L624 - ACA PNGSDP AR09 Covers 25/5/10 2:24 PM Page 1 PNG SUSTAINABLE DEVELOPMENT PROGRAM LTD PNG SUSTAINABLE PNG SUSTAINABLE DEVELOPMENT PROGRAM LTD PNG SUSTAINABLE www.pngsdp.com ANNUAL REPORT Annual Report 2009 2009 PNG Sustainable Development Program Ltd L624 - ACA PNGSDP AR09 Covers 25/5/10 2:24 PM Page 2 PNG SUSTAINABLE DEVELOPMENT PROGRAM LTD CORPORATE DIRECTORY MISSION AND VALUES OUR MISSION OUR VALUES OUR ACTIONS HEAD OFFICE PNGSDP promotes development We recognise the significant onus We will achieve these by: PNG Sustainable Development Program Ltd that meets the needs of the present of trust, responsibility and • investing and managing wisely 7th Floor, Pacific Place generation and establishes the challenge that has been placed the income and resources of the PO Box 1786, Port Moresby 121 foundation for continuing progress upon the Company. Company; Papua New Guinea for future generations of Papua New Guineans. We will be honest, fair and • undertaking investments and accountable in all our dealings, projects that provide significant while promoting equality and short and long term benefits to Tel (675) 320 3844 Fax (675) 320 3855 efficiency in our conduct and the people, local communities, (675) 320 3845 activities. provinces and the nation; We commit ourselves, through the • meeting the best financial, activities of the Company, to physical, cultural, social and promote and improve the quality environmental standards in all REGISTERED OFFICE of life of current and future our activities; and generations of the people of Papua • working together with the Drew Corp Services Pte Ltd New Guinea, especially of Western people of Papua New Guinea in 20 Raffles Place #09-01 Province. partnership with the Ocean Towers government, churches and Singapore 048620 other non-government development and business Tel (65) 6531 4187 Fax (65) 6533 1542 partners. (65) 6531 2266 (65) 6533 7649 PNG SUSTAINABLE DEVELOPMENT PROGRAM LTD STRATEGIC OBJECTIVES & LONG TERM GOAL PNGSDP'S STRATEGIC OBJECTIVES • To improve basic infrastructure and services that are critical for economic development in a sustainable way. • To invest in sustainable economic activities that will raise household incomes and empower local communities to participate in sustainable development. PHOTOS BACK COVER Back Cover - Left hand photo: PNGSDP Australian scholarship recipient Hilda Duwaba from Western Province. Back Cover - Center: PNGSDP'S LONG TERM GOAL Recipients of the Western Province Scholarship scheme to study in Australia: Front row (L-R): Peter Olton, Lady Mina Siaguru (Education Consultant, PNGSDP), Hilda Duwaba, Bareya Kanora, Jason Magaia, To promote diversified and balanced economic development of the Nation, Anita Malawa. Back row (L-R): Dominic Sibili, Mr. Camillus Midire (CPO, PNGSDP),Velle Kissua, Thomas Amani, especially Western Province, providing for improved well-being and self-determination of Eileen Fergusson, Devinago Deho, Carina Davey, Elizabeth Wamsa, Joanne McLachlan (GRM International). local communities beyond the life of the Ok Tedi mine. Back Cover - Right hand photo: PNGSDP Australian scholarship recipient Dominic Sibili from Western Province. Front Cover: Balimo Canoe Festival, Balimo, Western Province. LETTER FROM THE CHAIRMAN PNG Sustainable Development Program Ltd. Port Moresby, Papua New Guinea 6 APRIL, 2010 The Independent State of Papua New Guinea BHP Billiton Ltd. Ok Tedi Mining Ltd. In accordance with Clause 20 of the Company's Program Rules under the Articles of Association of the PNG Sustainable Development Program Ltd., I submit to the Independent State of Papua New Guinea, BHP Billiton Ltd., and Ok Tedi Mining Ltd., the Annual Report 2009, covering the financial year ending 31 December 2009. The Annual Report also includes the financial statements and the report of the Auditor. Furthermore, in accordance with Clause 19.3 of the Program Rules of the Company, the key elements of the Annual Report will be presented for discussion at the Annual Report Meeting of the Company, to commence at 9.00 am on Tuesday 25 May 2010 at the Conference Room, Crowne Plaza Hotel, Port Moresby. Sincerely, ROSS GARNAUT AO Chairman Board of Directors TABLE OF CONTENTS Mission & Values; Strategic Objectives & Long Term Goal.........................................................IFC ASSOCIATES REPORT ......................................................31 Letter from Chairman .........................................................1 PNG Microfinance ............................................................31 Table of Contents ...............................................................1 MANAGEMENT REPORT .................................................32 CHAIRMAN'S REPORT .......................................................2 Management ....................................................................32 CEO's REPORT....................................................................4 - Management Organisational Structure ...........................33 Advisory Council Report....................................................34 BACKGROUND ..................................................................6 Corporate Governance Report ..........................................35 PNG Sustainable Program Ltd Strategic Framework............6 - Board of Directors .........................................................35 PNG Sustainable Program Ltd History.................................8 - Corporate Governance Statement ..................................39 Ok Tedi Mine......................................................................9 - Subsidiaries and Joint Venture.........................................43 Financial Management......................................................10 Funds Management..........................................................12 FINANCIAL STATEMENTS................................................44 The Development Fund ....................................................13 Directors' Report ...............................................................44 Statement by Directors .....................................................45 PROGRAM REPORT .........................................................14 Independent Auditor’s Report ...........................................46 Mine Closure ....................................................................14 Statements of Comprehensive Income..............................48 Transformational Projects ..................................................15 Balance Sheets ..................................................................49 Western Province Program................................................16 Statement of Changes in Equity........................................50 - Overview ........................................................................16 Statement of Cash Flow....................................................52 - Infrastructure ..................................................................16 Notes to the Financial Statements.....................................53 - Industry ..........................................................................18 - Community and Social Investment .................................20 MAPS .............................................................................103 National Program .............................................................23 Western Province Program..............................................103 - Overview ........................................................................23 National Program ...........................................................104 - Infrastructure ..................................................................23 - Industry .........................................................................25 GLOSSARY OF ACRONYMS.............................................106 - Community and Social Investment .................................26 Corporate Directory.........................................................IBC SUBSIDIARY REPORT.......................................................29 Cloudy Bay Sustainable Forestry .......................................29 Western Province Sustainable Power .................................30 PNG Energy Development ................................................30 ANNUAL REPORT 2009 1 CHAIRMAN'S REPORT - A message from Ross Garnaut Director appointed, to provide a point of coordination of a wide range of education and training activities. PNGSDP is also contributing to work on sustainable governance arrangements for the town, to be introduced in the transition to mine closure, and to provide a basis for long term town management. The Long Term Fund generated returns of 5.01% in 2009, a good result in a year that began in economic crisis. The weighted average return to investments in the Long Term Fund from its beginning in 2002 is now 5.4% percent through a period that covers the global financial crisis. These returns are in United States dollars. At the end of 2009, the Long Term Fund had a Dr Ross Garnaut AO - Chairman balance of US$817.9 million. It seems likely that the balance of the Long Term Fund will exceed $US one The year under review saw good progress on billion before the end of 2010. The Long Term Fund is PNGSDP's most important long term objectives. managed cautiously, to ensure that its resources will be The Global Financial Crisis turned out to have only a available to support essential services, infrastructure short and moderate impact on the Company, and on and development