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  Dear Shareholder, BP delivered sustained progress in 2003, with continued high oil prices leading to a strong year for the company. This performance has enabled BP to increase its total annual dividend per share to 26 cents, an increase in dollar terms of 8.3% over 2002. The weakening dollar/sterling exchange rate means this equates to a decrease in sterling terms of 0.8%. In stewarding the company for you, its owners, the board must be responsive to the evolving nature of the group, as well as its surrounding economic and competitive landscape. In recent years, BP has grown through significant acquisitions to develop a strong portfolio of assets and leading market positions. It has been transformed into a major oil and gas company with a genuinely global reach. Today, we employ more than 103,000 people around the world. They display tremendous knowledge and skill and have provided the means for BP's development, performance and prospects. On behalf of the board, I would like to pay tribute to their achievements in 2003 and thank them for the value they have created. Strategic direction Building on these foundations, our challenge is to realize the potential of our portfolio in the coming years and make the most of the strategic positions we have established by being a first mover in key markets. We approach the future with confidence, in the belief that the scale of our operations worldwide and the progressive introduction of new producing assets will form the basis for both near-term performance and the generation of sustained shareholder value. While there were signs of renewed global economic strength throughout 2003, geopolitics and energy markets remained unsettled. The map of areas in the world with accessible raw materials for our business has once again been redrawn. Of particular significance is the TNK-BP joint venture in Russia, which commenced in August. Working with the TNK-BP board, we believe we can deliver value to the benefit of our shareholders and reinforce our position in this vital market. Innovative transactions in newer markets – and the development of our existing operations – present significant challenges for John Browne and his executive colleagues. Individually and collectively, they are an excellent team and enjoy our full confidence and support. BP's growth and transformation led to a review during 2003 of the ways in which the group is controlled and how decisions are made. We are confident that this will see the realization of BP as a truly global group. Corporate governance Some years ago, BP adopted an approach to governance based on fundamental principles that delineate the role, authority and accountability of the board and the executive management of the group. We have reported to shareholders annually on this topic. These governance policies are well embedded into our culture and ensure compliance with many new regulatory developments on both sides of the Atlantic. Our approach to governance and transparency is tailored to the nature of the group and its businesses. In our report on corporate governance (see Related links) we have set out an explanation of why we believe our approach is both conceptually sound and right for BP and its shareholders. The board, which comprises a majority of independent non-executive directors, works to ensure that your long-term interests as owners are both protected and enhanced. Our work includes assessing the opportunities and risks confronting the group and monitoring the controls applied to manage and exploit them. In its oversight of the group, the board recognizes the need for the executive team to exercise its judgement in the management of the business, displaying innovation and entrepreneurship – the qualities that have led BP to its current position – but without compromising our standards of probity and transparency. By its nature, the group's business brings BP into contact with many different societies, people and challenges in diverse parts of the world. Our activities are scrutinized by numerous regulatory authorities and other organizations that represent the interests of those who are affected by our operations. As your representatives, we believe it is essential to be responsive to those with whom we come into contact; it is equally essential to discharge our overall responsibility to you as shareholders, in order to protect and enhance the long-term value of your investment. We are mindful of this balance in managing our roles and activities, such as when making decisions about whether to pursue opportunities in environmentally sensitive areas. We only operate in such areas if we believe we can properly manage the environmental and social risks according to our own standards, as well as comply with applicable laws and regulations. Board changes Over the year, the board's focus has included its own succession and development planning. Our corporate governance report sets out the board's approach over the coming years to refresh its membership and ensure it continues to operate effectively and efficiently. Among the transitions ahead is the departure of Floris Maljers, who will step down at the 2004 annual general meeting. During the six years Floris has been on the board he has contributed greatly to its discussions and we thank him for his contribution. As we say goodbye to Floris, we are pleased to welcome Antony Burgmans to the board. He brings with him great experience of marketing matters and an important European perspective. 2003 also saw the retirement of Judith Hanratty as company secretary. Judith has been instrumental in the work of the board since her appointment in 1994. The rigour of our governance policies and the infrastructure that supports our work as a board owe much to her endeavours. We wish her well in her retirement.  Peter Sutherland Chairman 9 February 2004 |
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