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Annual Report 2004/05

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Remuneration Report

Policy and Structure
Specific Remuneration Details
Employment Contracts


1. POLICY AND STRUCTURE

1.1 Board Policy Setting

The Board oversees the BlueScope Steel Human Resources Strategy, both directly and through the Remuneration and Organisation Committee of the Board. The purpose of the Committee as set out in its charter is "...to assist the Board to ensure that the Company:

- has a human resources strategy aligned to the overall business strategy, which supports "Our Bond";

- has coherent remuneration policies that are observed and that enable it to attract and retain executives and Directors who will create value for shareholders;

- fairly and responsibly rewards executives having regard to the performance of the Company, the creation of value for shareholders, the performance of the executive and the external remuneration environment; and

- plans and implements the development and succession of executive management."

As part of its charter the Committee considers remuneration strategy, policies and practices applicable to Non-Executive Directors, the Managing Director and Chief Executive Officer, senior managers and employees generally.

Input to the Committee's operations is sought from the Managing Director and Chief Executive Officer and the Executive Vice President People and Performance who both attend Committee meetings, as appropriate. In addition, advice is received from independent expert advisers in a number of areas including:

- Remuneration benchmarking

- Short term incentives

- Long term incentives

- Contract terms

The Board recognises that BlueScope Steel operates in a highly competitive global environment and that the performance of the Company depends on the quality of its people.

The Company's approach to remuneration for Non-Executive Directors and employees, with particular reference to salaried employees and senior managers is set out below.

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1.2 Non-Executive Directors' Remuneration

Fees and payments to Non-Executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. Non-Executive Directors' fees and payments are reviewed annually. The Board has sought the advice of an expert external remuneration consultant to ensure that fees and payments to Non-Executive Directors, the Chairman of the Board and the Chairman of Committees of the Board reflect their duties and are in line with the market. The Chairman is not present at any discussions relating to the determination of his own remuneration.

Non-Executive Directors do not receive share rights or other performance based rewards. Non-Executive Directors are expected to accumulate over time a shareholding in the Company at least equivalent in value to their annual remuneration. Non-Executive Directors are required to salary sacrifice a minimum of 10% of their remuneration each year and be provided with BlueScope Steel shares (instead of cash fees), which are acquired on-market in the approved policy windows. Shareholders approved this arrangement at the Annual General Meeting in November 2003, and Non-Executive Directors commenced participation in this arrangement in January 2004.

The current annual base fees for Non-Executive Directors are as follows:

- Chairman - $420,000

- Deputy Chairman - $220,000

- Directors - $140,000

The remuneration of the Chairman and Deputy Chairman is inclusive of Board Committee fees. Other Non-Executive Directors who chair a Board Committee receive additional yearly fees and members of the Audit and Risk Committee also receive an additional yearly fee on the basis of advice from the remuneration consultant. The current annual Committee Chair fees are as follows:

- Remuneration and Organisation Committee - $20,000

- Audit and Risk Committee - $30,000

- Health, Safety, Environment and Community Committee - $15,000 (Currently chaired by the Deputy Chairman of the Board so no fee is currently paid).

Members of the Audit and Risk Committee (other than Chairman and Deputy Chairman of Board and the Chairman of the Committee) receive a fee of $15,000 per annum.

Mr Tan (a resident of Singapore) receives a travel and representation allowance recognising his involvement in representing the Board in activities with BlueScope Steel's Asian business and the significant travel requirement imposed in respect of his attendance at meetings. This allowance is currently $20,000 per annum.

Non-Executive Directors' fees are determined within an aggregate Directors' fee pool limit, which is approved by shareholders. The maximum fee pool limit is $1,750,000 per annum (inclusive of superannuation) as approved by shareholders at the Annual General Meeting in 2003. As it has been 3 years since the fee limit was established, the Board believes it appropriate to seek shareholder approval at the forthcoming Annual General Meeting, to raise the maximum remuneration payable to $2,250,000 per annum (inclusive of superannuation). Approval will allow BlueScope Steel the flexibility to appoint another Director without exceeding the limit.

Compulsory superannuation contributions on behalf of each Director are paid in addition to the fees capped at $11,585. Non-Executive Directors do not receive any other retirement benefits.

Non-Executive Director Fees and payments will be next reviewed by an independent expert in January 2006.

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1.3 Salaried Employees

1.3.1. Principles

BlueScope Steel has approximately 7,600 salaried employees. Other employees are covered by Collective Agreements or statutory instruments in the countries in which BlueScope Steel operates.

BlueScope Steel's remuneration and reward practices aim to attract, motivate and retain talent of the highest calibre and support "Our Bond" by creating distinguishable differences in remuneration, consistent with performance.

The Company's salaried remuneration framework is designed to:

- make a clear link between rewarding employees and the creation of value for the shareholders and the business.

- Recognise and reward individual performance and accountability for key job goals.

- Provide distinguishable remuneration differences between levels.

- Maintain a competitive remuneration level relative to the markets in which the Company operates.

The framework is built on an appropriate mix of base salary/pay (including work and expense related allowances), variable pay/short term incentives and long term equity participation opportunities.

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1.3.2 Base Salary/Pay

Base salary/pay is determined by reference to the scope and nature of an individual's role, performance, experience, work requirements and market data.

Market data is obtained from external sources to establish appropriate guidelines for positions, with the goal to pay slightly above median.

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1.3.3 Variable Pay and Short Term Incentives

Most employees have access to a variable/at risk component of remuneration in the form of a performance related pay, or other variable pay schemes in which reward is at risk. All senior managers and many salaried employees participate in a formal short term incentive plan.

The Short Term Incentive Plan (STI) is an annual "at risk" cash bonus scheme which is structured to deliver total compensation in the upper quartile for the respective market group when stretch performance is attained. STI awards are not an entitlement but rather the reward for overall company results and the individual or team contribution to performance. The scheme is applied at the discretion of the Board which has established rules and protocols to ensure that STI payments are aligned with organisation and individual performance outcomes. Target Short Term Incentive levels are set having regard to appropriate levels in the market and range from 10% of base salary through to 100% at CEO level. For outstanding results, participants may receive up to 150% of their target bonus amount.

Goals are established for each participant under the following categories which are drawn from the "Our Bond" charter. Each year objectives are selected to focus on key areas which underpin the achievement of outstanding performance including:

- Shareholder Value Delivery - financial performance measures are used including Net Profit After Tax, Cash Flow, and Earnings Before Interest and Tax. Company wide financial performance goals are predetermined by the Board with the goals for the combined individual businesses required to exceed the overall goal. A minimum of 30% of STI Plans at senior manager level (with 60% at CEO level), is based on BlueScope Steel wide financials. For other participants, 20% of the Plan is based on BlueScope Steel corporate financials.

- Zero Harm - safety and environmental performance measures, including Lost Time Injury Frequency Rates, Medical Treatment Injury Frequency Rates and environmental measures.

- Business Excellence - performance measures for the financial year ended 30 June 2005 were focused on delivery performance, days of inventory and quality measures.

- Strategy - implementation of specific longer term strategic initiatives.

STI Plans are developed using a balanced approach to Financial/Shareholder value and Key Performance Indicator (KPI) metrics. At the senior executive level, 60% of the STI award is based on Financial/Shareholder value measures with 40% based on KPI metrics. For other participants, 50% of the STI award is based on Financial/Shareholder value measures and 50% is based on KPI metrics.

Predetermined performance conditions including threshold, target and stretch hurdles are set for each plan and are assessed against these conditions using quantified and verifiable measures or an assessment of value contribution. Target levels are set having regard to the desired result for each goal. The applicable threshold and stretch ranges are set taking into account the degree of stretch inherent in the target. The threshold is the minimum performance level for which a payment will be made. The stretch is the maximum level. Consequently, if threshold is not reached, no payment is made in respect of that goal.

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1.3.4 Equity Based Opportunities

The Board gives consideration each year to the creation of opportunities for employees to participate as equity owners in the Company based on Company performance and other relevant factors. Shareholder approval is sought for any shares or share rights to be granted to the Managing Director and Chief Executive Officer.

a) Employee Share Plans

In August 2004, all employees were invited to participate in a scheme which provided for a grant of 150 ordinary BlueScope Steel shares (or a reward of equal value in countries where the issue of shares was not practicable). The aim of the Plan was to assist employees to build a stake in the Company by providing each eligible employee with a parcel of shares, at no cost to the employee. Employees who become shareholders have the potential to benefit from dividends paid on the shares, growth in the market value of their shares and any bonus shares or rights issues the Board of Directors may approve from time to time.

The form of the share offer depended on local regulations and tax laws. In Australia, eligible employees were offered shares with a restriction on trading of these shares for 3 years. Over 99% of employees worldwide who were offered shares participated in the Plan.

The allocation of shares to employees under such schemes and the form of the offer is at the discretion of the Board and is considered on a year by year basis.

b) Long Term Incentive Plan - Approach

Consideration is also given on an annual basis to the award of share rights to senior managers under the Long Term Incentive Plan. The Long Term Incentive Plan is designed to reward senior managers for long term value creation. It is part of the Company's overall recognition and retention strategy having regard to the long term incentives awarded to senior managers in the markets in which the Company operates.

The decision to make an award of share rights is made annually by the Board. Individual participation is determined based on the:

- Strategic significance of the role and outcomes achieved.

- Impact on strategic outcomes in terms of special achievements or requirements.

- Future potential and succession planning requirements.

- Performance and personal effectiveness in achieving outstanding results.

Details of the awards under the Plan since the demerger are set out below. In summary, the main features of the Plan is as follows:

- The awards are generally made in the form of share rights (with the exception of part of the July 2002 award as set out below). Share rights are a right to acquire an ordinary share in BlueScope Steel at a later date subject to the satisfaction of certain performance criteria.

- The vesting of share rights under the Plan requires a sustained performance over a number of years (usually 3) with a hurdle based on Total Shareholder Return (TSR) relative to the TSR of the companies in the S&P/ASX 100 index at the award grant date. The hurdles have been set to underpin the creation of superior Total Shareholder Return in the context of the top 100 Australian Companies.

- The share rights available for exercise are contingent on BlueScope Steel's ranking - TSR percentile with either a stepped vesting (2002 awards) or a sliding scale (2003 and 2004 awards) with the minimum ranking for vesting being the 51st percentile. With sliding scale vesting the total number of share rights that vest for a senior manager increase proportionally as BlueScope Steel's TSR percentile ranking increases. The sliding scale introduced in 2003 was based on advice from an external remuneration consultant and was part of a review which balanced short and long term risk in the short and long term incentive schemes.

- Given the potential volatility of the Company's earnings and the cyclical nature of the markets in which the Company operates, provision is generally made for limited retesting on a predetermined basis (however, this does not apply to the September 2002 award).

- Any share rights which do not vest, lapse on resignation or termination for cause or at the expiry of the relevant performance period, which ever comes first.

- The Board has discretion to vest share rights in the event of a change in control. The Board has determined that any outstanding share rights can vest before the end of the performance period if a "change in control" occurs. Vesting at this time will depend upon early testing of the relevant performance hurdles at that time. A "change of control" is generally an entity acquiring unconditionally more than 50% of the issued shares of the Company.

- External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of the Executive Share Rights at grant date for each award. The valuation has been made using the Binomial Option Pricing Model using standard option pricing inputs such as the underlying stock price, exercise price, expected dividends, expected risk free interest rates and expected share price volatility. In addition, specific factors in relation to the likely achievement of performance hurdles and employment tenure have been taken into account.

The July 2002 award, which was tested on 30 September 2004 against the set performance hurdles, achieved the TSR performance hurdle at the 100th percentile. Accordingly, all share rights outstanding for this award vested having regard to the outstanding performance achieved.

The September 2002 award has an additional restriction that any shares acquired under this award cannot be sold prior to 30 September 2007 and any participant who resigns during this two year holding period forfeits any shares acquired under this award, unless the Board (in its absolute discretion) determines otherwise.

In September 2004, 201 senior and high potential managers were invited to participate in the Long Term Incentive Plan.

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c) Long Term Incentive Plan - Outline of Specific Awards

(i) July 2002 Award

Nominated executives were awarded share rights in BlueScope Steel Limited in lieu of the awards that would otherwise have been made under BHP Billiton Limited's Long Term Incentive Plan in October 2001. For this award, a once-only increase equivalent to an additional 50% of the value of the award was made. This once-only increase was to recognise that, but for the BlueScope Steel demerger, the nominated employees would have been eligible for an award under the BHP Billiton Limited's Long Term Incentive Plan in October 2001, and the first performance period under the BlueScope Steel Long Term Incentive Plan was shorter than the three year period usually adopted under BHP Billiton Limited's plan.

 

 Vesting Requirements

TSR Performance Hurdle

First Performance Period
% of Share Rights that Vest
Second Performance Period
% of Share Rights that Vest



80th - 100th percentile 100% 50%
70th - < 80th percentile 90% 50%
60th - < 70th percentile 70% 50%
50th - < 60th percentile 50% 50%
< 50th percentile 50% of share rights awarded lapse and 50% to be carried over to a second performance period at the Board's discretion None - all unvested share rights lapse immediately.

 

 Details of the July 2002 Award


Market Price Share Rights Nil Priced Share Rights



Grant Date 25 July 2002 25 July 2002
Exercise Date (subject to
vesting requirements)
From 30 September 2004 From 30 September 2004
Latest Expiry Date 25 July 2007 31 March 2006
Share Rights Granted 14,355,000 2,800,300
Number of Participants at Grant Date 105 12
Number of Current Participants 3 11
Exercise Price(1) $2.85 Nil
Fair Value Estimate at Grant Date(2) $5,742,000 $3,276,351
Share Rights Lapsed since Grant Date 1,265,394 194,900
Performance hurdle achieved 100% 100%
Number of Share Rights Vested 13,089,606 2,605,400
Number of Share Rights Exercised 12,808,655 2,605,400
Number of participants at Exercise Date 100 11
Share Rights still to be Exercised 280,951 -

1  The share rights awarded in July 2002 comprised both nil priced and market priced share rights. The exercise price established for the Market Priced Share Rights was based on the volume weighted average price of the BlueScope Steel Limited shares sold under the sale facility at the time of the demerger from BHP Billiton and BlueScope Steel shares on the Australian Stock Exchange during the first five trading days. Selected executives received Share Rights with a nil exercise price.
2  External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of the Executive Share Rights at grant date. Currently, these fair values are not recognised as expenses in the financial statements. However, were these grants to have been expensed they would have been amortised over the vesting period resulting in an estimated increase in employee benefits expense of $1.04 million for the 2005 (2004: $4.2 million) financial year. Note that no adjustments to these amounts have been made to reflect actual forfeiture of shares.

 

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 (ii) September 2002 Award

 Vesting Requirements

TSR Performance Hurdle % of Share Rights that Vest


80th - 100th percentile 100%
70th - < 80th percentile 90%
60th - < 70th percentile 70%
51st - < 60th percentile 50%
< 51st percentile None - all unvested share rights will lapse immediately.

 

 Details of the September 2002 Award

  Nil Priced Share Rights


Grant Date 30 September 2002
Exercise Date (Subject to vesting requirements) From 1 October 2005
Expiry Date 30 September 2006
Share Rights Granted 4,751,500
Number of Participants at Grant Date 119
Number of current Participants 116
Exercise Price Nil
Fair Value Estimate at Grant Date1 $4,656,470
Share Rights Lapsed since Grant Date 282,621

1 External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of the Executive Share Rights at grant date. Currently, these fair values are not recognised as expenses in the financial statements. However, were these grants to have been expensed they would have been amortised over the vesting period resulting in an estimated increase in employee benefits expense of $1.55 million for the year ended 30 June 2005 (2004: $1.55 million). Note that no adjustment to this amount has been made to reflect actual forfeiture of shares.

 

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 (iii) September 2003 Award

 Vesting Requirements

TSR Performance Hurdle % of Share Rights that Vest


75th - 100th percentile 100%
51st - < 75th percentile A minimum of 52% plus a further 2% for each increased percentage ranking. Any unvested share rights will be carried over to be assessed at subsequent performance periods.
< 51st percentile All share rights will be carried over to be assessed at subsequent performance periods.


If the performance hurdles are not met at the end of the first performance period (or are only partially met), four subsequent performance periods will apply. The subsequent performance periods commence on 1 October 2003 and end on 31 March 2007, 30 September 2007, 31 March 2008 and 30 September 2008 respectively. Vesting at a subsequent performance period will only occur if the vesting requirements have been met and any previous percentile rankings are exceeded.

 

 Details of the September 2003 Award

  Nil Priced Share Rights


Grant Date 24 October 2003 (All executives excluding Managing Director and Chief Executive Officer)
13 November 2003 (Managing Director and Chief Executive Officer)
Exercise Date (subject to vesting requirements) From 1 October 2006
Expiry Date 30 September 2008
Share Rights Granted 3,183,800
Number of Participants at Grant Date 144
Number of current Participants 141
Exercise Price Nil
Fair Value Estimate at Grant Date1 $9,678,752
Share Rights Lapsed since Grant Date 109,453

1 External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of the Executive Share Rights at grant date. Currently, these fair values are not recognised as expenses in the financial statements. However, were these grants to have been expensed they would have been amortised over the vesting period resulting in an estimated increase in employee benefits expense of $3.3 million for the year ended 30 June 2005 (2004: $2.3 million). Note that no adjustment to this amount has been made to reflect actual forfeiture of shares.

 

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(iv) September 2004 Award

 Vesting Requirements

TSR Performance Hurdle % of Share Rights that Vest


75th - 100th percentile 100%
51st - < 75th percentile A minimum of 52% plus a further 2% for each percentage ranking. Any unvested share rights will be carried over to be assessed at subsequent performance periods.
< 51st percentile All share rights will be carried over to be assessed at subsequent performance periods.


If the performance hurdles are not met at the end of the first performance period (or are only partially met), four subsequent performance periods will apply. The subsequent performance periods commence on 1 September 2004 and end on 29 February 2008, 31 August 2008, 28 February 2009 and 31 August 2009 respectively. Vesting at a subsequent performance period will only occur if the vesting requirements have been met and any previous percentile rankings are exceeded.

 

Details of the September 2004 Award

  Nil Priced Share Rights


Grant Date2 31 August 2004
Exercise Date (subject to vesting requirements) From 1 September 2007
Expiry Date 31 October 2009
Share Rights Granted 2,306,400
Number of Participants at Grant Date 201
Number of current Participants 200
Exercise Price Nil
Fair Value Estimate at Grant Date1 $11,139,912
Share Rights Lapsed since Grant Date 6000

1 External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of the Executive Share Rights at grant date. Currently, these fair values are not recognised as expenses in the financial statements. However, were these grants to have been expensed they would have been amortised over the vesting period resulting in an estimated increase in employee benefits expense of $2.3 million for the year ended 30 June 2005. Note that no adjustment to this amount has been made to reflect actual forfeiture of shares.
2 The award granted on 31 August 2004 to the Managing Director and Chief Executive Officer was subject to Shareholder approval at the 2004 Annual General Meeting.

d) Special Share Rights Awards

Special Share Rights are awarded by the Board from time to time to meet specific or exceptional demands. In 2004, special share rights were awarded to two executives to facilitate the effective integration and turn around of the North America Coated and Building Products business, the effective integration of the China operations of BlueScope Butler and successful completion of Asian capital expansion. The awards have been made in the form of share rights in 2 tranches which are vested on the achievement of specific performance objectives determined by the Managing Director and Chief Executive Officer and the Chairman of the Board. The performance hurdles set are tested at the end of each performance period (i.e. 30 June 2005 for Tranche 1 and 30 June 2006 for Tranche 2). Any unvested share rights rolled over from Tranche 1 which did not meet the performance hurdles are added to the Tranche 2 award and new performance hurdles determined for the period 1 July 2005 - 30 June 2006. No tranche 1 special share rights were vested.

e) Employee Share Purchase Plan

Facility is also made available, to Australian employees only at this stage, to be provided with shares at market prices through salary sacrifice from salary or incentives/bonuses. Under the purchase plan, shares can be provided on a tax deferred basis and therefore sale or transfer is restricted. Shares provided under the Plan are entitled to participate in dividends.

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1.3.5 Superannuation

BlueScope Steel operates superannuation funds in Australia, New Zealand and North America for its employees. In these locations there are a combination of defined benefit and accumulation type plans. The defined benefit schemes are closed to new members.

Contributions are also made to other international superannuation plans for employees outside of Australia, New Zealand and North America.

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1.3.6 Other Benefits

Additionally, executives are eligible to participate in an annual health assessment program designed to safeguard the Company against the loss or long term absence for health related reasons.

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2. RELATIONSHIP BETWEEN COMPANY PERFORMANCE AND REMUNERATION

The graph set out below outlines the performance of BlueScope Steel in terms of Total Shareholder Return compared to the performance of the S&P/ASX 100 for the same period. The TSR Index for BlueScope Steel as at 30 June 2005 was 314.9 compared to 151.2 for the S&P/ASX 100.

BLUESCOPE STEEL LIMITED

TOTAL SHAREHOLDER RETURN INDEX COMPARED TO S&P/ASX100
15/07/02 TO 30/06/05


Graph

An analysis of other Company performance and performance related remuneration data relating to the nominated senior Corporate executives set out in Section 3 over the same period are set out in the tables below:

 BlueScope Steel Performance Analysis

Measure 30 June 2002 30 June 2003 30 June 2004 30 June 2005





Share Price $2.85 (1) $3.72 $6.74 $8.23
Change in Share Price $ - $0.87 $3.02 $1.49
Change in Share Price % - 30.5% 81.2% 22.1%
Dividend Per Share N/A 0.29 cents 0.40 cents 0.62 cents
Earnings Per Share N/A 57.1 cents 77.8 cents 137.4 cents
NPAT $m N/A $452m $584m $1,007m
  % movement N/A - 29.2% 72.4%
EBIT $m $160m $611m $818m $1388m
  % movement - 282% 34% 70%
EBITDA $m $412m $881m $1105m $1696
  % movement - 114% 25% 53%

(1) Share Price as at 15 July 2002

As reflected in the table above, over the total period:
-  EBITDA has increased by 312% since 30 June 2002.
-  EBIT has increased by 768% since 30 June 2002.
-  Earnings per share for the two years ended 30 June 2003 to 30 June 2005 have increased by 141%.

BSL Performance Related Remuneration Analysis for Senior Corporate Executives

Measure
Year ended
30 June 2003
Year ended
30 June 2004
Year ended
30 June 2005




Average % increase in short term incentive Payments 1st year 1.9 12.3

The Board Remuneration Strategy short term incentive component takes into account business unit financial performances and non financial and strategic hurdles. Market consensus on future earnings is also taken into account in setting financial targets as these take into account forecast movements in steel prices, exchange rate and other external factors likely to impact financial performance. Some participants in short term incentives have not met all of the hurdles with the result that some short term incentive payments have been below the possible maximum level. On average, the short term incentives payable to the Managing Director and Chief Executive Officer and other senior nominated executives was 100% of the potential short term incentive which could be awarded, which reflects the outstanding results achieved this year.

In relation to long term incentives, share price and earnings performance have been in the top percentile when measured against the Companies in the S&P/ASX 100 index and this performance is the key factor impacting the value of long term equity incentives and their likelihood of meeting the required hurdles for vesting.

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3. SPECIFIC REMUNERATION DETAILS

3.1 Directors

Details of the audited remuneration for the year ended 30 June 2005 for each Non-Executive Director of BlueScope Steel is set out in the following table.

  PRIMARY POST-EMPLOYMENT





  BASE FEE
       
Name Cash Salary Sacrifice Committee Fee /
Allowance
Other Superannuation Total


$
$
$
$
$
$
GJ Kraehe 340,304 37,811 - 6,678 11,585 396,378
RJ McNeilly 168,681 18,742 - - 11,585 199,008
J Crabb
(resigned 27 July 2004)
10,577 - 1,269 - 1,337 13,183
DJ Grady 73,199 52,839 20,000 - 11,585 157,623
HK McCann 111,935 14,103 15,000 - 11,585 152,623
PJ Rizzo 120,844 16,779 30,000 - - 167,623
Tan YP 111,434 14,604 20,000 - 11,585 157,623

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3.2 Details of senior executives' (including the Managing Director and Chief Executive Officer's) remuneration

The audited information contained in the table below represents the annual remuneration for the year ended 30 June 2005 for the Managing Director and Chief Executive Officer and the six most highly remunerated executives responsible for the strategic and operational direction of the Company.

In addition there was one Business Unit executive who met the requirement for remuneration disclosure for the financial year ended 30 June 2005, being Mr Alossi, President BlueScope Buildings, China.

  PRIMARY
POST-EMPLOYMENT EQUITY
 







Name Cash Salary and Fees At Risk Cash Bonus(1) Other Sub total Superannuation Share Rights
(2)
Total

$ $ $ $ $ $ $








EXECUTIVE DIRECTOR              
KC Adams - Managing Director and CEO 1,411,442 2,131,250     8,302     3,550,994 207,482 803,956 4,562,432
EXECUTIVES              
LE Hockridge - President
BlueScope Steel North America
(effective 1 April 2005, formerly
President Industrial Markets)
630,161 600,000     67,011     1,297,172 90,490 294,664 1,682,326
BG Kruger - Chief Financial Officer 525,747 470,000     -     995,747 76,779 230,439 1,302,965
KJ Fagg - President Market and Logistics Solutions 526,385 470,000     -     996,385 73,769 250,400 1,320,554
NH Cornish - President Australian Building and Manufacturing Markets 476,318 430,000     -     906,318 69,497 217,821 1,193,636
M Courtnall - President Asian Building and Manufacturing Markets 424,029 380,000     41,686     845,715 61,811 187,042 1,094,568
IR Cummin - Executive Vice President Human Resources 406,385 370,000     1,527     777,912 56,969 148,931 983,812
M Alossi - President BlueScope Buildings China 358,455 505,579(3) 414,811(4) 1,278,845 12,200 12,850 1,303,895

(1) Refer to Section 1.3.3 for details of the at risk cash bonus (Short-Term Incentive Plan). Amounts reflect the annual cash bonus for the year ended 30 June 2005 based on actual performance. Actual annual cash bonus amounts will be paid in September 2005.
(2) Valuation of equity remuneration in the form of share rights granted, excludes the effect of tenure risk. For each award, total fair value is pro-rated over the award period, from grant date to expected vesting date.
(3) Mr Alossi's previous employment agreement provided for a bonus for the 12 months ending 31 December 2004. 50% of that bonus has been included in the table above. Further Mr Alossi was eligible for a bonus for the 6 months ending 30 June 2005, which has been included above. Mr Alossi's contract has now been aligned with the BlueScope Steel STI Plan as outlined in Section 1.3.3.
(4) Mr Alossi is a US Expatriate with BlueScope Steel China. The non-monetary benefits indicated relate to benefits arising out of his assignment in China, including medical plan, housing, foreign and US taxes.

It should be noted that effective 1 July 2005, the following senior executives assumed new positions within the BlueScope Steel Limited organisation structure, with the exception of Mr Cummin who assumes his new role effective 1 September 2005.

Name New Title


BG Kruger President Australian Manufacturing Markets
KJ Fagg President Australian Building and Logistics Solutions
NH Cornish President Australian and New Zealand Industrial Markets
IR Cummin Executive Vice President People and Performance

 

Share Rights granted to the Managing Director and Chief Executive Officer and the top seven most highly remunerated executives during the financial year ended 30 June 2005 were as follows:

Name % of Remuneration
Consisting of
Share Rights (1)
Value of Share Rights
Granted during the Year
at Grant Date (2)
Value of Share Rights
exercised during
the year (3)
Value of Share Rights at
lapse date, that lapsed
during the year (4)





DIRECTORS        
K C Adams 18% 931,368 917,900 -
EXECUTIVES        
L E Hockridge 18% 353,118 388,332 -
B G Kruger 18% 277,046 296,542 -
K Fagg 20% 277,046 345,988 -
N Cornish 20% 250,832 296,542 -
M Courtnall 18% 222,048 236,510 -
I Cummin 16% 214,338 - -
M Alossi 1% 61,680 - -

(1) This figure is calculated on the value of share rights awarded in the year ended 30 June 2005 as a percentage of the total value of all remuneration received in that same year.
(2) External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of the Executive Share Rights. The valuation has been made using the Binomial Option Pricing Model using standard option pricing inputs such as the underlying stock price, exercise price, expected dividends, expected risk free interest rates and expected share price volatility. In addition, the likely achievement of performance hurdles of the share rights have been taken into account.
(3) External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of the Executive Share Rights for the July 2002 award that were exercised in the year ended 30 June 2005.
(4) Mr Hockridge and Mr Courtnall were awarded 20,000 and 10,000 Share Rights (Tranche 1) respectively under the Special Incentive award on 3 August 2004. Tranche 1 performance hurdles as at 30 June 2005 were not met. In accordance with the terms of the Special Share Rights Issue the Share Rights from Tranche 1 were rolled over into the second performance period. A further Award of 20,000 and 10,000 respectively (Tranche 2) have been awarded and both Tranches are subject to new performance hurdles as determined by the Board for the period 1 July 2005 - 30 June 2006. Refer to Section 1.3.4 (d) for further information.

The Share Rights Awarded to Executives under the July 2002 Award vested at the 100% level in September 2004.

Details of the audited Share Rights holdings for the specified executives are set out below:

Name Share Rights
Balance at
30 June 2004
Share Rights Granted in
year ended
30 June 2005
Share Rights Vested in
year ended
30 June 2005
Share Rights Lapsed
in year ended
30 June 2005
Share Rights
Balance at
30 June 2005






DIRECTORS          
K C Adams 1,448,800 181,200 685,000 - 945,000
EXECUTIVES          
L E Hockridge 552,900 68,700 289,800 - 331,800
B G Kruger 425,700 53,900 221,300 - 258,300
K Fagg 488,700 53,900 258,200 - 284,400
N Cornish 419,200 48,800 221,300 - 246,700
M Courtnall 342,300 43,200 176,500 - 209,000
I Cummin 94,700 41,700 - - 136,400
M Alossi - 12,000 - - 12,000

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4. EMPLOYMENT CONTRACTS

4.1 Managing Director and Chief Executive Officer - Outline Of Employment Contract

Outlined below are the key terms and conditions of employment contained within the employment contract for Mr Kirby Adams, the Managing Director and Chief Executive Officer.

Mr Adams' base employment contract conditions were determined prior to the demerger on 7 July 2002 and are regularly reviewed by the Board of BlueScope Steel. He receives an annual base pay of $1,425,000. This amount is reviewed on an annual basis in accordance with the Board's senior executive salary review policy. In addition, Mr Adams is eligible to participate in the Short Term Incentive Plan and, subject to shareholder approval, Long Term Incentive Plan awards.

Mr Adams may terminate the contract by giving three months' written notice, upon which he is entitled to his annual base pay, which has been accrued but not paid up to the date of termination, plus any vested awards under the Long Term Incentive Plan, and any other payments for which he is eligible under the Short Term Incentive Plan. The Company may terminate the contract by giving one months' written notice (or a payment in lieu of notice based on Mr Adams' annual base pay) and a gross termination payment equal to 24 months of Mr Adams' annual base pay, plus any applicable Short Term Incentive Plan and Long Term Incentive Plan awards, and reimbursement for the reasonable costs of relocation from Australia to the United States of America. The Company may also terminate the contract on 30 days' notice in the event of serious misconduct or a serious breach of the contract. In this event, Mr Adams is only entitled to his annual base pay which has accrued but not been paid up to the date of termination plus any vested Long Term Incentive Plan awards.

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4.2 Other Specified Executives

Remuneration and other terms of employment for the other specified executives set out above are formalised in employment contracts which can be terminated with notice. Each of these agreements provide for the annual review of annual base pay, provision of performance-related cash bonuses, other benefits including annual health assessment, and participation, when eligible, in the Long Term Incentive Plan. The contracts provide for notice of one to six months for resignation by the executive or termination by the Company. In the event of termination by the Company other than for cause, a termination payment of 12 months pay or the Company Redundancy Policy, whichever is the greater, will apply. The Company Redundancy Policy provides for 14 weeks pay plus 2.5 weeks for each year of service.

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