
|
|
|
|
|
|
|
KPMG (b) |
|
|
2.006 |
|
|
|
1.141 |
|
Taxation services (d) |
|
|
|
|
|
|
|
|
KPMG (b) |
|
|
1.470 |
|
|
|
1.500 |
|
Other services (e) |
|
|
|
|
|
|
|
|
KPMG (b) |
|
|
0.209 |
|
|
|
0.110 |
|
PricewaterhouseCoopers (a) |
|
|
|
|
|
|
1.457 |
|
|
Total other services |
|
|
3.685 |
|
|
|
4.208 |
|
|
Total fees |
|
|
14.708 |
|
|
|
14.872 |
|
|
(a) |
|
Audit fees and other service fees for PricewaterhouseCoopers arose in
connection with their role as auditor of WMC Resources Ltd (WMC), where they were auditor of WMC up
to 30 June 2005. |
|
(b) |
|
The amounts paid to the UK firms and their associates for the year ended 30 June
2006 in respect of other services amounted to US$0.581 million (2005: US$0.600 million). |
|
(c) |
|
Mainly includes accounting advice and services associated with securities offerings.
For the year ended 30 June 2006, audit fees of US$0.185 million (2005: US$0.328 million) relating
to pension plans, which are not directly payable by the BHP Billiton Group, have been excluded from
the above analysis. |
|
(d) |
|
Mainly includes tax compliance services and employee expatriate taxation services. |
|
(e) |
|
Mainly includes certifications and non-financial audits. |
6. Subsequent events
Subsequent to 30 June 2006, the sale of BHP Billitons 45.5 per cent joint venture interest
in Valesul Aluminio SA, an aluminium smelter; the sale of Southern Cross Fertilisers Pty Ltd, a
fertiliser mining and processing business; the sale of the Cascade and Chinook oil and gas
prospects; and the sale of the Coal Bed Methane assets have been finalised. These assets are
classified as held for sale as at 30 June 2006. The financial effects of these transactions have
not been brought to account at 30 June 2006.
|
|
|
|
|
|
BHP BILLITON ANNUAL REVIEW 20065
|
|
77 |
Notes to the Summary Financial Statements continued
7. Transition to International Financial Reporting Standards
The accounting policies set out in this financial report have been applied for the years
ended 30 June 2006 and 2005, and in the preparation of an opening IFRS balance sheet at 1 July
2004.
In preparing its opening IFRS balance sheet, the BHP Billiton Group has adjusted amounts reported
previously in financial reports prepared in accordance with its previous basis of accounting
(previous GAAP). An explanation of how the transition from previous UK and Australian GAAP to IFRS
has affected the Groups financial position and financial performance is set out in the following
tables and accompanying notes. Because of the DLC structure, the preparation of IFRS financial
statements for the BHP Billiton Group requires transition from the two different predecessor GAAPs
of BHP Billiton Limited (which reported under Australian GAAP) and BHP Billiton Plc (which reported
under UK GAAP). Where necessary, Australian GAAP has been chosen as the reference predecessor GAAP
from which to base transition adjustments.
The amounts presented below differ to the amounts presented in the note on the impact of adopting
IFRS in the financial statements for the year ended 30 June 2005. This follows resolution of the
treatment of two items identified in that note as being subject to interpretation and revision. The
amounts in the tables below are presented based on the application of the revised interpretation
from the date of transition to IFRS:
|
|
Royalties and resource rent taxes, which are in the nature of an income tax, are now measured
and presented as income tax, in accordance with IAS 12/AASB 112 Income Taxes deferred tax
principles. At 30 June 2005, these were accounted for as operating costs. |
|
|
Deferred tax liabilities are no longer recorded on non-tax depreciable assets, such as
mineral rights, where a tax base exists for capital gains tax, and that tax base exceeds the
book base. At 30 June 2005, a deferred tax liability was recorded by reference to the tax base
for income tax purposes. |
The following table presents a summary of the impact of IFRS on net equity as at 30 June 2005 and 1
July 2004.
Reconciliation of net equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK GAAP |
|
|
Australian GAAP |
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
As at |
|
|
As at |
|
|
|
|
|
|
|
30 June 2005 |
|
|
1 July 2004 |
|
|
30 June 2005 |
|
|
1 July 2004 |
|
|
|
Note |
|
|
US$M |
|
|
US$M |
|
|
US$M |
|
|
US$M |
|
|
Net equity as previously reported
under UK and Australian GAAP |
|
|
|
|
|
|
17,489 |
|
|
|
14,380 |
|
|
|
18,364 |
|
|
|
15,425 |
|
IAS 19/AASB 119 Post-retirement pension
obligations pre tax |
|
|
(A |
) |
|
|
(650 |
) |
|
|
(527 |
) |
|
|
(650 |
) |
|
|
(527 |
) |
IAS 19/AASB 119 Post-retirement pension
obligations
deferred tax effect |
|
|
(A |
) |
|
|
158 |
|
|
|
135 |
|
|
|
158 |
|
|
|
135 |
|
IAS 19/AASB 119 Post-retirement medical
benefits pre tax |
|
|
(A |
) |
|
|
(111 |
) |
|
|
(76 |
) |
|
|
(111 |
) |
|
|
(76 |
) |
IAS 19/AASB 119 Post-retirement medical
benefits
deferred tax effect |
|
|
(A |
) |
|
|
30 |
|
|
|
21 |
|
|
|
30 |
|
|
|
21 |
|
IAS 12/AASB 112 Deferred income tax
accounting |
|
|
(B |
) |
|
|
(226 |
) |
|
|
(202 |
) |
|
|
36 |
|
|
|
(267 |
) |
IAS 12/AASB 112 Remeasurement of royalties
as income taxes |
|
|
(B |
) |
|
|
32 |
|
|
|
30 |
|
|
|
32 |
|
|
|
30 |
|
IFRS 3/AASB 3 Reinstatement of goodwill |
|
|
(C |
) |
|
|
354 |
|
|
|
388 |
|
|
|
41 |
|
|
|
|
|
IAS 10/AASB 110 Reversal of dividend payable |
|
|
(D |
) |
|
|
878 |
|
|
|
592 |
|
|
|
|
|
|
|
|
|
IFRS 2/AASB 2 Equity based compensation
payments to
employees tax effect |
|
|
(E |
) |
|
|
16 |
|
|
|
2 |
|
|
|
16 |
|
|
|
2 |
|
IFRS 3/AASB 3 Business combinations WMC
acquisition |
|
|
(C |
) |
|
|
(54 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net equity in accordance with IFRS |
|
|
|
|
|
|
17,916 |
|
|
|
14,743 |
|
|
|
17,916 |
|
|
|
14,743 |
|
|
Overall net increase/(decrease) in equity
under IFRS |
|
|
|
|
|
|
427 |
|
|
|
363 |
|
|
|
(448 |
) |
|
|
(682 |
) |
|
|
|
|
|
|
|
78
|
|
5BHP BILLITON ANNUAL REVIEW 2006 |
7. Transition to International Financial Reporting Standards continued
The following table presents a summary of the impact of IFRS on investments in jointly
controlled entities as at 30 June 2005 and 1 July 2004.
Reconciliation of investments in jointly controlled entities UK and Australian GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
|
|
|
|
|
30 June 2005 |
|
|
1 July 2004 |
|
|
|
Note |
|
|
US$M |
|
|
US$M |
|
|
Investments in jointly controlled entities as previously
reported under UK and Australian GAAP |
|
|
|
|
|
|
1,525 |
|
|
|
1,369 |
|
Impact on investments in jointly controlled entities of
adjustments to reclassify assets and liabilities
previously accounted for by proportional consolidation: |
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
623 |
|
|
|
507 |
|
Non-current assets |
|
|
|
|
|
|
2,687 |
|
|
|
2,425 |
|
Current liabilities |
|
|
|
|
|
|
(374 |
) |
|
|
(505 |
) |
Non-current liabilities |
|
|
|
|
|
|
(1,184 |
) |
|
|
(1,196 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in investments in jointly controlled entities in
applying the equity method of accounting |
|
|
(F |
) |
|
|
1,752 |
|
|
|
1,231 |
|
Other IFRS and acquisition accounting adjustments |
|
|
|
|
|
|
(23 |
) |
|
|
(7 |
) |
|
Investments in jointly controlled entities in accordance with IFRS |
|
|
|
|
|
|
3,254 |
|
|
|
2,593 |
|
|
The following tables present a summary of the impact of IFRS on profit after taxation for the year
ended 30 June 2005.
Reconciliation of profit after tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK GAAP |
|
|
Australian GAAP |
|
|
|
|
|
|
|
Year ended |
|
|
Year ended |
|
|
|
|
|
|
|
30 June 2005 |
|
|
30 June 2005 |
|
|
|
Note |
|
|
US$M |
|
|
US$M |
|
|
Net profit after tax as previously reported under UK and
Australian GAAP |
|
|
|
|
|
|
6,630 |
|
|
|
6,241 |
|
|
Pre tax IFRS adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
IAS 19/AASB 119 Post-retirement medical and pension obligations |
|
|
(A |
) |
|
|
(8 |
) |
|
|
(8 |
) |
IAS 12/AASB 112 Deferred tax effects within jointly controlled entities |
|
|
(B |
) |
|
|
(6 |
) |
|
|
(6 |
) |
IFRS 3/AASB 3 Reversal of amortisation of goodwill |
|
|
(C |
) |
|
|
2 |
|
|
|
44 |
|
IFRS 2/AASB 2 Equity based compensation payments to employees |
|
|
(E |
) |
|
|
56 |
|
|
|
56 |
|
Adjustment to goodwill included in the net book value of the disposed
Chrome operations |
|
|
(C |
) |
|
|
31 |
|
|
|
(3 |
) |
IFRS 3/AASB 3 Business combinations WMC acquisition |
|
|
(C |
) |
|
|
(54 |
) |
|
|
|
|
IAS 31/AASB 131 Reclassification of jointly controlled entity tax
expense to profit before tax previously equity accounted |
|
|
(F |
) |
|
|
(197 |
) |
|
|
|
|
IAS 31/AASB 131 Reclassification of jointly controlled entity tax
expense to profit before tax previously proportionately consolidated |
|
|
(F |
) |
|
|
(230 |
) |
|
|
(230 |
) |
IAS 12/AASB 112 Deferred tax on the disposed Chrome operations |
|
|
(B |
) |
|
|
3 |
|
|
|
3 |
|
IAS 12/AASB 112 Reclassification of royalties which are accounted for
as income taxes |
|
|
(G |
) |
|
|
603 |
|
|
|
603 |
|
Other |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax IFRS adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
IAS 12/AASB 112 Recognition of prior year tax losses |
|
|
(B |
) |
|
|
|
|
|
|
350 |
|
IAS 12/AASB 112 Withholding and repatriation taxes |
|
|
(B |
) |
|
|
(10 |
) |
|
|
(10 |
) |
IAS 12/AASB 112 Additional foreign exchange variations |
|
|
(B |
) |
|
|
(40 |
) |
|
|
(46 |
) |
IAS 12/AASB 112 Non-tax depreciable items now tax-effected |
|
|
(B |
) |
|
|
31 |
|
|
|
31 |
|
IAS 12/AASB 112 Tax base resets under Australian tax consolidations |
|
|
(B |
) |
|
|
17 |
|
|
|
|
|
IFRS 2/AASB 2 Equity based compensation payments to employees |
|
|
(E |
) |
|
|
(12 |
) |
|
|
(12 |
) |
IAS 31/AASB 131 Reclassification of jointly controlled entity tax
expense to profit before tax previously equity accounted |
|
|
(F |
) |
|
|
197 |
|
|
|
|
|
IAS 31/AASB 131 Reclassification of jointly controlled entity tax
expense to profit before tax previously proportionately consolidated |
|
|
(F |
) |
|
|
230 |
|
|
|
230 |
|
IAS 19/AASB 119 Post-retirement medical and pension benefits tax
impact |
|
|
(A |
) |
|
|
3 |
|
|
|
3 |
|
IAS 12/AASB 112 Reclassification of royalties which are accounted for
as income taxes |
|
|
(G |
) |
|
|
(603 |
) |
|
|
(603 |
) |
IAS 12/AASB 112 Remeasurement of royalties as income taxes |
|
|
(G |
) |
|
|
2 |
|
|
|
2 |
|
Other |
|
|
|
|
|
|
(16 |
) |
|
|
(17 |
) |
|
Profit after taxation in accordance with IFRS |
|
|
|
|
|
|
6,628 |
|
|
|
6,628 |
|
|
|
|
|
|
|
|
BHP BILLITON ANNUAL REVIEW 20065
|
|
79 |
Notes to the Summary Financial Statements continued
7. Transition to International Financial Reporting Standards continued
(A) |
|
Post-retirement and medical benefits (IAS 19/AASB 119 Employee Benefits) |
|
|
|
Under IFRS, defined benefit pension plan and medical benefit plan arrangements result in the
recognition of net assets or liabilities directly based on the underlying obligations and assets
of those plans. The recognised net asset or liability is subject to changes in value that are
more volatile than changes in assets and liabilities that were recognised under the BHP Billiton
Groups previous policy, which was based on the UK Statement of Accounting Practice (SSAP) 24
Accounting for Pension Costs. |
|
|
|
Under SSAP 24, the cost of providing pensions was charged to profit and loss so as to allocate
the cost systematically over the employees service lives on the basis of independent actuarial
advice. A pension liability or asset was consequently recognised in the balance sheet to the
extent that the contributions payable either lagged or preceded expense recognition. |
(B) Deferred tax (IAS 12/AASB 112 Income Taxes)
On transition to IFRS, the balance sheet liability method of tax-effect accounting was adopted,
rather than the income statement liability method applied under previous BHP Billiton Group
policy. This balance sheet method recognises deferred tax assets and liabilities on temporary
differences between the accounting and tax values of balance sheet items, rather than accounting
and tax values of items recognised in profit and loss. This approach gives rise to a wider range
of deferred tax assets and liabilities and an increase in the volatility of deferred tax balances
brought about by foreign exchange rate movements. IFRS requires deferred tax to be recognised on
items that do not have a tax base, such as certain mineral rights and fair value adjustments on
acquisitions, and for tax on unremitted earnings from subsidiaries and joint ventures except to
the extent that the Group can control the timing of distributions and those distributions are not
probable in the foreseeable future. In addition, royalty arrangements that are in the nature of
income tax have been measured and presented as income tax in accordance with IAS 12/AASB 112
deferred tax accounting principles. The impact on deferred tax balances of adopting IAS 12/AASB
112, other than the tax effect of other IFRS adjustments, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK GAAP to IFRS |
|
|
Australian GAAP to IFRS |
|
|
|
30 June 2005 |
|
|
1 Jul 2004 |
|
|
30 June 2005 |
|
|
1 Jul 2004 |
|
|
|
Tax asset/ |
|
|
Tax asset/ |
|
|
Tax asset/ |
|
|
Tax asset/ |
|
|
|
(provision) |
|
|
(provision) |
|
|
(provision) |
|
|
(provision) |
|
|
|
US$M |
|
|
US$M |
|
|
US$M |
|
|
US$M |
|
|
Deferred tax
on non-depreciable assets acquired in business combinations |
|
|
(309 |
) |
|
|
(321 |
) |
|
|
(309 |
) |
|
|
(321 |
) |
Tax base resets under Australian tax consolidations |
|
|
188 |
|
|
|
165 |
|
|
|
|
|
|
|
|
|
Foreign exchange movements tax base of
non-monetary assets |
|
|
434 |
|
|
|
216 |
|
|
|
434 |
|
|
|
216 |
|
Foreign exchange movements USD debt |
|
|
(516 |
) |
|
|
(255 |
) |
|
|
(516 |
) |
|
|
(255 |
) |
Withholding taxes |
|
|
(10 |
) |
|
|
|
|
|
|
(10 |
) |
|
|
|
|
Adoption of IAS 12 to jointly controlled entities |
|
|
(13 |
) |
|
|
(7 |
) |
|
|
(13 |
) |
|
|
(7 |
) |
Remeasurement of royalties as income taxes |
|
|
32 |
|
|
|
30 |
|
|
|
32 |
|
|
|
30 |
|
Recognition of tax losses |
|
|
|
|
|
|
|
|
|
|
450 |
|
|
|
100 |
|
|
(Increase)/decrease in net deferred tax liability |
|
|
(194 |
) |
|
|
(172 |
) |
|
|
68 |
|
|
|
(237 |
) |
|
(C) |
|
Goodwill and business combinations (IFRS 3/AASB 3 Business Combinations) |
|
|
|
IFRS requires impairment assessments of goodwill, whereas both previous UK and Australian GAAP
permitted/required the amortisation of goodwill. Business combinations undertaken after the date
of transition to IFRS (1 July 2004) must be accounted for in accordance with IFRS. The
acquisition of WMC Resources Ltd was effective 3 June 2005. Differences in accounting for the
acquisition exist between UK GAAP and IFRS with respect to the measurement of fair value of
inventory and the recognition of deferred tax liabilities, and between Australian GAAP and IFRS
with respect to deferred tax assets attributable to unused tax losses. |
|
|
|
Under previous UK GAAP, goodwill existing prior to 1998 was classified as a reduction of retained
earnings. In order to maintain consistency in the IFRS treatment of goodwill in the DLC
structure, such goodwill has been reclassified on transition as an asset in the balance sheet in
accordance with previous GAAP. The reclassification of goodwill was required because the IFRS
accounting for past business combinations is determined from the previous basis of accounting
applied by the Group under previous Australian GAAP, which has been chosen as the reference
predecessor GAAP for these purposes. |
|
(D) |
|
Dividend payable (IAS 10/AASB 110 Events after the Balance Sheet Date) |
|
|
|
IFRS does not permit the recognition of dividends payable as a liability until the dividend has
been formally declared by the Directors. Under previous UK GAAP, dividends payable were
recognised as a liability in the balance sheet at balance date, despite the fact they were
declared subsequent to balance date. |
|
(E) |
|
Equity-based compensation (IFRS 2/AASB 2 Share-based Payment) |
|
|
|
Under IFRS the cost of employee compensation provided in the form of equity-based compensation
(including shares and options) is measured based on the fair value of those instruments rather
than their intrinsic value as recognised under previous BHP Billiton Group policy. In addition,
the change in the tax base over time is reflected directly in equity. |
|
(F) |
|
Joint ventures (IAS 31/AASB 131 Interests in Joint Ventures) |
|
|
|
Under IFRS as implemented in Australia, all joint ventures that are constituted as a legal entity
are accounted for using the equity method. Under both previous UK and Australian GAAP, the BHP
Billiton Groups interests in the Escondida, Mozal and Valesul joint ventures were accounted for
by proportional consolidation. As each of these joint ventures operates through an incorporated
entity, IFRS classifies them as jointly controlled entities and the Australian version of IFRS
mandates the use of the equity method of accounting, notwithstanding that in substance none of
the entities operate as independent business entities. The change to single line equity
accounting for jointly controlled entities does not impact net profit or net equity, however, as
demonstrated in the schedules above, the amounts of profit before tax, income tax expense,
investments in jointly controlled entities and other balance sheet and income statement line
items are significantly affected. |
|
(G) |
|
Royalty related taxation (IAS 12/AASB 112 Income Taxes) |
|
|
|
Under IFRS, royalties and resource rent taxes are treated as taxation arrangements when they have
the characteristics of a tax. For such arrangements, current and deferred tax is provided on the
same basis as for other forms of taxation. Under previous UK and Australian GAAP, such taxes were
included in operating costs and, in some cases, were not calculated in accordance with deferred
tax principles. |
Material adjustments to cash flow
The use of the equity method of accounting under IFRS for the Groups interests in the Escondida,
Mozal and Valesul jointly controlled entities, as compared to proportional consolidation under
previous UK and Australian GAAP, has corresponding impacts on the Cash Flow Statement. Under IFRS,
amounts included in dividends received from these jointly controlled entities were previously
included elsewhere in cash flows related to operating activities. In addition, capital expenditure
and debt repayments for these joint ventures are now excluded from the Groups investing and
financing cash flows.
The presentation of the cash flow statement is consistent with previous Australian GAAP, however,
compared to UK GAAP, the cash flows have been reclassified as operating, investing and financing.
|
|
|
|
|
|
80
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|
5BHP BILLITON ANNUAL REVIEW 2006 |
Directors Declaration
In accordance with a resolution of the Directors of the BHP Billiton Group, the Directors
declare that the summary financial statements of the BHP Billiton Group for the year ended 30 June
2006, set out on pages 68 to 80:
(a) |
|
have been derived from or are consistent with the full financial report for the financial year;
and |
|
(b) |
|
comply with the relevant requirements of Section 251 of the United Kingdom Companies Act 1985,
and the regulations made thereunder, and Section 314 of the Australian Corporations Act 2001. |
In the 2006 full financial report we declared that:
(a) |
|
the financial statements and notes, including the information in the Remuneration Report that
is described as having been audited, are in accordance with the United Kingdom Companies Act 1985
and the Australian Corporations Act 2001, including giving a true and fair view of the financial
position of the BHP Billiton Group as at 30 June 2006 and of its performance for the year ended 30
June 2006; and |
|
(b) |
|
there are reasonable grounds to believe that each of the BHP
Billiton Group, BHP Billiton Limited and BHP Billiton Plc will be able to pay its debts as and when
they become due and payable. |
The Directors have been given the declarations required by Section 295A of the Corporations Act
2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30
June 2006.
Signed in accordance with a resolution of the Board of Directors.
![-s- D R Argus](y25422y2542254.gif)
D R Argus Chairman
![-s- C W Goodyear](y25422y2542255.gif)
C W Goodyear Chief Executive Officer
Dated this 11th day of September 2006
|
|
|
|
|
|
BHP BILLITON ANNUAL REVIEW 20065
|
|
81 |
Lead Auditors Independence Declaration
To the directors of BHP Billiton Limited:
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2006 there have been:
(i) |
|
no contraventions of the auditor independence requirements as set out in the Australian
Corporations Act 2001 in relation to the audit; and |
|
(ii) |
|
no contraventions of any applicable code of professional conduct in relation to the audit. |
This declaration is in respect of the BHP Billiton
Group and the entities it controlled during the
year.
![-s- KPMG](y25422y2542256.gif)
KPMG
![-s- Peter Nash](y25422y2542257.gif)
Peter Nash
Partner
Dated in Melbourne this 11th day of September 2006
|
|
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|
|
82
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|
5BHP BILLITON ANNUAL REVIEW 2006 |
Independent Auditors Reports
of KPMG Audit Plc to the members of BHP Billiton Plc and KPMG to the members of BHP Billiton Limited on the summary financial report
Scope
For the purpose of these reports, the terms we and our denote KPMG Audit Plc in relation
to UK professional and regulatory responsibilities and reporting obligations to the members of BHP
Billiton Plc and KPMG in relation to Australian professional and regulatory responsibilities and
reporting obligations to the members of BHP Billiton Limited.
The summary financial report set out on pages 67 to 81 comprises the consolidated income statement,
consolidated statement of recognised income and expense, consolidated balance sheet, consolidated
cash flow statement, accompanying notes 1 to 7, the Directors Declaration and the relevant
information in the Remuneration Report, which for Australian reporting purposes is limited to the
information that is described as having been audited.
The BHP Billiton Group (the Group) consists of BHP Billiton Plc and BHP Billiton Limited and the
entities they controlled at the end of the year or from time to time during the financial year.
KPMG Audit Plcs report is made solely to the members of BHP Billiton Plc, as a body, in accordance
with section 251 of the Companies Act 1985. Our work has been undertaken so that we might state to
the members of BHP Billiton Plc those matters we are required to state to them in such a report and
for no other purpose. To the fullest extent permitted by law, KPMG Audit Plc does not accept or
assume responsibility to anyone other than BHP Billiton Plc and the members of BHP Billiton Plc as
a body, for our work, for our report, or for the opinions we have formed.
To the fullest extent permitted by law, KPMG does not accept or assume responsibility to anyone
other than BHP Billiton Limited and the members of BHP Billiton Limited as a body, for our work,
for our report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
The Directors are responsible for the preparation of the summary financial report in accordance
with Australian Accounting Standard AASB 1039 Concise Financial Reports and applicable United
Kingdom law. This includes responsibility for the maintenance of adequate accounting records and
internal controls that are designed to prevent and detect fraud and error, and for the accounting
policies and accounting estimates inherent in the summary financial report.
KPMG Audit Plcs
responsibility is to report to the members of BHP Billiton Plc our opinion on the consistency of
the summary financial report with the full annual financial statements and the Remuneration Report,
and its compliance with the relevant requirements of section 251 of the UK Companies Act 1985 and
the regulations made thereunder.
KPMG conducted an independent audit in order to express an opinion to the members of BHP Billiton
Limited. Our audit was conducted in accordance with Australian Auditing Standards in order to
provide reasonable assurance as to whether the summary financial report is free of material
misstatement and the information in the Remuneration Report that is described as having been
audited complies with Australian Accounting Standard AASB 124 Related Party Disclosures and the
Corporations Regulations 2001.
We also read the other information contained in the annual review and consider the implications for
our reports if we become aware of any apparent misstatements or material inconsistencies with the
summary financial report.
Basis of opinions
The independent auditors reports in respect of the Groups full annual financial statements
describe the basis of our audit opinions on those financial statements.
KPMG Audit Plc conducted its work in accordance with Bulletin 1999/6 The auditors statement on
the summary financial statement issued by the Auditing Practices Board for use in the United
Kingdom.
KPMG performed procedures in respect of the audit of the summary financial report to
assess whether, in all material respects, the summary financial report is presented fairly in
accordance with Australian Accounting Standard AASB 1039 Concise Financial Reports.
We formed our
audit opinions on the basis of these procedures, which included:
|
|
testing that the information in the summary financial report is consistent with
the full financial report; and |
|
|
|
examining, on a test basis, information to provide evidence supporting the amounts
and other disclosures which were not directly derived from the full financial report. |
While we considered the effectiveness of managements internal controls over financial reporting
when determining the nature and extent of our procedures, our audit was not designed to provide
assurance on internal controls.
We have also conducted audits of the full financial report of the Group for the year ended 30 June
2006. Our audit reports on the full financial report were signed on 11 September 2006, and were not
subject to any qualification.
Opinion of KPMG Audit Plc to the members of BHP Billiton Plc
In our opinion the summary financial report is consistent with the full annual financial
statements and the Remuneration Report of BHP Billiton Plc for the year ended 30 June 2006 and
complies with the applicable requirements of section 251 of the UK Companies Act 1985 and the
regulations made thereunder.
KPMG Audit Plc
Chartered Accountants and Registered Auditor
London
11 September 2006
Opinion of KPMG to the members of BHP Billiton Limited
In our opinion, the summary financial report of the BHP Billiton Group for the financial year
ended 30 June 2006 complies with Australian Accounting Standard AASB 1039 Concise Financial
Reports.
KPMG
Peter Nash
Partner
Melbourne
11 September 2006
|
|
|
BHP BILLITON ANNUAL REVIEW 2006 5
|
|
83 |
Information for Shareholders
Information for BHP Billiton Limited and BHP Billiton Plc shareholders this year is provided
in the BHP Billiton Group Annual Review 2006 and the Annual Report 2006.
The Annual Review contains key information about the BHP Billiton Group in a concise format. The
Annual Report provides more detailed financial data and information on the BHP Billiton Groups
performance.
The summary financial statements and notes included in the Annual Review cannot
provide as full an understanding of the financial performance, position, and funding and investing
activities of the BHP Billiton Group as the full financial statements included in the Annual
Report. Shareholders of BHP Billiton Limited and BHP Billiton Plc will receive the Annual Review
unless they have opted to receive the Annual Report. (Please also refer to Access your Annual
Review and Annual Report on the web below).
Dividend payments
BHP Billiton Limited shareholders may receive cash dividends paid directly into any bank,
building society or credit union for Australian shareholders, any bank or building society for UK
shareholders and any bank nominated by shareholders in New Zealand or the United States.
Shareholders from those locations above who do not provide their direct credit details and
shareholders with registered addresses outside Australia, New Zealand, the United Kingdom and the
United States will receive dividend payments by way of an Australian currency cheque.
BHP Billiton
Plc shareholders may have their dividends paid directly into a bank or building society account.
Please contact the BHP Billiton Share Registrar in the UK or South Africa, as appropriate, for a
dividend mandate form.
When you close your account or amend your banking arrangements, it is essential you notify the
appropriate BHP Billiton Share Registrar of the new details.
Dividend determination
The US dollar, in which the majority of the Groups sales are made, most reliably records the
Groups global business performance and is BHP Billitons main reporting currency. It is,
therefore, the currency in which dividends are determined. BHP Billitons dividends are declared in
US dollars and converted for BHP Billiton Plc into sterling for shareholders on the principal
register in the UK and into rand for shareholders on the branch register in South Africa. BHP
Billiton Limited dividends are also declared in US dollars and converted into Australian dollars,
sterling, New Zealand dollars or US dollars.
Change of address
It is important that shareholders notify the appropriate BHP Billiton Share Registrar in
writing immediately if there is a change to their registered address. For the protection of
shareholders, instructions to BHP Billitons Share Registrar need to be in writing and show the
Shareholder Reference Number (SRN). Shareholders on the BHP Billiton Limited CHESS sub-register
should forward the change of address advice to their sponsoring broker quoting the Holder
Identification Number (HIN).
Dematerialised holdings under STRATE
(South African shareholders)
If you hold shares dematerialised into STRATE, you should contact your CSDP or stockbroker
regarding the customer service items mentioned above.
Stock exchange listings
BHP Billiton Limited is listed on stock exchanges in Australia, Germany (Frankfurt),
Switzerland (Zurich) and the US (New York).
BHP Billiton Plc is listed on stock exchanges in the UK (London), South Africa (Johannesburg) and
the US (New York).
Trading on the New York Stock Exchange is via American Depositary Shares (each representing two
Ordinary shares) evidenced by American Depositary Receipts (ADRs) issued by JPMorgan Chase Bank.
The trustees and dividend-paying banks for internationally registered shares are shown on the
inside back cover of this Annual Review.
Annual General Meetings
The Annual General Meeting of BHP Billiton Plc will be held at the Royal Horticultural Halls,
Lindley Hall, Elverton Street, London SW1P 2PE, UK on Thursday, 26 October 2006 commencing at 10.30
am.
The Annual General Meeting of BHP Billiton Limited will be held at the Brisbane Convention and
Exhibition Centre, corner Merivale and Glenelg Streets, South Bank, Brisbane, Queensland, Australia
on Wednesday, 29 November 2006 at 10.30 am.
Details of the business of the meeting are contained in the separate Notice of Meeting enclosed
with this Annual Review.
Enquiries
Shareholders who wish to contact BHP Billiton on any matter relating to their share or ADR
holdings are invited to telephone the appropriate office of the BHP Billiton Share Registrar listed
on the inside back cover of this Annual Review.
Shareholders can also access their current shareholding details through the Shareholder Services
link located under Investor & Media on BHP Billitons website www.bhpbilliton.com (you will need
your Shareholder Reference Number or Holder Identification Number to access this information).
Access your Annual Review or Annual Report on the web
BHP Billiton offers an alternative for shareholders who wish to be advised of the
availability of the Annual Review and Annual Report through the Companys website via an email
notification (refer instructions below).
By providing an email address through our website on the internet, shareholders will receive by
email a direct link to the Annual Review and Annual Report, when those documents have been
released. Shareholders will also receive notification of other major BHP Billiton announcements by
email.
How to set up email notification
Enter BHP Billiton website www.bhpbilliton.com and click onto Investor & Media then
Shareholder Services. Under the heading Provide Your Email Address click on the appropriate
link. You will be requested to enter your Securityholder/Shareholder Reference Number or Holder
Identification Number and postcode or country code. This sign-on requirement is a security access
validation prior to entering your email address under Electronic Shareholder Communication.
After confirmation of your email address you will receive notification of the availability of
future Annual Reviews and Annual Reports and other major BHP Billiton announcements by email.
Key Dates for Shareholders*
|
|
|
Date |
|
Event |
27 September 2006
|
|
Payment Date for Final Dividend |
26 October 2006
|
|
BHP Billiton Plc Annual General Meeting in London |
29 November 2006
|
|
BHP Billiton Ltd Annual General Meeting in Brisbane |
7 February 2007
|
|
Interim Results Announced |
2 March 2007
|
|
Interim Dividend Record Date |
20 March 2007
|
|
Interim Dividend Payment Date |
22 August 2007
|
|
Annual Results Announced |
|
|
|
* |
|
If there are any changes to these dates, all stock exchanges where BHP Billiton
Ltd and BHP Billiton Plc are listed will be notified. |
|
|
|
|
|
|
|
84
|
|
5 BHP BILLITON ANNUAL REVIEW 2006 |
Corporate Directory
BHP BILLITON GROUP REGISTERED OFFICES BHP BILLITON LIMITED Australia |
BHP Billiton Limited BHP Billiton Centre 180 Lonsdale Street Melbourne VIC 3000 Telephone (61 3)
9609 3333 Facsimile (61 3) 9609 3015 |
BHP BILLITON PLC United Kingdom |
Neathouse Place London SW1V 1BH |
Telephone (44 20) 7802 4000 Facsimile (44 20) 7802 4111 |
Karen J Wood (Group Company Secretary) Jane McAloon (Company Secretary BHP Billiton Limited)
Robert Franklin (Company Secretary BHP Billiton Plc) |
BHP BILLITON CORPORATE CENTRES South Africa |
6 Hollard Street Johannesburg 2001 Telephone (27 11) 376 9111 Facsimile (27 11) 838 4716 |
Avenida Americo Vespucio Sur # 100, 9th Floor Las Condes Santiago Telephone (56 2) 330 5000
Facsimile (56 2) 330 5601 |
1360 Post Oak Boulevard, Suite 150 Houston, TX 77056-3020 Telephone (1 713) 961 8500 Facsimile (1
713) 961 8400 |
MARKETING OFFICES The Netherlands |
Verheeskade 25 2521 BE The Hague Telephone (31 70) 315 6666 Facsimile (31 70) 315 6767 |
168 Robinson Road #10-01 Capital Tower Singapore 068912 Telephone (65) 6349 3333 Facsimile (65)
6349 4000 |
SHARE REGISTRARS AND TRANSFER OFFICES Australia |
BHP Billiton Limited Registrar Computershare Investor Services Pty Limited Yarra Falls, 452
Johnston Street Abbotsford VIC 3067 Postal Address GPO Box 2975 Melbourne VIC 3001 Telephone 1300
656 780 (within Australia) (61 3) 9415 4020 (outside Australia) Facsimile (61 3) 9473 2460 Email
enquiries: web.queries@computershare.com.au |
BHP Billiton Plc Registrar |
Computershare Investor Services PLC The Pavilions, Bridgwater Road Bristol BS99 7NH |
PO Box 82 Bristol BS99 7NH Telephone (44 870) 889 3148 Facsimile (44 870) 703 6103 Email enquiries:
web.queries@computershare.co.uk |
BHP Billiton Plc branch register Mailing Address Computershare Investor Services 2004 (Pty) Limited
PO Box 61051 Marshalltown 2107 Office Address 70 Marshall Street Johannesburg 2001 Telephone (27
11) 370 5131 Facsimile (27 11) 688 5250 Holders of shares dematerialised into STRATE should contact
their CSDP or stockbroker |
Computershare Investor Services Limited Level 2/159 Hurstmere Road Takapuna North Shore City Postal
Address Bag 92119 Auckland 1020 Telephone (64 9) 488 8777 Facsimile (64 9) 488 8787 |
Computershare Investor Services 2 North LaSalle Street Chicago, IL 60602 Postal Address PO Box
0289 Chicago, IL 60690-9569 Telephone 1 888 404 6340 (toll-free within US) Facsimile (1 312) 461
4331 |
ADR Depositary, Transfer Agent and Registrar JPMorgan Chase Bank, NA |
JPMorgan Service Center PO Box 3408 |
South Hackensack, NJ 07606-3408 USA |
Telephone (1 201) 680 6630 (outside of US) 1 800 990 1135 (toll-free within US) Email:
jpmorganadr@mellon.com Website: www.adr.com |
Other details provided to assist shareholders. |
Deutsche Boerse Clearing AG |
SEGA Schweizerrische Effekten-Giro AG |
Credit Suisse First Boston |
Receive your Annual Report electronically. |
The BHP Billiton Group produces an Annual Review and an Annual Report, which are posted on the
internet. Shareholders are encouraged to visit www.bhpbilliton.com to inspect the electronic
version of the Annual Review and Annual Report and provide feedback to the Company. |
The single parent entity financial statements of BHP Billiton Limited are available on the
Companys website (www.bhpbilliton.com) and are available to shareholders on request free of
charge. |
BHP Billiton is a Dual Listed Company comprising BHP Billiton Limited and BHP Billiton Plc.
The two entities continue to exist as separate companies but operate as a combined group known as
BHP Billiton. |
The headquarters of BHP Billiton Limited and the global headquarters of the combined BHP Billiton
Group are located in Melbourne, Australia. BHP Billiton Plc is located in London, UK. Both
companies have identical Boards of Directors and are run by a unified management team. Throughout
this Report the Boards are referred to collectively as the Board. Shareholders in each company have
equivalent economic and voting rights in the BHP Billiton Group as a whole. |
Throughout this Annual Review, the terms BHP Billiton, the Company and the Group refer to the
combined group, including both BHP Billiton Limited and subsidiary companies and BHP Billiton Plc
and subsidiary companies. The term the merger has a corresponding meaning. |
Copies of the Annual Review and Annual Report for the Group can be found on www.bhpbilliton.com.
Shareholders may also request a copy free of charge by telephoning 1300 656 780 (within Australia),
(44 870) 889 3148 (within the UK) or (61 3) 9649 5020 (from elsewhere). |
All the models in this Review, with the exception of the children, the cyclist and the lady in
the Stainless Steel Materials highlights, are BHP Billiton employees. We are very grateful for
their enthusiasm and help in putting this Review together. Photography by Giles Barnard, Andrew
Craig, Jamshyd Masud, Garth Oriander, Andrew Stevens, Graeme Williams and others. Designed by
Amanda Roach Design, printed in the UK by St Ives Westerham Press/printed in Australia by PMP
Print. |