22 Employee share ownership plans

Awards, in the form of the right to receive ordinary shares in either BHP Billiton Limited or BHP Billiton Plc, have been granted under the following employee share ownership plans: Long-Term Incentive Plan (LTIP), Short-Term Incentive Plan (STIP), Management Award Plan (MAP), Group Short-Term Incentive Plan (GSTIP), Transitional Executive KMP awards and the all-employee share plan, Shareplus.

Some awards are eligible to receive a cash payment, or the equivalent value in shares, equal to the dividend amount that would have been earned on the underlying shares awarded to those participants (the Dividend Equivalent Payment, or DEP). The DEP is provided to the participants once the underlying shares are allocated or transferred to them. Awards under the plans do not confer any rights to participate in a share issue; however, there is discretion under each of the plans to adjust the awards in response to a variation in the share capital of BHP Billiton Limited or BHP Billiton Plc.

The table below provides a description of each of the plans.


Plan	STIP and GSTIP	LTIP and MAP	Transitional Executive KMP awards	Shareplus
Type	Short-term incentive	Long-term incentive	Long-term incentive	All-employee share purchase plan


Overview	The STIP is a plan for the Executive KMP and the GSTIP is a plan for BHP senior management who are not KMP. Under both plans, half of the value of a participant’s short-term incentive amount is awarded as rights to receive BHP Billiton Limited or BHP Billiton Plc shares at the end of the vesting period.	The LTIP is a plan for Executive KMP and awards are granted annually. The MAP is a plan for BHP senior management who are not KMP. The number of share rights awarded is determined by a participant’s role and grade.	Awards may be granted to new Executive KMP recruited from within the Group to bridge the gap created by the different timeframes of the vesting of MAP awards, granted in their non-KMP role, and LTIP awards, granted to Executive KMP. No Transitional awards were granted to Executive KMP in FY2018.	Employees may contribute up to US$5,000 to acquire shares in any plan year. On the third anniversary of the start of a plan year, the Group will match the number of acquired shares.


Vesting conditions	Service condition only.	LTIP: Service and performance conditions. For awards granted from December 2013 onwards, BHP’s Total Shareholder Return (TSR)⁽¹⁾ performance relative to the Peer Group TSR over a five-year performance period determines the vesting of 67 per cent of the awards, while performance relative to the Index TSR (being the index value where the comparator group is a market index) determines the vesting of 33 per cent of the awards. For the awards to vest in full, BHP’s TSR⁽¹⁾ must exceed the Peer Group TSR and Index TSR (if applicable) by a specified percentage per year, determined for each grant by the Remuneration Committee. Since the establishment of the LTIP in 2004, this percentage has been set at 5.5 per cent per year. MAP: Service conditions only.	Service conditions and performance conditions. The Remuneration Committee has absolute discretion to determine if the performance condition has been met and whether any, all or part of the award will vest (or otherwise lapse), having regard to (but not limited to) the BHP’s TSR⁽¹⁾ over the three- or four-year performance period (respectively), the participant’s contribution to Group outcomes and the participant’s personal performance (with guidance on this assessment from the CEO).	Service conditions only.


Vesting period	2 years	LTIP – 5 years MAP – 1 to 5 years	3 years or 4 years	3 years


Dividend Equivalent Payment	Yes, except GSTIP awards granted after 1 July 2011	Yes, except MAP granted after 1 July 2011	No	No


Exercise period	None	LTIP – None MAP – None	None	None

⁽¹⁾	BHP’s TSR is the weighted average of the TSRs of BHP Billiton Limited and BHP Billiton Plc.

Employee share awards

2018

Number
of awards
at the
beginning
of the
financial
year

Number of
awards
issued
during the
year

Number of
awards
vested and
exercised

Number of
awards
lapsed

Number of
awards at
the end of
the
financial
year

Number of
awards
vested and
exercisable
at the end
of the
financial
year

Weighted
average
remaining
contractual
life (years)

BHP Billiton Limited

STIP awards

497,634

274,743

464,349

–

308,028

–

1.0

GSTIP awards

2,001,583

1,422,338

1,383,656

31,810

2,008,455

28,981

0.8

LTIP awards

4,679,513

1,523,309

65,247

156,600

5,980,975

–

2.5

Transitional OMC awards

137,194

–

61,485

28,869

46,840

–

0.7

MAP awards

7,348,428

5,731,891

2,185,614

515,442

10,379,263

60,134

1.5

Shareplus

5,998,517

2,483,091

3,184,545

521,984

4,775,079

–

1.2

Employee Share Plan shares (legacy plan)

338,883

–

338,883

–

n/a

BHP Billiton Plc

GSTIP awards

84,250

40,957

59,577

1,762

63,868

–

0.8

LTIP awards

386,912

–

74,988

311,924

–

n/a

MAP awards

596,443

133,926

406,783

8,135

315,451

–

1.3

Shareplus

336,108

137,832

165,450

26,331

282,159

–

1.2

Fair value and assumptions in the calculation of fair value for awards issued

2018

Weighted
average fair
value of
awards
granted
during the
year US$

Risk-free
interest
rate

Estimated
life of
awards

Share
price at
grant
date

Estimated
volatility
of share
price

Dividend
yield

BHP Billiton Limited

STIP awards

20.65

n/a

3 years

A$27.97

n/a

GSTIP awards

18.83

n/a

3 years

A$25.98

n/a

4.30

LTIP awards

13.11

2.08

5 years

A$27.97

33.0

n/a

MAP awards

18.37

n/a

1-2-3 years

A$25.98

n/a

4.30

Shareplus

18.12

1.85

3 years

A$24.00

n/a

4.33

BHP Billiton Plc

GSTIP awards

16.48

n/a

3 years

£13.29

n/a

5.10

MAP awards

15.62

n/a

1-2-3 years

£13.29

n/a

5.10

Shareplus

13.48

0.17

3 years

£12.34

n/a

5.10

Employee share awards expense is US$123.313 million (2017: US$106.214 million; 2016: US$140.445 million).⁽¹⁾

⁽¹⁾	Total employee share awards expense includes Onshore US. Refer to note 4 ‘Expenses and other income’ employee share awards for continuing operations.

Recognition and measurement

The fair value at grant date of equity-settled share awards is charged to the income statement over the period for which the benefits of employee services are expected to be derived. The fair values of awards granted were estimated using a Monte Carlo simulation methodology and Black-Scholes option pricing technique and consider the following factors:

•

exercise price;

•

expected life of the award;

•

current market price of the underlying shares;

•

expected volatility using an analysis of historic volatility over different rolling periods. For the LTIP, it is calculated for all sector comparators and the published MSCI World index;

•

expected dividends;

•

risk-free interest rate, which is an applicable government bond rate;

•

market-based performance hurdles;

•

non-vesting conditions.

Where awards are forfeited because non-market-based vesting conditions are not satisfied, the expense previously recognised is proportionately reversed.

The tax effect of awards granted is recognised in income tax expense, except to the extent that the total tax deductions are expected to exceed the cumulative remuneration expense. In this situation, the excess of the associated current or deferred tax is recognised in other comprehensive income and forms part of the employee share awards reserve. The fair value of awards as presented in the tables above represents the fair value at grant date.

In respect of employee share awards, the Group utilises the Billiton Employee Share Ownership Trust and the BHP Billiton Limited Employee Equity Trust. The trustees of these trusts are independent companies, resident in Jersey. The trusts use funds provided by the Group to acquire ordinary shares to enable awards to be made or satisfied. The ordinary shares may be acquired by purchase in the market or by subscription at not less than nominal value. The BHP Billiton Limited Employee Equity Trust has waived its rights to current and future dividends on shares held to meet future awards under the plans.