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l Companies 18 l Financial Services 41 l Property 46 l M en ’s H eal th 5 8 l Editorial 62www.afr.com

BHP turnshostile in$44bn bid

Leasing rulesnew liabilityfor top 20Kate Burgess

Australia’s 20 largest companies willhavetobookacombined$40billionintheir balance sheets under new rulesthat will force them to recogniseoperating leases as a liability for the

first time.The rules, issued by the London- based International AccountingStandards Board yesterday, willrequire airlines, retailers and othercompanies to recognise billions of dollars of leased assets now held off balance sheet.

The changes will increase debtlevels, putting some companies inbreach of debt covenants, making itharder for businesses tryi ng to securefinancei n thenexttwoyears.

When the changes are adopted,Woolworths will have to increaseliabilities on its balance sheet by$4.96 bil lion, Wesfarmers by$4.73 billionand Qantas by $3.96 billion, based on their most recentaccounts.

The accounting rulemakers hopethe changes will stop companies

window dressing their accounts byunder-reporting liabilities.

“Thiswillendoneofthebigrortsinaccounting. The lease standard is notprecise andcompanies have beenableto leave major assets off their balancesheets,” Grant Thornton partnerKeith Reilly said.

The new rules will also hit banksContinued page 4

Jamie Freed and Anthony Hughes NEW YORK

BHP Billiton has upped the stakes inits bid for Potash Corporation of Sas- katchewan, formally launching ahostile bid and declaring itself the

“natural owner’’ of the world’s big- gest supplier of the prized fertiliser.After meeting in Melbourne yes-

terday, the BHP board decided to testinvestors’ appetite for a change of control by formalisi ng the $US130-a- share bid that was spurned by thePotashCorp board as “grossly inade- quate’’ just hours earlier.

The decision, and a sharp spike inthe PotashCorp share price has led tospeculation BHP could eventuallyboost the price of the offer, an outcome BHP chief executive MariusKloppers yesterday refused to ruleout.

Mr Kloppers said the launch of what would rank as the world’s big- gest resources takeover would allowthe company to add to its base of world-class assets at a time of i n- c re as ing d em and for soft

commodities.“We are driven bya belief thatpot-

ash mining has good long-term industry fundamentals and significantgrowth potential, which in its sim- plest form is underpinned by a grow-

Continued page 22

n $6.2bn surplus in 2012 13 n New savings from public sector n Labor claims costing blunder

Coalition promises bigger surplusLaura Tingle and Lisa Murray

The Coalition has claimed it willalmost double the budget surplusforecast by Labor for 2012-13, but itssurplus of $6.2 billion h as been builton an accounting ploy, more cuts tothe public service and a “border protection dividend”.

Havingrefusedtosubmittheirmostexpensive policy promises and sav-

ings measures for official costing,shadow treasurer Joe Hockey and opposition finance spokesman AndrewRobb released updated costings

figures yesterday. The delayed releaseuntil late afternoon provoked newattacks from the government aboutthe Coalition’s refusal to have its

figures properly scrutinised.Mr Hockey andMr Robbsaid their

savings measures would help cut debtby $30 billion within four years andimprove the budget bottom line by$11.5 bill ion over the next four years,despite their having made spendingcommitments worth $38 billion during the electioncampaign.

About $22 billion of the cut in debtwill come from forecast proceeds

from selling Medibank Private andfrom notcontinuing withthe nationalbroadband network.

The costing release camebefore thetown hall-style meetings with Opposi- tion Leader Tony Abbott and PrimeMinister Julia Gillard last night inBrisbane, although there was no face-

Continued page 8

It’s not so taxing for the big minersNeil Chenoweth

Themanleadingthecampaigntostopthe government’s mi nerals resourcerent tax, billionaire Andrew Forrest,has never signed a corporate incometaxchequeforany ofthe listedcompa- nies hehas run in thepast16 years.

He isn’t the only billionaire minerwith fortuitous tax arrangements;

Clive Palmer’stax payments remain amystery – his Mineralogy Groupfiles no accounts – and Gina Rine- hart’s Hancock Prospecting, thanksto exploration costs, averaged a10.6 per cent tax rate over a five-yearperiod.

But Forrest, who yesterday chal- lengedPrimeMinisterJuliaGillardtodebate the mining tax, holds an awk-

wardpositionwhenitcomestotaxpol- icy:he is a bigcorporatetaxpayer whodoesn’t actually make any corporateincometax payments.

Forrest holds the ear of politicianson both sides, not just for his pioneer- ing mining efforts but for his philan-

Continued page 60

Steven, (left) Frank and Peter Lowy inspect work at the new Westfieldcentre in Pitt Street, Sydney. Westfield yesterday reported a better thanexpected half year result. Full report: Property, page 46

Photo: LOUIE DOUVIS

Westfield fights back

‘The Coalition would be less likely to waste taxpayers’ money on risky projects than Labor, less inclined to sacrifice efficiency for fairness and protect weakindustries and more likely to embrace productivity boosting reforms in

welfare, tax and – hopefully by 2013 – the workplace.’ Editorial, page 62

Mining tax debate, page 10 n

Reports, analysis, pages 8-14n

Full coverage, pages 22-24 nChanticleer, back page n

y DFO bailout favoured

ACCC chairman GraemeSamuel steps down fromNAB/AXA bid over conflictof interest. Page 3

y ANZ moveson AFS

Lender seeks tomake up ground inwealth management.Page 41

y Resourcesdaily online

Get the latest newsfrom the miningand energy sectors,only on afr.com

y Results round upWoodside blames Chevron for Pluto delay,Boral warns of tough outlook. Plus: Gunns focuses on Bell Bay partner, CSL, Fletcher,Domino’s, Henderson, DEXUS.

Pages 18 21, 41, 46 51, 57

FBA 001



60 FEATURES The Australian Financial Review

Thursday 19 August 2010 l www.afr.com

Charity begins at home

It’s not just A ndrew Forrest’s voice in thetax debate that makes politicians of allcolours listen to him. When OppositionLeader Tony Abbott reached out toForrest last week, it was to tap his

expertise in helping i ndigenous workers.Forrest’s demonstrated comm itment toindigenous employment makes hi m invaluableto whoever is in government. By standi ng nearForrest, politicians can say they are making adifference.

It’s a unique position. While the governmentprovides fundi ng for GenerationOne, theorganisation’s website is owned by Forrest’scharity, the Australian Children’s Trust (ACT),which also supplies G enOne’s chief executive,the former national secretary of the AustralianLabor Party, Tim Gartrell.

Forrest also actively supports the AustralianEmployment Covenant, another organisationpromoting i ndigenous employment. While thefederal government supported setting up theCovenant, its operating company, AustralianCovenant, is a subsidiary of Forrest’s companyLeaping Joey, as trustee for the ACT.

But it is in his philanthropic work whereForrest’s record is most open to interpretation.While it hasn’t been his intention, falling shareprices and tax deductions have meant that mostof his donations to his ACT charity have beenpaid for by taxpayers.

Forrest declined to comment on The

Australian Financial Review ’s findings. Senioraccountants consulted by the AFR weresupportive of the AFR’s methodology butstressed that it was very difficult to say with certainty what i ncome or deduction outcomeseventuated from donations made i n the past.

While Forrest has donated more than$90 million in assets to his ACT charity –the

largest exercise in philanthropy in Australianhistory –the net personal cost to Forrest’sinterests is probably less than $2 million.

How that remarkable outcome eventuated –and how Forrest became the compassionateface of Big Mining – is a saga that beginsduring a car ride to the Anaconda Resourcesoffice on May 31, 2001, the day that majorshareholders Anglo American and Glencoreforced him out of the struggli ng company hehad founded seven years before.

“As I was driven into work I kept thinkingabout how I could make some good out of thi sdisaster and this treachery,” Forrest said in a2007 statement tabled in hi s court battles with the Australian Taxation Office. “I decided Iwould try to raise $10 million to $12 millionfor charity ... If Anglo, Glencore and

Anaconda agreed, and if I could negotiatesome protection for shareholders, mysupporters and I would go peacefully.”

Under the deal Forrest struck that morning,Anaconda would pay his $3.5 milliontermination fee to the ACT, the private charityhe and hi s wife Nicola would set up to promoteindigenous welfare, while Glencore would payanother $3.5 million into a charity that Forrestwould nomi nate.

It was a generous gesture, but one that wouldbecome controversial as the deal grew morecomplicated.

“In June or July 2001, Nicola and I ...decided to donate 3.5 mill ion of my shares tothe ACT,” he said i n the statement, quoted in a

Federal Court judgement last February. Whenthey made the decision for a donation “I h adnot thought of selling any of my shares to theACT”.

That had changed by September.“Anaconda’s share price h ad fallensubstantially from its high, and from the price Ihad bought some of my shares for,” he said i nthe court statement. “I had borrowedsubstantial sums of money to buy shares inAnaconda ... I was under financial pressurefrom my bank following the fall in the

Anaconda share price.”It was logical to sell the shares to his newcharity – Forrest said he believed the shareprice would recover, benefiting the ACT, and if he sold shares elsewhere “that publicity aboutme selling shares in Anaconda wouldadversely affect the market’s confidence inAnaconda”.

The $3.5 million termination payment fromAnaconda was paid into the bank account of ACT’s trustee company, L eaping Joey, onDecember 31, 2001. On January 15, 2002Leaping Joey used the money to buy4.1 million Anaconda shares in three parcels,from And rew, from And rew and Nicola, andfrom the family’s Minderoo Trust.

But the donations weren’t over. Forrest’scompany Metals Group gave the ACT another

2.9 mil lion Anaconda sh ares for free.It was a remarkable gesture, but Forrest had

his critics. What made it controversial was thatthe ACT bought the shares for 85¢, when theclosing price on market was 74¢. Then theshare price dived. Five weeks after the deal,Anaconda announced a $457 million loss. ByJune 30, when the full-year loss hit$919 million, the share price was 30¢.

Forrest had given his charity trust$5.6 million in cash and shares. But by June 30it was only worth $2.1 mill ion.

That’s stil l more than most people will evergive away. But how much did it cost Forrest?It’s always easy to be harsh in h indsight.Forrest didn’t k now what was going to happen

to the share price when he made his gifts.What can be said is that even with the

donations, the Forrest family i nterests endedup with cash and tax deductions worth $4.2 mi llion. (It would be less if there wascapital gains tax on the share sale, but Forresttestified he b ought shares for more than the 85¢sale price).

In fact, if you compare the Forrest familyfinances after they had made the donationswith where they would be if they had givennothing, after the tax break and the share pricedisaster it looks like they ended up less than$270,000 poorer for their generosity.

The ACT charity was up $2.1 mil lion, butmost of that was than ks to taxpayers.

While Forrest has given

over $90 million in assets to his charity, the net cost to his interests is probablyless than $2 million.

It’s not so taxing for the big mining companiesthropy, which is just as taxeffective. While thereis no denying Forrest’s deep commitment tohelping indigenous communities, three dealswhere he donated more than $90 million to theAustralian Chi ldren’s Trust appear to have costhim less than $2millioni n thelong term,as a result of taxdeductions andfalling share prices.

The enduring image of the miners’ three- month battle against the new resources tax wasAustralia’s richest woman, Rinehart, worth $4.7 billion, standing on the back of a flat-bedtruck with Forrest, who is worth $4.2 billion, toaddress a rally of mi neworkers in central Perth.

HancockProspecting,whichowns50per centofthe Hope Downs jointventure, reportedcash taxpaymentsof$54millionagainstpretaxprof- its of $510 million in the five years to 2008, aneffective taxcashrate of10.6per cent, reflectingexplorationand start-up costs.

Queensland’s Palmer, worth $3.9bill ion,wasaddressing five meetings a day on the evils of government at the height of the anti-tax cam- paign. But how much tax he pays is not clear –he files no accounts for his private MineralogyGroup.

But it i s Forrest who has become the de facto

From page 1 spokesman for the industry, campaigning inmarginal seats across thecountryto drive homethe case against any requirement to pay moretax. When he is not on the election trail he hasbeen travelling just as assiduously to promoteevents for GenerationOne, his government- funded program to provide jobs for i ndigenousworkers, while working on high-level deals forFortescueMetals Group – onAugust 11he toldanalysts and fund managers in Perth that theiron ore group would li ft annual production by900 per centto 360 million tonnes by 2015.

Forrestsaysheis“devastated”thatthenprimemini ster Kevin Rudd and Treasurer WayneSwan dressed up “a huge mining tax which waspredicated on all of Australia’s mini ng indus- tries being greedy multinationals that don’t tellthe truth and don’t pay much tax, in some casescrimi nally low rates of tax”.

Forrest told journali sts last month: “I’m veryhappyto pay tax, in factI’mhonoured tobe oneof Australia’s major taxpayers.”

While Fortescuehas booked nearly $300 million in income tax expense against its account- ingprofitinthepasttwoyears,ithasreportednoactualtaxpaymentsdueto$200millioninaccu- mulated tax losses and other factors.

Forrest declined to comment.The debate about the mining tax has centred

on actual tax paid rather than accounting en- tries: theHenry tax report that inspiredthe tax,the responses by the Minerals Council of Aus- tralia, and the tax rates calculated by BHP Bil- liton and Rio Tinto were based on cash payments. The cash-flow accounts for Fortescue,aswell as Poseidon Nickel during Forrest’s tenure

as chairman, andalso Anaconda Nickel duringthesevenyears heran it,showcash taxpaymentsfor each year as zero.

Anaconda, now called Minara Resources,wasrestructuredandhasgoneontopaysubstan- tialamounts oftax.

And there is little surprise in Forrest’s tax

record – most mining companies do not makeprofits in their early years, and when they do,accumulated losses can defer the tax bill formany years.

While mature miners like BHP, Rio andXstrata claim to pay out on average between34 per cent and 43 per cent of their reportedprofits as tax payments in cash, Tax Office figures show that 68 per cent of Australia’s 4200miningcompaniespaidnotaxin2008–largelybecausethey made no taxable profits.

Forrest points to other people whom he helpstopaytax: “We employtens ofthousandsof people who become PAYE taxpayers.”

Unli ke income tax, royalty payments are notaffected by tax losses, and Fortescue has reported paying royalties of $US151 mi llion($167.5 million) on its iron ore to the state government since 2008. However, under the newminerals resource rent tax, future royalty payments would be refunded.

Under the new tax guidelines, Fortescuewould not be required to pay any resource tax until it had recouped the cost of building itsmines and earned a profit of more than 12 percenton its i nvestment.

with Fiona Buffini

I’m very happy to pay tax,in fact I’m honoured to beone of Australia’s major taxpayers.

Fortescue’s Andrew Forrest

The global financial crisis and other factors conspired against the good

intentions of Andrew Forrest, Australia’s most generous – but also

controversial–

philanthropist, writes Neil Chenoweth.

Friends at court: Andrew Forrest embraces Deputy Opposition Leader Julie Bishop during protests against

FBA 060



The Australian Financial Review

www.afr.com l Thursday 19 August 2010 FEATURES 61

for Forrest

Unhappily, the ATO took the view that thiswas a scheme to avoid tax. By 2007 Forrest waschallenging this, unsuccessfully, in theAdmin istrative Appeals Tribunal. LastFebruary, the full Federal Court overturned anATO rul ing on interest payments by theWinderoo Trust, but confirmed th at Forrestshould pay tax on his termination paymentfrom Anaconda, though it said thi s was amistake for which he should not be penalised.

By June 2007, Forrest had a much bigger tax worry. It had b egun h appily enough whenForrest agreed to help restructure an ail ing

min ing company, which he renamed PoseidonNickel. A grateful Poseidon Nickel boardagreed in April 2007 to grant Forrest115 million options.

They were exercisable at 40¢, but would onlyvest when the share price reached various levelsup to $1. With the shares at 49¢ it seemedreasonably pitched.

The Forrest magic proved strong for thePoseidon share price. By July 2, whenshareholders approved the options for Forrestthat the company then granted, the shares had

jumped to $2.14. T he option package wasworth $200 million.

That produced an in stant tax problem.Forrest’s options would give him 39 per cent of the company if exercised. “If options willprovide more than 5 per cent of the companywhen exercised, tax on them cannot bedeferred,” says Gary Fitton, a director of Remuneration Strategies Group in Melbourne.

It would produce a catastrophic tax bill forForrest if the options ever reached him. Butthey never did.

The Poseidon board granted the shares on

July 2, 2007, wrote off the cost of them at thatdate i n the accounts under a Black-Scholesvaluation of $226.8 mil lion, but delayedissuing them to Forrest.

One of the factors that had fuelled thesurging Poseidon share price was a marketingagreement with Fortescue Metals. In Aug ust2007, Poseidon announced that the marketingdeal with Fortescue was off.

The shares headed south. By September 19,2007 they were down to 77.5¢, when Forrestcalled a h asty press conference in theFortescue offices. He announced he wasmaking a huge charitable donation. The boardhad finally issued the options, which Forresthad instructed should be credited directly tohis charity, the ACT.

With the falling share price the value of theoptions had dropped to $43.1 million –which meant they were stil l a tax problem. If the

options had been issued to a Forrest company,it would have triggered a tax bill of at least$12.9 mil lion at a company tax rate.

By electing to give the options to his charity,Forrest had saved himself a large tax bill. Ju stover a year later, Poseidon shares droppedbelow the 40¢ exercise price –they were worth nothing to the ch arity, though Forrest didn’tknow this would be the result when he made thegift.

But the options were not the only donationForrest announced on September 19, 2007. Hisfamily trust, the Peepingee Trust, gave the ACT

1 mi llion Fortescue shares with a cu rrent valueof $42.6 million.

By any standards thi s was hugely generous,particularly as the share price continued tosoar.

Then the global financial crisis kicked in.A year after Forrest donated the shares, they

were worth only $26.8 mi llion –and theywould fall much further before they recovered.

While a trust pays no tax, its beneficiariesdo. The donation by Forrest’s Peepingee Trustwould have produced a $42.6 mi llion tax deduction for its beneficiaries. At a 30 per centtax rate, the tax benefit would come to$12.8 m illion.

Again, any view is coloured by hindsight.What can be said is that at the time of the pressconference in September 2007, the ACT hadreceived gifts worth $85 mi llion. A year laterthe value had fallen to $26.8 mi llion.

Forrest in return was freed from a tax bi ll onthe options; in addition, his family trust couldpass on tax benefits. The combined gain fromthese two tax savings came to $25.7 mi llion.

What do these nu mbers mean? The Forrestfamily interests had made an $85 milliondonation, but in the long term, after tax benefits and falli ng share prices, the net cost of making that donation was just $1.1 million.

The ACT did indeed receive a huge donation,but the bulk of the wealth given to the ACT tospend on indigenous welfare was paid for bytaxpayers.

This is not what Forrest intended. He had nonotion that the fi nancial crisi s would savagethe value of his gifts. It was merely goodfortune on hi s part.

“The tax system is structured in a deliberatefashion to encourage private phi lanthropy thatbenefits the wider community, so it is notunusual for donors to benefit from tax breakson the money they put into trusts th at areestabli shed for that purpose, ” says Yasser El-

Ansary, tax counsel for the Institute of Chartered Accountants.In general comments about the tax system,

El-Ansary says: “There is clear need for privatedonors to step in and contribute to those whoare disadvantaged in some way. Using the tax system to encourage that b ehaviour is effective,as long as the rules are not abused th rough theuse of contrived and deliberate schemes thatare established to avoid tax . . . Whi lst ever thetax laws are complex and pie cemeal, the use of planning strategies to mi nimi se tax willcontinue to be a type of fi nancial sport forsome people in the community.”

The tax system needs to become moretransparent so taxpayers have a clearerunderstanding of the rules th at apply tobenevolent causes, El-Ansary says.

Meanwhile, some of the fi rst results of Forrest’s charity work show his skil ls atleveraging. In February 2008, WesternAustralia’s then health minister, Jim McGinty,

announced a $3 million program to increasefamily and community health services inFitzroy Crossing.

Forrest had convinced James Packer todonate $500,000 for the project. Another$330,000 came from federal government fundswith $1.7 million assistance from the stategovernment. Forrest him self kicked i n the restwith a $500,000 contribution. It came from theACT.

#$US †Restated in following year *Interim

*Interim #Includes $226.8m expensed for Forrest options

SOURCE: AFR

Twiggy Forrest’s corporate tax record

Anaconda Nickel

Fortescue Metals

Poseidon Nickel

For the record

1994

1995

1996

1997

1998

1999

2000

2001

2002

-0.7

-0.4

-1.3

54.4

4.2

2.6

-5.0

-87.5

-919.7

0

0

0

0

2.0

1.4

0.7

0

0

-

-

-

-

-

-

-

4.2

-

0

0

0

0

0

0

0

0

0

2004

20052006

2007

2007†

2008

2008†

2009#

2010#*

0.6

-0.8-1.7

-103.6

-280.5

-3595.9

-1592.7

662.0

62.0

0

00

0

0

0

0

153.9

18.9

-

--

35.2

88.2

1079.7

478.7

-

-

0

00

0

0

0

0

0

0

2008#

2009

2010*

-256.1

7.4

-1.1

0

0

0

-

-

-

0

0

0

Pretaxprofit

$mTax expense

$mTax benefit

$mTax paid

$m

Cash flowAccounting entry

Pretaxprofit

$mTax expense

$mTax benefit

$mTax paid

$m


Pretaxprofit

$mTax expense

$mTax benefit

$mTax paid

$m


SHARING THE LOVEAndrew Forrest’s charity work inspired ClivePalmer, pictured, to announce in January 2008that he was set ting up a $100 million foundationfor medical research and indigenous welfare. Thiswas just the start of a $1 billion targetcommitment, he said at the time.

“We also believe that from those to whommuch is given, much is expected. ManyAustralians have benefited from the currentresource boom as well as government and avibrant economic system. That is why I feel we allhave a real responsibility to give back to society.

“What’s needed is more love and forgivenessto be extended to those less fortunate thanourselves and the reconciliation of man to hisbrothers in aboriginal communities.”

Palmer laterclarified that thedonation was waiting for his royalty streamfrom CITIC’s iron oredevelopment in thePilbara, expected tobegin production laterthis year. In Februarythe Griffith Institutefor Health andMedical Research inBrisbane said Palmer would chair its newdevelopment board. Director Lyn Griffiths saidMr Palmer would not fund the GIHMR. Hiscontribution would be his expertise and networks.

Some dealsjust don’t payNeil Chenoweth

How muchtax do the big three miners pay? RioTintosays between2000 and 2009 it paid35.6 per centof its Australian profits as tax androyalties. Between 2005 and2009, when itearned 75 per cent of its profits for thedecade,it paid 34.7 per centi n taxes.

BHP Billiton says it paidan effective cash taxrate of 43 per centlast year, witha six-yearaverage of 42 per cent. Xstrata says its averageeffective tax rateon profits generatedi n

Australia since last year was 40 per cent.The miners give few details on how they

calculatedthe figures. Rio’s numbers suggestthat from 2005 its actual taxrate was lowercompared with thefirsthalf ofthe decade,while Rio andBHP have reported hugeimpairment charges in the pasttwo years which reducedaccounting profits – but notthe cash taxpayments they quotei n their taxrates.

On April 13, Xstrata chiefexecutive Mick Davis finalised a dealwith Xstrata’scontrolling shareholder, Glencore, that reducedXstrata Australia’s taxable income by$1.2 billion. WhenXstrata plc announcedarights issuelast year, Glencore foundthe cash to take up its rights by selling Xstrata Australiaits Prodeco coalmine in Colombia for$US2 billion. It thenpaid Xstrata Australia$250 million for an option to buy it back for$US2.3 billion.

A spokesman says it was impossibletoforesee thehugerise in theAustralian dollar,butXstrata lost $449 mil lion when Glencoreboughtthe mine back.

Glencoredid not gainfrom this,but Xstratafunded the deal with$US1.57 billion inpreference shares held by other Xstratacompanies in Dubai andZug. Paying thembackin April crystallised$751 million inlosses shifted beyond the reach of the ATO.

THE DEALS AnacondaDecember 31, 2001: Anaconda Nickel paysAndrew Forrest’s $3.5m termination pay toAustralian Children’s Trust (ACT). FederalCourt later finds that Forrest sidestepped$1.1m tax.

January 15, 2002: ACT pays $3.5m toForrest interests for 4.1m Anaconda sharesat 85¢, above closing price of 74¢.

January 15, 2002: Forrest company donates2.9m Anaconda shares, can claim

$735,000 tax deduction. Total value of cashand shares donated: $5.95m.February 28, 2002: Anaconda reports$457m half year loss.

June 30, 2002: Shares dive to 30¢.Forrest interests hold $4.23m cash and tax deductions. If no cash or shares had beendonated, Forrest interests would hold$4.5m.Net cost of making donation: $270,000.ACT now owns 7m Anaconda shares worth$2.1m.

Poseidon April 4, 2007: Niagara Mining announcesrestructure, change of name to PoseidonNickel, and issue of 115m optionsexercisable at 40¢ to Andrew Forrest.

July 2, 2007: Shareholders approve granting Forrest options and company writes off $200m+ cost of the grant. With share price$2.14, options are now worth $200m,taxable in 2008 year. But options are notissued.

August 29, 2007: Poseidon shares fall afterForrest’s Fortescue Group cancelsagreement to market its nickel.

September 19, 2007: Poseidon shares77.5¢, Forrest options now worth $43.1m.Forrest announces the options have beenissued to his charity, ACT, saving $12.9mtax.

September 19, 2007: Forrest announces heis giving Fortescue shares worth $42.6m toACT, producing $12.9m tax deduction.End of 2008: Value of shares and optionsgiven to ACT:Poseidon options: NilFortescue shares: $26.8mTax savings for Forrest interests: $25.7mForrest interests donated $85.7mNet cost of gifts: $1.1 million

Forrest had no notion that the financial crisis wouldsavage the value of his

gifts. It was merely good fortune on his part.

the mining tax proposal. Photo: SHARON SMITH

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andrew forrest tax holidays afr article-1

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