Newcrest Mining Limited Booklet 2011 Disclaimer: This booklet, including the taxation commentary, is a summary of the general way in which the Plan works. The Plan Rules prevail in the case of conflict. The booklet does not attempt to give legal, tax or accounting advice. If you need help to make an informed decision, you should read the Plan Rules and/or discuss any questions relating to the Plan with a professional adviser such as a lawyer, tax adviser or stock broker. Last amended on 1/09/2011 6:13 PM Page 1
A Guide to the Newcrest Share Acquisition Plan What this booklet is about? At the Newcrest Annual General Meeting in October 1996, the shareholders resolved that the Company should establish the Newcrest (ESAP). This booklet summarises what the Plan is, what benefits you may gain under it and how you can participate. It also provides answers to many of the questions often asked by employees about share plans. For further information please refer to the Employees Shares Acquisition Plan Rules which can be found on the Newcrest Portal. If you have any other questions, please contact HR Services on 1800 676 904 option 2. What is the? The Plan is a method of providing employees of Newcrest and its Group Companies with an opportunity to acquire and own shares in Newcrest. It is designed, and will be operated, to comply with Australian tax legislation that permits an annual tax-free grant to certain employees of shares in the employer company or its holding company of up to $1,000 worth of Newcrest shares. For this reason, the shares will be kept in a separate plan register. The Newcrest Board gives consideration to making grants of Newcrest shares annually (up to the tax exemption limit), at the Board s discretion and subject to the Company s performance. What benefits can you gain from the Plan? The Plan will enable you to become a shareholder in Newcrest. As a shareholder you will be a part-owner of the Company and will share in the future growth and profitability of the Company. You will have the satisfaction of knowing that your own efforts and those of your fellow employees are contributing to your future and that of the Company. You will receive dividends as they are declared. Like all shares traded on the Australian Securities Exchange (ASX), Newcrest shares can go up or down in value. Why is the Company offering shares to employees? The Company believes that employees who are also shareholders will gain a better understanding of the way the business operates, and will get satisfaction and reward from helping it grow. Overseas and in Australia, many companies with employee share plans have been shown to perform consistently better than the average for their industry and to have a lower staff turnover as well. Who qualifies for shares under the Plan? An employee is eligible to acquire Shares under the Plan on any day ("the allocation day") if (and only if) he or she is on the allocation day a Permanent Employee of a Participating Company; Permanent (full-time and part-time) employees with at least 12 months service who reside and work in Australia or have been seconded out of Australia are eligible to join the Plan. Last amended on 1/09/2011 6:13 PM Page 2
Casual employees, contractors, fixed-term employees, and all managers and executives who are eligible to participate in the Executive Performance Share Plan (ie, Long Term Incentive Plan), are not eligible to participate in the ESAP. Are there any restrictions on shares granted under the Plan? You may not sell or transfer the shares until the expiry of three years from the date they are granted to you, or earlier if you cease to be employed by the Company or a Group Company. The Plan share register will have a holding lock preventing any trading of your shares during this period. This is to satisfy the requirements of the Australian tax legislation that provides the exemption mentioned above. What happens if I resign or retire? If, prior to the expiry of the three years restriction period, you leave your employment with the Company or a Group Company or you retire, you will then be entitled to freely deal with the shares. This would include selling the shares if you wished. In the event of death while employed, the shares would be part of your estate with no restrictions on disposal. What is the value of the shares? The price of shares quoted on the ASX can change from minute to minute. Price is influenced by many factors including demand and supply (ie the number of shares people want to buy, and the number of shares available for sale). It is also affected by the financial and commercial performance of the company and other factors such as the local and world economies and most importantly, in the case of Newcrest, the gold price. In short, future share prices cannot be predicted with certainty: a share price can go up or come down. What is the price of the shares when they are allocated? If the shares are acquired on the ASX for allocation under the Plan (and for other Company employee share plans), they will be allocated to you at the average purchase price of the shares acquired. If the shares are newly issued by Newcrest, they will be allocated to you at their market value. Broadly, the market value of the shares is the weighted average of the prices of the shares on the ASX over the period of a week. You will be advised of the actual price of the shares following their allocation. You will need to know this for tax purposes (refer below). Administration of the Plan The Board is ultimately responsible for the administration of the Plan. The day to day management is handled by the Company s share registry, Link Market Services Limited. The Board will ensure that Plan records are maintained and that relevant reports are sent to members. Last amended on 1/09/2011 6:13 PM Page 3
How do I accept the share offer? There are two methods of accepting the share offer; online or with the postal application form. Option 1: Online (preferred method) - To accept the share offer online, you must complete the online Acceptance Form on the Link Market Services website. Details of how to log in and accept the shares are provided to you with your invitation letter. Option 2: Post - Alternatively, you can apply for shares by completing and returning the hardcopy Application Form. Applications must be received by the Company on or before the date shown on the Application Form. Completing the Application Form Please read the Application Form carefully before you complete it. If you have any questions about any part of the form, please discuss it with your Supervisor or HRBP. Australian Taxation Regulations The tax exemption The Plan has been designed and will be operated to comply with the requirements of Australian tax legislation so that the grant of the shares can be received by certain participating employees free of income tax. Recent tax changes have limited this tax exemption to employees with taxable income (after adjustments) of up to $180,000. There may be capital gains tax payable on any future sale of the shares. Likely FY12 taxation treatment FY12 taxation treatment of shares provided under the Share Acquisition Plan is dependent upon your FY12 adjusted taxable income. This is defined to mean your taxable income (including salary, bonus etc) plus reportable fringe benefits, plus reportable superannuation contributions plus any net investment loss. FY12 adjusted taxable income Taxation treatment Up to $180,000 Exempt from tax $180,001+ Value of shares included as assessable income in FY12 tax return The recent tax changes also remove any employee elections regarding upfront tax or deferred tax. Last amended on 1/09/2011 6:13 PM Page 4
Tax file number You are recommended to quote your Australian tax file number when applying for these shares, otherwise Newcrest may be required to withhold tax at the highest marginal rate of tax on both the provision of the shares, and on any unfranked portion of any dividend payments. Taxation on dividends Dividends received by you in respect of the shares must be included in your assessable income in the year that you receive the dividend. If the dividend is franked, you will also be required to include the franking credit in your income, but you will be allowed to reduce the tax payable by the amount of the franking credit (or you should receive a refund of any credits in excess of your tax payable). Franking information will be advised on your dividend statement. Tax payable on any unfranked dividends or any additional tax on any franked dividends will be payable by you. Capital Gains Tax (CGT) Subject to your personal circumstances, capital gains tax is likely to apply on the future disposal of the shares if the sale price is greater than the value of the shares when granted to you. A 50% reduction in the capital gain may be available where you have owned the shares for more than one year. If the sale price is less than the value of the shares when granted, you may be entitled to a capital loss. You should seek professional advice in relation to CGT implications of disposing of the shares. Employer reporting Newcrest is now required to provide to both employees and the Australian Tax Office a summary of share plan awards provided during the year. This report is to be provided shortly after 30 June each year. Questions and Answers Participating in the Plan Q. Must I pay any money? A. No. The shares are granted free to you and no payments are required to be made by eligible employees who join the Plan. Q. Must I join the Plan? A. Participation in the Plan is voluntary. Each employee invited to participate is free to decide whether or not to do so. Q. If I do not join the Plan now, will I get another chance in the future? A. If an employee decides not to join this year, any future opportunity to join will be subject to the discretion of the Board. However, any shares not taken up when first available will not become available again in the future. Last amended on 1/09/2011 6:13 PM Page 5
Q. Would joining the Plan affect my superannuation or other benefits? A. The Plan is quite separate from, and in addition to any other aspect of Newcrest s remuneration arrangements. Q. Can I have cash instead of the shares? A. No. The Plan is aimed to encourage employees to be shareholders of Newcrest. The exemption provided by the tax legislation to certain employees does not extend to cash payments. Q. Can my shares be allocated to my spouse? A. No. The shares must be acquired by a person who is employed by Newcrest or another Group Company. The shares Q. Are the shares really free? A. The shares are granted free to eligible employees joining the Plan. The Company pays for them. Employees make no payments, and the shares cannot be taken back from you by the Company. However, employees with adjusted taxable income of more than $180,000 are personally liable for any tax payable for FY12 on the provision of the shares. Also, if and when the shares are sold after the restriction period, employees may be liable for CGT in the financial year that the shares are sold. Q. Will I get dividends? A. The company is not required to declare dividends on its shares every year, but if Newcrest declares a dividend, you will receive it. Q. Can I vote at meetings? A. You can vote according to the shares allocated to you like any other shareholder. Q. How will I know how my shares are performing? A. As a shareholder, you will receive the reports sent to all shareholders. You will also be able to follow the market price of the shares in the share lists in the newspapers or online (eg. www.asx.com.au). Q. What information will I receive? A. As a shareholder, you will have access to a copy of the Annual Report each year. You will also receive Notices to Shareholders in respect of the Annual General Meetings and any other general meetings. When dividends are paid, detailed information will be sent to you for inclusion in your tax return. You will also receive a summary of share plan awards provided to you during the year. This report is to be provided shortly after 30 June each year. Q. Will I get the benefit of any bonus shares? A. If the Company issues bonus shares in respect of ordinary shares, they will be issued to all shareholders including participants in the Plan. Participants bonus shares will Last amended on 1/09/2011 6:13 PM Page 6
be subject to the same restrictions on trading as the underlying Plan shares to which they relate. Transferring the shares Q. Can I give my shares to my family? A. The shares cannot be transferred until at least three years have elapsed from the date of grant of the shares or earlier if you have ceased to be employed by the Company or a Group Company. If you wish to transfer shares to a family member after that, it would be as a normal share transfer. Q. What happens if I die? A. Shares to which you are entitled will form part of your estate. A Quick Guide to Owning Shares Q. What are shares? A. A company is a way for a group of people to invest in a business. So that it is clear how much of the company each person owns, ownership is divided into shares and each owner is allocated a number of shares representing the interest held in the company. These shares can be bought and sold. Where a company is listed on the ASX (as Newcrest is), the ASX provides a market place for buying and selling the shares. Q. Why own shares? A. Many people in Australia and around the world invest in shares as a way of participating in a business. If the company makes profits, it can then declare a dividend which is paid to the shareholders. In this way shareholders participate in the company s prosperity. Q. How do people buy and sell shares? A. Most people buy and sell their shares on the ASX through stockbrokers. If you wish to sell your shares after they become unrestricted, you may contact the ASX for a list of stockbrokers. Q. What are the risks in owning shares? A. There are some risks in all investments. Share prices can go up or down. However apart from this, the owner of a fully paid share has no personal risk because he or she has the protection of the limited liability of the Company. This means that even if some unforeseen event affects the Company, creditors cannot require the shareholders of fully paid shares to pay in more funds. Newcrest shares are fully paid shares. Last amended on 1/09/2011 6:13 PM Page 7
Share Terminology The Australian Securities Exchange (ASX) The ASX is a regulated market where shares and other securities are bought and sold. For companies listed on the ASX (as Newcrest is), most share transactions take place through the ASX. The aim of the ASX is to provide a fair and well-informed market, to maintain investor protection in their dealings and to protect the reputation of the market. Floats Many businesses start off as unlisted companies owned by a small group of people who are actively involved in the day to day operations. When a business becomes large and needs more capital, often an approach is made to the public to buy shares issued by the company. This gives the company the capital it needs to carry on business. Where this is done the company is said to have gone public or to have been floated. Directors The shareholders elect the directors to oversee the running of the company by management on the shareholders behalf. The election of directors is usually conducted at the Annual General Meeting of the company. The directors report to the shareholders at least twice each year on the financial state of the company. The directors duties are to oversee the management of the company and to act honestly, in good faith and in the company s best interest. Directors are required to apply care, skill and diligence to the exercise of their duties. Boards usually include executive and non-executive directors. Executive directors are those who are also employed by the company. Dividends When a company makes a profit, it may distribute part of this profit to the shareholders by declaring a dividend of a fixed amount payable in relation to each share held. The rest of the profit may be used for new projects, to repay borrowings or supplement working capital requirements, amongst other things. The Board determines whether it pays a dividend and if so, how much. In some years, a company may not declare a dividend. Franked dividends Most companies pay company tax on profits before dividends are paid to the shareholders out of those profits. The amount of company tax paid by the company can reduce the amount of tax payable by the shareholder on the dividends. This is known as franking of company dividends. When a dividend is paid, the Company will tell its shareholders whether or not the dividend is franked and, if it is, the amount of franking credits which are included. This information will be required by the shareholder when preparing their personal tax return. Market Price The market price of shares is the actual price paid when shares are bought or sold on the ASX. The market price of a share can go up and down in the course of a day. Last amended on 1/09/2011 6:13 PM Page 8
Listed Company A listed company is a company whose shares are quoted on a Stock Exchange. Newcrest shares are quoted on the Australian Securities Exchange (ASX). The ASX makes rules (the Listing Rules) which are intended to ensure that listed companies conduct their businesses openly and fairly and so as to protect the rights of the shareholders. Annual Reports The Corporations Act and the Listing Rules require listed companies to issue various reports and make public certain types of information. This includes Annual Reports and Half-yearly Reports on the financial results and on the company s activities and future plans. The Annual Report also sets out information about the directors and senior executives, and usually includes advice from the Chairman and Managing Director on how the company is performing and where it is heading. Statement of Financial Performance The Statement of Financial Performance sets out how well the company has performed in terms of income, expenses and profitability for the year. Statement of Financial Position The Statement of Financial Position is a summary of the assets and liabilities of the company at a particular date. It shows whether the company has more assets than liabilities, how much of its funds are borrowed and how much comprise shareholders funds. Holding Statement Share certificates are no longer required to evidence shareholding. A holding statement is issued to evidence shareholding details. How to Read the Sharemarket Lists Major newspapers and various web sites publish lists of shares with information about the buying and selling of the shares. Some of the information usually provided is explained below. The lists typically separate the industrial shares and the mining and oil shares. They list the shares by company name in alphabetical order. There may be several kinds of share for each company. Important columns are as follows. 52 week High and Low These columns show the highest and lowest prices for the shares over the preceding 52 weeks. Last sale This is the price at which the shares were sold at the last sale of the previous day s trading. + or - The change in price from the previous day s last sale. Last amended on 1/09/2011 6:13 PM Page 9
Vol 000 s or Turnover 000 s The number of shares (in thousands) traded in the day s trading. Quote: Buy and Sell The highest bid made to buy and the lowest bid made to sell at the close of the day s trading. Div d per share The rate of the last dividend paid in cents per share Div yield % This is the dividend yield which is the amount of the annual dividend per share divided by the share price, as a percentage. This is a way of showing return on investment. Last amended on 1/09/2011 6:13 PM Page 10