BHP BILLITON ANNUAL REPORT CORPORATE GOVERNANCE REPORT CONTENT CHECKLIST 2012 (as at 18 September 2012) Australia 1.

The checklist below details the BHP Billiton Groups compliance with the corporate governance reporting requirements introduced by the second edition of the Corporate Governance Principles and Recommendations (the Principles) established by the ASX Corporate Governance Council (the Council) in August 2007, and the location of the relevant information in the 2012 Annual Report. Those requirements are summarised below. ASX Listing Rule 4.10.3 requires BHP Billiton to include in its annual report a statement disclosing the extent to which BHP Billiton has complied with the Recommendations in the Principles. Where a Recommendation has not been followed, BHP Billiton is required to identify the Recommendation, specify the extent of non-compliance and provide reasons for non-compliance. Where a Recommendation has only been followed for part of the period, BHP Billiton must state the period during which the Recommendation has been followed. On 30 June 2010, the ASX Corporate Governance Council released amendments to the Principles (the amended Principles) which include a requirement for each entity listed on the ASX to adopt and disclose a diversity policy and set measurable objectives relating to gender diversity for disclosure in their Annual Report (on an if not, why not? basis). In addition, there were amendments to the Principles in respect of trading policies, corporate briefings and remuneration committees. For BHP Billiton, the amended Principles apply from 1 July 2011, with the new reporting obligations applying for the first time in relation to the 2012 Annual Report. On 10 February 2012, ASX released a revised version of ASX Listing Rules Guidance Note 9 Disclosure of Corporate Governance Practices. This replaces the previous Guidance Notes 9 and 9A. The revised Guidance Note has greater guidance on ASXs expectations regarding the corporate governance disclosures to be made by listed entities under Listing Rule 4.10.3 and its monitoring and enforcement processes under that rule. In particular, the Guidance Note recommends that all corporate governance related disclosures required by ASX Listing Rule 4.10.3 be included in a clearly labelled corporate governance statement (CGS), rather than using cross-references to where the information is located elsewhere in the annual report. The only exceptions to this are: disclosures under Recommendation 2.6 regarding the skills, experience and expertise of directors, the period they have held office as director and whether they are considered to be independent. This information most logically belongs in the section of the annual report giving information about the board of directors; disclosures under Recommendations 7.2 and 7.3 regarding risk management and reporting. These disclosures could either be included in the directors report or in the CGS; and

2.

3.

4.

disclosures under Recommendations 3.3 and 3.4 regarding gender diversity. If the annual report has a section dealing with its diversity or affirmative action policies, these disclosures could either be included in that section of the annual report or in the CGS. Where the information is included outside the CGS, the CGS should note that the information has been included elsewhere in the annual report with a cross-reference to the relevant page(s).

The Guidance Note also recommends that where an entity discloses additional corporate governance information on its website, the CGS should include a list of all governance-related documents that can be viewed on the companys website. Requirement/Recommendation Corporations Act 2001 (Cth) Company Secretaries (s300(10) (d)) The directors report shall describe the qualifications and experience of each person who is a company secretary of the company as at the end of the financial year. Non-audit Services (s300 (11B) and (11C)) In the directors report under a heading non-audit services include: Annual Report Sections 4.1 (a cross reference to which is included in sections 5.21), 7.6 Compliance How we comply

details of the amounts paid or payable for non-audit services to the auditor or another person or firm acting on the auditors behalf during the year including the name of the author and the dollar amount paid or payable by the parent or subsidiary for each of the non-audit services; a statement as to whether the directors are satisfied that the provision of non-audit services are compatible with the general standard of independence of the auditor imposed by the Act; and

Annual Report Sections 5.13.1 and 7.13 and Note 34 (a cross reference to which is included in section 7.13 and 5.13.1)

a statement of reasons for being satisfied. The directors two statements must be made in accordance with advice provided by the companys audit committee pursuant to s300(11D) and (11E) - see further the directors report checklist.
Directorships of other entities (s300(11)(e)) Disclose details of directorships (including the period for which each directorship has been held) of other listed companies held by each director in the three years prior to the end of the current financial year. Annual Report Section 4.1 (a cross reference to which is included in section 5.4, 5.5 and 5.13.1)

Requirement/Recommendation Corporate Governance Principles and Recommendations Number 1.1 Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions.

Compliance

How we comply Annual Report Section 5.3 and 5.15 The Board Governance Document which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Section 5.15

1.2 1.3

Companies should disclose the process for evaluating the performance of senior executives. Provide the following information in the corporate governance statement in the annual report:

an explanation of any departure from recommendations 1.1, 1.2 or 1.3 the process for evaluating the performance of senior executives1 whether a performance evaluation for senior executives has taken place in the reporting period and whether it was in accordance with the process disclosed.

N/A

Annual Report Section 5.15 Annual Report Section 5.15

The following material should be made publicly available, ideally on the companys website in a clearly marked corporate governance section:

a statement of matters reserved for the board, or the board charter or the statement of areas of delegated authority to senior executives.

Annual Report Section 5.3 and 5.15 The Board Governance Document which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Sections 5.4 and 5.9 Annual Report Sections 5.4 and 5.5 Annual Report Sections 5.4 and 5.5 Annual Report Section 5.13.3 The Terms of Reference and members of the Nomination Committee can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page

2.1 2.2 2.3 2.4

A majority of the board should be independent directors. The chair should be an independent director. The roles of chair and chief executive officer should not be exercised by the same individual. The board should establish a nomination committee.

The guide to reporting in Recommendation 1.3 implies, but does not specifically state, that an entity ought to disclose its process for evaluating the performance of senior executives under Recommendation 1.2. However, ASX Guidance Note 9 indicates that it is preferable that this information is disclosed.

Requirement/Recommendation 2.5 2.6 Companies should disclose the process for evaluating the performance of the board, its committees and individual directors. Provide the following information in corporate governance statement in the annual report:

Compliance

How we comply s/governance.aspx Annual Report Section 5.10

Requirement/Recommendation

Compliance

How we comply Annual Report Sections 4.1 and 5.7 Annual Report Sections 5.4 and 5.9

the skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report the names of the directors considered by the board to constitute independent directors and the companys materiality thresholds. (Note: The board should state its reasons if it considers a director to be independent notwithstanding the existence of relationships listed in Box 2.1 of the ASX Guidelines see below) a statement as to the existence of any relationships affecting independent status (Box 2.1) and an explanation of why the board considers a director to be independent, notwithstanding the existence of those relationships a statement as to whether there is a procedure agreed by the board for directors to take independent professional advice at the expense of the company a statement as to the mix of skills and diversity for which the board of directors is looking to achieve in membership of the board the period of office held by each director in office at the date of the annual report the names of members of the nomination committee and their attendance at meetings of the committee the process for evaluating the performance of the board, its committees and individual directors2 whether a performance evaluation for the board and its members has taken place in the reporting period and whether it was in accordance with the process disclosed an explanation of any departures from recommendations 2.1, 2.2, 2.3, 2.4, 2.5, or 2.6.

Annual Report Section 5.9

N/A

Annual Report Section 5.3 Annual Report Section 5.7 Annual Report Section 4.1 Annual Report Sections 5.11 and 5.13.3 Annual Report Section 5.10 Annual Report Section 5.10

The guide to reporting in Recommendation 2.6 implies, but does not specifically state, that an entity ought to disclose its process for evaluating the performance of the process for evaluating the performance of the board, its committees and individual directors under Recommendation 2.5. However. ASX Guidance Note 9 indicates that it is preferable that this information is disclosed.

Requirement/Recommendation The following material should be made publicly available, ideally on the companys website in a clearly marked corporate governance section:

Compliance

How we comply

a description of the procedure for the selection and appointment of new directors to the board and re-election of incumbent directors

Annual Report Sections 5.7, 5.12 and 5.13.3 The Board Governance Document and the Terms of Reference of the Nomination Committee can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/ Pages/governance.aspx Annual Report Section 5.13.3 The Terms of Reference of the Nomination Committee can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/ Pages/governance.aspx Annual Report Sections 5.7, 5.12 and 5.13.3 The Terms of Reference of the Nomination Committee can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/ Pages/governance.aspx Annual Report Sections 5.1 and 5.16 The BHP Billiton Code of Business Conduct and other core policies can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Pag es/governance.aspx

the charter of the nomination committee or a summary of the role, rights, responsibilities and membership requirements for that committee

the boards policy for the nomination and appointment of directors

3.1

Companies should establish a code of conduct and disclose the code or a summary of the code as to:

3.2

the practices necessary to maintain confidence in the companys integrity the practices necessary to take into account their legal obligations and the expectations of their stakeholders the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity and for the board to assess annually both the objectives and progress in achieving them.

Annual Report Section 5.17

Requirement/Recommendation 3.3 Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them. Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board. Provide the following information in corporate governance statement in the annual report:

Compliance

How we comply Annual Report Sections 5.17

3.4

Annual Report Section 5.7, and 2.9 (a cross reference to which is included in section 5.17)

3.5

an explanation of any departure from recommendations 3.1, 3.2 or 3.3. The following material should be made publicly available, ideally on the companys website in a clearly marked corporate governance section: any applicable code of conduct or a summary

N/A

The BHP Billiton Code of Business Conduct and other core policies can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Section 5.17

the diversity policy or a summary of its main provisions

the measurable objectives for achieving gender diversity set by the board3 the proportion of women employees in the whole organisation, women in senior positions and women on the board3

Annual Report - Section 5.17

Section 5.7 and 2.9 (a cross reference to which is included in section 5.17)

The guide to reporting in Recommendation 3.5 does not mention that an entity ought to disclose in its annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them under Recommendation 3.3, nor the proportion of women employees in the whole organisation, women in senior executive positions and women on the board under Recommendation 3.4. However, ASX Guidance Note 9 indicates that it is preferable that this information is disclosed.

Requirement/Recommendation 4.1 The board should establish an audit committee.4

Compliance

How we comply Annual Report Section 5.13.1 The Terms of Reference of the Risk and Audit Committee can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Sections 5.9 and 5.13.1 The Terms of Reference and members of the Risk and Audit Committee can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

4.2

Structure the audit committee so that it:

4.3

consists of only non-executive directors consists of a majority of independent directors is chaired by an independent chair, who is not chair of the board has at least three members.

The audit committee should have a formal charter.

Annual Report Section 5.13.1 The Terms of Reference of the Risk and Audit Committee can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

4.4

Provide the following information in the corporate governance statement in the annual report:

the names and qualifications of those appointed to the audit committee and their attendance at meetings of the committee the number of meetings of the audit committee an explanation of any departures from recommendations 4.1, 4.2, 4.3, or 4.4.

N/A

Annual Report Sections 4.1, 5.11 and 5.13.1 Annual Report Section 5.11

The following material should be made publicly available, ideally on the companys website in a clearly marked corporate governance section:

Listing Rule 12.7 provides that entities in the S&P/ASX 300 Index must comply with the Recommendations & Principles regarding the composition, operation and responsibility of the audit committee. Guidance Note 9 clarifies that it is therefore not possible to if not, why not report against Recommendations 4.1 to 4.4 (that is, not follow the recommendations and give reasons for not following), as that would amount to a breach of the Listing Rules.

Requirement/Recommendation

Compliance

How we comply Annual Report Section 5.13.1 The Terms of Reference of the Risk and Audit Committee and the Policy on Provision of Audit and Other Services by the External Auditor can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Section 5.13.1 and 7.12 The Policy on Provision of Audit and Other Services by the External Auditor can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Section 5.18 The Market Disclosure and Communications Policy can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

the audit committee charter

information on procedures for the selection and appointment of the external auditor, and for the rotation of external audit engagement partners.

5.1

Companies should establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. Provide the following information in the corporate governance statement in the annual report: an explanation of any departures from recommendations 5.1 or 5.2. The following material should be made publicly available, ideally on the companys website in a clearly marked corporate governance section:

5.2

N/A

the policies or a summary of the policies designed to guide compliance with Listing Rule disclosure requirements.

The Market Disclosure and Communications Policy can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Sections 5.2 and 5.18 The Market Disclosure and Communications Policy can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

6.1

Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy

6.2

Provide the following information in the corporate governance statement in the annual

Requirement/Recommendation report: an explanation of any departures from recommendations 6.1 or 6.2. The following material should be made publicly available, ideally on the companys website in a clearly marked corporate governance section:

Compliance N/A

How we comply

a description of how the company will communicate with its shareholders.

Annual Report Sections 5.2 and 5.18 The Market Disclosure and Communications Policy can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Sections 1.5, 5.13.1 and 5.14 The Risk Management Policy can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Sections 5.13.1 and 5.14

7.1

Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies.

7.2

The board should require management to design and implement the risk management and internal control system to manage the companys material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the companys management of its material business risks. The board should disclose whether it has received assurance from the CEO (or equivalent) and the CFO (or equivalent) that the declaration provided in accordance with s 295A of the Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. Provide the following information in the corporate governance statement in the annual report:

7.3

Annual Report Sections 5.13.1

7.4

an explanation of any departures from recommendations 7.1, 7.2, 7.3 or 7.4 whether the board has received the report from management under recommendation 7.2

N/A

Annual Report Sections 5.13.1

Requirement/Recommendation

Compliance

How we comply Annual Report Sections 5.13.1

whether the board has received the assurance from the CEO (or equivalent) and the CFO (or equivalent) under recommendation 7.3.

The following material should be made publicly available, ideally on the companys website in a clearly marked corporate governance section:

a summary of the companys policies on risk oversight and management of material business risks.

Annual Report Sections 1.5 and 5.14 The Risk Management Policy can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Section 5.13.2 The Terms of Reference for the Remuneration Committee can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Sections 5.13.2 and 5.9 The Terms of Reference and members of the Remuneration Committee can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Section 6 (to which there is a cross reference in section 5.19)

8.1

The board should establish a remuneration committee.5

8.2

The remuneration committee should be structured so that it:

8.3

consists of a majority of independent directors is chaired by an independent chair has at least three members

Companies should clearly distinguish the structure of non-executive directors remuneration from that of executive directors and senior executives. Provide the following information in the corporate governance statement in the annual report or by clear cross reference.

8.4

5 6

the names of the members of the remuneration committee and their attendance at meetings of the committee the existence and terms of any schemes for retirement benefits, other than

Annual Report Sections 5.13.2 and 5.11 Annual Report Sections 5.9 and 6.10.3

Listing Rule 12.8 provides that an entity in the S&P/ASX 300 Index must have a remuneration committee. Listing Rule 12.8, which applies to entities in the S&P/ASX 300 Index, is more prescriptive than Recommendation 8.2. It requires that the remuneration committee must be comprised solely of non-executive directors.

Requirement/Recommendation statutory superannuation, for non-executive directors

Compliance

How we comply

N/A

an explanation of any departures from recommendations 8.1, 8.2 or 8.3.

The following material should be made publicly available, ideally on the companys website in a clearly marked corporate governance section:

the charter of the remuneration committee or a summary of the role, rights, responsibilities and membership requirements for that committee.

Annual Report Section 5.13.2 The Terms of Reference for the Remuneration Committee can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report - Section 6.3.4 (to which there is a cross reference in Section 5.20) The Securities Dealing document can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

a summary of the companys policy on prohibiting entering into transactions in associated products which limit the economic risk of participating in unvested entitlements under any equity based remuneration schemes.

United Kingdom

1.

Part 1 of the checklist below details compliance by the BHP Billiton Group with the UK Corporate Governance Code (the Code) published on 28 May 2010. This replaces the UK Combined Code on Corporate Governance (the Combined Code) in respect of financial years beginning on or after 29 June 2010. The Code sets out the Main and Supporting Principles, as well as the provisions of the Code (the Code Provisions). Part 1 of the checklist sets out a brief description of the Main and Supporting Principles and the Code Provisions (which have been summarised in parts). It also contains references to other UK legislation and guidance where applicable, including: the UKLA Listing Rules (the Listing Rules, and Listing Rule is a reference to a corresponding rule set out therein); the UK Disclosure and Transparency Rules (the DTRs, and DTR is a reference to a corresponding rule set out therein); the UK Companies Act 2006 (Accounts, Reports and Audit) Regulations 2009 (the 2009 Regulations); the UK Companies Act 2006 (CA 06); and the Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008 (the 2008 Regulations).

2.

Listing Rule 9.8.6(5) and (6) requires BHP Billiton to include in its annual report: a statement of how BHP Billiton has applied the Main Principles set out in the Code (the statement should be set out in a manner that would enable shareholders to evaluate how the principles have been applied); and a statement as to whether or not it has complied with the Code Provisions during the financial year. Where BHP Billiton has not complied with a Code Provision, the statement must specify the Code Provisions with which BHP Billiton has not complied, for how long the non-compliance continued and the reasons for the non-compliance.

3.

A corporate governance statement is required by Chapter 77 of the DTRs. This statement can either be published in the directors report section of the annual report or in a separate report published together with the annual report8. In the event of a separate report, the corporate governance statement must be cross referenced in the directors report which must specify where the statement is available on BHP Billitons website9. Any separate corporate governance statement must also be approved by the board of directors and signed on behalf of the board by a director or the secretary of the company and filed with the UK Registrar of Companies 10. Part 2 of the checklist below details compliance by the BHP Billiton Group with the UKs requirements in relation to the corporate governance statement. Chapter 711 of the DTRs also sets out certain requirements with respect to audit committees and their functions. The FSA has taken the view that compliance with the relevant provisions of the Code (Code Provisions A.1.2, C.3.1, C.3.2 and C.3.3) will result in compliance with the audit committee requirements set out in Chapter 7 of the DTRs. However, in circumstances where there is a departure from the Code, the following requirements must be complied with:

4.

Chapter 7.2 DTRs. DTR 7.2.9. 9 DTR 7.2.9. 10 Sections 419A and 447 CA 06 (as amended by regulation 4 of 2009 Regulations). 11 Chapter 7.1 DTRs.
7 8

(a) (b)

(c) (d)

BHP Billiton must have a body which is responsible for performing the functions set out in (b) below. At least one member of that body must be independent and at least one member must have competence in accounting and/or auditing;12 BHP Billiton must ensure that, as a minimum, the relevant body must: i. monitor the financial reporting process; ii. monitor the effectiveness of BHP Billitons internal control, internal audit and risk management systems; iii. monitor the statutory audit of the annual and consolidated accounts; and iv. review and monitor the independence of the statutory auditor13, and in particular the provision of additional services to BHP Billiton 14; BHP Billiton must base any proposal to appoint a statutory auditor on a recommendation made by the relevant body15; and BHP Billiton must make a statement available to the public disclosing which body carries out the functions required by (b) above and how it is composed.16

DTR 7.1.2 provides that the requirements for independence and competence in accounting and/or auditing may be satisfied by the same member or by different members of the relevant body. A statutory auditor as defined in section 1210 CA 06. 14 DTR 7.1.3. With effect from 1 October 2011, the Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2008 (the Regulations) have been amended by the Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) (Amendment) Regulations 2011. A new Schedule 2A has been inserted in the Regulations listing the types of services to be disclosed and the list has been updated to correlate with revised Ethical Standards published by the Auditing Practices Board. 15 DTR 7.1.4 16 DTR 7.1.6 provides that such a statement can be made in the corporate governance statement discussed above.
12 13

PART 1 - The Code

Requirement PREFACE 1. To follow the spirit of the Code to good effect, boards must think deeply, thoroughly and on a continuing basis, about their overall tasks and the implications of these for the roles of their individual members. Absolutely key in this endeavour are the leadership of the chairman of a board, the support given to and by the CEO, and the frankness and openness of mind with which issues are discussed and tackled by all directors. 2. The challenge should not be underrated. To run a corporate board successfully is extremely demanding. Constraints on time and knowledge combine with the need to maintain mutual respect and openness between a cast of strong, able and busy directors dealing with each other across the different demands of executive and non-executive roles. To achieve good governance requires continuing and high quality effort. 3. Chairmen are encouraged to report personally in their annual statements how the principles relating to the role and effectiveness of the board (in Sections A and B of the Code) have been applied. Not only will this give investors a clearer picture of the steps taken by boards to operate effectively but also, by providing fuller context, it may make investors more willing to accept explanations when a company chooses to explain rather than to comply with one or more provisions. Above all, the personal reporting on governance by chairmen as the leaders of boards might be a turning point in attacking the fungus of boiler-plate which is so often the preferred and easy option in sensitive areas but which is dead communication. 4. The Code recommends that, in the interests of greater accountability, all directors of FTSE 350 companies should be subject to annual re-election. As with all other provisions of the Code, companies are free to explain rather than comply if they believe that their existing arrangements ensure proper accountability and underpin board effectiveness, or that a transitional period is needed before they introduce annual re-election. Compliance with Code Provisions Reference

N/A

N/A

Annual Report -Section 5.1

Annual Report - Section 5.12

Requirement A. A.1 DIRECTORS THE BOARD17

Compliance with Code Provisions

Reference

Main Principle

Every company should be headed by an effective board, which is collectively responsible for the long-term success of the company. Supporting Principles The boards role is to provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed.

Annual Report - Section 5.3

Annual Report - Section 5.3 Annual Report - Section 5.3 The Board Governance Document which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report - Sections 5.3 and 5.7

The board should set the companys strategic aims, ensure that the necessary financial and human resources are in place for the company to meet its objectives and review management performance. The board should set the companys values and standards and ensure that its obligations to its shareholders and others are understood and met. All directors must act in what they consider to be the best interests of the company, consistent with their statutory duties18.

The guidance entitled Guidance of Board Effectiveness published by the Financial Reporting Council in March 2011 replaced the Suggestions to Good Practice from the Higgs Report (June 2006) and provides guidance in relation to the roles of: non-executive directors, executive directors, the chairman, the senior independent director and the company secretary, however it has no formal status and companies are not required to follow it when applying the Code. 18 These duties are set out in sections 170 to 177 of the CA 06.
17

Requirement Code Provisions A.1.1 The board should meet sufficiently regularly to discharge its duties effectively. There should be a formal schedule of matters specifically reserved for its decision. The annual report should include a statement of how the board operates, including a high level statement of which types of decisions are to be taken by the board and which are to be delegated to management. A.1.2 The annual report to identify: the chairman, deputy chairman (where there is one), the chief executive, the senior independent director, chairmen and members of the board committees19; and the number of meetings of the board and its committees and individual attendance by directors.

Compliance with Code Provisions

Reference

Annual Report - Section 5.3 The Board Governance Document which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

Annual Report - Sections 5.4, 5.5, 5.6, 5.11 and 5.13 Annual Report - Section 5.11

A.1.3 The company should arrange appropriate insurance cover in respect of legal action against its directors. A.2 DIVISION OF RESPONSIBILITIES Main Principle There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the companys business. No one individual should have unfettered powers of decision. Code Provision A.2.1 The roles of the chairman and the chief executive should not to be exercised by the same individual. The division of responsibilities between the chairman and chief executive should be clearly established, set out in writing and agreed by the board.

Annual Report Section 7.7

Annual Report - Sections 5.3 and 5.5

Annual Report - Section 5.5 The Board Governance Document which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

19

Provisions A.1.1 and A.1.2 overlap with DTR 7.2.7; Provision A.1.2 also overlaps with DTR 7.1.5 (see Schedule B of the Code).

Requirement A.3 THE CHAIRMAN

Compliance with Code Provisions

Reference

Main Principle The chairman is responsible for leadership of the board and ensuring its effectiveness on all aspects of its role. Supporting Principles The chairman is responsible for setting the boards agenda and ensuring that adequate time is available for discussion of all agenda items, in particular strategic issues. The chairman should also promote a culture of openness and debate by facilitating the effective contribution of non-executive directors in particular and ensuring constructive relations between executive and non-executive directors.

Annual Report - Section 5.5

Annual Report - Section 5.5 The Board Governance Document which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report - Section 5.5

The chairman is responsible for ensuring that the directors receive accurate, timely and clear information. The chairman should ensure effective communication with shareholders.

Code Provision A.3.1 The chairman should on appointment meet the independence criteria set out in B.1.1 below. A chief executive should not go on to become chairman of the same company. If exceptionally, a board decides that a chief executive should become chairman; the board should consult major shareholders in advance and should set out its reasons to shareholders at the time of the appointment and in the next annual report.20

Annual Report - Section 5.5 N/A

20

Compliance or otherwise with this provision need only be reported for the year in which the appointment is made.

Requirement A.4 NON-EXECUTIVE DIRECTORS

Compliance with Code Provisions

Reference

Main Principle As part of their role as members of a unitary board, non-executive directors should constructively challenge and help develop proposals on strategy. Supporting Principles

Annual Report Section 5.7

Non-executive directors should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance. They should satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are robust and defensible. They are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing and, where necessary, removing executive directors, and in succession planning. The board should appoint one of the independent non-executive directors to be the senior independent director to provide a sounding board for the chairman and to serve as an intermediary for the other directors when necessary. The senior independent director should be available to shareholders if they have concerns which contact through the normal channels of chairman, chief executive or other executive directors has failed to resolve or for which such contact is inappropriate. The chairman should hold meetings with the non-executive directors without the executives present. Led by the senior independent director, the non-executive directors should meet without the chairman present at least annually to appraise the chairmans performance and on such other occasions as are deemed appropriate. Where directors have concerns which cannot be resolved about the running of the company or a proposed action, they should ensure that their concerns are recorded in the board minutes. On resignation, a non-executive director should provide a written statement to the chairman, for circulation to the board, if they have any such concerns.

Annual Report - Sections 5.13.2 and 5.15

Annual Report - Sections 5.7 and 5.13.1 Annual Report - Sections 5.13.2 and 5.13.3

Code Provisions A.4.1

Annual Report - Section 5.6

A.4.2

N/A

Annual Report - Sections 5.4 and 5.10 N/A

A.4.3

Requirement SECTION B: EFFECTIVENESS B.1 THE COMPOSITION OF THE BOARD Main Principle The board and its committees should have the appropriate balance of skills, experience, independence and knowledge of the company to enable them to discharge their respective duties and responsibilities effectively.

Compliance with Code Provisions

Reference

Annual Report - Section 5.7 The Board Governance Document and the Terms of Reference of the Nomination Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report - Section 5.4 The Board Governance Document and the Terms of Reference of the Nomination Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report - Section 5.4 The Board Governance Document and the Terms of Reference of the Nomination Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report - Section 5.3 and 5.10

Supporting Principles The board should be of sufficient size that the requirements of the business can be met and that changes to the boards composition and that of its committees can be managed without undue disruption, and should not be so large as to be unwieldy.

The board should include an appropriate combination of executive and non-executive directors (and, in particular, independent non-executive directors) such that no individual or small group of individuals can dominate the boards decision taking.

The value of ensuring that committee membership is refreshed and that undue reliance is not placed on particular individuals should be taken into account in deciding chairmanship and membership of committees. No one other than the committee chairman and members is entitled to be present at a meeting of the nomination, audit or remuneration committee, but others may attend at the invitation of the committee.

Annual Report - Section 5.8 and 5.11

Requirement Code Provisions B.1.1 The board should identify in the annual report each non-executive director it considers to be independent21. The board should determine whether the director is independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, the directors judgement. The board should state its reasons if it determines that a director is independent notwithstanding the existence of relationships or circumstances which may appear relevant to its determination, including if the director: has been an employee of the company or group within the last five years; has, or has had within the last three years, a material business relationship with the company either directly, or as a partner, shareholder, director or senior employee of a body that has such a relationship with the company; has received or receives additional remuneration from the company apart from a directors fee, participates in the companys share option or a performance-related pay scheme, or is a member of the companys pension scheme; has close family ties with any of the companys advisers, directors or senior employees; holds cross-directorships or has significant links with other directors through involvement in other companies or bodies; represents a significant shareholder; or has served on the board for more than nine years from the date of their first election.

Compliance with Code Provisions

Reference

Annual Report Sections 5.4 and 5.9

B.1.2

At least half the board, excluding the chairman, should comprise non-executive directors determined by the board to be independent.

Annual Report - Section 5.4 The Board Governance Document which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

21

A.3.1 states that the chairman should, on appointment, meet the independence criteria set out in this provision, but thereafter the test of independence is not appropriate in relation to the chairman.

Requirement B.2 APPOINTMENTS TO THE BOARD

Compliance with Code Provisions

Reference

Main Principle There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board. Supporting Principles The search for board candidates should be conducted, and appointments made on merit and against objective criteria and with due regard for the benefits of diversity on the board, including gender.

Annual Report - Section 5.7

Annual Report - Sections 5.7 and 5.17

The board should satisfy itself that plans are in place for orderly succession for appointments to the board and to senior management, so as to maintain an appropriate balance of skills and experience within the company and on the board and to ensure progressive refreshing of the board. There should be a nomination committee, which should:

Annual Report - Section 5.3 and 5.13.3

Code Provisions B.2.1 lead the process for board appointments and make recommendations to the board; comprise a majority of independent non-executive directors; be chaired by the chairman or an independent non-executive director, but the chairman should not chair the nomination committee when it is dealing with the appointment of a successor to the chairmanship; and make available its terms of reference 22 , explaining the committees role and the authority delegated to it by the board.

N/A

Sections 5.7 and 5.13.3 Section 5.13.3 Section 5.13.3 The Terms of Reference of the Nomination Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

22

Including the information on the BHP Billiton website is sufficient.

Requirement B.2.2 The nomination committee should evaluate the balance of skills, experience, independence and knowledge on the board and, in the light of this evaluation, prepare a description of the role and capabilities required for a particular appointment.

Compliance with Code Provisions

Reference Annual Report - Section 5.7 and 5.13.3 The Terms of Reference of the Nomination Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report - Section 5.7 and 5.9 The Terms of Reference of the Nomination Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report - Section 5.13.3

B.2.3

Non-executive directors should be appointed for specified terms subject to re-election and to statutory provisions relating to the removal of a director. Any term beyond six years for a non-executive director should be subject to particularly rigorous review, and should take into account the need for progressive refreshing of the board. A separate section of the annual report should describe the work of the nomination committee 23 , including the process it has used in relation to board appointments. An explanation should be given if neither an external search consultancy nor open advertising has been used in the appointment of a chairman or a non-executive director.24 From 1 October 2012, this Code Provision will be amended to state that this section of the annual report should include a description of the boards policy on diversity, including gender, any measurable objectives that it has set for implementing policy, and progress on achieving objectives. Earlier compliance has been encouraged by the FRC.25

B.2.4

Section 5.17 (a cross reference to which is included in Section 5.13.3)

B.3

COMMITMENT

Main Principle All directors should be able to allocate sufficient time to the company to discharge their responsibilities effectively.

Annual Report - Sections 5.5 and 5.7

This provision overlaps with DTR 7.2.7 (see Schedule B of the Code). The Report into Women on Boards led by Lord Davies (February 2011) (the Lord Davies Report) recommends that in line with provision B.2.4 of the Code, the chairman should disclose meaningful information about the companys appointment process and how it addresses diversity in the annual report, including a description of the search and nomination process (Recommendation 5). In addition, the Lord Davies Report suggests that companies should report on the matters in (i) Recommendation 1 (percentage of women to be on the board in 2013 and 2015); (ii) Recommendation 2 (the proportion of women on the board, women in senior executive positions and females employees in the whole organisation); and (iii) Recommendation 3 (policy on boardroom diversity and progress made in meeting measurable objectives). 25 See the FRCs Feedback Statement Gender Diversity on Boards published in October 2011.
23 24

Requirement Code Provisions B.3.1 For the appointment of a chairman, the nomination committee should prepare a job specification, including an assessment of the time commitment expected, recognising the need for availability in the event of crises. A chairmans other significant commitments should be disclosed to the board before appointment and included in the annual report. Changes to such commitments should be reported to the board as they arise, and included in the next annual report. The terms and conditions of appointment of non-executive directors should be made available for inspection26. The letter of appointment should set out the expected time commitment. Non-executive directors should undertake that they will have sufficient time to meet what is expected of them. Their other significant commitments should be disclosed to the board before appointment, with a broad indication of the time involved and the board should be informed of subsequent changes.

Compliance with Code Provisions N/A

Reference

B.3.2

Annual Report - Section 5.7 The Terms of Appointment of Non-executive Directors which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

B.3.3

The board should not agree to a full time executive director taking on more than one non-executive directorship in a FTSE 100 company nor the chairmanship of such a company. DEVELOPMENT

N/A

B.4

Main Principle All directors should receive induction on joining the board and should regularly update and refresh their skills and knowledge.

Annual Report - Section 5.8 The Non-executive Director Induction Program which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

Supporting Principles The chairman should ensure that directors continually update their skills and the knowledge
26

The terms and conditions of appointment of non-executive directors should be made available for inspection by any person wishing to inspect the terms and conditions of appointment of non-executive directors at BHP Billitons registered office during normal business hours and at the AGM (for 15 minutes prior to the meeting and during the meeting).

Requirement and familiarity with the company required to fulfill their role on the board and on board committees. The company should provide the necessary resources for developing and updating its directors knowledge and capabilities.

Compliance with Code Provisions

Reference Annual Report - Section 5.8

To function effectively, all directors need appropriate knowledge of the company and access to its operations and staff. The chairman should ensure new directors receive a full, formal and tailored induction on joining the board. As part of this, directors should avail themselves of opportunities to meet major shareholders.

Annual Report - Section 5.8

Code Provisions B.4.1

Annual Report Sections 5.2 and 5.8 The Non-executive Director Induction Program which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Section 5.8

B.4.2

The chairman should regularly review and agree with each director their training and development needs.

B.5 INFORMATION AND SUPPORT Main Principle The board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties. Supporting Principles The chairman is responsible for ensuring that the directors receive accurate, timely and clear information. Management has an obligation to provide such information but directors should seek clarification or amplification where necessary.

Annual Report Section 5.5 The Board Governance Document which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Sections 5.5 and 5.21

Under the direction of the chairman, the company secretarys responsibilities include ensuring good information flows within the board and its committees and between senior management and non-executive directors, as well as facilitating induction and assisting with professional development as required. The company secretary should be responsible for advising the board through the chairman on all governance matters.

Annual Report - Section 5.21

Section 5.21

Requirement Code Provisions B.5.1 The board should ensure that directors, especially non-executive directors have access to independent professional advice at the companys expense where they judge it necessary to discharge their responsibilities as directors. Committees should be provided with sufficient resources to undertake their duties. All directors should have access to the advice and services of the company secretary, who is responsible to the board for ensuring that board procedures are complied with. Both the appointment and removal of the company secretary should be a matter for the board as a whole. EVALUATION

Compliance with Code Provisions

Reference

Annual Report Section 5.3 The Board Governance Document which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Section 5.21 The Board Governance Document which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Section 5.10 The Board Governance Document which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Section 5.10

B.5.2

B.6

Main Principle The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors. Supporting Principles The chairman should act on the results of the performance evaluation by recognising the strengths and addressing the weaknesses of the board and, where appropriate, proposing new members to be appointed to the board or seeking the resignations of directors.

Individual evaluation should aim to show whether each director continues to contribute effectively and to demonstrate commitment to the role (including commitment of time for board and committee meetings and any other duties).

Annual Report Section 5.10

From 1 October 2012, a new Supporting Principle will be included to state that evaluation of the board should consider the balance of skills, experience, independence and knowledge of the company on the board, its diversity, including gender, how the board works together as a unit, and other factors relevant to its effectiveness. Earlier compliance has been encouraged by the FRC.27

Annual Report Sections 5.1, 5.10 and 5.17

27

See the FRCs Feedback Statement Gender Diversity on Boards published in October 2011.

Requirement Code Provisions B.6.1 B.6.2 The board should state in the annual report how performance evaluation of the board, its committees and its individual directors has been conducted. Evaluation of the board should be externally facilitated at least every three years. A statement should be made available of whether an external facilitator has any other connection with the company28. The annual report should also identify external advisers used in relation to a board evaluation.29 The non-executive directors, led by the senior independent director, should be responsible for performance evaluation of the chairman, taking into account the views of executive directors. RE-ELECTION

Compliance with Code Provisions

Reference

Annual Report Section 5.10

Annual Report Section 5.10

B.6.3

Annual Report Section 5.10

B.7

Main Principle All directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance. Code Provisions B.7.1 All directors should be subject to annual election by shareholders. The names of directors submitted for election or re-election should be accompanied by sufficient biographical details and any other relevant information to enable shareholders to take an informed decision on their election. The board should set out to shareholders in papers accompanying a resolution to elect a non-executive director why they believe an individual should be elected. The chairman should confirm to shareholders when proposing re-election that, following formal performance evaluation, the individuals performance continues to be effective and he or she demonstrates commitment to the role.

Annual Report Section 5.12

Annual Report Section 5.12 Biographical details contained in 2012 BHP Billiton Notices of Annual General Meeting

B.7.2

Annual Report - Section 5.12 and The 2012 BHP Biliton Notice of Annual General Meeting and proxy forms

28 29

The requirement to make the information available would be met by including the information on the BHP Billiton website. See comment of FRC on page 17 of its Developments in corporate governance: The impact and implementation of the UK Corporate Governance and Stewardship Codes (December 2011).

Requirement C ACCOUNTABILITY

Compliance with Code Provisions

Reference

C.1 FINANCIAL AND BUSINESS REPORTING Main Principle The board should present a balanced and understandable assessment of the companys position and prospects. Supporting Principle The boards responsibility to present a balanced and understandable assessment extends to interim and other price-sensitive public reports and reports to regulators as well as to information required to be presented by statutory requirements. Code Provisions C.1.1 The directors should explain in the annual report their responsibility for preparing the annual report and accounts30, and there should be a statement by the auditor about their reporting responsibilities31.

Annual Report sections 1.2, 1.4, 1.5, 1.6, 3 and 9.

Statement of Directors Responsibilities in respect of the Annual Report and the Financial Statements. Independent auditorsreports of KPMG Audit Plc (KPMG UK) to the members of BHP Billiton Plc and of KPMG (KPMG Australia) to the members of BHP Billiton Limited. Annual Report Sections 1.1, 1.2 and 3.2

C.1.2

The directors should include in the annual report an explanation of the basis on which the company generates or preserves value over the longer term (the business model) and the strategy for delivering the objectives of the company.

Schedule 4 of the 2008 Regulations sets out the information on related undertakings required to be included in the annual accounts. However, section 410 CA 06 states that if the directors believe that to provide all the necessary information for all subsidiary undertakings would result in an excessive amount of information being provided in the notes to the accounts, that information only needs to be provided for those undertakings whose results or financial position principally affected the companys figures (section 410(2)(a) CA 06). However, if advantage is taken of section 410(1), the notes to the accounts must make it clear that information is only being provided about those undertakings whose results or financial position have principally affected the companys figures and the full information about all undertakings must be annexed to the companys next annual return (section 410(3)). 31 The requirement may be met by the disclosures about the audit scope and the responsibilities of the auditor included, or referred to, in the auditors report pursuant to the requirements in paragraph 16 of ISA (UK and Ireland) 700, The Auditors Report on Financial Statements Copies are available at: http://www.frc.org.uk/apb/publications/pub2102.html.
30

Requirement The directors should report in annual and half-yearly financial statements that the business is a going concern, with supporting assumptions or qualifications as necessary. C.2 RISK MANAGEMENT AND INTERNAL CONTROL32 Main Principle The board is responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives. The board should maintain sound risk management and internal control systems. C.1.3

Compliance with Code Provisions

Reference Annual Report Section 7.3

Annual Report Section 5.13.1 and 5.14 The Board Governance Document and the Terms of Reference of the Risk and Audit Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

Code Provision C.2.1 The board should, at least annually, conduct a review of the effectiveness of the companys risk management and internal control systems and should report to shareholders that they have done so. The review should cover all material controls, including financial, operational and compliance controls.

Annual Report Section 5.13.1 The Board Governance Document and the Terms of Reference of the Risk and Audit Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

C.3

AUDIT COMMITTEE AND AUDITORS33

Main Principle

The Turnbull guidance suggests means of applying this part of the Code. Copies are available at www.frc.org.uk/corporate/internalcontrol.cfm. In its Effective Company Stewardship: Next Steps document published in September 2011, the FRC announced that it is to update the Turnbull Guidance to reflect improvements in practice and to clarify the boards responsibility for determining the nature and extent of the significant risks it is willing to take. 33 The FRC Guidance on Audit Committees suggests means of applying this part of the Code. Copies are available at http://www.frc.org.uk/corporate/auditcommittees.com
32

Requirement The board should establish formal and transparent arrangements for considering how they should apply the corporate reporting and risk management and internal control principles and for maintaining an appropriate relationship with the companys auditor.

Compliance with Code Provisions

Reference Annual Report Sections 5.13.1 and 5.14 The Board Governance Document and the Terms of Reference of the Risk and Audit Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

Code Provisions C.3.1 The board should establish an audit committee 34 of at least three independent non-executive directors. The board should satisfy itself that at least one member of the audit committee has recent and relevant financial experience35.

Annual Report Sections 5.7, 5.9 and 5.13.1 The Board Governance Document and the Terms of Reference of the Risk and Audit Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

FRCs Update for Audit Committees: Issues arising from the current economic conditions (November 2010), seeks to identify issues that will be relevant to work of audit committees during the 2010/2011 reporting season and sets out key questions for audit committees to consider when preparing audit reports. 35 This provision overlaps with DTR 7.1.1 (see Schedule B of the Code).
34

Requirement C.3.2 The main role and responsibilities of the audit committee should be set out in written terms of reference36 and should include: to monitor the integrity of the financial statements of the company and any formal announcements relating to the companys financial performance, reviewing significant financial reporting judgements contained in them; to review the companys internal financial controls and, unless expressly addressed by a separate board risk committee composed of independent directors, or by the board itself, to review the companys internal control and risk management systems; to monitor and review the effectiveness of the companys internal audit function; to make recommendations to the board, for it to put to the shareholders for their approval in general meeting, in relation to the appointment, re-appointment and removal of the external auditor 37 and to approve the remuneration and terms of engagement of the external auditor 38; to review and monitor the external auditors independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements; and to develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm, and to report to the board, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken39.

Compliance with Code Provisions

Reference Annual Report Section 5.13.1 The Board Governance Document and the Terms of Reference of the Risk and Audit Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

This provision overlaps with DTR 7.1.3 (see Schedule B of the Code). BHP Billiton must base any proposal to appoint a statutory auditor on a recommendation by the Audit Committee as required by DTR 7.1.4. 38 If, to safeguard the quality of the audit, the audit committee decides that the audit engagement partner may continue in this position for up to seven years, the audit committee should disclose this fact and reasons for it to shareholders as early as practicable (Audit Committee Guidance, paragraph 4.36). 39 Section 494 CA 06 requires the annual report to include a note disclosing the amount of the auditors remuneration for audit work and remuneration for non-audit work.
36 37

Requirement C.3.3 The terms of reference of the audit committee, including its role and the authority delegated to it by the board, should be made available40. A separate section of the annual report should describe the work of the committee in discharging those responsibilities 41,42.

Compliance with Code Provisions

Reference Annual Report Section 5.13.1 The Board Governance Document and the Terms of Reference of the Risk and Audit Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Section 5.13.1 and 5.16

C.3.4

The audit committee should review arrangements by which staff of the company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. The audit committees objective should be to ensure that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow-up action. The audit committee should monitor and review the effectiveness of the internal audit activities. The audit committee should have primary responsibility for making a recommendation on the appointment, reappointment and removal of the external auditor. If the board does not accept the audit committees recommendation, it should include in the annual report, and in any papers recommending appointment or re-appointment, a statement from the audit committee explaining the recommendation and should set out reasons why the board has taken a different position. The annual report should explain to shareholders how, if the auditor provides non-audit services, auditor objectivity and independence is safeguarded. REMUNERATION THE LEVEL AND COMPONENTS OF REMUNERATION

C.3.5 C.3.6

Annual Report Section 5.13.1

Annual Report Section 5.13.1

C.3.7 D. D.1

Annual Report Section 5.13.1

Main Principle Levels of remuneration should be sufficient to attract, retain and motivate the directors of the quality required to run the company successfully, but a company should avoid paying
40 41

Annual Report Sections 5.13.2 and 6

The requirement to make the information available would be met by including the information on the BHP Billiton website. This provision overlaps with DTR 7.1.5 and 7.2.7 (see Schedule B of the Code). 42 The FRCs Guidance on Audit Committees sets out the content the separate section of the annual report should include.

Requirement more than is necessary for this purpose. A significant proportion of executive directors remuneration should be structured so as to link rewards to corporate and individual performance. Supporting Principles The performance-related elements of executive directors remuneration should be stretching and designed to promote the long-term success of the company. The remuneration committee should judge where to position their company relative to other companies. But they should use such comparisons with caution in view of the risk of an upward ratchet of remuneration levels with no corresponding improvement in performance. They should also be sensitive to pay and employment conditions elsewhere in the group, especially when determining annual salary increases. Code Provisions D.1.1 D.1.2 In designing schemes of performance-related remuneration for executive directors, the remuneration committee should follow the provisions in Schedule A to the Code. Where a company releases an executive director to serve as a non-executive director elsewhere, the remuneration report should include a statement as to whether or not the director will retain such earnings and, if so, what the remuneration is. Levels of remuneration for non-executive directors should reflect the time commitment and responsibilities of the role. Remuneration for non-executive directors should not include share options or other performance related elements. If, exceptionally, options are granted, shareholder approval should be sought in advance and any shares acquired by exercise of the options should be held until at least one year after the non-executive director leaves the board. Holding of share options could be relevant to determination of non-executive director independence (as set out in Code Provision B.1.1). The remuneration committee should carefully consider what compensation commitments (including pension contributions and all other elements) their directors terms of appointment would entail in the event of early termination. The aim should be to avoid rewarding poor performance. They should take a robust line on reducing compensation to reflect departing directors obligations to mitigate loss.

Compliance with Code Provisions

Reference

Annual Report Sections 6.3 and 6.4. Annual Report Sections 6.3 and 6.4 Annual Report Sections 6.3, 6.4 and 6.10

N/A

Annual Report Section 6 N/A

D.1.3

Annual Report Section 6.10.

D.1.4

Annual Report Sections 6.7.1, 6.10

Requirement D.1.5 D.2 Notice or contract periods should be set at one year or less. If it is necessary to offer longer notice or contract periods to new directors recruited from outside, such periods should reduce to one year or less after the initial period. PROCEDURE

Compliance with Code Provisions

Reference Annual Report Section 6.7.1

Main Principle There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration. Supporting Principles The remuneration committee should consult with chairman and/or chief executive about their proposals relating to the remuneration of other executive directors. The remuneration committee should also be responsible for appointing any consultants in respect of executive director remuneration. Where executive directors or senior management are involved in advising or supporting the remuneration committee, care should be taken to recognise and avoid conflicts of interest. The chairman should ensure that the company maintains contact as required with its principal shareholders about remuneration. Code Provisions D.2.1 The board should establish a remuneration committee of at least three independent non-executive directors. In addition, the company chairman may also be a member of, but not chair, the committee if he or she was considered independent on appointment as chairman. The remuneration committee should make available its terms of reference, explaining its role and the authority delegated to it by the board43. Where remuneration consultants are appointed, a statement should be made available of whether they have any other connection with the company.

Annual Report Sections 5.13.2 and 6 The Board Governance Document and the Terms of Reference of the Remuneration Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Section 6.3.3

Annual Report sections 5.2, 5.13.2 and 6 Annual Report Section 5.13.2 and section 6.3.2 The Board Governance Document and the Terms of Reference of the Remuneration Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

43

This provision overlaps with DTR 7.2.7 (see Schedule B of the Code).

Requirement D.2.2 The remuneration committee should have delegated responsibility for setting remuneration for all executive directors and the chairman, including pension rights and any compensation payments. The committee should also recommend and monitor the level and of remuneration for senior management. The definition of senior management for this purpose should be determined by board but should normally include the first layer of management below board level. The board itself or, where required by the Articles of Association, the shareholders should determine the remuneration of the non-executive directors within the limits set in the Articles. Where permitted by the Articles, the board may however delegate this responsibility to a committee, which might include the chief executive. Shareholders should be invited specifically to approve all new long-term incentive schemes (as defined in the Listing Rules) and significant changes to existing schemes, save in the circumstances permitted by the Listing Rules. RELATIONS WITH SHAREHOLDERS DIALOGUE WITH INSTITUTIONAL SHAREHOLDERS

Compliance with Code Provisions

Reference Annual Report Section 5.13.2 The Board Governance Document and the Terms of Reference of the Remuneration Committee which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Section 6.10.2 The Board Governance Document which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx N/A

D.2.3

D.2.4 E. E.1

Main Principle There should be a dialogue with shareholders based on the mutual understanding of objectives. The board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place. Supporting Principles Whilst recognising that most shareholder contact is with the chief executive and the finance director, the chairman should ensure that all directors are made aware of their major shareholders issues and concerns.

Annual Report Section 5.2 The Board Governance Document e which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx Annual Report Section 5.2

The board should keep in touch with shareholder opinion in whatever ways are most practical and efficient.

Annual Report Section 5.2

Code Provisions

Requirement E.1.1 The chairman should ensure that the views of shareholders are communicated to the board as a whole. The chairman should discuss governance and strategy with major shareholders. Non-executive directors should be offered the opportunity to attend scheduled meetings with major shareholders and should expect to attend meetings if requested by major shareholders. The senior independent director should attend sufficient meetings with a range of major shareholders to listen to their views in order to help develop a balanced understanding of the issues and concerns of major shareholders. The board should state in the annual report the steps they have taken to ensure that the members of the board (and, in particular, the non-executive directors) develop an understanding of the views of major shareholders about the company, for example through direct face-to-face contact, analysts or brokers briefings and surveys of shareholder opinion. CONSTRUCTIVE USE OF THE AGM

Compliance with Code Provisions

Reference Annual Report Sections 5.2, 5.5 and 5.6 The Board Governance Document which can be found at http://www.bhpbilliton.com/home/aboutus/ourcompany/Page s/governance.aspx

E.1.2

Annual Report Sections 5.2 and 5.3

E.2

Main Principle The board should use the AGM to communicate with investors and to encourage their participation. Code Provisions E.2.1 At any general meeting, the company should propose a separate resolution on each substantially separate issue, and should, in particular propose a resolution at the AGM relating to the report and accounts. For each resolution, proxy appointment forms should provide shareholders with the option to direct their proxy to vote either for or against the resolution or to withhold their vote. The proxy form and any announcement of the results of a vote should make it clear that a vote withheld is not a vote in law and will not be counted in the calculation of the proportion of votes for and against the resolution.

Annual Report Section 5.2 and the 2012 BHP Billiton Notices of Annual General Meeting and proxy forms

The 2012 BHP Billiton Notices of Annual General Meeting and proxy forms

Requirement E.2.2 The company should ensure that all valid proxy appointments received for general meetings are properly recorded and counted. For each resolution, where a vote has been taken on a show of hands, the company should ensure that the following information is given at the meeting and made available as soon as reasonably practicable on its website: the number of shares in respect of which proxy appointments have been validly made; the number of votes for the resolution; the number of votes against the resolution; and the number of shares in respect of which the vote was directed to be withheld. The chairman should arrange for the chairmen of the audit, remuneration and nomination committees to be available to answer questions at the AGM and for all directors to attend. The company should arrange for the Notice of the AGM and related papers to be sent to shareholders at least 20 working days before the meeting.

Compliance with Code Provisions

Reference Group practice

E.2.3 E.2.4

Group practice Group practice

PART 2 - The DTRs

Requirement Compliance with DTR Reference

DTR
7.2.1 7.2.2

Requirement
The directors report must contain a corporate governance statement containing at least the information in DTR 7.2.2 to DTR 7.2.7 and DTR 7.2.10 (as set out below). 44 The corporate governance statement must contain reference to: (a) the corporate governance code to which the company is subject; and/or (b) the corporate governance code to which the company may have voluntarily decided to apply; and/or (c) all relevant information about the corporate governance practices applied beyond the requirements under national law. The directors report must include details of where the relevant corporate governance code is publicly available should be included and, to the extent that the company departs from that corporate governance code, an explanation of which parts of the corporate governance code it departs from and the reasons for doing so. The directors report must include details of where the companys corporate governance practices can be found and such practices must be publicly available. If the company has decided not to apply any provisions of a corporate governance code, an explanation of its reasons for that decision must be included in its corporate governance statement45. Annual Report Sections 7.10 and 7.23 Annual Report Sections 5.1 and 5.22

7.2.3(1)

Annual Report Section 5.22

7.2.3(2) 7.2.3(3)

N/A

Annual Report Section 5.22

44 DTR 7.2.9 permits the corporate governance statement to be set out in a separate report rather than in the directors report. That separate report must be published with and in the same manner as the annual report and the corporate governance statement must contain either the information required by DTR 7.2.6, or a reference to the directors report where that information is available, or by means of reference in the directors report to where such document is publicly available on the companys website). If the corporate governance statement is in a separate report it must (i) be approved by the board and signed on behalf of the board by a director or secretary, (ii) state the name of the person who signed it and (iii) be filed with the Registrar of Companies (as provided by sections 419A and 447 CA 06 (as amended by regulation 4 of the 2009 Regulations). The auditor must also state in his report on the annual accounts whether in his opinion the information given in the statement in compliance with DTR 7.2.5 and 7.2.6 is consistent with the accounts (section 497A CA 06). 45 Compliance with Listing Rule 9.8.6(6) (comply or explain rule in relation to the Code) will be sufficient to ensure compliance with DTR 7.2.2 and 7.2.3 (DTR 7.2.4).

Requirement 7.2.5 The corporate governance statement must contain a description of the main features of the companys Internal control and risk management systems in relation to the financial reporting process (including in relation to the process for preparing consolidated accounts). In the event that the company presents its own annual report and its consolidated annual report as a single report, this information must be included in the corporate governance statement. The corporate governance statement must contain the information required by paragraph 13(2)(c), (d), (f), (h) and (i) of Schedule 7 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (information about share capital required under Directive 2004/25/EC (the Takeover Directive)). The corporate governance statement must contain a description of the composition and operation of the companys administrative, management and supervisory bodies and their committees. 46

Compliance with DTR

Reference Annual Report Sections 5.13.1 and 5.14

7.2.6

Annual Report Sections 5.23 and 7.23

7.2.7

Annual Report Sections 5.3, 5.4, 5.13 and 5.15

46

Compliance with the information specified in Code Provisions A.1.1, A.1.2, B.2.4, D.2.1 and C.3.3 of the Code will satisfy this requirement (DTR 7.2.8).