KPMG Audit Churchillplein 6 Financial Services 2517 JW The Hague P.O. Box 29761 The Netherlands 2502 LT The Hague Telephone +31 (0)70 338 2222 The Netherlands Fax +31(0)70 350 3191 BHP Billiton Finance B.V. Ourref J.7.0016 Attn.: Mr W. Murray Verheeskade 25 2521 BE THE HAGUE The Hague, 2 November 2006 Dear Sirs, Financial Statements BHP Billiton Finance B.V. for the year ended 30 June 2006 We confirm our agreement for you to include the auditors' report below in the 'Other information' accompanying the Directors' report and financial statements. These financial statements and Directors' report should be issued in accordance with the final draft presented to us, of which an initialled copy is enclosed. "Auditors' report Introduction We have audited the financial statements of BHP Billiton Finance B.V., The Hague for the year ended 30 June 2006 as set out on pages 3 to 16. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. Scope We conducted our audit in accordance with auditing standards generally accepted in the Netherlands. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the company financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the company financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the company financial statements. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, these financial statements give a true and fair view of thefinancialposition of the company as at 30 June 2006 and of the result for the year then ended in accordance with accounting principles generally accepted in the Netherlands and also comply with the financial reporting requirements included in Part 9 of Book 2 of the Netherlands Civil Code. KPMG Accountants N.V., registered with the trade register in the Netherlands under number 33263683 end a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All our services are subject to our general conditions, which are filed at the Amsterdam District Court under number 32/2004, and which we will send to you on request.
BHP BUliton Finance B. V. Financial Statements BHP BUliton Finance B. V. for the year ended 30 June 2006 The Hague, 2 November 2006 Furthermore we have established to the extent of our competence that the Directors' Report is consistent with the financial statements. The Hague, 27 October 2006 KPMG ACCOUNTANTS N.V. CJ.M. Coremans RA" We also confirm our permission to include the text of our auditors' report in the 'Other information' accompanying the financial statements that are presented to the shareholders for the adoption by the General Meeting of Shareholders. We also confirm our permission to publish at the Trade register the text of our auditors' report, provided the prepared financial statements are unchanged for the adoption by the General Meeting of Shareholders and subsequent filing occurs at the trade register within one month (from the date of this letter). If you present the Directors' report, financial statements and the auditors' report on the internet, you should ensure that the financial statements are properly separated from other information on the internet site. Separation can be achieved, for example, by presenting the financial statements in an unchangeable format, stored as a separate file or by issuing a warning if the reader switches from the financial statements ("you are leaving the secured zone of the audited financial statements"). A copy of the financial statements should be signed by Board of Directors and be presented to the shareholders). These financial statements should be adopted in a General Meeting of Shareholders and the adoption should be recorded in the minutes. Incidentally, we should point out that, until the General Meeting of Shareholders, if circumstances arise that necessitate the amendment of the financial statements, such an amendment has to be made before the meeting in accordance with the provisions of section 362:6 and section 2:392 part lg of the Netherlands Civil Code. In this situation, of course, we withdraw our permission granted above. No later than 8 days after the adoption by the shareholder(s), and in any event before (13 months after the end of the financial year), the prepared financial statements should have been filed at the Trade register of the Chamber of Commerce of The Hague. In an accompanying letter to the Chamber of Commerce, you should report that the original financial statements have been signed Board Directors and adopted by the General Meeting of Shareholders, including the date on which this occurred. This can be omitted if it is clearly prefaced in the filed financial statements that, for example, you file a signed copy of the financial statements. J.7.0016
BHP Billiton Finance B. V. Financial Statements BHP Billiton Finance B. V. for the year ended 30 June 2006 The Hague, 2 November 2006 We would like to remind you that the filing of the Directors' report and financial statements is a statutory requirement, and that failing to file them is a punishable offence. In certain circumstances, the failure to file could even lead to the members of the Board of Directors being made personally liable. We will be happy to provide any further information you may require. Yours sincerely, KPMG ACCOUNTANTS N.V. C.J.M. Coremans RA A Enclosure(s): Financial Statements BHP Billiton Finance B.V. for the year ended 30 June 2006 Initials for identification purposeso J.7.0016
Financial Statements for the year ended 30 June 2006 KPMG Audit the Appendix pertaining to the letter of 2N0V Initiate for identification KPMG Accountants N.V.
Financial statements for the year ended 30 June 2006 Table of contents Directors' report Page no. 2 Financial statements Balance sheet as at 30 June 2006 3 Profit and loss account for the year ended 30 June 2006 4 Notes to the financial statements 30 June 2006 5 Other information Statutory rules regarding appropriation of profits Appropriation of result Auditors' report 17 17 18 KPMG Audit the Appendix pertaining to the Setter c 2 HOV 2008 Initials for identification purposes f) KPMG Accountants N.V^ y
Directors' report The management, herewith, submits the financial statements of BHP Billiton Finance BV ('the Company') for the year ended 30 June 2006. General The Company is the principal finance company of the BHP Billiton Group, responsible for funding, liquidity management and financial risk management, including hedging of currencies and interest exposure positions, in addition to its role as an intermediate Dutch holding company. Result for the period The result before taxation, excluding profit on sale of fixed assets, increased by USD 676 million compared to the previous reporting year. Major changes in the profit and loss account include: Dividends income of USD 255 million, no income last year; Higher net interest income of USD 66 million mainly due to higher net balances loaned to Group Companies; Write down on investments in BHP Billiton Group companies of USD 355 million last year. Further note that the Company issued 1 share with a nominal value of EUR 1,000 against payment in cash of an aggregate amount of USD 741.1 million. Future outlook Looking at the year ahead, the main source of income of the Company will be interest and dividends from equity participations. Because these sources of income are dependent on the financing needs and results of the BHP Billiton Group, the Company refrains from providing cash flow and/or result forecasts. Tax status The Company obtained a Group finance company status under article 15b Corporate Income Tax Act 1969, effective from 1 July 1997 for a tenyear period, maturing July 2007. Currently legislative proposals are underway to introduce a new regime for the taxation of intercompany interest income, with the expected result that intercompany interest income is effectively taxed at a 5% corporate tax rate. Risks and risk management The Company is exposed to interest, foreign exchange, liquidity and credit risks for the Group. The Company may enter into various types of financial instruments such as forward exchange contracts, foreign exchange swaps and interestrate caps for the purpose of managing risk exposures for the Group. The Company uses derivatives, such as interestrate swaps and forward rate agreements to manage the exposure to movements in interest rates and thus to help achieve target levels of interest income or expense. Foreign exchange derivatives, including forward exchange contracts, currency swaps and currency options are used for managing currency exposure and cash management. The Company manages and executes all foreign exchange transactions of the BHP Billiton Group. Limited positions are taken based on the one month mandates approved by the BHP Billiton Groups' Financial Risk Management Committee (FRMC). All counterparty limits are approved according to the guidelines provided by the FRMC and Banks credit worthiness are continually reviewed. The Hague, 27 October 2006 Board of Directors / ' f, ' / A.T. Cornfield P.A. Koppelman KPMG"AuBit the Appendix pertaining to the letter I NOV 2006 Initials for identification purposes KPMG Accountants N.V.
Balance sheet as at 30 June 2006 (before appropriation of net result) USD ('000) Notes 30062006 30062005 Financial fixed assets 5,776,690 5,951,915 Current assets Receivables from BHP Billiton Group 10 2,433,997 companies Prepayments and other debtors 7,432 Cash and cash equivalents 11 & 14 176,496 Total Current assets 542,571 3,703 845,905 2,617,925 1,392,179 Current liabilities Bank loans, overdrafts and facilities Payables and deposits from BHP Billiton Group companies Accruals and other creditors Total current liabilities Total current assets less current liabilities NonCurrent Liabilities 14 12 764,559 2,557,356 9,576 3,331,491 (713,566) 67,225 3,207,784 15,188 3,290,197 (1,898,018) Medium Term Notes 15 741,100 741,100 Net assets 4,322,024 3,312,797 Shareholder's funds Paid up share capital Share premium Retained earnings Result for the period 13 13 13 13 10,197 2,118,032 1,929,668 264,127 10,196 1,372,933 (1,509,873) 3,439,541 Total shareholder's funds 4,322,024 3,312,797 j.'mg Audit the Appendix pertaining to the Initials for identification purposes ~ KPMG Accountants N.V. ]j
Profit and loss account for the 12 months period ended 30 June 2006 USD ('000) Notes 12 months period ended 30062006 12 months period ended 30062005 Income from operations Dividend income Interest income 9 4 254,900 241,844 132,878 Interest expense 5 (186,008) (143,023) FX gains & (losses) (7,200) (5,785) Provision against loans to BHP Billiton Group companies 9&10 (18,143) (19,017) Writedown investments in BHP Billiton Group companies (354,585) 285,393 (389,532) General and administrative expenses (13,462) (14,693) Profit on sale of financial fixed assets 3,850,048 Result before taxation 271,931 3,445,823 Taxation (7,804) (6,282) Net result for the year 13 264,127 3,439,541 KPMG Audit the Appendix pertaining to thetettercr 2008 Initials for identification purposes KPMG Accountants UMA A y
Notes to the financial statements 30 June 2006 1. Group affiliation and principal activity BHP Billiton Finance BV ('the Company') was incorporated in the Netherlands with limited liability on 5 May 1994. The Company is a wholly owned subsidiary of BHP Billiton Company BV. The company forms part of the BHP Billiton Group headed by BHP Billiton Pic and BHP Billiton Ltd. The Company's principal activity is to act as the central treasury department and finance vehicle, as well as to hold certain investments for the BHP Billiton Group. 2. Basis of preparation The financial statements, which are expressed in US Dollars, the principal currency of the Company's business, have been prepared under the historic cost convention in accordance with accounting principles generally accepted in the Netherlands and comply with the provisions of the Netherlands Civil Code, Book 2, Title 9. Application has been made of the facilities under Article 408 of the Netherlands Civil Code, Book 2. The financial statements of the wholly owned subsidiaries of the Company will be consolidated in the financial statements of BHP Billiton Pic. Based on the exemption under Article 408 no cash flow statement has been included in the financial statement. Related parties The Company has related party relationships with its investments, group companies, the parent company and its directors. Related party transactions and balances are identified in the notes to these accounts. In principle, all related party transactions are discussed and approved by the shareholders prior to entering into the transaction. As a basis for the pricing of these transactions the arms' length principle is applied. 3. Summary of significant accounting policies 3.1 Financial fixed assets The Company carries its investments in Group companies at historic cost less provision for any diminution in value deemed to be of a permanent nature. Provisions for losses on disposal or liquidation of investments are made when such losses can reasonably be foreseen. The value of the Company's investment portfolio is assessed on an individual basis and provisions for any other permanent diminution in value is made on this basis. Information regarding the Company's interest in the net asset value and its share in the earnings of Group companies is given in note 9. Interest bearing loans and receivables included in financial fixed assets are accounted for at their nominal amount, with provisions for reduction in value if appropriate. Loans granted to exploration companies are fully provided for. These provisions may be reversed if an exploration project becomes commercially viable. 3.2 Foreign currencies Assets and liabilities denominated in foreign currencies are translated into US Dollars at the rate of exchange prevailing at the balance sheet date. Transactions in foreign currencies during the year are translated at the prevailing daily exchange rate. The resulting gains and losses from foreign currency translation are reflected in the profit and loss account. 3.3 Financial instruments The accounting method used for derivative financial instrumeft^llw^?tq ww'd«exc^nge contracts, and foreign exchange swaps) is determined by whether or not the instramen^j^d^y^^j «sgatfredgetter c* and, if so, by the accounting method used for the item being hedged. Financial instruments used to 2 NOV 2008 Initials for identification purposes KPMG Accountants N.V.
hedge recognized items are included at fair value with the resulting gains and losses taken to income. Derivative financial instruments used to hedge forecasted transactions are included at fair value with gains and losses deferred and recognized when the gains or losses on the hedged transactions are recognised. Outstanding positions are included under "Accruals and other creditors". Refer to note 15 for further details on the outstanding positions. 3.4 Deferred taxation Deferred taxation is calculated, using the liability method, in respect of timing differences arising from the difference between accounting and taxable profits. 3.5 Other assets and liabilities All assets and liabilities, other than those for which the basis of valuation is indicated on the face of the balance sheet or notes thereto, are shown at face value less provisions deemed necessary. 3.6 Income and expense recognition Interest income, interest expenses and general and administrative expenses are accounted for in the period to which they relate. 4. Interest income USD ('000) 12 months 12 months period ended period ended 30062006 30062005 Intercompany (BHP Billiton Group) interest receivables Pool benefit (refer note 13) Bank balances & deposits 146,187 50,883 44,774 62,604 30,128 40,146 241,844 132,878 The increase in the Intercompany (BHP Billiton Group) interest receivable is mainly due to higher balances loaned to Group Companies. 5. Interest expense USD ('000) 12 months 12 months period ended period ended 30062006 30062005 Intercompany (BHP Billiton Group) interest payable Bank loans and overdraft 6. General and administrative expenses 114,885 71,123 92,723 50,300 186,008 143,023 USD ('000) 12 months 12 months period ended period ended 30062006 30062005 Service and other fees from BHP Billiton Group companies Political risk insurance Other financing costs l ir 11,174 2,205 83 12,154 2,205 334 13 3 462 14,693 the Appendix pertaining to the letter oi 1 NOV 2008 Initials for identification purposes KPMG Accountants N.V,
7. Profit on sale of financial fixed assets In June 2005 a restructuring of companies in the BHP Billiton Group was implemented. The transaction involved a number of steps and with the following effect in the Company: The Company sold 100% of the shares in BHP Billiton Holdings BV to BHP Billiton Company BV at a market value of USD 3,850 million, which resulted in a profit of USD 3,850 million (book value of investment in the books of the Company was nil). This amount is fully reflected in the profit and loss account under profit on sale of fixed assets. The Company used the proceeds of the sale to redeem the discounted security issued to BHP Billiton Waterloo CV (USD 3,005 million). A loan of USD 1,000 million payable at call was issued by BHP Billiton Company BV to the Company. An interim dividend of USD 1,896 million was declared by the Company to BHP Billiton Company BV. 8. Taxation The tax charge can be analyzed as follows: USD ('000) Notes 12 months period ended 30062006 Corporate tax charge Current year Withholding tax claim 12 months period ended 30062005 7,804 6,282 LI The Company obtained a Group finance company status under article 15b Corporate Income Tax Act 1969, effective from 1 July 1997 for a tenyear period. Also, as from 1 July 1997 the Company forms part of a fiscal unity in the Netherlands which is headed by BHP Billiton Company BV The tax accounting for the Company is on a standalone basis. In this respect it should be noted that the provision for exploration loans is not treated as a taxable reduction, and net interest income (of some USD (5) million as accounted for by the Company) which eliminates within the fiscal unity has not been regarded as taxable income. i.2 Under the terms of the finance company ruling the Company is entitled to make a tax free contribution to a "risk reserve" of an amount up to 80 per cent of its profits derived from Group financing activities. However the financing income is limited to 80 per cent of the taxable income of the fiscal unity. The remaining 20 per cent will be taxed at the average rate for the period of 30.55 per cent. The risk reserve can be released tax free when the Company makes qualifying investments..3 The Company, as a member of the fiscal unity, is jointly and severally liable for the payment of any tax liability of the fiscal unity..4 The 30 June 2006 tax payable has been recorded as a payable to BHP Billiton Company BV as head of the fiscal unity (this balance is included in the net position with BHP Billiton Company BV as reflected in note 10). 7,804 7,804 6,282 6,282 ;\ K'.'AG Audit the Appendix pertaining to the letter o; 2 Initials for identification purpose? / KPMQ Accountants N.V.
9. Financial fixed assets USD ('000) Statutory seat Note Share 30062006 30062005 Shares BHP Billiton SA Investment Ltd Billiton Nickel Holdings BV Billiton Coal Australia Holdings BV Billiton Metals Canada Inc Billiton Manganese Holdings BV Billiton Suriname Holdings BV BHP Billiton Aluminium Vietnam UK Ltd Billiton Investment 14 BV Billiton Investment 7 BV Billiton Investment BV companies BHP Billiton South Africa (Jersey) Ltd Billiton Development BV London The Hague The Hague Toronto The Hague The Hague London The Hague The Hague The Hague Jersey The Hague 9.1 100% 100% 100% 10% 100% 100% 100% 100% 100% 9.2 100% 18% 9.3 100% 3,591,056 430,961 219,511 100,000 87,957 4,000 3,500 0 285 40 33 0 3,591,056 430,961 219,511 100,000 87,957 4,000 3,500 0 285 40 33 0 Total Investments 4,437,343 4,437,343 Interest bearing loans and receivables from BHP Billiton Group Companies Billiton Metals Canada Inc. Billiton Aluminium Australia Pty Ltd. Billiton Manganese Australia (Pty) Ltd. Billiton Development BV *1 9.3 BHP Billiton Metais S.A. 9.3 San Felipe Mining Ltd. * 1 Billiton Investment 14 BV Billiton Investment 3 BV 9.4 Billiton Investment 8 BV 9.4 Billiton Investment 15 BV 9.4 597,542 552,288 166,430 135,972 23,082 11,378 5 570,034 524,393 158,576 96,901 23,356 11,652 5 170,985 46,788 21,813 Total Provision against loans Total loans and receivables from BHP Billiton Group Companies 9.5 1,486,697 1,624,503 (147,350) (130,370) 1,339,347 1,494,133 External interest bearing loans Kermas Ltd 9.6 20,439 Total Investments, loans and receivables 5,776,690 5,951,915 *1 Exploration loan Contingent Interest 9.1 In November 2005 the Company received a dividend of US Investment Ltd. The funds received were used to partly repa BV. pn form BHP Billiton SA BHP Billiton Company KPMG Audit the Appendix pertaining to the letter 9.2 The Billiton Investment BV companies' principal activity is to act as intermediate holding companies 2 NOV 2016 Initials for identification purposes; KPMG Accountants N.V. i
for the BHP Billiton Group. 9.3 Billiton Development BV, a wholly owned subsidiary of the Company, is used as a vehicle to fund exploration activities worldwide. Contingent interest on loans to BHP Billiton Development BV amounted to USD 6.5 million (30 June 2005 USD 5.0 million). The loan to BHP Billiton Metais S.A. is secured on its export sales. The average interest earned on this loan during the 12 months to 30 June 2006 was 5.76% (30 June 2005 4.38%). For further details on applicable interest rates and repayment terms, refer note 10 to the financial statements. 9.4 As part of a restructuring of companies in the BHP Billiton Group in May 2006, the loans with Billiton Investment 3 BV, Billiton Investment 8 BV and Billiton Investment 15 BV were repaid. 9.5 The provision reflected in the table on page 8 is made under the regular policy of providing loans to exploration companies and other group companies (refer note 3.1). Provision is made for the loans with Billiton Development BV, San Felipe Mining Ltd, Billiton Investment 14 BV and Billiton Investment 15 BV. 9.6 Loan was prepaid during the financial year. 9.7 The movements in the book value of the financial fixed assets can be summarised as follows: USD ('000) 30062006 30062005 Opening Balance 5,951,915 7,063,261 Net movement in investments (1,101,216) Net movement in loans (refer note 8.9) (158,245) (15,738) Provision against loans (net movement) (16,980) 5,608 Closing Balance 5,776,690 5,951,915 9.8 The Company's interest in the net equity value of the equity investments as per 30 June 2006 amounts to approximately USD 6,663 million (30 June 2005 USD 5,418 million comparative figures have been adjusted to IFRS). The book value exceeds the equity value by approximately USD 2,226 million (As at 30 June 2005 the equity value exceeded the book value by USD 981 million). The Company's interest in the net equity value has been calculated in accordance with the accounting policies applied in the consolidated accounts of the BHP Billiton Group. 9.9 The Company's share in the 2006 earnings of the Company's investments amounted to a profit of approximately USD 1,394 million (30 June 2005 profit of approximately USD 1,476 million). Principal subsidiary undertakings and joint ventures of the Company are set out in the table on page 8. A list of companies drawn up with due observance of the provisions in Article 379, Book 2 of The Netherlands Civil Code, has been deposited at the Commercial Register in The Hague. 9.10 Interest bearing loans and receivables are unsecured and the borrowers may repay the loans and receivables or any part thereof at any time. Interest is compounded monthly and charged based on onemonth market rates (unless otherwise stated). Outstanding balances at yearend may include accrued interest. KPMG Audit the Appendix pertaining to the letter: 2 NOV 2008 Initials for identification purpose*, KPMG Accountants N.V, /'/
10. Receivables from BHP Billiton Group companies USD ('000) 30062006 30062005 BHP Billiton Resources Inc. BHP Billiton Pic Hunter Valley Energy Coal Ltd Billiton ESOP Trustee Ltd BHP Billiton Marketing Investment Ltd BHP Billiton South Africa Holdings BV QNI (Pty) Ltd BHP Billiton Company BV Billiton RA BV Billiton Marketing Investments BV Westralian Bulk Chart. Services Australian Bulk Chart. Services Billiton Metal Canada Inc. Billiton Korea Ltd Blue Ocean Shipping Ltd Billiton Australia Holdings BV Billiton Jersey Ltd Billiton International Services Ltd Samancor AG BHP Billiton Finance Ltd Rio Algom Mining Corporation Billiton Japan Ltd Australian Bulk Chart. Services Blue Ocean Shipping Ltd BHP Billiton Holdings Ltd Total Provision against loans Total Receivables from Group Companies 1,535,168 428,623 198,490 77,415 62,970 62,162 45,016 11,344 7,659 6,594 1,968 1,387 983 444 368 2,440,591 (6,594) 2,433,977 198,467 32,990 59,998 59,229 45,005 7,298 6,265 8 614 47,453 37,358 29,986 12,885 4,755 3,201 1,484 1,179 656 5 548,836 (6,265) 542,571 The receivables included in note 10 are unsecured and repayable on demand. The borrowers may repay the loans or any part thereof at any time. Interest is compounded monthly and charged based on onemonth market rates. Amounts receivable from BHP Billiton Group companies include accrued interest for the last month in the financial year if not settled at balance sheet date. The provision reflected in the table above is made under the regular policy of providing loans to exploration companies and other group companies (refer pbpjr^fflovision is made for the loan with Billiton Marketing Investments BV. ^^WeJ rww «* jcpjyta Audit th«appendix pertaining to the letter o< 2 Initials for Identification purposes KFMG Accountants N.V. io
11. Cash and cash equivalents USD ('000) 30062006 30062005 Money market investments 176,496 377,977 Bank accounts 467,928 176,496 845,905 The money market investments are not freely available to the Company as it serves as security given to BHP Billiton Group companies. Shortterm money market loans and deposits are used for cash management. Further reference is made to note 14 Bank loans, overdrafts and facilities. KPMG Audit the Appendix pertaining to the lett' 2 NOV Initials for identification purposes A KPMG Accountants N.VlI y
12. Payables and deposits from BHP Billiton Group companies USD ('000) Cerro Matoso SA BHP Billiton Marketing AG Billiton (UK) Ltd Billiton Aluminium Holdings BV Alusaf Hillside Compafiia Minera Cerro Colorado Limitada BHP Billiton Holdings BV BHP Billiton Metais S.A. Stein Insurance Ltd. Samancor Manganese (Pty) Ltd Billiton Investment 12 BV Aluminium Bayside BHP Billiton Victoria Ltd Samancor AG BHP Billiton Chile Inversiones Ltda BM Alliance Marketing Pty Ltd Billiton Metall GmbH Rio Algom Mining Corporation Billiton Investment 15 BV CDC Marketing BHP Billiton International Metals BV (payable interest free) Billiton Investment 2 BV Billiton Investment 7 BV BHP Billiton Finance (USA) BV Ingwe Colliery Ltd BHP Billiton Nickel Holdings BV Billiton Investment 13 BV Billiton South Africa Ltd Billiton Aluminium Vietnam UK Ltd BHP Billiton Company BV BHP Billiton Waterloo CV BHP Chile Inc BHP Billiton Pic Chrystal Services Ltd BHP Billiton Petroleum (Deepwater) MSI Investments BVI Ltd. Billiton Brasil Holdings BV Billiton Metals Holdings BV nn Deposits held with BHP Billiton Group companies are unsecured, repa interest based on onemonth market rates. 30062006 740,760 425,061 278,373 281,221 279,420 117,211 86,623 76,635 64,984 64,723 50,281 46,754 23,381 10,169 3,152 2,095 1,908 1,511 1,170 1,100 682 36 29 20 19 18 14 4 2 l^,557,356 2 NOV 2006 30062005 550,408 457,730 219,441 32,232 140,433 387,655 30,004 5,042 44,524 32,175 22,618 125,460 720 818 1,820 15,164 1,300 1,355 35 28 20 337 17 14 181 2 1,047,605 55,070 11,527 10,634 6,260 5,826 1,255 55 19 3,207,784 initials for Identification purpose KPMG Accountants N.V.
Amounts payables from BHP Billiton Group companies include accrued interest for the last month in the financial year if not settled at balance sheet date. 13. Shareholder's funds Summary of movements USD ('000) Paidup capital Share premium Retained earnings Result for the period Total Balance as at 30 June 2004 10,196 1,372,933 437,922 698,053 2,519,104 Appropriation of result 698,053 (698,053) Result for the period 3,439,541 3,439,541 Interim dividend paid (2,645,848) (2,645,848) Balance as at 30 June 2005 10,196 1,372,933 (1,509,873) 3,439,541 3,312,797 Appropriation of result 3,439,541 (3,439,541) Result for the period 264,127 264,127 Share issue 1 745,099 745,100 Balance as at 30 June 2006 10,197 2,118,032 1,929,668 264,127 4,322,024 On 28 December 2001 the issued 21,001 shares with a nominal value of NLG 1,000 each were converted into 9,530 shares with a nominal value of EUR 1,000. The increase of EUR 0.615 translated at 0.8814 USD: EUR exchange rate (USD 0.542) due to rounding is reduced from the Share premium reserve. On 28 June 2004 the Company issued 1 share with a nominal value of EUR 1,000 against a contribution in kind of the shares in BHP Billiton Holdings BV (refer note 9.1). Effective from 1 January 2006, the Company issued 1 share with a nominal value of EUR 1,000 against payment in cash of an aggregate amount of USD 745,100,000. The proceeds were used to repay the loan with BHP Billiton Company BV. The Company's authorised share capital consists of 47,650 shares with a nominal value of EUR 1,000 each. 14. Bank loans, overdrafts and facilities The Company, together with a number of BHP Billiton Group companies, is party to a Multiparty Account Pooling Facility, which includes several currency accounts with the USD being the dominating currency. Under the Multiparty Account Pooling Facility a 'pool benefit' is received by the Company. This income is presented under Interest income after allocation of the pool benefit to Interest expenses on "bank loans and overdrafts" in case the Company has taken an overdraft position to net off the pool. At 30 June 2006, the net bank balance of the BHP Billiton Group companies party to the pooling facility was USD 147 million equivalent (30 June 2005 USD 73 million), of which the Company contributed a net unfavourable bank balance of USD 765 million equivalent (30 June 2005 net bank balance of USD 467 million). The Company has uncommitted, unsecured bank facilities totaling USD 430 million (30 June 2005 USD 430 million) as well as an overdraft facility with Bank of America of USD 50 million (30 June 2005 USD 50 million). In March 2005 the USD 2 billion Revolving Credit Facility was increased to USD 3 billion and an USD 5.5 billion acquisition facility was put in place to fund *e]iwmeirrlsourees Ltd acquisition by the BHP Billiton Group. The acquisition facility consists of tjmrfejjftjffiejusd 3 billion for a period of 18 months with a 6 month extension and USD 2.5 billion M^yearsHri^e/ificftlt^^were signed^,. n( on the 18* of March 2005. The balance of the draw down by BHP Billiton KhialRMrgtePIS'PtWftilfty"'"" " as at 30 June 2006 is USD 900 million. 2 NQV 2008 Initials for identification P^P 0^5^ Accountants N.v'13 ';
15. Financial instruments The Company may enter into various types of financial instruments such as forward exchange contracts, foreign exchange swaps and interestrate caps for the purpose of managing risk exposures. Interest rate risk The Company uses derivatives, such as interestrate swaps and forward rate agreements to manage the exposure to movements in interest rates and thus to help achieve target levels of interest income or expense for the Group. In October 2002, the Company issued Euro 750 million 4.375 per cent Notes due 2007 guaranteed by BHP Billiton Pic with the benefit of a cross guarantee from BHP Billiton Ltd. These notes were issued under the USD 2.0 billion Euro Medium Term Note Program of BHP Billiton Finance Ltd, BHP Billiton Finance BV, BHP Billiton Pic and BHP Billiton Ltd and were placed at 99.4%. The Euro commitment (principal and interest) has been swapped into an USD commitment (fixed rate of 3.88%) using 5 year cross currency interest rate swaps. On 10 October 2003 the fixed interest rate was swapped back to an average 6 months floating rate minus 28 basis points, by entering into interest rate swaps. In May 2006 BHP Billiton Finance Ltd. issued an additional tranche of EUR 650 million 4.125% notes due 2011 under the US$ 2.0 billion Euro Medium Term Note Programme. The proceeds were used to partially repay debt incurred at the WMC acquisition in June 2005. The Company has swapped the notes to an average floating and a floating US$ interest rate, by entering into several cross currency interest rate swaps. The Company entered into an opposite cross currency interest rate swap with BHP Billiton Finance (USA) Ltd, with no remaining results in the Company. In April 2003, BHP Billiton Finance (USA) Ltd issued USD 850 million 4.8 per cent Senior Notes due 2013 guaranteed by BHP Billiton Pic and BHP Billiton Ltd. The bonds were placed at 99.89%. The net proceeds of the issue have been received in the Company via several Group companies (including BHP Financial Services (UK) Ltd). The Company has entered into interest rate swaps (fixed to floating) with external banks for the entire interest obligation. Under the swap arrangement an upfront swap discount was received of the amount of the bond discount and withheld costs of the bond issue. This discount is settled via the periodic swap settlements (interest payments). The Company entered into an opposite interest rate swap (floating to fixed) with BHP Billiton Finance (USA) Ltd, with no remaining results in the Company. In December 2005 an additional USD 1,350 million was raised by BHP Billiton Finance (USA) Ltd. by issuing a 5 year (US$ 600 million) and 10 year tranche (US$ 750 million) of the Global Bond. The proceeds of this issue were used to repay Tranche A of the Acquisition Facility (US$ 500 million) and partially redeem US Commercial Paper. The Company has entered into interest rate swaps (fixed to floating) with external banks for the entire interest obligation. The Company entered into an opposite interest rate swap (floating to fixed) with BHP Billiton Finance (USA) Ltd, with no remaining results in the Company. Foreign exchange risk Foreign exchange derivatives, including forward exchange contracts, currency swaps and currency options are used for managing currency exposure and cash management for the Group. The Company manages and executes all foreign exchange transactions of the BHP Billiton Group. Limited positions are taken based on the one month mandates approved by the BHP Billiton Groups' Financial Risk Management Committee (FRMC). BHP Billiton Group has a policy of hedging nonus$ c^hl fi3pv l xposure related to capital expenditure on projects. Any nonus$ committed exposur ifpi IpJP ~^ capital expenditure on projects requiring hedging are taken out by the Company with the externalbmwte&uffife Company then enters into a backtoback transaction directly with the relevant ass(h e dipiwi# BHf^ffifHtSn i8ttef c 2 NOV 108 A Initials for identification purposes I KPMG Accountants N.v'.._/
Finance Limited, who then in turn enters into another backtoback transaction with the relevant asset that is undertaking the capital expenditure project. The total contract/notional value of the Company's forward exchange contracts, currency swaps, currency options and cash balances at 30 June 2006 is summarised below. Summary of net positions (30 June 2006) in thousands* Internal Amount MtM (USD) External Amount MtM (USD) Total FX Amount MtM (USD) Bank/ MM Amount Total net position per currency Amount Latest maturity AUD CAD CLP (2,260,241) (98,954) (43,063,153) (6,534) (448) 1,564 2,198,734 98,954 43,063,153 4,983 445 (1,564) (61,507) 0 0 (1,551) (3) 0 (17,559) 3 0 (79,066) 3 0 Apr09 Dec07 Jan07 EUR GBP 207,762 60,035 1,193 1,696 (207,821) (62,284) (430) (1,322) (59) (2,249) 763 374 96 2,057 37 (192) Jan08 Dec07 ZAR (275,800) 3,262 257,800 (3,262) (18,000) 0 357 (17,643) Jul07 Total 733 (1,150) (417) *Amounts in foreign currencies; negative amounts reflect a future "sell" position for the Company The carrying amount of the foreign exchange derivatives is equal to the amounts reflected in the table above. Liquidity risk All interest bearing assets and liabilities have in principle floating interest rate terms. The cashflow risk as a result of flexible repayment conditions is offset by available borrowing facilities as set out in note 14. The BHP Billiton Board approved the establishment of a US$ 2.0 billion US Commercial Paper Programme in July 2002. In 2005 approval was obtained for an increase of the US Commercial Paper Programme from US$ 2.0 billion to US$ 3.0 billion. As at 30 June 2006, US$ 1,354 million Commercial Paper (30 June 2005: US$ 1.6 billion) was outstanding in BHP Billiton Finance (USA) Ltd. The Company facilitated the issue of Commercial Paper in the external market. Credit risk All counterparty limits are approved according to the guidelines provided by the FRMC and Banks credit worthiness are continually reviewed. The total credit exposure as at 30 June 2006 amounted to USD 1,251 million (30 June 2005 USD 1,249 million). 16. Fair value of recognised financial instruments Fair values of recognised financial instruments approximate the carrying amounts as Receivables, Cash and cash equivalents, Bank loans, overdrafts and facilities and Payables and deposits from BHP Billiton Group companies mature within 3 months or bear floating interest rates. 17. Employees The Company had no employees during the period. The entire personnel of the Company is employed by a Billiton service company. These costs are on charged to 18. Remuneration of directors No remuneration is paid to directors. KPMG Audit the Appendix pertaining to the letter c 2 NOV 2006 Initials for identification purposaps A KPMG Accountants N.v, 15 V/
19. Commitments and guarantees 19.1 In May 2005 a counterparty indemnity to BNP Paribas was issued for the work to be performed on the Oudam (USD 6.8 million) and Hassi Bir Rekaiz (USD 14.5 million) blocks in Algeria, expiring in November 2008. 19.2 In May 2005 a letter of credit was issued from BNP Paribas facility for the amount of USD 125 thousands with regards to Colombian petroleum exploration in favour of BHP Billiton Petroleum (Americas) Inc, expiring in March 2007. 19.3 The Company issued in July 2005 a payment performance guarantee to Canadian Imperial Bank of Commerce, Toronto for debts of Rio Algom Ltd and Rio Algom Mining Corp. 19.4 In April 2006 two letters of credit were issued from the BNP Paribas facility for the amount of USD 225 thousand each. These are in favour of BHP Billiton Petroleum (Colombia) Corporation regarding two exploration licences and must be in place for a total period of 21 months. 19.5 The Company provided the following guarantees in respect of BHP Billiton Group companies: A guarantee in respect of the Dutch fiscal unity as explained in note 8.4. A guarantee in respect of the Multiparty Account Pooling Facility, refer to note 14. In April 2005 a USD 45 million fronting facility was issued in favour of Stein Insurance Ltd. The Hague, 27 October 2006 Board of Directors P.A. Koppefman Wi Murtaf ILL A.T. Cornfield \ WiO Audit the Appendix pertaining to the Setter % NOV 2006 Initials for identification purposes ICPfviG Accountants N. v.
Other information Statutory rules regarding appropriation of profits According to Article 12 of the Company's Articles of Association the profit of the Company shall be at the disposal of the general meeting of shareholders. No dividends may be declared until accumulated losses have been recovered. Appropriation of result The Board of Directors proposes to appropriate the result for the year ended 30 June 2006 to Shareholder's funds. This proposal has not yet been included in the financial statements for the 12 months period ended 30 June 2006. The proposal to add the result for the year ended 30 June 2005 to retained earnings was adopted by the General Meeting of Shareholders and added to the Retained Earnings in these financial statements. KPMG Audit the Appendix pertaining to the letter oi 2 NOY 2008 Initials for identification purpcj^68;fj KPMG Accountants N.V. /
Auditors' report Introduction We have audited the financial statements of BHP Billiton Finance B.V., The Hague for the year ended 30 June 2006 as set out on pages 3 to 16. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. Scope We conducted our audit in accordance with auditing standards generally accepted in the Netherlands. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the company financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the company financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the company financial statements. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, these financial statements give a true and fair view of the financial position of the company as at 30 June 2006 and of the result for the year then ended in accordance with accounting principles generally accepted in the Netherlands and also comply with the financial reporting requirements included in Part 9 of Book 2 of the Netherlands Civil Code. Furthermore we have established to the extent of our competence that the Directors' Report is consistent with the financial statements. The Hague, 27 October 2006 KPMG ACCOUNTANTS N.V. C.J.M. Coremans RA K '" ' ' rjf KPMG Audit the Appendix pertaining to the 2 HOV 2006 Initials lor identification pu'pc KPMG Accountants h,.v. 18