This was a challenging year  for AGL, but the Board is  confident our strategy will  deliver improved returns  for shareholders in the years  to come. The statutory net profit of your company was $558.7 million  compared with $356.1 million last year. However, a more useful  comparison for shareholders is that, on an underlying basis,  net profit of $431.1 million was up only slightly on last year’s  $428.9 million. This underlying result would have reached our original  expectations were it not for an unusual set of weather events  which happened across eastern and southern Australia in late  January and early February. Subsequently, the Board commissioned a review of AGL’s electricity  hedging policies and procedures to consider whether there were  actions that could reasonably have been taken to reduce the financial  consequences of these events. That review confirmed that the  weather events in late January and early February were very unusual  and statistically would only be expected to occur very infrequently.  While AGL could theoretically have put in place additional hedging  cover, the cost of doing so would have far outweighed the  occasional losses suffered in such unusual circumstances. Most  importantly the review confirmed that AGL’s hedging policies and  procedures are appropriately designed and implemented. From the outset of the acquisition process, your Board and  management were determined that any acquisition had to be value  accretive. This discipline is critical if we are to succeed in improving  our average return on funds employed. Encouraging progress has been made against the milestones on this  strategic journey. I did however just want to comment on one high  profile strategic opportunity AGL did not finally pursue. The partial  privatisation of the New South Wales electricity industry was a  complex process but did eventually offer a potential opportunity to  quickly increase AGL’s electricity market share in New South Wales. The Board remains committed to AGL’s vertical integration strategy  and its potential to create value from developing our depth and  reach in Australian electricity and gas markets. Although the underlying profit is relatively flat compared with last  year, I am pleased to report a small increase in the final dividend. The  final dividend of 31 cents will bring the total dividend for the year to  60 cents, an increase of 1 cent on last year’s total dividend. I am also  pleased to report that the final dividend will be fully franked. For the  forseeable future, we anticipate that dividends will be fully franked. 6 Chairman’s  Report Dividend Financial Results Strategy