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Value Release from Unification at BHP

February 2018


FTI Consulting, Inc.Mandate and Scope

2

FTI Consulting, Inc. (“FTI”) is a global consulting firm with approximately 4,600 professionals in 28 countries, includingGreat Britain, Australia, South Africa and the United States. FTI’s common stock is listed on the New York Stock Exchangeand trades under the symbol “FCN”. FTI was retained by Elliott Advisors (HK) Limited (“Elliott”) to undertake an analysisof and prepare an independent report on the efficacy, benefits and costs associated with the unification of BHP BillitonLtd (“Ltd”) and BHP Billiton Plc (“Plc” and together with Ltd, “BHP”).

FTI’s mandate in this matter was to examine the public claims and assertions made by both Elliott and BHP pertaining toa proposed unification and to analyse the relevant qualitative and quantitative attributes of unification for BHP and itsshareholders. The scope of FTI’s work in this matter included the review of the presentations published by Elliott in Apriland May 2017, as well as the response materials published by BHP in April 2017. In connection with the preparation ofthis report, FTI conducted its own independent analysis based upon a number of sources, including: (a) publicly availableinformation and data pertaining to the question of whether shareholders of Ltd and Plc would derive value from aunification of BHP’s dual listed company (“DLC”) structure implemented in 2001; (b) a review of Elliott’s underlyinganalyses; and (c) research materials prepared by nine well-respected global investment banks and brokerages regardingBHP and considerations relevant to the question of whether unification would provide incremental value to shareholdersof Ltd and Plc.

FTI received a fee from Elliott for the report that was appropriate to allow FTI to undertake suitable research andanalyses. The total amount of fees paid to FTI in connection with this report is not material in comparison to FTI’s totalannual revenues. In 2016, FTI had total revenues of US$1.81 billion.


Table of Contents

3

Executive Summary

Preamble

Economic and Strategic Barriers

Structure of Unification

Value of Unification

Costs of Unification

Impact of Unification

Appendix

4

15

20

33

36

59

64

75

Executive Summary



Executive SummaryCompanies are Moving Away from the DLC Structure

5

1907-2005 1988-1999 1990-2001

1997-2000 1998-2000 2001-2006

1993 1995 2001

1996-1999

2008-2009

2002 2002 2007US$49.4 billion US$13.2 billion

US$49.1 billion US$102.9 billion US$126.2 billion

US$7.4 billion

15 companies utilised a DLC structure in the past 25 years

8 companies have moved away from the DLC structure

1 is actively moving towards a unified structure

1930US$173.2 billion


40.2%59.8%Cash

Executive SummaryDLC Structure Limits BHP’s M&A Options

6

• Among other limitations, the DLC structure creates a significant impediment for M&A transactions

• Industry peers have used a mix of cash and stock for M&A transactions since 1995

• BHP has used only cash since becoming a DLC. DLC peers have used predominantly cash as well

Industry Benchmark

Oil & Gas and Mining Sector Companies

Stock

BHP

99.5%Cash

0.5% Stock

100.0%Cash

DLCs

37.5%62.5% StockCash

Market

Total Market All Companies


Executive SummaryEconomic and Strategic Barriers

7

0.0%

100.0%

80.0%

60.0%

40.0%

20.0%

2001 2017

38.6%

90.8%

61.4%

9.2%

Operating Profit

0.0%

100.0%

80.0%

60.0%

40.0%

20.0%

2001 2017

38.5%

60.3%61.5%

39.7%

NOSH1

Ltd Plc

Following the 2015 demerger of South32,Plc No Longer Generates Sufficient Income to Fund Dividends

• Plc only generated approximately 9% of BHP’s 2017 operating profit, but Plc’s shareholders still account for 39.7% of BHP’s shareholder base

1. Number of Outstanding Share Holdings (“NOSH”)


8

Executive SummaryStructural Alternatives for a Unified BHP

“Plc” Shareholders

“Ltd” Shareholders

BHP Plc(UK)

BHP Ltd(Australia)

DLC Merger Sharing

Agreement

Current BHP:DLC Structure



BHP Plc(delisted)

BHP Ltd(delisted)

DLC Merger Agreement Terminated

Australian Top-Hat Structure:Unified BHP

Unified BHP(ASX & LSE)



BHP Plc(delisted)


Ltd Acquisition:Unified BHP Ltd

BHP Ltd(ASX & LSE)

For BHP’s Situation, an Australian Top-Hat Structure Would Maximise Value


Executive SummaryValue of a Unified Structure

9

Organisational and financial benefits:

• BHP can operate without the confines, complexity and opacity of the DLC structure and agreements

• Transparency and accountability

• Cost reduction through removal of duplicative functions

• Improved capital/corporate structure allows:

• Greater M&A flexibility• Simpler demergers• Removal of structural barriers to

takeovers

Structural benefits:

• A single Australian incorporated and Australian headquartered BHP

• Eliminates price discrepancy between the two shares

• Primary listing on the ASX, premium listing on the LSE, maintaining other listings on the JSE and NYSE, with a unified shareholder base


Executive SummaryCosts of Unification

10

Direct Costs Unexplained Costs

According to BHP’s public statements, management performs a regular review of the DLC structure, but have provided limited details to the market:

• Estimated costs of US$1.3 billion to unify (based on preliminary internal analysis) without a detailed explanation of content

• Annual cost synergies of only US$2.4 million but ignores key unification benefits

• Transaction advisory fees

• Stamp duties


0.0%

5.0%

10.0%

15.0%

20.0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Unadjusted Average Sector Adjusted Average

Executive SummaryValue of a Unified Structure - Precedents for Releasing Value

11

ShareAppreciation2 (0.1%) Net of Index 1.1% Net of Index 31.9% Net of Index 2.4% Net of Index

ShareAppreciation2 24.2% Net of Index 9.9% Net of Index 7.7% Net of Index 12.5% Net of Index

1. See slide 45 for additional detail2. Average share price increase of both shares on a weighted basis using total shares outstanding, which is adjusted to remove the

respective industry index movements over the period of time between unification announcement and unification completion measured in US$

Note: the X-Axis represents the time between unification announcement and unification completion

Shar

e Pr

ice

Upl

ift

Unification Completed

Unification Announcement

If BHP were to unify, its shareholders can expect to realise a return on unification of 11.2%, in line with precedent unifications

+11.2%

+18.7%

Share Price Uplift

Share Price Uplift1


Executive SummaryValue of a Unified Structure

12

• Whilst returning capital through both dividends and off-market buy-backs are options already available to BHP, the DLC structure significantly limits the release of value from franking credits

1. See slides 47-54 for discussion on franking credits and value release

• Franking credits continue to accumulate at BHP, but the value of franking credits is only recognised by shareholders upon distribution

Franking Credit Balance

Actual Forecast

$ -

$ 5

$ 10

$ 15

$ 20

$ 25

$ 30

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 20292030

BHP Build-Up of Franking Credit Balance Under the DLC Structure (US$ billions)1


Unification UnificationTotal - DLC = Net of DLC

Enhanced Unification Return $ 14,135 - $ 14,135

Enhanced Capital Return Benefits:Dividend Franking Credit Release 9,716 6,749 2,967

DSM use of Franking Credits - (1,701) 1,701 Dividend Franking Credit Value Release $ 9,716 $ 5,048 $ 4,668

Franking Credit Value from Off-Market Share Buy-Backs 6,174 3,774 2,400

Shareholder Return from Off-Market Share Buy-Backs 3,887 2,276 1,611 Off-Market Buy-Back Franking Credit Value Release $ 10,061 $ 6,050 $ 4,011

Total Enhanced Capital Return Benefits $ 19,777 $ 11,098 $ 8,679 Total Value $ 33,912 $ 11,098 $ 22,814

Costs to Achieve (391) - (391)

Total Net Present Value $ 33,521 $ 11,098 $ 22,423

1

Executive SummaryValue Available to Shareholders Post-Unification

13

• The table below represents the net present value of unification benefits on a gross and net (i.e. deducting what value would otherwise be released under the existing DLC) basis:

Net Present Value (US$ millions)

1. DSM means Dividend Share Mechanism and is explained on slide 27

2

1

a

b


Executive SummaryNet Present Value of Unification Benefits to Shareholders

Current Aggregate Market Capitalisation

(as of 19 January 2018)


Enhanced Unification Return

(11.2% Uplift)

Dividend Franking Credit (“FC”)

Value Release

Off-Market Buy-Back

Value Release

Value increase is equal to 18% of BHP’s current market capitalisation

Value of Unification (US$ millions)

$2,400 FC

$126,208

$22,423

+ $14,135

+ $4,668

+ $4,011

At Time of Unification

$1,611 Shareholder Return

$(391)

Costs to Achieve

21

a

b

14

Preamble



Preamble

16

Elliott published a report on increasing shareholder value at BHP in early April 2017.

Through several publicly disseminated investor presentations, Elliott and BHP have traded views on how to build value:

• Elliott presentation – 10 April 2017 – Value unlock presentation • Unification of Ltd and Plc• Demerger and separate listing of petroleum business• Adopting a consistent and optimal policy of capital return for shareholders

• BHP response – 12 April 2017 – Provided its views on all three Elliott areas of focus • Unification – Costs outweigh benefits (based on preliminary internal analysis)• Petroleum – Petroleum assets benefit group• Capital Return – Buy-backs, while important, now is not the right time• BHP stated that “Each of Elliott’s proposals could be implemented independently and the

merits of each should be addressed on a standalone basis.”

• Elliott presentation – 16 May 2017 – Focus on underperformance at BHP• Disposal of shale and optimise value of the petroleum business• Unify and return excess capital

• BHP press release – 16 May 2017 – BHP will review and formally respond

• There has been no response to date


PreambleCompanies are Moving Away from the DLC Structure

17

1907-2005 1988-1999 1990-2001

1997-2000 1998-2000 2001-2006

1996-1999

2008-2009

1993 1995 2001

2002 2002 2007US$49.4 billion US$13.2 billion

US$49.1 billion US$102.9 billion US$126.2 billion

US$7.4 billion

1930US$173.2 billion

15 companies utilised a DLC structure in the past 25 years

8 companies have moved away from the DLC structure

1 is actively moving towards a unified structure


“The complexity of the dual structure was cited by Graeme Pitkethly, Unilever finance director, as a reason making it harder to spin off businesses, such as the group’s margarines unit, which is being sold in an auction. It also makes it harder to undertake large deals involving shares, though under Mr. Polman, Unilever has preferred small acquisitions.”

PreambleCompanies are Moving Away from the DLC Structure

18

• After fending off a recent hostile takeover attempt by Kraft Heinz, Unilever reviewed its corporate strategy. On 28 November 2017, Unilever announced, amongst other findings, that its board favoured unifying its DLC structure, which has been in place since 1930

“Unilever said the board had determined that ‘unification with a single share class would be in the best interests of Unilever and its shareholders,’ providing ‘greater ongoing strategic flexibility for value-creating portfolio change.’”

28 November 201728 November 2017


PreambleCommon Criticisms of the DLC Structure

19

1. Governance• Corporate governance/management complexity• Investor confusion• Conflicts between the DLC entities• Lacks transparency and accountability

2. Operational• Cost redundancy• Lower market visibility• Limitation of synergies

3. Financial• Share price discrepancies• Limits level of index weighting and liquidity• Hinders M&A activity• Added complexity for corporate actions such as demergers and capital raising

Economic and Strategic Barriers



Economic and Strategic BarriersA Historical Look at BHP

21

• BHP’s DLC structure was implemented in 2001 upon BHP’s merger with Billiton when economic alignment of the Ltd and Plc entities reflected their shareholder base. The 2001 split for NOSH and Operating Profit was approximately 40% Plc and 60% Ltd

• Following the 2015 demerger of South32, only four substantive assets remain in Plc – Antamina, Spence, Cerrejon and Mt Arthur – which together generated only approximately 9% of BHP’s 2017 Operating Profit, but Plc’s shareholders still account for approximately 40% of BHP’s shareholder base

• Given the prescribed DLC equalisation ratio, as well as Plc’s relative size and contribution, it is necessary for Ltd to support Plc by transferring cash through the Dividend Share Mechanism (“DSM”) to fund dividends to Plc shareholders


Economic and Strategic BarriersPlc No Longer Generates Sufficient Income to Fund Dividends

22

0.0%

100.0%

80.0%

60.0%

40.0%

20.0%

20011 2017

38.6%

90.8%

61.4%

9.2%

0.0%

100.0%

80.0%

60.0%

40.0%

20.0%

20011 2017

38.5%

60.3%61.5%

39.7%

Ltd Plc

Operating ProfitNOSH

• Plc only generated approximately 9% of BHP’s 2017 operating profit, but Plc’s shareholders still account for 39.7% of BHP’s shareholder base

• If BHP conducts Ltd only buy-backs, the economic misalignment of NOSH versus Operating Profit will increase, furthering the use of the DSM and lost franking credit value

1. Per BHP’s Proposed DLC Merger Explanatory Memorandum, number of shares outstanding are as of 9 April 2001, and operating profit is as of fiscal year ended 30 June 2000


Economic and Strategic BarriersDSM Effect Since the South32 Demerger

23

• US$2.4 billion transferred from Ltd to Plc through the DSM1

• US$1.0 billion of valuable franking credits have been lost due to the DSM1

1. BHP paid a dividend in September 2017 that is not reflected in the numbers above. See further explanation on slide 28


24

2001July

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017July2

Economic and Strategic BarriersPlc Trades at a Discount to Ltd

Plc Buy-Back Time Period1 Ltd Buy-Back Time Period1

1. The buy-back information is from BHP’s website2. Share price data has been extended through to 19 January 2018

−25%

Average Discount (10%)

−1 STDV

+1 STDV

Normalised Ltd Share Price

10%

5%

0%

−5%

−10%

−15%

−20%

US$409 US$6,002 US$3,677

US$1,780US$1,600

US$2,817 US$6,340

South32 Demerger

Discount of Plc to Ltd (%) and Timing of Buy-Backs (US$ millions)

• The DLC structure requires BHP to be operated as a single economic entity and that shareholders receive equivalent economic returns

• Since the inception of the DLC, Plc’s share price discount has been 10% on average with a standard deviation of 5%

• Since 2004, BHP has completed four off-market and three on-market share buy-back programs

• The South32 Demerger occurred in May 2015


Economic and Strategic BarriersFranking Credits Explained

25

• Franking credits were introduced to prevent double taxation of dividends in Australia

• Australian tax resident companies can record the tax paid (typically at the corporate income tax rate of 30%) as franking credits

• The company can attach those franking credits to dividends and other frankable distributions (such as off-market buy-backs)

• Franking credits can be used by Australian tax-resident shareholders to offset their own Australian tax liability. In general, non-corporate shareholders (including individuals and superannuation funds) are entitled to a refund from the Australian Tax Office (“ATO”) to the extent their franking credits exceed their Australian tax liability

PROFIT AU$100

Corporate Tax AU$30

FrankingCreditsAU$30

DividendAU$70

Taxes/Refund

Shareholder

Company

ATO

The grossed-up dividend including franking credits equals AU$100


Economic and Strategic BarriersGrowing Balance of Franking Credits

26

• FYE2017 franking credit balance of US$11.4 billion, which would have been US$12.4 billion without the loss of credits through the DSM

• The DSM was established in 2015 as a response to the South32 demerger and to allow liquidity to transfer from Ltd to Plc • Since 2015, US$2.4 billion in fully franked dividends have been transferred to Plc causing the drop in franking

credit balance as the franking credits could not be monetised by any BHP shareholders

• Franking credits are generated at a rate of 30% of income generated in Australia

• Franking credits are growing at an increasing rate relative to BHP’s book value – a trend which continues under the DLC structure

-

5.0%

10.0%

15.0%

20.0%

25.0%

$ -

$ 3,000

$ 6,000

$ 9,000

$ 12,000

$ 15,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Franking Credit Balance (LHS) Franking Credit Balance as % of Book Value of Equity (RHS)

Franking Credit Balance (US$ millions)


Economic and Strategic Barriers Dividend Share Mechanism Explained

27

DividendFranking Credits

DSMDividend

Dividend

Predominantly Australian Tax-Resident Investors

Predominantly International Investors

Lost

Ltd Plc

Franking Credits

• Dividend Share Mechanism – dividends are paid by Ltd to move distributable profits from Ltd to Plc, so that Plc can issue matching dividends to its shareholders per the DLC agreements, which results in significant losses of valuable franking credits

DSM


Economic and Strategic BarriersLost Franking Credits are Expected to Continue Under the DSM

28

Cumulative DSM Usage to Support Plc and the Resulting Loss of Franking Credits (US$ millions)

• The cumulative payment of dividends through the DSM has been US$2.4 billion through 2017. Dividends distributed to Plc were fully franked and attached franking credits totalling US$1.0 billion, which could not be monetised by any BHP shareholders

• Based on future dividend expectations and analyst consensus forecasted income, Plc will require additional funds as it is not likely to be in a position to fund dividends through its own earnings and liquidity

2016 20171

$1,990 $2,430

$853 $1,041

1. The September 2017 dividend is not included in the DSM usage chart above as 2017 represents the fiscal year ended 30 June

Cumulative DSM Transfer Cumulative Loss of Franking Credits


Economic and Strategic BarriersHistorical Buy-Backs have Returned Suboptimal Value

29

• As a result of the DLC structure, management has historically undertaken share buy-backs in proportion to the respective numbers of shares outstanding at Plc and Ltd, but the buy-backs have not achieved optimal value for shareholders

• Since Ltd off-market share buy-backs can be undertaken at up to a 14% discount to market price, as a matter of economic and commercial logic, BHP should only repurchase Plc shares if Plc’s share price is at a discount of greater than 14% to Ltd’s share price

• Any buy-back programme that results in more Ltd shares than Plc shares being repurchased by BHP would significantly exacerbate the shareholder base imbalance and Plc’s dividend gap

100%84%

37%61% 61%

16%

63%39% 39%

0%10%20%30%40%50%60%70%80%90%

100%

2004 Buyback First Half of 2006Buyback

Second Half of2006 to 2007

Buyback

2010 to 2011Buyback

Cumulative

− 2% − 8% − 7% − 17%Plc’s market discount to Ltd at time of buy-back announcement

Percentage Breakdown of Number of Shares Bought Back

Percentage of SharesBought Back in Plc

Percentage of SharesBought Back in Ltd

Buy-BackBuy-BackBuy-Back

2004 Buy-Back


37.5%62.5% StockCash

Market M&A Activity1,2 DLC M&A Activity1,2,3

Economic and Strategic BarriersDLC Structure Limits BHP’s M&A Options

30

• Based on our in-depth research and analysis of M&A transactions, it is clear that virtually all M&A transactions since 1995 by companies with a DLC structure were completed using cash

• This contrasts with the broader market, which uses stock to fund 37.5% of M&A consideration –providing evidence of the structural impediment created by DLC structures

US$178.5 billionUS$36.3 trillionMarket transaction value:4

99.5%Cash

0.5%Stock

1. This percentage is based on completed transactions from 1 January 1995 to 31 October 2017 where (i) the acquirer is not a financial sponsor, (ii) the acquirer’s initial stake in the target is less than 20% (to exclude privatisations) and (iii) the acquired stake of the target is 50% or more post-transaction. Where a combination of cash and stock is given as consideration, transaction value is split based on the combination of cash consideration versus stock consideration

2. The split between cash and stock value is determined by transaction value (as opposed to number of transactions to avoid overweighting of insignificant transactions within the data)3. The DLC cash vs. stock split excludes the Fortis / Generale de Banque transaction in 1998 because it was part of a series of corporate

reorganisations4. Market transaction value only considers the cash and stock portions of the consideration

Market transaction value:4


59.8%Cash

Stock40.2%

Industry M&A Activity1, 2

Economic and Strategic BarriersDLC Structure Limits BHP’s M&A Options

31

BHP M&A Activity as a DLC2

Oil & Gas and Mining Sector Companies

100.0%Cash

• Industry peers have used a mix of cash and stock for M&A transactions

• On the other hand, since 2001 when the DLC began, BHP has only used cash for M&A transactions

1. This percentage is based on completed transactions by Oil & Gas and Mining Sector companies from 1 January 1995 to 31 October 2017 where (i) the acquirer is not a financial sponsor, (ii) the acquirer’s initial stake in the target is less than 20% (to exclude privatisations) and (iii) the acquired stake of the target is 50% or more post-transaction. Where a combination of cash and stock is given as consideration, transaction value is split based on the combination of cash consideration versus stock consideration

BHP

2. The split between cash and stock value is determined by transaction value (as opposed to number of transactions to avoid overweighting of insignificant transactions within the data)

3. Market transaction value only considers the cash and stock portions of the consideration

US$3.0 trillionMarket transaction value:3

US$33.3 billionMarket transaction value:3


Economic and Strategic BarriersDLC Structure Limits M&A Options

32

1. The percentages represent the Oil & Gas and Mining Sector companies market transaction split from slide 31. This percentage is based on completed transactions by Oil & Gas and Mining Sector companies from 1 January 1995 to 31 October 2017 where (i) the acquirer is not a financial sponsor, (ii) the acquirer’s initial stake in the target is less than 20% (to exclude privatisations) and (iii) the acquired stake of the target is 50% or more post-transaction. Where a combination of cash and stock is given as consideration, transaction value is split based on the combination of cash consideration versus stock consideration

2. On the basis of BHP issuing stock from Ltd and Plc utilising a 60%/40% split3. As of 19 January 2018

$16,871

$10,087 $10,087

$6,784$4,272

$0

$4,000

$8,000

$12,000

$16,000

$20,000

59.8%Cash

40.2%Stock

37.0% value loss

US$2,512 millionvalue loss

Cash Only(2011 bid)

Combination1,2

(2011 bid)Combination2,3

(Current stock price)

Illustrative Additional Value Loss from Using 100% Cashfor the Petrohawk and Fayetteville Acquisitions (US$ millions)

• This comparison is based on the M&A norms within the Oil & Gas and Mining Sector companies by using consideration of 59.8% cash1 and 40.2% stock1,2

• BHP’s previous acquisitions of US shale assets, Fayetteville and Petrohawk, entirely for cash as a result of the DLC structure (rather than a combination of stock and cash in line with industry sector M&A norms) resulted in an illustrative additional value loss of US$2.5 billion

Structure of Unification



Structure of UnificationSteps to Achieve Unification

Alternatives for Unification• The unification of the DLC can be undertaken in two permissible ways to create a unified BHP

• Option 1: Australian Top-Hat Structure

• Option 2: Ltd Acquisition of Plc

Key Approvals for Unification• Shareholder approval by each of the Ltd and Plc shareholder bases• Relevant court approval(s) for applicable scheme(s) and approvals from UK and Australian

tax and regulatory authorities as needed • Listing approvals from the UK Listing Authority, ASX, JSE and NYSE

34


• For BHP’s situation, an Australian Top-Hat structure would maximise value• The Australian Top-Hat structure for unification is utilised in preparation of this report

Structure of UnificationStructural Alternatives for a Unified BHP



BHP Plc(UK)

BHP Ltd(Australia)

DLC Merger Sharing

Agreement

Current BHP:DLC Structure



BHP Plc(delisted)

BHP Ltd(delisted)


Australian Top-Hat Structure:Unified BHP

Unified BHP(ASX & LSE)



BHP Plc(delisted)


Ltd Acquisition:Unified BHP Ltd

BHP Ltd(ASX & LSE)

35


Value of UnificationUnification Yields Benefits

37

Organisational and financial benefits:

• BHP can operate without the confines, complexity and opacity of the DLC structure and agreements

• Place all shareholders on an equal, standalone footing, eliminating the DSM

• Focus on core operations and optimised returns/value rather than dividend equalisation pressures

• Equalisation of economic and voting rights

• Elimination of contractual/legal agreements (joint electorate actions, class rights action and cross guarantees)

• Cost reduction through removal of duplicative functions

• Improved capital/corporate structure allows:

• Greater M&A flexibility

• Simpler demergers

• Removal of structural barriers to takeovers

Structural benefits:

• A single Australian incorporated and Australian headquartered BHP

• Eliminates price discrepancy between the two shares

• Primary listing on the ASX, premium listing on the LSE, maintaining other listings on the JSE and NYSE, with a unified shareholder base


Industry Engineering Financial Financial Financial

Countries Switzerland/Sweden Belgium/France Sweden/Finland Switzerland/UK

Pre-Unification Split 50% ABB AG & 50% ABB AB

50% Dexia Belgium &50% Dexia France

60% Nordbanken &40% Merita

57% Zurich Allied &43% Allied Zurich

Unification Structure Top-Hatting with a new Swiss entity Dexia Belgium acquired Dexia France Nordbanken (Swedish company) acquired Merita

Top-Hatting with a new Swiss entity

Post-Unification Listings

Swiss, Stockholm, Frankfurt and London Exchanges

Brussels, Paris and Luxembourg Exchanges Stockholm, Helsinki and Copenhagen Exchanges

Swiss and London Exchanges

DLC Start Date and Unification Date

1988 - 1999 1996 - 1999 1997 - 2000 1998 - 2000

Time From Announcement to Unification

~5 months ~2 months ~4 months ~6 months

Share Appreciation1 28.9% Share Return- 4.7% STOXX Industrials Index24.2% Net Index

15.5% Share Return - 5.6% STOXX Banks9.9% Net Index

5.1% Share Return-(2.6%) STOXX Banks

7.7% Net Index

5.2% Share Return-(7.3%) STOXX Insurance12.5% Net Index

Credit Rating Update After Unification

• No change • Declining guidance • Improving guidance • Improving guidance

Costs • No taxation at Company level • Not available • Not available • Not available

Value of UnificationThe Experience of Other Unified DLCs

381. Average share price increase of both shares on a weighted basis using total shares outstanding, which is adjusted to remove the



Value of UnificationThe Experience of Other Unified DLCs

Industry Financial Oil & Gas Industrials Financial and Information Services

Countries Belgium/Netherlands Netherlands/UK Australia/UK Canada/UK

Pre-Unification Split 57% Fortis (B) Belgian entity &43% Fortis (NL) Dutch entity

60% Royal Dutch &40% Shell Transport

59% Brambles Industries Ltd &41% Brambles Industries Plc

78% Thomson Reuters Corp &22% Thomson Reuters PLC

Unification Structure Stapled share – twinned the two individuals shares

Top-Hatting with a new UK entity Top-Hatting with a new Australian entity Canadian entity acquired UK entity


Euronext Brussels, Amsterdam and Luxembourg Exchanges

Amsterdam, London and New York Exchanges

Sydney and London Exchanges Toronto and New York Exchanges

DLC Start Date and Unification Date

1990 - 2001 1907 - 2005 2001 - 2006 2008 - 2009

Time From Announcement to Unification

~3 months ~9 months ~12 months ~3 months

Share Appreciation1 9.6% Share Return-9.7% STOXX Insurance(0.1%) Net Index

17.4% Share Return- 16.3% STOXX Oil & Gas

1.1% Net Index

52.0% Share Return- 20.1% S&P/ASX200 Industrials

31.9% Net Index

16.1% Share Return-13.7% BI Global Information Services 2.4% Net Index

Credit Rating Update After Unification

• Improved rating • No change • Fitch improved rating B- to B • Moody’s improved rating A1 to Aa3

Costs • Unification was realised with exemption from income tax in Belgium for Fortis (B), Fortis SA/NV and Fortis Brussels

• EUR 861,000 capital tax due on issue price of the shares in Fortis (NL)

• US$115 million, which included “investment banking, legal and registration expenses”

• No material liability for corporate tax or stamp duty

• US$45 million costs or expenses • US$29 million stamp duty• Total after-tax cost of restructuring and

unification across FY06 and FY07 was US$144 million includes costs associated with divestments

• Not available

391. Average share price increase of both shares on a weighted basis using total shares outstanding, which is adjusted to remove the



Value of UnificationUnification Yields Benefits1

40

• Enhance liquidity and increase financial flexibility; can finance strategic acquisitions with both debt and equity

• Single-class share structure provides a more transparent way to compare to peers, making it easier for shareholders, investors and the Company

• Broaden the shareholder base

• Single stock market listing• Clearly defined operating organisation• Simplified organisation and ensures

greater coherence and transparency

• Dividend flows and capital structuring simplified as cash will pass through the structure more directly and rapidly

• Removes pricing difference between the two shares

• New group able to issue shares more easily

• More transparent for the financial markets

• Concentration of trading in a single share should improve liquidity

• A single share may lead to inclusion of the share in additional indices

• Enhances strategic flexibility • Simplifies capital raising • Reduces complexity for investors and

analysts• Increases the liquidity of new Zurich

Financial Services shares• Removes pricing difference between

the two shares relative to the values implied by the Equalisation Ratio

• Improved stock market visibility • Enhanced liquidity of shares• Increased weighting in the principal

share indices will lead to additionaldemand for Fortis shares

• Each shareholder will be able to choose to receive either a wholly Belgian or wholly Dutch dividend

• Increased clarity and simplicity of governance

• Increased management efficiency• Increased accountability• Flexibility in issuing equity and debt

• Elimination of the complexity of the DLC Structure would allow for the focus on core businesses

• Increase in index weighting via a concentration of Brambles’ capital in a single market, the ASX

• Removes pricing difference between the two shares

• Reduce complexity and costs• Provide greater strategic flexibility

• Consolidated and improved trading of shares

• Simplified capital structure• Single, global and deep pool of

liquidity• Removes pricing difference between

the two shares

1. The benefits of unification are as discussed from the various companies’ unification and other corporate documents


Value of UnificationBrambles Case Study – Remarkable Similarities

41

DLC Type Plc-Ltd separate legal entities Plc-Ltd separate legal entities

DLC Merger Date Announced April 2001 Announced March 2001

Unification Structure A new Australian holding company established in 2006 to acquire both Plc and Ltd – Top-Hat structure

A new Australian holding company could be established to acquire both Plc and Ltd – Top-Hat structure


Primary listing – ASX

Other listing – LSE

Primary listing – ASX

Premium listing – LSE

Other listings – JSE and NYSE

Countries of Operations

44 at the time of unification 31 per the BHP Annual Report 2017

Plc/Ltd Share Capital Split

41% Plc / 59% Ltd (immediately prior to unification)

40% Plc / 60% Ltd (currently)



42

Costs of Unification UK stamp duty of US$29.0 million plus estimated transaction advisory fees of US$45.0 million

Estimated UK and Australian stamp duty of US$286.5 million plus estimated transaction advisory fees of US$104.6 million1

Financial Advisors • Greenhill• Macquarie• UBS

• JP Morgan• Dresdner Kleinwort Wasserstein• Gresham Partners• UBS

Legal Advisors • Allens• Freshfields Bruckhaus Deringer• Mallesons Stephen Jacques • Clifford Chance• Skadden, Arps, Slate, Meagher & Flom• Slaughter and May• Sullivan & Cromwell

• Allens• Freehills • Linklaters• Slaughter and May• Sullivan & Cromwell

Headquarters Sydney, Australia Melbourne, Australia

1. See additional detail on slides 61 and 62



43

Unification rationale:1

• Better operational focus on key business units by reducing the complexity of the DLC structure

• Upweighting in key stock market indices

• Elimination of the historical share price difference between Brambles Industries Plc and Brambles Industries Ltd

• Common equity currency for use in M&A activity

• Opportunity to engage in restructuring business portfolio

• Reduce costs with simplified structure

• Aggregate liquidity for purposes of engaging in share buy-backs

1. The benefits of unification are as discussed from Brambles’ unification and other corporate documents


Value of UnificationBrambles Case Study – Increased ASX200 Weighting

44

1.2%

1.9%

Brambles Industries LtdPre-Unification

Brambles LtdPost-Unification

57%increase

As of 1 December 2006, when the ASX200 re-weighted


Value of UnificationPrecedents for Releasing Value

45

ShareAppreciation1

9.6% Share Return-9.7% STOXX Insurance(0.1%) Net of Index

17.4% Share Return- 16.3% STOXX Oil & Gas

1.1% Net of Index

52.0% Share Return- 20.1% S&P/ASX200 Industrials

31.9% Net of Index

16.1% Share Return-13.7% BI Global Information Services2.4% Net of Index

ShareAppreciation1

28.9% Share Return- 4.7% STOXX Industrials Index24.2% Net of Index

15.5% Share Return - 5.6% STOXX Banks9.9% Net of Index

5.1% Share Return-(2.6%) STOXX Banks

7.7% Net of Index

5.2% Share Return-(7.3%) STOXX Insurance12.5% Net of Index

Unification Value Premium

1. Average share price increase of both shares on a weighted basis using total shares outstanding, which is adjusted to remove the respective industry index movements over the period of time between unification announcement and unification completion measured in US$

Note: the X-Axis represents the time between unification announcement and unification completion

Shar

e Pr

ice

Upl

ift

Unification Completed

Unification Announcement

+11.2%

+18.7%

Share Price Uplift

Share Price Uplift

0.0%

5.0%

10.0%

15.0%

20.0%

Unadjusted Average Sector Adjusted Average


Value of UnificationReleasing Value at BHP

46

• If BHP were to unify, its shareholders can expect to realise a return on unification of 11.2%, in line with precedent unifications

BHP market cap of US$126.2 billion × 11.2% = US$14.1 billion or US$2.66 per share

• Of the comparable unification precedents, Brambles most closely resembles BHP, as it is the only UK Plc – Australian Ltd unification. If BHP were to unify and experience returns in line with those of Brambles on unification, BHP shareholders would realise a return on unification of 31.9%

BHP market cap of US$126.2 billion × 31.9% = US$40.3 billion or US$7.56 per share


Value of UnificationMaximise Release of Franking Credits

47

Distribution of Dividends Off-Market Share Buy-Backs

• Discounted off-market buy-backs which attach franking credits allow investors to whom franking credits are most valuable to tender their shares into the buy-back to optimise the release of franking credits

• There is also a significant additional capital benefit that varies depending on the shareholder’s cost basis

• Non-tendering shareholders also benefit from the shareholder return driven by unified BHP reducing the number of shares in issue at a discounted buy-back price

• While discretionary in nature, shareholders often expect to receive returns via dividends

• The value of dividends is higher to Australian shareholders due to franking credits

• The value of franking credits is only released on distribution

There are two primary ways to release franking credits: distributing dividends or undertaking off-market share buy-backs. Off-market buy-backs are the more valuable of the two


Value of UnificationValue of a Unified Structure

48

• Whilst returning capital through both dividends and off-market buy-backs are options already available to BHP, the DLC structure significantly limits the release of value from franking credits

• Franking credits continue to accumulate at BHP, but the value of franking credits is only recognised by shareholders upon distribution

BHP Build-Up of Franking Credit Balance Under the DLC Structure (US$ billions)

Franking Credit Balance

Actual Forecast

$ -

$ 5

$ 10

$ 15

$ 20

$ 25

$ 30

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 20292030


$ (60)

$ (45)

$ (30)

$ (15)

$ -

$ 15

$ 30

$ -

$ 5

$ 10

$ 15

$ 20

$ 25

$ 30

2018 2020 2022 2024 2026 2028 2030Excess Free Cash Flows (LHS) Dividends (LHS)

$16B in Buy-Backs (LHS) $10B in Buy-Backs from Sale of Shale (LHS)

Capex (LHS) Net Debt | (Cash) (RHS)

Value of UnificationSufficient Free Cash Flow to Return Capital to Shareholders

49

• BHP will continue to generate excess free cash flows after capex sufficient to fund dividends and planned buy-backs

• Remaining cash flows can be used to pay down debt. Cash balance could exceed total debt by 2022

Forecast of Excess Free Cash Flow (US$ billions)

Target Net Debt (RHS)


Value of UnificationRelease of the Franking Credit Balance

50

• Under the DLC structure, the franking credit balance could grow to US$25 billion by 2030

• Unification would enable accelerated monetisation of the growing stockpile of franking credits

Forecast of Franking Credit Balance (US$ billions)

US$4B

US$7B

US$7B

US$18B

Net franking credit balance under a unified structure

Actual Forecast

$ -

$ 5

$ 10

$ 15

$ 20

$ 25

$ 30

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029

Franking Credit Release from $10B in Buy-Backs from Sale of Shale Franking Credit Release from $16B in Buy-Backs

Franking Credit Release from Dividends Franking Credit Balance

Franking Credit Balance under DLC Structure

2030


Value of UnificationExpert Valuation Range for Franking Credits

51

2016 Frontier Economics

2016 Capital Financial Consultants

2013 Economic Regulation Authority

2010 Minney

2006 Beggs and Skeels

2004 Hathaway and Officer

Average: AU$0.47

AU$0.35

AU$0.60

AU$0.45

AU$0.40

AU$0.57

AU$0.45

• The value of franking credits, when distributed to shareholders, is based upon the extent to which they can be utilised by eligible recipients

• Published expert reports provide reliable third party estimates of the value of franking credits, which in some cases are referenced in value ranges

• Below is a summary of expert studies on franking credit value which indicate a value of AU$0.47 on the dollar of distributed franking credits (within a range of AU$0.35 to AU$0.60 on the dollar)

1. Frontier – “An Updated Dividend Drop-off Estimate”, Prof. Stephen Gray, September 2016, Frontier Economics Pty, Ltd. Capital – “Gamma and The Act Decision”, Dr. Martin Lally, Capital Financial Consultants, 23 May, 2016. Economic – “Estimating the Market Value of Franking Credits in Australia”, September 2013, Duc Vo, Economic Regulatory Authority. Minney – “The Value of Franking Credits to Investors”, Aaron Minney, The Finsia Journal of Applied Finance, 2010. Beggs and Skeels – “Market Arbitrage of Cash Dividends and Franking Credits”, David J Beggs and Christopher L. Skeels, Department of Economics The University of Melbourne, September 2006. Hathaway – “The Value of Imputation Tax Credits”, Neville Hathaway and Bob Officer, November 2004, Capital Research Pty Ltd.

Value of Franking Credits by Expert Third Party Studies1


Value of UnificationQuantifying the Value of Franking Credits

52

Dividend Drop-Off Valuation Methodology:

• Dividend drop-off studies provide an empirical and reliable means to estimate franking credit value

• In relation to payment of dividends, the share price drops concurrently as the shares go ex-dividend and this drop is a reflection of that dividend’s value

• The extent to which the share price change is greater for a franked dividend compared to a non-franked dividend implies the value of the franking credits attached to the franked dividend

• The dividend drop-off study conducted by FTI is based on over 3,200 drop-off observations among existing S&P/ASX200 companies since July 2002

Dividend Drop-Off Summary ASX Adjusted

Franked dividend drop-off as % of total dividends 95.1%

Unfranked dividend drop-off as % of total dividends 75.9%

Difference 19.2%

AU$1.00 dividend = AU$0.429 of franking credit1 AU$0.43

Value of Franking Credits (difference/AU$0.429) AU$0.45

1. Franking credit value is equal to corporate tax rate (30%) divided by (100%-30%) = AU$0.429

On average – the decline in share price was equivalent to95.1% of the dividend’s value, compared to 75.9% forunfranked dividends

The 19.2% difference between the two shows the impliedvalue of franking credits i.e., the market pays AU$0.19 morefor the AU$0.429 of franking credit attached to eachAU$1.00 of fully franked dividend

Therefore, the market attributes a value to each distributedAU$1.00 of franking credit of AU$0.45 (19.2% divided by42.9% x AU$1.00)


Value of UnificationShareholder Composition1 – A Key to Releasing Franking Credit Value

53

Australian – Funds3

3.2 billion2.2 billion

68.7%

Ltd Pre-unification(Plc and Ltd)

Unified BHP(Immediately Upon

Unification)

Unified BHP (Following

Unification)4

• More shares in the hands of Australian tax residents results in increased utilisation of franking credits • The result of this analysis is that we expect a ~46% increase in the number of BHP shares held by Australian tax residents over

time following unification, in accordance with the charts below:

1. Refer to the Impact of Unification slides 64-722. If the retail shareholder base remains static at 20.3% of the total shares outstanding post-unification, then 49.6% of the total unified BHP shares would be held by Australian tax residents3. Calculation of beneficial shareholders is prepared based on the report and analysis of a shareholder proxy advisory firm who reviewed the relevant underlying composition of the registered

holders reported by BHP in its shareholder register. FTI utilised this analysis as a proxy for Australian domiciled share ownership4. The timing of uplift in the shareholder base occurs within three years after unification


41.6%


44.3%

5.3 billion 3.2 billion

60.4%2

Total Shares:Australian Domiciled:

% of Total:

Australian – Retail3 International3

21.3%

20.3%58.4%

24.0%

20.3%55.7%

30.3%

30.1%

39.6%35.3%

33.4%

31.3%


Value of UnificationValue of Franking Credits – Off-Market Buy-Backs

54

The value of franking credits released via discounted off-market buy-backs

• Discounted off-market buy-backs which attach franking credits allow investors to whom franking credits are most valuable to tender their shares into the buy-back to optimise franking credits

• A further capital benefit can be achieved that is unique to the specific investor’s circumstances

• Australian tax residents can utilise franking credits in their entirety to either off-set or reimburse their tax liability

• Based on the expected accounting for share capital upon unification, common control transactions like unification can utilise the pooling of interests method, so share capital component (US$0.42) at unified BHP would remain effectively unchanged post-unification

• ATO class rulings on the matter over the past ten years support this assumption

Illustrative Value of Off-Market Buy-Back (US$)

Share Price

Capital Component

Fully Franked Dividend

Component

Franking Credit

Grossed Up

ShareholderProceeds

Buy-Back

Discount

Buy-Back Price

22.1% ReturnUS$5.42 per share($0.42)

$8.86

$24.54

$21.10 $20.68

$29.96Capital Component

$0.42

(14.0%)


Value of UnificationFTI’s Capital Allocation Assumptions for the Value of Unification

55

Assumptions by Category DLC Unification

Dividend payout ratio of 65% Franking credit value of AU$0.45

on the dollar A negative franking credit value

of AU$(0.45) on the dollar has been attributed to the DSM

Dividends Dividend payout ratio of 65% Franking credit value of AU$0.40

on the dollar within three years of unification

60% of buy-backs are off-market Shareholder Return from Off-Market Buy-Backs (Ltd) 1

100% of buy-backs are off-market

1. The off-market buy-back assumes a 14% discount, which is the same discount used in prior BHP off-market buy-backs and accepted by the ATO in prior ATO class rulings

US$10.0 billion net cash proceeds from sale of shale assets in 2018

US$4.0 billion recurring amount every 4 years, beginning in 2018

100% of buy-backs are off-market and in Australia

US$10.0 billion net cash proceeds from sale of shale assets in 2018

US$4.0 billion recurring amount every 4 years, beginning in 2018

60% of buy-backs are off-market in Australia through Ltd

Buy-Backs



Enhanced Capital Return Benefits:Dividend Franking Credit Value Release $ 9,716 $ 5,048 $ 4,668



Total Enhanced Capital Return Benefits $ 19,777 $ 11,098 $ 8,679

Value of UnificationValue Available to Shareholders Based on Capital Allocation Assumptions

56

The table below represents the net present value of capital return benefits of unification based upon the utilisation of franking credits through dividends and discounted off-market share buy-backs in the context of unified BHP’s expected shareholder composition versus the existing DLC structure

If BHP were to implement 100% of the buy-backs in Ltd using the DLC structure:1. It would result in further economic misalignment - by 2050 Ltd shares as a percentage of total BHP NOSH

would decline from 60.3% to 41.7%2. The total enhanced capital return benefits of unification as compared to the existing DLC structure would be

US$6,747 million


Returning capital through both dividends and off-market buy-backs are options already available to BHP but the DLC structure has significantly restricted the optimal release of value from franking credits. The value of franking credits is only realised on either their distribution or the expectation that franking credits will be distributed, which is limited under DLC

a

b


Value of UnificationValue Available to Shareholders Post-Unification

57

The table below represents the net present value of unification benefits on a gross and net (i.e. deducting what value would otherwise be released under the existing DLC structure) basis, through:


2

1

a

b


Enhanced Unification Return $ 14,135 - $ 14,135

Enhanced Capital Return Benefits:Dividend Franking Credit Release 9,716 6,749 2,967

DSM use of Franking Credits - (1,701) 1,701 Dividend Franking Credit Value Release $ 9,716 $ 5,048 $ 4,668



Total Enhanced Capital Return Benefits $ 19,777 $ 11,098 $ 8,679 Total Value $ 33,912 $ 11,098 $ 22,814

Costs to Achieve (391) - (391)

Total Net Present Value $ 33,521 $ 11,098 $ 22,423


Value of UnificationNet Present Value of Unification Benefits to Shareholders

1. BHP’s market capitalisation as of 19 January 2018 is US$126,208 million: (3,212 million Ltd shares x US$24.54 Ltd price = $78,809 million) + (2,112 million Plc shares x US$22.44 Plc price = $47,399 million)

2. Value of franking credits from dividends decreases to US$3,071 million if FTI’s forecast of retail shareholder upweighting does not occur after unification

Current Aggregate Market Capitalisation


Enhanced Unification Return

(11.2% uplift)

Dividend Franking Credit Value Release

Off-Market Buy-Back

Value Release

Value of Unification (US$ millions)

$2,400 FC

$126,2081

$22,423

+ $14,135

+ $4,6682

+ $4,011

At Time of Unification

$1,611 Shareholder Return

$(391)

Costs to Achieve

a

b

21

Value increase is equal to 18% of BHP’s current market capitalisation

58

Costs of Unification



Costs of UnificationDetermining the Costs of Unification

60

Direct Costs

• Transaction advisory fees

• Stamp duties

Unexplained Costs

According to BHP’s public statements, management performs a regular review of the DLC structure, but have provided limited details to the market:

• Estimated total costs of US$1.3 billion (based on preliminary internal analysis) excluding transaction advisory fees without detailed explanation of content

• Annual cost synergies of only US$2.4 million but ignores key unification benefits


Costs of UnificationDirect Costs

61

• Two costs directly associated with unification will be:

1. Transaction Advisory Fees – legal, accounting and advisory services

2. Stamp Duties – a tax on certain stock/asset value transferred

• Total costs for unification are expected to be around US$391.1 million1

1. Transaction Advisory Fees

Transaction Advisory Fees are Estimated to Total Around US$104.6 million

• Transaction fees for the Royal Dutch Shell unification (market capitalisation of US$212.8 billion2) were estimated at US$115 million. For the Brambles unification (market capitalisation of US$15.5 billion2), transaction fees were estimated at US$45 million

• Taking into account BHP’s market capitalisation of US$126.2 billion,3 the Brambles and Royal Dutch Shell unifications, and adjusting for inflation, we estimate that the transaction advisory fees for BHP’s unification transaction to be US$104.6 million

1. There may be certain indirect costs of unification that are specific to certain classes of shareholders2. As of unification date. 20 July 2005 used for Royal Dutch Shell. 24 November 2006 used for Brambles3. As of 19 January 2018


Costs of UnificationDirect Costs

62

2. Stamp Duties

Stamp Duties are Estimated to Total Around US$286.5 Million1

• The UK stamp duty upon unification is estimated at US$236.8 million• The UK stamp duty is 0.5% of the value of the consideration given for the transfer (i.e., the market capitalisation

of the new shares issued to the transferring shareholders)

• The Australian stamp duty upon unification is estimated at US$49.7 million2

• Queensland and Western Australia assets are expected to receive exemptions for the duty under corporate restructuring provisions

Additional Exemption Relief Details and Assumptions:1. Stamp duties are not applicable to assets held in South Africa or the US under the unification of Plc and Ltd entities2. FTI is not aware that BHP has any assets in the Australian Capital Territory and Tasmania3. Exemption relief is available should the unification transaction qualify as corporate reconstruction or consolidation in NSW4. The transfer of a landholder interest for BHP in relation to its South Australian mining tenements should not be subject to duty on or after 1 July 2018. Corporate reconstruction relief

provisions are also available in South Australia until and after that date5. Victoria assets (Minerva) are assumed to be 1/3 of the value of the Minerva, Macedon, and Pyrenees asset grouping. Bass Strait and Minerva represent offshore and onshore assets

Although ‘interest in land’ has a limited meaning that does not include mineral or petroleum interests, transactions involving mineral or petroleum interests are not dutiable property. However, as the Victoria assets are a mixture of offshore and onshore, FTI has applied a stamp duty rate of 0.55% to 50% of the asset value to estimate a potential stamp duty. Note that Victoria offers corporate reconstruction relief provisions

Jurisdiction Stock/Assets Rate US$ millionsAustralian Duty

Queensland 0.58% $ 0.0New South Wales NSW Energy Coal3 0.55% 20.1South Australia Olympic Dam4 0.55% 10.9Victoria Offshore Assets5 0.55% 18.7Western Australia 5.15% 0.0

United Kingdom Mkt Cap of Transferred Stock6 0.50% 236.8Total $286.5

6. Exemption relief from this cost could be considered by BHP for company reconstructions and acquisitions under the Finance Act of1986 Section 75 (Section 77 relief involves more stringent conditions and enforcement)


Costs of UnificationUnderstated Cost Synergies

63

In BHP’s 12 April 2017 response, management valued ongoing DLC costs at approximately US$2.4 million per year:

However, the analysis omits other important unification cost synergies:

Excess real estate

Redundant IT infrastructure

Duplicative layers of management and personnel

Impact of Unification



Impact of UnificationCurrent Shareholder Composition

65

31.3%

33.4%

35.3%

0.9%

Ltd1

3,212 million shares60.3% outstanding shares

Plc2,112 million shares

39.7% outstanding shares

1. The geographical percentage breakdown of shareholders provided by BHP in its annual reports only provides details of the direct legal ownership of BHP – primarily nominee accounts, who hold shares on behalf of the ultimate beneficial shareholders of BHP. In determining the current shareholder composition of BHP for FTI’s flow analysis, FTI took into account certain information and third party expert analyses regarding BHP’s ultimate beneficial shareholders

68.7% Australian

InternationalAustralian – RetailAustralian – Funds

99.1%

0.9% Australian


Impact of Unification Shareholder Composition at a Unified BHP

66

Share Flows on Unification

• In the context of unification of BHP’s DLC structure, the flow analysis quantifies the magnitude of buying (flow forward) and selling (flow back) by BHP shareholders which can be expected to occur by virtue of the index-driven and/or portfolio rebalancing effects of unification

• Important factors in determining the level of flow forward and any flow back include the liquidity of both stocks, shareholder interest, the relative market capitalisations of the two stocks and their weightings in indices

• Based on FTI’s detailed shareholder composition analysis, the net flow forward in unified BHP’s shares would absorb any foreseeable flow back


67

Impact of Unification Shareholder Composition at a Unified BHP – Classification of Analysis

In the context of unification of BHP’s DLC structure, for the purposes of the share flows analysis, BHP shareholders can be analysed as follows:1

• Passive Funds: analysis shows that such funds can be expected to systematically upweight their BHP shareholdings in proportion to the percentage increase in BHP’s inclusion in the respective indices on unification

• Active Funds: analysis shows that on average, such funds can be expected to upweight their BHP shareholding in proportion to the percentage increase in BHP’s inclusion in the respective indices. Active funds without a known mandate have conservatively been forecast to upweight at ~50% of the respective indices, but it would be reasonable to expect that an active fund would upweight in-line with the indices

• Superfunds: flow forward in this category will be driven by two primary factors:• Partial passive rebalancing occurs to match S&P/ASX200 weighting• Interest in a wholly-owned Australian entity will increase demand

• Superfunds are attracted by fully franked dividends offered by BHP including potential tax refunds• Australian superfunds have large cash and cash equivalents balances (25.0% of assets on average2) and may seek

opportunities to invest

• Retail: By virtue of BHP’s ability to pay fully franked dividends and its iconic listed company status, it can reasonably be expected that over time the level of Australian retail shareholding in a unified BHP would re-weight to Ltd’s current retail level of 33.4%. However, we took a conservative approach and assumed that re-weighting would achieve a level of only 30.1%

1. This analysis is based on unified BHP being included in the FTSE100 index, given that clear precedent for that to occur exists2. The Association of Superannuation Funds of Australia Limited


Impact of Unification Inclusion in Key Indices – S&P/ASX200 and S&P/ASX300

68

• The S&P/ASX200 and S&P/ASX300 are recognised as the institutional, investable benchmarks in Australia

• Index constituents are drawn from eligible companies listed on the ASX. These indices are designed to measure the performance of the 200 and 300 largest index-eligible stocks listed on the ASX by float-adjusted market capitalisation

• A unified BHP would have approximately 5.3 billion shares in issue after unification. Based on BHP’s higher market capitalisation on the ASX, its index weighting would increase to approximately 8.7% in the S&P/ASX200 and 8.4% in the S&P/ASX300

5.4%8.7%

0%

5%

10%

15%

Pre-Unification (3.2 billion

shares)

Post-Unification (5.3 billion

shares)

BHP’s S&P/ASX200 Market Capitalisation Weighting

5.2%8.4%

0%

5%

10%

15%

62%increase


shares)


shares)

BHP’s S&P/ASX300 Market Capitalisation Weighting

61%increase


1.7%

4.4%

0%

2%

4%

6%

69

Impact of Unification Inclusion in Key Indices – FTSE100• Upon unification, BHP will be incorporated in Australia

• Plc is weighted at approximately 1.7% of the FTSE100 (as of 1 January 2018)• Plc has a long tradition of connections in the UK, including a main office, UK operations and a significant

number of UK shareholders• A unified BHP would satisfy many of the requirements for FTSE100 inclusion, such as a Premium listing on the

LSE, corporate governance criteria, pre-emption rights, significant UK business links, size of free float and liquidity. In terms of the UK nationality requirement, fulfilment of this criterion would be determined at the discretion of FTSE. We note that a number of non-UK incorporated companies are included in the FTSE100, including International Consolidated Airlines Group (Spain), TUI AG (Germany), Coca-Cola HBC AG (Switzerland) and several Irish companies

• With 5.3 billion shares in issue after unification, BHP’s weighting in the FTSE100 would increase to approximately 4.4%


shares)


shares)

BHP’s FTSE100 Market Capitalisation Weighting

159%increase


Impact of Unification Shareholder Composition at a Unified BHP

70

• A review of the top ten S&P/ASX companies reveals eight companies that fully frank their dividends1

• Analysis shows that the average retail shareholding proportion for these companies1 (excluding BHP) is estimated to be 43.7%2

S&P/ASX Rank Company Market Cap

(US$ million)Brand

RankingEstimated Retail %2

1 CBA $111,690 2 43.0%

2 WBC $84,030 7 39.0%

3 BHP $78,809 8 34.7%

4 ANZ $66,550 3 36.4%

5 NAB $63,210 4 40.4%

8 TLS $33,926 1 58.1%

9 WOW $28,139 5 45.1%

1. Wesfarmers is one of the top ten S&P/ASX companies and fully franks its dividends, but it does not disclose sufficient shareholdings information to calculate an estimated retail percentage, nor does it publicly disclose its retail ownership

2. To ensure that estimated retail ownership levels are calculated across all of the relevant companies on a consistent basis, FTI estimated total retail ownership as the proportion of shares held by shareholders with an aggregate holding of less than US$2.0 million. FTI cross-checked these estimates against publicly available information on retail ownership provided by four of the companies referenced, each of which utilizes its own metrics for categorising retail shareholders

3

3. BHP Ltd only. Retail percentage shareholding includes both Australian and international shareholders


71

Impact of Unification Shareholder Composition at a Unified BHP – Flow Analysis

1. This analysis is based on unified BHP being included in the FTSE100 index, given that clear precedent for that to occur exists2. Our analysis also shows that even if unified BHP was not included in the FTSE100 (contrary to clear precedent) then upon or soon

after unification there would be positive flow forward of 2.2X and within three years after unification positive flow forward would reach 4.3X

Illustrative Flow Analysis

• Our analysis shows that with or without FTSE100 inclusion for unified BHP, there would be no net share flow back

Share Flows by Class (in millions)1

Plc Flow Forward Ltd Flow Forward

Passive index funds 187 81

Active index funds 125 266

Active-Other 449 78

Superfunds N/A 210

Upon or soon after unification 761 635

Retail 0 601

Within three years after unification 761 1,236

Flow Back Flow Forward Net Flow

With FTSE Inclusion 0 1,997 1,997

Without FTSE Inclusion2 (289) 1,236 947

Illustrative Flow Forward / Flow Back upon Unification (in millions)


72

Impact of Unification Shareholder Composition at a Unified BHP – Base Movement

• The composition of the shareholder base is presented prior to and following unification. Upon unification passive investors such as index funds will rebalance. By contrast, retail investors will take more time to increase their weighting in the unified BHP. The timing of the uplift in the retail shareholder base occurs within three years after unification

• The international base contracts while all categories of Australian shareholders increase their holdings in line with the increase in index weighting on the S&P/ASX200 and the other benefits of unification

Shareholders (in millions) Pre-Unification % Total Post-Unification % TotalAustralian – Funds 1,132 21.3% 1,616 30.3%Australian – Retail 1,074 20.3% 1,603 30.1%International 3,118 58.4% 2,105 39.6%Total 5,324 100.0% 5,324 100.0%

Pre-Unification (Ltd and Plc) Post-Unification

Australian – Funds

Australian – Retail

International

• Given that unification results in fully franked dividends on all BHP shares, an increased weighting in the ASX and its releasing of the substantial balance of accumulated franking credits, a significant increase in Australian retail demand for BHP shares is highly likely

30.3%

30.1%

39.6%21.3%

20.3%58.4%


Impact of UnificationOther Tax Issues

73

• Australian gross carry forward tax losses are consolidated within the Plc tax group

• Mt Arthur is the only asset through which these tax losses can be monetised as it is the only BHP asset located both in Australia and classified in the Plc tax group

1. Pursuant to section 165-13 of the Income Tax Assessment Act 1997

Mt Arthur (Australia)

Ltd’s Australian assets

Head Tax Entity (Australia)

Head Tax Entity (Australia)

Unified BHP (Australia)

Carry forward tax losses located in the

Plc tax group

Plc’s only producing Australian asset to

utilise the tax losses

• It has been suggested that upon unification the ability to utilise these tax losses would be lost, resulting in a cost of unification. However, in accordance with the applicable tax legislation, a unified BHP could structure unification to both maintain its two distinct Australian tax consolidated groups, and satisfy the Same Business Test,1

resulting in the preservation post-unification of the carry forward losses

Tax Consolidated Groups in Australian Top-Hat Unification Structure

Plc Ltd


Impact of UnificationATO Tax Dispute – Singapore Marketing Structure

74

Unification – A Catalyst to Resolve ATO Dispute

• BHP is facing an ATO tax assessment of AU$1,016 million related to its Singapore marketing structure. The tax assessment relates to AU$899 million due to prior periods dating back to 2003, as well as AU$117 million due to the transfer pricing assessment dating back to 2009

• To date, BHP has paid approximately AU$328 million to the ATO to stop penalties and interest from further accruing on this assessment. The tax benefits and marketing margins associated with this structure appear unsustainable

• Singapore marketing structures have gained the attention of the ATO. Rio Tinto has recently received a significant ATO tax bill in connection with an AU$447 million transfer pricing dispute related to a similar marketing structure

• Unification would provide an opportunity to resolve BHP’s outstanding Singapore tax dispute and which results in an Australian incorporated, Australian tax resident and Australian headquartered BHP with increased transparency and a better public profile that may be embraced by the ATO

• FTI has considered the structure and terms of BHP’s Singapore marketing entity and, on balance, consider the successful resolution of outstanding ATO disputes is likely to outweigh any claimed losses associated with the Singapore marketing entity on unification

Appendix



76

Variables 2018-2050 projection period1

Revenue Forecasted to be in-line with analyst average consensus

EBITDA Forecasted to be below analyst average consensus

Net Income Forecasted to be below analyst average consensus

Capex Forecasted to be above analyst average consensus

WACC Average of analyst estimates

Terminal Value Growth Average of analyst estimates

1. Terminal value growth assumption applies to perpetual period beyond 2050

FTI developed its own financial model, which was aided by analysing and aggregating the forecasts of nine well-respected global investment banks• The FTI forecast has been used to determine likely future earnings and the subsequent value impact

of the distribution of dividends and franking credits • FTI used the third party consensus forecasts when extending the financial projections to 2050, the

furthest forecast period for an investment bank

Appendix - Value of UnificationForecasts Grounded in Third Party Consensus Estimates


Appendix - Value of UnificationDetermining a Discount Rate to Calculate Present Value of Unification

77

FTI developed its own financial model, which was aided by analysing and aggregating the forecasts of nine well-respected global investment banks

• In determining the discount rate and terminal value growth percentage assumptions, FTI used data from the same nine analysts to determine the consensus average rates as detailed below

Weighted Average Cost of Capital (Nominal)

Terminal Value Growth

Analyst Consensus: WACC - %

Mean 9.4%

Median 10.0%

Minimum 8.5%

Maximum 10.0%

Analyst Consensus: WACC - %

Mean 2.1%

Median 2.0%

Minimum 1.5%

Maximum 2.6%

TVG


Appendix - Value of UnificationImpact if Retail Shareholder Upweighting Does Not Occur After Unification

78

Dividend Valuation Methodology – Impact on Unification:

• FTI forecasted the upweighting in retail shareholders to occur in a measured manner over a three year period after unification

• The upweighting in Australian shareholders which includes an increase in both funds and retail results in an increase from 44.3% to 60.4%. However, if the retail ownership remains flat then the increase is from 44.3% to 49.6%

• The value of franking credits on dividends if retail shareholder upweighting does not occur after unification is presented in footnote 2 of slide 58 - Net Present Value of Unification Benefits to Shareholders

Australian Domiciled Shareholder Composition - % of Shares Outstanding

DLC Funds & Retail Funds & No Change in Retail

68.7%1 44.3% - 60.4% 44.3% - 49.6%

Value of Franking Credits on Dividends – on the AU$

DLC Funds & Retail Funds & No Change in Retail

AU$0.45 AU$0.29 - $0.40 AU$0.29 - $0.33

1. 68.7% is the assumed starting point of Ltd Australian domiciled shareholder composition which is equivalent to 41.6% of BHP

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2001 Ross AvenueSuite 300Dallas, TX 75201

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