• Chairman’s Review
• Chief Executive Officer’s Report
• BHP Billiton locations

Chairman’s Review

It is comforting to see the strategic direction of a company delivering on its objectives. The current fiscal reporting period has delivered another outstanding result.

Our underlying earnings before interest and tax (EBIT) were US$20.1 billion, our net operating cash flows increased to US$15.6 billion and our total dividend payment for the year is 47 US cents a share, reflecting the eleventh consecutive increase in our dividend. We have not moved away from our progressive dividend policy; rather we have rebased the dividend to reflect our confidence in the insatiability of the demand for commodities over the medium term.

With our market capitalisation at US$165 billion at 30 June and a large-scale capital return program, total shareholder returns for the year continued to break records.

High prices across our range of commodities once again played a significant role in our financial results. Like our market valuation, we have little control over commodity prices, which are largely a function of a tight global supply situation. What we can control is our response to the continually increasing demand for the commodities we produce and the way we plan to meet that demand into the future to enhance the value of the Company for our shareholders.

We have to be careful that we do not have a myopic concentration on the short term. The strength of our strategy is in the balance between optimising current conditions and progressing our pipeline of next generation high growth opportunities.

Never before has the industry been in a position where planning to ensure we maintain our share of growing markets into the future has been so important.

Essentially, our strategy is to ensure we have a suite of long-life, low-cost assets, diversified by geography and commodity, that can be expanded and that are largely export-oriented. The growth opportunities implicit in this strategy mean we can move quickly to increase capacity from an existing operation when we determine that global demand warrants such an expansion.

At the end of the last financial year, we were conducting final assessments – what we call feasibility stage – for 15 major projects and, during the year, we approved the development of three major projects. We have many more high-growth opportunities in the pipeline.

We are a value-driven Company whose Board makes its decisions for the long term.

While shareholder value is our primary driver, every decision the Board makes takes into account the needs and expectations of all our stakeholders: customers, resource owners, communities and governments, partners, suppliers and our employees.

Corporate Responsibility

To ensure we continue to meet growing global demand for commodities requires that, as well as progressing our existing growth opportunities, we actively compete for access to undeveloped resources in regions throughout the world. In many cases, the governments and communities of these regions recognise that the development of their natural resources with the right choice of industry partner can dramatically improve their economic and social development.

The best way we can demonstrate why BHP Billiton should be the partner of choice to develop these resources, many of which are in regions such as Africa, Asia and the former Soviet Union, is to point to our track record of benefiting the communities and environments in which we operate. We have numerous examples that demonstrate our absolute commitment to improving the quality of life of the communities we work with and to minimising harm to the environment. This Review touches on some of that work but I strongly encourage you to visit the sustainable development area of our website at www.bhpbilliton.com to read about some of the programs we run throughout the world.

Our journey in response to the global issue of climate change reached a new milestone during this year with our implementation of new aggressive targets to reduce the intensity of gas emissions and energy usage at our operations. Most significantly, our revised policy recognises that real behavioural change is required by our employees, our customers and our communities and we have pledged to support that process.

As you are aware, we have been active in this space for a number of years and we are proud of what we have achieved to date. We have directed and funded projects to identify low emissions technologies for energy generation, participated in the development of national climate change policies, examined the strategic impacts of climate change on our businesses and exceeded our targets to reduce greenhouse gas emissions, including a 10 per cent reduction in greenhouse gas intensity from 1995 to 2000 and a further five per cent reduction by 2007.

Corporate Governance

While the board of any company must ensure that a robust governance structure is in place, my fellow Directors and I are equally committed to fostering a culture throughout the Company that values and rewards exemplary ethical standards, personal and corporate integrity and respect for others. Our approach to governance is predicated on the belief that there is a link between high-quality governance and the creation of shareholder value.

The Company’s culture will always be formed not only by the Directors, but more significantly, the Chief Executive Officer. We have been fortunate in having an outstanding Chief Executive Officer in Chip Goodyear for the past five years. Through his leadership, Chip has driven financial and operational success within a strong culture of teamwork and integrity. On behalf of my fellow Directors I want to thank him for a tremendous effort and wish him and his family well for their future.

I also want to welcome Marius Kloppers as our new Chief Executive Officer on 1 October 2007. The Board conducted an extensive global search to ensure we identified the best possible candidate to succeed Chip. It is immensely satisfying that such an exhaustive process made clear to us that the best person for the role was one of our existing executives, demonstrating the success of our internal succession program. I am very much looking forward to working with Marius and watching him make his mark on this outstanding Company.

With changes to our senior management team during the year and Chip’s retirement at the end of this calendar year, the Board’s renewal process continues. This year, Dr David Brink is retiring. He brought to the Board deep operating experience in the mining sector and an intimate knowledge of the South African environment, and we will miss his insightful contributions. On behalf of the Board I extend our sincere appreciation and wish him well in the future. We continue to assess the performance of each Board member as well as the collective effort of the Board as a whole and we engage external search firms to locate people with specific skills in the areas of finance, mining and project management, to ensure that renewal of Board membership is undertaken in an orderly manner. I thank all my fellow Directors for their contribution and commitment through the year.

Outlook

The global economy remains robust, driven by solid activity in Asia and Europe. Growth in China’s demand for raw materials should continue and place ongoing pressure on the global supply of commodities. Structurally higher cost sources of supply will be required and this, combined with higher energy prices, is likely to have a flow-on effect to commodity prices. Over the medium term we expect commodity prices to move towards long-run marginal costs of supply but, in the interim, prices are likely to stay high relative to historical levels, albeit with increased volatility.

Don Argus