UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

BHP BILLITON LIMITED		BHP BILLITON PLC
(ABN 49 004 028 077) (Exact name of Registrant as specified in its charter)		(REG. NO. 3196209) (Exact name of Registrant as specified in its charter)
VICTORIA, AUSTRALIA (Jurisdiction of incorporation or organisation)		ENGLAND AND WALES (Jurisdiction of incorporation or organisation)
180 LONSDALE STREET, MELBOURNE, VICTORIA 3000 AUSTRALIA (Address of principal executive offices)		NEATHOUSE PLACE, VICTORIA, LONDON, UNITED KINGDOM (Address of principal executive offices)

     

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: þ Form 20-F o Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934: o Yes þ No

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): n/a

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

				BHP Billiton Limited and BHP Billiton Plc
Date: 26 September 2007		By: Name:		Jane McAloon   Jane McAloon
		Title:		Group Company Secretary

Group highlights 2007

•		Records achieved across all key earnings measures including Underlying Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) up 27.1 per cent to US$23.0 billion and Underlying Earnings Before Interest and Tax (EBIT) up 31.4 per cent to US$20.1 billion.
•		Attributable profit up 34.7 per cent to US$13.7 billion and Earnings Per Share (EPS) up 39.1 per cent, benefiting from ongoing buy-backs (both measures excluding exceptionals).
•		Record Underlying EBIT margin and Return on Capital Employed increased to 48.4 per cent and 38.4 per cent respectively. This is the sixth consecutive record for both measures.
•		Final dividend rebased to 27 US cents per share demonstrating our confidence in the outlook. This is an increase of 46 per cent on last year’s final dividend.
•		US$6.3 billion of a US$13.0 billion capital management program completed, representing 5.2 per cent of outstanding shares.

Five Year Summary

US$M		2007		(a)		2006		(a)		2005		(a)		2004		(b)		2003		(b)
Revenue together with share of jointly controlled entities’ revenue (Turnover)			47,473				39,099				31,150				24,943				17,506
Underlying EBIT (c)			20,067				15,277				9,921				5,488				3,481
Attributable Profit — excluding exceptional items			13,675				10,154				6,426				3,510				1,920
Attributable Profit — including exceptional items			13,416				10,450				6,396				3,379				1,901
Net operating cash flow including dividends from jointly controlled entities and after net interest and taxation			15,595				10,476				8,374				5,100				3,631
Basic EPS — including exceptional items (US cents per share)			229.5				173.2				104.4				56.4				30.9
Basic EPS — excluding exceptional items (US cents per share)			233.9				168.2				104.9				54.3				30.6
Dividend per share (d)
BHP Billiton Plc (US cents)			47.0				36.0				28.0				26.0				14.5
BHP Billiton Limited (US cents)			47.0				36.0				28.0				26.0				14.5
Underlying EBITDA Interest Coverage (c) (times)			54.0				44.3				51.7				21.1				13.3
Underlying gearing (per cent)			25.0				27.2				35.8				25.7				31.7

(a)		Information for the years 2005, 2006 and 2007 is stated under IFRS.
(b)		Information for the years 2003 and 2004 is prepared and presented in accordance with UKGAAP and has not been restated.
(c)		Underlying EBIT is earnings before net finance costs and taxation, jointly controlled entities’ net finance costs and taxation and any exceptional items. Underlying EBITDA is Underlying EBIT before depreciation, impairments and amortisation. We believe that Underlying EBIT and Underlying EBITDA provide useful information, but should not be considered as an indication of, or alternative to, attributable profit as an indicator of operating performance or as an alternative to cash flow as a measure of liquidity.
(d)		Three dividends were declared for the year ended 30 June 2004 as a result of the Group’s decision to realign dividend declarations to coincide with the announcements of interim and full year results.

2		BHP BILLITON ANNUAL REVIEW 2007

Chairman’s Review

DON ARGUS, CHAIRMAN

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. The strength of our strategy is in the balance between optimising current conditions and progressing our pipeline of next generation high growth opportunities.

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.

6		BHP BILLITON ANNUAL REVIEW 2007

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.

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

BHP BILLITON ANNUAL REVIEW 2007		7

Chief Executive Officer’s Report

CHIP GOODYEAR,
CHIEF EXECUTIVE OFFICER

BHP Billiton plays a central role in providing the raw materials essential to support economic and social development. The aspirations of billions of people for a better quality of life depends on access to raw materials at a reasonable cost. To be part of an organisation that realises its critical role in making a difference to billions of people around the world has truly been a great honour.

The 2007 financial year continued the positive trend in global economic growth that has provided the backdrop for the performance of BHP Billiton in the past several years. This trend, combined with the emergence of the developing economies, has allowed the Company to generate another outstanding set of operating results and record financial performance.

Global demand for our products has enabled us to benefit from our high-quality asset base and from our decisions over the past seven years to reinvest in our business through organic projects and acquisitions. As a result, we have set annual production records in eight commodities. FY2008 is expected to be another year of strong volume growth with the continued ramp-up of a number of projects and the commencement of production from new projects across our businesses.

Global supply of commodities, which are essential for economic and social development, continues to lag growth in demand and we expect this situation to continue. This means commodity prices, while volatile, are expected to exceed long-term averages and, together with record volumes, should continue to contribute to the outstanding financial success of BHP Billiton.

As a leader in the global resources industry, we remain well-placed to respond to continuing demand growth and have demonstrated during the year our capacity to bring on-line major new sources of supply, such as the new Spence copper operation in northern Chile, and commit to further major expansions of operations such as at our iron ore business in Western Australia. When we see value in a potential acquisition we are able to act, as we did during the financial year when we purchased an interest in the Genghis Khan oil and gas development in the Gulf of Mexico, adding to our oil and gas production capacity from this new financial year, and announced a one-third interest in an alumina project in Guinea, West Africa.

8		BHP BILLITON ANNUAL REVIEW 2007

Global demand for our products has enabled us to benefit from our high-quality asset base and from our decisions over the last seven years to reinvest in our business through organic projects and acquisitions. As a result, we have set annual production records in eight commodities.

We continue to identify and evaluate numerous other project options that can be brought on-line as global demand grows in the years ahead. Our track record in delivering 33 world-class projects across the globe over the past six years is a testament to the capabilities of our people, and we remain committed to developing projects in line with the approved budgets and schedules while acknowledging the current cost and labour pressures. After five years of continual growth, expansion and development, we are still able to say we have an inventory of future project options unparalleled in the global resources industry.

We also remain well-placed to manage the challenges created by increasing demand for commodities and are determined to retain our competitive position in meeting demand. Those challenges include shortages of skilled employees and essential equipment, escalating costs of the labour and raw materials required to construct projects and maintain operations, the intense competition for the rights to develop new resources and the difficulties associated with accessing resources in increasingly remote and sometimes challenging parts of the world.

In meeting these challenges we have been able to draw on the diversity and breadth of our people and our business, combined with robust and evolving systems and processes that ensure we are sharing our skills and experiences across all of our assets and project teams.

I am very proud to be part of a truly global organisation characterised by a senior management team drawn from many parts of the world. As some of the most experienced people in the global resources industry, they lead an organisation drawn from many countries. This diversity and depth of talent, combined with our geographic spread of assets and diversity of commodities and markets gives us a significant competitive advantage through the economic cycle.

Sustainability

The continuing success and sustainability of our Company is heavily dependent on securing and maintaining our ‘licence to operate’, wherever we do business around the globe. We work actively on securing and maintaining our licence to operate through the ethical conduct of all our people, our determination to keep our people healthy and safe, our efforts to improve the quality of life of the communities in which we operate and the protection of the environment.

However, we are facing many challenges. More than 10 years ago BHP Billiton began to set targets to manage and control the gas emissions from and energy usage by our operations. Over the past year the call for precautionary action to reduce greenhouse gas emissions has become loud and universal. This year we again reviewed and reassessed our commitment to tackling climate change. The result is an updated policy that not only sets new aggressive targets for emissions and energy reduction and commits increased funds to finding technological solutions but promises to work in partnership with various organisations to better understand and manage our impacts, and the impact of our products, on climate change.

The health and safety of our people and communities, stewardship of the products we sell and our work in developing communities are all areas that continue to challenge us, but it is critical we get these right in order to preserve and enhance our licence to operate. The ability to meet the strong demand for our commodities requires that we have a positive impact on those we encounter through our business activities.

Companies that develop the skills, resources and relationships to meet these challenges will thrive and prosper. Our long-term success is contingent on our ability to manage our business in a sustainable fashion. But to find truly effective and sustainable solutions will require others to engage in the challenge. We can not do it alone; it is a shared responsibility that we have with our host nations, local communities, our people, our partners and our industry.

Farewell

I have had the enormous privilege of leading the world’s largest diversified resources company for the past five years. BHP Billiton plays a central role in providing the raw materials essential to support economic and social development. The aspirations of billions of people for a better quality of life depends on access to raw materials at a reasonable cost. To be part of an organisation that realises its critical role in making a difference to billions of people around the world has truly been a great honour.

No organisation is successful without talented and dedicated people. At BHP Billiton I have been fortunate to have had the opportunity to work with an outstanding group of people from all over the world. I would like to thank all our employees and contractors for their commitment and efforts and for their contribution to the success of BHP Billiton. I will leave knowing that the Company is well positioned for the years ahead and will continue to prosper and succeed through its next phase of growth. My successor, Marius Kloppers, has been a valuable contributor to the organisation in many roles and will be an outstanding Chief Executive Officer. I wish Marius, the executive team and all the members of the BHP Billiton family all the best for the years ahead.

Chip Goodyear

BHP BILLITON ANNUAL REVIEW 2007		9

It’s the driving force behind our continued success

We have around 39,000 employees and 60,000 contractors working in more than 100 operations across 25 countries, creating a great diversity of cultures and experiences. Many of our employees are based in Australia (42 per cent), Southern Africa (30 per cent) and South and North America (23 per cent).

SHORTAGE OF LABOUR IS AN ONGOING ISSUE IN THE GLOBAL RESOURCES SECTOR. BY 2015, THE AUSTRALIAN MINERALS INDUSTRY ALONE WILL NEED 70,000 MORE WORKERS.

Our people

Great assets need great people – talented and motivated people are our most precious resource. They form the fundamental platform of our seven strategic drivers and are essential to our success.

It is our people who discover, secure, develop and operate our assets and it is our people who get our products to our customers. Our people are the ones who work to find better ways to maximise the volumes we produce from our assets and to develop the technologies we rely on to improve our efficiency and access untapped resources.

Valuing diversity

With operations and projects spanning the globe, we truly value diversity of culture, gender, thought and language, and have recruitment targets to meet these objectives. Our people are diverse by nature but unified in purpose. We expect our people to behave according to our Charter and to value the way we do business.

A strong global commodities market means that great people are harder to find and employ than they once were. Like the resources industry generally, we are facing a shortage of technical and professional people. That means we have to work hard to ensure these people want to work with us.

Recruiting the best from around the world

We run a broad and comprehensive graduate recruitment program throughout the world. The program supports students in regions that we expect will produce our next generation of talent; countries like China, Russia and India. Our recruits are trained across the Company in order to experience the breadth of opportunities we offer. In many cases we train our recruits away from their home countries to give them a variety of experiences that they can then apply back in their home regions, as we seek to secure, develop and run operations in those regions.

Developing tomorrow’s leaders

The global nature of our businesses requires us to have strong and effective leaders at each of our operations and offices. We need people who can not only perform their professional roles, but can effectively engage with stakeholders across the range of business issues. We also need people who will be the leaders and senior management of our future.

The best way to attract and retain talented people is to develop them. We put significant effort into assessment, development and succession planning to ensure our people are doing what they want to do and to ensure that they’re achieving their goals. Our compensation packages are globally competitive and strongly tied to performance, both short and long term.

We use performance enhancement processes that ensure clear agreement about performance goals. Performance assessment takes into account not only job performance, but also how behaviours and values align with our Charter.

Our people, wherever they might be, are our voice and our identity – they are our future.

14		BHP BILLITON ANNUAL REVIEW 2007

It’s our reputation as a partner of choice

Our licence to operate

Gaining and maintaining our licence to operate is critical to our business. We aim to ensure that the communities in which we operate value our citizenship. With many new projects located in developing countries, it is increasingly important for us to be able to demonstrate to key stakeholders, including governments, our track record in making a sustainable contribution to the socio-economic development of our host communities.

Working with our communities

We aim to improve the social and economic circumstances of the communities in which we operate. We aim to build capacity within the community, placing much of the decision-making in the hands of the individuals and groups involved. Typical activities include access to basic health care and recreational facilities, provision of quality education and employment opportunities. Where our presence in a country is significant, we often provide support for provincial or national programs through the development of a community foundation. For example, our Minera Escondida Foundation in Chile has a founding mission to contribute to improving the quality of life of low-income groups, principally in Antofagasta and the Second Region but also nationally.

Working with our suppliers

We recognise the value to local economies that can be delivered through our activities and, wherever possible, encourage the development and the use of local suppliers and contractors. We also understand that our support of indigenous contractors and businesses is important for many of the communities in which we operate. This year our Western Australia Iron Ore group has implemented a A$25 million Indigenous Contracting Strategy in the Pilbara region. In response to the introduction of Black Economic Empowerment (BEE) legislation in South Africa, the implementation of our BEE Procurement Policy in 2003 has resulted in the proportion of the Company’s spend with BEE-compliant suppliers increasing from 4 per cent to 36 per cent in four years.

Working together for a better environment

We aim to mine our products responsibly and supply them to those who demonstrate a similar commitment to responsible handling throughout the product’s life cycle. We work with industry, consumer groups, government and non-government organisations to minimise the environmental, health and safety impacts of the production, use and disposal of our products.

Water scarcity impacts our operations and our local communities. Our efforts to increase water efficiency, recycling and alternative supply options are helping to reduce the burden on local water courses and supply systems.

Even more broadly, we support the global scientific community’s concerns about climate change and our new Climate Change Policy commits us to accelerated action.

Annual Black Economic Empowerment Supply Spend

We will spend US$300 million over the next five years to develop low emission technology for our products, support internal energy excellence programs and encourage emissions abatement by our employees and local communities. We will work with our customers, research institutions, peer companies, employees and communities to get the most out of these initiatives.

WE SUPPORT OUR LOCAL COMMUNITIES BY SOURCING MOST OF OUR MATERIALS AND LABOUR FROM THE COUNTRIES IN WHICH OUR MINES ARE LOCATED. 30 PER CENT OF OUR TOTAL SUPPLY SPEND IS WITH SUPPLIERS FROM THE LOCAL COMMUNITY OR REGION.

PHOTO: WA IRON ORE – AUSTRALIA

BHP BILLITON ANNUAL REVIEW 2007		15

It’s our record production

Our world-class assets

With around 100 operating assets across the globe, we produce a range of commodities. We are the only diversified resources company that produces a full suite of energy products – oil, gas, coal and uranium – as well as having industry-leading positions in minerals such as alumina, copper, nickel, iron ore and metallurgical coal.

A diversified global footprint

We have a world-class portfolio of assets, reflecting our strategy to focus on large assets that will continue producing over many decades at low cost, thereby ensuring that we remain profitable throughout the inevitable economic cycles. Our portfolio also meets our overriding strategic requirement – an asset base which is diversified by commodity and geography, so that we have a natural buffer against downturns in any particular commodity or region.

Many of our operating assets are in Australia. Our Western Australian operations produce nickel, iron ore, alumina and petroleum products, while our operations in eastern Australia produce both metallurgical and thermal coal. In South Australia, our Olympic Dam asset produces copper, uranium and gold.

Another of our more concentrated regions is southern Africa, home to our aluminium smelters, titanium dioxide interest and significant thermal coal operations. Heading west across the Atlantic, we operate several copper mines and a nickel mine in South America, where we also have interests in alumina, aluminium and thermal coal operations.

Our diversified global footprint also encompasses a diamond mine, EKATI, in northern Canada, and petroleum assets in the Gulf of Mexico, Pakistan, Algeria, Trinidad and Tobago and the United Kingdom.

From production to delivery

With an emphasis on upstream assets, we produce and sell mainly raw materials and products in their basic stages of processing. These products are sold primarily to overseas customers and transported by ship. Each of our operating assets is supported by complex infrastructure. This infrastructure ensures that we can move sufficient amounts of earth, then process and transport the raw material in the most efficient way.

Around the world, our infrastructure assets include the railway and ports that we manage to ensure a seamless production process from mine to ship, and the petroleum rigs that draw on cutting-edge technology to allow us to drill for gas and oil in increasingly deep water.

Stretching the boundaries

In a strong commodities market our objective is to run our assets at full capacity and keep stretching the boundaries. The quality of our assets means that, in many cases, we can continue to increase their output in a safe and sustainable manner.

In financial year 2007, we achieved production records across eight commodities. Record annual production was achieved at 17 operations including the North West Shelf petroleum operation, the Worsley alumina operation and the iron ore operations in Western Australia. Records were also achieved at the GEMCO manganese mine on Groote Eylandt, Queensland Coal, Hunter Valley Coal and Illawarra Coal Bed Methane, all in Australia. The Mad Dog petroleum operation in the Gulf of Mexico, Zamzama in Pakistan, Alumar in Brazil, Paranam in Suriname, the Hillside and Bayside aluminium smelters and Samancor manganese operation in South Africa, the Mozal aluminium smelter in Mozambique, the massive Escondida copper mine in Chile and Cerrejon Coal in Colombia, all achieved record annual production.

Our Cerro Matoso mine in Colombia is one of the world’s richest lateritic nickel deposits. Our mining concessions and exploration rights span 77,000 hectares of the Colombian nickel belt, estimated to be capable of sustaining production for around 30 years. The smelter produces high-quality ferronickel and can produce around 55,000 tonnes of contained nickel each year.

OUR STRATEGY IS BASED ON UPSTREAM, LARGE, LONG-LIFE, LOW-COST, EXPANDABLE, EXPORT-ORIENTED ASSETS THAT ARE DIVERSIFIED BY COMMODITY AND GEOGRAPHY.

BHP BILLITON ANNUAL REVIEW 2007		17

It’s the way we share knowledge and expertise

A recent Business Excellence project focused on increasing the ore feeding rate to two kilns at our Cerro Matoso ferronickel mining and smelting complex in Colombia. The solutions implemented not only increased the ore feed rate, but also reduced both the gas consumption in the kilns and the energy consumption in the electrical furnaces. The resulting cost savings generated an additional US$23 million EBIT.

MORE THAN 6,000 OF OUR TECHNICAL EXPERTS ACROSS THE WORLD SHARE THEIR IDEAS AND BEST PRACTICES THROUGH MORE THAN 300 VIRTUAL COMMUNITIES THAT WE OPERATE GLOBALLY. THIS MAKES US MORE EFFICIENT AND ENSURES GOOD IDEAS ARE SPREAD ACROSS THE ORGANISATION.

PHOTO: MELBOURNE OFFICE – AUSTRALIA

Our BHP Billiton way

While the commodities we produce are many and varied, and the locations of our assets spread far and wide, the issues and challenges that hinder performance can often be remarkably similar. Sharing knowledge, expertise and ideas across our operations, therefore, is vital. We use a series of networks to help us identify and share successful practices for the benefit of everyone across the Company.

Different locations, same values

The values, standards, policies and processes that we apply to the behaviour and actions of our people at one operation are the same as those applied at any other part of the business, regardless of geography or culture. This consistent philosophy helps us to ensure the health and safety of our employees, as well as governing the way we work with customers and other stakeholders and the way we manage investment decisions.

Our Charter values provide the overriding guide for how we work. They outline our major commitments as an organisation – commitments to health, safety, environment and community responsibility; integrity in what we do and what we say we will do; high performance; relationships that focus on the creation of value for all parties; the courage to lead change; and respect for each other.

The real benefits of Business Excellence

Our Business Excellence program runs company-wide and helps us to encourage and apply best practice across the broad spread of our businesses and corporate functions. In doing so, we can increase revenues, decrease costs and improve operational efficiency.

The program establishes an ‘excellence cycle’, which requires every business to regularly evaluate performance, examine opportunities for improvement and measure the resulting financial benefits.

Crucially, the program ensures that successful improvements are shared across all our assets through knowledge-sharing networks and Communities of Practice (CoPs). This is where the real benefits of the Business Excellence program are demonstrated. We are running 300 CoPs throughout the Company, with more than 6,000 technical experts sharing their ideas and best practices electronically, by telephone and in dedicated workshops.

When our team at New Mexico Coal in the US wanted to increase output by improving the use of conveyors, they contacted the conveyor maintenance CoP. Within 24 hours, operations from around the world provided the New Mexico team with improvement ideas that were quickly put in place.

Improvement projects just like this deliver significant financial benefits every year in every business.

It’s the returns we make for our shareholders

Our financial strength and discipline

Six years ago, BHP Billiton had a market capitalisation of around US$28 billion. As at 30 June, our market capitalisation had grown to around US$165 billion. In financial year 2007, our full-year profit alone amounted to almost half of our entire 2001 market capitalisation. Now, more than ever, a disciplined approach when it comes to utilising our cash flow is crucial.

Capital management strategy is central to our long-term performance

Our capital management strategy remains the same: to reinvest in our extensive pipeline of world-class projects that carry attractive rates of return regardless of the economic climate; ensure a solid balance sheet; and return excess capital to shareholders.

In a strong commodities market, the cost of reinvesting in projects has grown, but our robust investment approvals process ensures that projects have a high probability of success and are capable of achieving optimal shareholder value with an acceptable degree of risk. Our goal is to invest in opportunities that are aligned with our strategic drivers and that achieve returns in excess of the cost of capital over the long term.

The US$13 billion capital management program announced during the year, together with five years of consecutive dividend growth and a commitment to maintain a progressive dividend policy, reflects our confidence in our ability to continue producing solid earnings and cash flow that can support these increased shareholder returns without impacting our investment program.

During the financial year we bought back 287,820,269 of our shares at a cost of US$5.8 billion through on-market share buy-back programs in the United Kingdom and an off-market share buy-back program in Australia. The cancellation of those shares effectively reduced the number of shares on issue in the market, thereby increasing the earnings and cash flow attributable to each remaining share. The rebasing of the final dividend to 27 US cents per share – an increase of 46 per cent over last year’s final dividend – is a strong indication of our confidence in the outlook for the industry and our ability to support this higher level of dividend over the longer term.

A strong credit rating

Underpinning all our financial initiatives is our commitment to maintaining a solid ‘A’ credit rating and the low-cost position of our asset portfolio.

Controlling costs

We continue to be vigilant in controlling our costs and take a view that cost management is even more important in a strong commodities market if shareholders are to realise optimum value from their investment. With costs under pressure throughout the industry, leveraging our size and geographic diversification allows us to manage our costs, giving us an advantage over our competitors.

We have continued to build on our outstanding track record of meeting our capital management commitment and delivering value to shareholders. In February, we announced a US$10 billion increase to our capital management program. This was our third sizeable capital return announcement in a 12-month period and brought our total capital management initiatives since August 2004 to US$17 billion.

Returns to shareholders since 2001

Dividends

OUR FULL YEAR DIVIDEND OF 47 US CENTS PER SHARE WAS 30.6 PER CENT HIGHER THAN THE YEAR BEFORE. IT WAS ALSO OUR 11TH CONSECUTIVE DIVIDEND INCREASE.

BHP BILLITON ANNUAL REVIEW 2007		19

It’s our capacity to meet demand

Our Spence copper operation in Chile will reach full capacity towards the end of CY2007. During its construction, the workforce peaked at more than 5,000 people and the project was recognised by the Chilean National Mining and Geology Service (Sernageomin) for its safety record. Spence’s Solvent Extraction/Electrowinning plant is among the most modern in the world.

SINCE JULY 2001, WE HAVE COMPLETED 33 PROJECTS. ANOTHER 33 ARE IN DEVELOPMENT OR IN THE FINAL STAGE OF ASSESSMENT.

Our project pipeline

Our world-class assets represent a range of valuable growth opportunities. In the past six years we have completed 33 projects spanning our entire portfolio of commodities. This capacity to increase production volumes to meet growing global demand has been a critical factor in enabling us to capture the current high commodity prices.

Many of our most significant assets have undergone almost continuous expansion over the past six years. During that time, our share of production from the Western Australia iron ore assets, for example, has grown from 58.3 Mt to 91.6 Mt, while production from the Escondida copper operation in Chile has increased from 500,700 tonnes to 765,000 tonnes.

An unparalleled project pipeline

During the financial year 2007, we approved the development of WA Iron Ore RGP4, Genghis Khan and Pinto Valley, and we commissioned Spence, in northern Chile, which will produce 200,000 tonnes of copper a year.

When we acquired WMC in 2005, we added nickel assets in Western Australia and the Olympic Dam copper, uranium and gold resource in South Australia to our portfolio. In this past year, we acquired an interest in the Genghis Khan oil field in the Gulf of Mexico and a one-third share of the Guinea Alumina project, which consists of high-quality bauxite reserves and the development of an alumina refinery in Guinea.

Our project pipeline is unparalleled in the resources industry. It comprises US$14.3 billion of investment in projects that have been approved by the Board and are now under way. The 19 projects represented by this investment are due to reach full production capacity within approximately three years. Another 14 projects, representing a further US$6.6 billion of investment, are in the final stage of evaluation before being approved.

Increasing volumes in 2008

In the financial year 2008, we expect to significantly increase production with the delivery of five petroleum projects, three of which are in the deepwater Gulf of Mexico. The commissioning of the Ravensthorpe and Yabulu nickel operations and another iron ore expansion, all in Australia, and the completion of the Koala Underground diamond project in northern Canada, add to the increasing 2008 volumes.

We take great pride in delivering our projects on time and within budget. Despite cost pressures and shortages of labour and materials throughout the industry, we continue to meet our commitments thanks to the technical skill of our people and our global supply and procurement processes.

22		BHP BILLITON ANNUAL REVIEW 2007

It’s our potential for future growth

Our growth options

We need to look beyond our current project pipeline if we are to secure a foundation for future generations of growth. That’s why we are looking to secure growth in several ways – from existing operations to emerging regions, through exploration, technology and possible merger and acquisition activity.

Existing operations offer decades of growth

Our abundance of existing resources in economically and politically stable countries provides us with a unique set of options to deliver decades of growth. We have growth opportunities within our unique portfolio of energy assets, including our oil, gas, liquefied natural gas, energy coal and uranium assets. We also have a range of exciting expansion opportunities across our other operations, including our Western Australia iron ore assets, the Escondida copper mine in northern Chile, the Olympic Dam copper, uranium and gold mine in South Australia, the Cerro Matoso nickel operation in Colombia and the GEMCO manganese mine at Groote Eylandt in north-eastern Australia.

Emerging regions

Many of our assets are in the traditional resource regions of Australia, South Africa, South America and the US. However, we also have significant experience in operating in more challenging geographies. This experience helps us build and strengthen our position in emerging regions – regions that we expect will play an increasingly central role as resource bases in the future. It means we can secure future development options as opportunities emerge in regions such as sub-Saharan Africa.

Expanding the possibilities

As the world’s readily accessible resources become more scarce, we need to look towards technology and expand the possibilities for extracting resources in an economically viable and sustainable manner, and to reach those resources once regarded as beyond our capabilities. We aim to be leaders when it comes to understanding and harnessing future developments in science and technology that will help us to capture the full value of our assets. Every day, our engineers and scientists are developing our understanding of how to locate new resources and unlock resources once deemed too complex or uneconomical to process.

Exploration continues to be an important focus for us. In our minerals businesses we are undertaking exploration in 28 countries, while petroleum exploration is under way in eight countries. We are exploring for diamonds in Angola, Canada and the Democratic Republic of Congo (DRC); for copper in Australia, Chile, Mongolia, the DRC and Zambia; and for nickel in Australia, Russia and Africa. During the year, we also conducted exploration for iron ore, coal, potash and bauxite across many regions including Australia, Brazil, Canada and West Africa.

Future growth may also include merger and acquisition activity. We evaluate all opportunities for mergers and acquisitions as they arise, and make our decisions based on the long-term value that such transactions can bring to our shareholders.

Our bioleaching technology is a relatively inexpensive process that helps us recover metal from concentrates that are difficult to treat. It also helps us recover metal from low-grade ores, which is increasingly important as high-grade ore reserves are depleted. Bioleaching also reduces our energy consumption.

BioNIC^TM AND BioCOP^TM ARE JUST TWO OF THE REGISTERED BIOLEACHING PROCESSES DEVELOPED BY OUR GLOBAL TECHNOLOGY GROUP.

BHP BILLITON ANNUAL REVIEW 2007		23

Customer Sector Group highlights

•		Record annual production records at 17 of our assets right across our commodity range, including record production in eight key commodities: natural gas, alumina, aluminium, copper, nickel, iron ore, manganese ore and metallurgical coal.
•		Significant volume growth expected in FY2008, especially in oil and gas, copper, iron ore and nickel.
•		Our project pipeline provides significant future value, with 33 projects in either execution or feasibility representing an expected capital investment of US$20.9 billion. We also have further medium-term options in our portfolio with capital expenditure requirements in excess of US$50 billion.

Petroleum

J Michael Yeager		Underlying EBIT increased			1.5	%

		US$ million
Turnover			5,885
Underlying EBIT			3,014
Capital expenditure			1,687
Net operating assets			7,061

•		Development of the Shenzi oil and gas field in the Gulf of Mexico was given the go-ahead in June 2006. Shenzi will have the capacity to produce up to 100,000 barrels of oil and 50 million cubic feet of gas per day and is scheduled to come onstream by mid 2009.
•		The acquisition of an interest in the Genghis Khan oil and gas development in the deepwater Gulf of Mexico adds to our total oil and gas production.
•		Petroleum expanded its exploration portfolio in March with the addition of two highly prospective acreage positions offshore Malaysia, in the Sabah region northwest of Borneo, where water depths range from 1,600 to 2,800 metres.
•		Petroleum achieved a 50 per cent improvement in safety with a 2.37 total recordable incident frequency rate for FY2007, versus a rate of 4.73 the previous year.

Aluminium

Nelson Silva		Underlying EBIT increased			55.8	%

		US$ million
Turnover			5,879
Underlying EBIT			1,856
Capital expenditure			369
Net operating assets			6,178

•		Record production of aluminium (1.3 mt) and alumina (4.5 mt) was achieved across a number of assets, which, combined with strong prices and cost control, resulted in a record Underlying EBIT contribution of US$1,856 million.
•		Our expansion project at Worsley in Australia was successfully ramped-up, to produce a record 2,956 mt. The Alumar Refinery expansion in northern Brazil remains in line with its revised budget and timetable.
•		We acquired a one-third interest in a long-life, low-cost bauxite resource and alumina refinery in Guinea, West Africa, one of the most advanced projects of its type.
•		The Aluminium Customer Sector Group achieved a significant decrease in the incidence of occupational illnesses in 2007.

Base Metals

Diego Hernandez		Underlying EBIT increased			27.9	%

		US$ million
Turnover			12,635
Underlying EBIT			6,905
Capital expenditure			835
Net operating assets			10,954

•		A record Underlying EBIT of US$6,905 million, due largely to record copper production of 1,250.1 kt from ongoing operations, and continuing high commodity prices.
•		Spence, our new copper mine in Chile, began operating. Combined with our other mines, including Escondida and Olympic Dam, Spence made us the world’s second largest producer of copper in FY2007.
•		Spence also delivered outstanding safety performance, receiving a safety award from the Chilean National Mining and Geology Service (Sernageomin).
•		The Escondida Sulphide Bioleach Project harvested its first copper cathodes and will increase the production of electro-won cathodes by 180,000 tonnes per year (100 per cent) when at full capacity. The new seawater desalinisation plant, a milestone in the industry, produces 525 litres per second of industrial water that is transported through a 170 kilometre pipeline to the site, located 3,200 metres above sea level.

Diamonds and Specialty Products

Alberto Calderon		Underlying
		EBIT decreased			(24.3	)%

		US$ million
Turnover			893
Underlying EBIT			261
Capital expenditure			144
Net operating assets			1,759

•		EKATI in northern Canada is transitioning from open-pit mining to underground. The Koala Underground project is on time and on budget with first production anticipated in the second quarter of FY2008.
•		Diamonds exploration makes good progress in Angola.
•		We captured access to substantial acreage in the world’s most sizable potash basin in Saskatchewan, with evaluation at the Corridor Sands project in Mozambique to progress next year.
•		The Diamonds and Specialty Products Customer Sector Group achieved a 30 per cent reduction in classified injuries, 23 per cent reduction in classified injury frequency rate and a 45 per cent reduction in total recordable injury frequency rate.

24				BHP BILLITON ANNUAL REVIEW 2007

Stainless Steel Materials

Jimmy Wilson		Underlying
		EBIT increased			310.3	%

		US$ million
Turnover			6,901
Underlying EBIT			3,697
Capital expenditure			1,509
Net operating assets			6,598

•		Nickel production from the combined Yabulu Extension and Ravensthorpe projects in Australia is expected in the first quarter of CY2008 with the projects tracking to schedule.
•		We responded strongly to increased market demand with nickel production increasing by 7 per cent over the previous 12 months to 186,300 tonnes.
•		Strong demand conditions emphasise our imperative of delivering on existing and new projects including developing our new joint venture with Norilsk in Russia and furthering studies in other areas prospective for nickel, particularly South East Asia and South America.
•		Our approach to community development at Cerro Matoso, Colombia, is recognised as leading practice and lessons learned are being used in Guatemala and the Philippines.

Iron Ore

Ian Ashby		Underlying EBIT increased			7.9	%

		US$ million
Turnover			5,524
Underlying EBIT			2,738
Capital expenditure			1,186
Net operating assets			4,191

•		Strong market conditions and the successful integration of expansion capacity resulted in record production and sales at the Western Australian iron ore operations.
•		Rapid Growth Project 4, which will increase capacity at the Western Australian iron ore operations to 155 mtpa by the first half of CY2010, was approved.
•		Construction of a third pellet plant at Samarco in Brazil continued on schedule and on budget. The project will increase annual iron ore pellet production capacity to more than 21 mtpa and is expected to be completed in the first half of CY2008.
•		A healthy lifestyle program called ‘The Biggest Winner’ has been launched for Western Australian iron ore workers and their families in Newman and Port Hedland. The program is facilitated by an external provider and, to date, 1,000 employees and family members have signed on.

Manganese

Peter Beaven		Underlying EBIT increased			91.7	%

		US$ million
Turnover			1,244
Underlying EBIT			253
Capital expenditure			72
Net operating assets			590

•		All time record production levels were recorded for both ore and alloy. Production for ore was 14 per cent higher than FY2006 and alloy was 17 per cent higher, due to increased reliability and productivity and stable operations.
•		Second highest ever Underlying EBIT was achieved for the Manganese Customer Sector Group in FY2007.
•		The expansion project at the Groote Eylandt ore mine progressed to feasibility stage and the expanded capacity is expected to be on stream by the end of December 2008.
•		The percentage of employees in our South African operations attending voluntary confidential counselling and testing for HIV and AIDS increased to 71 per cent (target 60 per cent).

Metallurgical Coal

Dave Murray		Underlying EBIT decreased			(31.9	)%

		US$ million
Turnover			3,769
Underlying EBIT			1,249
Capital expenditure			555
Net operating assets			2,173

•		The demand for seaborne high-quality metallurgical coal remains solid with year on year volume growth, although prices retreated from their peak levels of two years ago.
•		Annual production records were delivered at Queensland Coal in Australia to meet customer needs, with Poitrel having commenced production in October.
•		Record throughput at our Hay Point Terminal, which was being successfully expanded to 40 mtpa capacity. Further expansion will see throughput capacity increase to 44 mtpa by the end of CY2007.
•		A$65 million was committed over five years to low emissions technology development through the Australian coal industry’s COAL21 Fund. Going forward, our contribution will increase to in excess of A$100 million over 10 years.

Energy Coal

Dave Murray (pictured above)		Underlying EBIT increased			48	%

		US$ million
Turnover			4,576
Underlying EBIT			484
Capital expenditure			242
Net operating assets			1,846

•		Operational performance at Hunter Valley Coal in Australia has shown significant improvement, achieving two quarters of record production.
•		At New Mexico Coal in the US, the San Juan long-wall move was successfully completed and was below budget. The Navajo mine also achieved 142 injury free days.
•		Substantial operational improvements were achieved at Middelburg and Klipspruit in South Africa, and the Middelburg Middlings plant project is on-line to meet cost and delivery targets.
•		Identifying health challenges facing Indonesian Coal project’s local workforce (80 per cent), Energy Coal commissioned the Health Research Centre of the University of Indonesia (PPKUI) to conduct a comprehensive baseline public health survey. It targeted basic hygiene, maternal and child health (immunisation, nutrition, family planning, etc.), communicable diseases, clean water, sanitation, provision of basic medical services, health service infrastructure and health practitioner training.

BHP BILLITON ANNUAL REVIEW 2007				25

Board of Directors

Don Argus AO, SF FIN, FCPA, 69

Term of office: Director of BHP Limited since November 1996 and Chairman since April 1999. Chairman of BHP Billiton Limited and BHP Billiton Plc since June 2001. Mr Argus was last re-elected in 2006 and, in accordance with the Group’s policy described under ‘Tenure’ on page 37 of this Annual Review, is retiring and standing for re-election in 2007.

Independent: Yes

Skills and experience: Don Argus has considerable experience in international business and a strong management background. He has more than 40 years’ experience in the banking industry and is a former Managing Director and CEO of the National Australia Bank Limited.

Other directorships and offices (current and recent):

•		Chairman of Brambles Limited (since September 1999) and a Director (since May 1999)
•		Director of Australian Foundation Investment Company Ltd (since May 1999)
•		Former Director of Southcorp Limited (from May 1999 to August 2003)
•		Member of the International Advisory Board of Allianz Aktiengesellschaft (since April 2000)
•		Member of International Advisory Committee to the New York Stock Exchange Board of Directors (since November 2005)

Board Committee membership:

•

Chairman of the Nomination Committee

Charles (Chip) Goodyear BSc, MBA, FCPA, 49

Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since November 2001. Appointed Chief Executive Officer (CEO) in January 2003. Mr Goodyear was last re-elected in 2004 and is retiring from the Board this year.

Independent: No

Skills and experience: Charles Goodyear has extensive experience in finance, corporate restructuring and mergers and acquisitions. He joined the Group as Chief Financial Officer (CFO) in 1999. He was previously President of Goodyear Capital Corporation and executive Vice President and CFO of Freeport-McMoRan Inc.

Other directorships and offices (current and recent):

•		Member of the International Council of Mining and Metals
•		Member of Business Council of Australia
•		Member of the United States National Petroleum Council

Board Committee membership:

•

None

Paul Anderson B S (Mech Eng), MBA, 62

Term of office: Appointed a non-executive Director of BHP Billiton Limited and BHP Billiton Plc on 26 April 2006 with effect from 6 June 2006. He was the CEO and Managing Director of BHP Limited from December 1998 until June 2001 and of BHP Billiton Limited and BHP Billiton Plc from June 2001 until July 2002. He was a non-executive Director of BHP Billiton Limited and BHP Billiton Plc from July to November 2002. Mr Anderson was elected in 2006.

Independent: Yes

Skills and experience: Paul Anderson has an extensive background in natural resources and energy and, as one of the architects of the merger that created BHP Billiton, has a deep understanding of the strategy behind the Group’s success. He is Chairman of Spectra Energy Corporation and retired as Chairman of Duke Energy Corporation in January 2007 where he had more than 20 years’ experience at Duke Energy and its predecessors.

Other directorships and offices (current and recent):

•		Chairman of Spectra Energy Corporation (since January 2007)
•		Director of Qantas Airways Limited (since September 2002)
•		Former Chairman of Duke Energy Corporation (from November 2003 to January 2007) and former CEO (from November 2003 to April 2006)
•		Former Director of Temple Inland Inc (from February 2002 to May 2004)
•		Former Director of Fluor Corporation (from March to October 2003)
•		Member of the US President’s Council of Advisors on Science and Technology

Board Committee membership:

•

Member of the Sustainability Committee

David Brink MSc Eng (Mining), D Com (hc), 68

Term of office: Director of Billiton Plc since June 1997. Director of BHP Billiton Limited and BHP Billiton Plc since June 2001. Dr Brink was last re-elected in 2006 and will retire at the conclusion of this year’s Annual General Meetings.

Independent: Yes

Skills and experience: David Brink brings considerable mining and finance experience to the Group. He has over 20 years’ experience in the mining industry, in particular shaft sinking, tunnelling and exploration contracting, followed by 12 years as the CEO of a major listed construction, engineering and manufacturing conglomerate.

Other directorships and offices (current and recent):

•		Deputy Chairman of ABSA Bank Limited (from 1997) and ABSA Group Limited (since April 1992)
•		Director of Sappi Limited (since March 1994)
•		Former Director of Sanlam Limited (from January 1994 to June 2006)
•		Former Chairman of Unitrans Limited (November 1997 to May 2007)
•		Former Director of Murray & Roberts Holdings Ltd (from July 1984 to December 2003)
•		Vice President of the South African Institute of Directors

Board Committee membership:

•		Member of the Risk and Audit Committee
•		Chairman of the Sustainability Committee (until March 2007)

28				BHP BILLITON ANNUAL REVIEW 2007

John Buchanan BSc, MSc (Hons 1), PhD, 64

Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since February 2003. Dr Buchanan has been designated as the Senior Independent Director of BHP Billiton Plc since his appointment. He was last re-elected in 2006.

Independent: Yes

Skills and experience: John Buchanan has had a wide international business career gained in large and complex international businesses. He has substantial experience in the petroleum industry and knowledge of the UK and international investor community. He has held various leadership roles in strategic, financial, operational and marketing positions, including executive experience in different countries. He is a former executive Director and Group CFO of BP, serving on the BP Board for six years, until November 2002.

Other directorships and offices (current and recent):

•		Chairman of Smith & Nephew Plc (since April 2006) and former Deputy Chairman (from February 2005 to April 2006)
•		Director of AstraZeneca Plc (since April 2002)
•		Senior Independent Director and Deputy Chairman of Vodafone Group Plc (since July 2006) and Director (since April 2003)
•		Former Director of Boots Plc (from December 1997 to July 2003)

Board Committee membership:

•		Chairman of the Remuneration Committee
•		Member of the Nomination Committee

Carlos Cordeiro AB, MBA, 51

Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since February 2005. Mr Cordeiro was elected in 2005 and is standing for re-election in 2007.

Independent: Yes

Skills and experience: Carlos Cordeiro brings to the Board more than 25 years’ experience in providing strategic and financial advice to corporations, financial institutions and governments around the world. He was previously Partner and Managing Director of Goldman Sachs Group Inc.

Other directorships and offices (current and recent):

•		Advisory Director of The Goldman Sachs Group Inc (since December 2001)
•		Vice Chairman of Goldman Sachs (Asia) (since June 2000)

Board Committee membership:

•

Member of the Remuneration Committee

David Crawford BComm, LLB, FCA, FCPA, FAICD, 63

Term of office: Director of BHP Limited since May 1994. Director of BHP Billiton Limited and BHP Billiton Plc since June 2001. Mr Crawford was last re-elected in 2006 and, in accordance with the Group’s policy described under ‘Tenure’ on page 37 of this Annual Review, is retiring and standing for re-election in 2007.

Independent: Yes

Skills and experience: David Crawford has extensive experience in risk management and business reorganisation. He has acted as a consultant, scheme manager, receiver and manager and liquidator to very large and complex groups of companies. He was previously Australian National Chairman of KPMG, Chartered Accountants. The Board has nominated Mr Crawford as the financial expert of the Risk and Audit Committee for the purposes of the US Securities and Exchange Commission Rules and is satisfied that he has recent and relevant financial experience for the purposes of the UK Listing Authority’s Combined Code.

Other directorships and offices (current and recent):

•		Chairman of Lend Lease Corporation Limited (since May 2003) and Director (since July 2001)
•		Director of Foster’s Group Limited (since August 2001)
•		Director of Westpac Banking Corporation (since May 2002)
•		Former Chairman of National Foods Limited (Director from November 2001 to June 2005)

Board Committee membership:

•		Chairman of the Risk and Audit Committee

BHP BILLITON ANNUAL REVIEW 2007				29

Board of Directors continued

Gail de Planque AB Mathematics, MS (Physics), PhD (Env Health Sciences), 62

Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since 19 October 2005. The Hon E G de Planque was elected in 2005 and is standing for re-election in 2007.

Independent: Yes

Skills and experience: Gail de Planque is an expert in nuclear technology and has 40 years’ experience as a physicist, adviser and regulator in the field of nuclear energy. She also has significant experience as a non-executive Director of global energy companies and is a consultant on atomic energy matters. She is President of Strategy Matters Inc, a former Commissioner of the United States Nuclear Regulatory Commission, a former Director of the Environmental Measurements Laboratory of the US Department of Energy, a Fellow and former President of the American Nuclear Society, a fellow of the American Association of the Advancement of Science and a Member of the US National Academy of Engineering.

Other directorships and offices (current and recent):

•		Director of Northeast Utilities (since October 1995)
•		Director of Landauer Inc (since December 2001)
•		President of Strategy Matters Inc (since March 2000)
•		Director of Energy Strategists Consultancy Ltd (since May 1999)
•		Former Director of TXU Corporation (from February 2004 to March 2007)
•		Former Director of BNFL Plc (from November 2000 to March 2005)
•		Former Director of BNG America Inc (from March 1995 to March 2006)

Board Committee membership:

•		Member of the Sustainability Committee
•		Member of the Remuneration Committee

David Jenkins BA, PhD (Geology), 68

Term of office: Director of BHP Limited since March 2000. Director of BHP Billiton Limited and BHP Billiton Plc since June 2001. Dr Jenkins was last re-elected in 2005 and is standing for re-election in 2007.

Independent: Yes

Skills and experience: David Jenkins is a recognised authority on oil and gas technology. He was previously Chief Geologist, Director Technology and Chief Technology Advisor to BP Plc. He was also a member of the Technology Advisory Committee of the Halliburton Company and the Advisory Council of Consort Resources and Chairman of the Energy Advisory Panel of Science Applications International Corporation.

Other directorships and offices (current and recent):

•		Director of Chartwood Resources Ltd (since November 1998)
•		Director Mintaka International (Oil & Gas) Limited (previously Orion International (Oil & Gas) Ltd) (since March 2005)
•		Director of Orion International Petroleum (Gibraltar) Limited (since June 2007)

Board Committee membership:

•		Member of the Remuneration Committee
•		Member of the Risk and Audit Committee

Marius Kloppers BE (Chem), MBA, PhD (Materials Science), 45

Term of office: Director of BHP Billiton Limited and BHP Billiton Plc since January 2006. Mr Kloppers will be appointed CEO on
1 October 2007. He was appointed Group President Non-Ferrous Materials and executive Director in January 2006 and was previously Chief Commercial Officer. Mr Kloppers was elected at the 2006 Annual General Meetings.

Independent: No

Skills and experience: Marius Kloppers has extensive knowledge of the mining industry and of BHP Billiton’s operations. Active in the mining and resources industry since 1993, he was appointed Chief Commercial Officer in December 2003. He was previously Chief Marketing Officer, Group Executive of Billiton Plc, Chief Executive of Samancor Manganese and held various positions at Billiton Aluminium, including Chief Operating Officer and General Manager of Hillside Aluminium.

Other directorships and offices (current and recent):

•

None

Board Committee membership:

•

None

30				BHP BILLITON ANNUAL REVIEW 2007

Jacques Nasser AO, BBus, Hon DT, 59

Term of office: Appointed a non-executive Director of BHP Billiton Limited and BHP Billiton Plc on 26 April 2006 with effect from 6 June 2006. Mr Nasser was elected at the 2006 Annual General Meetings.

Independent: Yes

Skills and experience: Following a 33 year career with Ford in various leadership positions in Europe, Australia, Asia, South America and the US, Jacques Nasser served as a member of the Board of Directors and as President and Chief Executive Officer of Ford Motor Company from 1998 to 2001. He has more than 30 years’ experience in large-scale global businesses.

Other directorships and offices (current and recent):

•		Director of British Sky Broadcasting Ltd (since November 2002)
•		Director of Brambles Limited (since March 2004)
•		Director of Quintiles Transnational Corporation (since March 2004)
•		Partner of One Equity Partners (since November 2002)
•		Member of the International Advisory Board of Allianz Aktiengesellschaft (since February 2001)
•		Former Chairman of Polaroid Corporation (from November 2002 to April 2005)

Board Committee membership:

•

Member of the Risk and Audit Committee

John Schubert BC Eng, PhD (Chem Eng), FIEAust, FTSE, 64

Term of office: Director of BHP Limited since June 2000 and a Director of BHP Billiton Limited and BHP Billiton Plc since June 2001. Dr Schubert was last re-elected in 2006.

Independent: Yes

Skills and experience: John Schubert has considerable experience in the international oil industry, including at CEO level. He has had executive mining and financial responsibilities and was CEO of Pioneer International Limited for six years, where he operated in the building materials industry in 16 countries. He has experience in mergers, acquisitions and divestments, project analysis and management. He was previously Chairman and Managing Director of Esso Australia Limited and President of the Business Council of Australia.

Other directorships and offices (current and recent):

•		Chairman of Commonwealth Bank of Australia (since November 2004) and Director (since October 1991)
•		Director of Qantas Airways Limited (since October 2000)
•		Chairman of G2 Therapies Limited (since November 2000)
•		Former Director of Hanson Plc (from May 2000 to May 2003)
•		Former Chairman and Director of Worley Parsons Limited (from November 2002 to February 2005)

Board Committee membership:

•		Chairman of the Sustainability Committee (from March 2007)
•		Member of the Nomination Committee

Group Company Secretary

Karen Wood BEd, LLB (Hons), FCIS, 51

Karen Wood was Chief Governance Officer and Group Company Secretary until 11 July 2007 when she was appointed Group Executive and Chief People Officer. Details of Ms Wood’s skills and experience are set out on page 32 of this Review. On 11 July Jane McAloon assumed the role of Group Company Secretary.

Jane McAloon BEc (Hons), LLB, GDipGov, FCIS, 43

Term of office: Jane McAloon was appointed Group Company Secretary in July 2007 and joined the BHP Billiton Group in September 2006 as Company Secretary for BHP Billiton Limited.

Skills and experience: Prior to joining BHP Billiton, Jane McAloon held the position of Company Secretary and Group Manager External and Regulatory Services in the Australian Gas Light Company. Prior to this she held various State and Commonwealth government positions, including Director General of the NSW Ministry of Energy and Utilities and Deputy Director General of the NSW Cabinet Office. She is a Fellow of the Institute of Chartered Secretaries.

 

BHP BILLITON ANNUAL REVIEW 2007				31

Group Management Committee

Charles (Chip) Goodyear BSc, MBA, FCPA, 49

Chairman of the GMC and the Executive Committee

Charles Goodyear joined the Group as Chief Financial Officer in 1999. He was appointed to the Boards of BHP Billiton Limited and BHP Billiton Plc in November 2001 and as Chief Executive Officer in January 2003. He previously held positions of Chief Development Officer and of Chief Financial Officer. He is a former President of Goodyear Capital Corporation and former Executive Vice President and Chief Financial Officer of Freeport-McMoRan Inc, and has extensive financial, corporate restructuring and merger and acquisition experience. He is a Member of ICMM, Business Council of Australia and the US National Petroleum Council. He will retire as Chief Executive Officer on 30 September 2007 and leave BHP Billiton in January 2008.

Alberto Calderon PhD Econ, M Phil Econ – Yale University, JD Law, BA Econ – Andes University, 47

President Diamonds and Specialty Products (to 11 July 2007)
Group Executive and Chief Commercial Officer (from 11 July 2007)

Member of the GMC and the Executive Committee

Alberto Calderon joined the Group as President Diamonds and Specialty Products in February 2006 and has been in his current position since July 2007. Prior to this, he was President of Cerrejón Coal Company from July 2002. His previous positions include President of Ecopetrol, General Manager of the Power Company of Bogota and various senior roles in investment banking and in the Colombian Government.

Marius Kloppers BE (Chem), MBA, PhD (Materials Science), 45

Group Executive and Chief Executive Non-Ferrous and Executive Director Member of the GMC and the Executive Committee

Marius Kloppers has been active in the mining and resources industry since 1993. He was previously Chief Commercial Officer, Chief Marketing Officer, Group Executive of Billiton Plc, Chief Executive of Samancor Manganese and held various positions at Billiton Aluminium, among them Chief Operating Officer and General Manager of Hillside Aluminium. He will take over as CEO from Charles Goodyear on 1 October 2007.

Marcus Randolph BSc, MBA Harvard Business School, 51

Group Executive and Chief Executive Ferrous and Coal Member of the GMC and the Executive Committee

Marcus Randolph was previously Chief Organisation Development Officer, President Diamonds and Specialty Products, Chief Development Officer Minerals and Chief Strategic Officer Minerals for BHP Billiton. His prior career includes Chief Executive Officer, First Dynasty Mines, Mining and Minerals Executive, Rio Tinto Plc, Director of Acquisitions and Strategy, Kennecott Inc, General Manager Corporacion Minera Nor Peru. Asarco Inc, and various mine operating positions in the US with Asarco Inc.

Alex Vanselow BComm, Wharton AMP, 45

Group Executive and Chief Financial Officer

Member of the GMC and Chairman of the Investment Review Committee and Financial Risk Management Committee

Alex Vanselow joined the Group in 1989 and was appointed President Aluminium in March 2004 and appointed Chief Financial Officer in March 2006. He was previously Chief Financial Officer of Aluminium, Vice President Finance and Chief Financial Officer of Orinoco Iron CA and Manager Accounting and Control BHP Iron Ore. His prior career was with Arthur Andersen.

Karen Wood BEd, LLB (Hons), FCIS, 51

Group Executive and Chief People Officer (from 11 July 2007)
Member of the GMC and Chairman of the Global Ethics Panel and the Disclosure Committee

Karen Wood’s previous positions with BHP Billiton were Chief Governance Officer, Group Company Secretary and Special Advisor and Head of Group Secretariat. She is a member of the Takeovers Panel (Australia), the Business Regulatory Advisory Group (Australia) and the JD (Juris Doctor) Advisory Board of the University of Melbourne, a Fellow of the Institute of Chartered Secretaries and a member of the Law Council of Australia and the Law Institute of Victoria. Before joining BHP Billiton, she was General Counsel and Company Secretary for Bonlac Foods Limited.

J Michael Yeager BSc, MSc, 54

Group Executive and Chief Executive Petroleum
Member of the GMC and the Executive Committee

Mike Yeager joined the Group in April 2006 as Group President Energy. He was previously Vice President, ExxonMobil Development Company with responsibility for major joint venture projects. Other previous roles include Senior Vice President, Imperial Oil Ltd and Chief Executive Officer, Imperial Oil Resources, Vice President Africa, ExxonMobil Production Company, Vice President Europe, ExxonMobil Production Company and President, Mobil Exploration and Production in the US.

32				BHP BILLITON ANNUAL REVIEW 2007

Corporate Governance Statement

‘Governance is not just a matter for the Board, a culture of good governance must be fostered throughout the organisation.’ Don Argus, Chairman

Corporate Governance Statement at a Glance

						page
1.		Governance at BHP Billiton					34
2.		Shareholder engagement					34
3.		Board of Directors					35
		3.1		Role and responsibilities			35
		3.2		Membership			35
		3.3		Skills, knowledge, experience and attributes of Directors			36
		3.4		Chairman			36
		3.5		Independence			36
		3.6		Senior Independent Director			37
		3.7		Terms of appointment			37
		3.8		Induction and training			37
		3.9		Independent advice			37
		3.10		Remuneration			37
		3.11		Share ownership			38
		3.12		Meetings			38
		3.13		Company Secretaries			38
4.		Board of Directors – Review, re-election and renewal					38
		4.1		Review			38
		4.2		Re-election			39
		4.3		Renewal			39
5.		Board Committees					39
		5.1		Risk and Audit Committee report			40
		5.2		Remuneration Committee report			41
		5.3		Nomination Committee report			42
		5.4		Sustainability Committee report			42
6.		Risk Management					43
7.		Management					43
		7.1		The Office of Chief Executive and Group Management Committee			43
		7.2		Other Management Committees			44
8.		Business conduct					44
9.		Market disclosure					45
10.		Conformance with corporate governance standards					45

BHP BILLITON ANNUAL REVIEW 2007				33

Corporate Governance Statement

1. Governance at BHP Billiton

‘BHP Billiton’s Corporate Objective is to create long-term value through the discovery, development and conversion of natural resources and the provision of innovative customer and market-focused solutions.

In pursuing the Corporate Objective, we have committed to the highest level of governance and strive to foster a culture 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. Our expectations of employees and those to whom we contract business are set out in our Guide to Business Conduct.

This statement outlines our system of governance. Shareholders are reminded that we operate as a single economic entity under a Dual Listed Company (DLC) structure with a unified Board and management. We have primary listings in Australia and the UK and are registered in the US and listed on the New York Stock Exchange (NYSE). In formulating our governance framework, the regulatory requirements in Australia, the UK and the US have been taken into account, together with prevailing standards of best practice. Where governance principles vary across these jurisdictions the Board has resolved to adopt what we consider to be the better of the prevailing standards.

It is our view that governance is not just a matter for the Board, a culture of good governance must be fostered throughout the organisation.’

Don Argus, Chairman

2. Shareholder engagement

The Board represents the Group’s shareholders and is accountable to them for creating and delivering value through the effective governance of the business. Shareholders vote on important matters affecting the business, including the election of Directors, changes to our constitutional documents, the receipt of annual financial statements and incentive arrangements for executive Directors.

Shareholders are encouraged to make their views known to us and to raise directly any matters of concern. The Chairman has regular meetings with institutional shareholders and investor representatives to discuss governance matters and keeps the Board informed of the views and concerns that have been raised. The Chief Executive Officer (CEO), Chief Financial Officer (CFO) and investor relations team regularly meet with institutional shareholders to discuss our strategy, financial and operating performance.

The Dual Listed Structure means that Annual General Meetings of BHP Billiton Plc and BHP Billiton Limited are held in the United Kingdom and Australia around late October and November, respectively, each year. Shareholders are encouraged to attend the Annual General Meetings and to use these opportunities to ask questions. Questions can be registered prior to the meeting by completing the relevant form accompanying the Notice of Meeting or by emailing the Group at investor.relations@bhpbilliton.com. Questions that have been lodged ahead of the meeting, and the answers to them, are posted to our website. The External Auditor attends the Annual General Meetings and is available to answer questions. Shareholders may appoint proxies electronically through our website. The Notice of Meeting describes how this can be done.

Proceedings at shareholder meetings and important briefings are broadcast live from our website. Copies of the speeches delivered by the Chairman and CEO to the Annual General Meetings, a summary of the proceedings and the outcome of voting on the items of business are posted to our website following both Meetings.

34				BHP BILLITON ANNUAL REVIEW 2007

3. Board of Directors

3.1 Role and responsibilities

The Board’s role is to represent the shareholders and is accountable to them for creating and delivering value through the effective governance of the business.

The Board Governance Document can be found at www.bhpbilliton.com/ aboutus/governance.

The Board has published a Board Governance Document, which is a statement of the practices and processes the Board has adopted to discharge its responsibilities. It includes the processes the Board has implemented to undertake its own tasks and activities; the matters it has reserved for its own consideration and decision-making; the authority it has delegated to the CEO, including the limits on the way in which the CEO can execute that authority; and provides guidance on the relationship between the Board and the CEO.

The matters that the Board has specifically reserved for its decision are:

•		the appointment of the CEO and approval of the appointments of direct reports to the CEO
•		approval of the overall strategy and annual budgets of the business
•		determination of matters in accordance with the approvals framework
•		formal determinations that are required by the Group’s constitutional documents, by statute or by other external regulation.

The Board is free to alter the matters reserved for its decision, subject to the limitations imposed by the constitutional documents and the law.

Beyond those matters, the Board has delegated all authority to achieve the Corporate Objective to the CEO, who is free to take all decisions and actions which, in the CEO’s judgement, are reasonable having regard to the limits imposed by the Board. The CEO remains accountable to the Board for the authority that is delegated, and for the performance of the business. The Board monitors the decisions and actions of the CEO and the performance of the business to gain assurance that progress is being made towards the Corporate Objective, within the limits it has imposed. The Board also monitors the performance of the Group through its Committees. Reports from each of the Committees are set out in section 5 of this Statement.

The CEO is required to report regularly in a spirit of openness and trust on the progress being made by the business. The Board and its Committees determine the information required from the CEO and any employee or external party, including the auditor. Open dialogue between individual members of the Board and the CEO and other employees is encouraged to enable Directors to gain a better understanding of our business.

Key activities during the year

CEO succession

The most important task undertaken by the Board during the year was to appoint a new CEO following the announcement in February 2007 that Mr Charles Goodyear intended to resign as CEO toward the end of September 2007. The Board retained the services of Heidrick & Struggles to assist in the identification of potential candidates to replace Mr Charles Goodyear. Following a worldwide executive search a number of potential external and internal candidates were identified and, following a rigorous evaluation, it was decided that Mr Marius Kloppers, currently Group Executive and Chief Executive, Non-Ferrous, would replace Mr Goodyear as CEO with effect from 1 October 2007.

In selecting Mr Kloppers the Board concluded that he would bring to the role the skills necessary to take our business to the next stage of its development. His considerable experience in the resources sector and demonstrated strategic capabilities will assist him in performing the new role. Mr Goodyear will officially handover to Mr Kloppers on 1 October 2007. Following the handover he will assist Mr Kloppers with the transition program and will then retire from the Board this year and the Group in January 2008.

Other highlights

The Directors also oversaw an independent review of the Board. The Board considered major business decisions, including capital projects and capital management strategies.

The Board is satisfied that it has discharged its obligations as set out in the Board Governance Document.

3.2 Membership

The Board currently has 12 members. Of these, 10, including the Chairman, are independent non-executive Directors. The non-executive Directors are considered by the Board to be independent of management and free from any business relationship or other circumstance that could materially interfere with the exercise of objective, unfettered or independent judgement. Further information on the process for assessing independence is in section 3.5 of this Statement. Mr Miklos Salamon retired from the Board on 26 October 2006 and Mr Chris Lynch retired from the Board on 30 June 2007. Dr David Brink has indicated an intention to retire from the Board at the conclusion of the 2007 Annual General Meetings. Mr Charles Goodyear will also retire from the Board this year.

The Directors of the Group are:
Mr Don Argus AO (Chairman)
Mr Charles Goodyear
Mr Paul Anderson
Dr David Brink
Dr John Buchanan
Mr Carlos Cordeiro
Mr David Crawford
The Hon Gail de Planque
Dr David Jenkins
Mr Marius Kloppers
Mr Jacques Nasser AO
Dr John Schubert.

The biographical details of the Directors are set out on pages 28 to 31 of this Annual Review.

BHP BILLITON ANNUAL REVIEW 2007		35

Corporate Governance Statement continued

3.3 Skills, knowledge, experience and attributes of Directors

The Board considers that the executive and non-executive Directors together have the range of skills, knowledge and experience necessary to enable them to effectively govern the business. The non-executive Directors contribute international and operational experience; understanding of the sectors in which we operate; knowledge of world capital markets and an understanding of the health, safety, environmental and community challenges that we face. Executive Directors bring additional perspectives to the Board’s work through a deep understanding of the Group’s business.

Directors must demonstrate unquestioned honesty and integrity, a preparedness to question, challenge and critique and a willingness to understand and commit to the highest standards of governance. Each Director must ensure that no decision or action is taken that places his or her interests in front of the interests of the business.

Directors commit to the collective decision-making processes of the Board. Individual Directors are required to debate issues openly and constructively and be free to question or challenge the opinions of others.

The Nomination Committee assists the Board in ensuring that the Board is comprised of high calibre individuals whose background, skills, experience and personal characteristics will augment the present Board and meet its future needs.

3.4 Chairman

The Chairman, Mr Don Argus, is considered by the Board to be independent. He was appointed Chairman of BHP Limited in 1999 and has been Chairman of the Group since 2001. As Chairman, he is responsible for:

•		ensuring that the principles and processes of the Board are maintained, including the provision of accurate, timely and clear information
•		encouraging debate and constructive criticism
•		setting agendas for meetings of the Board, in conjunction with the CEO and Group Company Secretary, that focus on the strategic direction and performance of our business
•		leading the Board and individual Director performance assessments
•		speaking and acting for the Board and representing the Board to shareholders
•		presenting shareholders’ views to the Board
•		facilitating the relationship between the Board and the CEO.

Mr Argus is Chairman of Brambles Limited, a company listed on the Australian Securities Exchange. The Board considers that neither his Chairmanship of Brambles, nor any of his other commitments (set out on page 28 of this Annual Review), interfere with the discharge of his responsibilities to the Group. The Board is satisfied that he makes sufficient time available to serve the company effectively.

The Group does not have a Deputy Chairman but has identified Dr John Schubert to act as Chairman should the need arise at short notice.

3.5 Independence

The Board considers that an appropriate balance between executive and non-executive Directors is necessary to promote shareholder interests and to govern the business effectively. It is committed to ensuring a majority of Directors are independent.

Process to determine independence

A copy of the Policy on Independence of Directors is available at www.bhpbilliton.com/aboutus/governance.

The Board has developed a policy that it uses to determine the independence of its Directors. This determination is carried out annually or at any other time where the circumstances of a Director change such as to warrant reconsideration.

The Policy provides that the test of independence is whether the Director is: ‘independent of management and any business or other relationship that could materially interfere with the exercise of objective, unfettered or independent judgement by the Director or the Director’s ability to act in the best interests of the BHP Billiton Group’.

Where a Director is considered by the Board to be independent but is affected by circumstances that may give rise to a perception that the Director is not independent, the Board has undertaken to explain the reasons why it reached its conclusion. In applying the independence test, the Board considers relationships with management, major shareholders, subsidiary and associated companies and other parties with whom the Group transacts business against predetermined materiality thresholds, all of which are set out in the Policy. A summary of the factors that may be perceived to impact the independence of Directors is set out below.

36		BHP BILLITON ANNUAL REVIEW 2007

3.5 Independence continued

Tenure

The Board has a policy requiring non-executive Directors who have served on the Board for nine years or more to stand for annual re-election. All Directors standing for re-election must undergo a formal performance assessment, irrespective of the period they have served on the Board. At the conclusion of the 2007 Annual General Meetings, Mr Don Argus and Mr David Crawford will each have served on the Board for more than nine years and will stand for annual re-election. The Board does not believe that either of these Directors has served for a period that could materially interfere with their ability to act in the best interests of the Group. The Board also believes that they have retained independence of character and judgement and have not formed associations with management (or others) that might compromise their ability to exercise independent judgement or act in the best interests of the Group. Dr David Brink, who has also served for nine years, will not seek re-election at the 2007 Annual General Meetings.

Retirement plan

The former Directors of BHP Limited (Mr Don Argus, Mr David Crawford, Dr David Jenkins and Dr John Schubert) participated in a retirement plan approved by shareholders in 1989. The plan was closed on 24 October 2003 and benefits accrued to that date, together with interest earned on the benefits, have been preserved and will be paid on retirement. The Board does not believe that the independence of any participating Director is compromised as a result of this plan.

Relationships and associations

Mr David Crawford was the National Chairman of KPMG in Australia. He retired in June 2001 and has no ongoing relationship with KPMG. KPMG was a joint auditor of Billiton Plc prior to the merger with BHP Limited and of BHP Billiton up to 2003 and the sole auditor of BHP Billiton from December 2003. The Board considers this matter on an annual basis and does not consider Mr Crawford’s independence to be compromised. The Board considers Mr Crawford’s financial acumen to be important in the discharge of the Board’s responsibilities. Accordingly, his membership of the Board and Chairmanship of the Risk and Audit Committee is considered by the Board to be appropriate and desirable. In June 2006, the Board reappointed former Chief Executive Officer Mr Paul Anderson as a non-executive Director. Before appointing Mr Anderson, the Board considered his independence in light of the Policy on Independence of Directors, the UK Combined Code and the Australian Securities Exchange Principles and Recommendations. Each of these include that a measure of independence is whether a Director has been an executive within the past five years. The Board considers Mr Anderson to be independent. At the time of his appointment as a non-executive Director, almost four years had elapsed since Mr Anderson had retired as Chief Executive Officer. The Board maintains the view that this previous employment history does not interfere with his objective, unfettered or independent judgement or affect his ability to act in the best interests of the Group.

Some of the Directors hold or previously held positions in companies with which we have commercial relationships. Those positions and companies are set out on pages 28 to 31 of this Annual Review. The Board has assessed all of the relationships between the Group and companies in which Directors hold or held positions and concluded that in all cases the relationships do not interfere with the Directors’ exercise of objective, unfettered or independent judgement or their ability to act in the best interests of our business. Transactions during the year that amounted to related-party transactions with Directors or Director-related entities under International Financial Reporting Standards (IFRS) are outlined in note 34 ‘Related Party Transactions’ to the financial statements in the Annual Report.

Some of the Directors hold cross-directorships. Mr Don Argus and Mr Jacques Nasser are both directors of Brambles Limited, and members of the International Advisory Board of Allianz Aktiengesellschaft. Dr John Schubert and Mr Paul Anderson are both directors of Qantas Airways Limited. The Board has assessed each of these relationships and in all cases concluded that the relationships do not interfere with the Directors’ exercise of objective, unfettered or independent judgement or the Directors’ ability to act in the Group’s best interests.

Executive Directors

The two executive Directors, Mr Charles Goodyear, and Mr Marius Kloppers, are not considered independent because of their executive responsibilities. None of the executive Directors hold directorships in any other company included in the ASX 100 or FTSE 100.

3.6 Senior Independent Director

The Board has appointed Dr John Buchanan as the Senior Independent Director of BHP Billiton Plc in accordance with the UK Combined Code. Dr Buchanan is available to shareholders who have concerns that cannot be addressed through the Chairman, CEO or CFO.

3.7 Terms of appointment

A copy of the letter is available at www.bhpbilliton.com/ aboutus/governance.

The Board has adopted a letter of appointment that contains the terms on which non-executive Directors will be appointed, including the basis upon which they will be indemnified.

3.8 Induction and training

A copy of an indicative induction program is available at www.bhpbilliton.com/ aboutus/governance.

Each new non-executive Director undertakes an induction program specifically tailored to their needs.

Non-executive Directors participate in the Board’s training and development program, which has been designed to ensure that non-executive Directors update their skills and knowledge to maximise their effectiveness as Directors throughout their tenure.

3.9 Independent advice

The Board and its Committees may seek advice from independent experts whenever it is considered appropriate. Individual Directors, with the consent of the Chairman, may seek independent professional advice on any matter connected with the discharge of their responsibilities, at the Group’s expense.

3.10 Remuneration

Details of our remuneration policies and practices and the remuneration paid to the Directors (executive and non-executive) are set out in the Remuneration Report on pages 46 to 59 of this Annual Review. Shareholders will be invited to consider and to approve the Remuneration Report at the 2007 Annual General Meetings.

BHP BILLITON ANNUAL REVIEW 2007		37

Corporate Governance Statement continued

3.11 Share ownership

Non-executive Directors have agreed to apply at least 25 per cent of their remuneration to the purchase of BHP Billiton shares until they achieve a shareholding equivalent in value to one year’s remuneration. Thereafter, they must maintain at least that level of shareholding throughout their tenure. All dealings by Directors are reported to the Board and to the stock exchanges.

Information on our policy governing the use of hedge arrangements over shares in BHP Billiton by both Directors and members of the Office of Chief Executive is set out on page 49 of this Annual Review.

Details of the Shares held by Directors are set out on page 64 of this Annual Review.

3.12 Meetings

The Board meets as often as necessary to fulfil its role. During the reporting year it met ten times with seven of those meetings being held in Australia, two in the UK and one in South Africa. Generally, meetings run for two days. Non-executive Directors meet at the end of each Board meeting in the absence of executive Directors and management. In addition, the non-executive Directors met on several occasions during the year, without executive Directors present, to consider CEO succession. Attendance by Directors at Board and Board Committee meetings is set out in the table in section 4.1 of this Statement.

Members of the Office of Chief Executive (OCE) and other members of senior management attended meetings of the Board by invitation. Senior managers delivered presentations on the status and performance of our businesses and matters reserved for the Board, including the approval of budgets, annual financial statements and business strategy.

3.13 Company Secretaries

Ms Karen Wood was the Chief Governance Officer and Group Company Secretary until 11 July 2007. From that date Ms Jane McAloon became Group Company Secretary. Prior to this appointment Ms McAloon was the Company Secretary of BHP Billiton Limited. The Group Company Secretary is responsible for developing and maintaining the information systems and processes that enable the Board to fulfil its role. The Group Company Secretary is also responsible to the Board for ensuring that Board procedures are complied with and advising the Board on governance matters. All Directors have access to the Group Company Secretary for advice and services. Independent advisory services are retained by the office at the request of the Board or Board Committees. Ms McAloon is supported by Mr Robert Franklin, Company Secretary of BHP Billiton Plc; Ms Elizabeth Hobley, Deputy Company Secretary of BHP Billiton Plc; and Ms Fiona Smith and Mr Ross Mallet who are Deputy Company Secretaries of BHP Billiton Limited. The Board appoints and removes the Company Secretaries.

4. Board of Directors – Review, re-election and renewal

4.1 Review

The Board is committed to transparency in determining Board membership and in assessing the performance of Directors. Contemporary performance measures are considered an important part of this process.

The Board conducts regular evaluations of its performance, its Committees, the Chairman, individual Directors and the governance processes which support Board work. The evaluation of the Board’s performance is conducted by focusing on individual Directors in one year and the Board as a whole in the following year. In addition to the above, the Board conducts evaluations of the performance of Directors retiring and seeking re-election and uses the results of the evaluation when considering the re-election of Directors. External independent advisers are engaged to assist these processes as necessary. It is thought that the involvement of an independent third party has assisted the evaluation processes to be both rigorous and fair. This year the Board has undertaken a review of the Board as a whole with the assistance of independent advisers. The evaluation was based on findings from interviews with Directors and OCE members. The 2007 review indicated that the Board is continuing to perform in an effective manner.

The effectiveness of the Board and its Committees is assessed against the accountabilities set down in the Board Governance Document and each of the Committees’ Terms of Reference. Matters considered in the assessment include the effectiveness of:

•		discussion and debate at Board meetings
•		the Board’s processes and relationship with management
•		quality and timeliness of meeting agendas, Board papers and secretariat support
•		the composition of the Board, focusing on the blend of skills and experience.

Performance of individual Directors is assessed against a range of criteria, including the ability of the Director to:

•		consistently take the perspective of creating shareholder value
•		contribute to the development of strategy
•		understand the major risks affecting the business
•		provide clear direction to management
•		contribute to Board cohesion
•		commit the time required to fulfil the role
•		listen to and respect the ideas of fellow Directors and members of management.

The process is managed by the Chairman, but feedback on the Chairman’s performance is provided to him by Dr Schubert.

38		BHP BILLITON ANNUAL REVIEW 2007

Attendance at Board and Board Committee meetings during the year ended 30 June 2007

		Board								Risk and Audit								Nomination								Remuneration								Sustainability
		A(1)				B				A				B				A				B				A				B				A				B
Paul Anderson			10				9				—				—				—				—				—				—				4				4
Don Argus			10				10				—				—				6				6				—				—				—				—
David Brink			10				10				9				9				—				—				—				—				3				3
John Buchanan			10				8				—				—				6				5				7				7				—				—
Carlos Cordeiro			10				10				—				—				—				—				7				7				—				—
David Crawford			10				10				9				9				—				—				—				—				—				—
E Gail de Planque			10				10				—				—				—				—				7				6				4				4
Charles Goodyear			8				8				—				—				—				—				—				—				—				—
David Jenkins			10				10				9				9				—				—				7				7				—				—
Marius Kloppers			8				8				—				—				—				—				—				—				—				—
Chris Lynch (2)			8				6				—				—				—				—				—				—				—				—
Jacques Nasser			10				9				9				8				—				—				—				—				—				—
Miklos Salamon (3)			3				2				—				—				—				—				—				—				—				—
John Schubert			10				9				—				—				6				6				—				—				4				4

4.2 Re-election

At least one-third of Directors retire at each Annual General Meeting. Directors are not appointed for a fixed term but must submit themselves to shareholders for re-election after three years. The period that Directors have served on the Board and the years in which they were first appointed and last elected are set out from pages 28 to 31 of this Annual Review.

The Board has determined that non-executive Directors who have served on the Board for more than nine years from the date of their first election must stand for re-election annually starting from the first Annual General Meeting after the expiration of their current term.

Reappointment is not automatic. Retiring Directors who are seeking re-election are subject to a performance appraisal overseen by the Nomination Committee. Following that appraisal, the Board, on the recommendation of the Nomination Committee, makes a determination as to whether it will endorse a retiring Director for re-election. The Board will not endorse a Director for re-election if his or her performance is not considered satisfactory. The Board will advise shareholders in the Notice of Meeting whether or not re-election is supported.

4.3 Renewal

The Board plans for its own succession with the assistance of the Nomination Committee. In doing this, the Board:

•		considers the skills, knowledge and experience necessary to allow it to meet the strategic vision for the business
•		assesses the skills, knowledge and experience currently represented
•		identifies any skills, knowledge and experience not adequately represented and agrees the process necessary to ensure a candidate is selected that brings those traits
•		reviews how Board performance might be enhanced, both at an individual Director level and for the Board as a whole.

When considering new appointments to the Board, the Nomination Committee oversees the preparation of a position specification that is provided to an independent recruitment organisation retained to conduct a global search. In addition to the specific skills, knowledge and experience deemed necessary, the specification contains criteria such as:

•		a proven track record of creating shareholder value
•		unquestioned integrity
•		a commitment to the highest standards of governance
•		having the required time available to devote to the job
•		strategic mind set, an awareness of market leadership, outstanding monitoring skills
•		a preparedness to question, challenge and critique
•		an independent point of view.

Newly appointed Directors must submit themselves to shareholders for election at the first Annual General Meeting following their appointment.

5. Board Committees

The Terms of Reference for each Committee can be found at: www.bhpbilliton.com/ aboutus/governance.

The Board has established Committees to assist it in exercising its authority, including monitoring the performance of the business to gain assurance that progress is being made towards the Corporate Objective within the limits imposed by the Board. The permanent Committees of the Board are the Risk and Audit Committee, the Sustainability Committee, the Nomination Committee and the Remuneration Committee. Other Committees are formed from time to time to deal with specific matters.

Each of the permanent Committees has Terms of Reference under which authority is delegated by the Board.

The office of the Company Secretary provides secretariat services for each of the Committees. Committee meeting agendas, papers and minutes are made available to all members of the Board. Subject to appropriate controls and the overriding scrutiny of the Board, Committee Chairmen are free to use whatever resources they consider necessary to discharge their responsibilities.

Reports from each of the Committees appear below.

BHP BILLITON ANNUAL REVIEW 2007		39

Corporate Governance Statement continued

5.1 Risk and Audit Committee report

Mr David Crawford

The Risk and Audit Committee (RAC) met nine times during the year. Its members are Mr David Crawford (Chairman), Dr David Brink, Dr David Jenkins and Mr Jacques Nasser all of whom are independent non-executive Directors. The Board has nominated Mr David Crawford as the Committee’s financial expert.

Role and focus

The role of the RAC is to assist the Board in monitoring the decisions and actions of the CEO and the Group and to gain assurance that progress is being made towards the Corporate Objective within the CEO’s limits. The RAC undertakes this by overseeing:

•		the integrity of the financial statements
•		the appointment, remuneration, qualifications, independence and performance of the external auditor and the integrity of the audit process as a whole
•		the performance and leadership of the internal audit function
•		the effectiveness of the system of internal controls and risk management
•		compliance with applicable legal and regulatory requirements
•		compliance by management with constraints imposed by the Board.

CSG Risk and Audit Committees

To assist management in providing the information necessary to allow the RAC to discharge its responsibilities, separate Risk and Audit Committees have been established for each of the Customer Services Groups (CSG) and key functional areas. These Committees, known as CSG RACs, have been established and operate as committees of management but are chaired by members of the RAC or by other external appointees with appropriate skills and experience. They perform an important monitoring function in the overall governance of the Group. Management reports on significant matters raised at CSG RAC meetings to the RAC.

Activities undertaken during the year

Integrity of financial statements

The RAC assists the Board in assuring the integrity of the financial statements. The RAC evaluates and makes recommendations to the Board about the appropriateness of accounting policies and practices, areas of judgement, compliance with Accounting Standards, stock exchange and legal requirements and the results of the external audit. It reviews the half yearly and annual financial statements and makes recommendations on specific actions or decisions (including formal adoption of the financial statements and reports) the Board should consider in order to maintain the integrity of the financial statements. From time to time the Board may delegate authority to the RAC to approve the release of the statements to the stock exchanges, shareholders and the financial community.

The CEO and CFO have certified that the 2007 financial statements present a true and fair view, in all material respects, of our financial condition and operating results and are in accordance with applicable regulatory requirements.

External Auditor

The RAC manages the relationship with the External Auditor on behalf of the Board. It recommends to the Board potential auditors for appointment and the terms of engagement, including remuneration. In December 2003, the Board, on the recommendation of the RAC, approved the appointment of KPMG. Shareholders are asked to approve reappointment of the auditors each year in the UK.

The RAC evaluates the performance of the External Auditor during its term of appointment against specified criteria, including delivering value to shareholders and ourselves. The RAC reviews the integrity, independence and objectivity of the External Auditor. This review includes:

•		confirming that the External Auditor is, in its judgement, independent of the Group
•		obtaining from the External Auditor an account of all relationships between the External Auditor and the Group
•		monitoring the number of former employees of the External Auditor currently employed in senior positions and assessing whether those appointments impair, or appear to impair, the External Auditor’s judgement or independence
•		considering whether the various relationships between the Group and the External Auditor collectively impair, or appear to impair, the External Auditor’s judgement or independence
•		determining whether the compensation of individuals employed by the External Auditor who conduct the audit is tied to the provision of non-audit services and, if so, whether this impairs, or appears to impair, the External Auditor’s judgement or independence
•		reviewing the economic importance of the Group’s business to the External Auditor and assessing whether that importance impairs, or appears to impair, the External Auditor’s judgement or independence.

The audit engagement partner rotates every five years.

This Policy on Provision of Other Services by the External Auditor can be viewed at www.bhpbilliton.com/ aboutus/governance.

We have a policy governing the conduct of non-audit work by the External Auditor. Under the Non-Audit Services Policy the External Auditor cannot provide services where the External Auditor:

•		may be required to audit its own work
•		participates in activities that would normally be undertaken by management
•		is remunerated through a ‘success fee’ structure
•		acts in an advocacy role for our business.

Fees paid to the Group’s External Auditor during the year for audit and other services were US$17.9 million, of which 59 per cent comprised audit-related fees, 37 per cent related to other legislative requirements (including Sarbanes-Oxley) and 4 per cent other services. Details of the fees paid are set out in section 12 of the Directors’ Report and in note 4 ‘Expenses’ to the financial statements in the Annual Report. Based on the review by the RAC, the Board is satisfied that the External Auditor is independent.

Internal audit

The internal audit function is carried out internally by Group Audit Services (GAS). The role of GAS is to determine whether risk management, control and governance processes are adequate and functioning. The internal audit function is independent of the External Auditor. The Board’s RAC reviews the mission and charter of GAS, the staffing levels and its scope of work to ensure that it is appropriate in light of the key risks we face. It also reviews and approves the annual internal audit plan.

The RAC also approves the appointment and dismissal of the Vice President Risk Management and Assurance and assesses his or her performance, independence and objectivity. The role of the Vice President Risk Management and Assurance includes achievement of the internal audit objectives; enterprise-wide risk management systems, risk management information systems and insurance strategy. The position is held by Mr Stefano Giorgini. Mr Giorgini reports to management and has all necessary access to management and the right to see information and explanations, and has unfettered access to the RAC.

40		BHP BILLITON ANNUAL REVIEW 2007

Effectiveness of systems of internal control and risk management

In delegating authority to the CEO, the Board has established CEO limits in the Board Governance Document. One of the limits is to ensure that there is a system of control in place for identifying and managing risk. The Directors, through the RAC, review the systems that have been established for this purpose and regularly review their effectiveness.

The RAC is responsible for the oversight of risk management and reviews the internal controls and risk management systems. In undertaking this role the RAC reviews the following:

•		procedures for identifying business risks and controlling their financial impact on the Group and the operational effectiveness of the policies and procedures related to risk and control
•		the budgeting and forecasting systems, financial reporting systems and controls
•		policies and practices put in place by the CEO for detecting, reporting and preventing fraud and serious breaches of business conduct and whistle-blowing procedures
•		procedures for ensuring compliance with relevant regulatory and legal requirements
•		arrangements for protecting intellectual property and other non-physical assets
•		the operational effectiveness of the CSG RAC structures
•		overseeing the adequacy of the internal controls and allocation of responsibilities for monitoring internal financial controls
•		policies, information systems and procedures for preparation and dissemination of information to shareholders, stock exchanges and the financial community.

For further discussion on our approach to risk management refer to section 6 in this Statement.

During the year, the Board conducted reviews of the effectiveness of the Group’s system of internal controls for the financial year and up to the date of this Review in accordance with the UK Combined Code on Corporate Governance (Turnbull Guidance) and the Principles and Recommendations published by the Australian Securities Exchange Corporate Governance Council. These reviews covered financial, operational and compliance controls and risk assessment. The review was overseen by the RAC with findings and recommendations reported to the Board. In addition to considering key risks facing the Group, the Board received an assessment of the effectiveness of internal controls over key risks identified through the work of the Board Committees. The Board is satisfied that the effectiveness of the internal controls has been properly reviewed.

CEO and CFO certification

The CEO and CFO have certified to the Board that the financial statements are founded on a sound system of risk management and internal compliance and that the system is operating efficiently and effectively in all material respects.

During the year the RAC reviewed our response to the obligations imposed by the US Sarbanes-Oxley Act, and in particular, progress in evaluating and documenting internal controls as required by section 404 of the Act, which is applied to the business in the year ended 30 June 2007.

The CEO and CFO, along with the management team, have performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of 30 June 2007. Disclosure controls and procedures are designed to provide reasonable assurance that the material financial and non-financial information required to be disclosed is recorded, processed, summarised and reported on a timely basis and that such information is accumulated and communicated to the members of the Office of Chief Executive and Executive Committee, as appropriate, to allow timely decisions regarding required disclosure.

We conclude that our disclosure controls and procedures are effective in providing that reasonable assurance. In reaching that conclusion we recognise that any controls and procedures, no matter how well designed and operated, have the inherent limitation that they can provide only reasonable, not absolute, assurance that:

•		the objectives of the disclosure controls and procedures are met
•		all control issues and instances of fraud, if any have occurred, have been detected.

Further, when designing and evaluating possible disclosure controls and procedures for the Group, our management is required to apply its judgement with respect to the relevant costs and benefits of the various internal controls.

During the year, the Group undertook a major process initiative over its financial processes and systems which have led to enhanced controls over financial reporting. In all other respects, there have been no changes in our internal control over financial reporting (as that term is defined by the Securities Exchange Act) during the year ended 30 June 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Assessment of RAC performance

During the year the Committee assessed its performance in accordance with its Terms of Reference. As a result of that assessment the Committee is satisfied it has met the RAC Terms of Reference.

5.2 Remuneration Committee report

Dr John Buchanan

The Remuneration Committee met seven times during the year. Its members are Dr John Buchanan (Chairman), Dr David Jenkins, the Hon Gail de Planque and Mr Carlos Cordeiro. All of the Committee members are independent non-executive Directors. Mr Gordon Clark of Kepler Associates acts as an independent adviser to the Committee.

Role and focus

The role of the Committee is to assist the Board in its oversight of:

•		the remuneration policy and its specific application to the CEO, the executive Directors and the CEO’s direct reports, and its general application to all employees
•		the adoption of annual and longer-term incentive plans
•		the determination of levels of reward for the CEO and approval of reward to the CEO’s direct reports
•		the annual evaluation of the performance of the CEO, by giving guidance to the Chairman
•		the communication to shareholders on remuneration policy and the Committee’s work on behalf of the Board, including the preparation of the Remuneration Report for inclusion in the Annual Report
•		compliance with applicable legal and regulatory requirements associated with remuneration matters.

Activities undertaken during the year

Full details of the Committee’s work on behalf of the Board are set out in the Remuneration Report on pages 46 to 59 of this Annual Review.

During the year the Committee assessed its performance in accordance with its Terms of Reference. As a result of that assessment the Committee is satisfied that it has met the Remuneration Committee Terms of Reference.

BHP BILLITON ANNUAL REVIEW 2007		41

Corporate Governance Statement continued

5.3 Nomination Committee report

Mr Don Argus

The Nomination Committee met six times during the year. The members of the Committee are Mr Don Argus (Chairman), Dr John Buchanan and Dr John Schubert. All members of the Committee are independent non-executive Directors.

Role and focus

The role of the Committee is to assist in ensuring that the Board is comprised of individuals who are best able to discharge the responsibilities of a Director, having regard to the highest standards of governance. It does so by focusing on:

•		reviewing the skills represented on the Board and identifying skills that may be required
•		retaining the services of independent search firms and identifying suitable candidates for the Board
•		overseeing the review of the assessment of the performance of individual Directors and making recommendations to the Board on the endorsement of retiring Directors seeking re-election (refer to section 4.2 of this Statement)
•		communicating to shareholders on the work of the Committee on behalf of the Board.

Activities undertaken during the year

There were significant changes to the composition of the Board during the year. The CEO, Mr Charles Goodyear, indicated his intention to resign as CEO toward the end of September 2007. Mr Marius Kloppers will be appointed CEO from 1 October 2007. Mr Miklos Salamon resigned as an executive Director in October 2006 and Mr Chris Lynch resigned as an executive Director in June 2007. The Committee retained the services of Heidrick & Struggles and Egon Zehnder to assist in the identification of potential candidates for the Board.

5.4 Sustainability Committee report

Dr John Schubert

The Sustainability Committee met four times during the year. The current members of the Committee are Dr John Schubert (Chairman), Mr Paul Anderson and the Hon Gail de Planque. All members of the Committee are independent non-executive Directors. Dr John Schubert replaced Dr David Brink as Chairman in March 2007. Following a review of its performance, the Committee revised its Terms of Reference during the year and its membership. The Committee also assessed its performance as required in its Terms of Reference and is satisfied that it is meeting the Terms of Reference.

Role and focus

The role of the Sustainability Committee is to assist the Board in its oversight of:

•		our compliance with applicable legal and regulatory requirements associated with health, safety, environment and community matters
•		our performance in relation to health, safety, environment and community matters
•		the performance and leadership of the health, safety and environment function and the sustainable development function
•		health, safety, environment and community risks
•		our Annual Summary Sustainability Report
•		communication to shareholders on the work of the Committee on behalf of the Board.

Sustainable development governance

Our approach to HSEC and sustainable development governance is characterised by:

•		the Sustainability Committee overseeing the health, safety, environment and community (HSEC) matters across the Group
•		business line management having primary responsibility and accountability for HSEC performance
•		the HSEC function providing advice and guidance directly, as well as through a series of networks across the business
•		seeking input and insight from external experts such as our Forum for Corporate Responsibility
•		clear links between remuneration and HSEC performance.

Activities undertaken during the year

A copy of the Summary and Full report can be found at www.bhpbilliton.com.

During the year the Sustainability Committee considered the Group’s Climate Change Policy, reports on HSEC audits, reviewed the Group’s performance against the HSEC public targets and the Key Performance Indicators for the HSEC and Sustainable Development functions. The Committee also reviewed the performance of the Vice President Health, Safety and Environment and the Vice President Sustainable Development. The Committee reviewed and recommended to the Board the approval of the annual Sustainability Summary Report for publication. The Sustainability Summary Report identifies our targets for health, safety, environment and community matters and its performance against those targets.

42		BHP BILLITON ANNUAL REVIEW 2007

6. Risk management

Approach to risk management

We believe that the identification and management of risk is central to achieving the Corporate Objective of delivering long-term value to shareholders. Each year the Board reviews and considers the risk profile for the whole business. This risk profile covers both operational and strategic risks.

The Board has delegated the oversight of risk management to the RAC. In addition, the Board specifically requires the CEO to implement a system of control for identifying and managing risk. The Directors, through the RAC, review the systems that have been established for this purpose and regularly review their effectiveness.

Our Risk Management Policy can be found at www.bhpbilliton.com/ aboutus/governance.

The Group operates an Enterprise-Wide Risk Management System (EWRM) that provides an over-arching and consistent framework for the assessment and management of risks. Risks are ranked using a common methodology. Where a risk is assessed as material it is reported and reviewed by senior management. During the year the Risk Management Policy was reviewed and changes approved.

Business risks

The scope of our operations and the number of industries in which we operate and engage mean that a range of factors may impact our results. Material risks that could negatively affect our results and performance include:

•		fluctuations in commodity prices
•		fluctuations in currency exchange rates
•		failure to discover new reserves, enhance existing reserves or develop new operations
•		influence of China and impact of a slowdown in consumption
•		actions by governments and political events in the countries in which we operate
•		inability to successfully integrate acquired businesses
•		inability to recover investments in mining and oil and gas projects
•		non-compliance to the Group’s standards by non-controlled assets
•		operating cost pressures and shortages
•		impact of health, safety and environmental exposures and related regulations on operations and reputation
•		unexpected natural and operational catastrophes
•		climate change and greenhouse effects
•		inadequate human resource talent pool
•		breaches in information technology security
•		breaches in governance processes.

Risk management governance structure

The principal aim of the Group’s risk management governance structure and system of internal control is to manage business risks, with a view to enhancing the value of shareholders’ investments and safeguarding assets.

Management has put in place a number of key policies, processes and independent controls to provide assurance to the Board and the RAC as to the integrity of our reporting and effectiveness of our systems of internal control and risk management. The governance assurance diagram on page 34 of this Statement highlights the relationship between the Board and the various controls in the assurance process. Some of the more significant internal control systems include Board and management committees, CSG RACs, the Enterprise-Wide Risk Management System (EWRM) and internal audit.

CSG Risk and Audit Committees

The CSG RACs assist the RAC to monitor the Group’s obligations in relation to financial reporting, internal control structure, risk management systems and the internal and external audit functions. Each half year, the President and CFOs of each CSG and each of the Marketing, Shared Services Centres and Treasury functions must review internal controls and provide formal representations to the Group Financial Controller, which are noted by the applicable CSG RAC, assuring compliance with our policies and procedures and confirming that internal control systems are adequate. These representations are summarised and provided to the RAC.

Board Committees

Directors also monitor risks and controls through the RAC, the Remuneration Committee and the Sustainability Committee.

Management Committees

Management Committees also perform roles in relation to risk and control. Strategic risks and opportunities arising from changes in our business environment are regularly reviewed by the Office of Chief Executive (OCE) now the Group Management Committee and discussed by the Board. The Financial Risk Management Committee (FRMC) reviews the effectiveness of internal controls relating to commodity price risk, counterparty credit risk, currency risk, financing risk, interest rate risk and insurance. Minutes of the OCE and the FRMC are provided to the Board. The Investment Review Committee (IRC) provides oversight for investment processes across the business and coordinates the investment toll-gating process for major investments. Reports are made to the Board on findings by the IRC in relation to major capital projects.

7. Management

Except for those matters that the Board has reserved for its own decision-making, the CEO holds delegated authority from the Board to achieve the Corporate Objective. The CEO has developed an approvals framework which delegates authority to management Committees and individual members of management. Notwithstanding those further delegations, the CEO remains accountable to the Board for the authority delegated to him.

7.1 The Office of Chief Executive and Group Management Committee

The senior management team of the Group was the Office of Chief Executive (OCE). In July 2007 the name of this group was changed to the Group Management Committee (GMC). The role of the GMC is consistent with the role of the OCE as it operated throughout the year. The role of the OCE was to provide advice to the CEO on matters that are strategic and long term in nature or have the potential to significantly impact our business. The OCE determined key business-wide policies, including the Charter, Guide to Business Conduct, the Sustainable Development Policy, the Human Resources Strategy and the Risk Management Policy.

BHP BILLITON ANNUAL REVIEW 2007		43

Corporate Governance Statement continued

7.1 The Office of Chief Executive and Group Management Committee continued

During the year the members of the OCE were:

•		Mr Charles Goodyear, Chief Executive Officer and executive Director (Chairman)
•		Mr John Fast, Chief Legal Counsel and Head of External Affairs (retired in September 2007)
•		Mr Robert Kirkby, Executive President (retired 31 December 2006)
•		Mr Marius Kloppers, Group President, Non-Ferrous Materials and executive Director
•		Mr Chris Lynch, Group President, Carbon Steel Materials and executive Director (retired 30 June 2007)
•		Mr Marcus Randolph, Chief Organisation Development Officer
•		Mr Miklos Salamon, Executive President and executive Director (retired 26 October 2006)
•		Mr Alex Vanselow, Chief Financial Officer
•		Ms Karen Wood, Chief Governance Officer and Group Company Secretary
•		Mr J Michael Yeager, Group President Energy.

From 11 July 2007 the members of the Group Management Committee are:

•		Mr Charles Goodyear, Chief Executive Officer (to be succeeded by Mr Marius Kloppers on 1 October 2007)
•		Mr Marius Kloppers, Group Executive and Chief Executive Non-Ferrous (until 1 October 2007)
•		Mr Marcus Randolph, Group Executive and Chief Executive Ferrous and Coal
•		Mr J Michael Yeager, Group Executive and Chief Executive Petroleum
•		Mr Alex Vanselow, Group Executive and Chief Financial Officer
•		Ms Karen Wood, Group Executive and Chief People Officer
•		Mr Alberto Calderon, Group Executive and Chief Commercial Officer.

The biographical details of members of the Group Management Committee are set out on page 32 of this Annual Review.

7.2 Other management Committees

The CEO draws on the work of other Committees to assist in monitoring and achieving outcomes consistent with the Corporate Objective. The management Committees and their purposes are listed below:

•		Executive Committee – The Executive Committee assists the CEO to increase the value of our business by achieving agreed operational outcomes.
•		Financial Risk Management Committee (FRMC) – The FRMC monitors the Group’s financial risk management policies and exposures and approves financial transactions within the scope of its authority.
•		Investment Review Committee (IRC) – The IRC oversees the management approval processes for major investments, which are designed to ensure that investments are aligned to our agreed strategies and values, risks are identified and evaluated, investments are fully optimised to produce the maximum shareholder value within an acceptable risk framework, and appropriate risk management strategies are pursued.

The members of the Executive Committee are:

•		Mr Charles Goodyear (Chairman)
•		Mr Ian Ashby, President Iron Ore
•		Mr Peter Beaven, President Manganese
•		Mr Alberto Calderon, President Diamonds and Specialty Products (until 11 July 2007)
•		Mr Seamus French, Vice President Business Excellence (until 13 August 2007)
•		Mr Diego Hernandez, President Base Metals
•		Mr Graeme Hunt, President Aluminium (from 11 July 2007 President Uranium and Olympic Dam Development)
•		Mr Marius Kloppers, Group Executive and Chief Executive, Non-Ferrous and executive Director
•		Mr Chris Lynch, Group President, Carbon Steel Materials and executive Director (until 30 June 2007)
•		Ms Rebecca McDonald, President Gas and Power
•		Mr David Murray, President Coal
•		Mr Tom Schutte, President Marketing
•		Mr Mahomed Seedat, President Energy Coal (until 8 March 2007)
•		Mr Nelson Silva, President Aluminium (from 11 July 2007)
•		Mr Jimmy Wilson, President Stainless Steel Materials
•		Mr J Michael Yeager, Group Executive and Chief Executive Petroleum.

8. Business conduct

Guide to Business Conduct

The Guide to Business Conduct can be found at our website at www.bhpbilliton.com/ aboutus/governance.

We have published a Guide to Business Conduct, which is available in eight languages. The Guide reflects our Charter values of integrity, respect, trust and openness. It provides clear direction and advice on conducting business internationally, interacting with communities, governments and business partners and general workplace behaviour. The Guide applies to Directors and to all employees, regardless of their position or location. Consultants, contractors and business partners are also expected to act in accordance with the Guide.

Insider trading

A copy of the Securities Dealing Code and Securities Dealing Policy can be found at our website at www.bhpbilliton.com/ aboutus/governance.

We have a Securities Dealing Code that covers dealings by Directors and identified employees and a Securities Dealing Policy that covers dealings by all other employees. Both these documents restrict dealings by Directors and employees in shares and other securities during designated prohibited periods and at any time when they are in the possession of unpublished price sensitive information.

Global Ethics Panel

The CEO has formed a Global Ethics Panel to:

•		advise on matters affecting the values and behaviours of the Group
•		assist business leaders in assessing acceptable outcomes on issues of business ethics
•		review the rationale, structure and content of the Guide to Business Conduct and propose changes
•		promote awareness and effective implementation of the Guide to Business Conduct.

Panel members have been selected on the basis of their knowledge of and experience in contemporary aspects of ethics and culture that are relevant to the Group and consists of both employees and external members. The Panel is chaired by the Group Executive and Chief People Officer.

Employee help lines

We have established regional help lines so that employees can seek guidance or express concerns on business-related issues. Reports can be made anonymously and without fear of retaliation. A fraud hotline facility is available for reporting cases of suspected misappropriations, fraud, bribery or corruption. Arrangements are in place to investigate such matters. Where appropriate, investigations are conducted independently. Levels of activity and support processes for the employee and fraud help lines are monitored with activity reports presented to the RAC and the Board. Further information on the Business Conduct Helpline and fraud hotline can be found in the Guide to Business Conduct.

Political donations

We maintain a position of impartiality with respect to party politics and do not contribute funds to any political party, politician or candidate for public office. We do, however, contribute to the public debate of policy issues that may affect our business in the countries in which we operate.

44		BHP BILLITON ANNUAL REVIEW 2007

Key activities during the year

In November 2006 the CEO accepted the findings of the internal review into the matters raised by the Royal Commission of Inquiry established by the Australian Government into certain Australian companies in relation to their involvement with the United Nations Oil-for-Food Programme and adopted the recommendations of the internal review. The conclusions reached by the internal review were consistent with the findings of the Commissioner that there was no breach of law by the BHP Billiton Group. The internal review recommended that a number of actions be taken to enhance our systems and processes and these actions have been implemented.

9. Market disclosure

We are committed to maintaining the highest standards of disclosure by ensuring that all investors and potential investors have the same access to high-quality, relevant information in an accessible and timely manner to assist them in making informed decisions. A Disclosure Committee manages our compliance with market disclosure obligations and is responsible for implementing reporting processes and controls and setting guidelines for the release of information.

Disclosure Officers have been appointed in each of the Group’s CSGs and functional departments. These officers are responsible for identifying and providing the Disclosure Committee with material information about the activities of the CSG or functional areas using disclosure guidelines developed by the Committee.

A copy of the Market Disclosure and Communications Policy is available at www.bhpbilliton.com/ aboutus/governance.

To safeguard the effective dissemination of information we have developed a Market Disclosure and Communications Policy which outlines how we identify and distribute information to shareholders and market participants.

Copies of announcements to the stock exchanges on which we are listed, investor briefings, half yearly financial statements, the Annual Report and other relevant information are posted to the Group’s website at www.bhpbilliton.com. Any person wishing to receive advice by email of news releases can subscribe at www.bhpbilliton.com.

10. Conformance with corporate governance standards

Our compliance with the governance standards in each of the jurisdictions in which we operate is summarised in this Statement, the Remuneration Report, the Directors’ Report and the financial statements.

The Listing Rules of the UK Listing Authority require UK-listed companies to report on the extent to which they comply with the Principles of Good Governance and Code of Best Practice, which are contained in Section 1 of the Combined Code, and explain the reasons for any non-compliance.

The Listing Rules of the Australian Securities Exchange require Australian-listed companies to report on the extent to which they meet the Principles and Recommendations published by the Australian Securities Exchange Corporate Governance Council as part of its Principles of Good Corporate Governance (ASX Principles and Recommendations) and explain the reasons for any non-compliance.

A checklist summarising our compliance with the UK Combined Code and the ASX Best Practice Recommendations has been posted to the website at www.bhpbilliton.com/ aboutus/governance.

Both the Combined Code and the ASX Principles and Recommendations require the Board to consider the application of the relevant corporate governance principles, while recognising that departures from those principles are appropriate in some circumstances. We have complied with the provisions set out in Section 1 of the Combined Code and with the ASX Principles and Recommendations throughout the financial period and have continued to comply up to the date of this Annual Review.

BHP Billiton Limited and BHP Billiton Plc are registrants of the Securities and Exchange Commission in the US. Both companies are classified as foreign private issuers and both have American Depositary Receipts listed on the New York Stock Exchange (NYSE). We have reviewed the governance requirements currently applicable to foreign private issuers under the Sarbanes-Oxley Act (US), including the rules promulgated by the Securities and Exchange Commission and the rules of the NYSE and are satisfied that we comply with those requirements.

Section 303A of the NYSE Listed Company Manual has instituted a broad regime of corporate governance requirements for NYSE-listed companies. Under the NYSE rules foreign private issuers, such as ourselves, are permitted to follow home country practice in lieu of the requirements of Section 303A, except for the rule relating to compliance with Rule 10A-3 of the Securities Exchange Act of 1934 (Rule 10A-3) and certain notification provisions contained in Section 303A of the Listed Company Manual. Section 303A.11 of the Listed Company Manual, however, requires us to disclose any significant ways in which our corporate governance practices differ from those followed by US-listed companies under the NYSE corporate governance standards. Following a comparison of our corporate governance practices with the requirements of Section 303A of the NYSE Listed Company Manual that would otherwise currently apply to foreign private issuers, the following differences were identified:

•

Our Nomination Committee Charter does not include the purpose of developing and recommending to the Board a set of corporate governance principles applicable to the corporation. We believe that this task is integral to the governance of the Group and is therefore best dealt with by the Board as a whole.

•

Rule 10A-3 of the Securities Exchange Act of 1934 requires NYSE-listed companies to ensure that their audit committees are directly responsible for the appointment, compensation, retention and oversight of the work of the external auditor unless the company’s governing law or documents or other home country legal requirements require or permit shareholders to ultimately vote on or approve these matters. While the RAC is directly responsible for remuneration and oversight of the External Auditor, the ultimate responsibility for appointment and retention of External Auditors rests with our shareholders, in accordance with UK law and our constitutional documents. The RAC does, however, make recommendations to the Board on these matters, which are in turn reported to shareholders.

While the Board is satisfied with its level of compliance with the governance requirements in Australia, the UK and the US, it recognises that practices and procedures can always be improved, and there is merit in continuously reviewing its own standards against those in a variety of jurisdictions. The Board’s program of review will continue throughout the year ahead.

BHP BILLITON ANNUAL REVIEW 2007		45

Remuneration Report

Remuneration Report at a Glance

						page
		Introductory letter from Committee Chairman					47
1.		The Remuneration Committee					47
2.		Reporting requirements					47
3.		Remuneration policy and structure					47
		3.1		Key principles of our remuneration policy			47
		3.2		Service contracts			48
		3.3		Fixed remuneration			48
		3.4		At risk remuneration			48
		3.5		Share ownership guidelines			48
4.		Office of Chief Executive remuneration details					49
		4.1		Marius Kloppers’ remuneration on appointment as CEO			49
		4.2		Summary of remuneration arrangements			49
		4.3		Short-term incentives (at risk)			49
		4.4		Long-term incentives (at risk)			49
		4.5		Service contracts and termination provisions			49
		4.6		Retirement benefits			50
		4.7		Post-30 June 2007 departures			51
5.		Office of Chief Executive remuneration and share awards					51
		5.1		Summary of remuneration for executive Directors			51
		5.2		Share awards			51
				– Awards of Performance Shares under the LTIP			51
				– Awards of Deferred Shares under the GIS			53
				– Awards of Performance Shares under the GIS			54
				– Awards of Options under the GIS and the ESP			54
				– Awards of Performance Rights under the PSP			55
				– Awards of Partly Paid Shares under the ESP			55
		5.3		Estimated value range of awards			55
		5.4		Shareplus			55
		5.5		Remuneration for OCE members			56
6.		Non-executive Directors					57
		6.1		Retirement benefits			58
		6.2		Remuneration			58
7.		Aggregate Directors’ remuneration					59
8.		Group performance					59
9.		Earnings performance					59
10.		Share prices					59

Key abbreviations used in this Report are defined in the Glossary of Terms, which appears on page 83 of this Annual Review. With the exception of sections 1, 3.5, 5.1, 5.3, 5.4, 8, 9 and 10, all sections are subject to audit.

46		BHP BILLITON ANNUAL REVIEW 2007

Dear Shareholder

Welcome to the Remuneration Report for the 2007 financial year. As you will be aware, a number of senior management changes have been announced since the beginning of 2007. Charles (‘Chip’) Goodyear has decided to retire and, on 1 October 2007, will be succeeded as CEO by Marius Kloppers. Charles will step down as an executive Director this year, but will stay employed until 1 January 2008 to assist Marius with his transition program. Chris Lynch retired on 31 August 2007, having stepped down as an executive Director on 30 June 2007. John Fast will be leaving later this month. Details of the remuneration and leaving arrangements applicable to these individuals are set out in section 4 of this Report.

In 2006, shareholders approved the introduction of an all-employee share purchase plan, Shareplus, which allows employees to acquire shares up to the value of US$5,000 in any year. These are then matched if the employee holds the shares and remains in employment for a further three years. The initial take-up, following the launch in April 2007, was 33 per cent of eligible employees.

The Remuneration Committee regularly reviews the remuneration policy to assess whether it continues to meet the needs of BHP Billiton and its shareholders. Recruitment and retention of the highly-skilled executives needed to deliver BHP Billiton’s strategy remain key priorities for the Committee. During the next year, we will revisit our incentive arrangements to make sure we are best placed to deliver on the imperatives of recruitment and retention, while ensuring that the interests of senior executives and shareholders are aligned.

On behalf of the Committee, thank you for your interest in our Report.

John Buchanan
Chairman, Remuneration Committee

6 September 2007

1. The Remuneration Committee

The Committee is committed to the principles of accountability and transparency, and to ensuring that remuneration arrangements demonstrate a clear link between reward and performance. Operating under delegated authority from the Board, its activities are governed by Terms of Reference (adopted by the Board in June 2006), which are available on our website.

The Committee focuses on:

•

Remuneration policy and its specific application to the CEO, the executive Directors and other executives reporting to the CEO (Office of Chief Executive – OCE) as well as the general application to all our employees

•

The determination of levels of reward to the CEO, the executive Directors and other members of the OCE

•

Providing guidance to the Chairman on evaluating the performance of the CEO

•

Effective communication with shareholders on the remuneration policy and the Committee’s work on behalf of the Board.

The members of the Committee during FY2007 were Dr John Buchanan (Chairman), Mr Carlos Cordeiro, Dr David Jenkins and the Hon E. Gail de Planque. The Committee met seven times in FY2007, and attendance at those meetings is set out on page 39 of this Annual Review. At the invitation of the Committee, Mr Don Argus (the Group Chairman), Mr Charles Goodyear (the CEO), Mr Marcus Randolph (in his capacity as Chief Organisation Development Officer) and Ms Karen Wood (in her capacity as Chief Governance Officer and Group Company Secretary) attended meetings except where matters associated with their own remuneration were considered. Mr Derek Steptoe (Vice President Group Remuneration) also attended meetings by invitation. A report from the Committee and details of Board and Committee performance appear on pages 38 and 41 of this Annual Review. The Committee has access to advice and views from those invited to attend meetings, as mentioned above, and can draw on services from a range of external sources including remuneration consultants. A list of all consultants, together with the type of services supplied and whether services are provided elsewhere in the Group, is available on our website. Kepler Associates LLP, independent advisers to the Committee, supplies specialist remuneration advice. They do not provide any other services to the Group.

2. Reporting requirements

The senior management team of the Group during FY2007 was the Office of Chief Executive (OCE). In July 2007, the name of this group changed to the Group Management Committee (GMC). The role of the GMC is consistent with the role of the OCE as it operated throughout the year. The names and titles of the members of the OCE who served during the year are set out in section 4 of this Report.

Australian and International Financial Reporting Standards require BHP Billiton to make certain disclosures for ‘key management personnel’ (KMP). KMP is defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly.

For the purposes of this Report, it has been determined that the KMP are the Directors and the members of the OCE who served during FY2007. In addition, the Australian Corporations Act 2001 requires BHP Billiton to make certain disclosures in respect of the five highest-paid executives below Board level. In FY2007, the five highest-paid executives below Board level were all members of the OCE and are, therefore, already included as KMP.

3. Remuneration policy and structure

The Committee recognises that we operate in a global environment and that our performance depends on the quality of our people. It keeps the remuneration policy under regular review to ensure it is appropriate for the needs of the Group.

3.1 Key principles of our remuneration policy

The key principles of our remuneration policy are to:

•		Provide competitive rewards to attract, motivate and retain highly-skilled executives willing to work around the world
•		Apply demanding key performance indicators (KPIs), including financial and non-financial measures of performance
•		Link a large component of pay to our performance and the creation of value for our shareholders
•		Ensure remuneration arrangements are equitable and facilitate the deployment of human resources around our businesses
•		Limit severance payments on termination to pre-established contractual arrangements that do not commit us to making unjustified payments.

The Committee is confident that these principles, which were applied in the year under review, and will be applied in FY2008 and beyond, continue to meet the Group’s objectives.

BHP BILLITON ANNUAL REVIEW 2007		47

Remuneration Report continued

The remuneration paid and payable to members of the OCE (including executive Directors) in respect of FY2007 is disclosed in this Report. It comprises fixed and at risk components. The manner in which these components are determined is outlined in this section. The actual remuneration paid and payable is set out in the tables in sections 5.1 and 5.5 of this Report. Remuneration paid to non-executive Directors is set out in section 6.2.

3.2 Service contracts

It is our policy that service contracts have no fixed term, but are capable of termination on 12 months’ notice and that we retain the right to terminate the contract immediately by making a payment equal to 12 months’ base salary and retirement benefit contribution in lieu of notice. All members of the OCE have service contracts (see section 4.5 of this Report for full details). These contracts typically outline the components of remuneration paid, but do not prescribe how remuneration levels are to be modified from year-to-year.

3.3 Fixed remuneration

Fixed remuneration is made up of base salary, retirement and other benefits. It represents approximately 34 per cent of the individual’s remuneration package (based on target performance and using Expected Values for share awards). Base salary is targeted at industry average levels for comparable roles in global companies of similar complexity and size. Market data are used to benchmark salary levels and to inform decisions on base salary changes. Base salaries are set by reference to the scope and nature of the individual’s performance and experience, and are reviewed each year. The review takes into account any change in the scope of the role performed by the individual, any changes required to meet the principles of the remuneration policy and our market competitiveness.

Retirement benefits for new entrants are delivered under defined contribution plans. All defined benefit plans are now closed to new entrants. Employees who participate in these legacy defined benefit plans continue to accrue benefits in such plans for both past and future service unless they have opted to transfer to a defined contribution plan.

Other benefits include health insurance, relocation costs, life assurance, car allowances and tax advisory services as applicable. All such benefits are non-pensionable.

3.4 At risk remuneration

At risk remuneration is geared to Group performance and is made up of short-term and long-term incentives. It represents approximately 66 per cent of the individual’s remuneration package (based on target performance and using Expected Values for share awards).

Short-term incentives are delivered annually under the Group Incentive Scheme (GIS). Awards under the GIS are split equally between a cash award (being a percentage of base salary) and a grant of Deferred Shares and/or Options (to encourage employee retention and share ownership). These Deferred Shares and/or Options are subject to a two-year vesting period before they can be exercised. If, during that period, an individual resigns without the Committee’s consent, or is dismissed for cause, their entitlement to them is forfeited. Members of the OCE each have a target cash award of 70 per cent of base salary and a maximum award of 105 per cent.

The GIS incentivises employees to achieve annual goals linked to the business strategy, budget and personal objectives. Measures are set to reflect the critical KPIs of the Group in a combination of financial and non-financial areas. The key Group measures in FY2007, and in FY2008, are Health and Safety, Shareholder Value Added and Net Present Value Added. In addition, each member of the OCE has personal KPIs based on their key area of responsibility. Members of the OCE have approximately 80 per cent Group-based measures and 20 per cent personal measures. In light of Mr Goodyear’s planned retirement as CEO on 30 September 2007, and from the Group on 1 January 2008, his personal measures will be weighted toward the CEO transition.

The Committee believes that the KPIs set and the relative weightings given to the different categories of KPI effectively incentivise short-term performance. At the end of each year, the performance level achieved against each KPI is measured and awards are calculated and paid according to the level of performance.

Long-term incentives, in the form of Performance Shares, are awarded annually under the Long Term Incentive Plan (LTIP). The diversified natural resources industry is capital intensive, cyclical and long term. Outstanding performance comes from accessing high-quality resources, successfully developing new projects and maintaining efficient and safe operations. The Committee believes that in this environment, success can best be measured by our Total Shareholder Return (TSR) performance relative to the TSR of an index of a peer group of companies weighted 75 per cent to mining and 25 per cent to oil and gas (the Index).

The Performance Hurdle applicable to the awards granted in December 2006, and to those to be granted in December 2007, requires BHP Billiton’s TSR over a five-year performance period to be greater than the weighted average TSR of the Index. To the extent that the Performance Hurdle is not achieved, awards are forfeited. There is no retesting.

For all Performance Shares to vest, BHP Billiton’s TSR must exceed the weighted average TSR of the Index by a specified percentage, determined each year by the Committee. Since the establishment of the LTIP in 2004, this percentage has been set each year at 5.5 per cent. This annual amount equates to exceeding the weighted average TSR of the Index over the five-year performance period by more than 30 per cent. For performance between the weighted average TSR of the Index and 5.5 per cent per annum above the Index, vesting occurs on a sliding scale.

In the event that the Committee does not believe that BHP Billiton’s TSR properly reflects the financial performance of the Group, it retains the discretion to lapse the Performance Shares. It is anticipated that such discretion would only be used in exceptional circumstances. The maximum award that may be made to a participant in any one financial year is limited by the rules of the LTIP to an award with an Expected Value of twice their annual base salary. Expected Value has been used because it enables the Committee to set total target remuneration levels for the CEO and his direct reports, taking into account the degree of difficulty of the LTIP Performance Hurdle and the consequent probability of awards vesting, together with ensuring that awards are externally competitive. It can be defined as the average outcome weighted by probability, and takes into account the difficulty of achieving performance conditions and the correlation between these and share price appreciation. The valuation methodology also takes into account factors including volatility and forfeiture risk. Participants of the GIS and the LTIP are eligible to receive a payment equal to the dividend amount that would have been earned on the underlying shares represented by the Deferred Shares, Options and Performance Shares awarded to those participants (the Dividend Equivalent Payment). The Dividend Equivalent Payment is made to the participants once the underlying shares are issued or transferred to them. No Dividend Equivalent Payment is made in respect of Deferred Shares, Options and Performance Shares that lapse.

3.5 Share ownership guidelines

Participation in the GIS and the LTIP is approved by the Committee, and participants may be required to hold a minimum number of BHP Billiton shares (Minimum Shareholding Requirement – MSR), the level of which is determined by the Committee, throughout their period of participation in the schemes. The current MSR for the CEO and his direct reports is 50 per cent of one year’s base salary on an after-tax basis, calculated using the year-end BHP Billiton share price.

48		BHP BILLITON ANNUAL REVIEW 2007

The CEO and his direct reports are subject to a policy governing the use of hedge arrangements over BHP Billiton shares. This prohibits them from entering into hedge arrangements in relation to unvested shares and options and shares forming part of their MSR. Any permitted hedge arrangements require advance clearance under our Securities Dealing Code from specified officers and must be disclosed in this Report. None of these individuals currently has any hedge arrangement in place.

4. Office of Chief Executive remuneration details

This section contains information on the members of the OCE, including the executive Directors, who served during FY2007.

The executive Directors who served during the year were Mr Charles Goodyear (CEO), Mr Marius Kloppers (Group President, Non-Ferrous Materials, and CEO-designate), Mr Chris Lynch (Group President, Carbon Steel Materials) and Mr Miklos Salamon (Executive President). Mr Salamon and Mr Lynch stood down as Directors on 26 October 2006 and 30 June 2007 respectively.

In addition to the executive Directors, the other executives who served as members of the OCE during the year were Mr John Fast (Chief Legal Counsel and Head of External Affairs), Mr Robert Kirkby (Executive President), Mr Marcus Randolph (Chief Organisation Development Officer), Mr Alex Vanselow (Chief Financial Officer), Ms Karen Wood (Chief Governance Officer and Group Company Secretary) and Mr J Michael Yeager (Group President Energy). Mr Kirkby retired on 31 December 2006.

4.1 Marius Kloppers’ remuneration on appointment as CEO

The Committee has determined that Mr Kloppers will be remunerated in line with the policy and incentive structures that applied to Charles Goodyear.

With effect from 1 October 2007 (on his succession as CEO), Mr Kloppers’ gross base salary will be US$1,850,000 per annum. His annual target cash award will be 70 per cent of base salary with a maximum award of 105 per cent. His remuneration will also include an annual retirement benefit of 40 per cent of base salary. At the 2007 Annual General Meetings, shareholders will be asked to approve an award to Mr Kloppers of 400,000 Performance Shares. This award equates to an approximate face value of 4.75 times base salary or an Expected Value of approximately 1.4 times base salary.

4.2 Summary of remuneration arrangements

Total remuneration for members of the OCE is divided into two components: fixed and at risk. The at risk component is derived only in circumstances where the individual has met challenging KPIs and Performance Hurdles that contribute to our overall profitability and performance.

4.3 Short-term incentives (at risk)

Actual cash awards for the year ended 30 June 2007 were as follows ⁽¹⁾.

		Actual GIS cash award (% of base salary)
		Year ended				Year ended
		30 June 2007				30 June 2006
Executive Directors
Charles Goodyear			85.0				74.2
Marius Kloppers			93.0				74.0
Chris Lynch			91.0				69.5
Miklos Salamon (2)			N/A				69.0
Other members of the OCE
John Fast			87.0				68.7
Robert Kirkby (3)			70.0				67.1
Marcus Randolph			93.0				73.7
Alex Vanselow			101.0				67.5
Karen Wood			102.0				70.1
J Michael Yeager			105.0				83.2

4.4 Long-term incentives (at risk)

All shares under award form part of an individual’s at risk remuneration. The extent to which the Performance Shares will vest is dependent on the extent to which the Performance Hurdle is met and continued employment. A summary of interests in incentive schemes held by members of the OCE, including the number of awards granted in FY2007, is shown in section 5.2 of this Report.

4.5 Service contracts and termination provisions

The service contracts for the CEO and his direct reports have no fixed term. They typically outline the components of remuneration paid to the individual, but do not prescribe how remuneration levels are to be modified from year-to-year. With the exception of John Fast, whose arrangements were determined at the time of the merger of BHP Limited and Billiton Plc in 2001, the contracts are capable of termination on 12 months’ notice. In addition, we retain the right to terminate a contract immediately by making a payment equal to 12 months’ base salary plus retirement benefits for that period.

						Notice period –
						Employing		Notice period –
Name		Employing company		Date of contract		company		Employee
Executive Directors
Charles Goodyear		BHP Billiton Limited, BHP Billiton Plc		21 August 2003		12 months		3 months
Marius Kloppers		BHP Billiton Plc		19 February 2001, as amended on 31 August 2004		12 months		6 months
Chris Lynch		BHP Billiton Limited		31 August 2004 and 16 August 2006		12 months		6 months
Other members of the OCE
John Fast		BHP Billiton Limited		19 July 2001		3 months		3 months
Marcus Randolph		BHP Billiton Limited		13 December 2005		12 months		6 months
Alex Vanselow		BHP Billiton Minerals Service Company Limited		14 June 2006		12 months		6 months
Karen Wood		BHP Billiton Limited		21 February 2006		12 months		6 months
J Michael Yeager		BHP Billiton Petroleum (Americas) Limited		21 March 2006		12 months		6 months

BHP BILLITON ANNUAL REVIEW 2007		49

Remuneration Report continued

4.5 Service contracts and termination provisions continued

Entitlements under the GIS, LTIP and Retirement Plans on ceasing employment

The rules of the GIS and LTIP cover any entitlements participants might have on termination in relation to short-term and long-term incentives. They outline the circumstances in which all participants would be entitled to receive any Deferred Shares, Options or Performance Shares that had been granted, but which had not vested at the date of termination. The rules of the GIS and LTIP provide that should a participant cease employment for any reason other than death/disability, resignation or termination for cause, the following would apply:

•

Deferred Shares and Options already granted would vest in full

•

Participants would have a right to retain entitlements to Performance Shares that have been granted but that are not yet exercisable. The number of such Performance Shares would be pro-rated to reflect the period of service from the commencement of the relevant performance period to the date of departure and would only become exercisable to the extent that the Performance Hurdles are met.

The Committee regards it as an important principle that where a participant resigns without the Committee’s consent, or their employment is terminated for cause, they forfeit the entitlement to their unvested Deferred Shares, Options and Performance Shares.

The rules of the GIS outline the circumstances in which participants would be entitled to a cash award for the performance year in which they cease employment. Such circumstances depend on the reason for leaving. The only circumstances in which the Committee has considered using its discretion to allow members of the OCE to receive a cash award in the event of departure is for those individuals who have retired or are retiring.

On retirement, the CEO and his direct reports will receive any entitlements accrued under the rules of their respective retirement plans and as defined under their contractual arrangements.

4.6 Retirement benefits

For service after 1 January 2003, retirement, death and disability benefits were aligned, where possible, for members of the OCE. With the exception of Marius Kloppers, Miklos Salamon and Alex Vanselow, members of the OCE receive only a defined contribution entitlement. To deliver the retirement promise, the individual is given a choice of funding vehicles, including their current retirement arrangement, an unfunded Retirement Savings Plan, an International Retirement Plan or a cash payment in lieu.

Executive Directors with defined benefit promises

Marius Kloppers has had the choice of a (1) ‘defined benefit’, (2) ‘defined contribution’ underpinned by a defined benefit promise, or (3) ‘cash in lieu’ pension entitlement for each year since 1 July 2001. He has elected to take cash in lieu for each year except for FY2004 when he elected to take a defined contribution entitlement with a defined benefit underpin. Mr Kloppers retains the option to convert the entitlement accrued in the defined contribution fund to a defined benefit entitlement. However, since the value of his defined contribution entitlement (US$556,390) exceeds the transfer value of the defined benefit underpin that he would be entitled to should he revert to the defined benefit promise (US$390,200) (both measured at 30 June 2007), the entitlement is being treated on a defined contribution basis. Upon his succession as CEO on 1 October 2007, Mr Kloppers will relinquish all future defined benefit entitlements.

Miklos Salamon retired as an employee on 1 September 2006. On retirement, he became entitled to a pension under non-contributory defined benefit pension arrangements set up by BHP Billiton Plc and BHP Billiton Services Jersey Limited. The pension payable equated to two-thirds of base salary, with contingent spouse’s pension, and was reduced because payment commenced before the normal retirement age of 60. In accordance with the rules of the scheme, all pensions in payment will be indexed in line with the UK Retail Price Index. The disclosures for Mr Salamon are provided below:

Miklos Salamon — Defined benefits pension

US dollars

Amount by which the annual

pension entitlement has

increased during the two

Total annual pension

Estimated capital value (transfer value) of total

month period ended

entitlement at

Difference in transfer

accrued pension(2)

1 September 2006(1)

1 September 2006(2)

values(3)

1 September 2006

30 June 2006

62,762

936,762

5,789,329

19,987,198

14,197,869

Notes
(1)		Due to exchange rate movements.
(2)		The following information in respect of Mr Salamon’s retirement benefits, quoted as at 30 June 2007, is presented to satisfy the requirements of Schedule 7A of the UK Companies Act 1985:
·		At 30 June 2007, the total annual pension entitlement is US$27,852, with a corresponding transfer value of US$740,496. The decrease compared with Mr Salamon’s entitlements immediately prior to his retirement is due to the fact that he took the majority of his pension entitlement as a one-off cash payment upon retirement.
·		The decrease in the accrued annual pension entitlement compared with 30 June 2006, after making allowance for inflation of 4.3 per cent, is US$999,070. The transfer value of this decrease is US$15,974,904. The majority of the decrease is attributable to the fact that most of the benefit was taken as a cash lump sum.
		For FY2006, the decrease in the accrued pension, after making an allowance for inflation of 3.3 per cent, is US$2,532. The transfer value of the decrease is US$41,149.
(3)		Increase is primarily due to early retirement.