BP Annual Review 2003 Introduction Performance highlights Chairman's letter Group chief executive's review It starts here Financial performance Business performance Environmental and social performance Summary accounts Summary corporate governance Summary directors' remuneration report Board of directors Annual general meeting and information for shareholders Further information	Notes 1 Presentation of the accounts These summarized financial statements represent an abridged version of the financial statements in BP Annual Report and Accounts 2003. 2 Replacement cost profit Replacement cost profits reflect the current cost of supplies. The replacement cost profit is arrived at by excluding stock holding gains and losses from the historical cost profit. 3 Other income $ million   2003 2002 Group replacement cost operating profit includes:     Income from other fixed asset investments 157 139 Other interest and miscellaneous income 629 502 4 Analysis of total replacement cost operating profit $ million   2003 2002 By business     Exploration and Production 13,937 9,206 Gas, Power and Renewables 472 354 Refining and Marketing 2,340 872 Petrochemicals 568 515 Other businesses and corporate (904 ) (701 )   16,413 10,246 $ million   2003 2002 By geographical area     UK 2,594 1,696 Rest of Europe 2,208 1,703 USA 5,201 2,818 Rest of World 6,410 4,029     16,413 10,246 5 Exceptional items $ million   2003 2002 Exceptional items comprise profit (loss) on sale of fixed assets and businesses or termination of operations as follows:     Profit on sale of businesses or termination of operations – Group – 195 Loss on sale of businesses or termination of operations – Group (28 ) (228 )   (28 ) (33 ) Profit on sale of fixed assets     – Group 1,894 2,736 – Associated undertakings – 2 Loss on sale of fixed assets – Group (1,035 ) (1,537) Exceptional items 831 1,168 Taxation credit (charge):     Sale of businesses or termination of operations – 45 Sale of fixed assets (123 ) (170 ) Exceptional items (net of tax) 708 1,043 Sale of businesses or termination of operations The profit in 2002 relates mainly to the disposal of the group's retail network in Cyprus and the UK contract energy management business. The loss on sale of businesses or termination of operations for 2003 relates to the sale of our European oil speciality products business. For 2002, the loss relates to the disposal of our plastic fabrications business, the sale of the former Burmah Castrol speciality chemicals business Fosroc Construction, our withdrawal from solar thin film manufacturing and the provision for the loss on divestment of the former Burmah Castrol speciality chemicals businesses Sericol and Fosroc Mining. Sale of fixed assets The major elements of the profit on sale of fixed assets relate to the divestment of a further 20% interest in BP Trinidad and Tobago LLC to Repsol and the sale of the group's 96.14% interest in the Forties oil field in the UK North Sea. The sale of a package of UK Southern North Sea gas fields, the divestment of our interest in the In Amenas gas condensate project in Algeria to Statoil and the disposal of BP's interest in Kaltim Prima Coal also contributed to the profit on disposal. The major part of the profit during 2002 arises from the divestment of the group's shareholding in Ruhrgas. The other significant elements of the profit for the year are the gain on the redemption of certain preferred limited partnership interests BP retained following the Altura Energy common interest disposal in 2000 in exchange for BP loan notes held by the partnership, the profit on the sale of the group's interest in the Colonial pipeline in the US and the profit on the sale of a US downstream electronic payment system. The loss on sale of fixed assets in 2003 includes losses on exploration and production properties in China, Norway and the US, the loss on the sale of refining and marketing assets in Germany and Central Europe and the provision for losses on sale in early 2004 of exploration and production properties in Canada and Venezuela. The major element of the loss on sale of fixed assets in 2002 relates to provisions for losses on sale of exploration and production properties in the US announced in early 2003. 6 Distribution to shareholders pence per share   2003 2002 Preference dividends (non-equity)     Dividends per ordinary share:     First quarterly 3.947 4.051 Second quarterly 4.039   3.875   Third quarterly 3.857 3.897 Fourth quarterly 3.674 3.815   15.517 15.638 cents per share   2003 2002 Preference dividends (non-equity)     Dividends per ordinary share:     First quarterly 6.25 5.75 Second quarterly 6.50   6.00   Third quarterly 6.50 6.00 Fourth quarterly 6.75 6.25   26.00 24.00 $ million   2003 2002 Preference dividends (non-equity) 2 2 Dividends per ordinary share: First quarterly 1,386 1,290 Second quarterly 1,433   1,346   Third quarterly 1,438 1,340 Fourth quarterly 1,494 1,397   5,753 5,375 7 Earnings per ordinary share The calculation of basic earnings per ordinary share is based on the profit attributable to ordinary shareholders, i.e. profit for the year less preference dividends, related to the weighted average number of ordinary shares outstanding during the year. The profit attributable to ordinary shareholders is $10,265 million ($6,843 million). The average number of shares outstanding excludes the shares held by the Employee Share Ownership Plans. The calculation of diluted earnings per share is based on profit attributable to ordinary shareholders, adjusted for the unwinding of the discount on the deferred consideration for the acquisition of our interest in TNK-BP, of $10,289 million ($6,843 million). The number of shares outstanding is adjusted to show the potential dilution if employee share options are converted into ordinary shares, and for the ordinary shares issuable, in three annual tranches, in respect of the TNK-BP joint venture. In addition to basic earnings per share based on the historical cost profit for the year, a further measure, based on replacement cost profit before exceptional items, is provided as it is considered that this measure gives an indication of underlying performance. 8 Capital expenditure and acquisitions $ million   2003 2002 By business     Exploration and Production 15,452 9,699 Gas, Power and Renewables 359   408   Refining and Marketing 3,080 7,753 Petrochemicals 775 823 Other businesses and corporate   409   428     20,075 19,111 $ million   2003 2002 By geographical area     UK 1,619 1,637 Rest of Europe 1,277   6,556   USA 6,291 6,095 Rest of World 10,888 4,823             20,075 19,111 9 Directors' remuneration $ million   2003 2002 Total for all directors     Emoluments 17 14 Ex-gratia payment to executive director retiring in 2003 1   –   Gains made on the exercise of share options 1 – Amounts awarded under incentive schemes 4 14 Emoluments These amounts comprise fees paid to the non-executive chairman and the non-executive directors and, for executive directors, salary and benefits earned during the relevant financial year, plus bonuses awarded for the year. Pension contributions Six executive directors participated in a non-contributory pension scheme established for UK staff by a separate trust fund to which contributions are made by BP based on actuarial advice. One US executive director participated in the US BP Retirement Accumulation Plan during 2003. Office facilities for former chairmen and deputy chairmen It is customary for the company to make available to former chairmen and deputy chairmen, who were previously employed executives, the use of office and basic secretarial facilities following their retirement. The cost involved in doing so is not significant. Further information Further details of individual directors' remuneration are given in the summary directors' remuneration report (see Related links). In this section   Summary group income statement   Summary group balance sheet   Summary group cash flow statement Notes   Independent auditors' statement   United States accounting principles   Related links   Summary report on executive and non-executive directors' remuneration   Summary report on directors' remuneration

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