AMPOL LIMITED — Annual Report 2014

BY ELECTRONIC LODGEMENT

ASX ANNOUNCEMENT

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CALTEX AUSTRALIA LIMITED ACN 004 201 307

LEVEL 24, 2 MARKET STREET SYDNEY NSW 2000 AUSTRALIA

27 March 2015

Company Announcements Office Australian Securities Exchange

CALTEX AUSTRALIA LIMITED 2014 ANNUAL REPORT AND 2014 ANNUAL REVIEW

The Caltex Australia Limited (Caltex) 2014 Annual Report and the 2014 Annual Review (including a booklet titled “Transformation of a business” reflecting Caltex's history and recent transformation) are attached for immediate release to the market. These documents will be mailed to shareholders who have elected to receive a printed copy of annual reports.

The 2014 Annual Report, 2014 Annual Review and “Transformation of a business” booklet will be available on our website (www.caltex.com.au).

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Peter Lim Company Secretary

Phone: (02) 9250 5562 / 0414 815 732 Attach.

ASX - 2014 Annual Report and 2014 Annual Review

2014 ANNUAL REpoRt

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Focused Performance

FInAnCIAL CALenDAR

YeAR ended 31 decembeR 2014

07 MAY 2015 Annual General Meeting

YeAR ending 31 decembeR 2015[*]

24 AUGUst 2015

Half year results and interim dividend announcement

08 sePteMBeR 2015 Record date for interim dividend entitlement

30 sePteMBeR 2015 Interim dividend payable if declared

22 FeBRUARY 2016 Full year results and final dividend announcement

08 MARCH 2016 Record date for final dividend entitlement

31 MARCH 2016 Final dividend payable if declared

• These dates are subject to change.

Contents

• 1 With you all the way

• 2 Report from the Chairman and the Managing Director & Ceo 4 Corporate Governance statement

• 16 2014 Financial Report for Caltex Australia Limited

• 17 Directors’ Report

• 62 Consolidated income statement

• 63 Consolidated statement of comprehensive income

64 Consolidated balance sheet

• 65 Consolidated statement of changes in equity 66 Consolidated cash flow statement

67 notes to the financial statements

67 1. Significant accounting policies 76 2. Revenue and other income 76 3. Costs and expenses 77 4. Income tax expense 79 5. Dividends 79 6. Basic and diluted earnings per share 80 7. Receivables 81 8. Inventories 81 9. Other assets 81 10. Other investments 82 11. Intangibles 83 12. Property, plant and equipment 85 13. Payables 85 14. Interest bearing liabilities 86 15. Provisions 86 16. Issued capital 87 17. Financial instruments 93 18. Employee benefits 96 19. Commitments 97 20. Contingent assets and liabilities 98 21. Auditor’s remuneration 98 22. Particulars in relation to controlled entities 102 23. Investments accounted for using the equity method 104 24. Interest in joint venture operations 104 25. Notes to the cash flow statements 105 26. Business combinations 107 27. Financing arrangements 107 28. Related party information 111 29. Net tangible assets per share 112 30. Segmented reporting 114 31. Parent entity disclosures 114 32. Events subsequent to the end of the year

115 Comparative Financial Information

116 Replacement Cost of sales operating Profit Basis of Accounting 117 shareholder Information

119 statistical Information

120 Directory

1

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With a commitment to Australia tracing back to 1900, Caltex has grown to become the nation’s outright leader in transport fuel. Caltex supplies one-third of all Australia’s transport fuels and is unique in this market for being the only major brand listed on the Australian Securities Exchange. through a flexible fuel supply chain, Caltex has forged its reputation for providing safe and reliable supply of high-quality fuels to a diverse number of customer segments, including retail, mining, agriculture, aviation, transport, small-to-medium enterprises, marine, automotive and government. Caltex is also one of Australia’s largest convenience retailers and franchisors, with over 85% of its stores operated by franchisees.

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During 2014, Caltex launched its largest advertising campaign in almost a decade. Its aim was to demonstrate that Caltex moves more Australians than any other name, and no matter where you are in Australia, or what you drive, Caltex is with you all the way.

2014 Annual Report

This 2014 Annual Report for Caltex Australia Limited has been prepared as at 23 February 2015.

The 2014 Annual Report provides a summary of Caltex’s main operating activities and performance for the year ended 31 December 2014. The 2014 Financial Report, which forms part of the 2014 Annual Report, provides detailed financial information for the Caltex Australia Group for the year ended 31 December 2014. These and other reports are available from our website (www.caltex.com.au).

When we refer to the Caltex Australia Group in this 2014 Annual Report, we are referring to:

• Caltex Australia Limited (ACN 004 201 307), which is the parent company of the Caltex Australia Group and is listed on the Australian Securities Exchange (ASX)

• our major operating companies, including Caltex Australia Petroleum Pty Ltd, Caltex Refineries (NSW) Pty Ltd, Caltex Refineries (Qld) Pty Ltd, Caltex Petroleum Services Pty Ltd and Calstores Pty Ltd

• a number of wholly owned entities and other companies that are controlled by the Group.

• Please note that terms such as Caltex and Caltex Australia have the same meaning in the 2014 Annual Report as the Caltex Australia Group, unless the context requires otherwise.

Shareholders can request a printed copy of the 2014 Annual Report (and 2014 Financial Report) and/or the 2014 Annual Review, free of charge, by writing to the Company Secretary, Caltex Australia Limited, Level 24, 2 Market Street, Sydney NSW 2000 Australia.

2 Caltex / 2014 annual RePORt

Report from the Chairman and the Managing Director & CEo

2014 was a significant year for Caltex. It was a transformational year that built upon the success of the past 114 years and laid a strong foundation for the future.

Elizabeth Bryan AM Chairman

Julian Segal Managing Director & CEO

71 % share price

increase in 2014. On 31 December 2014, the share price closed at $34.21, compared with $20.05 on 31 December 2013.

TRAnsfoRming ouR business

In 2011, the articulation of Caltex’s vision – to be the outright leader in transport fuels across Australia – became a catalyst for change. Since then, this vision, as measured by top quartile total shareholder returns, has driven rapid and significant change at Caltex. It was this clear vision and an effective culture that has enabled Caltex to confidently embark on its transformation path, including the supply chain restructure announced in 2012.

This path has culminated in the successful conversion of the Kurnell refinery into Australia’s largest fuel terminal, increased investment in our distribution infrastructure, and the establishment of a product sourcing capability in Singapore. Each of these elements is key in the transformation of our business into an integrated transport fuels supply chain company.

This includes additional upgrades to the wharf and the final tank conversions once the refinery is closed. Further site works, including demolition of redundant plant and remediation, will be carried out over a number of years.

conTinued focus on sAfeTY

Overall, the total treated injury frequency rate (TTIFR) was slightly higher than the record 2013 result at 1.75 per million hours worked, compared with 1.36 per million hours worked in 2013. The lost time injury frequency rate (LTIFR) was also slightly higher than the previous year at 0.77 per million hours worked, compared with 0.63 per million hours worked in 2013.

The Board and management are committed to driving continued improvement in our safety performance and, given the slippage in our personal safety performance in 2014, are taking additional steps to do this in 2015.

successful TRAnsiTion

October 2014 saw the shutdown of the last of Kurnell refinery’s process units and the commencement of the new Kurnell terminal, now Australia’s largest transport fuels terminal. This was the most significant achievement of 2014 and a milestone for the transition project announced in July 2012. The purpose of the project was to enable continued reliable supply of transport fuels to Caltex customers, while stemming Kurnell refinery operating losses and reducing our exposure to volatile refining margins.

The new terminal supplies fuel to retail sites and commercial customers across New South Wales and the Australian Capital Territory. It will provide 660 million litres of storage capacity once stage two is completed in 2016.

The total cost of the terminal conversion is approximately $270 million, with close to $50 million remaining to be spent in 2015.

finAnciAl ResulTs

For the 2014 full year, Caltex recorded an after tax profit of $20 million on a statutory, or historic cost of sales operating profit measure, including a loss relating to significant items of approximately $112 million after tax. This compares with the 2013 full year profit of $530 million. The 2014 result includes a product and crude oil inventory loss of $361 million after tax and reflects a significant fall in Brent crude oil prices in the latter months of 2014.

On a replacement cost of sales operating profit (RCOP) basis, which is our preferred measure, as it excludes net inventory gains and losses, Caltex recorded an after tax profit for the 2014 full year of $493 million, excluding significant items. This compares with an RCOP after tax profit of $332 million for the 2013 full year, excluding significant items.

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dividend

The Board declared a final dividend of 50 cents per share (fully franked) for the second half of 2014. Combined with the interim dividend of 20 cents per share for the first half, paid in September 2014, this equates to a total dividend of 70 cents per share for 2014, fully franked. This compares with a total dividend payout of 34 cents per share (fully franked) for 2013, and is at the upper end of the reduced payout ratio (20% to 40%) during the Kurnell closure period.

conTinued mARkeTing gRowTh

Marketing delivered another record year with earnings before interest and tax (EBIT) of $812 million. This is 6% higher than the $764 million achieved in 2013. The strong result was delivered despite the loss of earnings from the Sydney bitumen business, which was divested in December 2013.

Driving sales of premium fuels (including Vortex Diesel), remains a focus for Marketing. Higher sales of premium grades of petrol and diesel, and jet fuel, continue to offset the long term decline in demand for unleaded petrol, including E10. Continued investment in growth, including new retail service stations and diesel stops and the refurbishment of existing service stations, underpinned the increased penetration of premium Vortex products.

Recent acquisitions, such as the Queensland Fuel Group in 2013 and the Scott’s Fuel Divisions, which was completed in June 2014, also contributed to the strong Marketing result.

Refining impRovemenT

Refining and Supply, now known as Supply Chain, delivered an EBIT result of $64 million for the 2014 full year. This compares with an EBIT loss of $171 million for 2013, and a 2014 first half loss of $65 million. The 2014 result has benefited from the impact of favourable externalities, particularly in the fourth quarter of the year. Lytton refinery’s strong operating performance during this period enabled the refinery to take advantage of these favourable conditions. In a year dominated by the Kurnell conversion project, the Kurnell refinery generated a 2014 EBIT loss of approximately $69 million.

The influence of exTeRnAliTies

The realised Caltex Refiner Margin (CRM) averaged US$12.42 per barrel for the 2014 full year. The strong July to December 2014 average CRM of US$16.38 per barrel compares favourably with both the 2014 first half average of US$9.20 per barrel and the 2013 full year average of US$9.34 per barrel. The sharp decline in Brent crude oil prices in the latter part of the year was a major contributor to the stronger average refiner margin in the second half as product prices did not fall as quickly as the crude price.

The fall in the Australian dollar has had a m favourable impact on the Australian dollar denominated refiner margin, but resulted in 660 a net loss after hedging on US dollar payables

of approximately $26 million (before tax). litres On 1 August 2014, the company changed its policy of hedging outstanding US dollar payables will be the total capacity of the Kurnell terminal from 50% to 80%, which mitigates the impact in 2016 when the stage of the fall in the Australian dollar.

will be the total capacity of the Kurnell terminal in 2016 when the stage two conversion works are completed.

cApiTAl mAnAgemenT

Caltex remains committed to delivering top quartile growth for our shareholders. To this end, in February 2014 we commenced a company-wide cost and efficiency review. Within this review, numerous initiatives have been developed that will provide Caltex with the financial strength to maintain and enhance its market leadership position and to enable the business to capture future growth opportunities.

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Caltex’s new business model is in line with our origins when the business began in 1900. It is based on one integrated supply chain and presents Caltex with significant opportunities to optimise our entire value chain.

Following the successful closure of the Kurnell refinery, the Board has determined that as of 2015, a target dividend payout ratio of 40-60% of RCOP net profit after tax will be reinstated.

ouR people

2014 was a challenging year for many people across Caltex. As part of the above-mentioned cost and efficiency review, employee headcount was reduced by approximately 350 people across operational and support functions. This reduction is in addition to the previously announced reductions relating to the conversion of the Kurnell refinery. Caltex is committed to supporting those people affected by the changes with the highest level of care and respect. Caltex has ensured that redeployment opportunities have been explored, in addition to generous redundancy entitlements and outplacement support.

Despite the uncertainty generated by the review, our people have delivered upon a range of significant financial and operational targets and must be commended for their professionalism, passion and dedication during 2014.

fuTuRe gRowTh

While the Australian fuels industry continues to go through a significant period of change, particularly with new competitors entering the market, Caltex is well positioned and prepared for the pace and intensity of this change.

Caltex will continue to leverage and optimise its strong supply chain in order to target higher growth, in addition to expanding both the breadth and quality of our retail and reseller network.

The Board and management are confident that Caltex is well positioned to remain the outright leader in transport fuels across Australia.

Caltex / 2014 annual RePORt

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Corporate Governance Statement

The Board is committed to conducting the business and operations of Caltex Australia Limited and its group companies (Caltex) in accordance with high standards of corporate governance, and in the best interests of our shareholders.

The Corporate Governance Statement provides information about the Caltex Group’s corporate governance practices for 2014, including compliance with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations for the year ended 31 December 2014 and as at the date of this Annual Report.

A graphical representation of Caltex’s Corporate Governance Framework (CG Framework) is set out below.

Assura~~n~~			Board			MD & CEO Delegation Accountability
	e
• External audito External Auditor • Internal Audit	rs Po	licy vice l or other professional advice Delegation			Oversight through reporting	C •Board Charter •Board Tenure Policy •Board Composition, Appointment, Induction & Election •Charter of Director Independence •Delegation of Authority •Performance Evaluation Process •Policy for Transactions with Chevron •Risk Management Summary •Continuous Disclosure Policy •Securities Trading Policy •Shareholder Communications Policy •Code of Conduct •Diversity and Inclusion Policy		Accountability		Delegation
Independent	Ad
								altex Leadership Team (CLT)
• Independent lega
Audit Committee OHS & Environmental Risk Committee Hum

• Audit Committee Charter • OHS & Environmental Risk Charter • Human Resources Committee Charter • Nomination Committee Charter

The CG Framework is regularly reviewed and updated in response to changes in Caltex’s business, Australian corporate governance practice and the law.

1. the Board

1.1 Role of the Board

The Board oversees and directs Caltex management in seeking to deliver superior business and operational performance and long term growth in shareholder value.

The Board has delegated responsibility for managing Caltex’s day-to-day business and operations to the Managing Director & CEO within the limits set out in delegations of authority approved by the Board. The Managing Director & CEO has in turn delegated authority for certain matters to the Caltex Leadership Team (CLT) who, along with the Managing Director & CEO, are accountable to the Board.

The Board Charter and Caltex’s delegations of authority policy balance giving Caltex’s Managing Director & CEO and the CLT the authority to manage Caltex’s day-to-day operations, while reserving important strategic, business, operational and governance matters to the Board.

The Board’s key responsibilities under the Board Charter include:

• approving Caltex’s strategic direction, business plan and annual budget

• evaluating and monitoring Caltex’s performance against financial, operational and safety objectives

• approving Caltex’s financial statements and reports to shareholders

• approving Caltex’s dividend policy and determining Caltex’s capital structure

• assessing and monitoring Caltex’s material business risks and the effectiveness of internal controls and risk management systems and policies

• establishing and promoting Caltex’s culture, including high standards of ethical conduct, corporate integrity, safety, corporate governance, and legal and regulatory compliance

• approving a policy for transactions between Caltex and Chevron and approving significant transactions with Chevron

• appointing, and reviewing the performance of, the Managing Director & CEO

• reviewing succession planning for the Board, the Managing Director & CEO and the CLT

• approving remuneration of the Managing Director & CEO and the CLT, and

• reviewing Board performance and approving non-executive director fees.

The Board Charter is available on the Corporate Governance page of the Caltex website (www.caltex.com.au).

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1.2 Composition of the Board

There are currently eight directors on the Caltex Board, comprising four independent, non-executive directors, three non-executive directors and the Managing Director & CEO.

Details of Caltex’s directors and their appointment dates are set out in the table below[1] .

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DIReCtoR tItLe APPoInteD
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Elizabeth Bryan	Chairman	18 July 2002
	Independent Non-executive Director	(Chairman: 1 October 2007)
Julian Segal	ManagingDirector & CEO	1July2009
Trevor Bourne	Independent Non-executive Director	2 March 2006
GreigGailey	Independent Non-executive Director	11 December 2007
Bruce Morgan	Independent Non-executive Director	29June 2013
Richard Brown2	Non-executive Director	28June 2012
Barbara Burger2	Non-executive Director	28June 2012
Ryan Krogmeier2	Non-executive Director	30 March 2012

1. On 6 March 2015, Caltex announced the appointment of an additional Independent Non-executive Director, Barbara Ward, effective from 1 April 2015.

3. Mr Brown, Ms Burger and Mr Krogmeier each serve as alternate directors for each other.

The Board Charter requires that the Chairman is an independent non-executive director. Elizabeth Bryan is the Chairman of the Caltex Board and, among other things, she is responsible for:

• facilitating the work of the Board

• overseeing the provision of appropriate information to the Board

• approving the agenda for each meeting in consultation with management

• managing Board activities to assist their efficient and effective conduct, and

• fostering a culture which encourages directors to contribute in an open and constructive manner.

In line with accepted practice, the roles of the Chairman and the Managing Director & CEO are not exercised by the same individual.

The Board annually reviews its composition, including the number of independent directors and the mix of skills, experience, expertise and diversity of directors and the Board.

Caltex has a major shareholder (Chevron) which holds 50% of Caltex shares on issue. Despite this shareholding, Caltex operates independently of Chevron, and all decisions are made in Australia by the Caltex Board and management. All decisions to appoint new directors are made by the Caltex Board and Chevron does not have a right to appoint nominee directors to the Caltex Board. Further details of the governance arrangements relating to Caltex’s relationship with Chevron are provided at section 6.6 of this Corporate Governance Statement.

To ensure the Board operates effectively and with appropriate consideration of the Chevron shareholding, the Board has determined that it will comprise at least four independent, non-executive directors and up to three directors who are Chevron executives.

Details of the skills, experience and expertise and special responsibilities for each director are provided in the Directors’ Report at pages 17 to 61 of this Annual Report.

Caltex / 2014 annual RePORt

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Corporate Governance Statement continued

1.3 Independence

Independence on the Caltex Board

Under the Charter of Director Independence , the Board recognises that it is in the best interests of shareholders to have a strong representation of independent directors. Ms Bryan, Mr Bourne, Mr Gailey and Mr Morgan are independent non-executive directors. Mr Brown, Ms Burger and Mr Krogmeier are not independent as they are executives of Chevron (Caltex’s major shareholder). The Caltex Board appoints Chevron executives as non-executive directors to give the Board direct access to current senior executives of a leading global energy company who have many years of industry experience. Each of Mr Brown, Ms Burger and Mr Krogmeier bring important knowledge and experience to the Board’s consideration of operational, strategic and business matters relevant to the petroleum industry. This level and breadth of experience is generally not available from independent directors unless they are, or have been, involved in the petroleum industry. The pool of independent directors with petroleum industry experience who would be available to Caltex is relatively small because candidates may have current or recent associations with Caltex’s competitors. Caltex has adopted policies for addressing conflicts of interest which may arise from its shareholding structure, and the Board’s practice is that directors who are Chevron executives leave the Board meeting during discussions or decisions that relate to Chevron and do not participate in these matters.

Julian Segal (Managing Director & CEO) is not independent because he is an executive director. Mr Segal does not have any former or current association with Chevron.

The Caltex Board does not have a majority of independent directors. However, the Board believes that the mix of independent directors, directors affiliated with Caltex’s major shareholder and one executive director is appropriate for Caltex’s business and circumstances and is in the best interests of shareholders as a whole.

Assessing director independence

Directors are required to disclose relevant personal interests and conflicts of interest when appointed and on an ongoing basis. A new interest or conflict of interest may trigger a review of a director’s independence. Independence is initially assessed on each director’s appointment and is reviewed each year and non-executive directors are required to provide a certificate to the Board in which they confirm their independence status. Additionally, directors complete a questionnaire each year providing details of any transactions with Caltex.

Caltex considers a director to be independent if they are free of any business or other relationship that could materially interfere with (or could reasonably be perceived to materially interfere with) the independent exercise of the director’s judgement.

An assessment of independence takes the following relationships with Caltex into account:

• service as an officer of a substantial shareholder

• length of previous service as a director on the Board or previous service as a senior executive of Caltex within the past three years

• service as a partner, principal or director of a professional adviser or consultant that has had a material business relationship with Caltex within the past three years

• service as a director, officer or senior executive of, or employee significantly associated with the service provided by, a professional adviser or consultant that has had a material business relationship with Caltex within the past three years

• significant direct or indirect involvement in the external audit of Caltex in the last five years or service as a partner, principal or director of the external auditor in that period

• a relationship (substantial shareholder, director, officer or senior executive) with a supplier or customer that has had a material business relationship with Caltex, and

• a contractual relationship (directly or indirectly), interest or other relationship with Caltex that could, or could reasonably be perceived to, materially interfere with the director’s ability to act in Caltex’s best interests.

A professional adviser, consultant, supplier or customer will be considered to have a material business relationship with Caltex if:

• from the perspective of the Caltex director, the business relationship is significant (directly or indirectly) to their own circumstances, or

• from Caltex’s perspective, the business relationship generates revenue or expenses (to Caltex) of 5% or more of Caltex’s total revenues or expenses, as applicable.

1.4 Access to independent advice

Caltex directors have access to independent professional advice at Caltex’s expense. A director can seek professional advice with prior approval by the Board Chairman. The Board Chairman can seek professional advice with prior approval by the Audit Committee Chairman.

The Company Secretary is accountable directly to the Board, through the Chairman, on all matters to do with the proper functioning of the Board.

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1.5 Appointment terms and re-election of directors

Process for appointment of new directors

When the Board decides to appoint a new non-executive director, the Nomination Committee prepares a set of selection criteria which reflect the Board’s desired capabilities, Caltex’s business and circumstances, and whether the new director is being appointed to replace an outgoing director or as an addition to the Board.

The Nomination Committee engages an independent search firm to conduct the search based on the selection criteria, and requests the firm to provide a list of candidates for consideration. Background checks are conducted as part of the process.

When the Board appoints a non-executive director who is a Chevron executive, the Chairman (typically with assistance from existing directors from Chevron) contacts Chevron to discuss potential candidates who would best meet the selection criteria. In addition to the selection criteria determined by the Nomination Committee, consideration is also given to:

• flexibility in the work schedule of a Chevron executive to meet the time commitments of being a Caltex director, and

• the networks of an executive within Chevron and their access to senior Chevron executives.

In all cases, the decision to appoint a new director is made by the Caltex Board. Further details about this process are contained in the Board Composition, Appointment, Induction & Election document which is available on the Corporate Governance page of the Caltex website (www.caltex.com.au).

Election and re-election of directors

A newly appointed non-executive director holds office until the end of the next Annual General Meeting and is eligible for election by shareholders at the meeting. The Managing Director & CEO is appointed by the Board and is not subject to election by shareholders.

Following election by shareholders, a director holds office for three years or until the third Annual General Meeting following the director’s last election (whichever is longer).

Before each Annual General Meeting, the Board decides whether to support a director standing for election or re-election. This is not automatic and is assessed with regard to advice provided by the Nomination Committee. The Nomination Committee considers various factors in forming its recommendations to the Board about the election or re-election of a director including:

• the director’s performance having regard to Caltex’s Performance Evaluation Policy

• the desired composition of the Board, including its size, capabilities and diversity, having regard to Caltex’s Charter of Director Independence and the Board Composition, Appointment, Induction & Election document

• the length of time the director has served on the Board, having regard to Caltex’s Board Tenure Policy , and

• the director’s external commitments.

The Board’s recommendations are disclosed in the notice of meeting sent to shareholders, together with biographical information for each director standing for election or re-election at that meeting.

1.6 Induction and training

All new directors take part in an induction program to familiarise them with Caltex’s business, strategy and operations, performance, risks, governance and external environment. The induction program is tailored to each director’s experience and circumstances and includes briefings with other Board members and senior executives, site visits and external training. New directors also receive an information pack containing key business documents, reference materials and internal policies.

A letter is provided to each new director which sets out the terms of their appointment, their responsibilities and the expectations of them in their role, and the assistance and resources that we provide to them.

The Nomination Committee periodically reviews the director induction program and the standard letter of appointment for new directors to ensure that they appropriately reflect directors’ evolving roles and changes to Caltex’s business and operations.

2. Board Committees

2.1 Overview of Committees

The Board has established the following four standing Committees to assist it in performing its role:

• Audit Committee, comprising three independent directors including an independent chairman

• Human Resources Committee, comprising a majority of independent directors

• OHS & Environmental Risk Committee, comprising a majority of independent directors

• Nomination Committee, comprising a majority of independent directors.

The Committees provide advice and recommendations to the Board in relation to their areas of expertise and make decisions on specific matters that have been delegated to them by the Board. The scope of the Committees’ advisory role and delegated authorities are set out in their respective charters.

8 Caltex / 2014 annual RePORt

Corporate Governance Statement continued

The current members and role of each Committee are set out below.

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----- Start of picture text -----

AUDIt HUMAn ResoURCes oHs & envIRonMentAL noMInAtIon
CoMMIttee CoMMIttee RIsk CoMMIttee CoMMIttee
Responsibilities
Assists the Board to: Assists the Board to: Assists the Board to: Assists the Board to:
• review the integrity • review the remuneration of • monitor the adequacy, • review the composition
of financial reporting, non-executive directors integrity and effectiveness of the Board
including accounting • review the incentive of the critical systems, • identify skills and desirable
policies and significant frameworks and internal controls and competencies for Board
areas of judgement remuneration levels for the processes and procedures and Board committees
• review dividend Managing Director & CEO used to manage • review policies and
recommendations and the CLT occupational health processes for the selection
• monitor the adequacy, • review the remuneration and safety (OHS) and of an induction program
integrity and effectiveness frameworks for employees environmental risks for non-executive directors
of financial risk • review the performance of • review the appropriateness • make recommendations on
management and the Managing Director & of Caltex’s practices to the election and re-election
internal controls CEO and the CLT manage material OHS and of non-executive directors
environmental risks
• review the findings, • review the remuneration • review and oversee
plans, independence disclosures in the annual • monitor compliance succession planning for
and performance of the report to shareholders with legal obligations non-executive directors
external auditors and • review termination in relation to OHS and • oversee the process
Caltex’s internal audit payments environmental matters for evaluating the
function and approve the • review succession planning • review investigations into performance of the
scope of their work for the Managing Director significant OHS and/or Board, its committees
& CEO and the CLT environmental incidents and individual directors
• review OHS and
• review the diversity and
environmental policies and
inclusion policy and gender
internal audit plans and
diversity objectives and
disclosures across Caltex findings in relation to OHS
and environmental matters
Members [1]
Bruce Morgan (Chairman) Greig Gailey (Chairman) Trevor Bourne (Chairman) Elizabeth Bryan (Chairman)
Trevor Bourne Trevor Bourne Greig Gailey Trevor Bourne
Greig Gailey Bruce Morgan Bruce Morgan Richard Brown
Ryan Krogmeier Barbara Burger Barbara Burger
Greig Gailey
Ryan Krogmeier
Bruce Morgan
----- End of picture text -----

1. Elizabeth Bryan, as Chairman of the Board, is an ex-officio member of each of the Audit Committee, Human Resources Committee and OHS & Environmental Risk Committee.

2.2 Directors’ attendance at Board and Committee meetings

The Board held eight scheduled meetings during 2014, with additional meetings called to consider specific or urgent matters, as appropriate.

The Board held preliminary meetings in the absence of Caltex management at scheduled Board meetings throughout the year. Details of directors’ attendance at meetings are provided at page 56 of this Annual Report.

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3. Performance evaluation and remuneration

3.1 Performance evaluation

Board

A formal Board evaluation process is carried out every two to three years. The Nomination Committee engaged an independent specialist to facilitate a performance review of the Board, its standing committees and individual directors at the end of 2012. As part of the review, the independent specialist interviewed each director to explore a range of focused topics relating to the Board’s effectiveness. Senior executives were also interviewed to obtain further information, including on the relationship between the Board and management.

The independent specialist prepared a report on the review which was discussed with the whole Board. The Board subsequently agreed on specific actions, together with expected timeframes and areas of responsibility, to further develop the Board’s effectiveness. The Chairman also discussed the report with individual directors and with the CLT.

Managing Director & CEO and the CLT

The Board sets annual performance objectives for the Managing Director & CEO based on Caltex’s business plan and advice provided by the Human Resources Committee. The Chairman met with the Managing Director & CEO in February 2015 to assess his performance for the previous year and discussed his performance review. The Human Resources Committee discussed the performance review with the Chairman and the Managing Director & CEO and made a recommendation to the Board for an annual performance assessment. In February 2015, the Board further discussed the Managing Director & CEO’s performance and approved an annual performance assessment for 2014.

The Managing Director & CEO formally reviews the performance of his direct reports twice a year against agreed business objectives and their job descriptions. The 2014 full year performance reviews for the CLT were considered by the Human Resources Committee and the Board in February 2015.

Further information on the performance review process for the CLT is provided at section 3c of the Remuneration Report.

3.2 Director and executive remuneration

Remuneration levels are set at competitive levels to attract and retain appropriately qualified and experienced executives. The Board and the Human Resources Committee consider performance, duties and responsibilities, market comparison and seek independent advice as part of the remuneration review process.

Remuneration for non-executive directors is fixed and is subject to a remuneration pool of $2 million, which was approved by shareholders at the 2010 Annual General Meeting. Non-executive directors receive statutory superannuation (and may salary sacrifice fees to superannuation) but do not participate in any incentive plans or receive any performance based remuneration. Superannuation is not paid for overseas directors. There is no retirement benefits scheme for non-executive directors.

Details of Caltex’s remuneration arrangements for the Managing Director & CEO, the Board and the CLT are provided in the Remuneration Report at pages 31 to 55 of this Annual Report.

4. Risk management framework

4.1 Risk management framework

The Board is ultimately responsible for monitoring the effectiveness of the critical systems and internal controls used to manage Caltex’s material business risks. It is also responsible for approving key financial and other risk management policies. The Board has delegated oversight of particular risks to its standing committees.

The Managing Director & CEO and the CLT are responsible for the design, implementation and maintenance of risk management systems to manage Caltex’s material business risks.

Caltex has adopted a risk management framework to proactively and systematically identify, assess and address events that could potentially impact our business objectives. This framework integrates the consideration of risk into our activities so that:

• risks in relation to the effective delivery of our business strategy are identified

• control measures are evaluated, and

• where potential improvements in controls are identified, improvement plans are scheduled and implemented.

Management assesses risks on a regular basis, and reports on material risks to the Board and its Committees. These reports include the status and effectiveness of control measures relating to each material risk. The Board, the Audit Committee, the OHS & Environmental Risk Committee and the Human Resources Committee each receive regular reports on material risks relevant to their responsibilities. The Board and the OHS & Environmental Risk Committee also receive quarterly risk updates throughout the year.

Caltex’s policies for overseeing and managing material business risks are regularly reviewed and approved by the Board.

The Risk Management Summary is available on the Caltex website (www.caltex.com.au) and outlines Caltex’s practices to oversee and manage risks, including the risk management framework and the roles and responsibilities of the Board, its Committees, senior executives and staff.

10 Caltex / 2014 annual RePORt

Corporate Governance Statement continued

4.2 Internal controls framework

Internal audit

Caltex has a dedicated internal audit function which provides an independent and objective assessment to the Board and management regarding the adequacy, effectiveness and efficiency of our risk management, control and governance processes. Internal audit conducts audits in accordance with audit plans approved by the Audit Committee (for financial risks) and the OHS & Environmental Risk Committee (for occupational health, safety and environmental risks), and provides regular reports to those Committees and to senior management.

The head of internal audit has a direct reporting line to the Chairmen of the Audit Committee and OHS & Environmental Risk Committee and meets with them regularly. The Audit Committee and OHS & Environmental Risk Committee also meet privately with the head of internal audit as part of each scheduled meeting.

Integrity in financial reporting

The Board has received assurance from the Managing Director & CEO and the Chief Financial Officer that the declaration provided under section 295A of the Corporations Act is founded on a sound system of risk management and internal control, and that the system is operating effectively in all material respects in relation to financial reporting risks.

4.3 External Auditor Policy

The Board has approved an External Auditor Policy that addresses the provision of services by the external auditor, including non-audit services. The Audit Committee monitors services provided by KPMG during the year to confirm that KPMG continues to be independent and to confirm compliance with the policy. The Audit Committee also monitors the rotation requirements for the external auditor under the Corporations Act with KPMG each year. Caltex’s Relationship with the External Auditor document is available on the Caltex website (www.caltex.com.au) and provides a summary of this process.

One of the Audit Committee’s key responsibilities is to assess the performance of the external auditor and, as appropriate, make recommendations to the Board on the appointment, reappointment or replacement of the external auditor. The Audit Committee reviewed KPMG’s performance as external auditor for 2013 before KPMG was engaged for the 2014 full year audit and half year review.

The Audit Committee meets privately with the external auditor at each scheduled Committee meeting and the Committee Chairman also meets with the external auditor from time to time outside Committee meetings, as appropriate.

Caltex’s external auditor attends its annual general meetings and is available to answer questions from security holders relevant to the audit.

5. Corporate social responsibility

Caltex is focused on conducting our operations with care. We work to deliver sustainable growth and shareholder value, contribute to the communities in which we operate, minimise our impact on the environment and remain an employer of choice.

Maintaining safe, reliable and sustainable operations is at the core of our business. A culture of operational excellence is formally supported through an enterprise-wide risk management framework and our operational excellence management system. Caltex has a health and safety policy, approved by the OHS & Environmental Risk Committee, which requires Caltex to provide a safe and healthy workplace for all our people, and to operate in a way that will not adversely affect the health and safety of our neighbours, customers or the public. The emphasis on health and safety is embedded in our business planning process and entrenched in the culture of our organisation.

Caltex is committed to further improving the energy efficiency of our operations. In 2014, Caltex continued to report under the National Greenhouse and Energy Reporting Scheme and the Carbon Disclosure Project. Caltex is also committed to supporting the communities in which we work and live. Our refineries, service stations and terminals are proud supporters of a variety of organisations, events and programs in local communities.

Further information on our social, ethical and environmental performance can be found in the Annual Review.

6. Governance policies

6.1 Code of Conduct

Caltex’s Code of Conduct applies to Caltex directors, senior executives and staff and provides a framework for decision making and business behaviour, which builds and sustains our corporate integrity, reputation and success. This Code of Conduct identifies responsibilities for investigating breaches of the code and associated reporting of breaches to the Board or senior management as appropriate.

The Board receives an annual report from the General Manager – Human Resources in relation to the administration of, and compliance with, the Code of Conduct .

A copy of the Code of Conduct is available on Caltex’s website (www.caltex.com.au).

11

6.2 Diversity and inclusion

Caltex embraces a strong belief in the advantages of an inclusive workplace in which individuals of varied backgrounds and perspectives are welcomed, encouraged and given the opportunity to contribute to their full potential.

At Caltex, diversity is defined as the prevalence of difference in our workplace, including women and men from different countries, cultures, ethnicities, generations and all the other unique differences in our backgrounds that make each of us who we are. Caltex believes diversity maximises opportunities to attract, retain and develop the best talent, seize opportunities for creative problem solving and grow our business through an informed understanding of the diverse markets in which Caltex operates.

The Diversity and Inclusion Policy sets out Caltex’s vision for a diverse workplace and the responsibilities of the Board, its committees, Caltex leaders, employees and contractors.

With assistance from the Human Resources Committee, the Board annually approves measurable objectives set in accordance with the Diversity and Inclusion Policy , assesses the progress against those objectives, and monitors the proportion of women and indigenous Australians at various levels across Caltex.

The Board approved a set of measureable objectives, related to gender diversity, indigenous employee representation, and inclusion, for 2014. The 2014 objectives were disclosed in the Corporate Governance Statement contained in Caltex’s 2013 Annual Report.

In August and December 2014, and again in February 2015, the Board assessed Caltex’s progress in achieving the 2014 diversity and inclusion objectives. The table below sets out the status of each 2014 objective.

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----- Start of picture text -----

oBjeCtIve PRoGRess
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2014	gender diversity objectives
1.	Increase the percentage of female senior leaders to	Female representation in senior leadership has increased to 25%
	33% by 2017	as at 31 December 2014, a 5% increase on the 2013 year-end
		fgure of 20%.
2.	Increase the percentage of external female new hires in	Corporate and Marketing external female hires were 53% and
	Corporate and Marketing (respectively) at experienced	41% respectively. These results compare very favourably to
	professional level	2013(Corporate: 40% and Marketing: 32%).
3.	Increase percentage of female headcount in	As at 31 December 2014, the female headcount in Supply Chain
	Supply Chain	was 21%, a 3.8% decrease from 31 December 2013.
		The closure of the Kurnell refnery had a signifcant impact on
		female headcount.
4.	Develop a retention plan for key female Kurnell	Leadership teams across Marketing and Supply Chain developed
	refnery talent	a plan for retaining key female Kurnell refnery talent.
		In 2014, 27% of females were redeployed into other areas of the
		company. Furthermore, following an “expression of interest”
		process undertaken in 2013 to understand preferred outcomes
		following the closure of Kurnell, 46% of females achieved their
		frst preferred outcome and 75% of females achieved one of
		their topthreepreferred outcomes(out of nine in total).
5.	Manage female voluntary turnover, ensuring it remains	As at 31 December 2014, the voluntary turnover rate amongst
	below 7%	graded female employees was 4.8%, a reduction of 0.4%
		compared to the 2013 outcome of 5.2%.
6.	Maintain minimal gender based pay differentials	The 2014 end of year gender pay differential is 2.3%
		in favour of males.
		While this level of pay differential is considered minimal,
		we are committed to further reducingthisgap.
7.	Maintain the percentage of females in the critical	Given the organisational restructure implemented in 2014,
	successor talent pool at the current level, ensuring	critical roles were last reviewed in September 2014.
	no less than the percentage female headcount in the Grade 58 and above talent pool	At this time, females represented 29% of the pipeline critical successors, which is above the 2013 representation (27%) and
		also above the female representation in Grade 58 and above.

12 Caltex / 2014 annual RePORt

Corporate Governance Statement continued

oBjeCtIve	oBjeCtIve	PRoGRess
2014 8. 2014	indigenous diversity objectives Increase indigenous employee headcount (those formally hired and retained via indigenous employment programs) inclusion objectives	Through the indigenous employment program, 21 indigenous employees were hired in 2014. Caltex has now met 83% of its commitment to the Australian Employment Covenant, a national industry-led initiative that aims to close the gap between indigenous and non-indigenous Australians in respect of employment. Despite our strong efforts in hiring indigenous employees, indigenous employee headcount reduced over 2014. As part of Caltex’s diversity and inclusion strategy for 2015, we will be focusing on both the attraction and retention of our indigenous employees.
9.	Increase score for the Engagement Survey statement:	67% of respondents agreed or strongly agreed with this
	“The work environment is very open and accepting	statement, a 4% improvement on the 2012 result of 63%
	of individual difference”	(thisquestion was not asked in 2013).
10.	At least maintain the number of graded employees	79% of respondents answered “yes” to this question, a 7%
	who answer “yes” to “Do you feel comfortable	improvement on the 2013 result of 72%.
	talkingtoyour manager about fexible work”

In 2014, the Board approved the following diversity and inclusion objectives for 2015.

	oBjeCtIve
2015 1.	gender diversity objectives Increase women in senior leadershiproles to 33% by2017
2.	Increase the percentage of external female new hires in Marketing, Supply, and Supply Chain, and maintain a strong percentage of external female new hires in Corporate,at experiencedprofessional level and above
3.	Ensure the female promotion rate in Marketing, Supply, Supply Chain and Corporate is above the female representation at the experiencedprofessional level and above
4.	Manage female voluntaryturnover to 6% or less at the experiencedprofessional level and above
5. 2015 6. 2015	Maintain minimal gender-based pay differences indigenous diversity objectives Increase indigenous employee representation inclusion objectives
7.	Increase the score for the number of employees who answer ‘yes’ to the Employee Survey question: “The work
	environment is veryopen and acceptingof individual difference.”
8.	At least maintain the score for the number of employees who answer ‘yes’ to the Employee Survey question “Do you feel
	comfortable talkingtoyour manager about fexible work”

The table below contains details about the representation of females in the Caltex workforce, Caltex’s leadership and senior teams, and the Board.

Level	2014	2013	2012
Board	25%	25%	25%
Senior executives(direct reports to the CEO)	0%	0%	0%
Senior managers(salary grades 58 and above)	25%	20%	21%
Middle managers(salary grades 56 and 57)	23%	18%	18%
Caltex	36%	34%	34%

13

6.3 Trading in securities

Caltex’s Securities Trading Policy , which is available on our website, sets out clear requirements for the Board, senior executives and staff to comply with insider trading laws when dealing in the securities of Caltex and other companies. The policy also contains trading restrictions which apply during blackout periods prior to results releases. It also prohibits senior executives from hedging an exposure to unvested or vested Caltex securities held through any of our executive incentive plans.

6.4 Continuous disclosure

Caltex is committed to promoting investor confidence by ensuring that trading in our securities takes place in an informed market. Caltex has mechanisms in place to ensure that we meet our continuous disclosure obligations under the ASX Listing Rules and the Corporations Act .

Caltex’s Continuous Disclosure Policy , which is available on our website, sets out the key obligations of the Board, senior executives and staff to ensure that we comply with our continuous disclosure obligations so that investors have equal and timely access to material information concerning Caltex, and company announcements are factual and presented in a clear and balanced way.

6.5 Shareholder communications

Caltex is committed to giving our investors timely, balanced and understandable information about our business and performance. The following practices support this goal.

• In addition to statutory reporting, we publish an annual review and a half year review which provide an overview of our key business developments, operational highlights and financial performance.

• We provide monthly updates to the market on the Caltex Refiner Margin, which is a contributor to our performance.

• We have a robust and proactive investor relations program which includes regular engagement with institutional investors and analysts. Our investor presentations are released to the market before the briefings occur and we give prior notice of significant briefings, such as half yearly and annual reporting.

• We provide ASX and media releases, corporate governance policies and charters and other relevant company information on our website (www.caltex.com.au).

We encourage shareholders to submit questions for the company or our auditor in the lead-up to our annual general meeting. The Chairman discusses significant issues raised in shareholders’ questions in her address to the meeting. Shareholders who attend in person have the opportunity to ask further questions at the meeting. We also webcast the annual general meeting so that it can be viewed by people who are unable to attend.

Caltex’s Shareholder Communications Policy sets out further details of our approach to providing fair and equal information to all investors.

6.6 Policy for transactions with Chevron

As noted above, Chevron holds 50% of the ordinary shares in Caltex. During the course of a year, Caltex companies enter into a number of commercial arrangements with Chevron companies. Significantly, Caltex has an agreement with Chevron for the procurement and supply of transport fuels, with associated shipping services.

The Caltex Board has adopted a Policy for Transactions with Chevron to ensure that all arrangements with Chevron are at arm’s length. Under that policy, all crude, product and shipping transactions or other significant dealings with Chevron must be approved by the Caltex Board. The Board’s practice is for the directors who are Chevron executives to leave the meeting and not participate in discussions or decisions on these matters.

Details of the policy, and other information concerning the relationship with Chevron, are available on the Caltex website (www.caltex.com.au).

14 Caltex / 2014 annual RePORt

Corporate Governance Statement continued

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----- Start of picture text -----

ASX CORPORATE GOVERNANCE COUNCIL’S PRINCIPLES AND RECOMMENDATIONS [1] SECTION REFERENCE COMPLY
Principle 1 Lay solid foundations for management and oversight
1.1 Companies should establish the functions reserved to the board and those 1.1 ✔
delegated to senior executives and disclose those functions.
1.2 Companies should disclose the process for evaluating the performance 3.1 and ✔
of senior executives. Remuneration Report
1.3 Companies should provide the information indicated in the Guide to reporting 1.1, 3.1 ✔
on Principle 1.
Principle 2 Structure the board to add value
2.1 A majority of the board should be independent directors. 1.2, 1.3 ✘
2.2 The chair should be an independent director. 1.3 ✔
2.3 The roles of chair and chief executive officer should not be exercised by 1.2 ✔
the same individual.
2.4 The board should establish a nomination committee. 2.1 ✔
2.5 Companies should disclose the process for evaluating the performance of 3.1 ✔
the board, its committees and individual directors.
2.6 Companies should provide the information indicated in the Guide to 1.2, 1.3, 2.1, 3.1 ✔
reporting on Principle 2. and website
Principle 3 Promote ethical and responsible decision making
3.1 Companies should establish a code of conduct and disclose the code or a summary 6.1 ✔
of the code as to:
• the practices necessary to maintain confidence in the company’s integrity
• the practices necessary to take into account their legal obligations and the
reasonable expectations of their stakeholders
• the responsibility and accountability of individuals for reporting and investigating
reports of unethical practices.
3.2 Companies should establish a policy concerning diversity and disclose the policy or 6.2 ✔
a summary of that policy. The policy should include requirements for the board to
establish measurable objectives for achieving gender diversity and for the board to
assess annually both the objectives and progress in achieving them.
3.3 Companies should disclose in each annual report the measurable objectives for 6.2 ✔
achieving gender diversity set by the board in accordance with the diversity policy
and progress towards achieving them.
3.4 Companies should disclose in each annual report the proportion of women 6.2 ✔
employees in the whole organisation, women in senior executive positions and
women on the board.
3.5 Companies should provide the information indicated in the Guide to reporting 6.1, 6.2 and website ✔
on Principle 3.
Principle 4 Safeguard integrity in financial reporting
4.1 The board should establish an audit committee. 2.1 ✔
4.2 The audit committee should be structured so that it: 2.1 ✔
• consists only of non-executive directors
• consists of a majority of independent directors
• is chaired by an independent chair, who is not chair of the board
• has at least three members.
4.3 The audit committee should have a formal charter. 2.1 ✔
4.4 Companies should provide the information indicated in the Guide to reporting 2.1, 4.2, 4.3 ✔
on Principle 4. and website
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15

AsX	CoRPoRAte GoveRnAnCe CoUnCIL’s PRInCIPLes AnD ReCoMMenDAtIons1	seCtIon ReFeRenCe	CoMPLY
Principle 5 Make timely and balanced disclosure 5.1 Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. 5.2 Companies should provide the information indicated in the Guide to reporting on Principle 5. Principle 6 Respect the rights of shareholders 6.1 Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy. 6.2 Companies should provide the information indicated in the Guide to reporting on Principle 6. Principle 7 Recognise and manage risk 7.1 Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies. 7.2 The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks. 7.3 The board should disclose whether it has received assurance from the chief executive offcer (or equivalent) and the chief fnancial offcer (or equivalent) that the declaration provided in accordance with section 295A of the_Corporations Act_is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to fnancial reporting risks. 7.4 Companies should provide the information indicated in the Guide to reporting on Principle 7. Principle 8 Remunerate fairly and responsibly		6.4 6.4 and website 6.5 6.5 and website 4.1 4.1, 4.2 4.2 4.1, 4.2, 4.3 and website	✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
8.1	The board should establish a remuneration committee.	2.1	✔
8.2	The remuneration committee should be structured so that it:	2.1	✔
	• consists of a majority of independent directors
	• is chaired by an independent chair
	• has at least three members.
8.3	Companies should clearly distinguish the structure of non-executive directors’	3.2 and website	✔
	remuneration from that of executive directors and senior executives.
8.4	Companies should provide the information indicated in the Guide to reporting	2.1, 3.2, Remuneration	✔
	on Principle 8.	Report and website

1. The 2014 Corporate Governance Statement has been prepared in accordance with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (2nd edition) with 2010 Amendments ; however, where appropriate, Caltex has adopted and reported against certain recommendations contained in the 3rd edition.

16 Caltex / 2014 annual RePORt

2014 Financial Report for Caltex Australia Limited

ACN 004 201 307

The 2014 Financial Report for Caltex Australia Limited includes:

• Directors’ Report

• Lead Auditor’s Independence Declaration

• Directors’ Declaration

• Independent Audit Report

• Consolidated Income Statement

• Consolidated Statement of Comprehensive Income

• Consolidated Balance Sheet

• Consolidated Statement of Changes in Equity

• Consolidated Cash Flow Statement

• Notes to the Financial Statements

for the year ended 31 December 2014.

Caltex Australia Group

For the purposes of this report, the Caltex Group (the Group) refers to:

• Caltex Australia Limited, which is the parent company of the Caltex Group and is listed on the Australian Securities Exchange (ASX)

• our major operating companies, including Caltex Australia Petroleum Pty Ltd

• a number of wholly owned entities and other companies that are controlled by the Caltex Group.

Please note that “Caltex” has the same meaning in this report as the Caltex Group, unless the context requires otherwise.

17

Directors’ Report

Introduction

The Board of Caltex Australia Limited presents the 2014 Directors’ Report (including the Remuneration Report) and the 2014 Financial Report for Caltex Australia Limited and its controlled entities (the Group) for the year ended 31 December 2014 to shareholders. An Independent Audit Report from KPMG, as external auditor, is also provided.

Board of directors

The Board of Caltex Australia Limited comprises Elizabeth Bryan (Chairman), Julian Segal (Managing Director & CEO), Trevor Bourne, Richard Brown, Barbara Burger, Greig Gailey, Ryan Krogmeier and Bruce Morgan.

Mr Brown, Ms Burger and Mr Krogmeier each serve as alternate directors for each other.

Board profiles

Elizabeth Bryan AM

Chairman (Non-executive/Independent)

Date of appointment Director:

18 July 2002

Date of appointment Chairman:

1 October 2007

Board committees:

Nomination Committee (Chairman) and attends meetings of the Audit Committee, the Human Resources Committee and the OHS & Environmental Risk Committee in an ex-officio capacity.

Ms Bryan brings management, strategic and financial expertise to the Caltex Board. She has over 32 years of experience in the financial services industry, government policy and administration, and on the boards of companies and statutory organisations. Prior to becoming a professional director, she served for six years as Managing Director of Deutsche Asset Management and its predecessor organisation, NSW State Superannuation Investment and Management Corporation.

Ms Bryan is a director of Insurance Australia Group Limited (appointed December 2014) and Westpac Banking Corporation (appointed November 2006). She is a member of the Australian Securities and Investments Commission’s Director Advisory Panel and the Takeovers Panel, and serves as a trustee of the Museum of Applied Arts and Sciences.

Ms Bryan holds a Bachelor of Arts (Economics) from the Australian National University and a Master of Arts (Economics) from the University of Hawaii (US).

Julian Segal

Managing Director & CEO

Date of appointment:

1 July 2009

Mr Segal joined Caltex from Incitec Pivot Limited, a leading global chemicals company, where he served as the Managing Director & CEO from June 2005 to May 2009. Prior to Incitec Pivot, Mr Segal spent six years at Orica in a number of senior management positions, including Manager of Strategic Market Planning, General Manager – Australia/Asia Mining Services, and Senior Vice President – Marketing for Orica Mining Services.

Mr Segal is a director of the Australian Institute of Petroleum Limited (appointed 1 July 2009).

Mr Segal holds a Bachelor of Science (Chemical Engineering) from the Israel Institute of Technology and a Master of Business Administration from the Macquarie Graduate School of Management.

Trevor Bourne

Director (Non-executive/Independent)

Date of appointment:

2 March 2006

Board committees:

OHS & Environmental Risk Committee (Chairman), Audit Committee, Human Resources Committee and Nomination Committee

Mr Bourne brings to the Board broad management experience in industrial and capital intensive industries, and a background in engineering and supply chain. From 1999 to 2003, he served as CEO of Tenix Investments. Prior to Tenix, Mr Bourne spent 15 years at Brambles Industries, including six years as Managing Director of Brambles Australasia. He has also previously worked for Incitec Pivot and BHP.

Mr Bourne is a director of Senex Energy Limited (appointed December 2014) and Sydney Water Corporation (appointed February 2014). He was previously a director of Origin Energy Limited (from February 2000 to November 2012) and formerly Chairman of Hastie Group Limited (where he served as a director from February 2005 until February 2012).

Mr Bourne holds a Bachelor of Science (Mechanical Engineering) from the University of New South Wales and a Master of Business Administration from the University of Newcastle.

18 Caltex / 2014 annual RePORt

Directors’ Report continued

Board profiles continued

Richard Brown

Director (Non-executive)

Date of appointment: 28 June 2012

Board committees:

Nomination Committee

Mr Brown brings to the Board over 30 years of oil industry experience with Chevron and substantial financial and management expertise. He is currently Chevron’s Regional Finance Officer – Asia Pacific, based in Singapore. He is responsible for financial and management reporting, credit approval, local cash management, tax matters and risk management for Chevron’s operations in the Asia Pacific region. Prior to this role, Mr Brown served as Chevron’s General Manager – Finance for Europe, Eurasia and Middle East Opco.

Mr Brown holds a Bachelor of Arts (Economics) from the University of Warwick (UK).

Barbara Burger

Director (Non-executive)

Date of appointment: 28 June 2012

Board committees:

OHS & Environmental Risk Committee and Nomination Committee

Ms Burger brings to the Board extensive experience in marketing, manufacturing and supply chain management. She has worked for Chevron for over 25 years and is currently the President of Chevron Technology Ventures (CTV), based in Houston, Texas. CTV champions innovation, commercialisation and integration of emerging technologies and related new business models within Chevron; its business units include advanced biofuels, emerging energy technology and venture capital. Prior to this role, Ms Burger was the Vice President – Lubricants Supply Chain and Base Oil for Chevron Lubricants.

Ms Burger holds a Bachelor of Science (Chemistry) from the University of Rochester (US), a Doctor of Philosophy (Chemistry) from the California Institute of Technology (US) and a Master of Business Administration (Finance) from the University of California (US).

Greig Gailey

Director (Non-executive/Independent)

Date of appointment:

11 December 2007

Board committees:

Human Resources Committee (Chairman), Audit Committee, Nomination Committee and OHS & Environmental Risk Committee

Mr Gailey brings to the Board extensive Australian and international oil industry experience, and broad management expertise from industrial and capital intensive industries. From 1964 to 1998, he worked at British Petroleum Company (BP), where he held various positions throughout Australia and offshore, including management of refining, supply and distribution in Australia and Europe. Mr Gailey was subsequently appointed CEO of Fletcher Challenge Energy (New Zealand), a position he held from 1998 to 2001. In August 2001, he joined Pasminco Limited as CEO. Pasminco relisted on the ASX as Zinifex Limited in April 2004, and Mr Gailey became Managing Director & CEO of Zinifex Limited from that date until standing down in June 2007.

Mr Gailey is Chairman of ConnectEast, Deputy Chairman of the Victorian Opera Company and a director of the Australian Advisory Board of Canada Steamships. Mr Gailey was previously President of the Business Council of Australia (from 2007 to 2009).

Mr Gailey holds a Bachelor of Economics from the University of Queensland.

Ryan Krogmeier

Director (Non-executive)

Date of appointment:

30 March 2012

Board committees:

Human Resources Committee and Nomination Committee

Mr Krogmeier brings to the Board considerable experience in the oil and gas industry, particularly in the areas of crude and products supply and trading, risk management and financial operations. He is currently the Global Vice President of International Products, Joint Ventures and Affiliates for Chevron. Mr Krogmeier is based in Singapore and has over 20 years of experience working for Chevron. Previously, he was the Vice President – Americas East, Caribbean and Latin America for Chevron, a role in which he was responsible for strategy and profits for Chevron’s downstream fuels business in those regions.

Mr Krogmeier is a director of GS Caltex Corporation (Korea), Star Petroleum Refining Co Ltd (Thailand) and Singapore Refining Company Pte Ltd (Singapore).

Mr Krogmeier holds a Bachelor of Business Administration (Accounting) from the University of Iowa (US) and a Master of Business Administration from the University of California (US).

19

Bruce Morgan

Director (Non-executive/Independent)

Date of appointment: 29 June 2013

Board committees:

Audit Committee (Chairman), Human Resources Committee, Nomination Committee and OHS & Environmental Risk Committee

Mr Morgan brings to the Board expertise in accounting, business advisory services, risk and general management. He was a partner with professional services firm PricewaterhouseCoopers (PwC) for over 25 years, where he practised as an audit partner with a focus on the energy and mining sectors. He was previously Chairman of the PwC Board and a member of the PwC Global Board. Prior to that, he was managing partner of PwC’s Sydney and Brisbane offices.

Mr Morgan is the Chairman of Sydney Water Corporation and a director of Origin Energy Limited (appointed November 2012), the University of NSW Foundation, the European Australian Business Council and Redkite.

He is a Fellow of the Australian Institute of Company Directors and Chartered Accountants Australia and New Zealand, and holds a Bachelor of Commerce (Accounting and Finance) from the University of NSW.

operating and financial review

The purpose of the operating and financial review (OFR) is to enhance the periodic financial reporting and provide shareholders with additional information regarding the Group’s operations, financial position, business strategies and prospects. The review complements the financial report on pages 62 to 114.

The OFR may contain forward looking statements. These statements are based solely on the information available at the time of this report, and there can be no certainty of outcome in relation to the matters to which the statements relate.

Company overview

Caltex, including predecessor companies, has operated in Australia for more than 100 years, focusing on providing ongoing, reliable, safe and efficient fuel supply to our customers.

Caltex is one of Australia’s leading transport fuel suppliers and convenience retailers and is listed on the Australian Securities Exchange. Caltex has a major shareholder, Chevron, which holds 50% of the company’s ordinary shares. Caltex operates independently of Chevron, and all decisions are made in Australia by the Caltex Board and management. The head office is based in Sydney, and Caltex has over 3,000 employees working across the country. Caltex operates its business as one integrated value chain and incorporates operational excellence principles throughout supply, refining, logistics and marketing.

The principal activities of Caltex during the year were the purchase, refining, distribution and marketing of petroleum products and the operation of convenience stores throughout Australia. Aside from those discussed below, there were no significant changes in the nature of Caltex’s principal activities or in the state of affairs during the financial year.

During 2014, Caltex operated two oil refineries – Kurnell refinery in Sydney and Lytton refinery in Brisbane – producing petrol, diesel and jet fuel, along with small amounts of fuel oil and specialty products, liquid petroleum gas (LPG) and other gases. As announced in July 2012, after extensive evaluation of its business, Caltex outlined plans to rebalance its supply chain, including the closure of the Kurnell refinery in Sydney, New South Wales. October 2014 saw the successful shutdown of the last of the Kurnell refinery’s process units and the commencement of operations of the new Kurnell terminal, which is Australia’s largest fuel import terminal. The purpose of the project was to enable continued and reliable supply of transport fuels to Caltex customers, while stemming Kurnell refinery operating losses and reducing our exposure to volatile refining margins.

Caltex also buys refined products on the open market both overseas and locally, and along with the products that Caltex refines, Caltex markets these products across retail and commercial channels. These products are supplied to customers via a network of pipelines, terminals, depots and company-owned and contracted transport fleets.

20 Caltex / 2014 annual RePORt

Directors’ Report continued

operating and financial review continued

Group strategy

Caltex’s vision is to continue to be the outright leader in transport fuels in Australia.

To achieve this objective, Caltex’s strategy consists of four key pillars:

1. Superior supply chain

2. Comprehensive targeted offer to customers

3. Organisational competitiveness

4. Corporate growth

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CALTEX’S VISION
Outright leader in transport fuels across Australia
MEASURE OF SUCCESS
Safely and reliably deliver top quartile total shareholder returns
KEY STRATEGY PILLARS
Comprehensive targeted offer to customers across Corporate
Superior supply chain Organisational competitiveness
products, channels and geographies growth
Enhance Enhance Grow Grow Seed Cost Capital Value Long
competitive competitive retail commercial future efficient efficient Chain term
product infrastructure sales and growth and and Optimisation growth
sourcing wholesale options effective effective options
sales
----- End of picture text -----

Understanding and management of risk; relentless pursuit of	Highly capable people	Competitive and reliable supply of product into each key	Large scale, cost competitive terminal, pipeline, depot and feet	Scale across the value chain, anchored by key customer	Comprehensive network of outlets, proftable franchise network,	Cost and capital efcient
operational excellence		geography	infrastructure in each geography	portfolio	leading fuel card ofer and brand

In 2011, the articulation of Caltex’s vision – to be the outright leader in transport fuels across Australia – became a catalyst for change. Since then, this vision as measured by top quartile total shareholder returns, has driven rapid and significant change at Caltex. It was this clear vision and an effective culture that have enabled Caltex to confidently embark on its transformation path, including the supply chain restructure announced in 2012.

The major components of the supply chain restructuring include:

• the continued investment in the development of Caltex’s supply chain and marketing operations to position Caltex as the outright leader in transport fuels across Australia

• the closure of the Kurnell refinery in Sydney, New South Wales and its conversion to a major import terminal to enable the continued reliable supply of transport fuels to Caltex customers; this project was completed in the second half of 2014 with the successful conversion of the Kurnell refinery into Australia’s largest fuel terminal

• continued operation of the company’s Lytton refinery in Brisbane, Queensland with a focus on necessary operational and financial performance improvements, and

• Caltex establishing an office in Singapore in 2013 to strengthen the fuel product supply chain following the closure of Kurnell refinery. The primary role of Ampol Singapore, a wholly owned subsidiary of Caltex Australia, is to source petroleum product imports and related shipping to Australia. Ampol has entered into a long term arrangement with Chevron to assist with the procurement and supply of transport fuels (petrol, diesel and jet) including associated shipping services.

Caltex’s strategy reflects historical and current demand in Australia for diesel, jet fuel and petrol and is focused on ensuring that Caltex is well positioned to benefit from those markets that are growing.

Underpinning Caltex’s offer to customers is a national distribution network of terminals, pipelines and depots.

During 2014, Caltex has undertaken a company-wide cost and efficiency review to give it the financial strength to maintain its marketing leadership position and to enable Caltex to capture future growth opportunities. Caltex intends to accelerate the pursuit of strategic growth initiatives in order to deliver on its target of delivering top quartile total shareholder returns, whilst ensuring a capital structure that is consistent with a stable investment grade credit rating. Caltex will continue to take a disciplined approach to capital management, and our target balance sheet settings will ensure that the company retains financial flexibility to take advantage of opportunities as they arise.

Caltex’s measure of success continues to be to safely and reliably deliver top quartile total shareholder returns.

21

Caltex Group results 31 December 2014

On an historic cost profit basis, Caltex recorded an after tax profit of $20 million for the 2014 full year, including a loss relating to significant items of $112 million after tax. This compares with the 2013 full year profit of $530 million, which included a significant gain of $26 million after tax, dominated by profit on the sale of the Sydney bitumen business. The 2014 result includes a product and crude oil inventory loss of $361 million after tax. The 2014 total inventory loss of $361 million compares with an inventory gain of $172 million after tax in 2013.

On an RCOP[1] basis, Caltex recorded an after tax profit for the 2014 full year of $493 million, excluding significant items. This compares with an RCOP after tax profit of $332 million for the 2013 full year, excluding significant items.

The overall result reflects another record Marketing profit and the impact of favourable externalities, which have benefited the Supply Chain result. An excellent operational performance enabled the Lytton refinery to take advantage of the strong external environment, with record production of transport fuels.

Caltex RCOP NPAT

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$m
500
320
261
400
161
300 155
151
200
197
163 171 173 ■ RCOP NPAT 1H
100 113 ■ RCOP NPAT 2H
0
2010 2011 2012 2013 2014
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A reconciliation of the underlying result to statutory result is set out in the following table:

	2014 $m	2013 $m
Reconciliation of the underlying result to statutory result	(after tax)	(after tax)
Netproft attributable to equityholders of theparent entity	20	530
Deduct/add: Signifcant items loss/(gain)	112	(26)
Deduct/add: Inventoryloss/(inventory gain)	361	(172)
RCoP nPAt(excluding signifcant items)	493	332

Dividend

The Board has declared a final fully franked dividend of 50 cents per share (fully franked) for the second half of 2014. Combined with the interim dividend of 20 cents per share for the first half, paid in October 2014, this equates to a total dividend of 70 cents per share for 2014, fully franked. This compares with a total dividend payout of 34 cents per share (fully franked) for 2013. Following the successful closure of the Kurnell refinery, the Board has announced the reinstatement of a target dividend payout ratio of 40-60% of RCOP NPAT.

1. Replacement cost of sales operating profit (RCOP) excluding significant items (on a pre- and post-tax basis) is a non-International Financial Reporting Standards (IFRS) measure. It is derived from the statutory profit adjusted for inventory gains/(losses), as management believes this presents a clearer picture of the company’s underlying business performance, as it is consistent with the basis of reporting commonly used within the global refineries industry. This is unaudited. RCOP excludes the impact of the fall or rise in oil prices (a key external factor) and presents a clearer picture of the company’s underlying business performance. It is calculated by restating the cost of sales using the replacement cost of goods sold rather than the historical cost, including the effect of contract based revenue lags.

22 Caltex / 2014 annual RePORt

Directors’ Report continued

operating and financial review continued

Income statement

For	the year ended 31 December 2014	2014 $m	2013 $m
1.	Total revenue1	24,232	24,682
2.	Total expenses2	(23,437)	(24,131)
	Replacement cost earnings before interest and tax	795	551
	Finance income	8	9
	Finance expenses3	(99)	(98)
3.	net fnance costs	(91)	(89)
	Income tax expense4	(211)	(130)
	Replacement cost of sales operating proft (RCoP)	493	332
4.	Signifcant items (loss)/gain after tax	(112)	26
5.	Inventory (loss)/gain after tax	(361)	172
	Historical cost net proft after tax	20	530
	Interim dividend per share	20c	17c
	Final dividend per share	50c	17c
	Basic earnings per share
	• Replacement cost (excluding signifcant items)	183c	123c
	• Historical cost(includingsignifcant items)	7c	196c

1. Includes other income of $1 million (2013: $45 million) and excludes significant item gain of nil (2013: $39 million).

2. Excludes significant item loss of $140 million (2013: $11 million).

3. Excludes significant item loss of $20 million (2013: nil).

4. Excludes tax benefit on inventory loss of $155 million (2013: $74 million tax expense) and excludes tax expense on significant items of $48 million (2013: $2 million tax benefit).

DIsCUssIon AnD AnALYsIs – InCoMe stAteMent

1. total revenue

Total revenue decreased primarily due to:

• 2% • lower fuel sales volumes than in the prior period (2014: 20.4 billion litres vs. 2013: 21.2 billion litres), and

• the decline in crude prices, which resulted in lower sales revenue.

2. total expenses – Total expenses decreased primarily as a result of lower replacement costs replacement cost basis of goods sold resulting from lower sales volumes and crude prices. ▼ 3%

23

	RCoP eBIt BReAkDoWn1
Caltex Refner Margin	CRM represents the difference between the cost of importing a standard Caltex basket of products
(CRM)	to eastern Australia and the cost of importing the crude oil required to make that product basket.
$876m	The CRM calculation basically represents: average Singapore refner margin + product quality
	premium + crude discount/(premium) + product freight – crude freight – yield loss.
	US dollar CRM was higher in 2014 at US$12.42/bbl, compared with US$9.34/bbl for
	2013. In AUD terms, the CRM was 8.70 Australian cents per litre in 2014, compared with
	6.01 Australian cents per litre in 2013.
	Total refnery production in 2014 of all products was 10.2 billion litres compared with
	11.4 billion litres in 2013, refecting the closure of the Kurnell refnery and its conversion to
	terminal operations in October 2014.
transport fuels	Transport fuels comprise petrol, diesel and jet. The transport fuels marketing margin is based
marketing margin	on the average net margin over Import Parity Price in Australia.
$839m	Transport fuel sales have increased, with volume growth across both commercial and retail
	segments. Falling product prices in late 2014 supported transport fuels margins. Premium fuel sales
	were 4.3 billion litres in 2014, compared with 3.4 billion litres in 2013. Caltex’s overall transport
	fuel sales volumes grew 3% compared to the prior year. Retail diesel margins have continued to
	grow strongly, driven by the premium diesel product, Vortex Diesel, and as a result of growth in
	the diesel vehicle market.
	Diesel fuel volumes increased approximately 6%, driven by premium fuels growth which increased
	approximately 49%. Overall petrol volumes decreased approximately 1%, in line with the market.
	However, premium petrol sales volumes continue to grow, with Vortex Premium Unleaded sales
	volumes increasing4%.Jet fuel volumes increased approximately3%.
Lubricants and	Lubricants and specialties products include fnished lubricants, base oils, liquefed petroleum gas,
specialties margin	petrochemicals, wax and marine fuels.
$95m	Specialty products fell in 2014, mainly driven by the sale of the bitumen business in 2H13.
	Lubricants volumes and margins also declined in a competitive market.
non-fuel income	Non-fuel income includes convenience store income, franchise income, royalties, property,
$185m	plant and equipment rentals, StarCard income and share of profts from distributor businesses.
	Non-fuel income has increased 6% due to increased card merchant service fees, supply chain
	benefts and retail network improvements.
operating expenses	Operating expenses in this caption include Supply Chain, Marketing and Corporate
($1,145m)	operating expenditure.
	The major drivers of the operating expenses increase of $92 million are:
	• higher salary and wages due to bonuses earned in 2014
	• operating expenses for the full year of Queensland Fuel Group, and the newly acquired
	Scott’s Fuel Divisions, including acquisition costs
	• higher depreciation expense
	• increased advertising and brand expenditure, and
	• higher operating expense due to higher underlying support costs as the network and
	infrastructure continue to expand.
other	Other includes a number of miscellaneous items that typically include: foreign exchange impacts,
($55m)	other refning gross margin impacts, gain/loss on disposal of assets and subsidiary earnings.
	The most signifcant component was the net foreign exchange loss of approximately $22 million
	(after hedging).
RCoP eBIt excluding
signifcant items
$795m

1. The breakdown of RCOP shown here represents a management reporting view of the breakdown and, therefore, individual components may not reconcile to statutory accounts.

24 Caltex / 2014 annual RePORt

Directors’ Report continued

operating and financial review continued

DIsCUssIon AnD AnALYsIs	– InCoMe stAteMent ContInUeD
3. net fnance costs	Net fnance costs increased by $2 million compared with 2013. Increased net fnance costs refect:
▲2%	• higher unwinding of discount on long term provisions due to changes in the predicted spending
	pattern and a decrease in the government bond rate.
	This is partly offset by:
	• higher capitalised fnance costs relating to the Kurnell terminal conversion capital project, and
	• lower interest expenses after the maturity and subsequent repayment of the US private
	placement facility in 2014, which resulted in the use of alternative sources of funding at a
	lower interest rate,together with lower average net debt during2014.
4. signifcant items	During 2014, the Group incurred signifcant item losses of $112 million after tax in relation to
after tax	the Group’s previously announced cost and effciency review. These signifcant items related to
▲$138m	redundancy expenses, contract cancellation costs, consulting fees and asset rationalisation costs.
	During 2013, the Group incurred signifcant item gains of $26 million after tax due to proft of
	$34 million on the sale of the bitumen business, net of costs relating to acquisitions and disposals.
	This was offset by an $8 million expense due to adjustments to provisions relating to the closure
	of the Kurnell refnery.
5. Inventory losses	Inventory losses in 2014 were driven by the signifcant decline in crude oil prices in the second
after tax	half of 2014, falling from US$112/bbl in June 2014 to US$63/bbl in December 2014. This decrease
▲$533m	resulted in a net inventory loss of $361 million after tax, compared to inventory gains
	of $172 million after tax in 2013.
	Included in the inventory loss is a write-down of inventory on hand at year end of $82 million
	after tax to its net realisable value, due to the continued decline in crude oil prices in January 2015.
	There was no net realisable value write-down of inventory in 2013.
	By comparison, the inventory gains in 2013 were driven by the signifcant decline in the Australian
	dollar exchange rate throughout the year. Crude inventory holdings are denominated in US dollars
	and as the AUD exchange rate weakens compared to the US dollar, the result is that Caltex’s
	inventory values increase from an Australian dollar perspective. While crude prices were relatively
	stable in 2013, the Australian dollar decreased in December 2013 to an average of 89.8 US cents,
	down from 104.6 US cents at December 2012.

Business unit performance

RCOP EBIT[*] ($m)

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1,000
812 795
800 764 756
736
697
600 578 551
501
442
400
200
88 64
4
0
(81) [(47)] [(68)] [(42)] (81)
(200)
(171)
(208)
(400)
Marketing Supply Chain Corporate Total
2010 2011 2012 2013 2014
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• RCOP EBIT excluding significant items.

25

Marketing

Marketing delivered an EBIT of $812 million, up approximately 6% on a record 2013 result ($764 million). This strong result was achieved despite the loss of earnings from the Sydney bitumen business which was divested in December 2013.

Marketing continues to focus on its core strategy of driving sales of premium fuels (including Vortex Diesel). Higher sales of premium grades of petrol and diesel, and jet fuel, continue to offset the long term decline in demand for unleaded petrol, including E10. The increased penetration of premium Vortex products has been underpinned by continued investment in new retail service stations and diesel stops, and the refurbishment of existing service stations.

Recent acquisitions, such as the Queensland Fuel Group in 2013 and the Scott’s Fuel Divisions, which was completed in June 2014, have also contributed to the strong Marketing result.

Supply Chain

Supply Chain generated an EBIT contribution of $64 million for the 2014 full year. This compares with an EBIT loss of $171 million for 2013, and a 2014 first half loss of $65 million. The 2014 result has benefited from the impact of favourable externalities, particularly in the fourth quarter of the year. A strong operating performance by the Lytton refinery enabled the refinery to take advantage of these favourable conditions.

As previously announced, the Kurnell refinery was successfully shut down and terminal operations commenced in October, a significant milestone in the $270 million project to convert the historic refinery site to Australia’s largest fuel import terminal. The project remains on-time and on-budget with modest capex (around $50 million) remaining to be spent in 2015. The Kurnell refinery generated a 2014 operating EBIT loss of $69 million in the period prior to closure.

Externalities

The realised Caltex Refiner Margin (CRM) averaged approximately US$12.42/bbl for the 2014 full year. The strong July to December 2014 average CRM of US$16.38/bbl compares favourably with the 2014 first half (US$9.20/bbl) and the 2013 full year (US$9.34/bbl). The sharp decline in Brent crude oil prices towards year end was a major contributor to the stronger refiner margin in the second half as product prices have not fallen as quickly as the crude price (increasing the seven day lag, whilst reducing the refining yield loss).

The recent strength in refiner margins is not expected to persist given new supply additions in the region and the expectation is that product prices will adjust downwards.

On 1 August 2014, the company changed its policy of hedging outstanding US dollar payables from 50% to 80%. This has mitigated the impact of the falling Australian dollar on US dollar payables, with a resulting net loss in 2014 on US dollar payables of approximately $26 million (before tax). Conversely, a lower Australian dollar has a favourable impact on the Australian dollar denominated refiner margin.

Company-wide cost and efficiency review

As previously announced in August 2014, Caltex has undertaken a company-wide cost and efficiency review to give it the financial strength to maintain its market leadership position and to enable Caltex to capture future growth opportunities.

The review has resulted in restructuring costs of $112 million after tax (including redundancy costs, other cash and non-cash costs), being recognised in the second half of 2014. The restructuring is expected to deliver associated benefits of approximately $80 million to $100 million (before tax) per annum, with the full annual run rate expected to be achieved in 2016. Benefits totalling approximately $15 million (before tax) have already been delivered in 2014.

Balance sheet remains strong

Net debt at 31 December 2014 was $639 million, compared with $827 million at 30 June 2014 and $742 million at 31 December 2013. The lower debt reflects lower working capital levels following the closure of the Kurnell refinery, as well as the favourable impact of the lower crude price.

26 Caltex / 2014 annual RePORt

Directors’ Report continued

operating and financial review continued

Balance sheet

As at	31 December 2014	2014 $m	2013 $m	Change
1.	Workingcapital	542	1,051	(509)
2.	Property, plant and equipment(PP&E)	2,364	2,126	238
3.	Intangibles	188	144	44
4.	Net debt	(639)	(742)	103
5.	Other non-current assets and liabilities	78	18	60
	Total equity	2,533	2,597	(64)

DIsCUssIon AnD AnALYsIs – BALAnCe sHeet

1. Working capital

• $509m

The decrease in working capital is primarily due to:

• lower payables, partially offset by lower receivables, due to the fall in crude oil prices in 2014

• lower inventory balances due to the fall in crude oil prices and lower crude on hand following the closure of Kurnell refinery, and

• an income tax asset due to the lower historic cost operating profit in 2014.

This has been partly offset by higher current redundancy and environmental provisions raised in 2014 in relation to the Group’s cost and efficiency review.

2. Property, plant The increase in property, plant and equipment is due to capital expenditure and accruals, and equipment including major cyclical maintenance, of $449 million. This is partly offset by depreciation of ▲ $238m $185 million and disposals of $26 million.

2. Property, plant

3. Intangibles The increase in intangibles is largely due to the acquisition of assets of the Scott’s Fuels Divisions ▲ $44m in June 2014, resulting in goodwill of $30 million and intangible assets of $8 million relating to customer relationships and trade restraint (totalling $38 million).

• Net debt decreased by $103 million to $639 million at 31 December 2014. Caltex’s gearing

• ▼ $103m at 31 December 2014 (net debt to net debt plus equity) was 20.2%, decreasing from 22.2% at 31 December 2013. On a lease-adjusted basis, gearing at 31 December 2014 was 30.9% compared with 31.0% at 31 December 2013.

4. net debt

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CURRent soURCes oF FUnDInG DeBt MAtURItY PRoFILe
A$m source
550
US$ notes 0 US institutional
Australian and Asian 250
A$ notes 150
institutional
Australian and 150
Bank loans 600
global banks
Inventory
250 Australian bank
finance 200 200
Australian and Asian
Hybrid 550 retail and institutional 100 100
investors 0
$1,550m 2015 2016 2017 2018 2019 Beyond
2020
USD Notes Bank Loans
Inventory Finance AUD Notes Hybrid
----- End of picture text -----

5. other non-current Other net non-current assets have increased due to the reclassification of the liability for assets and liabilities the next 12 month spend in relation to the Kurnell conversion provisions, resulting in these ▲ $60m provisions moving to current liabilities.

27

Cash flows

For	the year ended 31 December 2014	2014 $m	2013 $m	Change
1.	Net operatingcash infows	662	608	54
2.	Net investingcash outfows	(476)	(507)	31
3.	Net fnancingcash outfows	(333)	(111)	(222)
	Net decrease in cash held	(147)	(10)	(137)

DIsCUssIon AnD AnALYsIs – CAsH FLoWs

1. net operating The increase in net cash inflows from operating activities is primarily due to higher fuel cash inflows margins and sales volumes in the period. ▲ $54m

2. net investing The decrease in cash outflows is due to the acquisition of assets of Scott’s Fuel Divisions in 2014, cash outflows offset by lower payments for property, plant and equipment and lower proceeds from the sale ▼ $31m of assets. 2013 also included proceeds from the sale of the bitumen business.

▼$31m	of assets. 2013 also includedproceeds from the sale of the bitumen business.
3. net fnancing	The net fnancing outfow in 2014 arose from the repayment of US private placement facilities.
cash outfows ▲$222m	The net fnancing outfow in 2013 arose from the dividend payment. Net proceeds/repayment biilh ddf fd bii hi

The net financing outflow in 2013 arose from the dividend payment. Net proceeds/repayment of borrowing was nil, as there were no drawdowns or repayment of fixed borrowings in the period.

Capital expenditure

Capital expenditure in 2014 totalled $503 million. Excluding major turnaround and inspection (T&I) spend of $19 million, total capital expenditure was $484 million. Capital expenditure in 2015 is expected to range between $455 million and $510 million.

Caltex capital expenditure

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$m
600
568
500
503
400
420
403
361
300
200
100
0
2010 2011 2012 2013 2014
■ Capital expenditure (incl. T&I)
----- End of picture text -----

Business outlook and likely developments

This section includes information on Caltex’s prospects for future financial years. As Caltex’s financial prospects are dependent to a significant extent on external factors, such as the exchange rate and refiner margins, it is difficult to provide an outlook on Caltex’s financial prospects. Therefore, this section includes a general discussion of the key business drivers. To the extent that there are statements which contain forward-looking elements, they are based on Caltex’s current expectations, estimates and projections. Such statements are not statements of fact, and there can be no certainty of outcome in relation to the matters to which the statements relate. Accordingly, Caltex does not make any representation, assurance or guarantee as to the accuracy or likelihood of fulfilment of any forward-looking statement.

Overview

Caltex’s focus for the short term is to remain the outright leader in transport fuels in Australia. In support of this, short term priorities include the optimisation of the entire value chain from product sourcing to customer, underpinned by the growth of our product sourcing requirements via Ampol Singapore.

Lytton refinery will continue to focus on capturing further operational and margin improvements, and will undertake a major Turnaround & Inspection (T&I) in the second quarter of 2015. This major maintenance program will require the refinery to shut down totally for approximately seven weeks.

The company will continue the implementation of an organisation-wide cost and efficiency value program (“Tabula Rasa”).

28 Caltex / 2014 annual RePORt

Directors’ Report continued

operating and financial review continued

Business outlook and likely developments continued

Marketing

The industry landscape remains highly competitive. This is expected to continue with new industry players competing in the market.

Caltex remains committed to building a focused strategy for growth by targeting high growth products, geographies and channels, including continuing to build and leverage its supply chain across its national network.

This will involve the continuation of its retail network expansion and refurbishment and the increased emphasis on inorganic growth, leveraging core capabilities of retailing, supply chain management and infrastructure services.

Supply Chain

The Supply chain incorporates Caltex’s comprehensive national infrastructure network. This involves the company’s Lytton refinery, port terminals, inland terminals, airport terminals and pipelines. This infrastructure enables Caltex to supply product to customers safely and reliably. It is this sustained investment in infrastructure that has enabled Caltex to attain the outright leadership in transport fuels across Australia.

Caltex remains committed to ongoing investment to broaden and enhance its supply chain.

The closure of the Kurnell refinery (in the fourth quarter of 2014) has seen the amount of crude oil imported for Caltex refining reduce, while imports of refined fuel products are increasing. In adapting and evolving to the changing market conditions, Caltex established an office in Singapore to grow and strengthen its product sourcing supply via Ampol Singapore (a wholly owned subsidiary of Caltex Australia). Ampol Singapore’s primary role is to manage the sourcing of transport fuels product supplies and related shipping to Australia.

Ampol Singapore’s activities will be complemented by the establishment of a Caltex wide Value Chain Optimisation function to optimise the entire value chain from product sourcing through to the end customer.

Lytton refinery is now Caltex’s sole refinery. Caltex will continue to maintain an ongoing focus on capturing further operational and margin improvements at Lytton. This includes completing an investment upgrade to increase production of premium fuels. Additionally, a major T&I maintenance program is scheduled for the second quarter of 2015. This is expected to take approximately seven weeks.

Caltex considers itself operationally well placed to ensure that the company remains the outright leader in providing transport fuels to Australia.

Business risks and management

The key business risks that could have an impact on Caltex achieving its financial goals and business strategy are discussed below. In addition to the risk management procedures discussed below, Caltex has adopted a risk management framework to proactively and systematically identify, assess and address events that could potentially impact its business objectives. This framework integrates the consideration of risk into our activities so that:

• risks in relation to the effective delivery of our business strategy are identified

• control measures are evaluated, and

• where potential improvements in controls are identified, improvement plans are scheduled and implemented.

These risks are assessed on a regular basis by management, and material risks are regularly reported to the Board and its committees. These reports include the status and effectiveness of control measures relating to each material risk. The Board, the Audit Committee, the OHS & Environmental Risk Committee and the Human Resources Committee each receive reports on material risks relevant to their responsibilities. The Board and the OHS & Environmental Risk Committee also receive quarterly risk updates throughout the year.

Caltex Refiner Margin

The Caltex Refiner Margin (CRM) is a key metric which drives the profitability of Caltex’s refinery. The CRM represents the difference between the cost of importing a standard Caltex basket of products to eastern Australia and the cost of importing the crude oil required to make that product basket. A low CRM will adversely impact Caltex’s refining earnings and cash flows.

CRM is impacted by a range of factors:

• a decline in global and regional economic activity, leading to a surplus in refining capacity

• increased regional refinery capacity ahead of demand growth

• a decrease in product freight rates relative to crude freight rates

• an increase in the premium paid for light/sweet (e.g. Brent) crudes used by Caltex compared with the heavy/sour crudes used by major refineries in the region (the light/heavy spread), and

• the A$ strengthening versus the US$ (as the CRM components are US$ based, strengthening of the A$ relative to the US$ reduces the A$ revenue earned by Caltex).

Closure of the Kurnell refinery will reduce Caltex’s exposure to movements in the CRM.

Commodity price risk

Caltex is exposed to the risk of both crude and finished product price movements, as these impact Caltex’s earnings and cash flows. Caltex seeks, through policy, to neutralise adverse basis and timing risk brought about by purchase and sales transactions that are materially outside the normal operating conditions of Caltex. Caltex does not attempt to hedge refiner margins as a matter of policy. Caltex utilises both crude and finished product swap contracts from time to time, on specific cargoes, to manage the risk of price movements (basis and timing).

Foreign exchange

Caltex is exposed to the effect of changes in exchange rates on crude and product payables, refiner margin, capital expenditure and foreign borrowings. As Caltex purchases crude and products in US dollars, a decrease in the A$:US$ exchange rate between the time Caltex assumes liability for the crude and the time it subsequently pays for that crude will negatively impact Caltex’s payables, earnings and cash flows.

29

Additionally, the CRM is determined principally with reference to the US dollar Singapore spot product price relative to the US dollar Brent crude price. An increase in the A$:US$ exchange rate will adversely impact Caltex’s Australian dollar refiner margin and therefore refining earnings.

In June 2010, Caltex implemented a foreign exchange hedging policy of 50% of Caltex’s US dollar denominated crude and product payables exposure (after applying natural hedges). The hedging policy was updated in August 2014 to allow for hedging of 80% of Caltex’s US dollar denominated crude and product payables exposure (after applying natural hedges). The instruments used to manage foreign exchange risk expose Caltex to fair value foreign exchange rate risk and counterparty risks. Exposure limits are set on each counterparty to ensure that Caltex is not exposed to excess risks.

Liquidity risk

Due to the nature of the underlying business, Caltex must maintain sufficient cash and adequate committed credit facilities to meet the forecast requirements of the business. From time to time, Caltex will be required to refinance its debt facilities. There is no certainty as to the availability of debt facilities or the terms on which such facilities may be provided to Caltex in the future. Caltex seeks to prudently manage liquidity risk by maintaining adequate banking facilities and reserve borrowing facilities, with an extended facility maturity profile.

Operational risk

The nature of many of Caltex’s operations is inherently risky. Major hazards may cause injury or damage to people and/or property. Major incidents may cause a suspension of certain operations and/or financial loss.

Caltex’s operations are heavily reliant on information technology. While these systems are subject to regular review and maintenance, and business continuity plans are in place, if these systems are disrupted due to external threat or system error, this may have an adverse effect on Caltex’s operations and profitability.

Competitive risk

Caltex operates in a highly competitive market space, and could be adversely impacted by new entrants to the market or increased competition from existing competitors, changes in contractual terms and conditions with existing customers, and/or the loss of a major customer.

Environmental risks

Caltex imports, refines, stores, transports and sells petroleum products. Therefore, it is exposed to the risk of environmental spills and incidents. It is also responsible for contaminated sites which it operates or has previously operated.

Demand for Caltex’s products

Caltex’s operating and financial performance is influenced by a variety of general economic and business conditions, including economic growth and development, the level of inflation and government fiscal, monetary and regulatory policies. In a global or a local economic downturn, demand for Caltex’s products and services may be reduced, which may negatively impact Caltex’s financial performance.

Labour shortages and industrial disputes

There is a risk that Caltex may not be able to acquire or retain the necessary labour for operations and development projects. This may disrupt operations or lead to financial loss.

Credit risk

Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. Primary credit exposure relates to trade receivables.

Regulatory risk

Caltex operates in an extensively regulated industry and operates its facilities under various permits, licences, approvals and authorities from regulatory bodies. If those permits, licences, approvals and authorities are revoked or if Caltex breaches its permitted operating conditions, it may lose its right to operate those facilities, whether temporarily or permanently. This would adversely impact Caltex’s operations and profitability.

Changes in laws and government policy in Australia or elsewhere, including regulations, licence conditions and fuel quality standards, could materially impact Caltex’s operations, assets, contracts, profitability and prospects.

events subsequent to the end of the year

On 10 February 2015, Mr Adam Ritchie was appointed as the new General Manager – Supply, effective from 1 April 2015.

There were no other items, transactions or events of a material or unusual nature, that, in the opinion of the Board, are likely to significantly affect the operations of Caltex, the results of those operations or the state of affairs of the Group subsequent to 31 December 2014.

Clean energy Future (CeF) legislation

As part of the Australian Government’s Clean Energy legislative package, the Carbon Price Mechanism (CPM) commenced on 1 July 2012, establishing a price on carbon in Australia for facilities which emit at least 25,000 tonnes of carbon dioxide equivalent annually and via changes to fuel tax credit and excise for specific fuel use.

Through the 2013-2014 financial year Caltex continued to manage compliance reporting requirements under the CPM, accounting for greenhouse gas emissions from both the Kurnell and the Lytton refineries, and those greenhouse gas emissions associated with the sale of non-transport related gaseous fuels. Caltex also administered carbon pricing for domestic jet fuel through increased excise for the compliance period. Due to the emissions intensive trade exposed nature of petroleum refining Caltex again received freely granted permits under the Jobs and Competitiveness Program, with 2,311,280 permits received. Carbon permit surrender requirements also included Australian Carbon Credit Units (ACCUs) from verified Carbon Farming Initiative projects as permitted under Clean Energy Future legislation, and final compliance surrender requirements were managed through early 2015.

In 2014, the election of the Coalition Government resulted in the CPM being repealed retrospectively, with an effective date of 1 July 2014. Caltex acted to remove carbon pricing from impacted products following Royal Assent of the repeal legislation and refunded non-transport gaseous fuel carbon price costs and domestic jet excise carbon costs applicable from 1 July to 18 July 2014 to the relevant customers promptly.

30 Caltex / 2014 annual RePORt

Directors’ Report continued

Clean energy Future (CeF) legislation

continued

The Coalition’s Direct Action policy areas that will be of potential interest or impact to Caltex are the Emissions Reduction Fund (ERF) and the Safeguarding Mechanism respectively. Caltex will continue to monitor the legislative rules associated with the ERF and determine interest in participating in the Reverse Auction Process through 2015. With the Safeguarding Mechanism legislated to commence on 1 July 2016, details on how this legislative requirement will impact Lytton refinery are at this point unclear.

Caltex continues to support greenhouse gas reduction policies which maintain the international competitiveness of Australian industries such as petroleum refining.

environmental regulations

Caltex is committed to compliance with Australian laws, regulations and standards, as well as to minimising the impact of our operations on the environment. The Board’s OHS & Environmental Risk Committee addresses the appropriateness of Caltex’s OHS and environmental practices to manage material health, safety and environmental risks, so that these risks are managed in the best interests of Caltex and its stakeholders.

Caltex sets key performance indicators to measure environmental, health and safety performance and drive improvements against targets. In addition to review by the Board, progress against these performance measures is monitored regularly by the Managing Director & CEO and the General Managers.

Risks are examined and communicated through the Caltex Risk Management Framework, an enterprise-wide risk management system which provides a consistent approach to identifying and assessing all risks, including environmental risks. Under the framework, risks and controls are assessed, improvements identified, and regular reports are made to management and the Board.

The Caltex Operational Excellence Management System is designed to ensure that operations are carried out in an environmentally sound, safe, secure, reliable and efficient manner. Its operating standards and procedures support the Caltex Environment Policy, and the Caltex Health and Safety Policy.

Compliance with environmental regulations

A total of 19 environmental protection licences were held by companies in the Caltex Australia Group in 2014 in respect of two refinery sites, 11 terminals, three marketing facilities and three aviation refuelling facilities.

Any instances of non-compliance against these licences were reported to the environmental regulator. All significant spills and environmental incidents were recorded and reported as required to government authorities.

In 2014, Caltex’s Kurnell refinery received one penalty infringement notice of $15,000 from the NSW Environment Protection Authority (NSW EPA) relating to an incident where a release of oily water from the Waste Water Treatment Plant entered a redundant cooling water outlet during a heavy rainfall event and was observed in Botany Bay. The NSW EPA also commenced one Tier 1 and Tier 2 prosecution in the Land and Environment Court against Caltex in relation to a loss of primary containment into a tank bund incident at Banksmeadow Terminal which occurred in July 2013.

In addition, the Queensland Department of Environment and Heritage Protection commenced proceedings against Caltex for alleged breaches of Caltex’s licence conditions and failing to carry out certain activities with respect to a trackable waste. Waste in this instance refers to ethyl mercaptan, which is an odourant for LPG. Caltex’s specialist waste contractor has also been prosecuted with respect to the circumstances surrounding this incident.

Regular internal audits are carried out to assess the efficacy of management systems to prevent environmental incidents, as well as control other operational risks. Improvement actions determined through the audit process are reviewed by the Board’s OHS & Environmental Risk Committee and senior management.

Caltex is committed to achieving 100% compliance with environmental regulations and to ensuring that all breaches have been investigated thoroughly, and corrective actions are taken to prevent recurrence.

Lead auditor’s independence declaration

The lead auditor’s independence declaration is set out on page 59 and forms part of the Directors’ Report for the financial year ended 31 December 2014.

In 2014, Caltex made its sixth submission under the National Greenhouse and Energy Reporting Scheme, reporting energy consumption and production as well as greenhouse gas emissions from Group operations. Caltex also published its second public report under the third and final round of the Federal Energy Efficiency Opportunities program, communicating energy savings achieved, and also continued to disclose information on emissions under the National Pollutant Inventory. Caltex is a signatory to the Australian Packaging Covenant with 100% compliance among Caltex product suppliers and 40% of current packing reviewed using the Sustainable Packaging Guidelines.

31

Remuneration Report

The directors of Caltex Australia Limited present the Remuneration Report prepared in accordance with section 300A of the Corporations Act 2001 (Cth) ( Corporations Act ) for the Caltex Group for the year ended 31 December 2014.

The information provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act , apart from where it is indicated that the information is unaudited.

1. Remuneration snapshot

1a. Key Management Personnel (KMP)

This Remuneration Report is focused on the KMP of Caltex, being those persons with authority and responsibility for planning, directing and controlling the activities of Caltex. KMP includes the Non-executive Directors and Senior Executives (including the Managing Director (MD) & CEO). Senior Executives are also referred to as the Caltex Leadership Team (CLT) in this report. Unless otherwise indicated, the KMP were classified as KMP for the entire financial year.

Current non-executive Directors

Elizabeth Bryan	Chairman
Trevor Bourne	Independent Non-executive Director
Richard Brown	Non-executive Director
Barbara Burger	Non-executive Director
GreigGailey	Independent Non-executive Director
Ryan Krogmeier	Non-executive Director
Bruce Morgan	Independent Non-executive Director
Current senior executives
Julian Segal	MD & CEO
Andrew Brewer	General Manager – SupplyChain Operations(appointed 31 March 2014)
Simon Hepworth	Chief Financial Offcer
Peter Lim	General Manager – Legal & Corporate Affairs
Mike McMenamin(i)	General Manager – Strategy,Planning& Development(will cease employment on 31 May2015)
Bruce Rosengarten	General Manager – Marketing
Simon Willshire	General Manager – Human Resources
Former senior executive
GarySmith	General Manager – Refning& Supply (ceased employment on 9 May2014)

Note:

(i) Mr McMenamin ceased being a KMP on 31 December 2014.

Mr Adam Ritchie will commence as General Manager – Supply on 1 April 2015.

32 Caltex / 2014 annual RePORt

Directors’ Report continued

Remuneration Report continued

1. Remuneration snapshot continued

1b. Summary of 2014 remuneration arrangements for Senior Executives

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----- Start of picture text -----

vIsIon
To remain the outright leader in transport fuels across Australia
keY MeAsURe oF sUCCess
To safely and reliably deliver top quartile shareholder returns
ReMUneRAtIon PRInCIPLes
Alignment with Performance focused and Market
shareholders’ interests differentiated competitive
ReMUneRAtIon CoMPonents
Fixed remuneration Short term incentive (STI) Long term incentive (LTI)
• Consists of base salary, • Based on 12 month company, • Performance rights are granted
non-monetary benefits and department and individual which vest subject to the
superannuation. performance objectives which are achievement of service conditions
• Desired positioning is market linked to the achievement of the and performance conditions over
median against a peer group of annual business plan. a three year period.
companies that are comparable in • Only payable if 80% of RCOP • Performance measures are relative
terms of both size and complexity. NPAT is achieved. total shareholder return (TSR)
See section 3b for further detail. • One third of the STI (as long as the against S&P/ASX 100 companies
incentive is greater than $105,000) (60%), free cash flow (FCF) (20%)
is delivered in Caltex shares. These and strategic measures (20%).
shares have a six month service • For LTI grants made from 2013,
related forfeiture condition, a two all participants are required to
year dealing restriction and are hold 25% of vested shares for
subject to clawback provisions. an additional four years.
See sections 3c, 3d and 3f for • Clawback applies to unvested
further detail. LTI awards.
See sections 3e and 3f for further detail.
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1c. Senior Executive remuneration outcomes in 2014

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----- Start of picture text -----

ReMUneRAtIon
CoMPonent oUtCoMe
Fixed remuneration The 2014 fixed remuneration review for Senior Executives resulted in an average salary increase of 3.8%.
----- End of picture text -----

STI	RCOP NPAT performance in 2014 was 125% of target and the average 2014 STI award for Senior
	Executives was 141% of target. This outcome demonstrates the strong alignment between STI awards
	and proft outcomes. Similar alignment was seen in 2013 when no bonuses were paid because RCOP
	NPAT was below 80% of target.
	One-third of the actual STI paid to Senior Executives will be deferred into shares with a six month
	forfeiture condition and a two year dealing restriction. The shares are also subject to clawback.
	No clawback occurred in respect of the STI in 2014.
LTI	The 2012 LTI grant made under the Caltex Equity Incentive Plan (CEIP) was subject to a relative TSR
	measure. 75% of the grant was assessed against S&P/ASX 100 companies and 25% of the grant was
	assessed against a group of six international refning and marketing companies. This grant had a
	performance period that ended on 31 December 2014.
	Caltex’s TSR performance over the 2012-2014 period placed it at the 95.8th percentile against the S&P/ASX
	100 companies and at the 66.7th percentile against the selected group of international refning and marketing
	companies. As a result, 88.9% of the 2012 grant will vest in April 2015 and the remaining 11.1% will lapse.
	No clawback occurred in respect of the LTI in 2014.

33

1d. Summary of 2014 Non-executive Director fees

Non-executive Director fees are fixed and do not have any variable components. The Chairman receives a fee for chairing the Caltex Board and is not paid any other fees. Other Non-executive Directors receive a base fee and additional fees for each additional committee chairmanship and membership.

For FY14, superannuation contributions were made at a rate of 9.25% from 1 January to 30 June, increasing to 9.5% from 1 July 2014. Superannuation is not paid for overseas directors and no additional retirement benefits are paid.

Fees paid to Non-executive Directors are subject to a maximum annual Non-Executive Director fee pool of $2,000,000 (including superannuation).

See sections 4a and 4b for further detail.

1e. Outlook for FY15 (unaudited)

The FY15 executive remuneration structure will remain broadly consistent with 2014. The key changes are:

• We are increasing the weighting on relative TSR against S&P/ASX 100 companies in our LTI plan from 60% to 75%. The remaining 25% will be based on a measure aligned to earnings growth from mergers and acquisitions (core and non-core) and step-out ventures. This is reflective of the importance of growth in achieving our key success measure of top quartile shareholder returns.

• No STI deferral will apply in respect of 2015 STI awards as shareholder alignment will now be achieved through share retention arrangements. Under these arrangements, 25% of vested equity under the LTI plan must be held for an additional four years. These arrangements have been implemented to require executives to build up and maintain more sizeable shareholdings in Caltex over a longer period of time. The share retention arrangements will first apply from April 2016.

Senior Executive remuneration will increase on average by 10%. These increases were determined by the Board, upon the recommendation of the Human Resources Committee. The Human Resources Committee’s recommendation was determined having regard to the Senior Executive’s performance over the year and the remuneration recommendations provided by its independent remuneration adviser, Godfrey Remuneration Group (GRG).

In order to be able to attract and retain key talent, our remuneration philosophy is to position fixed remuneration at the median of a peer group of companies. For 2015, this peer group consisted of 24 companies that are comparable in terms of size (market capitalisation) and complexity. The GRG market data indicated that Senior Executive fixed remuneration levels were below the median. These increases will shift Senior Executive fixed remuneration levels closer to our desired market positioning and compensate Senior Executives for prior years’ pay restraint.

Given the transformation Caltex is going through, and that we have not reviewed our remuneration framework for several years, we believe it is timely to step back and to conduct a holistic review of our remuneration arrangements. We will be doing this over 2015 and it is envisaged that any changes will take effect from 2016.

Having had regard to market data and remuneration recommendations received from the independent remuneration adviser, GRG, the Board approved an increase of 3% for Non-executive Director base fees (effective from 1 January 2015). The market data was based on the same peer group used for the Senior Executive remuneration review. This is the first general increase to Chairman and Non-Executive Director base fees since 2012 (excluding the alignment of fees for the Human Resources Committee and the OHS & Environmental Risk Committee in 2013).

Caltex will seek shareholder approval at the 2015 Annual General Meeting to increase the Non-executive Director fee pool by 12.5%. An increase to the Non-executive Director fee pool was last approved by shareholders at the 2010 Annual General Meeting. Increasing the fee pool limit will enable Caltex to maintain an appropriate reserve to effect Board and Committee succession in an orderly fashion.

2. Oversight and external advice

2a. Board and Human Resources Committee

The Board takes an active role in the governance and oversight of Caltex’s remuneration policies and practices. Approval of certain key human resources and remuneration matters is reserved to the Board, including setting remuneration for directors and Senior Executives and any discretion applied in relation to the targets or funding pool for Caltex’s incentive plans.

The Human Resources Committee assists the Board by providing advice and recommendations in relation to Caltex’s remuneration framework. The Human Resources Committee seeks to put in place appropriate remuneration arrangements and practices that are clear and understandable, in the best interests of Caltex and support superior performance and long term growth in shareholder value.

The Human Resources Committee has also been delegated specific functions by the Board, including approving Caltex’s annual remuneration program and aspects of its incentive plans.

Further information about the role of the Board and the Human Resources Committee are set out in their charters, which are available from our website (www.caltex.com.au).

34 Caltex / 2014 annual RePORt

Directors’ Report continued

Remuneration Report continued

2. Oversight and external advice continued

2b. External advice

The Human Resources Committee is independent of management and is authorised by the Board to obtain external professional advice as necessary. The use of external specialists to provide advice and recommendations in relation to the remuneration of Non-executive Directors, the MD & CEO and Senior Executives is either initiated directly or approved by the Human Resources Committee, and these specialists are directly engaged by the Human Resources Committee Chairman.

During 2014, Caltex received “remuneration recommendations” (as defined in the Corporations Act ) from GRG in relation to Non-executive Director fees and the remuneration for the MD & CEO and other Senior Executives.

GRG has provided a formal declaration confirming that the recommendations provided were free from “undue influence” by the members of the KMP to whom the recommendations were related, and the Board is satisfied that the recommendations were made free from any undue influence. None of the KMP were involved in the selection and appointment of GRG or in the development of any advice or recommendations in relation to their own roles.

The fee paid to GRG for the above remuneration advice and recommendations was $38,500. GRG did not provide any other services (as defined in the Corporations Act ) to Caltex in 2014.

3. Senior Executive remuneration

3a. Remuneration philosophy and structure

The overarching goal of the Caltex remuneration philosophy and structure is to support the delivery of superior shareholder returns. The guiding philosophy for how Caltex rewards Senior Executives and all other employees is outlined below:

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----- Start of picture text -----

GUIDInG PHILosoPHY CoMMentARY
Alignment with The payment of variable incentives is dependent upon achieving financial and non-financial
----- End of picture text -----

Alignment with	The payment of variable incentives is dependent upon achieving fnancial and non-fnancial
shareholders’ interests	performance measures that are aligned with shareholders’ interests. Share retention arrangements
	require all executives to build up and maintain shareholdings to encourage further alignment
	with Caltex shareholders.
Performance focused and	Our reward and performance planning and review systems are closely integrated to maintain a
differentiated	strong emphasis and accountability for performance at the company, department and individual
	levels. Rewards are differentiated to incentivise and reward superiorperformance.
Market competitive	All elements of remuneration are set at competitive levels for comparable roles in Australia and
	allow Caltex to attract and retainqualitycandidates in the talent market.

Our Senior Executive remuneration structure consists of:

1. Fixed remuneration – comprising base salary, non-monetary benefits and superannuation. Superannuation is generally payable at a rate of 9.5% of base salary plus any cash incentive payments. Where an employee’s quarterly superannuation contributions are above the superannuation contributions limit, the employee may elect to receive the excess amount as cash in lieu of superannuation.

2. variable, at risk remuneration – comprising a mix of cash and equity based incentives awarded upon the achievement of financial and non-financial performance measures.

We undertake regular monitoring and comparison of the market competitiveness of Senior Executive remuneration.

Alignment with strategy

Short term incentives reward the delivery of stretching but potentially attainable financial and non-financial performance measures aligned to the annual business plan.

Long term equity based incentives are a combination of “output” and “input” measures. The LTI measures were chosen because they directly align to the Caltex strategic imperatives. See below for further detail.

35

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----- Start of picture text -----

2014 LtI MeAsURe AnD WeIGHtInG HoW tHe LtI MeAsURe ALIGns WItH tHe CALteX stRAteGY
----- End of picture text -----

Relative TSR (60%)	• Relative TSR provides direct alignment with shareholder outcomes and is a good
	indicator of proftable management of assets, operating effciencies, progress in
	meeting Caltex’s strategic objectives and long term performance.
	• The measure provides a direct comparison of relative performance in a range of
	market conditions and only rewards executives when returns are at least at the median
	ofpeer companies against which Caltex competes for capital,customers or talent.
FCF (20%)	• FCF funds opportunities for growth and cash dividend payments, improves our
	competitiveness in a substantially more contestable market and supports the Caltex
	strategy which has the overarching objective of creating shareholder value.
	• As a key objective of Caltex’s strategy is to deliver a stronger balance sheet, with
	lower debt post the closure of the Kurnell refnery, the demonstrated ability to
	deliver stronger free cash fow generation capability is key to this strategy. Having
	free cash fow as a LTI measure assists in maintaining the focus of Senior Executives,
	and other senior managers at Caltex,on the importance of this keybusiness metric.
Strategic measures (20%)	• Strategic measures focus the Senior Executives and other senior managers on the most
	important strategic initiatives that need to be executed over a three year period to create
	shareholder value. Further detail on the strategic measures is outlined in section 3e.

At Caltex, incentives are not designed as “profit sharing arrangements” and as such performance measures may factor in externalities which management cannot control (such as global refining margins). There will be occasions when incentives are paid when externalities such as the refiner margins and exchange rate fluctuations may have reduced overall shareholder returns. Equally, incentives may not be paid when externalities are favourable to shareholders but the company’s relative performance is poor.

3b. Remuneration mix and market competitiveness

Fixed remuneration is reviewed annually and set relative to the skills and accountabilities of the executive and our philosophy is to set fixed remuneration at the market median of a specific comparator group. Total remuneration can reach the upper quartile for outstanding performance.

Performance based, at risk, remuneration targets are set annually as a proportion of base salary. Short term incentives (currently delivered through both cash payments and restricted shares) are managed via the Rewarding Results Plan and long term equity based incentives are managed via the CEIP. The “at target” remuneration mix for Senior Executives is outlined below.

The remuneration mix is skewed towards variable pay to better align executive pay and performance. By way of comparison, Caltex has a larger than average LTI component than current market practice. Research undertaken by Caltex has also confirmed that Caltex has a more stretching relative TSR vesting schedule than most ASX 100 companies and that Caltex’s LTI vests more gradually as relative performance improves.

2014 Remuneration mix “at target”

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----- Start of picture text -----

MD & CEO 40% 13% 7% 40%
Other Senior 48% 16% 8% 28%
Executives
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
■ Base Salary ■ At Risk – STI Cash ■ At Risk – STI Shares ■ At Risk – LTI
----- End of picture text -----

Notes:

1. STI cash and STI shares comprise the incentive provided through the Rewarding Results Plan. For “at target” performance, two thirds is payable as cash and one third is deferred into shares assuming the incentive is greater than $105,000.

2. “At target” performance in the remuneration mix for “Other Senior Executives” is representative of a STI target of 50% of base salary which applies to Mr Brewer, Mr Hepworth and Mr Rosengarten. Mr Lim, Mr McMenamin and Mr Willshire have a STI target of 46% of base salary.

3. LTI comprises performance rights granted under the CEIP. It is the value of LTI at 75th percentile relative TSR performance, and the delivery of free cash flow and strategic measures at target. Grants of performance rights under the CEIP are made at the maximum stretch level of 150% of base salary for the MD & CEO and 90% of base salary for other Senior Executives. The proportion of the grant received depends on performance. For example, for the 2014 awards, executives will only receive the full value of the grant if relative TSR performance measure is at or above the 90th percentile against the S&P/ASX 100 peer group, free cash flow is at stretch levels, and performance against the strategic measures are exceeded.

36 Caltex / 2014 annual RePORt

Directors’ Report continued

Remuneration Report continued

3. Senior Executive remuneration continued

3b. Remuneration mix and market competitiveness continued

The remuneration mix and remuneration level for Senior Executives is reviewed annually by the Human Resources Committee and approved by the Board. In doing so, the Human Resources Committee utilises remuneration information provided by independent consultants based on Australian roles with similar skills, accountabilities and performance expectations.

In undertaking the 2014 review, the Board utilised a comparator group comprising 24 ASX listed companies with 10 larger and 14 smaller than Caltex’s market capitalisation. This group was chosen by the Board, with advice from GRG, as it comprises a mix of Energy, Industrials, Materials and Consumer Staples companies of similar market capitalisation and complexity to Caltex, and because these companies are also key competitors for executive talent.

3c. Setting and evaluating the performance of executives in 2014

Performance measures for 2014 were derived from the business plan in line with the company direction set by the Board. The Board approved the 2014 business plan and has regularly monitored and reviewed progress against plan milestones and targets.

The approved Caltex business plan was then translated into department objectives. The company objectives were approved by the Human Resources Committee at the start of the performance year.

Within each business unit, specific performance agreements were then developed for individual employees, thus completing the link between employees and the delivery of the business plan. Performance agreements must be agreed between the employee and his or her manager. Senior Executives set their performance agreements jointly with the MD & CEO, and the MD & CEO’s performance objectives are approved by the Board.

Examples of the key Caltex success measures for 2014, as approved by the Committee, are set out below. These measures were selected because they were identified as important financial and operational drivers which would determine the success of Caltex in 2014.

2014 Caltex success measures

Individual scorecards are set for each Senior Executive. At least 40% of the scorecard is weighted towards RCOP NPAT and at least 10% of the scorecard is weighted towards personal and process safety. The remaining 50% of measures are tailored to the Senior Executive’s role. An overview of common measures used in the STI plan is below:

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FInAnCIAL non-FInAnCIAL
• RCOP NPAT – see definition • Operational Excellence – continuous improvement of our health, safety and
----- End of picture text -----

•	RCOP NPAT – see defnition	• Operational Excellence – continuous improvement of our health, safety and
	and explanation below.	environmental performance. In 2014, this was measured against a scorecard of
•	FCF – the generation of	both personal safety performance (zero harm to our employees) and process safety
	suffcient cash fow to pursue	performance (the prevention and control of serious incidents). Minimising the frequency
	growth opportunities and pay	and the severity of personal safety incidents are core to our personal safety performance.
	dividends.	Process safety is measured consistent with industry practice and is aligned to American
•	Earnings before interest and	Petroleum Institute recommended practice.
	tax (EBIT) – the internal	• Delivery of Strategic Projects – examples of 2014 projects include:
	measure of fnancial	– implementing a company-wide cost and effciency review to drive organisational
	performance at a department	competitiveness and opportunities for growth
	level for each of Marketing and	– implementing a transformation of the Caltex supply chain – including deliverables
	Supply Chain.	linked to the conversion of Kurnell refnery to a fuel import terminal; putting new
•	Sales volumes.	product supply agreements into operation; and delivering performance improvements
•	High value product production	at the Lytton refnery
	– the production of high value	– the delivery of a number of key initiatives to proftably grow the Marketing business.
	transport fuels.	• Leadership – this was measured in 2014 via a company-wide Employee Engagement
		survey,with targets set in the context of 2012 engagement scores.

37

RCOP NPAT (explanation of the relevance of this measure to the Caltex business and treatment of significant items)

The Board has selected replacement cost of sales operating profit (RCOP) NPAT as the primary STI measure because RCOP NPAT removes the impact of inventory gains and losses, giving a truer reflection of underlying financial performance.

Gains and losses in the value of inventory due to fluctuations in the AUD price of crude (which is impacted by both the USD price of crude and the foreign exchange rate) constitute a major external influence on Caltex’s profits. RCOP NPAT restates profit to remove these impacts. The Caltex RCOP methodology is consistent with the methods used by other refining and marketing companies for restatement of their financial results.

As a general rule, an increase in crude prices on an AUD basis will create an earnings gain for Caltex (but working capital requirements will also increase). Conversely, a fall in crude prices on an AUD basis will create an earnings loss. This is a direct consequence of the first in first out (FIFO) costing process used by Caltex in adherence with accounting standards to produce the financial result on a historical cost basis. With Caltex holding approximately 45 to 60 days of inventory, revenues reflect current prices in Singapore whereas FIFO costing reflects costs some 45 to 60 days earlier. The timing difference creates these inventory gains and losses.

To remove the impact of this factor on earnings and to better reflect the underlying performance of the business, the RCOP NPAT methodology calculates the cost of goods sold on the basis of theoretical new purchases instead of actual costs from inventory. The cost of these theoretical new purchases is calculated as the average monthly cost of cargoes received during the month of those sales.

Each year the Board reviews any significant items, positive and negative, and considers their relevance to the RCOP NPAT result. Generally, the Board will exclude any exceptional events from RCOP NPAT that management and the Board consider to be outside the scope of usual business. These are excluded to give a truer reflection of underlying financial performance from one period to the next.

3d. Performance based “at risk” remuneration – 2014 STI Plan

Plan	STI awards are made under the RewardingResults Plan.
Performance period	Annual payment based on pre-agreed performance objectives over the 12 month period ended
	31 December 2014. Payments are made in April 2015.
2014 target	MD & CEO – between 50% of base salary “at target” and 100% of base salary at maximum stretch.
and maximum opportunity levels	Other Senior Executives – between 46% and 50% of base salary “at target” and between 92% and 100% of base salaryat maximum stretch dependingupon role.
Plan rationale	The Board believes that the Rewarding Results Plan is in the best interests of shareholders because
	it rewards a combination of fnancial and non-fnancial performance measures that are aligned to
	the creation of shareholder value. Primary emphasis is placed on RCOP NPAT, and the non-fnancial
	measures focus our executives on executingthe most critical business and strategic objectives.
Performance	In 2014, RCOP NPAT performance, including the cost of incentives, had to be at least 80% of target
measures and	before any short term incentives would be payable.
assessment	Objectives that are relevant to each executive are set with a threshold, target and maximum stretch
	level of performance expected, with at least 40% of scorecard weighted towards RCOP NPAT and
	at least 10% of the scorecard weighted towardspersonal andprocess safety.

38 Caltex / 2014 annual RePORt

Directors’ Report continued

Remuneration Report continued

3. Senior Executive remuneration continued

3d. Performance based “at risk” remuneration – 2014 STI Plan continued

Performance measures If business objectives are achieved at threshold level, 60% of the target opportunity would be payable. and assessment If 100% of the target is achieved, 100% of the target opportunity would be payable. If business continued objectives are achieved at the maximum stretch level, 200% of the target opportunity would be payable. Payments are pro-rated between threshold and target, and between target and maximum stretch. This payout schedule deliberately incentivises over-plan performance.

Examples of performance measures used in 2014 are below, along with performance against those objectives.

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MeAsURe PeRFoRMAnCe RAnGe CoMMentARY
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	Below threshold	threshold to target	target	target to stretch	stretch
RCOP NPAT				✓		Growth compared to 2013 and signifcantly above targetperformance.
Free Cash Flow before growth capital expenditure and dividends				✓		Growth compared to 2013 and above target performance.
Marketing EBIT			✓			Growth compared to 2013 with performance slightly above target despite a very competitive market.
Marketing growth projects					✓	Above 90% of milestones associated with Marketing’s top three growth projects were achieved.
Personal safety	✓					TTIFR of 1.76 per million man hours and LTIFR of 0.77 per million man hours – including employees and contractors. These are disappointing fgures, especially compared to 2013.
Process safety	✓					22 reportable (> 1bbl and marine) spills in 2014. Four of these spills were Tier 1 process safety incidents. These are disappointing fgures,especiallycompared to 2013.
Cost and Effciency Review					✓	Signifcant cost savings achieved with the company well set up to realise benefts in 2015 and beyond.
High Value Product production (HVP)				✓		Overall production of high value transport fuels was below 2013 (due to Kurnell refnery closure) but Lytton production was ahead of 2013 and above target.
Project delivery associated with the transformation of the Caltex supplychain					✓	99% of project milestones met compared to a target of 80%. Kurnell refnery was shut down on budget and on schedule.
Leadership		✓				This was a positive result in a challenging year due to workforce reduction as part of the cost and effciency review. Measured via a company-wide Employee Engagement survey.

39

Use of discretion	The Human Resources Committee, in its advisory role, reviews proposed adjustments to Rewarding
	Results outcomes where there are exceptional unforeseen and uncontrollable impacts on the agreed
	performance measures and makes recommendations for any changes to performance measures, which
	may only be approved by the Board. KPMG assisted the Human Resources Committee with the review
	of scorecard fnancial results by performing agreed upon procedures over the calculated metrics.
	During 2014, discretion was exercised by the Board to exclude the impact of these signifcant items
	from the RCOP NPAT result that were determined by the Board to be outside of the control of
	employees and not considered part of normal trading operations. The items excluded from the
	Caltex 2014 RCOP NPAT result for both statutory disclosure and incentive purposes were:
	• redundancy costs
	• other costs and fees associated with the Cost and Effciency Review
	• contract penalties associated with the Cost and Effciency Review
	• liabilities and write-offs associated with asset rationalisation projects
	• funding restructure costs
	• interest cost of earlyrepayment of fnal USprivateplacement tranche,net of 2014 benefts.
Payment vehicle	For the Senior Executives, one third of the award is deferred into shares if the cash value of the
	award exceeds $105,000. These shares are subject to a six month service related forfeiture condition
	and a twoyear dealingrestriction.
Clawback Policy	See section 3f for information on the Caltex Clawback Policy.
3e. Performance based	“at risk” remuneration – LTI plan
Plan	LTI awards aregranted under the CEIP.
LtI instrument	Performance rights are granted by the company for nil consideration. Each performance right is a
	right to receive a fully-paid ordinary share at no cost if service based and performance based vesting
	conditions are achieved. Performance rights do not carry voting or dividend rights.
	For the 2013 and 2014 awards, the Board may determine to pay executives the cash value of a share
	in satisfaction of a vested performance right, instead of providing a share or restricted share. It is
	expected such discretion will only be exercised in limited cases, typically where the executive is a ”good
	leaver” from Caltex,i.e. where the employee ceases employment due to redundancyor retirement.
Allocation	The number of performance rights granted is determined by dividing the maximum opportunity
methodology	level by the fve day volume weighted average price up to and including the frst day of the
	performance period, discounted by the value of the annual dividend to which the performance
	rights are not entitled.
Performance period	Performance periods under the CEIP are three years commencing on 1 January in the year the
	awards are made. For the 2014 awards this is the three year period commencing 1 January 2014
	and ending31 December 2016.
2014 target	The MD & CEO received a grant of performance rights based on a maximum LTI value
and maximum	of 150% of base salary. Senior Executive grants were based on a maximum LTI value
opportunity levels	of 90% of base salary.

40 Caltex / 2014 annual RePORt

Directors’ Report continued

Remuneration Report continued

3. Senior Executive remuneration continued

3e. Performance based “at risk” remuneration – LTI plan continued

Performance measures (2012 awards)	For the 2012 awards, relative TSR is assessed against two comparator groups – S&P/ASX 100 companies (weighted at 75%) and a selection of six international refning and marketing companies (weighted at 25%). The international refning and marketing companies comprised Motor Oil Hellas Corinth Refneries SA (Greece), Neste Oil OY J (Finland), S-Oil Corporation (Korea), Tesoro Corporation (USA), Valero Energy Corporation (USA) and Western Refning Incorporated (USA). The relative TSR vesting schedule for both (independent) peer groups is:
	Performance scale vesting %
	Below Threshold Zero
	Threshold: 50thpercentile 33.3% of the rights will vest
	Between Threshold and Target Pro-rata vestingoccurs between these relativeperformance levels
	Target: 75thpercentile 66.6% of the rights will vest
	Between Target and Stretch Pro-rata vestingoccurs between these relativeperformance levels
	Stretch: 90thpercentile 100% of the rights will vest
Performance measures (2013 and 2014 awards)	Relative tsR (weighted at 60%) For the 2013 and 2014 awards, relative TSR is assessed against S&P/ASX 100 companies in accordance with the 2012 vesting schedule outlined above. Relative TSR is no longer measured against the international refning and marketing company comparator group given the restructure of Caltex’s supply chain and the company’s reduced exposure to refning earnings volatility and asset concentration risk. FCF (weighted at 20%) FCF measures performance against the cumulative FCF threshold, target and stretch levels set by the Board for the three year periods ending 31 December 2015 (2013 award) and 31 December 2016 (2014 award), based on the respective three year business plan. The targets are achievable only if growth expectations in Marketing are achieved, a competitive supply chain is maintained, and key strategic projects are achieved. FCF performance is measured before dividends and growth investment capital to ensure management is not discouraged from considering growth opportunities. The Board may modify the performance outcome to take into account material changes to the external environment and potentially those controllable items that may change to refect appropriate Board decisions over the three year period. At the end of the 2013-2015 and 2014-2016 performance periods, the Board will set out Caltex’s performance against the cumulative FCF target in the 2015 and 2016 Remuneration Reports, including how,if at all,the Board has modifed theperformance outcome noted above.

41

Performance	strategic measures (weighted at 20%)
measures	2013 award
(2013 and 2014 awards) continued	The 2013 strategic measure is based on performance against the Board approved project cost and schedule milestones for the Kurnell conversion project. The cost schedules and milestones are those that are to be delivered before 31 December 2015 and which were approved by the Board during 2013.
	Half of the Board’s assessment (10% weighting) will be measured based on the delivery of the
	Kurnell conversion project to budget. The remaining half (10% weighting) will be measured based
	on the Board’s qualitative assessment of performance during the three year period against a range of
	parameters including delivery of project milestones to time, safety and environment performance,
	and continuity of supply to customers.
	The Board intends to only reward performance that is consistent with shareholder expectations and has
	discretion to modify the proportion of performance rights that will vest based on actual performance.
	2014 award
	The 2014 strategic measure is based on the Board’s qualitative assessment of the outcomes achieved
	through key strategic projects, each designed to support top quartile shareholder returns, through
	the transformation of the company into a competitively effcient organisation with innovation and
	growth capabilities.
	The expected outcomes of the projects will be:
	• a competitively effcient organisation
	• the development and demonstration of end to end value chain optimisation capability
	• the development and demonstration of competitive supply capability
	• the development and demonstration of innovation and growth capabilities.
	_Disclosure of performance outcomes:_At the end of the respective 2013-2015 and 2014-2016 performance
	periods, the Board will set out in the 2015 and 2016 Remuneration Reports how Caltex performed
	against these measures,includingthe Board’s rationale for the relevant vesting percentage.
shares acquired	Shares to satisfy vested performance rights are purchased on market at the time of vesting if the
upon vesting of the	vesting conditions are met and the performance rights vest.
performance rights	Shares allocated upon vesting of performance rights will carry the same rights as other ordinary
	shares(includingdividends and votingrights).
share retention	For the 2013 and 2014 CEIP awards, where performance rights vest, new share retention arrangements
arrangements	will apply to all participants. The share retention arrangements are designed to encourage all executives
	to build up and maintain more sizeable shareholdings in Caltex for a longer period of time and further
	align the interests of Caltex executives and shareholders.
	Under the share retention arrangements, 25% of the vested portion of performance rights will be
	converted into restricted shares, and dealing with the restricted shares will not be permitted for a
	period of seven years (until 1 April 2021 for the 2014 CEIP awards), effectively extending the life of
	the LTI over this period.
	Based on this policy, if it is assumed the CEIP awards vest at target levels over a period of four years,
	then the MD & CEO and Senior Executives would have theoretical shareholdings of 100% and 60%
	of their base salary respectively.
	Executives can also elect additional voluntary restrictions on dealing with the remaining 75% of vested
	performance rights, resulting in a greater percentage of vested performance rights becoming restricted
	shares. On ceasing employment, all dealing restrictions on the restricted shares cease to apply, subject
	to the application of the Clawback Policy.
Clawback Policy	See section 3f for information on the Caltex Clawback Policy.
termination	If a participant ceases to be an employee due to resignation, all unvested equity awards held by the
provisions	participant will lapse, except in exceptional circumstances as approved by the Board.
	The Board has the discretion to determine the extent to which equity awards granted to a participant
	under the CEIP vest on a pro-rated basis where the participant ceases to be an employee of a Group
	company for reasons including retirement, death, total and permanent disablement, and bona fde
	redundancy. In these cases, the Board’s usual practice is to pro-rate the award to refect the portion of
	the period from the date of grant to the date the participant ceased to be employed. In addition, the
	portion of the award that ultimately vests is determined by testing against the relevant performance
	hurdles. If no determination is made bythe Board,all equityawards held bytheparticipant will lapse.
Change of control	Any unvested performance rights may vest at the Board’s discretion, having regard to
provisions	pro-ratedperformance.

42 Caltex / 2014 annual RePORt

Directors’ Report continued

Remuneration Report continued

3. Senior Executive remuneration continued

3f. Clawback Policy

Caltex has a Clawback Policy which allows the company to recoup incentives which may have been awarded and/or vested to Senior Executives in certain circumstances. The specific triggers which allow Caltex to recoup the incentives include Senior Executives acting fraudulently or dishonestly, acting in a manner which has brought a Group company into disrepute; where there has been a material misstatement or omission in the financial statements in relation to a Group company in any of the previous three financial years; or any other circumstances occur which the Board determines in good faith to have resulted in an “unfair benefit” to the Senior Executive.

Upon the occurrence of any of the triggers, the Board may then take such actions it deems necessary or appropriate to address the events that gave rise to an “unfair benefit”. Such actions may include:

1. requiring the Senior Executive to repay some or all of any cash or equity incentive remuneration paid in any of the previous three financial years

2. requiring the Senior Executive to repay any gains realised in any of the previous three financial years through the CEIP or on the open-market sale of vested shares

3. cancelling or requiring the forfeiture of some or all of the Senior Executive’s unvested performance rights, restricted shares or shares

4. reissuing any number of performance rights or restricted shares to the participant subject to new vesting conditions in place of the forfeited performance rights, restricted shares or shares

5. adjusting the Senior Executive’s future incentive remuneration, and/or

6. initiating legal action against the Senior Executive.

3g. Hedging and margin lending policies

The Caltex Securities Trading Policy prohibits Senior Executives from hedging an exposure to unvested or vested Caltex securities held through any of our incentive plans. The policy also requires directors and Senior Executives to give prior notice to the Company Secretary of any proposed margin loan arrangements. If a demand for payment is made under a margin loan arrangement, the director or Senior Executive must immediately advise the Company Secretary.

The Securities Trading Policy is a core corporate governance policy and Caltex has implemented appropriate measures to ensure compliance. Each year, directors, Senior Executives and certain other personnel are required to provide a certificate to the Company Secretary confirming their compliance with the Securities Trading Policy . Any breach of the Securities Trading Policy must be immediately advised to the Company Secretary, who will report the breach to the Board. A breach of the Securities Trading Policy may lead to disciplinary action, which may include termination of employment in serious cases.

3h. MD & CEO remuneration and service agreement

The MD & CEO’s remuneration is determined by the Board, upon the recommendation of the Committee. In making its 2014 remuneration recommendation, the Human Resources Committee considered the performance of the MD & CEO and advice provided by GRG which took into account remuneration levels provided by companies of a similar size and complexity.

The split between the MD & CEO’s 2014 total target and maximum stretch remuneration is outlined below.

	totAL tARGet AnD MAXIMUM ReMUneRAtIon	totAL tARGet AnD MAXIMUM ReMUneRAtIon
Fixed remuneration including superannuation	“At risk” – performance based remuneration
	stI(ii) LtI(iii)
$2,089,270(i)	“At target” $994,635_(50% of base salary)_	“At target”– when TSR is at the 75th percentile of peer companies, the free cash fow target is met, and the targets associated with the strategic measure have been met. $1,989,270_(100% of base salary)_
	“Stretch” $1,989,270_(100% of base salary)_	“Stretch” – when TSR is at the 90th percentile of peer companies, free cash fow performance is at stretch, and the targets associated with the strategic measures have been exceeded. $2,983,905_(150% of base salary)_

Notes:

(i) The MD & CEO’s remuneration increased by 3.5% during the 2014 remuneration review.

(ii) Currently there is mandatory deferral into shares of 33.3% of the actual STI above $105,000.

(iii) Share retention arrangements have been implemented to encourage share retention and promote alignment with shareholders over the longer term. For the 2013 and 2014 CEIP award, all CEIP participants, including the MD & CEO, are required to hold 25% of the shares awarded when the performance rights vest, for an additional four years.

43

Table 1. Summary of MD & CEO’s Service Agreement

term	Conditions
Duration	Ongoinguntil notice isgiven byeitherparty
Termination by MD & CEO	Six months’ notice
	Companymayelect to makepayment in lieu of notice
Termination bycompanyfor cause	No notice requirement or termination benefts(other than accrued entitlements)
Termination by company (other)	12 months’ notice
	Termination payment of 12 months’ base salary (reduced by any payment in lieu of notice)
	Treatment of unvested STI and LTI in accordance withplan terms
Post-employment restraints	Restraint applies for 12 months if employed in the same industrywithin Australia

3i. Other Senior Executive Service Agreements

The remuneration and other terms of employment for the other Senior Executives are formalised in Service Agreements (contracts of employment). The material terms of the Service Agreements are set out below.

The Senior Executives of Caltex are appointed as permanent Caltex employees. Their employment contracts require both Caltex and the executive to give a notice period within a range between one and six months as stipulated by their individual contracts should they resign or have their service terminated by Caltex. The terms and conditions of the executive contracts reflect market conditions at the time of the contract negotiation and appointment. It is Caltex’s intention going forward to reset the termination notice for all newly appointed Senior Executives to at least three months.

The details of the contracts of the current Senior Executives of Caltex are set out below. The durations of the contracts are open ended (i.e. ongoing until notice is given by either party).

Table 2. Summary of Service Agreements for other Senior Executives

	termination on notice	Resignation
	(by the company)	(by the senior executive)
Current senior executives
Andrew Brewer	6 months	6 months
Simon Hepworth	3 months	3 months
Peter Lim	6 months	6 months
Mike McMenamin	1 month	1 month
Bruce Rosengarten	6 months	6 months
Simon Willshire	6 months	6 months
Former senior executive
GarySmith	6 months	3 months

If a Senior Executive was to resign, their entitlement to unvested shares payable through the CEIP would generally be forfeited and, if resignation was on or before 31 December of the year, generally their payment from the Rewarding Results Plan would also be forfeited, subject to the discretion of the Board. If a Senior Executive is made redundant, their redundancy payment is determined by the Caltex Redundancy Policy, with the payment calculated based on years of service and the applicable notice period.

Other than prescribed notice periods, there is no special termination benefit payable under the contracts of employment. Statutory benefits (such as long service leave) are paid in accordance with the legislative requirements at the time the Senior Executive ceases employment.

44 Caltex / 2014 annual RePORt

Directors’ Report continued

Remuneration Report continued

3. Senior Executive remuneration continued

3i. Other Senior Executive Service Agreements continued

Appointment of General Manager – Marketing

Mr Bruce Rosengarten was appointed on 1 November 2013. Mr Rosengarten’s contract included relocation support to assist him to relocate from Melbourne, where he was previously employed. This relocation support was incurred in 2013. If Mr Rosengarten’s employment ceases due to resignation, serious and wilful misconduct or negligent behaviour within 36 months of commencement, a prorated portion of relocation assistance must be repaid.

Mr Rosengarten also received a payment to compensate him for forgone STI and an award of restricted shares to compensate him for unvested LTI at his prior employer. The payment in relation to forgone STI is required to be repaid in full if Mr Rosengarten ceases employment within 24 months of his commencement date.

Fifty percent (50%) of the restricted share grant vests on Mr Rosengarten’s second anniversary of commencement, with the remaining 50% vesting on his third anniversary. Each tranche lapses if Mr Rosengarten’s employment ceases due to resignation, serious and wilful misconduct, negligent behaviour or unsatisfactory performance prior to each respective date. The award of restricted shares is outlined in table 6b.

General Manager – Strategy, Planning & Development

In April 2014, the Board approved an application from Mr Mike McMenamin, for the release of his outstanding STI Deferred shares due to exceptional circumstances. These shares remain subject to clawback until 1 April 2015.

In December 2014, as part of the corporate restructure under a major cost and efficiency review, a decision was taken that the position of General Manager – Strategy, Planning & Development is no longer required and that the role is to be made redundant. Mr McMenamin will remain employed with Caltex until 31 May 2015. Under these arrangements, Mr McMenamin will receive his 2014 STI payment, his 2012 LTI award, a redundancy package (including notice) and his statutory leave entitlements.

The 2013 and 2014 CEIP LTI awards will be pro-rated to the date he ceases employment, with those performance rights remaining “on-foot” to be tested against the relevant performance measures at the end of the respective performance periods. Mr McMenamin will not receive a 2015 CEIP LTI award and will not be eligible for a 2015 STI payment.

Resignation of the General Manager – Refining & Supply

Mr Gary Smith resigned and ceased employment with Caltex on 9 May 2014. As Mr Smith resigned he forfeited all outstanding CEIP LTI awards on cessation of employment. However, as he had satisfied the six month service condition on his STI Deferred shares, these shares were released to Mr Smith, although these shares remain subject to clawback until 1 April 2015.

As Mr Smith resigned prior to the completion of the supply chain realignment strategy, the remaining payments due under the retention plan were forfeited (worth approximately $563,160).

Given Mr Smith’s long experience with the Kurnell refinery, the Board determined that it would still require his services to assist with the closure of the refinery and its subsequent conversion (the Project). Accordingly, a consultancy agreement was signed with Mr Smith for his services associated with the Project. Under this agreement, a payment was made to Mr Smith in February 2015 of $280,000 for his consultancy services associated with the successful closure of the Kurnell refinery.

3j. Link between company performance and executive remuneration

The link between executive remuneration and company performance is outlined in various parts of this report. This includes section 1 where the 2014 remuneration outcomes are communicated, and section 3 where the short term and long term performance measures are explained, including why the measures have been chosen and how they relate to the performance of the business.

Table 3 below outlines Caltex’s TSR, dividend, share price, earnings per share and RCOP NPAT performance each year from 2010 to 2014 together with the linkage to actual STI and LTI outcomes.

45

Table 3. Link between company performance and executive remuneration (unaudited)

summary of performance over 2010-2014	2014	2013	2012	2011	2010
12 month TSR %(i)	74.1	6.1	66.6	(15.0)	61.0
Dividends (cents per share)	70c	34c	40c	45c	60c
Share price(ii)	$34.21	$20.05	$19.21	$11.77	$14.37
RCOP excluding signifcant items earnings per share	$1.83	$1.23	$1.70	$0.98	$1.18
RCOP NPAT excluding signifcant items (million)(iii)	$493	$332	$458	$264	$318
Caltex Safety – TTIFR(iv)	1.76	1.36	2.86	2.53	2.95
Caltex Safety– LTIFR(v)	0.77	0.63	0.59	0.99	1.23
Link to remuneration
STI – percentage of business plan RCOP NPAT target achieved	125%	76%	137%	82.5%	130%
STI – funding of STI pool (relative to target)	127%	0%	144%	94%	147%
LTI – percentage vesting three years after grant date
Year of grant	2012	2011	2010	2009	2008
Percentage ofgrant vesting	88.9%	42.3%	77.8%	82.2%	50%

Notes:

(i) TSR is calculated as the change in share price for the year, plus dividends announced for the year, divided by the opening share price. TSR is a measure of the return to shareholders in respect to each financial year.

(ii) The price quoted is the trading price for the last day of trading (31 December) in each calendar year.

(iii) Measured using the RCOP method which excludes the impact of the rise or fall in oil prices (a key external factor) and excludes significant items as determined by the Board.

(iv) TTIFR – Total Treatable Injury Frequency Rate.

• (v) LTIFR – Lost Time Injury Frequency Rate.

The 2014 executive remuneration outcomes are outlined further below, both in terms of “actual remuneration earned” (table 4a) and statutory remuneration disclosures (table 4b).

The two charts below provide a comparison of Caltex’s three year TSR compared to S&P/ASX 100 companies and to the six international marketing and refining companies. This reflects the 2012 LTI grant where performance is measured over the period from 1 January 2012 to 31 December 2014. As seen, Caltex’s three year TSR is well above the 90th percentile of the S&P/ASX 100 peer group, and above the median of the international marketing and refining company peer group.

Three year TSR performance 1 January 2012 to 31 December 2014

Caltex Australia Limited and the Constituents of the S&P/ASX 100 Index Total Shareholders Return Performance 1 January 2012 – 31 December 2014

Caltex 90th Percentile 75th Percentile 50th Percentile ASX 100

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2014 Copyright. All Rights Reserved. Egan Associates. Indices based on a value of 100 at 1 January 2012. Three month smoothing applied. 1. Constituents based on the S&P/ASX 100 Index as at grant date (i.e. 1 January 2012). Caltex is included in the S&P/ASX 100 Index. Source: S&P Capital IQ

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46 Caltex / 2014 annual RePORt

Directors’ Report continued

Remuneration Report continued

3. Senior Executive remuneration continued

3j. Link between company performance and executive remuneration continued

Three year TSR performance 1 January 2012 to 31 December 2014

Caltex Australia Limited and the Constituents of the Bespoke International Comparator Group Total Shareholders Return Performance 1 January 2012 – 31 December 2014

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• 2014 Copyright. All Rights Reserved. Egan Associates. Indices based on a value of 100 at 1 January 2012. Three month smoothing applied. 1. The International Comparator Group includes Caltex, Motor Oil, Neste, S-Oil, Tesoro, Valero and Western Refining. Source: S&P Capital IQ

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The chart below provides a comparison of Caltex’s one year TSR performance compared to S&P/ASX 100 companies over the period from 1 January 2014 to 31 December 2014. This reflects the current status of the 2014 LTI grant. As seen, the Caltex TSR was well above the 90th percentile over 2014. The 2014 LTI grant is not assessed against an international marketing and refining company peer group.

One year TSR performance 1 January 2014 to 31 December 2014

Caltex Australia Limited and the Constituents of the S&P/ASX 100 Index Total Shareholders Return Performance 1 January 2014 – 31 December 2014

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• 2014 Copyright. All Rights Reserved. Egan Associates. Indices based on a value of 100 at 1 January 2014. 60 trading days smoothing applied. 1. Constituents based on the S&P/ASX 100 Index as at grant date (i.e. 1 January 2014). Caltex is included in the S&P/ASX 100 Index. Source: S&P Capital IQ

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47

3k. Remuneration tables

Table 4a. Total remuneration earned for Senior Executives in 2014 (unaudited, non-statutory disclosures)

The following table sets out the actual remuneration earned by Senior Executives in 2014, from an individual perspective. The value of remuneration includes the equity grants where the Senior Executive received control of the shares in 2014.

The purpose of this table is to provide a summary of the “past” and “present” remuneration outcomes received in either cash or in the form of equity granted in prior years which has vested in 2014. As a result, the values in this table will not reconcile with those provided in the statutory disclosures in table 4b. For example, table 4b discloses the value of grants in the CEIP which may or may not vest in future years, whereas this table discloses the value of grants from previous years which vested in 2014. No deferred STI vested in 2014 as no bonuses were paid in 2013.

		Fixed		Deferred	LtI vested	Remuneration
Dollars	salary and fees (i)	other remuneration (iii)	Bonus (stI) (iv)	stI vested in the year	during the year (v)	“earned” for 2014
Current senior executives
Julian Segal (MD & CEO)(ii)
2014	2,047,453	236,744	949,862	–	1,767,862	5,001,921
Andrew Brewer (General Manager – Supply Chain Operations)(ii)		(vi)
2014	436,467	120,588	258,587	–	165,260	980,902
Simon Hepworth (Chief Financial Offcer)
2014	713,823	147,206	351,563	–	373,151	1,585,743
Peter Lim (General Manager – Legal & Corporate Affairs)(ii)
2014	480,356	77,684	203,698	–	102,640	864,378
Mike McMenamin (General Manager – Strategy,	Planning & Development)(ii)
2014	553,699	54,736	357,286	–	259,761	1,225,482
Bruce Rosengarten (General Manager – Marketing)(ii)
2014	761,669	76,344	300,384	–	–	1,138,397
Simon Willshire (General Manager – Human Resources)(ii)
2014	506,611	61,400	217,636	–	254,883	1,040,530
Former senior executive
Gary Smith (General Manager – Refning & Supply)(ii) (vii)
2014	337,977	15,256	–	–	401,860	755,093
total remuneration: senior executives
2014	5,838,055	789,958	2,639,016	–	3,325,417	12,592,446

Notes:

(i) Salary and fees comprises base salary, and cash payments in lieu of employer superannuation (on base salary and/or on STI payments made in respect of the 2014 performance year paid in 2015).

(ii) These Senior Executives elect to receive an equivalent cash payment in lieu of employer superannuation that is in excess of the quarterly Superannuation Guarantee Maximum.

(iii) Fixed other remuneration includes the cash value of non-monetary benefits, superannuation, annual leave and long service leave entitlements. It also includes any fringe benefits tax payable on non-monetary benefits.

(iv) The bonus amounts are the cash component (66.6%) of the STI to be received for the 2014 year, which will be paid in April 2015. 33.3% of the STI will be deferred and restricted for two years. The exception is Mr McMenamin who will receive 100% of his STI in cash, with 33.3% of the payment subject to clawback, due to his redundancy shortly after the Deferred STI shares would have been granted.

(v) Equity based plans from prior years that have vested in the current year. The value is calculated using the closing share price of Caltex shares on the vesting date. The 2014 figures reflect the TSR performance for the 2011 awards, which resulted in 42.3% of these performance rights vesting during 2014.

(vi) Mr Brewer’s remuneration relates to the period from 31 March 2014 when he was appointed General Manager – Supply Chain Operations and became a KMP.

(vii) Mr Smith’s remuneration relates to the period from 1 January 2014 up until his resignation took effect on 9 May 2014.

48 Caltex / 2014 annual RePORt

Directors’ Report continued

Remuneration Report continued

3. Senior Executive remuneration continued

3k. Remuneration tables continued

Table 4b. Total remuneration for Senior Executives in 2014 (statutory disclosures)

The following table sets out the audited total remuneration for Senior Executives in 2013 and 2014, calculated in accordance with statutory accounting requirements:

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Post- otHeR
PRIMARY eMPLoYMent LonG teRM eqUItY totAL
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		Bonus (short	non-			share benefts	Rights benefts
Dollars	salary and fees (i)	term incentive) (iii)	monetary benefts (iv)	super- annuation	other (v)	(short term incentive)	(long term incentive) (vi)
Current senior executives
Julian Segal (MD & CEO)(ii)
2014	2,188,995	949,862	12,756	25,000	57,445	259,053	2,198,465	5,691,576
2013	2,012,184	–	13,657	25,000	91,130	196,723	1,853,110	4,191,804
Andrew Brewer (General Manager – Supply Chain Operations)(ii) (vii)
2014	468,463	258,587	8,345	20,700	59,546	70,524	216,732	1,102,897
2013	–	–	–	–	–	–	–	–
Simon Hepworth (Chief Financial Offcer)
2014	740,351	351,563	15,570	68,851	36,257	95,881	485,512	1,793,985
2013	704,067	–	14,403	95,097	17,615	74,595	399,720	1,305,497
Peter Lim (General Manager – Legal & Corporate Affairs)(ii)
2014	485,218	203,698	17,213	27,000	28,609	55,554	293,916	1,111,208
2013	488,889	–	15,396	24,001	13,469	44,683	202,670	789,108
Mike McMenamin (General Manager – Strategy, Planning &				Development)(ii)
2014	554,141	357,286	15,059	18,279	20,956	–	344,375	1,310,096
2013	530,955	–	15,154	24,235	12,478	53,184	283,395	919,401
Bruce Rosengarten (General Manager – Marketing)(ii) (viii)
2014	799,361	300,384	13,252	25,400	–	349,496	131,094	1,618,987
2013	438,023	241,958	5,128	5,100	1,438	31,522	–	723,169
Simon Willshire (General Manager – Human Resources)(ii)
2014	520,698	217,636	13,173	18,279	15,862	59,355	319,382	1,164,385
2013	495,477	–	12,712	17,122	11,605	48,986	268,111	854,013
Former senior	executives
Gary Smith (General Manager – Refning & Supply)(ii) (ix)
2014	337,977	–	6,369	8,887	–	–	21,606	374,839
2013	885,160	–	13,428	17,122	266,727	122,853	428,893	1,734,183
Andy Walz (General Manager – Marketing)(x)
2014	–	–	–	–	–	–	–	–
2013	397,716	208,051	425,595	34,001	313,258	–	–	1,378,621
total remuneration: senior executives
2014	6,095,204	2,639,016	101,737	212,396	218,675	889,863	4,011,082	14,167,973
2013	5,952,471	450,009	515,473	241,678	727,720	572,546	3,435,899	11,895,796

Notes:

(i) Salary and fees include base salary, cash payments in lieu of employer superannuation on base salary, and annual leave accruals.

(ii) These executives elect to receive an equivalent cash payment in lieu of employer superannuation that is in excess of the quarterly Superannuation Guarantee Maximum.

(iii) No STI was awarded to Senior Executives for the 2013 Performance Year due to the company failing to meet the required profit threshold under the Rewarding Results Plan.

(iv) The non-monetary benefits received by Senior Executives include car parking benefits, employee StarCard benefits, the payment of the default premiums for death and total and permanent disability insurance cover and related FBT payments made by Caltex.

(v) Other long term remuneration represents long service leave for all Senior Executives and the accrual of retention payments for Mr Smith (in 2013 only).

(vi) These values have been calculated under Accounting Standards and as such the value may not represent the future value that may (or may not) be received by the Senior Executive as the vesting of the performance rights is subject to the achievement of service based and performance based vesting conditions.

(vii) Mr Brewer’s 2014 remuneration relates to the period from 31 March 2014 when he was appointed General Manager – Supply Chain Operations and became a KMP.

(viii) Mr Rosengarten’s 2013 remuneration relates to the period from 1 November 2013 when he was appointed General Manager – Marketing. The salary and fees amount paid to Mr Rosengarten in 2013 includes one off payments of relocation assistance totalling $248,357. The Bonus (short term incentive) amount relates to the pro-rated STI paid in lieu of the STI forgone with his prior employer.

(ix) Mr Smith’s 2014 remuneration relates to the period from 1 January 2014 up until 9 May 2014 when his resignation took effect. His 2013 salary and fees include a retention payment.

(x) Mr Walz’s 2013 remuneration relates to the period from 1 January 2013 to 31 May 2013 when his secondment with Caltex from Chevron concluded.

49

Table 5. Unvested shareholdings of Senior Executives during 2014

			shares vested
	Unvested	Restricted	from prior		Unvested
	shares at	shares	performance		shares at
	31 Dec 2013	granted (ii)	years (iii)	Forfeited	31 Dec 2014
Current senior executives
Julian Segal	–	13,883	–	–	13,883
Andrew Brewer	–	3,779	–	–	3,779
Simon Hepworth	–	5,138	–	–	5,138
Peter Lim	–	2,977	–	–	2,977
Mike McMenamin	–	–	–	–	–
Bruce Rosengarten	33,864(i)	4,390	–	–	38,254
Simon Willshire	–	3,181	–	–	3,181
Former senior executive
GarySmith	–	–	–	–	–

Notes:

(i) The restricted shares awarded to Mr Rosengarten represent the grant received on commencement with Caltex in lieu of the LTI forgone with his previous employer (refer to section 3i for further detail). If Mr Rosengarten meets the service conditions, the shares will vest in November 2015 (50%) and November 2016 (50%).

• (ii) Restricted shares granted represents the 2014 STI deferred into equity (33.3%). The shares will be purchased in 2015 and will vest in October 2015. The shares will be subject to a six month service related forfeiture condition and a two year dealing restriction from the date of grant. This disclosure represents the estimated number of shares to be acquired at that time. The exception is Mr McMenamin who will receive 100% of his STI in cash, with 33.3% of the payment subject to clawback, due to his redundancy shortly after the restricted shares would have been granted.

(iii) No restricted shares vested in 2014 (as no STI Deferred shares were granted given that no STI was paid for the 2013 Performance Year).

Table 6a. Restricted share grants to Senior Executives in 2014 – STI

The following table provides an estimate of the future cost to Caltex of unvested restricted shares based on the progressive vesting of the STI deferred shares. Of the 2014 STI deferred shares, no shares have vested and the estimated future cost has been provided.

				Future cost
		vested	Future years	to Caltex
	Deferred	(% of shares	when shares	of unvested
	stI year	vested)	will vest	shares ($)
senior executives
Julian Segal	2014	0%	2015	215,878
Andrew Brewer	2014	0%	2015	58,770
Simon Hepworth	2014	0%	2015	79,901
Peter Lim	2014	0%	2015	46,295
Mike McMenamin	2014	–	–	–
Bruce Rosengarten	2014	0%	2015	68,269
Simon Willshire	2014	0%	2015	49,463

Table 6b. Restricted share grants to Senior Executives – other awards

The following table provides an estimate of the future cost to Caltex of unvested restricted shares based on the progressive vesting of the restricted shares, where the shares were not awarded under the STI Deferral plan. No new awards of restricted shares were made during 2014. One award was made to the General Manager – Marketing in 2013 on commencement of employment in lieu of the unvested LTI which lapsed on his resignation with his prior employer. As no shares have vested the estimated future cost has been provided.

					Future cost
			vested	Future years	to Caltex
	type of	Year of	(% of shares	when shares	of unvested
	award	award	vested)	will vest	shares ($)
senior executive
Bruce Rosengarten	Sign-on	2013	0%	2015 (50%)	330,873
				2016(50%)

50 Caltex / 2014 annual RePORt

Directors’ Report continued

Remuneration Report continued

3. Senior Executive remuneration continued

3k. Remuneration tables continued

Table 7. 2014 Senior Executive performance rights

Long term incentives for Senior Executives are awarded as performance rights under the CEIP as explained in section 3e. The following table sets out details of movements in performance rights held by Senior Executives during the year, including details of the performance rights that vested.

	Performance
	rights at	Granted in	vested in	Lapsed in	Balance at
	1 jan 2014 (i)	2014 (ii)	2014	2014 (iii)	31 Dec 2014
Current senior executives
Julian Segal	642,160	161,815	(81,900)	(111,764)	610,311
Andrew Brewer	61,014	26,805	(7,656)	(10,448)	69,715
Simon Hepworth	139,529	36,320	(17,287)	(23,593)	134,969
Peter Lim	71,165	22,785	(4,755)	(6,491)	82,704
Mike McMenamin	98,337	25,910	(12,034)	(16,424)	95,789
Bruce Rosengarten	–	34,165	–	–	34,165
Simon Willshire	92,916	23,675	(11,808)	(16,116)	88,667
Former senior executive
GarySmith	148,711	–	(18,617)	(130,094)	–

Notes:

(i) For 2012 and 2013 performance rights, if the service based and performance based vesting conditions are achieved, these performance rights will vest in 2015 and 2016 respectively.

(ii) For the 2014 performance rights, if the service based and performance based vesting conditions are achieved, these performance rights will vest in 2017.

(iii) Relates to 2011 performance rights of which 57.7% lapsed in the year and 42.3% vested.

Table 8. Valuation assumptions of performance rights granted

The fair value of performance rights granted under the CEIP is determined independently by Ernst & Young using an appropriate numerical pricing model. The model takes into account a range of assumptions and the fair values for each year of grant have been calculated incorporating the assumptions below.

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2014 GRAnt 2013 GRAnt 2012 GRAnt
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						International
		FCF and		FCF and		refning and
	s&P/	strategic	s&P/	strategic	s&P/	marketing
Peer group	AsX 100	measures	AsX 100	measures	AsX 100	companies
Grant date	7 April 2014	7 April 2014	22 April 2013	22 April 2013	2 April 2012	2 April 2012
Vestingdate	1 April 2017	1 April 2017	1 April 2016	1 April 2016	1 April 2015	1 April 2015
Exerciseprice	Nil	Nil	Nil	Nil	Nil	Nil
Volatility	35%	35%	40%	40%	45%	45%
Risk free interest rate	3.02%	3.02%	2.7%	2.7%	3.49%	3.49%
Dividendyield	2.7%	2.7%	2.0%	2.0%	4.7%	4.7%
Expected life(years)	3.0	3.0	2.9	2.9	3.0	3.0
Shareprice atgrant date	$21.85	$21.85	$20.60	$20.60	$14.03	$14.03
Valuationper right	$12.57	$20.16	$10.98	$19.42	$7.69	$7.52

Note:

Market performance measures, such as relative TSR, must be incorporated into the option-pricing model valuation used for the CEIP performance rights, which is reflected in the valuation per performance right. Non-market vesting conditions such as free cash flow and strategic measures are not taken into account when determining the value of the performance right. This explains the higher valuation for these performance rights. However, the value of the free cash flow and strategic measures may be discounted during the performance period to reflect the Board’s assessment of the probability that the measure will be met and the associated performance rights vesting. These values will be reflected in the values set out in table 4b.

51

Table 9. Distribution of 2014 fixed and variable elements of remuneration

The proportion of each Senior Executive’s remuneration for 2014 that was fixed, and the proportion that was subject to a performance condition, is outlined below. The percentages are based on the 2014 statutory remuneration disclosures and do not correspond to the target remuneration percentages outlined earlier in this report in section 3b.

		variable (including short and
	Fixed	long term incentive payments)
Current senior executives
Julian Segal	40%	60%
Andrew Brewer	51%	49%
Simon Hepworth	48%	52%
Peter Lim	50%	50%
Mike McMenamin	46%	54%
Bruce Rosengarten	52%	48%
Simon Willshire	49%	51%
Former senior executive
GarySmith	51%	49%

Table 10. FY14 STI Plan payment results

The following table sets out the FY14 STI awards, compared to FY13, as a percentage of the Senior Executive’s maximum STI opportunity.

	2014	2013
Current senior executives
Julian Segal	72%	0%
Andrew Brewer	71%	0%
Simon Hepworth	71%	0%
Peter Lim	71%	0%
Mike McMenamin	73%	0%
Bruce Rosengarten	64%	n/a
Simon Willshire	73%	0%
Former senior executive
GarySmith(i)	n/a	0%
Average	71%	0%

Note:

(i) Mr Smith ceased employment on 9 May 2014 and was therefore not entitled to a 2014 STI award.

52 Caltex / 2014 annual RePORt

Directors’ Report continued

Remuneration Report continued

4. Non-executive Director fees

4a. Our approach to Non-executive Director fees

Caltex’s business and corporate operations are managed under the direction of the Board on behalf of shareholders. The Board oversees the performance of Caltex management in seeking to deliver superior business and operational performance and long term growth in shareholder value. The Board recognises that providing strong leadership and strategic guidance to management is important to achieve our goals and objectives.

Under the Caltex Constitution and the ASX Listing Rules, the total annual fee pool for Non-executive Directors is determined by shareholders. Within this aggregate amount, Non-executive Director fees are reviewed by the Human Resources Committee, taking into account recommendations from an independent remuneration consultant, and set by the Board.

Fees for Non-executive Directors are set at a level to attract and retain directors with the necessary skills and experience to allow the Board to have a proper understanding of, and competence to deal with, current and emerging issues for Caltex’s business. The Board seeks to attract directors with different skills, experience and abilities to enable it to effectively oversee and challenge the performance of management. Additionally, when setting Non-executive Director fees, the Board takes into account factors such as external market data on fees and the size and complexity of Caltex’s operations.

The Non-executive Directors’ fees are fixed. The Non-executive Directors do not participate in any Caltex incentive plan. Caltex does not have a retirement plan for Non-executive Directors.

4b. Board and committee fees for 2014

The current maximum annual fee pool for Non-executive Directors is $2 million, including statutory entitlements. This amount was approved by shareholders at the 2010 Annual General Meeting.

Table 11. 2014 Non-executive Directors’ fees

The following table contains the 2014 Non-executive Director fees. As disclosed in Caltex’s 2013 Remuneration Report, the fees for the Chairmen and members of the Human Resources Committee and the OHS & Environmental Risk Committee increased from 1 January 2014 to align with the fees paid to the Chairman and members of the Audit Committee. The increase in these fees reflects the equivalent complexity and workload requirements of the Human Resources Committee and the Audit Committee, and the critical importance of the OHS & Environmental Risk Committee given the industry in which Caltex operates. All other fees remained unchanged from 2013.

	BoARD		CoMMIttees(i)	CoMMIttees(i)
	Chairman	Member	Chairman	Member
Fee(ii)	$465,000	$155,000	$36,000	$18,000

Notes:

(i) Comprising the Audit Committee, Human Resources Committee, and OHS & Environmental Risk Committee. No fees are paid for the Nomination Committee.

(ii) Caltex pays superannuation for Australian based Non-executive Directors in addition to the above fees. From 1 July 2014, the superannuation rate is 9.5%.

Mr Brown, Ms Burger and Mr Krogmeier each act as alternate directors for each other, but they do not receive any additional Board or committee fees for acting as alternate directors.

53

4c. Remuneration table

Table 12. Non-executive Director fees in 2014 (statutory disclosures)

The following table sets out the audited Non-executive Director fees in 2013 and 2014 calculated in accordance with statutory accounting requirements. Non-executive Directors are not eligible to receive any cash based or equity based incentives.

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Post- otHeR
PRIMARY eMPLoYMent LonG teRM totAL
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		non-
Dollars	salary and fees	monetary benefts	super- annuation (i)	other
Current non-executive Directors
Elizabeth Bryan (Chairman)
2014	490,315	389	18,279	–	508,983
2013	490,309	384	17,122	–	507,815
Trevor Bourne
2014	227,000	962	21,281	–	249,243
2013	215,125	1,276	19,629	–	236,030
Richard Brown
2014	155,000	–	–	–	155,000
2013	155,000	–	–	–	155,000
Barbara Burger
2014	173,000	–	–	–	173,000
2013	168,000	–	–	–	168,000
Greig Gailey
2014	227,000	615	21,281	–	248,896
2013	217,000	622	19,801	–	237,423
Ryan Krogmeier
2014	173,000	–	–	–	173,000
2013	170,500	–	–	–	170,500
Bruce Morgan
2014	227,000	781	21,281	–	249,062
2013	111,855	195	10,344	–	122,394
Former non-executive Director
John Thorn
2014	–	–	–	–	–
2013	86,310	479	6,808	–	93,597
total: non-executive Directors
2014	1,672,315	2,747	82,122	–	1,757,184
2013	1,614,099	2,956	73,704	–	1,690,759

Note:

(i) Superannuation contributions are made on behalf of Australian based Non-executive Directors to satisfy Caltex’s obligations under the Superannuation Guarantee legislation. Fees paid to Australian based Non-executive Directors may be subject to fee sacrifice arrangements for superannuation. Non-executive Directors may direct Caltex to pay superannuation contributions referable to fees in excess of the maximum earnings base as cash.

54 Caltex / 2014 annual RePORt

Directors’ Report continued

Remuneration Report continued

5. Shareholdings of Key Management Personnel

The movement during the reporting period in the number of shares of Caltex Australia Limited held directly or indirectly by each KMP, including their personally related entities, is below:

	Held at				Held at
31 December 2014	31 Dec 2013	Purchased	vested	sold	31 Dec 2014
non-executive Directors
Elizabeth Bryan	14,946	–	–	–	14,946
Trevor Bourne	5,395	–	–	–	5,395
Richard Brown	–	–	–	–	–
Barbara Burger	–	–	–	–	–
Greig Gailey	5,000	–	–	–	5,000
Ryan Krogmeier	–	–	–	–	–
Bruce Morgan	10,500	–	–	–	10,500
senior executives
Julian Segal	120,583	–	81,900	(53,933)	148,550
Andrew Brewer	27,825	–	7,656	(10,469)	25,012
Simon Hepworth	21,352	–	17,287	(26,800)	11,839
Peter Lim	10,669	–	4,755	–	15,424
Mike McMenamin	10,622	–	12,034	(22,656)	–
Bruce Rosengarten	–	–	–	–	–
Gary Smith	16,516	–	18,617	(25,604)	9,529
Simon Willshire	10,143	–	11,808	(16,794)	5,157

	Held at				Held at
31 December 2013	31 Dec 2012	Purchased	vested	sold	31 Dec 2013
non-executive Directors
Elizabeth Bryan	14,946	–	–	–	14,946
Trevor Bourne	5,395	–	–	–	5,395
Richard Brown	–	–	–	–	–
Barbara Burger	–	–	–	–	–
Greig Gailey	5,000	–	–	–	5,000
Colleen Jones-Cervantes	–	–	–	–	–
Ryan Krogmeier	–	–	–	–	–
Bruce Morgan	–	10,500	–	–	10,500
John Thorn	1,510	–	–	(1,510)	–
senior executives
Julian Segal	166,563	–	279,432	(325,412)	120,583
Simon Hepworth	65,358	–	59,494	(103,500)	21,352
Peter Lim	7,272	–	19,246	(15,849)	10,669
Mike McMenamin	12,827	–	43,626	(45,831)	10,622
Bruce Rosengarten	–	–	–	–	–
Gary Smith	21,123	–	68,372	(72,979)	16,516
Andy Walz	–	–	–	–	–
Simon Willshire	13,055	–	42,482	(45,394)	10,143

55

6. Other Key Management Personnel transactions

Apart from as disclosed in the indemnity section of the Directors’ Report, no KMP have entered into a material contract, loan or other transaction with any entity in the Caltex Group during the year ended 31 December 2014 (2013: nil).

During 2014, Ms Bryan was a director of Westpac Banking Corporation. The business relationship between Caltex and Westpac Banking Corporation has been in place for many years and transactions undertaken during 2014 were on normal commercial terms.

Also during 2014:

• Ms Bryan was a director of Insurance Australia Group Limited in December 2014; transactions with this company and (where relevant) its subsidiaries during 2014 were on normal commercial terms.

• Mr Bourne was a director of Senex Energy Limited and Sydney Water Corporation; transactions with these companies and (where relevant) their subsidiaries during 2014 were on normal commercial terms.

• Mr Morgan was a director of Origin Energy Limited and Sydney Water Corporation; transactions with these companies and (where relevant) their subsidiaries during 2014 were on normal commercial terms.

Directors’ interests

The directors’ relevant interests in the shares of Caltex Australia Limited at 31 December 2014 are set out in the following table.

Director	shareholding	nature of interest
Elizabeth Bryan	14,946	Direct interest
Julian Segal	148,550	Direct interest (127,911 shares); indirect interest (20,639 shares).
		Mr Segal also has a direct interest in 610,311performance rights.
Trevor Bourne	5,395	Direct interest(2,395 shares);indirect interest(3,000 shares)
Richard Brown	Nil	n/a
Barbara Burger	Nil	n/a
GreigGailey	5,000	Indirect interest
Ryan Krogmeier	Nil	n/a
Bruce Morgan	10,500	Indirect interest

Note:

No director has acquired or disposed of any relevant interests in the company’s shares in the period from 1 January 2015 to the date of this Annual Report.

Board and committee meetings

The Board of Caltex Australia Limited met nine times during the year ended 31 December 2014. In addition, directors attended Board strategy sessions and workshops, site visits and special purpose committee meetings during the year.

In 2014, the Board convened the following standing committees:

• Audit Committee

• Human Resources Committee

• Nomination Committee

• OHS & Environmental Risk Committee.

Special purpose committees were convened on two occasions in 2014.

56 Caltex / 2014 annual RePORt

Directors’ Report continued

Board and committee meetings continued

The number of Board and committee meetings attended by each director during 2014 is set out in the following table.

DIReCtoR	BoARD1	BoARD1	AUDIt CoMMIttee	AUDIt CoMMIttee	HUMAn ResoURCes CoMMIttee	HUMAn ResoURCes CoMMIttee	noMInAtIon CoMMIttee	noMInAtIon CoMMIttee	oHs & envIRon- MentAL RIsk CoMMIttee	oHs & envIRon- MentAL RIsk CoMMIttee	otHeR3	otHeR3
Current directors	A 2	B	A	B	A	B	A	B	A	B	A	B
Elizabeth Bryan	9	9	–	–	–	–	3	3	–	–	8	8
Julian Segal	9	9	–	–	–	–	3	3	–	–	8	8
Trevor Bourne	9	8	4	4	4	4	3	3	4	4	5	5
Richard Brown	9	9	–	–	–	–	3	3	–	–	5	5
Barbara Burger	9	8	–	–	–	–	3	3	4	4	5	5
GreigGailey	9	9	4	4	4	4	3	3	4	4	5	5
Ryan Krogmeier	9	9	–	–	4	4	3	3	–	–	5	5
Bruce Morgan	9	9	4	4	4	4	3	3	3	4	8	8

Notes:

• A: Number of meetings eligible to attend.

• B: Number of meetings attended.

• Includes one unscheduled Board meeting.

• All directors are invited to and regularly attend committee meetings; this table lists attendance only where a director is a member of the relevant committee.

• Includes Board strategy sessions, workshops, site visits and special purpose committee meetings.

shares and interests

The total number of ordinary shares on issue at the date of this report and during 2014 is 270 million shares (2013: 270 million shares). The total number of performance rights on issue at the date of this report is 2,018,111 (2013: 2,437,647). 676,620 performance rights were issued during 2014 (2013: 667,640). 1,096,156 performance rights were distributed or lapsed during the year (2013: 1,137,307). On vesting, Caltex is required to allocate one ordinary share for each performance right. For each right that vests, Caltex will purchase a share on market following vesting.

non-audit services

KPMG is the external auditor of Caltex Australia Limited and the Caltex Australia Group.

In 2014, KPMG performed non-audit services for the Caltex Australia Group in addition to its statutory audit and review engagements for the full year and half year.

KPMG received or was due to receive the following amounts for services performed for the Caltex Australia Group during the year ended 31 December 2014:

• for non-audit services – total fees of $78,500 (2013: $151,400); these services included taxation services ($43,700) and other assurance services ($34,800), and

The Board has received a written advice from the Audit Committee in relation to the independence of KPMG, as external auditor, for 2014. The advice was made in accordance with a resolution of the Audit Committee.

The directors are satisfied that:

• the provision of non-audit services to the Caltex Australia Group during the year ended 31 December 2014 by KPMG is compatible with the general standard of independence for auditors imposed by the Corporations Act , and

• the provision of non-audit services during the year ended 31 December 2014 by KPMG did not compromise the auditor independence requirements of the Corporations Act for the following reasons:

  • the provision of non-audit services in 2014 was consistent with the Board’s policy on the provision of services by the external auditor

  • the non-audit services provided in 2014 are not considered to be in conflict with the role of external auditor, and

  • the directors are not aware of any matter relating to the provision of the non-audit services in 2014 that would impair the impartial and objective judgement of KPMG as external auditor.

• for audit services – total fees of $995,900 (2013: $919,400).

57

Company secretaries

The following persons served as company secretaries of Caltex Australia Limited and the Caltex Group during 2014.

Peter Lim

Mr Lim is Caltex’s General Manager – Legal & Corporate Affairs. In this role, he serves as Company Secretary to the Board, as Committee Secretary for the Nomination Committee, and as a company secretary for various companies in the Caltex Group.

Mr Lim was appointed to the Caltex Board as Company Secretary in April 2011. Mr Lim joined Caltex in 2006 after spending a number of years as a lawyer in private practice. He was appointed to the role of Assistant General Counsel in 2009 and was later appointed Company Secretary and General Counsel (January 2012).

Mr Lim holds a Bachelor of Commerce and a Bachelor of Laws from the University of New South Wales.

Katie King

Ms King served as Assistant Company Secretary for part of 2014, having been appointed as a company secretary of Caltex Australia Limited from 27 October 2011. She also served as Committee Secretary for the Audit Committee, the Human Resources Committee and the OHS & Environmental Risk Committee, and was a company secretary of various companies in the Caltex Group.

Ms King holds a Bachelor of Commerce from the University of New South Wales, and is a member of the Governance Institute of Australia and the Institute of Chartered Accountants in Australia.

Ms King resigned as Company Secretary in December 2014.

John Remedios

Mr Remedios served as Assistant Company Secretary for part of 2014, having been appointed as a company secretary of Caltex Australia Limited from 28 March 2014. He also served as company secretary of various companies in the Caltex Group.

Mr Remedios holds Bachelor of Economics and Bachelor of Law (Hons.) degrees from the University of Sydney and is a member of the Law Society of New South Wales.

Mr Remedios resigned as Company Secretary in December 2014.

Nawal Silfani

Ms Silfani joined Caltex in 2014 and was appointed to the Caltex Board as Company Secretary in December 2014. She serves as Committee Secretary for the Audit Committee, the Human Resources Committee and the OHS & Environmental Risk Committee, and is a company secretary of various companies in the Caltex Group.

Ms Silfani previously held similar roles in high profile ASX 100 companies and has extensive experience at a top tier Australian law firm, where she focused on corporate law and governance.

Ms Silfani holds various undergraduate and postgraduate qualifications in law, corporate governance and risk, including a Master of Laws from the University of Sydney, and she is a member of the Australian Institute of Company Directors, the Australian Corporate Lawyers Association and the Governance Institute of Australia.

Indemnity and insurance

Constitution

The Constitution of Caltex Australia Limited provides that, to the extent permitted by law and subject to the restrictions in sections 199A and 199B of the Corporations Act , Caltex Australia Limited indemnifies every person who is or has been a director or secretary of the company or of a subsidiary at the request of the Board of Caltex Australia Limited. The indemnities cover against:

• any liability (other than a liability for legal costs) incurred by that person as a director or secretary of Caltex Australia Limited or a subsidiary, and

• reasonable legal costs incurred in defending an action for a liability or alleged liability incurred by that person as a director or secretary of Caltex Australia Limited or a subsidiary.

Deeds of indemnity and insurance

During the year ended 31 December 2014, Caltex Australia Limited entered into a deed of access, insurance and indemnity with John Remedios on his appointment as a company secretary. Deeds of access, insurance and indemnity have previously been entered into by Caltex Australia Limited with current and former directors and secretaries.

Under the deeds, Caltex Australia Limited has agreed, in broad terms, to indemnify its directors and company secretaries (to the extent permitted by law and subject to the prohibitions in section 199A of the Corporations Act and the terms of the deed) against any and all:

• liabilities incurred as an officer of Caltex Australia Limited or a Group company (but not including liabilities for legal costs covered by the legal costs indemnity), and

• legal costs reasonably incurred in defending an action for a liability incurred or allegedly incurred as an officer of Caltex Australia Limited or a Group company and preparing for, attending or appearing in administrative proceedings or an investigation or inquiry by any regulatory authority or external administrator in respect of or arising out of or connected with any act.

Under the deeds entered into with directors and company secretaries, Caltex Australia Limited (either itself or through a Group company) is required to maintain and pay the premium on an insurance policy covering each director and company secretary (to the extent permitted by law and subject to the prohibitions in sections 199B and 199C of the Corporations Act ). In each case, the obligation continues for a period of seven years after the director or secretary (as the case may be) ceases to be an officer or, if a proceeding or an inquiry has commenced or arises within this seven year period and this has been notified to the company, a further period up to the outcome of the proceedings or inquiry or when the company is satisfied that the proceedings or inquiry will not proceed.

Contract of insurance

Caltex Australia Limited has paid a premium in respect of a contract insuring the directors and officers of Caltex Australia Limited against liabilities.

Details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors’ and officers’ liability insurance has not been disclosed as such disclosure is prohibited under the terms of the contract.

58 Caltex / 2014 annual RePORt

Directors’ Report continued

Rounding of amounts

Caltex Australia Limited is an entity to which ASIC Class Order 98/100 (CO98/100) applies. Amounts in the 2014 Directors’ Report and the 2014 Financial Report have been rounded off to the nearest thousand dollars (unless otherwise stated) in accordance with CO98/100.

The Directors’ Report is made in accordance with a resolution of the Board of Caltex Australia Limited

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EB Bryan AM Chairman

J Segal Managing Director & CEO

Sydney, 23 February 2015

59

Lead Auditor’s Independence Declaration

under section 307C of the Corporations Act 2001

To: The directors of Caltex Australia Limited

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 31 December 2014 there have been:

• (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

• (ii) no contraventions of any applicable code of professional conduct in relation to the audit.

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KPMG Greg Boydell Partner

Sydney, 23 February 2015

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

60 Caltex / 2014 annual RePORt

Directors’ Declaration

The Board of Caltex Australia Limited has declared that:

• (a) the directors have received the declarations required by section 295A of the Corporations Act from the Managing Director & CEO and the Chief Financial Officer for the year ended 31 December 2014

• (b) in the directors’ opinion, the financial statements and notes for the year ended 31 December 2014, and the Remuneration Report, are in accordance with the Corporations Act , including:

• (i) section 296 (compliance with Accounting Standards), and

• (ii) section 297 (true and fair view)

• (c) in the directors’ opinion, there are reasonable grounds to believe that Caltex Australia Limited will be able to pay its debts as and when they become due and payable

• (d) a statement of compliance with International Financial Reporting Standards has been included in note 1(a) to the financial statements, and

• (e) at the date of this declaration, there are reasonable grounds to believe that the companies in the Caltex Australia Group that are parties to the Deed of Cross Guarantee dated 22 December 1992 with Caltex Australia Limited (including companies added by Assumption Deed), as identified in note 22 of the 2014 Financial Report, will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the Deed of Cross Guarantee.

The Directors’ Declaration is made in accordance with a resolution of the Board of Caltex Australia Limited.

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EB Bryan AM Chairman

J Segal Managing Director & CEO

Sydney, 23 February 2015

61

Independent Auditor’s Report to the Members of Caltex Australia Limited

Report on the financial report

We have audited the accompanying financial report of Caltex Australia Limited (the Company), which comprises the consolidated balance sheet as at 31 December 2014, and consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement for the year ended on that date, notes 1 to 32 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement whether due to fraud or error. In note 1, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements , that the financial statements of the Group comply with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Group’s financial position and of its performance.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 .

Auditor’s opinion

In our opinion:

• (a) the financial report of the Group is in accordance with the Corporations Act 2001 , including:

• (i) giving a true and fair view of the Group’s financial position as at 31 December 2014 and of its performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001 .

• (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1.

Report on the remuneration report

We have audited the Remuneration Report included in pages 31 to 55 of the directors’ report for the year ended 31 December 2014. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with auditing standards.

Auditor’s opinion

In our opinion, the remuneration report of Caltex Australia Limited for the year ended 31 December 2014, complies with Section 300A of the Corporations Act 2001 .

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KPMG

==> picture [114 x 51] intentionally omitted <==

Greg Boydell Partner

Sydney, 23 February 2015

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

62 Caltex / 2014 annual RePORt

Consolidated income statement

for the year ended 31 December 2014

thousands of dollars	note 2014 2013
Revenue	2 24,231,200 24,676,383
Replacement cost of goods sold (excluding product duties and taxes and
inventory (losses)/gains)	(16,951,754) (17,912,406)
Product duties and taxes	(5,262,166) (5,126,439)
Inventory (losses)/gains	(515,694) 246,445
Cost ofgoods sold – historical cost	(22,729,614) (22,792,400)
Grossproft	1,501,586 1,883,983
Other income	2 726 44,881
Net foreign exchange losses	(21,730) (77,876)
Supply chain expenses	(328,265) (242,632)
Marketing expenses	(779,759) (731,302)
Other expenses	(231,771) (52,880)
Results from operating activities	140,787 824,174
Finance costs	3 (119,604) (97,675)
Finance income	3 8,234 8,884
net fnance costs	(111,370) (88,791)
Share of netproft of entities accounted for usingthe equitymethod	23(d) 917 158
Proft before income tax expense	30,334 735,541
Income tax expense	4 (7,664) (206,784)
netproft	22,670 528,757
Proft/(loss) attributable to:
Equity holders of the parent entity	19,931 530,028
Non-controllinginterest	2,739 (1,271)
netproft	22,670 528,757
Basic and diluted earnings per share:
Historical cost – centsper share	6 7.4 196.3

The consolidated income statement for the year ended 31 December 2014 includes significant losses of $160,163,000 (2013: $27,763,000 gain). Details of these items are disclosed in note 3.

The consolidated income statement is to be read in conjunction with the notes to the financial statements.

63

Consolidated statement of comprehensive income

for the year ended 31 December 2014

thousands of dollars	note 2014 2013
Proft for the period	22,670 528,757
other comprehensive income
Items that will not be reclassifed to proft or loss:
Actuarial gain on defned beneft plans	18(b) 8,608 30,470
Tax on items that will not be reclassifed toproft or loss	(2,582) (9,141)
total items that will not be reclassifed toproft or loss	6,026 21,329
Items that may be reclassifed subsequently to proft or loss:
Foreign operations – foreign currency translation differences	1,446 –
Effective portion of changes in fair value of cash fow hedges	18,640 88,206
Net change in fair value of cash fow hedges reclassifed to proft or loss	(8,299) (73,549)
Tax on items that maybe reclassifed subsequentlytoproft or loss	(3,103) (4,397)
total items that may be reclassifed subsequently toproft or loss	8,684 10,260
other comprehensive income for theperiod, net of income tax	14,710 31,589
total comprehensive income for theperiod	37,380 560,346
Attributable to:
Equity holders of the parent entity	34,641 561,617
Non-controllinginterest	2,739 (1,271)
total comprehensive income for theperiod	37,380 560,346

The consolidated statement of comprehensive income is to be read in conjunction with the notes to the financial statements.

64 Caltex / 2014 annual RePORt

Consolidated balance sheet

as at 31 December 2014

thousands of dollars	note 2014	2013
Current assets
Cash and cash equivalents	53,122	199,922
Receivables	7 837,672	988,533
Inventories	8 1,118,084	2,027,857
Current tax assets	56,704	–
Other	9 33,754	35,416
total current assets	2,099,336	3,251,728
non-current assets
Receivables	7 3,246	3,048
Investments accounted for using the equity method	23 24,181	23,863
Other investments	10 3	3
Intangibles	11 188,188	144,247
Property, plant and equipment	12 2,363,672	2,125,617
Deferred tax assets	4 442,183	469,890
Employee benefts	18 6,719	–
Other	9 1,006	2,474
total non-current assets	3,029,198	2,769,142
total assets	5,128,534	6,020,870
Current liabilities
Payables	13 1,175,515	1,716,399
Interest bearing liabilities	14 110	71,404
Current tax liabilities	–	55,361
Employee benefts	18 163,200	146,210
Provisions	15 165,075	82,783
total current liabilities	1,503,900	2,072,157
non-current liabilities
Payables	13 7,642	5,657
Interest bearing liabilities	14 692,169	870,921
Employee benefts	18 59,253	90,886
Provisions	15 332,979	384,217
total non-current liabilities	1,092,043	1,351,681
total liabilities	2,595,943	3,423,838
net assets	2,532,591	2,597,032
equity
Issued capital	16 543,415	543,415
Treasury stock	(607)	(610)
Reserves	(3,498)	(10,258)
Retained earnings	1,981,319	2,055,262
Total parent entity interest	2,520,629	2,587,809
Non-controllinginterest	11,962	9,223
total equity	2,532,591	2,597,032

The consolidated balance sheet is to be read in conjunction with the notes to the financial statements.

65

Consolidated statement of changes in equity

for the year ended 31 December 2014

			Foreign		equity
			currency		compen-			non-
	Issued	treasury	translation	Hedging	sation	Retained		controlling	total
thousands of dollars	capital	stock	reserve	reserve	reserve	earnings	total	interest	equity
Balance at 1 January 2013	543,415	20	–	(19,525)	11,870	1,611,905	2,147,685	11,894	2,159,579
total comprehensive
income for the year
Proft/(loss) for the year	–	–	–	–	–	530,028	530,028	(1,271)	528,757
Total other comprehensive
income	–	–	–	10,260	–	21,329	31,589	–	31,589
total comprehensive
income/(expense) for
the year	–	–	–	10,260	–	551,357	561,617	(1,271)	560,346
Foreign currency translation
differences for foreign
operations	–	–	(240)	–	–	–	(240)	–	(240)
Own shares acquired	–	(21,434)	–	–	–	–	(21,434)	–	(21,434)
Shares vested to employees	–	20,804	–	–	(20,804)	–	–	–	–
Expense on equity settled
transactions	–	–	–	–	8,181	–	8,181	–	8,181
Dividends to shareholders	–	–	–	–	–	(108,000)	(108,000)	(1,400)	(109,400)
Balance at
31 December 2013	543,415	(610)	(240)	(9,265)	(753)	2,055,262	2,587,809	9,223	2,597,032
Balance at 1 January 2014	543,415	(610)	(240)	(9,265)	(753)	**2,055,262 **	2,587,809	**9,223 **	2,597,032
total comprehensive
income for the year
Proft for the year	–	–	–	–	–	19,931	19,931	2,739	22,670
Total other comprehensive
income	–	–	1,446	7,238	–	6,026	14,710	–	14,710
total comprehensive
income for the year	–	–	1,446	7,238	–	25,957	34,641	2,739	37,380
Own shares acquired	–	(8,971)	–	–	–	–	(8,971)	–	(8,971)
Shares vested to employees	–	8,974	–	–	(8,974)	–	–	–	–
Expense on equity settled
transactions	–	–	–	–	7,050	–	7,050	–	7,050
Dividends to shareholders	–	–	–	–	–	(99,900)	(99,900)	–	(99,900)
Balance at
31 December 2014	543,415	(607)	1,206	(2,027)	**(2,677) **	**1,981,319 **	2,520,629	**11,962 **	2,532,591

The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements.

66 Caltex / 2014 annual RePORt

Consolidated cash flow statement

for the year ended 31 December 2014

thousands of dollars	note 2014 2013
Cash fows from operating activities
Receipts from customers	27,789,449 28,354,086
Payments to suppliers, employees and governments	(26,925,657) (27,552,535)
Dividends and disbursements received	600 2,550
Interest received	9,470 7,807
Interest and other fnance costs paid	(118,338) (87,391)
Income taxespaid	(93,955) (116,577)
net operating cash infows	25(b) 661,569 607,940
Cash fows from investing activities
Purchase of assets and liabilities through business combination	26 (86,466) (42,967)
Purchases of property, plant and equipment	(372,116) (481,582)
Major cyclical maintenance	(19,120) (36,173)
Purchases of intangibles	(23,337) (8,992)
Netproceeds from sale ofproperty, plant and equipment	25,290 62,545
net investing cash outfows	(475,749) (507,169)
Cash fows from fnancing activities
Proceeds from borrowings	6,811,500 4,237,000
Repayments of borrowings	(7,044,020) (4,237,000)
Repayment of fnance lease principal	(200) (1,378)
Dividends paid to non-controlling interest	– (1,400)
Dividendspaid	(99,900) (108,000)
net fnancing cash outfows	(332,620) (110,778)
Net increase in cash and cash equivalents	(146,800) (10,007)
Cash and cash equivalents at the beginningof theyear	199,922 209,929
Cash and cash equivalents at the end of theyear	25(a) 53,122 199,922

The consolidated cash flow statement is to be read in conjunction with the notes to the financial statements.

67

Notes to the financial statements for the year ended 31 December 2014

1. significant accounting policies

Caltex Australia Limited (the company) is a company limited by shares, incorporated and domiciled in Australia. The shares of Caltex Australia Limited are publicly traded on the Australian Securities Exchange. The consolidated financial statements for the year ended 31 December 2014 comprise the company and its controlled entities (together referred to as the Group) and the Group’s interest in associates and jointly controlled entities. The Group is a for-profit entity and is primarily involved in the purchase, refining, distribution and marketing of petroleum products and the operation of convenience stores. The consolidated financial statements were approved by the Board and authorised for issue on 23 February 2015.

(a) Statement of compliance and basis of preparation

The financial report has been prepared as a general purpose financial report and complies with the requirements of the Corporations Act , and Australian Accounting Standards (AASBs). The consolidated financial report complies with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB).

The consolidated financial report is prepared on the historical cost basis except for the following material items in the consolidated balance sheet:

• derivative financial instruments are measured at fair value, and

• the defined benefit liability is recognised as the net total of the plan assets, plus unrecognised past service cost less the present value of the defined benefit obligation.

The consolidated financial report is presented in Australian dollars, which is the Group’s functional currency.

The company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the consolidated financial report and Directors’ Report have been rounded to the nearest thousand dollars, unless otherwise stated.

The preparation of a consolidated financial report in conformity with AASBs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. These accounting policies have been consistently applied by each entity in the Group.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and future periods if the revision affects both current and future periods.

Judgements made by management in the application of AASBs that have a significant effect on the consolidated financial report and estimates with a significant risk of material adjustment in the next year are discussed in note 1(c).

The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial report by the Group, except where stated.

Changes in accounting policies

The Group has adopted all the mandatory amended Accounting Standards issued that are relevant to its operations and effective for the current reporting period. Of the Accounting Standards that were amended, the following had an impact upon Caltex’s financial statements:

AASB 124 Related Party Disclosures – AASB 124 was amended to remove the individual key management personnel disclosure requirements for all disclosing entities in relation to equity holdings, loans and other related party transactions. This amendment has resulted in reduced disclosures in the Group’s financial statements.

(b) Basis of consolidation

Subsidiaries

Subsidiaries are those entities controlled by the Group. Control exists when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns from its involvement with the entity and through its power over the entity.

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Interests in associates and jointly controlled entities

Associates are those entities over whose financial and operating policies the Group has significant influence, but not control. The consolidated financial statements include the Group’s share of the total recognised gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to nil and recognition of future losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

In the consolidated financial statements, investments in joint ventures are accounted for using equity accounting principles. Investments in joint ventures are carried at the lower of the equity accounted amount and recoverable amount.

The Group’s share of the joint venture’s net profit or loss is recognised in the consolidated income statement from the date joint control commences until the date joint control ceases. Other movements in reserves are recognised directly in the consolidated reserves.

Joint operations

The interests of the Group in unincorporated joint operations are brought to account by recognising in its financial statements the assets it controls and the liabilities that it incurs, and the expenses it incurs and its share of income that it earns from the sale of goods or services by the joint operation.

68 Caltex / 2014 annual RePORt

Notes to the financial statements continued

for the year ended 31 December 2014

1. significant accounting policies continued

(b) Basis of consolidation continued

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates and jointly controlled entities are eliminated to the extent of the Group’s interest in the entity. Unrealised losses arising from transactions with associates and jointly controlled entities are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(c) Accounting estimates and judgements

Significant areas of estimation, uncertainty and critical judgements in applying accounting policies include:

• note 1(n) contains information about the assumptions and the risk factors relating to impairment

• in assessing the carrying value of property, plant and equipment, management considers long-term assumptions relating to key external factors including crude oil prices, foreign exchange rates and Singapore refiner margins. Any changes in these assumptions can have a material impact on the carrying value

• in note 1(j), explanation is given of the foreign exchange, interest rate and commodity price exposures of the Group and the risk in relation to foreign exchange, interest rate and commodity price movements. Refer to note 17 for further detail

• note 1(w) provides key sources of estimation, uncertainty and assumptions used in regard to estimation of provisions. Refer to note 15 for further detail, and

• note 18(b) contains information about the principal actuarial assumptions used in determining pension obligations for the Group’s defined benefit plan.

(d) Revenue

Sale of goods

Revenue from the sale of goods in the ordinary course of activities is measured at the fair value of consideration received or receivable, net of rebates, discounts and allowances.

Gross sales revenue excludes amounts collected on behalf of third parties such as goods and services tax (GST). Sales revenue is recognised when the significant risks and rewards of ownership have been transferred to the customer, which is the date products are delivered to the customer.

Other revenue

Dividend income is recognised at the date the right to receive payment is established.

Rental income from leased sites is recognised in the consolidated income statement on a straight-line basis over the term of the lease. Franchise fee income is recognised in accordance with the substance of the agreement. Royalties are recognised as they accrue in accordance with the substance of the agreement.

Other income

Profit on disposal of property assets

The profit on disposal of property assets is brought to account at the date a contract of sale is settled, because it is at this time that:

• the costs incurred or to be incurred in respect of the sale can be measured reliably, and

• the significant risks and rewards of ownership of the property have been transferred to the buyer.

Assets that are held for sale are carried at the lower of the net book value and fair value less cost to sell.

(e) Cost of goods sold measured on a replacement cost basis

Cost of goods sold measured on a replacement cost basis excludes the effect of inventory gains and losses, including the impact of exchange rate movements. Inventory gains or losses arise due to movements in the landed price of crude oil, and represent the difference between the actual historic cost of sales and the current replacement value of that inventory.

The net inventory gain or loss is adjusted to reflect the impact of contractual revenue lags.

(f) Product duties and taxes

Product duties and taxes are included in cost of goods sold.

Product duties and taxes include fuel excise, which is a cents per litre impost on products used as fuels, and the product stewardship levy, which is a cents per litre impost on all lubricant products sold.

(g) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the item of expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the consolidated balance sheet. Cash flows are included in the consolidated cash flow statement on a gross basis. The GST components of cash flows arising from investing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(h) Net finance costs

Net finance costs include:

• interest income that is recognised on a time proportionate basis taking into account the effective yield on the financial asset

• interest payable on borrowings calculated using the effective interest rate method

• finance charges in respect of finance leases

• losses on hedging instruments that are recognised in profit or loss

• exchange differences arising from foreign currency borrowing to the extent that they are regarded as an adjustment to interest costs, and

• differences relating to the unwinding of the discount of assets and liabilities measured at amortised cost.

69

Finance costs are recognised as incurred unless they relate to qualifying assets. Qualifying assets are assets which take more than 12 months to get ready for their intended use or sale. In these circumstances, finance costs are capitalised to the cost of the assets.

Where funds are borrowed specifically for the acquisition, construction or production of a qualifying asset, the amounts of finance costs capitalised are those incurred in relation to that borrowing, net of any interest earned on those borrowings. Where funds are borrowed generally, finance costs are capitalised using a weighted average capitalisation rate.

(i) Foreign currencies

Foreign currency transactions

Foreign currency transactions are recorded, on initial recognition, in Australian dollars by applying the exchange rate at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate applicable for that date. Foreign exchange differences arising on translation are recognised in the consolidated income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined.

Foreign operations

The assets and liabilities of foreign operations are translated to Australian dollars at the foreign exchange rates applicable at the balance sheet date. The revenues and expenses of foreign operations are translated to Australian dollars at a rate that approximates the exchange rates at the dates of the transactions. Equity items are translated at historical rates.

Foreign currency differences arising on translation are recognised directly in the foreign currency translation reserve (FCTR), a separate component of equity.

Foreign exchange gains and losses arising from a monetary item receivable from or payable to, a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of the net investment in a foreign operation and are recognised directly in equity in the FCTR.

When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

(j) Derivative financial instruments

The Group is subject to interest rate, foreign currency and commodity price risks. The Group may use interest rate instruments, foreign exchange instruments, cross currency swaps, crude swap contracts and finished product swap contracts to hedge these risks.

The Group does not enter into derivative financial instrument transactions for trading or speculative purposes. However, financial instruments entered into to hedge an underlying exposure which does not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised at fair value. The gain or loss on subsequent remeasurement is recognised immediately in the consolidated income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.

Interest rate instruments

The fair value of interest rate swap contracts is the estimated amount that the Group would receive or pay to terminate the swap at balance date taking into account current interest rates and credit adjustments.

Foreign exchange contracts

The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles as at reporting date.

The fair value of foreign currency option contracts is determined using standard valuation techniques.

Spot foreign exchange contracts are recorded at fair value, being the quoted market price at balance date.

Crude and finished product swap contracts

The fair value of crude and product swap contracts is calculated by reference to market prices for contracts with similar maturity profiles at reporting date.

Hedging

Cash flow hedges

Interest rate instruments, forward exchange contracts, foreign currency options and crude and finished product swap contracts are cash flow hedges. Cross currency swaps may be cash flow hedges. Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity. When the anticipated transaction results in the recognition of a non-financial asset or non-financial liability, the cumulative gain or loss is removed from equity and included in the initial measurement of the non-financial asset or non-financial liability. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains and losses that were recognised directly in equity are reclassified into profit or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss (i.e. when interest income or expense is recognised).

70 Caltex / 2014 annual RePORt

Notes to the financial statements continued

for the year ended 31 December 2014

1. significant accounting policies continued

(j) Derivative financial instruments continued

For cash flow hedges, other than those covered by the preceding two policy statements, the associated cumulative gain or loss is removed from equity and recognised in the consolidated income statement in the same period or periods during which the hedged forecast transaction affects profit or loss. The ineffective part of any gain or loss in the carrying amount of a cash flow hedge is recognised in the consolidated income statement immediately.

When a hedging instrument or hedge relationship is terminated, but the hedged transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised in the consolidated income statement immediately.

Fair value hedges

A change in the carrying amount of a fair value hedge is recognised in the consolidated income statement, together with the change to the carrying amount of the hedged item.

The Group formally documents all relationships between hedging instruments and hedged items, as well as risk management objectives and strategies for undertaking various hedge transactions. When effectiveness ceases, hedge accounting is discontinued.

Cross currency swaps

The Group has entered into cross currency swaps with matched terms to the underlying US notes. These matched terms include principal, margin and payment terms. These contracts are initially designated as fair value hedges for the swap of the benchmark US and Australian interest rates (a cross currency swap excluding margins) and cash flow hedges for the swap of the fixed US and Australian margin. Initial designation documents also provide scope for interest rate swaps to be entered into over the life of the cross currency swap.

On entering into the interest rate swap, the initial fair value hedge is redesignated as a combined cross currency swap and interest rate swap and accounted for as a cash flow hedge.

Fair value measurement

AASB 13 Fair Value Measurement requires inclusion of a measure for credit risk in the calculations of assets and liabilities recorded at fair value. This has not had a significant impact on the fair value of the Group’s assets and liabilities for the current or comparative financial year.

(k) Income tax

Income tax expense comprises current and deferred tax. Income tax is recognised in the consolidated income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustments to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries, associates and jointly controlled entities to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Tax consolidation

Caltex Australia Limited, as the head company, recognises all current tax balances relating to its wholly owned Australian resident entities included in the tax-consolidated group (TCG).

Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the TCG are recognised in the separate financial statements of the members of the TCG using the “group allocation” approach.

Current tax expense/income is allocated based on the net profit/loss before tax of each separate member of the TCG adjusted for permanent differences and intra-group dividends, tax-effected using tax rates enacted or substantially enacted at the balance sheet date.

Any current tax liabilities and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by the head company in the TCG and are recognised as amounts payable to/receivable from other entities in the TCG in conjunction with any tax funding arrangement amounts.

The Group recognises deferred tax assets arising from unused tax losses of the TCG to the extent that it is probable that future taxable profits of the TCG will be available against which the asset can be utilised.

71

Nature of tax funding arrangements and tax sharing arrangements

The head entity, in conjunction with the other members of the TCG, has entered into a tax funding arrangement which sets out the funding obligations of members of the TCG in respect of tax amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability/(asset) assumed by the head entity and any tax loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity payable/(receivable) equal in amount to the tax liability/(asset) assumed. The inter-entity payables/(receivables) are at call.

Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities.

The head entity, in conjunction with the other members of the TCG, has also entered into a tax sharing agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote.

(l) Receivables

Receivables are initially recognised at fair value plus any directly attributable transaction costs and subsequently measured at amortised cost less impairment losses.

Impairment testing is performed at reporting date. A provision for impairment losses is raised if there is a specific indicator that an impairment loss on receivables has been incurred.

An impairment loss is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

(m) Inventories

Inventories are measured at the lower of cost and net realisable value. Cost is based on the first in first out (FIFO) principle and includes direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure incurred in acquiring the inventories and bringing them into the existing location and condition.

The amount of any write-down or loss of inventory is recognised as an expense in the period it is incurred.

Inventory write-downs may be reversed when net realisable value increases subsequent to initial write-down. The reversal is limited to the original write-down amount.

(n) Impairment

The carrying amounts of the Group’s assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is an indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the consolidated income statement, unless an asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through the consolidated income statement. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

Calculation of recoverable amount

The recoverable amount of the Group’s investments in held to maturity securities and receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial assets).

The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Reversals of impairment

An impairment loss in respect of a held to maturity security or receivable carried at amortised cost is reversed if the subsequent increase in the recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(o) Property, plant and equipment

Owned assets

Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of production overheads.

The cost of property, plant and equipment includes the cost of decommissioning and restoration costs at the end of their economic lives if a present legal or constructive obligation exists. More details of how this cost is estimated and recognised is contained in note 1(w).

Assessment of impairment is made in accordance with the impairment policy in note 1(n).

72 Caltex / 2014 annual RePORt

Notes to the financial statements continued

for the year ended 31 December 2014

1. significant accounting policies continued

(o) Property, plant and equipment continued

Leased assets

Leases of property, plant and equipment under which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Other leases are classified as operating leases.

Finance leases

Assets of the Group acquired under finance leases are capitalised and included in property, plant and equipment at the lesser of fair value or present value of the minimum lease payments with a corresponding finance lease liability. Contingent rentals are written off as an expense of the period in which they are incurred. Capitalised lease assets are depreciated over the shorter of the lease term and its useful life.

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The interest components of lease payments are charged to the consolidated income statement to reflect a constant rate of interest on the remaining balance of the liability for each accounting period.

Operating leases

Payments made under operating leases are charged against net profit or loss in equal instalments over the accounting period covered by the lease term, except where an alternative basis is more representative of the benefits to be derived from the leased property. Contingent rentals are recognised as an expense in the period in which they are incurred. Lease incentives received are recognised in the consolidated income statement as an integral part of the total lease expense on a straight-line basis over the lease term.

Subsequent expenditure

Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including cyclical maintenance, is capitalised. Other subsequent expenditure is capitalised only when it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the item can be reliably measured. All other expenditure is recognised in the consolidated income statement as an expense as incurred.

Major cyclical maintenance

Major cyclical maintenance expenditure is separately capitalised as an asset component to the extent that it is probable that future economic benefits, in excess of the originally assessed standard of performance, will eventuate. All other such costs are expensed as incurred. Capitalised cyclical maintenance expenditure is depreciated over the lesser of the additional useful life of the asset or the period until the next major cyclical maintenance is scheduled to occur.

Depreciation

Items of property, plant and equipment, including buildings and leasehold property but excluding freehold land, are depreciated using the straight-line method over their expected useful lives. Leasehold improvements are amortised over the shorter of the lease term or useful life.

The depreciation rates used, in the current and prior year, for each class of asset are as follows:

Freehold buildings	2%
Leasehold property	2 – 10%
Plant and equipment	3 – 25%
Leased plant and equipment	3 – 25%

Assets are depreciated from the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and held ready for use.

(p) Intangible assets

Goodwill

Goodwill arising on the acquisition of subsidiaries is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment (see note 1(n)). In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment in the associate.

Negative goodwill arising on an acquisition is recognised directly in the consolidated income statement.

Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the consolidated income statement as an expense as incurred.

Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible, future economic benefits are probable and the Group has sufficient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditure is recognised in the consolidated income statement as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses (see note 1(n)).

Other intangible assets

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses (see note 1(n)).

Subsequent expenditure

Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it related. All other expenditure is expensed as incurred.

Amortisation

Amortisation is charged to the consolidated income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill and intangible assets with an indefinite useful life are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives in the current and comparative periods are reflected by the following amortisation percentages:

73

Software development	5 – 20%
Software not integrated with hardware	17 – 20%
Rights and licences	6 – 10%

(q) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statement.

(r) Payables

Payables are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the Group. Trade accounts payable are normally settled within 30 days.

Payables are initially recognised at fair value less any directly attributable transaction costs and subsequently measured at amortised cost.

(s) Interest bearing liabilities

Interest bearing bank loans

Interest bearing bank loans are recognised when issued at fair value, less transaction costs, using the amortised cost method. Any difference between the amortised cost and the principal value is recognised in the consolidated income statement over the period of the interest bearing liability on an effective interest basis.

Domestic medium term and subordinated notes

These notes are recognised when issued at fair value, less transaction costs, using the amortised cost method. Any difference between the amortised cost and the principal value is recognised in the consolidated income statement over the period of the interest bearing liability on an effective interest basis.

US notes

US notes hedged by cross currency swaps are initially recognised at fair value less attributable transaction costs. Subsequent to initial recognition, these US notes are accounted for using fair value hedge accounting to the extent that an effective hedge exists (see note 1(j)).

Where cross currency swaps are redesignated as cash flow hedges, the hedged US notes are no longer subject to a fair value adjustment. Any accumulated gain/loss capitalised prior to the redesignation will be amortised over the remaining life of the US notes on an effective interest basis.

US notes issued in Australian dollars are recognised when issued at fair value, less transaction costs, using the amortised cost method. Any difference between the amortised cost and the principal value is recognised in the consolidated income statement over the period of the interest bearing liability on an effective interest basis.

(t) Employee benefits

Wages and salaries

The provision for employee benefits to wages and salaries represents the amount which the Group has a present obligation to pay resulting from employees’ services provided up to the balance date.

Annual leave, long service leave and retirement benefits

The provisions for employee benefits to annual leave, long service leave and retirement benefits which are expected to be settled within 12 months represent the undiscounted amount of the estimated future cash outflows to be made by the employer resulting from employees’ services provided up to the balance date. Provisions for employee benefits which are not expected to be settled within 12 months are calculated using expected future increases in wage and salary rates, including related oncosts, and expected settlement dates based on turnover history and are discounted using the rates attaching to national government securities at balance date, which most closely match the terms of maturity of the related liabilities.

Termination benefits

Termination benefits are recognised as an expense when the Group is demonstrably committed to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value.

Superannuation

The Group contributes to several defined contribution and defined benefit superannuation plans.

Defined contribution plans

Obligations for contributions to defined contribution plans are recognised as an expense in the consolidated income statement as incurred.

Defined benefit plans

The Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine the present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the beginning of the annual reporting period on government bonds that have maturity dates approximating the terms of the Group’s obligations. The calculation is performed by a qualified actuary using the projected unit credit method.

Changes in the net defined benefit liability, including all actuarial gains and losses that arise in calculating the Group’s obligation in respect of the plan, are recognised in other comprehensive income when they occur. All other expenses relating to the defined benefit plans are recognised as an expense in the consolidated income statement. The Group recognises gains and losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs.

When the calculation results in plan assets exceeding liabilities to the Group, the recognised asset is limited to the present value of any future refunds from the plan or reductions in future contributions to the plan.

74 Caltex / 2014 annual RePORt

Notes to the financial statements continued

for the year ended 31 December 2014

1. significant accounting policies continued

(u) Share based payments

The Group provides benefits to senior executives in the form of share based payment transactions, whereby senior executives render services in exchange for shares or rights over shares (equity settled transactions).

The cost of the equity settled transactions with employees is measured by reference to the fair value at the date at which they are granted.

The cost of equity settled transactions is recognised as an expense over the specified service period and ending on the date on which the relevant employees become fully entitled to the award (vesting date) with a corresponding increase in equity. The cumulative expense recognised for equity settled transactions at each reporting date until vesting date reflects the extent to which the vesting period has expired.

In the Group’s financial statements the transactions of the company sponsored employee share plan trust are treated as being executed directly by the Group (an external third party acts as the Group’s agent). Accordingly, shares held by the third party are recognised as treasury stock and deducted from equity.

The grant date fair value of share based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and nonmarket performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share based payment awards with non-vesting conditions, the grant date fair value of the share based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

(v) Environmental costs

Environmental costs related to known environmental obligations under existing law are accrued when they can be reasonably estimated. Accruals are based on best available information and are adjusted as further information develops or circumstances change. Environmental provisions are accounted for in accordance with the provisions accounting policy.

Costs of compliance with environmental regulations and ongoing maintenance and monitoring are expensed as incurred. Recoveries from third parties are recorded as assets when their realisation is virtually certain.

(w) Provisions

A provision is recognised when there is a present legal or constructive obligation as a result of a past event that can be measured reliably and it is probable that a future sacrifice of economic benefits will be required to settle the obligation, the timing or amount of which is uncertain.

If the effect is material, a provision is determined by discounting the expected future cash flows (adjusted for expected future risks) required to settle the obligation at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Subsequent accretion to the amount of a provision due to unwinding of the discount is recognised as a finance cost.

Estimates of the amount of an obligation are based on current legal and constructive obligations, technology and price levels. Actual outflows can differ from estimates due to changes in laws, regulations, public expectations, technology, prices and conditions and can take place many years in the future. The carrying amounts of provisions and liabilities are regularly reviewed and adjusted to take account of such change.

In general, the further in the future that a cash outflow for a liability is expected to occur, the greater the degree of uncertainty around the amount and timing of that cash outflow. Examples of cash outflows that are expected to occur a number of years in the future and, as a result, about which there is uncertainty of the amounts involved, include asset decommissioning and restoration obligations and employee pension obligations.

A change in the estimate of a recognised provision or liability would impact the consolidated income statement, with the exception of decommissioning and certain restoration costs that relate to the initial construction of an asset, which would be accounted for on a prospective basis.

Restoration and remediation

Provisions relating to current and future restoration and remediation activities are recognised as liabilities when a legal or constructive obligation arises.

The provision is the best estimate of the present value of the expenditure to settle the obligation at the reporting date. These costs are reviewed annually and any changes are reflected in the provision at the end of the reporting period through the consolidated income statement.

The ultimate cost of restoration and remediation is uncertain and cost estimates can vary in response to many factors including changes to the relevant legal and environmental requirements, the emergence of new techniques or experience at other sites and uncertainty as to the remaining life of existing sites.

Asset retirements

Costs for the future dismantling and removal of assets, and restoration of the site on which the assets are located, are provided for and capitalised upon initial construction of the asset, where an obligation to incur such costs arises. The present value of the expected future cash flows required to settle these obligations is capitalised and depreciated over the useful life of the asset. Subsequent accretion to the amount of a provision due to unwinding of the discount is recognised as a finance cost. A change in estimate of the provision is added to or deducted from the cost of the related asset in the period of the change, to the extent that any amount of deduction does not exceed the carrying amount of the asset. Any deduction in excess of the carrying amount is recognised in the consolidated income statement immediately. If an adjustment results in an addition to the cost of the related asset, consideration will be given to whether an indication of impairment exists and the impairment policy will be applied.

75

Dividends

A provision for dividends payable is recognised in the reporting period in which the dividends are declared, for the entire undistributed amount.

Restructuring and employee termination benefits

Provisions for restructuring or termination benefits are only recognised when a detailed plan has been approved and the restructuring or termination benefits have either commenced or been publicly announced, or when firm contracts related to the restructuring or termination benefits have been entered into. The liabilities for termination benefits have been included in the provision for employee and director benefits.

(x) Segment reporting

The Group determines and presents operating segments based on the information that internally is provided to the Group’s chief operating decision maker.

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available.

Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

(y) Carbon policy

The Group accounts for free carbon permits received under the Clean Energy Act 2011 at nominal value, i.e. nil value. These permits are surrendered to satisfy the Group’s emissions liability each period. If the Group’s carbon emissions are under/(over) the carbon permits received, other revenue/ (other expenses) is recognised at fair value.

(z) New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2015, and have not been applied in preparing these consolidated financial statements. None of these are expected to have a significant effect on the consolidated financial statements of the Group, except for:

• AASB 9 Financial Instruments, which becomes mandatory for the Group’s 2018 consolidated financial statements and could change the classification and measurement of financial assets and liabilities. The Group does not plan to adopt this standard early and the extent of the impact has not been determined, and

• AASB 15 Revenue from Contracts with Customers, which becomes mandatory for the Group’s 2017 consolidated financial statements and could change the basis for the recognition of revenue. The Group does not plan to adopt this standard early and the extent of the impact has not been determined.

Inter-entity sales are recognised based on an internally set transfer price. Sales between segments are based on arm’s length principles appropriate to reflect prevailing market pricing structures at that time. Where possible, relevant Import Parity Pricing is used to determine arm’s length pricing between the two segments. Revenue from external parties reported to the chief operating decision maker is measured in a manner consistent with that in the consolidated income statement. For the purposes of reporting to the chief operating decision maker, non-fuel income is included on a net basis and is not presented in gross revenue.

Income taxes and net financial income are dealt with at a Group level and not within the reportable segments.

The performance of each reportable segment is measured based on segment replacement cost of sales operating profit before interest and income tax excluding significant items. These measurement bases exclude the impact of the rise or fall in oil prices (a key external factor) and present a clearer picture of the reportable segments’ underlying business performance. Segment replacement cost of sales operating profit before interest and income tax excluding significant items is measured as management believes that such information is most useful in evaluating the performance of the differing internal business units relative to each other, and other like business units in the industry. Segment replacement cost operating profit excluding significant items is also used to assess the performance of each business unit against internal performance measures.

76 Caltex / 2014 annual RePORt

Notes to the financial statements

continued

for the year ended 31 December 2014

2. Revenue and other income

2. Revenue and other income
thousands of dollars	2014	2013
Revenue
Sale of goods	23,878,180	24,352,188
Other revenue
Rental income	71,671	64,232
Royalties and franchise income	106,617	108,000
Transaction and merchant fees	99,403	86,351
Other	75,329	65,612
Total other revenue	353,020	324,195
total revenue	24,231,200	24,676,383
other income
Netgain on sale ofproperty, plant and equipment	726	44,881

3. Costs and expenses

3. Costs and expenses
thousands of dollars 2014	2013
Interest expense 108,793	96,924
Finance charges on capitalised leases 29	43
Unwinding of discount 25,475	7,946
Less: capitalised fnance costs (14,693)	(7,238)
Finance costs 119,604	97,675
Finance income (8,234)	(8,884)
Net fnance costs 111,370	88,791
Depreciation and amortisation Depreciation of: Buildings 12,993	10,200
Plant and equipment 162,179	136,437
175,172	146,637
Amortisation of: Leasehold property 9,704	8,052
Leased plant and equipment 243	390
Intangibles 17,866	10,538
27,813	18,980
Total depreciation and amortisation 202,985	165,617
selected expenses Totalpersonnel expenses 396,745	425,148

Significant items

During 2014, the Group incurred significant items before tax totalling a loss of $160,163,000 that have been recognised in the income statement. These items relate to the Group cost and efficiency review project and include consulting fees ($25,065,000), redundancy costs ($53,814,000), contract cancellation costs ($12,000,000), interest expense ($20,311,000), foreign exchange gains ($4,755,000) and accelerated depreciation ($22,773,000) and environmental liabilities ($30,955,000).

During 2013, the Group incurred significant items totalling a gain of $27,763,000, that have been recognised in the income statement. These items relate to a gain on the sale of the bitumen business, net of costs relating to acquisitions and disposals ($38,766,000) and the net adjustment to provisions ($11,003,000) relating to the closure of the Kurnell refinery.

Of this total $160,163,000 significant items (2013: $27,763,000), $144,607,000 is included in Other expenses (2013: $3,845,000), $20,311,000 is included in Finance costs (2013: nil) and $4,755,000 is included in Foreign exchange gains (2013: nil). In addition to the above, 2013 significant items of $42,611,000 were included in Other income (2014: nil) and $11,003,000 in Supply Chain expenses (2014: nil).

77

4. Income tax expense

(a) Recognised in the income statement

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----- Start of picture text -----

||||
|---|---|---|
|thousands of dollars|2014|2013|
|Current tax expense:|
|Current year|(17,492)|164,726|
|Adjustments for prior years|(618)|(2,650)|
|(18,110)|162,076|
|Deferred tax benefit:|
|Origination and reversal of temporary differences|102,212|44,708|
|Benefit of tax losses recognised|(76,438)|–|
|25,774|44,708|
|total income tax expense in the income statement|7,664|206,784|
|(b) Reconciliation between income tax expense and profit before|
|income tax expense|
|Profit before income tax expense|30,334|735,541|
|Income tax using the domestic corporate tax rate of 30% (2013: 30%)|9,100|220,662|
|Effect of tax rates in foreign jurisdictions|(885)|(319)|
|Increase/(decrease) in income tax expense due to:|
|Imputation gross-up on dividends received|–|193|
|Share of net profit of associated entities|(275)|(47)|
|Capital gains tax|–|355|
|Capital tax losses utilised for which no deferred tax asset was recognised|(2,305)|(8,286)|
|Research and development allowances|(333)|(500)|
|–|
|Franking credits on dividends received|(193)|
|Share based payments|(39)|(4,041)|
|Other|3,019|1,610|
|Income tax over provided in prior years|(618)|(2,650)|
|Total income tax expense in the income statement|7,664|206,784|
|(c) Deferred tax recognised directly in equity|
|Related to actuarial gains|(2,582)|(9,141)|
|Related to cash flow hedges|(2,641)|(3,208)|
|Related to interest rate swaps|(462)|(1,189)|
|(5,685)|(13,538)|

----- End of picture text -----

78 Caltex / 2014 annual RePORt

Notes to the financial statements

continued

for the year ended 31 December 2014

4. Income tax expense continued

(d) Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

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----- Start of picture text -----

Assets LIABILItIes net
thousands of dollars 2014 2013 2014 2013 2014 2013
Receivables 1,853 1,558 – – 1,853 1,558
Inventories – – (1,507) (4,818) (1,507) (4,818)
– –
Property, plant and equipment and intangibles 124,882 252,025 124,882 252,025
– –
Payables 13,539 9,660 13,539 9,660
– –
Interest bearing liabilities 8,257 3,973 8,257 3,973
Provisions 221,032 211,229 – – 221,032 211,229
– – – –
Tax value of recognised tax losses 76,438 76,438
Other – – (2,311) (3,737) (2,311) (3,737)
net tax assets/(liabilities) 446,001 478,445 (3,818) (8,555) 442,183 469,890
----- End of picture text -----

(e) Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items:

thousands of dollars	2014	2013
Capital tax losses	148,958	150,203

Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which these benefits can be utilised by the Group.

(f) Movement in temporary differences during the year

thousands of dollars	Balance at 1 jan 14 Recognised in income	Recognised in equity	Acquired in business combination	Balance at 31 Dec 14
Receivables	1,558 295	–	–	1,853
Inventories	(4,818) 3,311	–	–	(1,507)
Property, plant and equipment and intangibles	252,025 (128,371)	–	1,228	124,882
Payables	9,660 3,879	–	–	13,539
Interest bearing liabilities	3,973 7,387	(3,103)	–	8,257
Provisions	211,229 9,861	(2,582)	2,524	221,032
Tax value of recognised tax losses	– 76,438	–	–	76,438
Other	(3,737) 1,426	–	–	(2,311)
	469,890 (25,774)	(5,685)	3,752	442,183
	Balance at	Recognised	Recognised	Balance at
thousands of dollars	1 jan 13	in income	in equity	31 Dec 13
Receivables	1,584	(26)	–	1,558
Inventories	(1,814)	(3,004)	–	(4,818)
Property, plant and equipment and intangibles	286,192	(34,167)	–	252,025
Payables	3,821	5,839	–	9,660
Interest bearing liabilities	8,746	(376)	(4,397)	3,973
Provisions	231,156	(10,786)	(9,141)	211,229
Other	(1,549)	(2,188)	–	(3,737)
	528,136	(44,708)	(13,538)	469,890

79

5. Dividends

(a) Dividends declared or paid

Dividends recognised in the current year by the company are:

				total
		Franked/	Cents per	amount
	Date of payment	unfranked	share	$’000
2014
Interim 2014	1 october 2014	Franked	20	54,000
Final 2013	3 April 2014	Franked	17	45,900
Total amount			37	99,900
2013
Interim 2013	2 October 2013	Franked	17	45,900
Final 2012	4 April 2013	Franked	23	62,100
Total amount			40	108,000

The dividends paid during 2014 were fully franked at the rate of 30%.

Subsequent events

Since 31 December 2014, the directors declared the following dividend. The dividend has not been provided for and there are no income tax consequences for the Group in relation to 2014.

Final 2014 2 April 2015 Franked 50 135,000

The financial effect of this final dividend has not been reflected in the financial statements for the year ended 31 December 2014 and will be recognised in subsequent financial reports.

and will be recognised in subsequent fnancial reports.
thousands of dollars	2014	2013
(b) Dividend franking account
30% franking credits available to shareholders of Caltex Australia Limited for subsequent
fnancialyears	1,125,403	1,187,013

The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends.

The impact on the dividend franking account of dividends proposed after the balance sheet date but not recognised as a liability, is to reduce the balance by $57,857,143 (2013: $19,671,429).

In accordance with the tax consolidation legislation, Caltex Australia Limited as the head entity in the tax-consolidated group has also assumed the benefit of $1,125,403,000 (2013: $1,187,013,000) in franking credits.

6. Basic and diluted earnings per share

6. Basic and diluted earnings per share
	2014	2013
Historical cost – centsper share	7.4	196.3
Replacement cost of sales operating proft(RCOP)excludingsignifcant items – centsper share	182.6	122.8

The calculation of historical cost basic earnings per share for the year ended 31 December 2014 was based on the net profit attributable to ordinary shareholders of the parent entity of $19,931,000 (2013: $530,028,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2014 of 270 million shares (2013: 270 million shares).

The calculation of RCOP excluding significant items basic earnings per share for the year ended 31 December 2014 was based on the net RCOP profit attributable to ordinary shareholders of the parent entity and a weighted average number of ordinary shares outstanding as disclosed during the year ended 31 December 2014 of 270 million shares (2013: 270 million shares). RCOP is calculated by adjusting the statutory profit for significant items and inventory gains and losses as follows:

80 Caltex / 2014 annual RePORt

Notes to the financial statements

continued

for the year ended 31 December 2014

6. Basic and diluted earnings per share continued

6. Basic and diluted earnings per sharecontinued
thousands of dollars	2014	2013
Net proft after tax attributable to equity holders of the parent entity	19,931	530,028
Adjust: Signifcant items losses/(gains) after tax	112,114	(25,904)
Adjust: Inventorylosses/(gains)after tax	360,986	(172,512)
Replacement cost of sales operating proft(RCOP)excludingsignifcant items after tax	493,031	331,612

There are no dilutive potential ordinary shares, and therefore diluted earnings per share equals basic earnings per share.

7. Receivables

7. Receivables
thousands of dollars	2014	2013
Current
Trade debtors	758,165	901,494
Allowance for impairment	(5,951)	(4,809)
	752,214	896,685
Associated entities	29,903	35,217
Other related entities	1,415	1,966
Other debtors	54,140	54,665
	837,672	988,533
non-current
Other loans	3,246	3,048

(a) Impaired receivables

As at 31 December 2014, current trade receivables of the Group with a nominal value of $5,951,000 (2013: $4,809,000) were impaired. The individually impaired receivables relate to a variety of customers who are in financial difficulties. No collateral is held over these impaired receivables.

As at 31 December 2014, trade receivables of $68,795,000 (2013: $35,776,000) were past due but not impaired. These relate to a number of customers for whom there is no recent history of default. The ageing analysis of receivables past due but not impaired is as follows:

thousands of dollars	2014	2013
Past due 0 – 30 days	62,276	29,871
Past due 31 – 60 days	3,404	2,849
Past duegreater than 60 days	3,115	3,056
	68,795	35,776

81

Movements in the allowance for impairment of receivables are as follows:

Movements in the allowance for impairment of receivables are as follows:
thousands of dollars	2014	2013
At 1 January	4,809	4,736
Provision for impairment recognised during the year	3,323	2,216
Receivables written off duringtheyear as uncollectible	(2,181)	(2,143)
At 31 December	5,951	4,809

The creation and release of the provision for impaired receivables has been included in Other expenses in the income statement. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. The other classes within trade and other receivables do not contain impaired assets and are not past due. Based on the credit history of these other classes, it is expected that these amounts will be received when due. There are no receivables that have had renegotiated terms that would otherwise, without that renegotiation, have been past due or impaired.

(b) Foreign exchange and interest rate risk

Refer to note 17 for exposures to foreign exchange and interest rate risk relating to trade and other receivables.

(c) Fair value and credit risk

Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. Maximum exposure to credit risk at the reporting date is the fair value of each class of receivables mentioned above. Refer to note 17 for further details.

8. Inventories

8. Inventories
thousands of dollars	2014	2013
Crude oil and raw materials	170,715	882,270
Inventory in process	114,959	128,496
Finished goods	816,374	1,000,990
Materials and supplies	16,036	16,101
	1,118,084	2,027,857

Inventories held at 31 December 2014 were written down to their net realisable value. The amount of the write-down was $117,000,000 (2013: nil) and is included in inventory losses in the income statement.

9. other assets

thousands of dollars	2014	2013
Current
Prepayments	33,754	35,416
non-current
Other	1,006	2,474

10. other investments

10. other investments
thousands of dollars	2014	2013
Investment in other entities	3	3

82 Caltex / 2014 annual RePORt

Notes to the financial statements

continued

for the year ended 31 December 2014

11. Intangibles

11. Intangibles
			Rights and
thousands of dollars	note	Goodwill	licences	software	total
Cost
At 1 January 2014		113,553	25,844	87,471	226,868
Acquisitions through business combinations	26	29,573	8,101	–	37,674
Additions		–	–	23,337	23,337
Disposals		–	(2,624)	(10,883)	(13,507)
Balance at 31 December 2014		143,126	31,321	99,925	274,372
Cost
At 1 January 2013		84,615	16,791	78,741	180,147
Acquisitions through business combinations	26	28,938	8,797	–	37,735
Additions		–	262	8,730	8,992
Disposals		–	(6)	–	(6)
Balance at 31 December 2013		113,553	25,844	87,471	226,868
Amortisation
At 1 January 2014		(16,391)	(8,327)	(57,903)	(82,621)
Amortisation for the year		–	(3,859)	(14,007)	(17,866)
Disposals		–	2,000	12,303	14,303
Balance at 31 December 2014		(16,391)	(10,186)	(59,607)	(86,184)
Amortisation
At 1 January 2013		(16,391)	(6,098)	(49,594)	(72,083)
Amortisation for theyear		–	(2,229)	(8,309)	(10,538)
Balance at 31 December 2013		(16,391)	(8,327)	(57,903)	(82,621)
Carrying amount
At 1January2014		97,162	17,517	29,568	144,247
At 31 December 2014		126,735	21,135	40,318	188,188
Carrying amount
At 1January2013		68,224	10,693	29,147	108,064
At 31 December 2013		97,162	17,517	29,568	144,247

Amortisation

The amortisation charge of $17,866,000 (2013: $10,538,000) is recognised in Supply chain expenses, Marketing expenses and Other expenses in the income statement.

Impairment tests for cash-generating units containing goodwill

Goodwill acquired through business combinations has been tested for impairment as follows:

thousands of dollars	2014	2013
Distributor businesses	126,735	97,162

Distributor businesses

The recoverable amount of goodwill with distributor businesses has been determined based on a value in use calculation.

This calculation uses pre-tax cash flow projections based on an extrapolation of the year end cash flows and available budget information. The cash flows have been discounted using a pre-tax discount rate of 14.6% p.a. The cash flows have been extrapolated using a constant growth rate of 2.5%. The growth rates used do not exceed the long term growth rate for the industry.

There were no impairment losses recognised in relation to the distributor businesses during the year ended 31 December 2014 (2013: nil).

83

Key assumptions used in value in use calculations

key assumption Basis for determining value in use assigned to key assumption Cash flow Earnings before interest, tax, depreciation and amortisation (EBITDA) Estimated long term average growth rate 2.5%, as considered appropriate for each distributor business based on past experience Discount period Represents the longest remaining life of assets acquired Discount rate The risk specific to the asset

The values assigned to the key assumptions represent management’s assessment of future trends in the petroleum industry and are based on both external sources and internal sources (historic data).

Management believes that any reasonably possible change in the key assumptions on which the recoverable amount is based would not cause the carrying amount of goodwill recorded to exceed its recoverable amount.

12. Property, plant and equipment

==> picture [498 x 369] intentionally omitted <==

----- Start of picture text -----

||||
|---|---|---|
|thousands of dollars|2014|2013|
|Freehold land|
|At cost|384,276|365,664|
|Accumulated impairment losses|(37,284)|(37,284)|
|net carrying amount|346,992|328,380|
|Buildings|
|At cost|558,200|478,768|
|Accumulated depreciation and impairment losses|(231,720)|(227,086)|
|net carrying amount|326,480|251,682|
|Leasehold property|
|At cost|158,895|140,408|
|Accumulated amortisation|(84,133)|(77,953)|
|net carrying amount|74,762|62,455|
|Plant and equipment|
|At cost|4,724,400|4,588,469|
|Accumulated depreciation and impairment losses|(3,663,930)|(3,606,357)|
|net carrying amount|1,060,470|982,112|
|Leased plant and equipment|
|–|
|At capitalised cost|25,012|
|Accumulated amortisation|–|(24,769)|
|net carrying amount|–|243|
|Capital projects in progress|
|At cost|571,088|539,210|
|Accumulated impairment losses|(16,120)|(38,465)|
|net carrying amount|554,968|500,745|
|total net carrying amount|2,363,672|2,125,617|

----- End of picture text -----

84 Caltex / 2014 annual RePORt

Notes to the financial statements

continued

for the year ended 31 December 2014

12. Property, plant and equipment continued

Reconciliations

Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:

thousands of dollars 2014	2013
Freehold land Carrying amount at the beginning of the year 328,380	328,185
Additions 12,187	3,085
Acquisition through business combination 11,830	–
Disposals (5,405)	(2,890)
Carrying amount at the end of theyear 346,992	328,380
Buildings Carrying amount at the beginning of the year 251,682	213,674
Additions 1,529	247
Acquisition through business combination 13,824	–
Disposals (1,664)	(1,102)
Transfers from capital projects in progress 74,102	49,063
Depreciation (12,993)	(10,200)
Carrying amount at the end of theyear 326,480	251,682
Leasehold property Carrying amount at the beginning of the year 62,455	51,514
Additions 304	52
Disposals (38)	(156)
Transfers from capital projects in progress 21,745	19,097
Amortisation (9,704)	(8,052)
Carrying amount at the end of theyear 74,762	62,455
Plant and equipment Carrying amount at the beginning of the year 982,112	848,320
Additions 17,965	40,248
Acquisition through business combination 16,548	2,265
Disposals (18,253)	(13,516)
Transfers to leased plant and equipment –	(311)
Transfers from capital projects in progress 224,277	241,543
Depreciation (162,179)	(136,437)
Carrying amount at the end of theyear 1,060,470	982,112
Leased plant and equipment Carrying amount at the beginning of the year 243	322
Transfers from plant and equipment –	311
Amortisation (243)	(390)
Carrying amount at the end of theyear –	243
Capital projects in progress Carrying amount at the beginning of the year 500,745	327,900
Additions 359,654	475,310
Borrowing costs capitalised 14,693	7,238
Transfers to buildings,leasedproperty, plant and equipment (320,124)	(309,703)
Carrying amount at the end of theyear 554,968	500,745

85

13. Payables

13. Payables
thousands of dollars	2014	2013
Current
Trade creditors – unsecured*
– Related entities	126,271	524,831
– Other corporations and persons	484,128	670,660
Other creditors and accrued expenses	565,116	520,908
	1,175,515	1,716,399
non-current
Other creditors and accrued expenses	7,642	5,657

• Trade creditors are non-interest bearing and are normally settled on between 30 and 60 day terms.

14. Interest bearing liabilities

14. Interest bearing liabilities
thousands of dollars 2014	2013
Current – unsecured US notes(i) (ii) –	56,216
Hedge payable(ii) –	15,041
Lease liabilities(iii) 110	147
110	71,404
non-current – unsecured Domestic medium term notes(i) 149,667	149,583
Subordinated note(i) 541,470	538,345
US notes(i) (ii) –	147,341
Hedge payable(i) (ii) –	35,652
Lease liabilities(iii) 1,032	–
692,169	870,921

This note provides information about the contractual terms of Caltex’s interest bearing loans and other liabilities. For more information about Caltex’s exposure to interest rate and foreign currency risk, see note 17.

(i) The domestic medium term notes, subordinated notes and the US notes are provided by a number of capital markets.

The domestic medium term notes and subordinated notes are denominated in Australian dollars, and US notes are denominated in US dollars. Under the note agreements, the Caltex Australia Group is required to comply with certain financial covenants.

There is no security or demand placed on the notes. The domestic medium term notes will mature in November 2018, totalling $149,667,000. The subordinated note has a maturity date of September 2037, with the option for redemption in September 2017, totalling $541,470,000.

(ii) The US notes and hedge payable matured in April 2014 (2013: $71,257,000). On 1 October 2014, the April 2016 US Notes were repurchased and the associated hedge payable was closed out (2013: $182,993,000).

(iii) Refer to note 19 for details on the timing and amount of future lease payments.

86 Caltex / 2014 annual RePORt

Notes to the financial statements

continued

for the year ended 31 December 2014

15. Provisions

15. Provisions
thousands of dollars	site remediation & dismantling other total
Balance at 1 January 2014	448,969 18,031 467,000
Assumed in a business combination	1,270 – 1,270
Provisions made during the year	49,302 2,569 51,871
Provisions used during the year	(41,813) (4,127) (45,940)
Discountingmovement	23,853 – 23,853
Balance at 31 December 2014	481,581 16,473 498,054
Current	151,923 13,152 165,075
Non-current	329,658 3,321 332,979
	481,581 16,473 498,054

Site remediation & dismantling

Provision is made for the remediation of oil refining, distribution and marketing sites, and in relation to the Kurnell conversion project. Significant judgements and estimates are involved in forming expectations of future activities and the amount and timing of expenditure associated with the environment remediation process. Those expectations are formed based on existing environment and regulatory requirements or, if more stringent, Caltex’s environmental policies which give rise to a constructive obligation. The restoration and remediation provision, whilst representing Caltex’s best estimate, remains subject to a level of uncertainty in relation to the timing and amount of each component of expenditure in future periods. Adjustments to the estimated amount and timing of future expenditures are a normal occurrence in light of significant judgements and estimates involved. Factors influencing those potential changes include revisions to lives of operations, developments in technology, regulatory requirements and environmental management strategies, and changes in the estimated extent and costs of anticipated activities.

Other

Other includes legal, insurance and other provisions.

16. Issued capital

16. Issued capital
thousands of dollars	2014	2013
ordinary shares
Issued capital 270 million ordinaryshares,fully paid	543,415	543,415

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings.

In the event of the winding up of Caltex Australia Limited, ordinary shareholders rank after all creditors and are fully entitled to any proceeds of liquidation.

Caltex grants performance rights to senior executives (refer to the Directors’ Report on pages 17 to 61 for further detail).

For each right that vests, Caltex will purchase a share on market following vesting.

87

17. Financial instruments

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange, interest rate and commodity price), as well as credit and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses a range of derivative financial instruments to hedge market exposures. The Group uses sensitivity analysis in the case of foreign exchange, interest rate and commodity price risk.

The Group enters into derivative transactions, principally interest rate swaps, foreign currency exchange contracts (forwards, swaps or options), and commodity price swaps. The purpose is to manage the market risks arising from the Group’s operations and its sources of finance.

It is the Group’s policy that no discretionary trading in financial instruments shall be undertaken. The Group’s accounting policies in relation to derivatives are set out in note 1.

Risk management is carried out by Group Treasury for market risk, liquidity risk, financial institutional credit risk and capital management. Risk management activities in respect to customer credit risk are carried out by the Group’s Credit Risk department. Both Group Treasury and Credit Risk operate under policies approved by the Board of directors. Group Treasury and Credit Risk identify, evaluate and monitor the financial risks in close co-operation with the Group’s operating units.

The Group finances its operations through a variety of financial instruments including bank loans, domestic medium term notes, subordinated notes, US notes, and finance leases. Surplus funds are invested in cash and short term deposits.

The Group has various other financial instruments such as trade debtors and trade creditors, which arise directly from its operations.

The magnitude of each type of financial risk that has arisen over the year is discussed below.

(a) Interest rate risk

Interest rate instruments

The Group enters into fixed interest rate instruments to manage cash flow risks associated with the interest rates on borrowings that are floating. Interest rate instruments allow the Group to swap floating rate borrowings into fixed rates. Maturities of swap contracts are principally between one and five years.

Each contract involves periodic payment or receipt of the net amount of interest. At 31 December 2014, the fixed rates varied from 3.4% p.a. to 5.3% p.a. (2013: 3.4% p.a. to 5.3% p.a.), a weighted average rate of 4.3% p.a. (2013: 4.3% p.a.). The floating rates were at bank bill rates.

The Group had combined cross currency swap and interest rate swap contracts classified as cash flow hedges and cross currency swap contracts (excluding margins) classified as fair value hedges and US and Australian margins classified as cash flow hedges due on 30 April 2014 and 30 April 2016. These contracts were to manage interest rate and currency risks on US dollar denominated borrowings. As US denominated borrowings either matured or were repurchased on 1 October 2014, all interest rate swaps and cross currency swaps associated with these borrowings have either matured or been repurchased.

The net fair value of interest rate swap contracts at 31 December 2014 was $5,124,000 loss (2013: $6,595,000 loss). The Group classifies qualifying interest rate swap contracts as cash flow hedges.

Interest rate sensitivity analysis

At 31 December 2014, if interest rates had changed by -/+1% from the year end rates, with all other variables held constant, net profit for the year for the Group and equity would have changed by:

==> picture [498 x 67] intentionally omitted <==

----- Start of picture text -----

2014 2013
Dollars net profit equity net profit equity
Interest rates decrease 1% 3,500,000 (1,900,000) 2,000,000 (4,100,000)
Interest rates increase 1% (3,500,000) 1,800,000 (2,000,000) 3,900,000
----- End of picture text -----

88 Caltex / 2014 annual RePORt

Notes to the financial statements

continued

for the year ended 31 December 2014

17. Financial instruments continued

(a) Interest rate risk continued

Interest rate risk exposure

The Group’s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and liabilities are set out as follows:

==> picture [498 x 167] intentionally omitted <==

----- Start of picture text -----

tHoUsAnDs oF DoLLARs FIXeD InteRest MAtURInG In:
Floating Between Greater non- effective
interest Less than one and than interest interest
31 December 2014 note rate one year five years five years bearing total rate p.a.
Financial assets
Cash at bank and on hand 53,122 – – – – 53,122 2.2%
53,122 – – – – 53,122
Financial liabilities
Domestic medium term notes 14 – – 149,667 – – 149,667 7.3%
Subordinated note 14 541,470 – – – – 541,470 6.9%
Lease liabilities 14 – 110 1,032 – – 1,142 10.0%
541,470 110 150,699 – – 692,279
----- End of picture text -----

==> picture [498 x 21] intentionally omitted <==

----- Start of picture text -----

tHoUsAnDs oF DoLLARs FIXeD InteRest MAtURInG In:
----- End of picture text -----

		Floating		Between	Greater	non-		effective
		interest	Less than	one and	than	interest		interest
31 December 2013	note	rate	one year	fve years	fve years	bearing	total	rate p.a.
Financial assets
Cash at bank and on hand		199,922	–	–	–	–	199,922	3.1%
		199,922	–	–	–	–	199,922
Financial liabilities
US notes	14	147,341	56,216	–	–	–	203,557	9.9%
Domestic medium term notes	14	–	–	149,583	–	–	149,583	7.3%
Subordinated note	14	538,345	–	–	–	–	538,345	7.1%
Hedge payable	14	35,652	15,041	–	–	–	50,693	9.9%
Lease liabilities	14	–	147	–	–	–	147	14.0%
		721,338	71,404	149,583	–	–	942,325

Interest on financial instruments classified as fixed rate is fixed until maturity of the instrument.

(b) Foreign exchange risk

The Group is exposed to the effect of changes in exchange rates on its operations.

Forward foreign exchange contracts and foreign currency options are used to hedge foreign currency payables in accordance with Group Policy. The Group implemented a foreign exchange policy in June 2010 of hedging 50% of the Group’s US dollar denominated crude and products payable. From 1 August 2014, the amended foreign exchange policy increased to 80% of the Group’s US dollar denominated crude and products payable. The Group also enters into forward foreign exchange contracts to cover major capital expenditure items. As at 31 December 2014, the total fair value of all outstanding forward contracts amounted to $2,851,000 gain (2013: $3,350,000 gain). US dollar denominated borrowings were swapped into Australian dollars; as a result, there were no net foreign currency gains or losses arising from translation of these borrowings.

89

Foreign exchange rate sensitivity analysis

At 31 December 2014, had the Australian dollar strengthened/weakened by 10% against the US dollar with all other variables held constant, post-tax profit for the year for the Group and equity would change by:

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----- Start of picture text -----

2014 2013
Dollars net profit equity net profit equity
AUD strengthens against USD 10% 12,300,000 (50,000) 29,100,000 (2,700,000)
AUD weakens against USD 10% 3,000,000 60,000 (30,300,000) 3,300,000
----- End of picture text -----

Exposure to foreign exchange risk

The carrying amounts of the Group’s financial instruments are exposed to the following currencies (Australian dollar equivalent amounts):

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----- Start of picture text -----

2014 2013
thousands of dollars Us Australian Us Australian
(Australian dollar equivalent amounts) dollar dollar total dollar dollar total
Cash and cash equivalents 6,115 47,007 53,122 11,871 188,051 199,922
Trade receivables 106,980 733,938 840,918 86,283 905,298 991,581
Trade payables (598,722) (587,286) (1,186,008) (1,107,933) (617,473) (1,725,406)
Forward exchange contracts 448 – 448 3,350 – 3,350
– – – –
Foreign currency option contracts 2,403 2,403
US notes – – – (203,557) – (203,557)
Hedge payable – – – (50,693) – (50,693)
----- End of picture text -----

(c) Commodity price risk

The Group is exposed to the effect of changes in commodity price on its operations.

The Group utilises both crude and finished product swap contracts to manage the risk of price timing movements. The Board approved commodity hedging policy precludes the use of refiner margin hedging. The commodity hedging policy seeks to neutralise adverse price timing risks brought about by purchase and sales transactions that are outside the normal operating conditions of the Group. During the year, the Group employed hedge instruments to correct timing exposures.

(d) Customer credit risk

Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.

The credit risk on financial assets of the Group which have been recognised on the consolidated balance sheet is the carrying amount of trade debtors, net of allowances for impairment. See note 7.

Caltex has a Board approved Credit Policy and manual which provide the guidelines for the management and diversification of the credit risk to Caltex. The guidelines provide for the manner in which the credit risk of customers is assessed and the use of credit rating and other information in order to set appropriate limits of trade with customers. The credit quality of customers is consistently monitored in order to identify any potential adverse changes in the credit risk of the customers. Where sales to retail customers are settled in cash or using major credit cards, the credit risk is mitigated.

Caltex also minimises concentrations of credit risk by undertaking transactions with a large number of customers across a variety of industries and networks. Accordingly, there are not any significant concentrations of credit risk.

Security is required to be supplied by certain groups of Caltex customers to minimise risk. The security is predominantly in the form of general security interests over the customer’s business and mortgages over the business property. However, mortgages are also held over directors’ property such as residential houses or rural properties. Bank guarantees or insurance bonds are also provided in some cases.

The estimated realisable value of the security takes into consideration that the sale of the assets under the security may be in a distressed situation.

90 Caltex / 2014 annual RePORt

Notes to the financial statements continued

for the year ended 31 December 2014

17. Financial instruments continued

(d) Customer credit risk continued

Financial institution credit risk

Credit risk on cash, short term deposits and derivative contracts is minimised by transacting with relationship banks which have acceptable credit ratings determined by a recognised ratings agency.

Swap and foreign exchange contracts are subject to credit risk in relation to the relevant counterparties, which are principally large relationship banks. Credit risk on crude and finished product swap contracts is minimised as counterparties are principally Chevron or large relationship banks.

The maximum credit risk exposure on foreign currency contracts is the full amount of the foreign currency that Caltex pays when settlement occurs, should the counterparty fail to pay the amount which it is committed to pay the Group. The full amount of the exposure is disclosed at note 17(e).

The credit risk on interest rate swaps is limited to the mark to market amount to be received from counterparties over the life of contracts that are favourable to the Group. As at 31 December 2014, there is no expected credit risk on any financial instruments (2013: nil).

(e) Liquidity risk management

Liquidity risk is the risk that an entity will encounter difficulty in maintaining obligations associated with financial liabilities.

The liquidity risk policy requires maintaining sufficient cash and an adequate amount of committed credit facilities to meet the forecast requirements of the business. Due to the dynamic nature of the underlying business, management maintains flexibility in funding by keeping additional committed credit facilities above forecast requirements.

The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching maturity profiles of financial assets and liabilities.

The Group may from time to time seek to purchase and retire outstanding debt through cash purchases in open market transactions, privately negotiated transactions or otherwise. Any such repurchases would depend on prevailing market conditions, liquidity requirements and possibly other factors.

The table below analyses the Group’s financial liabilities and net settled derivative financial instruments into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date.

The amounts disclosed in the table are the contractual undiscounted cash flows.

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|||||||||
|---|---|---|---|---|---|---|---|
|Weighted|
|average|Between|Greater|
|effective|Carrying|Contractual|Less than|one and|than|
|interest rate|amount|cash flows|one year|five years|five years|
|31 December 2014|%|$’000|$’000|$’000|$’000|$’000|
|Interest bearing liabilities|
|Domestic medium term notes|7.3|149,667|182,659|10,886|171,773|–|
|Subordinated note|[*]|6.9|541,470|654,296|38,633|615,663|–|
|Lease liabilities|10.0|1,142|1,546|219|1,327|–|
|Payables|
|Interest rate swaps|4.3|5,124|5,458|3,718|1,740|–|
|Forward FX contracts|
|–|–|–|
|– inflow|(448)|(79,779)|(79,779)|
|–|–|–|–|
|– outflow|79,424|79,424|
|Foreign currency options|
|–|–|–|
|– inflow|(2,403)|(213,910)|(213,910)|
|–|–|–|–|
|– outflow|213,058|213,058|
|Payables|–|1,180,884|1,182,952|1,175,448|7,504|–|

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• The subordinated note is assumed to be repaid on the first call date (15 September 2017).

91

	Weighted
	average				Between	Greater
	effective interest rate	Carrying amount	Contractual cash fows	Less than one year	one and fve years	than fve years
31 December 2013	%	$’000	$’000	$’000	$’000	$’000
Interest bearing liabilities
US notes	9.9	203,557	229,142	70,544	158,598	–
Domestic medium term notes	7.3	149,583	204,432	10,886	193,546	–
Subordinated note*	7.1	538,345	712,978	39,272	673,706	–
Hedge payable	9.9	50,693	63,617	19,992	43,625	–
Lease liabilities	14.0	147	152	152	–	–
Payables
Interest rate swaps	4.3	6,595	6,858	4,148	2,710	–
Forward FX contracts
– infow	–	(3,350)	(610,804)	(610,636)	(168)	–
– outfow	–	–	608,223	608,073	150	–
Payables	–	1,718,811	1,719,769	1,716,804	2,965	–

• The subordinated note is assumed to be repaid on the first call date (15 September 2017).

(f) Capital management

The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

During 2014, the Group’s strategy was to maintain a minimum long term credit rating of BBB+, in order to secure access to finance at a reasonable cost. The credit rating is impacted by two key ratios: Funds from Operations/Debt and Debt/Earnings Before Interest, Tax, Depreciation and Amortisation.

The Group’s gearing ratio is calculated as net debt/total capital. Net debt is calculated as total interest bearing liabilities less cash and cash equivalents. Total capital is calculated as equity as shown in the balance sheet plus net debt.

The gearing ratios at 31 December 2014 and 31 December 2013 were as follows:

cash and cash equivalents. Total capital is calculated as equity as shown in the balance sheet plus The gearing ratios at 31 December 2014 and 31 December 2013 were as follows:	net debt.
thousands of dollars	2014	2013
Total interest bearing liabilities	692,279	942,325
Less: cash and cash equivalents	(53,122)	(199,922)
Net debt	639,157	742,403
Total equity	2,532,591	2,597,032
Total capital	3,171,748	3,339,435
Gearingratio	20.2%	22.2%

92 Caltex / 2014 annual RePORt

Notes to the financial statements

continued

for the year ended 31 December 2014

17. Financial instruments continued

(g) Fair values of financial assets and liabilities

The Group’s accounting policies and disclosures may require the measurement of fair values for both financial and non-financial assets and liabilities. The Group has an established framework for fair value measurement. When measuring the fair value of an asset or a liability, the Group uses market observable data where available.

Fair values are categorised into different levels in a fair value hierarchy based on the following valuation techniques:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability can be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Fair values of recognised financial assets and liabilities with their carrying amounts shown in the balance sheet are as follows:

Asset/(LIABILItY)	Asset/(LIABILItY)
31 December 2014 thousands of dollars Carrying amount	Fair value total quoted market price (Level 1) observable inputs (Level 2) non-market observable inputs (Level 3)
Cash and cash equivalents 53,122 Receivables(i) 840,918 Interest bearing liabilities Domestic medium term notes(iii) (149,667) Subordinated note (541,470) Lease liabilities(v) (1,142) Payables Interest rate swaps(iv) (5,124) Forward foreign exchange contracts(iv) 448 Foreign currency options(iv) 2,403 Payables(i) (1,180,884)
	53,122 53,122 – –
	840,918 – 840,918 –
	(188,850) – (188,850) –
	(579,634) (579,634) – –
	(1,425) – (1,425) –
	(5,124) – (5,124) –
	448 – 448 –
	2,403 – 2,403 –
	(1,180,884) – (1,180,884) –
Total (981,396)	(1,059,026) (526,512) (532,514) –

Asset/(LIABILItY)	Asset/(LIABILItY)
31 December 2013 thousands of dollars Carrying amount	Fair value total quoted market price (Level 1) observable inputs (Level 2) non-market observable inputs (Level 3)
Cash and cash equivalents 199,922 Receivables(i) 991,581 Interest bearing liabilities US notes(ii) (203,557) Domestic medium term notes(iii) (149,583) Subordinated note (538,345) Cross currency swaps(iv) (50,693) Lease liabilities(v) (147) Payables Interest rate swaps(iv) (6,595) Forward foreign exchange contracts(iv) 3,350 Payables(i) (1,718,811)	199,922 199,922 – – 991,581 – 991,581 – (204,317) – (204,317) – (161,053) – (161,053) – (593,483) (593,483) – – (50,693) – (50,693) – (152) – (152) – (6,595) – (6,595) – 3,350 – 3,350 – (1,718,811) – (1,718,811) –
Total (1,472,878)	(1,540,250) (393,561) (1,146,689) –

93

Estimation of fair values

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments:

(i) Receivables/payables

For receivables/payables with a remaining life of less than six months, the notional amount is deemed to reflect the fair value. All other receivables/payables are discounted to determine the fair value, if the effect of discounting is material.

(ii) US notes

The fair value of US notes is determined as the present value of future contracted cash flows. Cash flows are discounted using standard valuation techniques at applicable market yield, having regard to the timing of cash flows.

(iii) Domestic medium term notes

The fair value of domestic medium term notes is determined by using an independent broker quotation.

(iv) Derivatives

The fair value of cross currency swaps, interest rate swaps and forward foreign exchange contracts is determined as the present value of future contracted cash flows and credit adjustments. The fair value of foreign currency options is determined using standard valuation techniques. Cash flows are discounted using standard valuation techniques at the applicable market yield, having regard to the timing of the cash flows.

(v) Lease liabilities

The fair value is estimated as the present value of future cash flows using the government bond rate.

(h) Interest rates

Caltex used the government bond rate as of 31 December 2014 plus an adequate constant credit spread to discount financial instruments. The annual interest rates used are as follows:

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||||
|---|---|---|
|2014|2013|
|Lease liabilities|2%|3%|
|Receivables|4%|4%|
|Payables|2–5%|2–5%|

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18. employee benefits

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||||
|---|---|---|
|thousands of dollars|2014|2013|
|non-current assets|
|Defined benefit superannuation asset|6,719|–|
|Total asset for employee benefits|6,719|–|
|Current liabilities|
|Liability for annual leave|34,885|42,630|
|Liability for long service leave|9,265|22,167|
|Liability for termination benefits|58,898|73,072|
|Bonus accrued|60,152|8,341|
|163,200|146,210|
|non-current liabilities|
|Liability for long service leave|43,600|46,283|
|Liability for termination benefits|9,791|24,286|
|Defined benefit superannuation obligation|5,862|20,317|
|59,253|90,886|
|Total liability for employee benefits|215,734|237,096|

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94 Caltex / 2014 annual RePORt

Notes to the financial statements continued

for the year ended 31 December 2014

18. employee benefits continued

(a) Employee benefits

The current balances for employee benefits, which include annual leave, long service leave, employee bonus, redundancy and retirement benefits, represent the present value of the estimated future cash outflows to be made by the Group resulting from employees’ services provided up to the balance date.

Employee benefits which are not expected to be settled within 12 months are calculated using future expected increases in salary rates, including related oncosts, turnover rates, and expected settlement dates based on turnover history, and are discounted using the rates attaching to the national government securities which most closely match the terms of maturity of the related liabilities.

(b) Superannuation commitments

The Group contributes to superannuation plans to provide benefits to employees and their dependants upon retirement, disability or death. Employer contributions (where applicable) are based on a percentage of salary. The employer is committed to contribute to the plans as prescribed by the relevant trust deeds and relevant legislation.

Caltex Australia Superannuation Plan – Defined Benefit Division

The Caltex Australia Superannuation Plan – Defined Benefit Division is predominantly a defined benefit plan, but it also includes the retirement account, which is a defined contribution payable by the Group.

Information from the most recent actuarial valuation for the defined benefit plan at 31 December 2014 follows:

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||||
|---|---|---|
|thousands of dollars|2014|2013|
|Movements in the net (asset)/liability for defined benefit obligation|
|recognised in the balance sheet|
|Net liability for defined benefit obligation at the beginning of the year|20,317|58,372|
|Current service cost|4,981|8,263|
|Net interest|291|1,149|
|Actual return on plan assets less interest income|(9,765)|(11,055)|
|Actuarial losses arising from changes in demographic assumptions|758|–|
|Actuarial losses/(gains) arising from changes in financial assumptions|4,437|(18,620)|
|Actuarial gains arising from liability experience|(4,038)|(795)|
|Employer contributions|(15,963)|(15,982)|
|Benefits paid|(1,875)|(1,015)|
|Net (asset)/liability for defined benefit obligation at the end of the year|(857)|20,317|
|Represented by:|
|Defined benefit (asset)/liability – Accumulation Division|(6,719)|11,584|
|Defined benefit liability – Guaranteed Retirement Payment Plan benefit|5,862|8,733|
|Net (asset)/liability for defined benefit obligation at the end of the year|(857)|20,317|
|Reconciliation of the present value of the defined benefit obligation|
|Present value of defined benefit obligation at the beginning of the year|182,522|204,108|
|Current service cost|4,981|8,263|
|Interest cost|5,151|4,844|
|Contributions by plan participants|1,944|1,941|
|Actuarial losses arising from changes in demographic assumptions|758|–|
|Actuarial losses/(gains) arising from changes in financial assumptions|4,437|(18,620)|
|Actuarial gains arising from liability experience|(4,038)|(795)|
|Benefits paid|(76,889)|(17,219)|
|Present value of defined benefit obligation at the end of the year|118,866|182,522|

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95

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||||
|---|---|---|
|Plan assets|
|thousands of dollars|2014|2013|
|Reconciliation of the fair value of plan assets|
|Fair value of plan assets at the beginning of the year|162,205|145,736|
|Actual return on plan assets less interest income|9,765|11,055|
|Interest income|4,860|3,695|
|Employer contributions|15,963|15,982|
|Contributions by plan participants|1,944|1,941|
|Benefits paid|(75,014)|(16,204)|
|Fair value of plan assets at the end of the year|119,723|162,205|
|Reconciliation of the net liability recognised in the balance sheet|
|Defined benefit obligation|118,866|182,522|
|Fair value of plan assets|(119,723)|(162,205)|
|Net liability|(857)|20,317|
|Actuarial gains and losses recognised in other comprehensive income|
|Actuarial losses/(gains) recognised in other comprehensive income|1,157|(19,415)|
|Actual return on plan assets less interest income|(9,765)|(11,055)|
|(8,608)|(30,470)|

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The defined benefit plan assets are invested in the Future Direction Moderately Conservative and Future Direction Conservative investment funds within the AMP Superannuation Savings Trust.

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||||
|---|---|---|
|2014|2013|
|The percentage invested in each asset class at the balance sheet date was:|
|Australian equity|13%|15%|
|International equity|16%|17%|
|Fixed income|33%|31%|
|Alternatives/Other|18%|15%|
|Property|5%|5%|
|Cash|15%|17%|

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The fair value of plan assets includes no amounts relating to any of the company’s own financial instruments, and any property occupied by, or other assets used by, the company.

The expected return on assets assumption is determined by weighting the expected long term return for each asset class by the target allocation of assets to each asset class. The returns used for each asset class are net of investment tax and investment fees.

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||||
|---|---|---|
|Principal actuarial assumptions at the balance sheet date (% p.a.)|2014|2013|
|Discount rate|2.4%|3.0%|
|Expected salary increase rate|3.0%|2–3%|

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Expected employer contributions for the reporting year to 31 December 2015 is $611,000.

96 Caltex / 2014 annual RePORt

Notes to the financial statements

continued

for the year ended 31 December 2014

18. employee benefits continued

(b) Superannuation commitments continued

Sensitivity analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.

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----- Start of picture text -----

2014 2013
thousands of dollars Increase Decrease Increase Decrease
Discount rate (0.5% movement) (2,422) 2,427 (2,266) 2,433
Expected salary rate (0.5% movement) 2,289 (2,211) 2,259 (2,086)
----- End of picture text -----

Although the analysis does not take into account the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.

Caltex Australia – Guaranteed Retirement Payment Plan benefit

The Caltex Australia Guaranteed Retirement Payment Plan (GRPP) is a benefit for which, if necessary, the company will supplement an eligible member’s entitlement from the accumulation division to guarantee a minimum total payment. Balances relating to this benefit have been included in the overall defined benefit figures presented in note 18(b) in the financial statements.

Caltex Australia Superannuation Plan – Accumulation Division

As this is a defined contribution plan, no actuarial review has been performed on this plan. The plan benefits to members are as described in the trust deed. Funds are available to satisfy all vested benefits in the event of termination of the fund or the voluntary or compulsory termination of employment of each employee of the participating employers.

thousands of dollars	2014	2013
Employer contributions to the accumulation divisionplan duringtheyear	16,855	19,264

19. Commitments

(a) Capital expenditure

19. Commitments (a) Capital expenditure
thousands of dollars	2014	2013
Capital expenditure contracted but notprovided for in the fnancial report andpayable	63,162	62,162

(b) Leases

Finance leases

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----- Start of picture text -----

31 DeCeMBeR 2014 31 DeCeMBeR 2013
Minimum Minimum
lease lease
thousands of dollars payments Interest Principal payments Interest Principal
Within one year 219 109 110 152 5 147
Between one and five years 1,328 296 1,032 – – –
1,547 405 1,142 152 5 147
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The Group leases production plant and equipment under finance leases expiring from one to five years. No contingent rentals were paid during the year (2013: nil).

97

Operating leases
thousands of dollars	2014	2013
non-cancellable operating leases – Group as lessee
Future minimum rentals payable:
Within one year	142,133	129,979
Between one and fve years	429,856	382,605
After fveyears	337,572	177,347
	909,561	689,931

The Group leases property under operating leases expiring from one to 37 years. Leases generally provide the Group with a right of renewal at which time all terms are renegotiated. Lease payments comprise mainly a base amount; however, in a few cases, they include a base amount and incremental contingent rental. Contingent rentals are based on operating performance criteria. Contingent rentals of $383,476 were paid during the year (2013: $87,594).

The expense recognised in the income statement during the year in respect of operating leases is $160,549,000 (2013: $136,643,000).

There are no restrictions placed upon the Group by entering into these leases. Renewals are at the option of the specific entity that holds the lease.

entity that holds the lease.
thousands of dollars	2014	2013
Non-cancellable operating leases – Group as lessor
Future minimum rentals receivable:
Within one year	70,580	78,923
Between one and fve years	150,124	149,042
After fveyears	21,845	19,119
	242,549	247,084

The Group leases property under operating leases expiring from one to 17 years. Some of the leased properties have been sublet by the Group. The leases and subleases expire between 2015 and 2032.

Note 2 shows the rental income recognised in the income statement in respect of operating leases.

20. Contingent assets and liabilities

The details and estimated maximum amounts of contingent assets and liabilities (for which no provisions are included in the financial report) are set out below. The directors are not aware of any circumstance or information which would lead them to believe that these assets and liabilities will crystallise and consequently no provisions are included in the financial report in respect of these matters.

believe that these assets and liabilities will crystallise and consequently no provisions are included respect of these matters.	in the fnancial report in
thousands of dollars	2014 2013
(a) Contingent assets – legal and other claims	– –

In the ordinary course of business, the Group is involved as a plaintiff in legal proceedings. Where appropriate, Caltex takes legal advice. The Group does not consider that the outcome of any current proceedings is likely to have a material effect on its operations or financial position.

its operations or fnancial position.
thousands of dollars	2014 2013
(b) Contingent liabilities – legal and other claims	– –

In the ordinary course of business, the Group is involved as a defendant in legal proceedings. Where appropriate, Caltex takes legal advice. The Group does not consider that the outcome of any current proceedings is likely to have a material effect on its operations or financial position.

A liability has been recognised for any known losses expected to be incurred where such losses are capable of reliable measurement.

98 Caltex / 2014 annual RePORt

Notes to the financial statements continued

for the year ended 31 December 2014

20. Contingent assets and liabilities continued

(c) Bank guarantees

The Group has granted indemnities to banks to cover bank guarantees given on behalf of controlled entities to a maximum exposure of $2,627,856 (2013: $2,192,587).

(d) Deed of Cross Guarantee and class order relief

Note 22(a) lists the companies in the Group that are parties to a Deed of Cross Guarantee dated 22 December 1992 with Caltex Australia Limited and each other (these companies are notated with (iii)).

As parties to the Deed of Cross Guarantee, and by virtue of ASIC Class Order CO 98/1418, these companies are relieved from complying with certain requirements of the Corporations Act . Under the Deed of Cross Guarantee, each company agrees to guarantee all of the debts (in full) of all companies that are parties to the deed subject to, and in accordance with, the terms set out in the deed.

No companies have been added to or removed from the Deed of Cross Guarantee during the year ended 31 December 2014 or from 1 January 2015 to the date of signing this financial report.

21. Auditor’s remuneration

21. Auditor’s remuneration
Dollars	2014	2013
Audit services – KPMG Australia	995,900	919,400
Non-audit services – KPMG Australia:
Other assurance services	34,800	81,400
Taxation services	43,700	70,000
	78,500	151,400

22. Particulars in relation to controlled entities

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% InteRest
(a) Name note 2014 2013
Companies
Ampol Bendigo Pty Ltd (iii) 100 100
Ampol International Holdings Pte Ltd (ii) 100 100
Ampol Management Services Pte Ltd (ii),(viii) 100 100
Ampol Property (Holdings) Pty Ltd (iii) 100 100
Ampol Refineries (Matraville) Pty Ltd 100 100
Ampol Singapore Trading Pte Ltd (ii),(ix) 100 100
Ampol Road Pantry Pty Ltd 100 100
Australian Petroleum Marine Pty Ltd (iii) 100 100
B & S Distributors Pty Ltd (iv) 50 50
Bowen Petroleum Services Pty Ltd 100 100
Brisbane Airport Fuel Services Pty Ltd 100 100
Calgas Pty Ltd 100 100
Calstores Pty Ltd (iii),(vi) 100 100
Caltex Australia Custodians Pty Ltd 100 100
Caltex Australia Management Pty Ltd 100 100
Caltex Australia Nominees Pty Ltd 100 100
Caltex Australia Petroleum Pty Ltd (iii) 100 100
Caltex Fuel Services Pty Ltd (iii) 100 100
Caltex Lubricating Oil Refinery Pty Ltd (iii) 100 100
Caltex Petroleum (Qld) Pty Ltd (iii) 100 100
Caltex Petroleum (Victoria) Pty Ltd (iii) 100 100
Caltex Petroleum Pty Ltd (iii) 100 100
Caltex Petroleum Services Pty Ltd (iii) 100 100
Caltex Refineries (NSW) Pty Ltd (iii) 100 100
Caltex Refineries (Qld) Pty Ltd (iii) 100 100
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99

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% InteRest
Name note 2014 2013
Circle Petroleum (Q’land) Pty Ltd 100 100
Cocks Petroleum Pty Ltd 100 100
Cooper & Dysart Pty Ltd 100 100
Graham Bailey Pty Ltd (iii) 100 100
Hanietee Pty Ltd (iii) 100 100
Hunter Pipe Line Company Pty Ltd (iii) 100 100
Jayvee Petroleum Pty Ltd 100 100
Jet Fuels Petroleum Distributors Pty Ltd (iii) 100 100
Link Energy Pty Ltd 100 100
Manworth Pty Ltd 100 100
Newcastle Pipe Line Company Pty Ltd (iii) 100 100
Northern Marketing Management Pty Ltd 100 100
Northern Marketing Pty Ltd (iii) 100 100
Octane Insurance Pte Ltd (ii) 100 100
Pilbara Fuels Pty Ltd 100 100
R & T Lubricants Pty Ltd (iii) 100 100
Ruzack Nominees Pty Ltd 100 100
Solo Oil Australia Pty Ltd 100 100
Solo Oil Corporation Pty Ltd 100 100
Solo Oil Investments Pty Ltd (iii) 100 100
Solo Oil Pty Ltd (iii) 100 100
South Coast Oils Pty Ltd 100 100
South East Queensland Fuels Pty Ltd 100 100
Sydney Metropolitan Pipeline Pty Ltd (iv) 60 60
Teraco Pty Ltd (iv) 50 50
Tulloch Petroleum Services Pty Ltd (iii) 100 100
Western Fuel Distributors Pty Ltd (iv) 50 50
Unit trusts
Eden Equity Unit Trust (v) 100 100
Petroleum Leasing Unit Trust (vi) 100 100
Petroleum Properties Unit Trust (vi) 100 100
South East Queensland Fuels Unit Trust (vii) 100 100
----- End of picture text -----

(i) All companies were incorporated in Australia except those companies noted in (ii). The unit trusts were formed in Australia.

(ii) These companies were incorporated in Singapore.

(iii) These companies are parties to a Deed of Cross Guarantee dated 22 December 1992 with Caltex Australia Limited and each other. As parties to the Deed of Cross Guarantee, and by virtue of ASIC Class Order CO 98/1418, these companies are relieved from certain requirements of the Corporations Act . Under the Deed of Cross Guarantee, each company agrees to guarantee all of the debts (in full) of all companies that are parties to the deed subject to, and in accordance with, the terms set out in the deed. No companies have been added to or removed from the Deed of Cross Guarantee during the year ended 31 December 2014 or from 1 January 2015 to the date of signing this financial report.

(iv) These entities have been included as controlled entities in accordance with AASB 127 Consolidated and Separate Financial Statements. In each case, control exists because a company within the Caltex Australia Group has the ability to dominate the composition of the entity’s board of directors, or enjoys the majority of the benefits and is exposed to the majority of the risks of the entity.

(v) Caltex Petroleum Services Pty Ltd is the sole unit holder of this trust.

(vi) Solo Oil Pty Ltd is the sole unit holder of these trusts.

(vii) Caltex Australia Petroleum Pty Ltd and Caltex Petroleum Services Pty Ltd each own half of the units in this trust.

(viii) Ampol Management Services Pte Ltd was incorporated in Singapore on 28 May 2013.

(ix) Ampol Singapore Trading Pte Ltd changed its name from Ampol Singapore Holdings Pte Ltd on 14 March 2013.

100 Caltex / 2014 annual RePORt

Notes to the financial statements

continued

for the year ended 31 December 2014

22. Particulars in relation to controlled entities continued

(b) Income statement for entities covered by the Deed of Cross Guarantee

(b) Income statement for entities covered by the Deed of Cross Guarantee 22. Particulars in relation to controlled entitiescontinued
thousands of dollars	2014	2013
Revenue	24,181,616	24,652,221
Cost ofgoods sold – historical cost	(22,710,323)	(22,782,130)
Grossproft	1,471,293	1,870,091
Other income	(21,730)	44,881
Operating expenses	(1,319,134)	(1,089,172)
Finance costs	(111,370)	(88,791)
Share ofproft of equity-accounted investees	917	158
Proft before income tax expense	19,976	737,167
Income tax expense	(5,367)	(204,785)
netproft	14,609	532,382
Retained earnings at the beginning of the year	2,036,998	1,591,287
Movement in reserves	6,026	21,329
Dividendsprovided for orpaid	(99,900)	(108,000)
Retained earnings at the end of theyear	1,957,733	2,036,998

101

(c) Balance sheet for entities covered by the Deed of Cross Guarantee

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||||
|---|---|---|
|thousands of dollars|2014|2013|
|Current assets|
|Cash and cash equivalents|38,707|189,960|
|Receivables|869,988|1,014,367|
|Inventories|936,689|2,027,857|
|Current tax asset|56,957|–|
|Other|31,963|34,902|
|total current assets|1,934,304|3,267,086|
|non-current assets|
|Receivables|3,246|3,048|
|Investments accounted for using the equity method|24,181|23,863|
|Other investments|3|3|
|Property, plant and equipment|2,321,944|2,084,695|
|Intangibles|163,035|119,094|
|Deferred tax assets|444,558|471,036|
|–|
|Employee benefits|6,719|
|Other|907|2,474|
|total non-current assets|2,964,593|2,704,213|
|total assets|4,898,897|5,971,299|
|Current liabilities|
|Payables|983,423|1,700,183|
|Interest bearing liabilities|115|71,407|
|Current tax liabilities|–|55,361|
|Employee benefits|163,200|146,210|
|Provisions|164,583|82,560|
|total current liabilities|1,311,321|2,055,721|
|non-current liabilities|
|–|
|Payables|7,641|
|Interest bearing liabilities|692,169|870,921|
|Employee benefits|59,253|90,886|
|Provisions|332,678|383,986|
|total non-current liabilities|1,091,741|1,345,793|
|total liabilities|2,403,062|3,401,514|
|net assets|2,495,835|2,569,785|
|equity|
|Issued capital|543,415|543,415|
|Treasury stock|(607)|(610)|
|Reserves|(4,706)|(10,018)|
|Retained earnings|1,957,733|2,036,998|
|total equity|2,495,835|2,569,785|

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102 Caltex / 2014 annual RePORt

Notes to the financial statements

continued

for the year ended 31 December 2014

23. Investments accounted for using the equity method

(a) Investments in associates and joint ventures

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% InteRest
2014 2013 Balance date
Airport Fuel Services Pty Ltd 40 40 31 December
Australasian Lubricants Manufacturing Company Pty Ltd 50 50 31 December
Cairns Airport Refuelling Service Pty Ltd 25 25 31 December
Geraldton Fuel Company Pty Ltd 50 50 31 December
South Coast Fuels Pty Ltd [ (i) ] 50 50 31 December
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(i) South Coast Fuels Pty Ltd was voluntarily deregistered on 14 January 2015.

The companies listed in the above table were all incorporated in Australia and are principally concerned with the sale, marketing and/or distribution of fuel products.

(b) Investments in associates

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share of
share of net assets as associates’
associates’ total total reported by net assets
thousands Revenue Profit net profit assets liabilities associates equity
of dollars (100%) (100%) recognised (100%) (100%) (100%) accounted
2014 1,407,645 3,762 1,372 25,443 9,797 15,646 7,696
2013 159,412 4,003 1,138 26,651 12,682 13,969 6,923
2014 2013
Results of associates
Share of associates’ profit before income tax expense 1,966 1,610
Share of associates’ income tax expense (590) (482)
Share of associates’ net profit 1,376 1,128
Unrealised profit in inventories (4) 10
Share of associates’ net profit – equity accounted 1,372 1,138
Commitments
Share of associates’ capital expenditure contracted but not provided
for in the financial report and payable:
– –
Within one year
Share of associates’ operating lease commitments not provided
for in the financial report and payable:
Within one year 173 190
Between one and five years 340 951
513 1,141
Share of associates’ finance lease commitments not provided for in the financial report and
payable:
Within one year 788 854
Between one and five years 1,397 1,797
2,185 2,651
Future finance charges (165) (290)
2,020 2,361
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103

(c) Investments in joint ventures

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net
(liabilities)/
assets as share of
share of reported joint ventures’
joint ventures’ total total by joint net assets
thousands Revenue Loss net loss assets liabilities venture equity
of dollars (100%) (100%) recognised (100%) (100%) (100%) accounted
2014 495,495 (458) (455) 382,444 383,251 (807) 16,485
2013 468,084 (415) (980) 342,579 339,579 3,000 16,940
2014 2013
Results of joint ventures
Share of joint ventures’ loss before income tax expense (413) (291)
Share of joint ventures’ income tax benefit 124 88
Share of joint ventures’ net loss (289) (203)
Unrealised loss in inventories (166) (777)
Share of joint ventures’ net loss – equity accounted (455) (980)
joint ventures’ assets and liabilities
Current assets 377,601 341,776
Non-current assets 4,843 803
Total assets 382,444 342,579
Current liabilities 369,623 324,165
Non-current liabilities 13,628 15,414
Total liabilities 383,251 339,579
Commitments
Share of joint ventures’ capital expenditure contracted but
not provided for in the financial report and payable:
Within one year – –
Share of joint ventures’ operating lease commitments not
provided for in the financial report and payable:
Within one year 1,111 1,233
Between one and five years 2,659 4,040
3,770 5,273
(d) Reconciliation to income statement
Share of net profit of associates accounted for using the equity method 1,372 1,138
Share of net loss of joint ventures accounted for using the equity method (455) (980)
917 158
(e) Reconciliation to balance sheet
Investment in associates accounted for using the equity method 7,696 6,923
Investment in joint ventures accounted for using the equity method 16,485 16,940
24,181 23,863
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104 Caltex / 2014 annual RePORt

Notes to the financial statements continued

for the year ended 31 December 2014

24. Interest in joint venture operations

The Group has joint interests in multiple Joint User Hydrant Installations (JUHIs), which are based at airports across Australia. The principal activity of the JUHIs is refuelling aircraft at the airports. For the year ended 31 December 2014, the contribution of the JUHIs to the operating profit of the Group was nil (2013: nil). Included in the assets and liabilities of the Group are the Group’s interests in the assets and liabilities employed in the joint venture operation:

Group’s interests in the assets and liabilities employed in the joint venture operation:
thousands of dollars	2014	2013
non-current assets
Plant and equipment expenditure	56,852	55,008
Less: accumulated amortisation	(33,282)	(32,720)
total non-current assets	23,570	22,288
total assets	23,570	22,288

25. notes to the cash flow statements

(a) Reconciliation of cash and cash equivalents

For the purposes of the cash flow statements, cash and cash equivalents includes:

Cash at bank	53,122	199,922
Total cash and cash equivalents	53,122	199,922
(b) Reconciliation of net proft to net operating cash fows
Net proft	22,670	528,757
Adjustments for:
Net gain on sale of property, plant and equipment	(726)	(44,881)
Interest paid capitalised	(14,693)	(7,238)
Amortisation of fnance costs	(9,721)	4,359
Depreciation/amortisation of property, plant and equipment	185,119	155,079
Amortisation of intangibles	17,866	10,538
Treasury stock movements net of expense	(1,921)	(13,253)
Share of associates’ and joint ventures’ net (loss)/proft	(317)	292
Movements in assets and liabilities:
Decrease in receivables	150,663	58,340
Decrease/(increase) in inventories	921,025	(373,433)
Decrease in other assets	3,130	6,392
(Decrease)/increase in payables	(535,150)	220,925
(Decrease)/increase in current tax liabilities	(112,065)	45,499
Increase in deferred tax assets	25,774	44,708
Increase/(decrease)inprovisions	9,915	(28,144)
net operating cash infows	661,569	607,940

105

26. Business combinations

2014

Scott’s Fuel Divisions (Scott’s)

On 4 June 2014, Caltex acquired the assets and liabilities of the Scott’s Fuel Divisions (Scott’s) for a consideration of $86,466,000 plus incidental acquisition costs. This acquisition included the businesses known as Scott’s Agencies and Sabadin Petroleum.

The Scott’s Fuel Divisions operate throughout the regional areas of South Australia, Victoria, southern New South Wales and southern/central Northern Territory. This extensive network consists of 28 retail service stations and 18 depots.

The acquisition complements Caltex’s existing national network and is consistent with Caltex’s strategy of being Australia’s leading transport fuels provider.

In the seven months up to 31 December 2014, Scott’s contributed a gross sales revenue of $180,395,000 and a net profit of $10,094,000 to the consolidated gross sales revenue and net profit for the year. If the acquisition had occurred on 1 January 2014, the Group estimates that gross sales revenue would have been $286,000,000 greater and net profit would have been $9,500,000 greater.

The acquisition had the following effect on the Group’s assets and liabilities:

have been $9,500,000 greater. The acquisition had the following effect on the Group’s assets and liabilities:
thousands of dollars	Recognised values
Intangibles	8,101
Property, plant and equipment	42,202
Inventories	11,252
Deferred tax assets	3,752
Provisions	(8,414)
Net identifable assets and liabilities	56,893
Goodwill on acquisition	29,573
Considerationpaid,satisfed in cash	86,466
Net cash outfow	(86,466)

The recognised values represent the fair value of assets recorded on acquisition.

Intangible assets acquired of $8,101,000 represents the amount paid to Scott’s for customer relationships and trade restraint, which meets the criteria for recognition as a separately identifiable intangible asset at the date of acquisition. These intangible assets are to be amortised over the remainder of the agreement term.

Goodwill acquired of $29,573,000 represents other intangible assets that did not meet the criteria for recognition as separately identifiable assets at the date of acquisition. None of the goodwill recognised is expected to be deductible for tax purposes.

There were no other material business combinations during the year ended 31 December 2014.

106 Caltex / 2014 annual RePORt

Notes to the financial statements

continued

for the year ended 31 December 2014

26. Business combinations continued

2013

Queensland Fuel Group (QFG)

On 1 October 2013, the Group terminated the franchise and acquired the assets and liabilities of Queensland Fuel Group Pty Ltd (QFG) for a consideration of $40,000,000 plus $2,967,000 for inventory, GST and provisions, and incidental acquisition costs.

QFG was a Caltex Franchise Reseller for over 15 years which operated retail sites and supplied commercial customers and primary producers. QFG’s prime marketing area was centred in the cities of Gladstone and Rockhampton, with a smaller network on the Sunshine Coast.

In the three months up to 31 December 2013, QFG contributed a gross sales revenue of $52,433,701 and a net profit of $3,264,375 to the consolidated gross sales revenue and net profit for the year. If the acquisition had occurred on 1 January 2013, the Group estimates that gross sales revenue would have been $210,723,852 greater and net profit would have been $14,065,658 greater.

The acquisition had the following effect on the Group’s assets and liabilities:

	Recognised
thousands of dollars	values
Intangibles	8,797
Property, plant and equipment	2,265
Inventories	2,915
Receivables	280
Provisions	(228)
Net identifable assets and liabilities	14,029
Goodwill on acquisition	28,938
Considerationpaid,satisfed in cash	42,967
Net cash outfow	(42,967)

The recognised values represent the fair value of assets recorded on acquisition.

Intangible assets acquired of $8,797,000 represents the amount paid to QFG for customer relationships and trade restraint, which meets the criteria for recognition as a separately identifiable intangible asset at the date of acquisition. These intangible assets are to be amortised over the remainder of the agreement term.

There were no other material business combinations during the year ended 31 December 2013.

Details of entities over which control has been gained or lost during the year

2014

There were no entities over which control was gained or lost during the period.

2013

On 28 May 2013, Ampol Management Services Pte Ltd was incorporated in Singapore. Ampol Management Services Pte Ltd is a wholly owned subsidiary of Caltex Australia Limited.

There were no other entities over which control was gained or lost during the period.

107

27. Financing arrangements

27. Financing arrangements
thousands of dollars 2014	2013
The Group has access to the following lines of credit: Total facilities available: Bank overdrafts 22,223	41,232
Bank loans and capital markets 1,541,137	2,092,178
1,563,360	2,133,410
Facilities utilised at balance date: Bank overdrafts –	839
Bank loans and capital markets 691,137	942,178
691,137	943,017
Facilities not utilised at balance date: Bank overdrafts 22,223	40,393
Bank loans and capital markets 850,000	1,150,000
872,223	1,190,393

These facilities are unsecured and have an average maturity of 2.9 years (2013: 2.6 years) assuming the subordinated notes are repaid on the first call date (15 September 2017).

28. Related party information

(a) Key management personnel

The key management personnel of the Group during 2014 and 2013 were:

(i) Directors of Caltex Australia Limited during 2014 and 2013:

Current directors

Ms Elizabeth Bryan, Chairman and Independent, Non-executive Director

Mr Julian Segal, Managing Director & CEO

Mr Trevor Bourne, Independent, Non-executive Director

Mr Richard Brown, Non-executive Director

Ms Barbara Burger, Non-executive Director

Mr Greig Gailey, Independent, Non-executive Director

Mr Ryan Krogmeier, Non-executive Director

Mr Bruce Morgan, Independent, Non-executive Director (from 29 June 2013)

Former director

Mr John Thorn, Independent, Non-executive Director (to 9 May 2013)

Former alternate director

Ms Colleen Jones-Cervantes[*] (to 25 July 2013)

• Ms Colleen Jones-Cervantes previously served as alternate director for Mr Krogmeier (from 30 March 2012) and Mr Brown and Ms Burger (from 28 June 2012).

108 Caltex / 2014 annual RePORt

Notes to the financial statements continued

for the year ended 31 December 2014

28. Related party information continued

(a) Key management personnel continued

(ii) Senior executives

Current senior executives

Mr Julian Segal, Managing Director & CEO

Mr Andrew Brewer, General Manager – Supply Chain Operations (from 31 March 2014) Mr Simon Hepworth, Chief Financial Officer

Mr Peter Lim, General Manager – Legal & Corporate Affairs

Mr Mike McMenamin, General Manager – Strategy, Planning & Development Mr Bruce Rosengarten, General Manager – Marketing (from 1 November 2013) Mr Gary Smith, General Manager – Refining & Supply (to 9 May 2014)

Mr Simon Willshire, General Manager – Human Resources

Former senior executive

Mr Andy Walz, General Manager – Marketing (to 31 March 2013)

(b) Key management personnel compensation

(b) Key management personnel compensation
Dollars	2014	2013
Short term benefts	10,511,019	8,535,008
Other long term benefts	218,675	727,720
Post-employment benefts	294,518	315,382
Share basedpayments	4,900,945	4,008,445
	15,925,157	13,586,555

Information regarding directors’ and executives’ compensation and some equity instruments disclosures is provided in the Remuneration Report section of the Directors’ Report on pages 31 to 55.

(c) Other related entities

Chevron Global Energy Inc. holds a 50% interest in Caltex Australia Limited. Transactions with the Chevron Group are summarised below.

On 26 July 2012, Caltex Australia Limited announced a restructuring of its supply chain. As part of this supply chain restructuring, an agreement was made with Chevron for the procurement and supply of transport fuels (petrol, diesel and jet fuel) with associated shipping services to provide a reliable and efficient supply of imported product. This agreement was put in place to provide certainty of product supply and to meet the shortfall following Kurnell refinery’s conversion to an import terminal and growing demand. This agreement is on arm’s length terms and at market based prices.

The Group paid $7,070,000 (2013: $6,135,000) to the Chevron Group for technical service fees. The Group received $5,244,000 (2013: $3,558,000) for technical service fees from the Chevron Group. These fees are in the ordinary course of business and on normal commercial terms and conditions.

The Group paid $1,146,000 (2013: $1,469,000) to the Chevron Group, including Iron Horse Insurance Company for insurance coverage. Dealings with Iron Horse Insurance Company are in the ordinary course of business and on normal commercial terms and conditions.

The Group purchased crude, other refinery feedstocks and petroleum products from the Chevron Group of $4,355,821,000 (2013: $6,004,682,000). The Group sold crude, other refinery feedstocks and petroleum products to the Chevron Group of $393,366,000 (2013: $466,993,000). These purchases and sales are in the ordinary course of business and on normal commercial terms and conditions.

Payments were made to the Chevron Group in 2013 (2014: nil) in respect of the secondment of Mr Walz. Details of these payments are shown in the Remuneration Report on pages 31 to 55.

The Chevron Group seconded three employees (2013: one employee) primarily to provide specialist expertise at Lytton refinery and specialist support to the Strategy, Planning & Development group. The total cost borne by Caltex Australia in respect of these secondees was $1,790,157 (2013: $448,809 for one secondee). This cost includes salary and bonuses, allowances including relocation, and indirect payroll related expenses.

Caltex Australia seconded six employees to various roles within the Chevron Group during 2014 (2013: seven employees). Caltex paid the salary and bonuses, allowances including relocation, and indirect payroll related expenses for two of these Caltex employees and the Chevron Group paid the associated costs for the remaining four employees.

Amounts receivable from and payable to other related entities are set out in notes 7 and 13 respectively.

109

(d) Associates

The Group sold petroleum products to associates totalling $123,073,000 (2013: $135,910,000). The Group received income from associates for rental income of $149,000 (2013: $145,457).

Details of associates are set out in note 23. Amounts receivable from associates are set out in note 7. Dividend and disbursement income from associates is $600,000 (2013: $450,000).

Caltex has interests in associates primarily for the marketing, sale and distribution of fuel products. Details of Caltex’s interests are set out in note 23.

(e) Joint ventures

Caltex has interests in joint ventures primarily for the marketing, sale and distribution of fuel products. There were no related party transactions with Caltex’s joint venture entities during 2014 (2013: nil). Details of Caltex’s interests are set out in notes 23 and 24.

(f) Executive share plan and performance rights

Executive share plan

Since 1 January 2010, a mandatory deferral of short term incentives (STI) applies to senior executives. Under the deferral policy, one third of their STI, as long as the incentive is greater than $105,000, will be delivered in Caltex shares, which have a six month service related forfeiture risk and are restricted from sale for two years.

The directors approved the 2014 STI in February 2015 which includes a deferred value of $1,140,865 with a vesting date in October 2015 and will be held under restriction until April 2017. The number of shares to be issued to plan participants will be purchased on market during April 2015.

No STI was awarded to senior executives for the 2013 year due to Caltex failing to meet the required profit thresholds under the Rewarding Results Plan.

The 2012 STI was approved in February 2013 for a total value of $2,425,000 which equated to 115,993 shares at a grant date fair value of $20.90 per share (formalised in April 2013). The service related forfeiture condition was met in October 2013 and the shares will be held under restriction until April 2015.

110 Caltex / 2014 annual RePORt

Notes to the financial statements

continued

for the year ended 31 December 2014

28. Related party information continued

(f) Executive share plan and performance rights continued

Performance rights

Since 1 January 2007, senior executives may receive performance rights under Caltex Australia Limited’s Equity Incentive Plan, based on the achievement of specific targets related to the performance of the Group. The measure of performance is Total Shareholder Returns (TSR) over a three year period relative to two comparator groups.

Summary of performance rights in the plan:

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----- Start of picture text -----

oPenInG
BALAnCe GRAnteD vesteD DURInG tHe YeAR LAPseD DURInG tHe YeAR CLosInG BALAnCe
----- End of picture text -----

number of performance rights	start date	number performance rights Fair value of performance rights ($)	Distribution date	number of performance rights Weighted average fair value per share ($)	Lapsed date	number of performance rights Weighted average fair value per share ($)	number of performance rights Fair value aggregate ($)
2014 1,561,834 611,151 264,662	7 Apr 14 7 Apr 14 7 Apr 14 22 Apr 13 22 Apr 13	405,972 12.57 135,324 22.18 135,324 20.16 676,620 400,584 10.98 267,056 19.42 667,640	28 Feb 14 1 Apr 14 9 May 14 4 Jul 14 30 Sep 14 31 Dec 14 2 Apr 13 8 Mar 13 15 Apr 13	(17,200) 20.98 (245,667) 21.59 (18,617) 22.47 (33,403) 22.25 (29,828) 27.99 (23,211) 34.21 (367,926) (825,373) 22.54 (8,667) 22.38 (10,537) 21.93 (844,577)	28 Feb 14 1 Apr 14 9 May 14 4 Jul 14 1 Aug 14 30 Sep 14 31 Dec 14 2 Apr 13 8 Mar 13 15 Apr 13 23 Aug 13	(40,904) – (361,262) – (130,094) – (90,698) – (7,940) – (67,059) – (30,273) – (728,230) (262,081) – (6,047) – (18,617) – (5,985) – (292,730)	1,340,333 13,155,109 215,272 1,618,845 462,806 9,402,724
2,437,647							2,018,111 24,176,678
2013 1,456,331 1,450,983							1,561,834 12,955,560 611,151 3,723,317 264,662 5,139,736
2,907,314							2,437,647 21,818,613

111

The inputs used in the measurement of the fair values at each grant date were as follows:

==> picture [498 x 200] intentionally omitted <==

----- Start of picture text -----

2014 GRAnt 2013 GRAnt 2012 GRAnt
Free Free International
AsX 100 cash flow AsX 100 cash flow AsX 100 refining and
Accumulation and strategic Accumulation and strategic Accumulation marketing
Index hurdle Index hurdle Index companies
Grant date 7 April 2014 7 April 2014 22 April 2013 22 April 2013 2 April 2012 2 April 2012
Vesting date 1 April 2017 1 April 2017 1 April 2016 1 April 2016 1 April 2015 1 April 2015
Fair value at grant date $12.57 $20.16 $10.98 $19.42 $7.69 $7.52
Share price at grant date $21.85 $21.85 $20.60 $20.60 $14.03 $14.03
Volatility 35% 35% 40% 40% 45% 45%
Dividend yield 2.7% 2.7% 2.0% 2.0% 4.7% 4.7%
Risk free interest rate 3.0% 3.0% 2.7% 2.7% 3.5% 3.5%
thousands of dollars 2014 2013
Executive share plan expense 7,050 8,181
----- End of picture text -----

29. net tangible assets per share

29. net tangible assets per share
	2014	2013
Net tangible assetsper share(dollars)	8.64	9.05

Net tangible assets are net assets attributable to members of Caltex less intangible assets. The weighted average number of ordinary shares used in the calculation of net tangible assets per share was 270 million (2013: 270 million).

112 Caltex / 2014 annual RePORt

Notes to the financial statements continued

for the year ended 31 December 2014

30. segmented reporting

(a) Segment disclosures

The accounting policies used by the Group in reporting segments are detailed in note 1.

Types of products and services

The following summary describes the operations in each of the Group’s reportable segments:

Marketing

The Marketing function promotes and sells Caltex fuels, lubricants, specialty products and convenience store goods through a national network of Caltex, Caltex Woolworths and Ampol branded service stations, as well as through company owned and non-equity resellers and direct sales to corporate customers.

Supply Chain

Caltex sources the supply of both crude oil and refined products on the international market and refines crude oil into petrol, diesel, jet fuel, along with small amounts of fuel oil and specialty products, liquid gas petroleum and other gases. Caltex buys and sells products and schedules product movements to meet marketing sales and the company’s broad distribution capabilities encompass pipelines, terminals, depots and both a company and contracted transportation fleet.

(b) Information about reportable segments

==> picture [498 x 255] intentionally omitted <==

----- Start of picture text -----

totAL oPeRAtInG
MARketInG sUPPLY CHAIn seGMents
thousands of dollars 2014 2013 2014 2013 2014 2013
Gross segment revenue 20,409,251 20,144,017 2,812,772 3,580,978 23,222,023 23,724,995
Product duties and taxes (5,269,246) (5,151,283) – – (5,269,246) (5,151,283)
External segment revenue 15,140,005 14,992,734 2,812,772 3,580,978 17,952,777 18,573,712
– –
Inter-segment revenue 13,834,802 13,850,421 13,834,802 13,850,421
total segment revenue 15,140,005 14,992,734 16,647,574 17,431,399 31,787,579 32,424,133
Share of profit of associates and
joint ventures 917 158 – – 917 158
Depreciation and amortisation (79,799) (69,880) (90,072) (87,524) (169,871) (157,404)
Replacement Cost of Sales Operating
Profit before interest and income tax 811,910 764,151 64,044 (170,655) 875,954 593,496
other material items:
Inventory gains/(losses) 35,631 (20,681) (551,325) 267,126 (515,694) 246,445
Capital expenditure
(including acquisitions) (274,193) (240,085) (230,940) (320,853) (505,133) (560,938)
----- End of picture text -----

113

(c) Reconciliation of reportable segment revenues, profit or loss and other material items

==> picture [498 x 382] intentionally omitted <==

----- Start of picture text -----

|||||
|---|---|---|---|
|thousands of dollars|2014|2013|
|Revenues|
|Total revenue for reportable segments|31,787,579|32,424,133|
|Product duties and taxes|5,269,246|5,151,283|
|Elimination of inter-segment revenue|(13,834,802)|(13,850,421)|
|Total reportable segments gross revenue|23,222,023|23,724,995|
|Non-fuel income and rebates|656,157|627,193|
|Other revenue|353,020|324,195|
|Consolidated revenue|24,231,200|24,676,383|
|Profit or loss|
|Segment Replacement Cost of Sales Operating Profit before interest and income tax,|
|excluding significant items|875,954|593,496|
|Other expenses|(81,443)|(42,101)|
|Replacement Cost of Sales Operating Profit before interest and income tax,|
|excluding significant items|794,511|551,395|
|Significant items excluded from profit and loss reported to the chief operating decision maker:|
|–|
|Consulting fees|(25,065)|
|–|
|Foreign exchange gains on repayment of finance facilities|4,755|
|–|
|Redundancy expenses|(53,814)|
|Contract cancellation costs|(12,000)|–|
|–|
|Provisions relating to asset rationalisation projects|(53,728)|
|–|
|Gain on sale of bitumen business, net of costs relating to acquisitions and disposals|38,766|
|Provisions relating to closure of the Kurnell refinery|–|(11,003)|
|Replacement Cost of sales operating Profit before interest and income tax|654,659|579,158|
|Inventory|(losses)/gains|(515,694)|246,445|
|Consolidated historical cost profit before interest and income tax|138,965|825,603|
|Net financing costs|(111,370)|(88,791)|
|Net profit/(loss) attributable to non-controlling interest|2,739|(1,271)|
|Consolidated profit before income tax|30,334|735,541|

----- End of picture text -----

==> picture [498 x 138] intentionally omitted <==

----- Start of picture text -----

|||||
|---|---|---|---|
|Reportable|
|segment|Consolidated|
|thousands of dollars|totals|other|totals|
|other material items 2014|
|Depreciation and amortisation|(169,871)|(33,114)|(202,985)|
|–|
|Inventory gains|(515,694)|(515,694)|
|Capital expenditure|(505,133)|(4,412)|(509,545)|
|other material items 2013|
|Depreciation and amortisation|(157,404)|(8,213)|(165,617)|
|–|
|Inventory losses|246,445|246,445|
|Capital expenditure|(560,938)|(6,998)|(567,936)|

----- End of picture text -----

(d) Geographical segments

The Group operates in Australia and Singapore. Revenue is predominantly generated in Australia.

All of the Group’s non-financial non-current assets are located in the Group’s country of domicile, Australia.

(e) Major customer

Revenues from one customer of the Group’s Marketing segment represent approximately $4,700,000,000 (2013: $4,800,000,000) of the Group’s total gross sales revenue (excluding product duties and taxes).

114 Caltex / 2014 annual RePORt

Notes to the financial statements

continued

for the year ended 31 December 2014

30. segmented reporting continued

(f) Revenue from products and services

30. segmented reportingcontinued (f) Revenue from products and services
thousands of dollars	2014	2013
Petrol	7,101,556	7,343,355
Diesel	7,599,818	7,856,634
Jet	2,307,913	2,248,123
Lubricants	273,552	279,891
Specialty and other products	669,938	845,709
Non-fuel income and rebates	656,157	627,193
Product duties and taxes	5,269,246	5,151,283
Other revenue	353,020	324,195
	24,231,200	24,676,383

31. Parent entity disclosures

As at, and throughout, the financial year ended 31 December 2014, the parent entity of the Group was Caltex Australia Limited.

thousands of dollars	2014	2013
Result of the parent entity
Proft for the period	78,770	6,317
Other comprehensive income	6,497	9,227
Total comprehensive income for theperiod	85,267	15,544
Financial position of parent entity at year end
Current assets	61,059	133,664
Total assets	2,068,326	2,240,726
Current liabilities	2,808	126,286
Total liabilities	1,512,017	1,667,865
total equity of the parent entity comprising:
Issued capital	543,415	543,415
Treasury stock	(607)	(610)
Reserves	(6,267)	(10,840)
Retained earnings	19,768	40,896
Total equity	556,309	572,861

Parent entity guarantees in respect of the debts of its subsidiaries

The parent entity has entered into a Deed of Cross Guarantee with the effect that each company agrees to guarantee all of the debts (in full) of all companies that are parties to the deed subject to, and in accordance with, the terms set out in the deed.

Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed are disclosed in note 22(a).

32. events subsequent to the end of the year

On 10 February 2015, Mr Adam Ritchie was appointed as the new General Manager – Supply, effective from 1 April 2015.

There were no other items, transactions or events of a material or unusual nature, that, in the opinion of the Board, are likely to significantly affect the operations of Caltex, the results of those operations or the state of affairs of the Group subsequent to 31 December 2014.

115

Comparative Financial Information

The additional information on pages 115 to 116 is provided for the information of shareholders. The information is based on, but does not form part of, the 2014 Financial Report.

Caltex Australia Limited consolidated results	2014	2013	2012	2011	2010
Proft and loss ($ million)
Historical cost operating proft before signifcant items,
interest and income tax expense	279	798	624	640	522
Interest income	8	9	2	1	2
Borrowing costs before signifcant items(i)	(99)	(98)	(99)	(69)	(59)
Historical cost income tax expense before signifcant items	(56)	(205)	(161)	(170)	(131)
Historical cost operating proft after tax and before
signifcant items	132	504	366	402	333
Signifcant items (net of tax)	(112)(i)	26(ii)	(309)(iii)	(1,116)	(16)
Historical cost operating proft/(loss) after income tax	20	530	57	(714)	317
Dividends
Amount paid and payable ($/share)	0.70	0.34	0.40	0.45	0.60
Times covered (excl. signifcant items)	0.70	5.49	3.39	3.31	2.06
Dividend payout ratio – replacement cost basis(iv)
(excl. signifcant items)	38%	28%	24%	46%	51%
Dividend franking percentage	100%	100%	100%	100%	100%
Other data
Total revenue ($ million)	24,231	24,676	23,542	22,400	18,931
Earnings per share – historical cost (cents per share)	7	196	21	(264)	117
Earnings per share – replacement cost (cents per share)
(excl. signifcant items)	183	123	170	98	118
Earnings before interest and tax – historical cost basis ($m)
(excl. signifcant items)	279	798	624	640	522
Earnings before interest and tax – replacement cost basis ($m)
(excl. signifcant items)	795	551	756	442	500
Operating cash fow per share ($/share)	2.5	2.3	1.5	1.7	1.6
Interest cover – historical cost basis	1.3	9.3	1.9	(14.0)	8.7
Interest cover – replacement cost basis (excl. signifcant items)	8.8	6.2	7.8	6.5	8.7
Return on capital employed – historical cost basis (%)(v)	0.7	15.8	2.0	(25.2)	8.7
Return on capital employed – replacement cost basis (excl.
signifcant items) (%)(iv)	15.5	9.9	15.8	9.3	8.8
Equity attributable to members of the company ($m)	2,521	2,588	2,148	2,206	3,071
Total equity ($m)	2,533	2,597	2,160	2,218	3,083
Return on equity attributable to members of the parent entity
after tax and before signifcant items – historical cost basis (%)	1	20	3	(32)	10
Total assets ($m)	5,129	6,021	5,386	4,861	5,291
Net tangible asset backing ($/share)	8.64	9.05	7.55	7.82	11.08
Debt ($m)	692	942	950	619	563
Net debt ($m)	639	742	740	617	544
Net debt to net debtplus equity (%)	20	22	26	22	15

(i) Includes significant items before tax totalling a loss of $160,163,000, that have been recognised in the income statement.

These items relate to the Group cost and efficiency review project and include consulting fees ($25,065,000), redundancy costs ($53,814,000), contract cancellation costs ($12,000,000), interest expense ($20,311,000), foreign exchange gains ($4,755,000) and accelerated depreciation ($22,773,000) and environmental liabilities ($30,955,000).

(ii) Includes significant items totalling a gain of $27,763,000 before tax, that have been recognised in the income statement.

These items relate to a gain on the sale of the bitumen business, net of costs relating to acquisitions and disposals ($38,766,000) and the net adjustment to provisions ($11,003,000) relating to the closure of the Kurnell refinery.

(iii) Includes significant items relating to employment benefit and remediation provisions ($430,000,000) arising from the announcement on 26 July 2012 of the planned 2014 closure of the Kurnell refinery in New South Wales, Australia and its proposed conversion to an import terminal. The remaining expenses of $11,355,000 relate to cancelled capital projects associated with the Kurnell refinery.

(iv) Dividend payout ratio – replacement cost basis calculated as follows:

Dividends paid and payable in respect of financial year

Replacement cost profit after income tax (excl. significant items) Net Profit After Tax Net Debt + Equity

(v) Return on capital employed is calculated as follows:

116 Caltex / 2014 annual RePORt

Replacement Cost of Sales operating profit Basis of Accounting

• To assist in understanding the Group’s operating performance, the directors have provided additional disclosure of the Group’s results for the year on a replacement cost of sales operating profit basis[ (i)] , which excludes net inventory gains and losses.

• On a replacement cost of sales operating profit basis excluding significant items, the Group’s net profit after income tax for the year was $493 million, compared to a profit of $332 million in 2013.

• 2014 net profit before interest, income tax and significant items on a replacement cost of sales operating profit basis was $795 million, an increase of $244 million over 2013.

$ million	Five years*	2014	2013	2012	2011	2010
Historical cost net proft before interest,
income tax and signifcant items	2,863	279	798	624	640	522
(Deduct)/add inventory (gains)/losses(ii)	184	516	(246)	132	(197)	(21)
Replacement cost of sales operating net proft
before interest, income tax and signifcant items	3,044	795	551	756	442	500
Net borrowing costs	(402)	(91)	(89)	(97)	(68)	(57)
Historical cost income tax expense before
signifcant items	(723)	(56)	(205)	(161)	(170)	(131)
Add/(deduct) tax effect of
inventory gains/(losses)	(56)	(155)	74	(40)	59	6
Replacement cost of sales operating proft after
income tax(iii)	1,865	493	332	458	264	318

• Note: Totals in table may not sum due to rounding.

(i) The replacement cost of sales operating profit basis (RCOP) removes the impact of inventory gains and losses, giving a truer reflection of underlying financial performance. Gains and losses in the value of inventory due to fluctuations in the USD price of crude oil and foreign exchange impacts constitute a major external influence on company profits. RCOP restates profit to remove these impacts. The Caltex RCOP methodology is consistent with the methods used by other refining and marketing companies for restatement of their financials.

As a general rule, an increase in crude prices on an Australian dollar basis will create an earnings gain for Caltex (but working capital requirements will also increase). Conversely, a drop in crude prices on an Australian dollar basis will create an earnings loss. This is a direct consequence of the first in first out (FIFO) costing process used by Caltex in adherence with accounting standards to produce the financial result on a historical cost basis. With Caltex holding approximately 45 to 60 days of inventory, revenues reflect current prices in Singapore whereas FIFO costings reflect costs some 45 to 60 days earlier. The timing difference creates these inventory gains and losses.

To remove the impact of this factor on earnings and to better reflect the underlying performance of the business, the RCOP NPAT methodology calculates the cost of goods sold on the basis of theoretical new purchases instead of actual costs from inventory. The cost of these theoretical new purchases is calculated as the average monthly cost of cargoes received during the month of those sales.

(ii) Historical cost results include gross inventory gains or losses from the movement in crude oil prices. In 2014, the historical cost result includes $516 million inventory loss (2013: $246 million inventory gain). Net inventory loss is adjusted to reflect impact of revenue lags.

(iii) Replacement cost of sales operating profit after income tax is calculated before taking into account any significant items over the five years. The total effect of these significant items in each year was:

2010: $23 million expenses before tax ($16 million after tax)

2011: $1,594 million expenses before tax ($1,116 million after tax)

2012: $441 million expenses before tax ($309 million after tax)

2013: $28 million gain before tax ($26 million after tax)

2014: $160 million expenses before tax ($112 million after tax).

117

Shareholder Information

Share capital

The information contained on pages 117 to 118 of this Annual Report is current as at 23 February 2015.

Substantial shareholders

The following shareholders are substantial shareholders of Caltex Australia Limited.

	ordinary	% of issued
shareholder	shares held	shares
Chevron Global EnergyInc	135,000,000	50%

Distribution of shareholdings

Caltex Australia Limited has one class of equity securities (ordinary shares) and the number of holders of those securities is 20,623.

The shareholdings in Caltex Australia Limited shares are distributed as set out in the table below.

	number of	number of	% of issued
number of shares	shareholders	shares held	shares
1 – 1,000	15,316	6,514,308	2.41
1,001 – 5,000	4,615	10,426,109	3.86
5,001 – 10,000	429	3,176,630	1.18
10,001 – 100,000	228	5,625,368	2.08
100,001 and over	35	244,257,585	90.47
total	20,623	270,000,000	100

As at 23 February 2015, 270 shareholders hold less than a marketable parcel of Caltex Australia Limited shares.

Details of the 20 largest shareholders of Caltex Australia Limited shares are listed in the table below.

		number of	% of issued
	shareholder	shares held	shares
1.	Chevron Global Energy Inc	135,000,000	50.00
2.	HSBC Custody Nominees (Australia) Limited	33,947,179	12.57
3.	J P Morgan Nominees Australia Limited	27,413,829	10.15
4.	National Nominees Limited	20,154,862	7.46
5.	Citicorp Nominees Pty Limited	10,436,592	3.87
6.	HSBC Custody Nominees (Australia) Limited	3,174,156	1.18
7.	BNP Paribas Noms Pty Ltd	2,687,204	1.00
8.	RBC Investor Services Australia Nominees Pty Limited	1,854,449	0.69
9.	Pan Australian Nominees Pty Limited	1,341,965	0.50
10.	Citicorp Nominees Pty Limited	1,138,731	0.42
11.	AMP Life Limited	924,336	0.34
12.	National Nominees Limited	918,430	0.34
13.	RBC Investor Services Australia Nominees Pty Limited	820,733	0.30
14.	Australian Foundation Investment Company Limited	455,000	0.17
15.	AET SFS Pty Ltd	309,471	0.11
16.	Share Direct Nominees Pty Ltd <10026 A/C>	299,398	0.11
17.	Invia Custodian Pty Limited	297,628	0.11
18.	BNP Paribas Nominees Pty Ltd	274,913	0.10
19.	UBS Nominees Pty Ltd	237,760	0.09
20.	RBC Investor Services Australia Nominees PtyLimited	236,762	0.09
	total	241,923,398	89.60

On-market buy-back

There is currently no on-market buy-back.

118 Caltex / 2014 annual RePORt

Shareholder Information continued

Shareholder enquiries

Shareholders with queries about their shares or dividend payments should contact Caltex’s share registry, Computershare, on phone 1300 850 505 or fax +61 3 9473 2500, or through its website (www.computershare.com.au) using their holder identification number (HIN) or shareholder reference number (SRN) to access their shareholder specific information, or write to:

Computershare Investor Services Pty Limited GPO Box 2975 Melbourne VIC 3001 Australia

All enquiries should include a SRN or HIN, which is recorded on the shareholder’s holding statement.

Change of address

Shareholders on the issuer sponsored sub-register who have changed their address should notify the share registry in writing. CHESS holders should notify their controlling sponsor.

Caltex publications

Caltex’s annual report published in March each year is the main source of information for shareholders. The annual report is available on Caltex’s website (www.caltex.com.au). Shareholders who wish to receive a hard copy of the annual report or half year report should notify the share registry in writing.

Voting rights

The share capital of Caltex Australia Limited comprises 270 million fully paid ordinary shares. Shareholders in Caltex Australia Limited have a right to attend and vote at all general meetings in accordance with the company’s Constitution, the Corporations Act and the ASX Listing Rules.

At a general meeting, individual shareholders may vote their shares in person or by proxy. A corporate shareholder may vote by proxy or through an individual who has been appointed as the company’s body corporate representative. Shareholders with at least two shares may appoint up to two proxies to attend and vote at a general meeting.

Securities exchange listing

The company’s shares and Caltex Subordinated Notes are listed on the Australian Securities Exchange (ticker: CTX and CTXHA).

General enquiries

Investor Relations

Rohan Gallagher +61 2 9250 5247

Company Secretaries

Peter Lim, Katie King, John Remedios and Nawal Silfani The address and telephone of the registered office is:

Level 24

2 Market Street Sydney NSW 2000 Telephone: +61 2 9250 5000 Fax: +61 2 9250 5742

The postal address is:

GPO Box 3916 Sydney NSW 2001 Website: www.caltex.com.au

The address at which the register of shares is kept is:

Computershare Investor Services Pty Limited Level 4, 60 Carrington Street Sydney NSW 2000 Australia Tollfree: 1300 850 505 (enquiries within Australia) Telephone: +61 3 9415 4000 (enquiries outside Australia) Fax: +61 3 9473 2500

Website:

www.computershare.com.au

The postal address is: GPO Box 2975 Melbourne VIC 3001 Australia

If shares are held jointly and two or more of the joint shareholders wish to vote, the vote of the shareholder named first in the register will be counted, to the exclusion of the other joint shareholder or shareholders.

Shareholders who are entitled to vote at the meeting should note that:

• on a poll, each shareholder has one vote for each share they hold, and

• on a show of hands, each shareholder has one vote.

If the shareholder has appointed a proxy, the proxy may vote but, if two proxies are appointed, neither proxy may vote on a show of hands.

For a complete analysis of shareholders’ voting rights, it is recommended that shareholders seek independent legal advice.

119

Statistical Information

Year ended 31 December	2014	2013	2012	2011	2010
People
Employees(i)	3,067	3,638	3,610	3,550	3,546
Assets
Fuel refneries	1	2	2	2	2
Lube oil refnery(ii)	–	–	–	1	1
Road tankers(iii)	252	216	168	168	170
Rail cars (operational)	42	66	66	66	66
Storage terminals operated by Caltex(iv)	13	12	12	13	12
Star convenience stores (Star Mart, Star Supermarket and Star Shop)	496	491	480	476	472
Service stations (owned or leased)	795	765	738	746	743
Depots	81	76	76	79	79
operations
Nameplate refning capacity (barrels per day)
Caltex Refneries (NSW) Pty Ltd(v)	–	135,000	135,000	135,000	135,000
Caltex Refneries (Qld) Pty Ltd	109,000	109,000	109,000	109,000	109,000
Caltex Lubricating Oil Refnery Pty Ltd(ii)	–	–	–	3,750	3,750
Fuel production (ML)	10,245	11,398	11,648	10,686	10,607
Lubricants production (ML)(ii)	–	–	–	15	78
Total sales volume (ML)	16,991	16,957	16,628	16,619	16,047
Lost time injuryfrequencyrate(LTIFR)(vi)	0.77	0.63	0.59	0.99	1.35

(i) Includes employees of Calstores Pty Ltd and Caltex 100% owned resellers.

(ii) Lube oil refinery closed in December 2011.

(iii) From 2009, road tanker numbers include Caltex 100% owned reseller fleet.

(iv) Caltex has access to product supply at a further seven terminals.

(v) Caltex Refineries (NSW) Pty Ltd (Kurnell refinery) ceased production in October 2014.

(vi) Employee and contractor lost time injury frequency rate per million work hours. From 2010, the injury frequency rate was changed to include Marketing contractors.

120 CALtEx / 2014 ANNUAL REpoRt

Directory

CoRPoRAte oFFICes

Caltex Australia Limited ACN 004 201 307

Caltex Australia Petroleum Pty Ltd ACN 000 032 128

Level 24 2 Market Street Sydney NSW 2000 Australia

Mail: GPO Box 3916 Sydney NSW 2001 Australia

T: +61 2 9250 5000 F: +61 2 9250 5742 www.caltex.com.au

sHARe ReGIstRY

Computershare Investor Services Pty Limited GPO Box 2975 Melbourne VIC 3001 Australia

Tollfree: 1300 850 505 (enquiries within Australia) T: +61 3 9415 4000 (enquiries outside Australia) F: +61 3 9473 2500

MARketInG oFFICes

New South Wales

Caltex Banksmeadow terminal Penhryn Road Banksmeadow NSW 2019

T: +61 2 9695 3600 F: +61 2 9666 5737

Queensland/ Northern Territory Caltex Lytton terminal

Tanker Street, off Port Drive Lytton QLD 4178

T: +61 7 3877 7333 F: +61 7 3877 7464

Victoria/Tasmania

Caltex Newport terminal 411 Douglas Parade Newport VIC 3015

T: +61 3 9287 9555 F: +61 3 9287 9572

Western Australia

Caltex Fremantle 85 Bracks Street North Fremantle WA 6159

T: +61 8 9430 2888 F: +61 8 9335 3062

CUstoMeR sUPPoRt FeeDBACk LIne

Complaints, compliments and suggestions Mon–Fri 8.30am to 5.00pm (EST)

T: 1800 240 398

Card Support Centre Card enquiries 24 hours/seven days

T: 1300 365 096

Lubelink

Mon–Thurs 8.00am to 6.00pm (EST) Fri 8.00am to 5.00pm (EST)

T: 1300 364 169 www.caltex.com.au

www.computershare.com.au

ReFIneRY

Caltex Refineries (Qld) Pty Ltd ACN 008 425 581

South Street Lytton QLD 4178

T: +61 7 3362 7555 F: +61 7 3362 7111

Environmental hotline: 1800 675 487

The Caltex 2014 Annual Report cover is printed on Pacesetter Laser Pro. This is FSC[®] Mix Certified, which ensures that all virgin pulp is derived from well-managed forests and controlled sources. It is manufactured by an ISO 14001 certified mill.

The text pages are printed on Sumo Offset. This is an environmentally responsible paper manufactured under the environmental management system ISO 14001 using Elemental Chlorine Free (ECF) pulp sourced from certified well managed forests. Sumo Offset is FSC[®] Mixed Sources Chain of Custody (CoC) certified.

==> picture [211 x 53] intentionally omitted <==

2014 ANNUAL REVIEW

==> picture [143 x 52] intentionally omitted <==

==> picture [213 x 39] intentionally omitted <==

finanCial Calendar Year ended 31 december 2014 07 May 2015 Annual General Meeting

Year ending 31 december 2015* 24 august 2015 Half year results and interim dividend announcement

With a commitment to Australia tracing back to 1900, Caltex has grown to become the nation’s outright leader in transport fuel. Caltex supplies one-third of all Australia’s transport fuels and is unique in this market for being the only major brand listed on the Australian Securities Exchange. Through a flexible fuel supply chain, Caltex has forged its reputation for providing safe and reliable supply of high-quality fuels to a diverse number of customer segments, including retail, mining, agriculture, aviation, transport, small-to-medium enterprises, marine, automotive and government. Caltex is also one of Australia’s largest convenience retailers and franchisors, with over 85% of its stores operated by franchisees.

08 septeMber 2015

Record date for interim dividend entitlement

30 septeMber 2015 Interim dividend payable if declared

22 february 2016 Full year results and final dividend announcement

08 MarCh 2016 Record date for final dividend entitlement

==> picture [143 x 96] intentionally omitted <==

During 2014, Caltex launched its largest advertising campaign in almost a decade. Its aim was to demonstrate that Caltex moves more Australians than any other name, and no matter where you are in Australia, or what you drive, Caltex is with you all the way.

31 MarCh 2016 Final dividend payable if declared

• These dates are subject to change.

Contents

ifC With you all the way

• 1 Highlights

• 6 Report from the Chairman and the Managing Director & CEO

• 8 Our strategy

• 10 Operational report – Marketing

• 12 Operational report – Supply Chain

• 14 Sustainable operations

• 24 Directors and leadership team

• 26 Five year summary

• 27 Replacement cost of sales basis of accounting and statistical information

• 28 Shareholder information bC Directory

This 2014 Annual Review for Caltex Australia Limited has been prepared as at 23 February 2014. The 2014 Annual Review provides a summary of Caltex’s main operating activities and performance for the year ended 31 December 2014. For further information about Caltex’s results and performance in 2014, please refer to the 2014 Annual Report (and the 2014 Financial Report, which forms part of the 2014 Annual Report). These and other reports are available from our website (www.caltex.com.au). When we refer to the Caltex Australia Group in this 2014 Annual Review, we are referring to:

• Caltex Australia Limited (ACN 004 201 307), which is the parent company of the Caltex Australia Group and is listed on the Australian Securities Exchange (ASX)

• our major operating companies, including Caltex Australia Petroleum Pty Ltd, Caltex Refineries (NSW) Pty Ltd, Caltex Refineries (Qld) Pty Ltd, Caltex Petroleum Services Pty Ltd and Calstores Pty Ltd

• a number of wholly owned entities and other companies that are controlled by the Group.

• Please note that terms such as Caltex and Caltex Australia have the same meaning in the 2014 Annual Review as the Caltex Australia Group, unless the context requires otherwise.

Shareholders can request a printed copy of the 2014 Annual Review and/or the 2014 Annual Report

(and 2014 Financial Report), free of charge, by writing to the Company Secretary, Caltex Australia Limited, Level 24, 2 Market Street, Sydney NSW 2000 Australia.

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6% 97% 10% 49% inCrease in Marketing refinery MeChaniCal inCrease in iMported inCrease in preMiuM earnings before aVailability refined produCt diesel sales interest and taX A five year high in mechanical Following the successful closure This includes Vortex Diesel Increased from $764 million in availability at Lytton refinery and conversion of the Kurnell and TecDiesel. These products 2013 to $812 million in 2014. enabled record production of refinery on-time and on-budget. represented 33% of total diesel sales in 2014.

refinery MeChaniCal aVailability A five year high in mechanical availability at Lytton refinery enabled record production of high value products in 2014.

historiC Cost of sales operating profit (hCop) ($ Million)

replaCeMent Cost of sales operating profit (rCop) ($ Million)

refinery transport fuel produCtion (billion litres)

transport fuel sales (billion litres)

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On a historic cost basis (including inventory losses), Caltex recorded an after tax profit of $20 million for the 2014 full year. This includes a loss relating to significant items of approximately $112 million after tax and a product and crude oil inventory loss of $361 million after tax.

Caltex recorded an after tax profit for the 2014 full year of $493 million, excluding significant items, on a replacement cost of sales operating profit basis (RCOP), which is our preferred measure, as it excludes net inventory gains and losses and better represents the underlying performance of the business.

The first half of 2014 saw a record production of petrol, diesel and jet fuel. The reduction in the second half reflects the closure of the Kurnell refinery in October 2014.

Fuel sales volumes continued to grow in 2014. The higher sales of premium grades of petrol and diesel, and jet fuel, offset the long term decline in demand for regular unleaded petrol, including E10.

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CALTEx / 2014 ANNUAL REVIEW

Marketing

Caltex is the outright leader in transport fuels across Australia. We are continuing to evolve to stay ahead of the competition.

The highlights of 2014, which produced a record earnings before interest and tax, include increased fuel sales across jet, diesel and premium fuels. The year also saw the structure of the Marketing business simplified to enable Caltex to be more customer-led, responsive and agile.

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supply Chain

Caltex continues to fuel Australia with safe, reliable and quality product. ongoing competitive supply is key to our business. The highlights of the year included the completion of Australia’s largest fuel import terminal at Kurnell, the record operational and utilisation metrics achieved by the Lytton refinery and the successful implementation of our new sourcing arrangements with Ampol Singapore, a wholly owned subsidiary of Caltex Australia.

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sustainable operations

Caltex always remains focused on maintaining safe, reliable and sustainable operations, despite a rapidly changing industry.

This is reflected in our commitment to being an employer of choice, limiting our impact on the environment, remaining a good community neighbour and continuing to add value for our shareholders. This commitment is echoed in our business plans and day-to-day operations.

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CALTEx / 2014 ANNUAL REVIEW

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REpoRT fRom ThE ChAIRmAN ANd ThE mANAgINg dIRECToR & CEo

2014 was a significant year for Caltex. It was a transformational year that built upon the success of the past 114 years and laid a strong foundation for the future.

Elizabeth Bryan Am Chairman

Julian Segal Managing Director & CEO

71 % share price

increase in 2014. On 31 December 2014, the share price closed at $34.21, compared with $20.05 on 31 December 2013.

tranSforming our buSineSS

In 2011, the articulation of Caltex’s vision – to be the outright leader in transport fuels across Australia – became a catalyst for change. Since then, this vision, as measured by top quartile total shareholder returns, has driven rapid and significant change at Caltex. It was this clear vision and an effective culture that has enabled Caltex to confidently embark on its transformation path, including the supply chain restructure announced in 2012.

in 2011, the articulation of caltex’s vision – to be the outright leader in transport fuels across australia – became a catalyst for change.

This path has culminated in the successful conversion of the Kurnell refinery into Australia’s largest fuel terminal, increased investment in our distribution infrastructure, and the establishment of a product sourcing capability in Singapore. Each of these elements is key in the transformation of our business into an integrated transport fuels supply chain company.

SucceSSful tranSition

October 2014 saw the shutdown of Kurnell refinery’s last process units and the commencement of the new Kurnell terminal, now Australia’s largest transport fuels terminal. This was the most significant achievement of 2014 and a milestone for the transition project announced in July 2012. The purpose of the project was to enable continued reliable supply of transport fuels to Caltex customers, while stemming Kurnell refinery operating losses and reducing our exposure to volatile refining margins.

The new terminal supplies fuel to retail sites and commercial customers across New South Wales and the Australian Capital Territory. It will provide 660 million litres of storage capacity once stage two is completed in 2016.

The total cost of the terminal conversion is approximately $270 million, with close to $50 million remaining to be spent in 2015. This includes additional upgrades to the wharf and the final tank conversions once the refinery is closed. Further site works, including demolition of redundant plant and remediation, will be carried out over a number of years.

continued focuS on SafetY

Overall, the total treated injury frequency rate (TTIFR) was slightly higher than the record 2013 result at 1.75 per million hours worked, compared with 1.36 per million hours worked in 2013. The lost time injury frequency rate (LTIFR) was also slightly higher than the previous year at 0.77 per million hours worked, compared with 0.63 per million hours worked in 2013.

The Board and management are committed to driving continued improvement in our safety performance and, given the slippage in our personal safety performance in 2014, are taking additional steps to do this in 2015.

financial reSultS

For the 2014 full year, Caltex recorded an after tax profit of $20 million on a statutory, or historic cost of sales operating profit measure, including a loss relating to significant items of approximately $112 million after tax. This compares with the 2013 full year profit of $530 million. The 2014 result includes a product and crude oil inventory loss of $361 million after tax and reflects a significant fall in Brent crude oil prices in the latter months of 2014.

On a replacement cost of sales operating profit (RCOP) basis, which is our preferred measure, as it excludes net inventory gains and losses, Caltex recorded an after tax profit for the 2014 full year of $493 million, excluding significant items. This compares with an RCOP after tax profit of $332 million for the 2013 full year, excluding significant items.

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diVidend

The Board declared a final dividend of 50 cents per share (fully franked) for the second half of 2014. Combined with the interim dividend of 20 cents per share for the first half, paid in September 2014, this equates to a total dividend of 70 cents per share for 2014, fully franked. This compares with a total dividend payout of 34 cents per share (fully franked) for 2013, and is at the upper end of the reduced payout ratio (20% to 40%) during the Kurnell closure period.

continued marketing growth

Marketing delivered another record year with earnings before interest and tax (EBIT) of $812 million. This is 6% higher than the $764 million achieved in 2013. The strong result was delivered despite the loss of earnings from the Sydney bitumen business, which was divested in December 2013.

Driving sales of premium fuels (including Vortex Diesel), remains a focus for Marketing. Higher sales of premium grades of petrol and diesel, and jet fuel, continue to offset the long term decline in demand for unleaded petrol, including E10. Continued investment in growth, including new retail service stations and diesel stops and the refurbishment of existing service stations, underpinned the increased penetration of premium Vortex products.

Recent acquisitions, such as the Queensland Fuel Group in 2013 and the Scott’s Fuel Divisions, which was completed in June 2014, also contributed to the strong Marketing result.

caltex will continue to leverage and optimise its strong supply chain in order to target higher growth, in addition to expanding both the breadth and quality of our retail and reseller network.

refining improVement

Refining and Supply, now known as Supply Chain, delivered an EBIT result of $64 million for the 2014 full year. This compares with an EBIT loss of $171 million for 2013, and a 2014 first half loss of $65 million. The 2014 result has benefited from the impact of favourable externalities, particularly in the fourth quarter of the year. Lytton refinery’s strong operating performance during this period enabled the refinery to take advantage of these favourable conditions. In a year dominated by the Kurnell conversion project, the Kurnell refinery generated a 2014 EBIT loss of approximately $69 million.

the influence of externalitieS

The realised Caltex Refiner Margin (CRM) averaged US$12.42 per barrel for the 2014 full year. The strong July to December 2014 average CRM of US$16.38 per barrel compares favourably with both the 2014 first half average of US$9.20 per barrel and the 2013 full year average of US$9.34 per barrel. The sharp decline in Brent crude oil prices in the latter part of the year was a major contributor to the stronger average refiner margin in the second half as product prices did not fall as quickly as the crude price.

The fall in the Australian dollar has had a favourable m impact on the Australian dollar denominated refiner margin, but resulted in a net loss after hedging on 660 US dollar payables of approximately $26 million

(before tax). On 1 August 2014, the company litres changed its policy of hedging outstanding US dollar payables from 50% to 80%, which mitigates the will be the total capacity of the Kurnell terminal impact of the fall in the Australian dollar.

will be the total capacity of the Kurnell terminal in 2016 when the stage two conversion works are completed.

capital management

Caltex remains committed to delivering top quartile growth for our shareholders. To this end, in February 2014 we commenced a company-wide cost and efficiency review. Within this review, numerous initiatives have been developed that will provide Caltex with the financial strength to maintain and enhance its market leadership position and to enable the business to capture future growth opportunities.

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Following the successful closure of the Kurnell refinery, the Board has determined that as of 2015, a target dividend payout ratio of 40-60% of RCOP net profit after tax will be reinstated.

Caltex’s new business model is in line with our origins when the business began in 1900. It is based on one integrated supply chain and presents Caltex with significant opportunities to optimise our entire value chain.

our people

2014 was a challenging year for many people across Caltex. As part of the above-mentioned cost and efficiency review, employee headcount was reduced by approximately 350 people across operational and support functions. This reduction is in addition to the previously announced reductions relating to the conversion of the Kurnell refinery. Caltex is committed to supporting those people affected by the changes with the highest level of care and respect. Caltex has ensured that redeployment opportunities have been explored, in addition to generous redundancy entitlements and outplacement support.

Despite the uncertainty generated by the review, our people have delivered upon a range of significant financial and operational targets and must be commended for their professionalism, passion and dedication during 2014.

future growth

While the Australian fuels industry continues to go through a significant period of change, particularly with new competitors entering the market, Caltex is well positioned and prepared for the pace and intensity of this change.

Caltex will continue to leverage and optimise its strong supply chain in order to target higher growth, in addition to expanding both the breadth and quality of our retail and reseller network.

The Board and management are confident that Caltex is well positioned to remain the outright leader in transport fuels across Australia.

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oUR STRATEgy IS CLEAR ANd SImpLE

Caltex has continually changed and adapted our business model to meet our customers’ ever evolving needs. What has not changed is our unswerving commitment to maintaining safe, reliable and sustainable operations.

caltex’s vision

outright leader in transport fuels across Australia

measure of success

Safely and reliably deliver top quartile total shareholder returns

our values

our values underpin everything we do

We hold safety and integrity as Core personal CoMMitMents

We look after our own safety and the safety of others We are intolerant of personal injury We treat each other and the environment with respect We are upfront and do the right thing

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We think and aCt like business oWners

We are results driven We treat the business as our own We never lose sight of tomorrow

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key strategy pillars

Superior supply chain

Comprehensive targeted offer to customers across products, channels and geographies

• Understanding and management of risk; relentless pursuit of operational excellence

• Highly capable organisation

• Competitive and reliable supply of product into each key geography

• Large scale, cost-competitive terminal, pipeline, depot and fleet infrastructure in each geography

organisational competitiveness

• Scale across the value chain, anchored by key customer portfolio

• Comprehensive network of outlets, profitable franchise network, leading fuel card offer and brand

Corporate growth

• Cost and capital efficient

We play to Win

We expect to achieve the extraordinary We are smart with money We make tough decisions to create shareholder value

We deliVer superb outCoMes for our CustoMers

We are one team, servicing our customers together We listen, understand and deliver

We deliVer With energy, ConViCtion and tenaCity

We act with a sense of urgency We are decisive and agile

We boldly find neW Ways to suCCeed

We step out from the traditional to seize opportunities We are curious, adventurous and innovative We have the courage to change

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operational report mARkETINg

Caltex’s marketing business continued to grow in 2014, producing another record year. This result is attributable to Caltex’s safe and reliable supply of quality products and its unwavering commitment to its customers.

Caltex has a diverse range of customers with unique needs. Wherever they are, whatever the complexity, Caltex continues to supply them with the fuel they require, safely and reliably. The essence of this diversity was captured in our brand campaign which launched in 2014. Featured across both television and outdoor billboards, Caltex reiterated its commitment to Australia with the statements, “one name moves more Australians than any other” and “Caltex, with you all the way”.

While the competitive landscape within our industry is undergoing profound structural change, our service to our customers remains unshakeable and we have continued to deliver, invest and grow in 2014.

b $ marketing reSultS 1.2 In 2014, Marketing delivered another record year with earnings before interest and tax (EBIT) of turnover $812 million, which is an increase of approximately 6% on the $764 million achieved in 2013. This 6% generated by Caltex increase on the EBIT achieved in 2013 was delivered Start Mart in 2014. despite the loss of earnings from the Sydney bitumen business, divested in December 2013.

Higher sales of Vortex grades of petrol and diesel continued to offset the long term decline in demand for unleaded petrol, including E10. This is attributable to our continued focus on driving sales of Vortex fuels, including Vortex Diesel, through the ongoing investment in new retail service stations and diesel stops, and the refurbishment of existing service stations. This is supported by the Vortex television advertisements which ran as part of the brand campaign.

13 % growth in volume of retail diesel sold in 2014.

5 % growth in volume of commercial diesel sales in 2014.

2014 also saw the acquisition and integration of Scott’s Fuel Divisions, which contributed to the strong Marketing result. Comprising 28 retail sites and 18 depots, this acquisition was completed in June 2014 and complements both our existing national network and our strategy of remaining Australia’s leading transport fuels provider.

conSumer SaleS

Delivering approximately 65% of Marketing’s EBIT result in 2014, Consumer Sales operates one of the largest fuel and convenience networks in Australia and is one of the largest franchisors, with over 88% of its forecourt and convenience sites operated by independent franchisees.

Caltex’s Consumer Sales division incorporates almost 1,250 Caltex-branded and StarCard accepting sites across our national network, including forecourt and convenience sites, service centres, truck stops, service stations, diesel stops, depot fronts and resellers. This is in addition to managing the Caltex Woolworths alliance, which includes fuel supply to over 500 Woolworths-owned sites and the operation of 90 Caltex sites that accept Woolworths fuel discount vouchers as part of the alliance. The alliance was successfully revised in 2014 to improve and simplify the structure for both parties.

In 2014, Consumer Sales delivered outstanding safety performance across all key metrics, achieving 594 days incident free with no lost time injuries or medical treated injuries.

while the competitive landscape within our industry is undergoing profound structural change, our service to our customers remains unshakeable and we have continued to deliver, invest and grow in 2014.

Fuel sales exceeded 7.8 billion litres in 2014. Within this result, sales of Vortex 95 and Vortex 98 grew 3.6% year on year and Vortex Diesel grew 21.7% on the prior year. Convenience shop sales grew at 4.9% across our forecourt and convenience sites and generated $1.2 billion in total sales revenue.

Significant progress was made on key initiatives such as Pay@Pump which is now installed at 393 sites, a new back office system which is now live at 589 sites, centralised logistics which now service 454 sites and the launch of the Caltex National Truck Network (NTN) to better service our transport fuels customers.

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Continuing investment in our forecourt and convenience retail site network resulted in 11 new sites, nine rebuilds and seven major upgrades.

A highlight of 2014 was the recognition of Caltex Star Mart at the annual Australasian Association of Convenience Stores (AACS) Awards. Caltex was awarded both the “Major Retailer Company Operated Store of the Year” and the “Major Retailer of the Year (Head Office)”.

buSineSS to buSineSS SaleS

Caltex’s Business to Business division within Marketing encompasses all Caltex’s commercial customers and Caltex’s StarCard and StarCash products. Caltex’s commercial customers span the mining, marine, transport, aviation, automotive, government and agricultural industries.

2014 saw a 3% increase in jet fuel sales. Caltex currently services all airports on the east coast of Australia either directly or through joint venture partnerships.

Growth was also experienced across commercial diesel sales of 5%. Significant contracts secured in 2014 contributed to this growth in diesel and will underpin sales volumes in the coming years.

Caltex’s card portfolio, encompassing StarCard, StarCard Debit, StarFleet and StarCash, remains Australia’s leading fuel card range. StarCard alone has close to 63,000 accounts with almost 1.4 million active StarCards.

In 2014, we launched a new Online Business Centre (OBC) with enhanced services, functionality and interface. This new system, which is used by our wholesale retail and commercial customers, enables fast and efficient online interaction and management of their Caltex products and services. Developed from the ground up with new technology, the new OBC provides the same functionality as its predecessor, with the added bonus of an improved interface and several new and enhanced functions. Demonstrating our customerled focus, the new OBC is built on a platform that can be easily extended and expanded, and has been designed specifically to meet the needs of the customer.

future focuS

Caltex Marketing has simplified its structure in order to be more adaptive, agile and customer-led. This will ensure that Caltex remains competitive in a highly contested market.

Our growth strategy remains sound, and we are committed to ensuring that we continue to meet and exceed our customers’ expectations. We will continue to build our consumer offer around our Vortex range, Star Mart convenience offering and innovative solutions for our business to business customers. We are well placed for 2015 with both the plans and the commitment to enable us to continue to be the outright leader in transport fuels across Australia.

Caltex Star Mart was recognised at the annual Australasian Association of Convenience Stores (AACS) Awards, winning two of the three major retailer awards – Major Retailer Company Operated Store of the Year 2014: Caltex Star Mart North Yunderup Western Australia, and Major Retailer of the Year (Head Office) 2014: Caltex Merchandise team.

The closing image of Caltex’s advertisement which was aired on television networks across Australia in 2014.

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operational report SUppLy ChAIN

Caltex remains committed to continuing to adapt and improve its supply chain to maintain reliable, secure and competitive quality fuel supply to its customers at a time of rapid change in the transport fuels industry.

21 m

barrels

the volume of refined imported product sourced by Ampol Singapore in 2014. This is equivalent to 1,369 Olympic swimming pools.

61 m

barrels

the number of crude barrels sourced in 2014 for both Kurnell and Lytton refineries. This compares with 74 million barrels in 2013. This quantity will reduce further in 2015, reflecting a full 12 months without Kurnell refinery operation.

128,000 aircraft

Caltex refuelled almost 128,000 aircraft in 2014, from fighter aircraft and passenger planes, including the A380, to cargo planes.

2014 was one of the most significant years for Caltex as we successfully transformed the Kurnell site from refinery operation into a fuel import terminal. This transition means that in 2014, Caltex’s supply chain moved to approximately 50% of fuel products sourced through our Supply business, both from third party Australian refineries and terminals, and from imports by Ampol Singapore. This is an increase from 40% in 2013.

The fall in the Australian dollar/US dollar exchange rate has had a favourable impact on the Australian dollar denominated refiner margin, but resulted in a net loss after hedging on US dollar payables of approximately $26 million (before tax). Caltex changed its policy of hedging outstanding US dollar payables from 50% to 80% on 1 August 2014, which mitigated the impact of the fall in the Australian dollar/US dollar exchange rate.

kurnell Site conVerSion

SupplY chain reSultS

As highlighted, October 2014 marked the safe, on-time and on-budget completion of Australia’s newest and largest fuel import terminal at Kurnell, and the closure of the refinery. After beginning operations in 1956 and delivering decades of faithful service to New South Wales and the Australian Capital Territory, the Kurnell refinery’s substantial contribution came to an end. The new modern import terminal at Kurnell will underpin the Caltex supply chain and will ensure reliable supply to New South Wales for many decades to come.

Overall, Supply Chain delivered an EBIT result of $64 million for the 2014 full year, compared with an EBIT loss of $171 million for 2013. This 2014 result for Supply Chain benefited from the impact of favourable externalities, particularly in the fourth quarter of the year. Pleasingly, Lytton refinery’s strong operating performance during this period enabled the refinery to take advantage of these favourable conditions in the latter part of the year. The Kurnell refinery operated for nine months in 2014 and generated a 2014 EBIT operating loss of approximately $69 million.

The smooth transition from refinery to terminal is a credit to all who worked on the project. As a team, they ensured that Caltex continued to operate a refinery while undertaking the complex conversion works on the same site. The safe transition to the new terminal, with no supply interruptions and only one minor hand injury, is a significant achievement and represents world-class performance.

For the 2014 full year, the realised Caltex Refiner Margin (CRM) averaged US$12.42 per barrel, compared with the 2013 full year average of US$9.34 per barrel. During December 2014, the sharp decline in Brent crude oil prices, in both an absolute and a relative sense, was a major contributor to the stronger refiner margin in the second half.

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©PaulAnthonySleeman.com

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Caltex’s Lytton refinery continued to focus on reliability and gross margin improvement in 2014.

Caltex has a formidable reputation for partnering with customers and ensuring they have safe and reliable supply of product, wherever and whenever they need it.

Final decommissioning of the refinery, which includes the demolition of redundant plant equipment, will continue into 2015 and will take up to three years. Remediation of the site will take place over subsequent years.

SupplY

Caltex continues to source crude oil from a number of Australian and international producers, although volumes have reduced since the closure of the Kurnell refinery. In 2014, over 61 million barrels of crude oil were sourced for both the Lytton and the Kurnell refineries, compared with 74 million barrels in 2013. This quantity will reduce further in 2015, reflecting a full 12 months without Kurnell refinery operation. The reduction in crude oil purchasing has been replaced with an increase in the amount of refined fuels imported by Caltex.

In 2014, Caltex’s refineries produced 9.7 billion litres of high value products (petrol, diesel and jet fuel), compared with 10.6 billion litres in 2013 and 10.7 billion litres in 2012. The reduced production reflects the transition of the Kurnell site from a refinery to a fuel import terminal during the final quarter of 2014.

Caltex’s wholly owned subsidiary, Ampol Singapore, continued to source refined fuels and the associated shipping requirements to Australia. In addition to sourcing refined fuels from multiple providers, Ampol Singapore also manages the provision of associated shipping services.

SupplY chain operationS

Lytton refinery in Brisbane continued to make operational improvements and targeted investments in 2014. As a result of a supply agreement, signed with BP Australasia in 2014, Caltex has begun the construction of a new pipeline from the Lytton refinery and fuel storage facilities on the south side of the Brisbane River to BP’s Bulwer Island facility on the north side of the river. This agreement will see Caltex supply petrol and diesel to BP once the Bulwer Island refinery closes in mid-2015. The construction of the new pipeline and associated works will cost approximately $30 million.

Lytton refinery’s focus on reliability and gross margin improvement resulted in record availability and production levels in 2014. Mechanical availability rose to 97%, compared with 96% in 2013 and 95% in 2012. Utilisation also rose to a record 89%, which is up from 78% in 2013. This is in addition to the refinery achieving its best ever safety results in 2014.

Throughout 2014, Caltex continued to invest in upgrades to our fuel depots, our distribution truck fleet, manned and unmanned diesel stops, truck stops, marine fuelling facilities and bolt-on acquisitions.

In 2014, Caltex, in conjunction with Terminals Pty Ltd, opened the 85 million litre Pelican Point terminal. Demonstrating its commitment to servicing its customers in South Australia, Caltex, through its 25 year lease with the facility’s owner, Terminals Pty Ltd, will supply the state with a full suite of fuel products. The terminal also includes a new bulk liquids berth and two pipelines to collectively deliver fuel to the terminal at a rate of 2.6 million litres an hour. The facility is designed for further potential expansion in storage capacity. This could reach 135 million litres in stage two and more in any future stages.

future focuS

A key focus in 2015 is to continue the work that started in 2014 to optimise Caltex’s value chain. The more integrated supply chain, which comes as a result of Caltex’s significant shift to a largely sourcing and import model, creates a real opportunity for us to take a “One Caltex” view of how we buy, distribute and sell fuel to deliver the best overall business outcome. This will also enable us to pursue growth opportunities and deliver top quartile performance.

Caltex will continue to pursue identified gross margin and cost efficiency initiatives at Lytton refinery, including reducing operating costs. This will also include improvements to yield, energy efficiency and reliability.

Caltex remains committed to ongoing investment across its entire supply chain. This commitment will ensure that our customers continue to have access to long-term, secure, safe and reliable product supply.

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sustainable operations fUELLINg A BRIghTER fUTURE

our commitment to being an employer of choice, limiting our impact on the environment, remaining a good community neighbour and continuing to add value for our shareholders, is reflected in our business plans and day-to-day operations.

Maintaining safe, reliable and sustainable operations is at the core of our business. Our culture of operational excellence is formally supported through our policies, operating systems and processes. It is this foundation that enables us to identify, manage and prioritise risk for the benefit of our employees, our community, our environment and our shareholders.

capabilitY

employee recognition

A highlight of the Caltex year is the annual Stellar Awards. This event is the cornerstone of our Recognising Results program, and it is specifically designed to celebrate the Caltex values in action.

The 2014 Stellar Awards recognised over 50 Caltex people. Throughout 2014, we also recognised and rewarded more than 1,000 employees and contractors for their stellar efforts through a variety of cash and non-cash awards.

developing senior talent mobility and agility

The company-wide cost and efficiency review that was undertaken in 2014 included significant organisational restructuring. Great care was taken to ensure that changes in organisational structure led to the creation of career development opportunities for many Caltex people.

In total, 62 senior managers’ roles changed during 2014 and of these changes, 22 were promotions. Nine of the role changes were cross-functional movements, delivering a

double benefit of developing individual capability, but also facilitating knowledge sharing and strengthening the Caltex single value chain philosophy.

The cost and efficiency review and subsequent reorganisation also provided an opportunity to bring in diverse external talent with specific valuable expertise to Caltex. During 2014, nine external appointments were made in senior management, eight of whom were women. In addition, the overall impact on existing senior female employees in Caltex has been positive. Of our 28 senior women, 14 are now in changed roles and seven of these represent promotions.

developing leadership capability

To support employees through the organisational restructuring, a number of workshops were undertaken, namely “Leading through Change and Transition” and “Connect and Engage” as part of our leadership program, Leading@Caltex. The workshops were designed to support leaders in navigating change with their team. These workshops had a 63% and 65% leader participation rate and an 88% and 91% recommendation rate respectively. In addition, our 100 most senior and influential leaders undertook group coaching with their peers throughout the year. This provided them with formalised support to navigate change and transition, both personally and for their teams. Late in 2014, we measured leadership effectiveness via our biannual employee engagement survey.

The results reflected the hard work and commitment of our people leaders during a year of widespread and significant change. As an example, the statement “my manager inspires me to higher levels of performance” increased by 15% from 50% in 2012 to 65% in 2014. In addition, the statement “my manager is a good communicator” increased by 14% from 58% in 2012 to 72% in 2014.

diversity and inclusion

In 2014, our Diversity and Inclusion program focused on gender diversity, indigenous employment and inclusion. Within gender diversity, we continued to achieve greater female participation in senior roles. One in four of our senior managers is female; this is an increase from one in five at the end of 2013. By 2017, Caltex is striving to further improve the ratio to one in three. In 2014, 50% of total new hires to Caltex were women.

Our generous BabyCare package continued to assist Caltex parents in 2014 to return to work after caring for their newborn.

In 2014, Caltex was the winner of the Best Employer Initiative for Women at the National Australia Bank’s Women’s Agenda Leadership Awards for our BabyCare package.

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gender trend at CalteX: perCentage of feMales to Males in the CalteX senior ManageMent population

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2010
18%
2014
25%
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2017 – target
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by 2017, caltex
is striving to
further improve
the percentage
to 33%.
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83 %
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of Caltex’s new hires in 2014 were women.

of indigenous placements committed by Caltex to the Australian Employment Covenant have been filled.

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In 2014, a group called Your Voice was formed to provide all employees with the opportunity to share their thoughts, feelings and ideas on an inclusive Caltex workplace. The topics covered by this group include, but are not limited to, multiculturalism, religion, indigenous issues, gender, sexual orientation, age, health and disability.

This is in addition to being selected as a finalist for the Australian Human Resources Institute Inclusion and Diversity Awards for both the Gender Equity in the Workplace Award and the Sir Ken Robinson Award for Workforce Flexibility. In 2014, we introduced the Parental Transition Group, a support network for existing, expectant and returning parents. Based on feedback received, we will be implementing a full program in 2015.

In 2014, 67% of respondents in the Caltex annual flexibility survey agreed or strongly agreed that “the work environment is accepting of individual difference”. This is a 4% improvement on the 2012 result of 63%.

Caltex expanded its indigenous involvement in 2014 with the commencement of an indigenous internship, engaged through CareerTrackers. Further opportunities were also explored with the Clontarf Foundation, including attending a number of career exhibitions. We have also fulfilled 83% of placements committed to Indigenous Employees for the Australian Employment Covenant.

Within the annual flexibility survey, 77% of respondents answered yes to the question “Do you feel comfortable talking to your manager about flexible work”. This is a 5% improvement on 2013 and a 10% improvement on 2012.

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sustainable operations SAfETy

At Caltex, our paramount concern is the safety of our people and our operations. We believe it’s each employee and contractor’s right to return home safely from work each day.

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This performance is not acceptable to the Board and management. As a result, targeted programs to reduce spills have been developed to ensure improvement in 2015.

health and wellbeing

Caltex aims to help employees and their immediate families improve their wellbeing and morale. This is achieved through the implementation of appropriately targeted health and wellbeing programs, including the active utilisation of the Caltex Employee Assistance Program.

In 2014, over 290 skin screening tests, 656 flu vaccinations and 267 heart health checks were conducted across Caltex’s refining and terminal operations and at the corporate head office in Sydney.

Caltex once again participated in the Global Corporate Challenge, with 175 employees funded to participate in the team based 16 week program aimed at promoting and increasing physical activity levels.

perSonal SafetY

Personal and process safety remain our highest priority. Despite this focus, our personal safety performance as measured by the total treated injury frequency rate (TTIFR) for 2014 shows a decline on 2013 performance. For 2014, the TTIFR was 1.74 per million hours worked, compared with 1.36 per million hours worked in 2013. The lost time injury frequency rate for 2014 was 0.76 per million hours worked, an increase on 2013, which was 0.63 per million hours worked.

While the results are disappointing, it is a solid result; most particularly given the level of change occurring across the business. However, the Board and management remain committed to driving continued improvement in our safety performance in 2015.

The number of significant motor vehicle accidents (MVAs) in 2014 was in line with 2013, with one MVA occurring in each year. The number of tanker truck accidents reduced from five in 2013 to four in 2014. As with TTIFR and LTIFR, Caltex is striving for continuous improvements in these areas, so any accident is unacceptable. Of utmost importance to our business is the safety of fuel transportation.

proceSS SafetY

Caltex’s process safety management focuses on the safe manufacture, distribution and transportation of products and the safe operation of all Caltex facilities. Our process safety management system is applied to reduce the likelihood and consequences of a major accident.

In 2014, Caltex recorded four Tier 1 and two Tier 2 process safety incidents. This is in line with 2013. Disappointingly, in 2014, spills greater than one barrel exceeded our annual objectives and increased, rather than decreased, year on year.

caltex’s process safety management focuses on the safe manufacture, distribution and transportation of products and the safe operation of all caltex facilities.

Caltex’s Drug and Alcohol Program aims to mitigate occupational risks associated with certain lifestyle factors. In 2014, over 2,700 drug and alcohol tests were conducted across the business. This includes both employees and contractors at safety critical sites.

occupational health

By controlling exposures at their source, Caltex is committed to mitigating the health risks associated with physical exposures to hazards within the workplace. This includes a commitment to managing all asbestos-containing materials across all assets within the business in a safe and effective manner. In 2014, Caltex undertook a comprehensive asbestos resurvey to confirm the presence of

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ttifr, ltifr – per Million hours Worked (inCluding ContraCtors) injury frequenCy rates

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TTIFR
LTIFR
10 11 12 13 14
Motor VehiCle and tanker
truCk aCCidents
MVA
TTA
10 11 12 13 14
Major proCess safety inCidents
tier 1 and tier 2
Tier 1
Tier 2
10 11 12 13 14
3.04 2.83
2.53
1.76
1.35 1.36
0.99
0.77
0.59 0.63
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3
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0 0
5
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0
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spills > 1 barrel (160 litres) and Marine spills (any VoluMe)

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FY10 FY11 FY12 FY13 FY14
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insurance and safety program qualifications to operate safely onsite. Each contractor is regularly reviewed on their safety performance, with the frequency of review based on their risk category and tenure at Caltex.

asbestos containing materials in all buildings and structures present on the Kurnell refinery site. This work has been integral in Caltex implementing a comprehensive asbestos management system to manage asbestos removal during the decontamination and demolition of the Kurnell refinery commencing in 2015.

In 2014, 136 safety reviews were conducted. Contractor subscription to Caltex’s external safety verification and validation service, ISNetworld, increased from 95% in January 2013 to 97% in December 2014. In addition, the contractor TTIFR for 2014 was 2.32, in line with the TTIFR of 2.37 in 2013.

contractor SafetY

Caltex’s strong safety culture also extends to the way we manage our contractors. Contractor safety management principles and practices are well embedded across Caltex. Each contractor is assigned a Caltex contractor owner, a procurement owner and an Operational Excellence and Risk owner from the relevant business area. They are also categorised according to risk and must have the appropriate

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sustainable operations ENVIRoNmENT

Striving to reduce the impact of its operations and undertaking activities across Australia in full compliance with all regulations and standards is of utmost importance to Caltex.

We manage risk at all levels of the organisation. Each and every day there are risk management activities underway. At the highest level, we use the Caltex Risk Management Framework (CRMF) to identify, monitor and report on the most significant risks we face. This includes risks to people and environment, business risks regarding our operations and strategic risks that may be either threats or opportunities for Caltex. Workshops are held frequently with senior management to ensure that managing risk is top of mind and that any new risks are quickly identified. Improvement opportunities are identified and tracked to completion. The Board and relevant Board committees receive risk reports quarterly.

In addition, our Lytton refinery and four licensed terminals across Australia (Kurnell, Banksmeadow, Mackay and Port Hedland) are accredited with the ISO-14001 Environment Management System to ensure additional validation of our management processes through external auditing and assessment.

In 2014, Caltex’s Kurnell refinery received one penalty infringement notice of $15,000 from the NSW Environment Protection Authority (NSW EPA) relating to an incident where a release of oily water from the waste water treatment plant entered the redundant cooling water outlet and was observed in Botany Bay during a heavy rainfall event.

The NSW EPA also commenced one Tier 1 and one Tier 2 prosecution against Caltex in relation to a loss of primary containment into a tank bund incident at the Banksmeadow Terminal in July 2013. After a thorough investigation into this incident, Caltex has refined some systems as part of its continual improvement process to minimise the risk of this recurring.

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The Kurnell peninsula, Sydney, the site of Caltex’s refinery for almost six decades, now features Australia’s largest fuel import terminal.

Our Operational Excellence Management System (OEMS) supports the systematic management of process safety, personal safety and health, environment, reliability and efficiency to achieve world-class performance. The key to our success is ensuring that a strong culture exists through leadership accountability and effective monitoring and governance of the processes that have been developed to cover 13 elements. A whole of system governance process known as the Management System Process (MSP) is applied to ensure that the system’s health is assessed and improved on a continuous cycle. This ensures that Caltex operates to the highest standards across our organisation.

In addition, the Queensland Department of Environment and Heritage Protection commenced proceedings against Caltex for alleged breaches of Caltex’s licence conditions and failing to carry out certain activities with respect to a trackable waste. In this instance, waste refers to ethyl mercaptan, which is an odourant for LPG. Caltex’s specialist waste contractor has also been prosecuted with respect to the circumstances surrounding this incident.

caltex operational excellence management SYStem

Caltex is committed to remaining the outright leader in transport fuels across Australia. To achieve this, we also need to be leaders in understanding and managing our risks. We also need to be relentless in our pursuit of operational excellence. Caltex already has a strong record of continuous improvement in health, safety, security, asset reliability and environmental performance. Operational excellence is also integral to the Caltex culture.

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96.0

In 2014, the Lytton refinery achieved its best ever rating on the Energy Intensity Index (EII) with a score of 96.

climate change

In 2014, Caltex monitored the changing legislative landscape relating to the Federal Government’s climate change policy while continuing to manage compliance reporting under the Clean Energy Future legislation’s Carbon Price Mechanism (CPM). Caltex completed its second year of compliance reporting under the CPM, accounting for greenhouse gas emissions from both the Kurnell and the Lytton refineries, and those greenhouse gas emissions associated with the sale of non-transport related gaseous fuels. Caltex also administered carbon pricing for domestic jet fuel through increased excise for the compliance period. Due to the emissions-intensive trade exposed nature of petroleum refining, Caltex again received freely granted permits under the Jobs and Competitiveness Program, with 2,311,280 permits received. Carbon permit surrender requirements also included Australian Carbon Credit Units (ACCUs) from verified Carbon Farming Initiative projects as permitted under Clean Energy Future legislation, and final compliance surrender requirements were managed through early 2015.

Caltex again purchased ACCUs from the Indigenous Land Corporation’s Fish River Fire Project, surrendering these as part of our 2013 – 2014 carbon liability. The Fish River Fire Project carries out early dry season savannah burning on Fish River in the Northern Territory, an approach which is scientifically proven to dramatically reduce greenhouse gas emissions that would otherwise be generated by

uncontrolled, late dry season wild fires. For this year’s contracted supply, Caltex was pleased to invite Clontarf Academy students from Darwin who have an interest in land care careers to visit the property and learn from Fish River indigenous rangers how their work combining traditional burning practices with modern technology delivers a range of social, cultural and environmental co-benefits.

caltex again purchased accus from the indigenous land corporation’s fish river fire project, surrendering these as part of our 2013 – 2014 carbon liability.

In 2014, the Coalition government retrospectively repealed the CPM, effective 1 July 2014. Caltex acted to remove carbon pricing from impacted products following Royal Assent of the repeal legislation and promptly refunded non-transport gaseous fuel carbon price costs and domestic jet excise carbon costs applicable from 1 July to 18 July 2014 to the relevant customers. The Coalition’s Direct Action policy areas that will be of potential interest or impact to Caltex are the Emissions Reduction Fund (ERF) and the Safeguarding Mechanism respectively. Caltex will continue to monitor the legislative rules associated with the ERF and determine interest in participating in the Reverse Auction Process through 2015. With the Safeguarding Mechanism legislated to commence on 1 July 2016, details on how this legislative requirement will impact Lytton refinery are yet to be determined.

Caltex continues to support greenhouse gas reduction policies which maintain the international competitiveness of Australian industries such as petroleum refining.

energY efficiencY and greenhouSe gaS emiSSionS

Within our operations, Caltex continued to implement greenhouse gas emissions related reduction activities in order to improve energy efficiency in 2014. Some of these activities included installing lower energy usage lighting fittings in new service station designs and targeted lighting upgrade programs which have delivered reduced energy usage and both operational and maintenance costs at current service station locations.

In 2014, the Lytton refinery achieved its best ever rating on the Energy Intensity Index (EII) with a score of 96.0, reduced from 97.8 in 2013. Higher plant utilisation in 2014, coupled with increased focus on energyimpacting operating variables contributed to greater energy efficiency overall.

Reporting under the National Greenhouse and Energy Reporting Scheme continued in 2014. Reported Scope 1 and Scope 2 emissions were slightly lower year on year due to energy saved from the closure of the Kurnell refinery. Scope 1 emissions are from energy sources owned and controlled by Caltex, and Scope 2 is purchased energy from electricity, heat or steam.

total sCope 1 and sCope 2 eMissions

total sCope 1 and sCope 2 eMissions
financial year	2008 – 2009	2009 – 2010	2010 – 2011	2011 – 2012	2012 – 2013	2013 – 2014
Scope 1, metric tonnes of CO2-equivalent	1,887,665	1,817,628	1,869,326	1,849,424	1,849,610	1,704,466
Scope 2, metric tonnes of CO2-equivalent	326,605	312,073	315,115	303,099	288,640	269,848

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sustainable operations INfRASTRUCTURE, INTEgRITy ANd pRodUCT RESpoNSIBILITy

Reliable, quality supply, coupled with strong infrastructure, are the cornerstones of Caltex’s ability to meet Australia’s transport fuels needs.

10 % Lytton refinery recorded a 10% increase in utilisation year on year, which is a significant increase.

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It can detect losses above a specified threshold per product circuit with a 95% probability of detection. All high priority sites are monitored on a weekly basis and all other sites are monitored monthly.

underground tank replacement and monitoring

The integrity of all our tanks, or Underground Petroleum Storage Systems (UPSS), at Caltex service stations and depot sites is managed via a comprehensive risk management and risk reduction program.

If tests produce “fail” or “inconclusive” results, a multi-stage management process is activated to determine if there is a leak, the source of the leak and necessary further action.

The aim of this program is to identify and manage environmental risks in order to prevent environmental contamination. The program was implemented after a risk assessment was undertaken in 2007 and, as a result of the program, sites are prioritised for tank replacement and monitoring.

reliable infraStructure and SupplY

The cornerstone of Caltex’s ability to meet Australia’s transport fuels needs is reliable supply, coupled with strong infrastructure. This is achieved through continued investment in infrastructure including our Lytton refinery, as well as port, inland and airport terminals, pipelines and retail sites.

In 2014, Caltex continued its underground tank replacement and monitoring program and replaced 17 underground tanks as part of rebuilding works and ongoing risk management. In total, 103 underground tanks have been replaced since the program began.

Lytton refinery’s focus on reliability and gross margin improvement resulted in record availability and production levels. Performance at the Kurnell refinery during 2013-2014 was strong, enabling the terminal conversion work to proceed according to plan, with the Kurnell refinery ultimately shutting down in October 2014.

inVentorY reconciliation

In order to identify and manage UPSS risk to the environment and neighbouring communities and comply with environmental laws, Caltex utilises a leak monitoring system, Statistical Inventory Reconciliation Analysis (SIRA), monitored and managed by a third party. SIRA monitors underground storage tank levels and detects any liquid product losses.

Together, the Lytton refinery and the Kurnell refinery achieved a reliability performance in 2014 which was consistent year on year across a range of measures. Mechanical availability was 97% in 2014, compared with 96% in 2013.

Average utilisation was 84% in 2014 compared with 76% in 2013, which was a great result and enabled Caltex to take advantage of the higher refiner margins in the last quarter of 2014. Lytton refinery recorded a 10% increase in utilisation, which is a significant increase. Strong reliability, improved volume yields and imported feedstocks led to record high value product volumes throughout the year.

In 2014, we completed a range of key infrastructure projects such as the dual, 2.6 kilometre dock line and loading arms at Pelican Point terminal in South Australia. This is in addition to the construction of a new 1.5 million litre jet fuel tank at Banksmeadow terminal.

product StewardShip and waSte management

The need to manage products and waste throughout their lifecycles, meeting legal and regulatory requirements and performance expectations and effectively communicating the necessary information to consumers, is recognised at Caltex. Effective product stewardship also forms an integral part of our licence to operate.

Product stewardship at Caltex ensures fuel quality and the integrity of our fuel storage and delivery systems.

Caltex is a signatory to the Australian Packaging Covenant, with 100% compliance among Caltex product suppliers and 40% of current packaging reviewed using the Sustainable Packaging Guidelines.

This covenant provides an opportunity for companies to contribute to reducing the environmental impacts of their packaging materials. Through a five year action plan, Caltex remains committed to improving waste management, including better recycling at our service stations, as well as implementing sustainable packaging guidelines into our procurement process.

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sustainable operations CALTEx IN ThE CommUNITy

our corporate sponsorship program partners with a select group of Australian organisations that share our values, providing financial support and leveraging our networks to make a real difference across Australia.

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In addition to financial support, Caltex employees donated their time, energy and enthusiasm to help the Clontarf students in 2014.

and contracted fleet nationally. Caltex is also investing in tanker driver safety through in-house classroom sessions and expanding our in-cab driver training process.

corporate Social inVeStment

focusing on road safety

Caltex is proud to be the major corporate sponsor of Fatality Free Friday, a national road safety program which we have supported since 2011. The efforts of this program and the Australian Road Safety Foundation directly align with our focus on safety.

The importance of driver safety in the community is also emphasised through the Australian Road Safety Foundation Awards, presented by Caltex. This is an initiative of the Australian Road Safety Foundation, and the awards are the only nation-wide road safety recognition program.

In 2014, Caltex supported the Fatality Free Friday call for road users to take the pledge at over 20 employee and public events across Australia. Over 4,500 Caltex Arrive Home Safe Fatality Free Friday key rings were handed out to remind our customers, employees, and communities to promise themselves, their family, friends and workmates to consciously exercise road safety and arrive home safe every day.

Making a difference for sick children

Caltex is a diamond sponsorship partner of MakeAWish[®] . MakeAWish[®] grants the wishes of children with life-threatening medical conditions to enrich the human experience with hope, strength and joy.

In 2014, Caltex expanded our support of MakeAWish[®] to include employee fundraising events in key office and terminal locations around Australia. Through employee fundraising alone, Caltex raised over $12,000 through raffles, bake sales

Caltex is also actively involved in tanker driver safety, through the ongoing monitoring of speed, fatigue and harsh braking with on-board monitoring. This is a requirement for both our company owned

and barbeques. This added to the Star Mart Wish Drive activities across Australia to achieve a total of $420,258 raised by Caltex. MakeAWish[®] children and ambassadors visited many Star Mart and Caltex office locations, sharing their journey and the difference that having their wish granted has made to both them and their families.

improving future prospects

Caltex is a proud corporate sponsor of the Clontarf Foundation, an organisation committed to improving the education, discipline, life skills, self-esteem and employment prospects of young Aboriginal men in order to equip them to participate meaningfully in society.

Clontarf was established in 2005, and has grown to cater for more than 3,000 boys in 59 schools across Western Australia, the Northern Territory, Victoria and New South Wales. Using Australian Rules or Rugby League football as a mechanism to attract indigenous boys to school, Clontarf gives them the opportunity to achieve, succeed and raise their self-esteem. Clontarf provides an important schoolengagement mechanism for many at-risk students who would otherwise not attend or have low school attendance.

Caltex has partnered with Clontarf for four years with a considerable financial sponsorship spend for each year. In addition to financial support, Caltex encourages employees to get involved and donate their time, energy and enthusiasm to helping the boys. As a result, Caltex employees from across Australia have participated in over 30 experiences ranging from Kimberley adventures with the Kununurra Academy, Western Australia, to football matches, Academy tours and supporting Academy students to visit Sydney and Perth. Facilitated by Caltex, students from the Darwin Clontarf Academy visited the Indigenous Land Corporation’s Fish River Property to see first-hand traditional mosaic burning and its biodiversity and other environmental benefits.

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sustainable operations CALTEx IN ThE CommUNITy Continued

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Over 50 Caltex employees either attended or volunteered at OzHarvest’s “Think.Eat.Save” events in Sydney, Brisbane and Adelaide.

fuelling food rescue

Conserving our country’s future

Fuelling the OzHarvest vans across Australia helps OzHarvest achieve its goal to reduce food waste while supporting those in need and the charities that support them. Caltex has partnered with OzHarvest since 2012. Each year, Caltex provides $160,000 in fuel to OzHarvest. In addition, our employees regularly get involved with OzHarvest through the Cooking for a Cause program. In July 2014, over 50 Caltex employees attended or volunteered at OzHarvest’s “Think.Eat.Save” events in Sydney, Brisbane and Adelaide. At these events, OzHarvest partnered with the United Nations Environment Program (UNEP) to illustrate how free, delicious and hearty hot meals can be made from surplus produce that would otherwise have ended up as landfill.

Caltex is a key supporter of Wild Futures, Conservation Volunteers Australia’s (CVA) national wildlife conservation program which works to protect rare and vulnerable species across Australia. Caltex’s support enables CVA to progress vital activities in support of multiple Wild Futures species including the Superb Parrot in New South Wales, and the Richmond Birdwing Butterfly in South East Queensland. Since Caltex and CVA began their partnership in 2011, Caltex employees have volunteered to contribute directly to on-ground conservation projects at important sites around Australia. In 2014, Caltex employees volunteered in several hands-on activities. This included 30 Caltex employees who removed 780 square metres of weeds, including 13 bags of invasive asparagus crowns, at CVA’s Red-crowned Toadlet habitat restoration work at Bradley’s Head in Sydney. Caltex employees also worked alongside the Bulimba Creek Catchment Group on World Environment Day in a popular family park along the Brisbane River in Murrarrie.

The team planted 240 plants over an area of 1,500 square metres, including bagging and staking and watering 500 plants. They also removed weeds from an area of 1,500 square metres to improve the chances of the native seedlings surviving and thriving.

recognising australia’s future leaders The Caltex Best All Rounder program celebrated its 29[th] year in 2014 with an impressive 2,040 schools across Australia participating in the program. The Best All Rounder program recognises final year students for their achievements in a number of areas, including academic, attitude, personal conduct, leadership, service and sport. This year, Caltex employees and franchisees attended events at over 300 schools to present these prestigious awards.

fuelling Change

Fuelling Change is Caltex’s workplace giving program. Employees have the option to donate from their pre-tax income to Caltex’s nominated community partners: Starlight Children’s Foundation, The Smith Family, Cancer Council, Heart Foundation, Oz Green and RSPCA. These donations are then matched by Caltex dollar for dollar. In 2014, 6% of Caltex employees donated as part of Fuelling Change, resulting in close to $150,000 in donations in total when matched by Caltex.

supporting our communities

Caltex facilities, in particular our refineries, are committed to supporting the communities in which we work and live. Financial and in-kind assistance was provided in 2014 for a range of educational, environmental, sporting, cultural, surf lifesaving and community initiatives in the communities around our facilities. In addition to the financial assistance provided to these organisations, sponsoring and supporting local initiatives gives us an opportunity to build relationships with our neighbours. Both refineries encourage feedback from stakeholders and have a formal process

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$420,258 was raised by Caltex across Australia for MakeAWish[®] in 2014.

2,040 secondary education schools participated in Caltex’s Best All Rounder Program in 2014 which is the program’s 29[th] year.

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In 2014, a photographic exhibition titled, “Capturing the spirit of the Kurnell Refinery” was held in Cronulla, Sydney. Featuring the work of a small group of amateur photographers, made up of past and present employees and contractors, the exhibition provided a unique insight into the refinery and its local surrounds as seen from the perspective of these photographers.

for reporting and addressing community concerns. Concerns can be raised 24 hours a day through our 1800 numbers. In addition, we continue to reach out to our communities to provide information about our operations through regular meetings, newsletters and activity advice letters.

promoting integrity

Caltex’s commitment to conducting our business in accordance with all applicable laws while demonstrating and promoting our values is articulated in our Code of Conduct. This code, and our adherence to it, provides our business with a framework for decision-making and business behaviour. This in turn builds and sustains our corporate integrity, reputation and success. Complementary policies and programs work in parallel with the Code of Conduct. These include the Fraud and Corruption Control Policy, the Ethical Business Practices Policy, the Workplace Bullying and Harassment Policy and the Competition and Consumer Act Compliance Policy, as examples. An externally managed hotline is also available for all employees, providing a confidential avenue for them to express concerns relating to the workplace.

Caltex and public policy

Caltex has an experienced, professional corporate affairs team that undertakes government and media relations, and corporate and internal communications. The purpose of this function is to engage with external and internal stakeholders to provide information, manage issues and protect and enhance Caltex’s reputation. By engaging openly with government and the media, Caltex contributes to the development of public policy related to the downstream petroleum industry and the improvement of public understanding of the industry and Caltex’s role. Corporate affairs activities complement Caltex’s business strategies by seeking to improve the business environment and avoiding negative regulatory changes, while making a broader contribution to the operation and development of Australia’s market economy.

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dIRECToRS

1. elizabeth brYan am

Chairman (non-executive/independent)

Elizabeth joined the Caltex Board in July 2002 and has served as Chairman since October 2007. She is the Chairman of the Board’s Nomination Committee. Elizabeth brings management, strategic and financial expertise to the Board. She has over 32 years of experience in the financial services industry, government policy and administration, and on the boards of companies and statutory organisations. Elizabeth is a director of Insurance Australia Group Limited and Westpac Banking Corporation. She is a member of the Australian Securities and Investments Commission’s Director Advisory Panel and the Takeovers Panel, and serves as a trustee of the Museum of Applied Arts and Sciences.

2. Julian Segal

Managing director & Ceo

Julian was appointed as Managing Director & CEO in July 2009. Julian is responsible for overseeing the Group’s day-to-day operations and brings extensive commercial and management experience to Caltex. He joined Caltex from Incitec Pivot Limited, a leading global chemicals company, where he served as the Managing Director & CEO from June 2005 to May 2009. Prior to Incitec Pivot, Julian spent six years at Orica in a number of senior management positions. Julian is also a director of the Australian Institute of Petroleum Limited.

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6. greig gaileY

3. treVor bourne

director (non-executive/independent)

director (non-executive/independent)

Greig joined the Caltex Board in December 2007. He is the Chairman of the Board’s Human Resources Committee. Greig brings to the Board extensive Australian and international oil industry experience, and a management background from industrial and capital-intensive industries as well as involvement in public policy. He is Chairman of ConnectEast, Deputy Chairman of the Victorian Opera Company and a director of the Australian Advisory Board of Canada Steamships. He was previously President of the Business Council of Australia.

Trevor joined the Caltex Board in March 2006. He is the Chairman of the Board’s OHS & Environmental Risk Committee. Trevor brings to the Board broad management experience in industrial and capital-intensive industries, and a background in engineering and supply chain. Trevor is a director of Sydney Water and Senex Energy Limited. Trevor was previously a director of Origin Energy Limited for 12 years and also previously the Chairman of Hastie Group Limited.

4. richard brown

director (non-executive)

Richard joined the Caltex Board in June 2012. Richard brings to the Board over 30 years of oil industry experience with Chevron and substantial financial and management expertise. He currently serves as Chevron’s Regional Finance Officer – Asia Pacific, based in Singapore. He is responsible for financial and management reporting, credit approval, local cash management, tax matters and risk management for Chevron’s operations in the Asia Pacific region. Richard is a director of Chevron Lubricants Lanka Plc (in Sri Lanka).

7. rYan krogmeier

director (non-executive)

Ryan joined the Caltex Board in March 2012. Ryan brings to the Board considerable experience in the oil and gas industry, particularly in the areas of crude and products supply and trading, risk management and financial operations. He currently serves as the Global Vice President of International Products, Joint Ventures and Affiliates for Chevron. Ryan is based in Singapore and has over 20 years of experience working for Chevron. He is a director of GS Caltex Corporation (in Korea), Star Petroleum Refining Co Ltd (in Thailand) and Singapore Refining Company Pte Ltd (in Singapore).

5. barbara burger

director (non-executive)

Barbara brings to the Board extensive experience in marketing, manufacturing and supply chain management. She has worked for Chevron for over 25 years and is currently the President of Chevron Technology Ventures (CTV), based in Houston, Texas (US). CTV champions innovation, commercialisation and integration of emerging technologies and related new business models. Prior to this role, Ms Burger was the Vice President – Lubricants Supply Chain and Base Oil for Chevron Lubricants.

8. bruce morgan

director (non-executive/independent) Bruce joined the Caltex Board in June 2013. He is the Chairman of the Board’s Audit Committee. Bruce brings to the Board expertise in accounting, business advisory services, risk and general management. Bruce is the Chairman of Sydney Water Corporation and a director of Origin Energy Limited, the University of NSW Foundation, the European Australian Business Council and Redkite. He was previously Chairman of the PwC Board and a member of the PwC Global Board.

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LEAdERShIp TEAm

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1. Simon hepworth

Chief financial officer

Simon was appointed to this position in 1999. He joined Ampol in 1996, after 10 years with Arthur Andersen. He is responsible for Finance, Accounting and Decision Support, Treasury, Taxation, Investor Relations, Information Technology and Procurement. Simon holds a Bachelor of Arts and a Masters of Applied Finance. He is a member of the Institute of Chartered Accountants in England and Wales. He is also a member of the Australian Institute of Company Directors.

2. Simon willShire

general Manager, human resources

Simon joined Caltex in 2006. He has more than 30 years of experience in Human Resources management with Shell, BHP, Levi Strauss and United Technologies Corporation. These roles have been in Australia, Asia and Europe. Simon graduated from the Flinders University of South Australia in 1980 with a Bachelor of Arts, majoring in Political Science and Sociology. He also holds a Graduate Diploma in Business (Industrial Relations) from Charles Sturt University. In 2013, Simon was made a Fellow of the Centre for Ethical Leadership in the Melbourne Business School.

3. bruce roSengarten

general Manager, Marketing

Bruce joined Caltex in December 2013 with over 30 years of executive experience. Bruce spent 10 years at Shell, holding senior executive roles in Australia, regionally across Asia Pacific and the Middle East and on a global basis. He also held senior roles at Coles Myer Ltd, Weight Watchers International Ltd, Crown Ltd and International Harvester Australia Ltd. Bruce holds a Bachelor of Economics from Monash University and Graduate Diploma in Physical Distribution Management from Chisholm Institute.

4. andrew brewer

general Manager,

supply Chain operations

Andrew was appointed to this position in April 2014. He is an experienced senior executive in the energy and resources sector. Commencing his career as a professional electrical engineer, Andrew has held leadership roles in engineering, project management, maintenance, reliability, operations, business strategy, planning and general management. This has spanned the minerals processing, resources and energy industries across Australia and in Canada where he was Downstream Country Chair and General Manager of the Burnaby oil refinery for Chevron Canada. Andrew also previously managed the Kurnell refinery.

5. peter lim

general Manager,

legal and Corporate affairs

Peter is head of the Caltex Legal, Secretariat, Internal Audit, Government Affairs, Corporate Communications and Media teams. He is also the Company Secretary of the Board, and a company secretary of various Caltex Australia Group companies. Peter joined Caltex in June 2006. He has a Bachelor of Commerce and a Bachelor of Laws from the University of New South Wales.

6. mike mcmenamin

general Manager, strategy, planning and development

Mike joined Caltex in 2004. He has held a range of senior international executive positions in Chevron across South Africa, New Zealand, the United States, Singapore and Central Africa. A commerce graduate from the University of Cape Town with postgraduate qualifications in accountancy and tax law, Mike qualified as a Chartered Accountant with Deloitte in South Africa and then worked in its London office.

CALTEx / 2014 ANNUAL REVIEW fIVE yEAR SUmmARy

26

The additional information on pages 26 to 27 is provided for the information of shareholders. The information is based on, but does not form part of, the 2014 Financial Report.

Caltex australia limited consolidated results	2014	2013	2012	2011	2010
Proft and loss ($ million)
Historical cost operating proft before signifcant items,
interest and income tax expense	279	798	624	640	522
Interest income	8	9	2	1	2
Borrowing costs before signifcant items(i)	(99)	(98)	(99)	(69)	(59)
Historical cost income tax expense before signifcant items	(56)	(205)	(161)	(170)	(131)
Historical cost operating proft after tax and before
signifcant items	132	504	366	402	333
Signifcant items (net of tax)	(112)(i)	26(ii)	(309)(iii)	(1,116)	(16)
Historical cost operating proft/(loss) after income tax	20	530	57	(714)	317
Dividends
Amount paid and payable ($/share)	0.70	0.34	0.40	0.45	0.60
Times covered (excl. signifcant items)	0.70	5.49	3.39	3.31	2.06
Dividend payout ratio – replacement cost basis(iv)
(excl. signifcant items)	38%	28%	24%	46%	51%
Dividend franking percentage	100%	100%	100%	100%	100%
Other data
Total revenue ($ million)	24,231	24,676	23,542	22,400	18,931
Earnings per share – historical cost (cents per share)	7	196	21	(264)	117
Earnings per share – replacement cost (cents per share)
(excl. signifcant items)	183	123	170	98	118
Earnings before interest and tax – historical cost basis ($m)
(excl. signifcant items)	279	798	624	640	522
Earnings before interest and tax – replacement cost basis ($m)
(excl. signifcant items)	795	551	756	442	500
Operating cash fow per share ($/share)	2.5	2.3	1.5	1.7	1.6
Interest cover – historical cost basis	1.3	9.3	1.9	(14.0)	8.7
Interest cover – replacement cost basis (excl. signifcant items)	8.8	6.2	7.8	6.5	8.7
Return on capital employed – historical cost basis (%)(v)	0.7	15.8	2.0	(25.2)	8.7
Return on capital employed – replacement cost basis
(excl. signifcant items) (%)(iv)	15.5	9.9	15.8	9.3	8.8
Equity attributable to members of the company ($m)	2,521	2,588	2,148	2,206	3,071
Total equity ($m)	2,533	2,597	2,160	2,218	3,083
Return on equity attributable to members of the parent entity
after tax and before signifcant items – historical cost basis (%)	1	20	3	(32)	10
Total assets ($m)	5,129	6,021	5,386	4,861	5,291
Net tangible asset backing ($/share)	8.64	9.05	7.55	7.82	11.08
Debt ($m)	692	942	950	619	563
Net debt ($m)	639	742	740	617	544
Net debt to net debtplus equity (%)	20	22	26	22	15

(i) Includes significant items before tax totalling a loss of $160,163,000, that have been recognised in the income statement.

These items relate to the Group cost and efficiency review project and include consulting fees ($25,065,000), redundancy costs ($53,814,000), contract cancellation costs ($12,000,000), interest expense ($20,311,000), foreign exchange gains ($4,755,000) and accelerated depreciation ($22,773,000) and environmental liabilities ($30,955,000).

(ii) Includes significant items totalling a gain of $27,763,000 before tax, that have been recognised in the income statement.

These items relate to a gain on the sale of the bitumen business, net of costs relating to acquisitions and disposals ($38,766,000) and the net adjustment to provisions ($11,003,000) relating to the closure of the Kurnell refinery.

(iii) Includes significant items relating to employment benefit and remediation provisions ($430,000,000) arising from the announcement on 26 July 2012 of the planned 2014 closure of the Kurnell refinery in New South Wales, Australia and its proposed conversion to an import terminal. The remaining expenses of $11,355,000 relate to cancelled capital projects associated with the Kurnell refinery. (iv) Dividend payout ratio – replacement cost basis calculated as follows:

Dividends paid and payable in respect of financial year

Replacement cost profit after income tax (excl. significant items) Net Profit After Tax Net Debt + Equity

(v) Return on capital employed is calculated as follows:

With you all the Way

27

REpLACEmENT CoST of SALES BASIS of ACCoUNTINg ANd STATISTICAL INfoRmATIoN

replacement coSt of SaleS operating profit baSiS of accounting

• To assist in understanding the Group’s operating performance, the directors have provided additional disclosure of the Group’s results for the year on a replacement cost of sales operating profit basis[ (i)] , which excludes net inventory gains and losses.

• On a replacement cost of sales operating profit basis excluding significant items, the Group’s net profit after income tax for the year was $493 million, compared to a profit of $332 million in 2013.

• 2014 net profit before interest, income tax and significant items on a replacement cost of sales operating profit basis was $795 million, an increase of $244 million over 2013.

$ million	five years*	2014	2013	2012	2011	2010
Historical cost net proft before interest, income tax and
signifcant items	2,863	279	798	624	640	522
(Deduct)/add inventory (gains)/losses(ii)	184	516	(246)	132	(197)	(21)
Replacement cost of sales operating net proft before interest,
income tax and signifcant items	3,044	795	551	756	442	500
Net borrowing costs	(402)	(91)	(89)	(97)	(68)	(57)
Historical cost income tax expense before signifcant items	(723)	(56)	(205)	(161)	(170)	(131)
Add/(deduct)tax effect of inventory gains/(losses)	(56)	(155)	74	(40)	59	6
Replacement cost of sales operating proft after income tax(iii)	1,865	493	332	458	264	318

• Note: Totals in table may not sum due to rounding. To remove the impact of this factor on earnings and to better reflect the (i) The replacement cost of sales operating profit basis (RCOP) removes the impact underlying performance of the business, the RCOP NPAT methodology of inventory gains and losses, giving a truer reflection of underlying financial calculates the cost of goods sold on the basis of theoretical new purchases performance. Gains and losses in the value of inventory due to fluctuations in instead of actual costs from inventory. The cost of these theoretical new the USD price of crude oil and foreign exchange impacts constitute a major purchases is calculated as the average monthly cost of cargoes received during the month of those sales.

(i) The replacement cost of sales operating profit basis (RCOP) removes the impact of inventory gains and losses, giving a truer reflection of underlying financial performance. Gains and losses in the value of inventory due to fluctuations in the USD price of crude oil and foreign exchange impacts constitute a major external influence on company profits. RCOP restates profit to remove these impacts. The Caltex RCOP methodology is consistent with the methods used by other refining and marketing companies for restatement of their financials.

(ii) Historical cost results include gross inventory gains or losses from the movement in crude oil prices. In 2014, the historical cost result includes $516 million inventory loss (2013: $246 million inventory gain). Net inventory loss is adjusted to reflect impact of revenue lags.

As a general rule, an increase in crude prices on an Australian dollar basis will create an earnings gain for Caltex (but working capital requirements will also increase). Conversely, a drop in crude prices on an Australian dollar basis will create an earnings loss. This is a direct consequence of the first in first out

• (iii) Replacement cost of sales operating profit after income tax is calculated before taking into account any significant items over the five years. The total effect of these significant items in each year was:

(FIFO) costing process used by Caltex in adherence with accounting standards to produce the financial result on a historical cost basis. With Caltex holding approximately 45 to 60 days of inventory, revenues reflect current prices in Singapore whereas FIFO costings reflect costs some 45 to 60 days earlier. The timing difference creates these inventory gains and losses.

2010: $23 million expenses before tax ($16 million after tax)

2011: $1,594 million expenses before tax ($1,116 million after tax)

2012: $441 million expenses before tax ($309 million after tax) 2013: $28 million gain before tax ($26 million after tax) 2014: $160 million expenses before tax ($112 million after tax).

StatiStical information

StatiStical information
year ended 31 december	2014	2013	2012	2011	2010
people
Employees(i)	3,067	3,638	3,610	3,550	3,546
assets
Fuel refneries	1	2	2	2	2
Lube oil refnery(ii)	–	–	–	1	1
Road tankers(iii)	252	216	168	168	170
Rail cars (operational)	42	66	66	66	66
Storage terminals operated by Caltex(iv)	13	12	12	13	12
Star convenience stores (Star Mart, Star Supermarket and Star Shop)	496	491	480	476	472
Service stations (owned or leased)	795	765	738	746	743
Depots	81	76	76	79	79
operations
Nameplate refning capacity (barrels per day)
Caltex Refneries (NSW) Pty Ltd(v)	–	135,000	135,000	135,000	135,000
Caltex Refneries (Qld) Pty Ltd	109,000	109,000	109,000	109,000	109,000
Caltex Lubricating Oil Refnery Pty Ltd(ii)	–	–	–	3,750	3,750
Fuel production (ML)	10,245	11,398	11,648	10,686	10,607
Lubricants production (ML)(ii)	–	–	–	15	78
Total sales volume (ML)	16,991	16,957	16,628	16,619	16,047
Lost time injuryfrequencyrate(LTIFR)(vi)	0.77	0.63	0.59	0.99	1.35

(i) Includes employees of Calstores Pty Ltd and Caltex 100% owned resellers.

(ii) Lube oil refinery closed in December 2011.

(iii) From 2009, road tanker numbers include Caltex 100% owned reseller fleet.

(iv) Caltex has access to product supply at a further seven terminals.

(v) Caltex Refineries (NSW) Pty Ltd (Kurnell refinery) ceased production in October 2014.

(vi) Employee and contractor lost time injury frequency rate per million work hours. From 2010, the injury frequency rate was changed to include Marketing contractors.

CALTEx / 2014 ANNUAL REVIEW

28

ShAREhoLdER INfoRmATIoN

Share capital

The information contained on page 28 of this Annual Review is current as at 23 February 2015.

SubStantial ShareholderS

The following shareholders are substantial shareholders of Caltex Australia Limited.

	ordinary	% of issued
shareholder	shares held	shares
Chevron Global EnergyInc	135,000,000	50%

diStribution of ShareholdingS

Caltex Australia Limited has one class of equity securities (ordinary shares) and the number of holders of those securities is 20,623.

The shareholdings in Caltex Australia Limited shares are distributed as set out in the table below.

	number of	number of	% of issued
number of shares	shareholders	shares held	shares
1 – 1,000	15,316	6,514,308	2.41
1,001 – 5,000	4,615	10,426,109	3.86
5,001 – 10,000	429	3,176,630	1.18
10,001 – 100,000	228	5,625,368	2.08
100,001 and over	35	244,257,585	90.47
total	20,623	270,000,000	100

As at 23 February 2015, 270 shareholders hold less than a marketable parcel of Caltex Australia Limited shares. Details of the 20 largest shareholders of Caltex Australia Limited shares are listed in the table below.

		number of	% of issued
	shareholder	shares held	shares
1.	Chevron Global Energy Inc	135,000,000	50.00
2.	HSBC Custody Nominees (Australia) Limited	33,947,179	12.57
3.	J P Morgan Nominees Australia Limited	27,413,829	10.15
4.	National Nominees Limited	20,154,862	7.46
5.	Citicorp Nominees Pty Limited	10,436,592	3.87
6.	HSBC Custody Nominees (Australia) Limited	3,174,156	1.18
7.	BNP Paribas Noms Pty Ltd	2,687,204	1.00
8.	RBC Investor Services Australia Nominees Pty Limited	1,854,449	0.69
9.	Pan Australian Nominees Pty Limited	1,341,965	0.50
10.	Citicorp Nominees Pty Limited	1,138,731	0.42
11.	AMP Life Limited	924,336	0.34
12.	National Nominees Limited	918,430	0.34
13.	RBC Investor Services Australia Nominees Pty Limited	820,733	0.30
14.	Australian Foundation Investment Company Limited	455,000	0.17
15.	AET SFS Pty Ltd	309,471	0.11
16.	Share Direct Nominees Pty Ltd <10026 A/C>	299,398	0.11
17.	Invia Custodian Pty Limited	297,628	0.11
18.	BNP Paribas Nominees Pty Ltd	274,913	0.10
19.	UBS Nominees Pty Ltd	237,760	0.09
20.	RBC Investor Services Australia Nominees PtyLimited	236,762	0.09
	total	241,923,398	89.60

on-market buY-back

There is currently no on-market buy-back.

Shareholder enquirieS

Shareholders with queries about their shares or dividend payments should contact Caltex’s share registry, Computershare, on phone 1300 850 505 or fax +61 3 9473 2500, or through its website (www.computershare.com.au) using their holder identification number (HIN) or shareholder reference number (SRN) to access their shareholder specific information, or write to:

Computershare Investor Services Pty Limited GPO Box 2975 Melbourne VIC 3001 Australia

All enquiries should include a SRN or HIN, which is recorded on the shareholder’s holding statement.

change of addreSS

Shareholders on the issuer sponsored sub-register who have changed their address should notify the share registry in writing. CHESS holders should notify their controlling sponsor.

caltex auStralia publicationS

Caltex’s annual report published in March each year is the main source of information for shareholders. Shareholders who wish to receive a hard copy of the annual report or half year report should notify the share registry in writing.

Voting rightS

The share capital of Caltex Australia Limited comprises 270 million fully paid ordinary shares. Shareholders in Caltex Australia Limited have a right to attend and vote at all general meetings in accordance with the company’s Constitution, the Corporations Act and the ASX Listing Rules.

At a general meeting, individual shareholders may vote their shares in person or by proxy. A corporate shareholder may vote by proxy or through an individual who has been appointed as the company’s body corporate representative. Shareholders with at least two shares may appoint up to two proxies to attend and vote at a general meeting.

If shares are held jointly and two or more of the joint shareholders wish to vote, the vote of the shareholder named first in the register will be counted, to the exclusion of the other joint shareholder or shareholders.

SecuritieS exchange liSting

The company’s shares and Caltex Subordinated Notes are listed on the Australian Securities Exchange (ticker: CTX and CTXHA).

general enquirieS

investor relations

Rohan Gallagher +61 2 9250 5247

Company secretaries

Peter Lim, Nawal Silfani

The address and telephone of the registered office is: Level 24 2 Market Street Sydney NSW 2000 T: +61 2 9250 5000 F: +61 2 9250 5742

The postal address is: GPO Box 3916 Sydney NSW 2001 Website: www.caltex.com.au

The address at which the register of shares is kept is: Computershare Investor Services Pty Limited Level 4, 60 Carrington Street Sydney NSW 2000 Australia Tollfree: 1300 850 505 (enquiries within Australia) T: +61 3 9415 4000 (enquiries outside Australia) F: +61 3 9473 2500 Website: www.computershare.com.au

The postal address is: GPO Box 2975 Melbourne VIC 3001 Australia

Shareholders who are entitled to vote at the meeting should note that:

• on a poll, each shareholder has one vote for each share they hold, and

• on a show of hands, each shareholder has one vote.

If the shareholder has appointed a proxy, the proxy may vote but, if two proxies are appointed, neither proxy may vote on a show of hands.

For a complete analysis of shareholders’ voting rights, it is recommended that shareholders seek independent legal advice.

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The 2014 Caltex Annual Review is printed on Pacesetter Laser Pro. This is FSC[®] Mix Certified, which ensures that all virgin pulp is derived from well-managed forests and controlled sources. It is manufactured by an ISO 14001 certified mill.

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Corporate offiCes

Caltex Australia Limited ACN 004 201 307

Caltex Australia Petroleum Pty Ltd ACN 000 032 128

Level 24 2 Market Street Sydney NSW 2000 Australia

Mail: GPO Box 3916 Sydney NSW 2001 Australia

T: +61 2 9250 5000 F: +61 2 9250 5742 www.caltex.com.au

share registry

Computershare Investor Services Pty Limited GPO Box 2975 Melbourne VIC 3001 Australia

Tollfree: 1300 850 505 (enquiries within Australia) T: +61 3 9415 4000 (enquiries outside Australia) F: +61 3 9473 2500

Marketing offiCes

New South Wales

Caltex Banksmeadow terminal Penhryn Road Banksmeadow NSW 2019

T: +61 2 9695 3600 F: +61 2 9666 5737

Queensland/

Northern Territory

Caltex Lytton terminal Tanker Street, off Port Drive Lytton QLD 4178

T: +61 7 3877 7333 F: +61 7 3877 7464

Victoria/Tasmania

Caltex Newport terminal 411 Douglas Parade Newport VIC 3015

T: +61 3 9287 9555 F: +61 3 9287 9572

Western Australia

Caltex Fremantle 85 Bracks Street North Fremantle WA 6159

T: +61 8 9430 2888 F: +61 8 9335 3062

CustoMer support feedbaCk line

Complaints, compliments and suggestions Mon–Fri 8.30am to 5.00pm (EST)

T: 1800 240 398

Card Support Centre Card enquiries 24 hours/seven days

T: 1300 365 096

Lubelink

Mon–Thurs 8.00am to 6.00pm (EST) Fri 8.00am to 5.00pm (EST) T: 1300 364 169

www.caltex.com.au

www.computershare.com.au

refinery

Caltex Refineries (Qld) Pty Ltd ACN 008 425 581

South Street Lytton QLD 4178

T: +61 7 3362 7555 F: +61 7 3362 7111

Environmental hotline: 1800 675 487

TRANSFORMATION OF A BUSINESS

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WITh yOU All ThE WAy

MOvINg MORE AUSTRAlIANS ThAN ANy OThER

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Since 1900, Caltex in all its forms has maintained its competitive advantage by evolving alongside its customers. In recent history, Caltex continued this evolution by embarking on a significant journey of change, transition and growth. This booklet is a small snapshot of what we have achieved since our inception and provides an outline of our aspirations and plans for the future. We trust you will enjoy this summary of the yesterday, today and tomorrow of Caltex.

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Julian Segal Managing Director & CEO

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1900

RW Cameron begins marketing Texaco products in Australia.

1948

Australian Motorists Petrol Company (previously incorporated in 1936) is listed on the Australian Securities Exchange.

1956

Caltex’s Kurnell refinery in Sydney comes on stream.

~~1900~~

~~1950~~

1949

1941 The Caltex brand name is used for the first time in Australia.

Australian Motorists Petrol Company changes its name to Ampol.

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2012

Caltex announces the intended closure of the Kurnell refinery and the conversion to Australia’s largest import fuel terminal.

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1981

Caltex acquires the Golden Fleece Company.

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1995

Caltex and Ampol merge their refining and marketing assets.

2013

Ampol Singapore, a wholly owned subsidiary of Caltex Australia, is established.

~~2000~~

~~2015~~

1965

Ampol’s Lytton refinery in Brisbane comes on stream.

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1982

Ampol acquires Total Australia’s refining and marketing assets.

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1999 Star Mart convenience brand is introduced by Caltex.

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2014

Caltex successfully closes the Kurnell refinery and opens Australia’s largest fuel import terminal at Kurnell.

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1. The Kurnell refinery at night circa 1956 as captured by Max Dupain

TRANSFORMATION

KURNELL 1956-2014

1. The No.1 fluid catalytic cracking unit (Plant 4) sparkles in the night

2. One of many tanks on site at Kurnell

3. The Whirler crane in the background assisted workers constructing the refinery, as captured by Max Dupain

4. The refinery stands in readiness to serve Australia’s fuel needs, as captured by Max Dupain

The opening of the Kurnell refinery in February 1956 and the transformation of the site into Australia’s largest fuel import terminal in October 2014 were both proud and significant milestones for Caltex. These events also signified shifts in the broader Australian liquid fuels marketplace.

From 1900 to 1956, Caltex and its predecessors were major importers of petroleum products. In the 1950s, an ambitious program of economic expansion instigated by the postwar Commonwealth Government led Caltex to realise that there was a viable opportunity to establish an oil refinery in New South Wales. The site on the Kurnell Peninsula of Botany Bay was selected due to the proximity to the Sydney market, access to the sea and room to expand.

Three thousand workers were rallied to construct the refinery. Four of the crude oil storage tanks, each able to hold 28.6 million litres, were the biggest in Australia at that time. In addition, the longest submarine pipelines in Australia, in a bundle of four, were laid across Botany Bay to transfer petroleum products to the new Banksmeadow terminal that was being built at the same time.

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@PaulAnthonySleeman.com
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Almost six decades after its opening in 1956, and once again responding to the needs of Australia, Caltex made the difficult decision to transform the site into Australia’s largest fuel import terminal. This allows Caltex to more effectively and efficiently meet the refined product demands of its customers. The terminal, opened in October 2014, has a tank capacity which is almost six times larger than the total capacity of the crude oil tanks that the refinery featured when it first opened.

Like the original construction of the refinery, the conversion to an import terminal was one of the most significantly challenging and ultimately successful projects of its time in Australia. This is a credit to all who have worked on the Kurnell site from the 1950s through to 2015.

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WITh yOU All ThE WAy

StRatEgy OUR STRATEgy IS ClEAR ANd SIMplE

Caltex has continually changed and adapted our business model to meet our customers’ ever evolving needs. What has not changed is our unswerving commitment to maintaining safe, reliable and sustainable operations.

caLtEx’S viSioN

Outright leader in transport fuels across Australia

mEaSURE of SUccESS

Safely and reliably deliver top quartile total shareholder returns

KEy StRatEgy piLLaRS

Superior supply chain

• Understanding and management of risk; relentless pursuit of operational excellence

• Highly capable organisation

Comprehensive targeted offer to customers across products, channels and geographies

Organisational competitiveness

Corporate growth

• Competitive and reliable supply of product into each key geography

• Large scale, costcompetitive terminal, pipeline, depot and fleet infrastructure in each geography

• Scale across the value chain, anchored by key customer portfolio

• Comprehensive network of outlets, profitable franchise network, leading fuel card offer and brand

• Cost and capital efficient

WITh yOU All ThE WAy

BUSiNESS tRaNSfoRmatioN SECURINg OUR FUTURE

In order to remain the outright leader in transport fuels across Australia, Caltex will continue to adapt and transform its strategy and business model as it has done over the past 114 years.

Evolving and growing

Since 1900, Caltex has made business decisions that were right for the time. As an example, for the first 50 years of its existence our business had no refineries.

When substantial crude oil was able to be sourced within Australia and in the region, it made business sense to build our refineries in Kurnell in 1956 and Lytton in 1965. Over 50 years on, we no longer have the advantage of being able to source large quantities of local crude oil and, as a result, Caltex has chosen to reduce its refining capacity.

ThE road To changE

In the lead-up to making the decision to close the Kurnell refinery, Caltex made a series of step-changes in our business. Firstly, we established our ambition to be the outright

leader in transport fuels across Australia, measured by delivering top quartile total shareholder returns. We distilled the central tenets of our culture to six core values. We also worked continuously to maximise the value of our distribution infrastructure and enhance our competitive sourcing capabilities. Following this, we looked closely at the role of our refineries and, as a result, decided to close the Kurnell refinery while continuing with our efforts to improve performance at our Lytton refinery. The culmination of this decision was the resetting of our business model to one integrated supply chain.

ThE road ahEad

To date, our strategy has delivered great results and we are confident it will keep delivering. We are committed to remaining the outright leader in transport fuels across Australia through ongoing reliable,

secure, competitive and efficient fuel supply to our customers. We will do this through ensuring a constant flow of product through our flexible and adaptable domestic and international supply chains. This flow of high quality and reliable product is sourced through Ampol Singapore, a wholly owned subsidiary of Caltex.

While the Australian fuels industry continues to go through a significant period of change, particularly with new competitors entering the market, Caltex is now well structured and prepared for the pace and intensity of this change. To consolidate our market leading position, we will continue to expand both the breadth and quality of our retail and reseller network.

We are confident that Caltex is well positioned to remain the outright leader in transport fuels in Australia.

$270 m The cost of the Kurnell refinery conversion to Australia’s largest fuel import terminal.

In 1955 the length and breadth of the tanker, Caltex Sydney, which delivered the first shipment of crude to the Kurnell refinery was 114x15m. In 2015 the tanker which delivered Caltex’s largest shipment to date of refined product to Kurnell terminal in February 2015 was 245x42m.

245 x 42m

114 x 15m

WITh yOU All ThE WAy

CAlTEx’S NATIONAl INFRASTRUCTURE NETWORK

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Owned terminal
Host terminal
Caltex depot
Darwin
Caltex refinery
Cairns
JV Lubricant distribution centre
Broome
JV Lubricant manufacturing facility
Airport jet fuel supply
Dampier Townsville
Fuel barge
Third party product barge
Major bunker location Mackay
Major pipeline Port Hedland
Bunker pipeline Gladstone
Alice Springs Lytton
Geraldton
Gold Coast
Kalgoorlie
Coogee
Silverwater
Newcastle
Port Lincoln
Esperance
Kurnell
Corio
Albany
Newport
Devonport
Pelican Point
North Fremantle (Adelaide)
Hobart
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in addition to this comprehensive infrastructure network, caltex has 1,250 caltex-branded and Starcard accepting sites across its national network.

With a commitment to Australia that flows back to 1900, Caltex has grown to become the nation’s outright leader in transport fuel. Caltex supplies one-third of all Australia’s transport fuels and is unique in this market for being the only major brand listed on the Australian Securities Exchange. Caltex owns and operates the most comprehensive fuels infrastructure in Australia. Through this infrastructure and our flexible supply chain, Caltex

has forged its reputation for providing safe and reliable supply of high-quality fuels to a diverse number of customer segments, including retail, mining, agriculture, aviation, transport, small-to-medium enterprises, marine, automotive and government. Caltex is also one of Australia’s largest convenience retailers and franchisors, with over 85% of its stores operated by franchisees.