Corporate Governance Report

The Combined Code

The Board is fully committed to the principle of best practice in corporate governance. This report describes how the Company has applied the main principles of the Combined Code on Corporate Governance issued by the Financial Reporting Council on June 2008 (the ’Code’).

During the year under review, the Company has complied with the provisions contained in Section 1 of the Combined Code, except, with regard to membership of the Remuneration Committee (Code Provision B.2.1) as the Chairman of the Committee is not considered independent and save that no individual member of the Audit Committee has been identified as having recent and relevant financial experience (Code Provision C.3.1). These two points are explained below.

A. Directors

A.1 The Board

The Board is satisfied that it meets the requirements of the Code in maintaining an effective Board which is collectively responsible for the success of the Company.

At the Annual General Meeting on 6 May 2008, Claude Lamoureux was elected a director of the Company. There were no other changes to the membership of the Board during the year. The Board, chaired by Willy Strothotte, has 11 directors, comprising three executive directors and eight non-executive directors. The three executive directors are Mick Davis, the Chief Executive, Trevor Reid, Chief Financial Officer, and Santiago Zaldumbide, Chief Executive of Xstrata Zinc. David Rough, an independent non-executive director is the Deputy Chairman. The non-executive directors possess a range of experience and are of sufficiently high calibre to bring independent judgement to bear on issues of strategy, performance, and resources that are vital to the success of the Group.

The Board is responsible for the governance of the Group on behalf of shareholders within a framework of policies and controls which provide for effective risk assessment and management. The Board provides leadership and articulates the Company’s objectives and strategy to achieve those objectives. The Board sets standards of conduct, as documented in an approved Statement of Business Principles, which provide an ethical framework for all Xstrata businesses. While the Board focuses on strategic issues, financial performance, risk management and critical business issues, it also has a formal schedule of matters specifically reserved to it for decision. These reserved matters which are documented in a comprehensive regime of authorisation levels and prior approval requirements for key corporate decisions and actions, are reviewed and updated annually by the Board. Such matters reserved to the Board include, but are not limited to, approval of budgets and business plans, major capital expenditure, major acquisitions and disposals, and other key commitments. Certain powers are delegated by the Board to an Executive Committee which is a committee of the Board of Xstrata (Schweiz) AG, the main trading subsidiary of Xstrata plc. This Committee and a description of its powers are described in the Board Committees.

The Company has a policy based on the Model Code published in the Listing Rules, which covers dealings in securities and applies to directors, persons discharging managerial responsibilities, and employee insiders.

Five scheduled Board meetings were held during the year and one additional meeting was held. Attendance by directors at Board meetings and at meetings of standing committees of the Board is shown below. In addition, the Chairman held a separate meeting with the non-executive directors without the executive directors being present and the non-executive directors held a separate meeting without the Chairman being present. All Board meetings are held in Switzerland.

There are four formally constituted committees of the Board. Details of attendance at Board and committee meetings is given below. The role and work of these committees is described in detail in the Board Committees.

Attendance at Board meetings and committees of the Board
Director	Board (6 of which 5 were scheduled)	Audit (4)	Remuneration (3)	Health, Safety, Environment & Community (4)	Nominations (5)
Mick Davis	5			4
Ivan Glasenberg	6				5
Paul Hazen	4		2
Claude Lamoureux *	5	2		3
Robert MacDonnell	6				5
Sir Steve Robson	5	4
David Rough	6	4	3	4	5
Trevor Reid	5
Ian Strachan	4	3		4
Willy Strothotte	5		3
Santiago Zaldumbide	5

A.2 Chairman and Chief Executive

A clear separation is maintained between the responsibilities of the Chairman and the Chief Executive. This is documented in a statement approved by the Board. The Chairman is responsible for leadership of the Board and creating the conditions for overall Board and individual director effectiveness while the Chief Executive is responsible for overall performance of the Group including the responsibility for arranging the effective day-to-day management controls over the running of the Group.

A.3 Board Balance and Independence

Of the eight non-executive directors, six are considered by the Board to be independent of management and free from any business or other relationship which could materially interfere with the exercise of their independent judgement and two, Willy Strothotte and Ivan Glasenberg, are directors of Glencore International AG (’Glencore’). Willy Strothotte is Chairman and Ivan Glasenberg is Chief Executive Officer of Glencore. The Board has considered these associations and considers the industry expertise and experience of these directors beneficial to the Group.

David Rough is the Deputy Chairman and the Senior Independent Director. His role and responsibilities as the Senior Independent Director are detailed in and formalised by Board resolution and, in summary, are that he should be available to shareholders to discuss their concerns where the normal channels would not be appropriate for this purpose, to have contact with analysts and major shareholders to obtain a balanced understanding of their issues and concerns, to chair the Nominations Committee and to lead the Board and director appraisal process.

The non-executive directors have a particular responsibility to ensure that the strategies proposed by the executive directors are fully considered. To enable the Board to discharge its duties, all directors receive appropriate and timely information and briefing papers are distributed to all directors.

The Board reviews annually the composition and chairmanship of its standing committees, namely the Audit, Remuneration, Nomination and the Health, Safety, Environment & Community Committee.

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A.4 Appointments to the Board

The Nominations Committee ensures that there is a formal, rigorous and transparent procedure for the appointment of new directors. Recommendations for appointments are made on merit and against objective criteria. The report on the Nominations Committee is set out in Board Committees.

Following a search for a new independent non-executive director conducted on behalf of the Company by an independent search consultancy and led by the Nominations Committee, Mr Peter Hooley was invited to join the Board as an independent non-executive director and will be proposed by the Board for election by the shareholders at the Annual General Meeting on 5 May 2009. Mr Hooley was Group Finance Director of Smith & Nephew plc until 2006. Since 2002, he has been a non-executive director of Cobham plc, the aerospace and defence group and is chairman of its Audit Committee. He is also a director and chairman of BSN medical, a medical textiles business. With his extensive financial markets experience and a strong track record of creating shareholder value, the Board is confident that Mr Hooley will add significant value to Xstrata. Mr Hooley has agreed to act as an independent external consultant to the Board with effect from 3 March 2009 until the AGM.

A.5 Information and Professional Development

As part of the annual Board evaluation process, the Board expressed its view that the Board papers are prepared to a high standard, are circulated in a timely manner and provide all relevant information and directors were satisfied that the Board is kept informed of all areas of major importance to the Company. The Board was also satisfied that it receives regular information on legal and regulatory developments and procedures are in place to give directors the opportunity for further training in order to regularly update their skills and knowledge.

All directors are made aware that they may take independent professional advice at the expense of the Company in the furtherance of their duties. All directors had access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that all governance matters are complied with and assists with professional development as required.

Arrangements have been approved by the Board to ensure that new directors should receive a full, formal and tailored induction on joining the Board. In addition, ongoing support and resources are provided to directors in order to enable them to extend and refresh their skills, knowledge and familiarity with the Company. Professional development and training is provided in three complementary ways: regular updating with information on changes and proposed changes in laws and regulations affecting the Group or its businesses; arrangements, including site visits, to ensure directors are familiar with the Group’s operations; and opportunities for professional and skills training.

A.6 Performance Evaluation

The Board undertook an evaluation of its own performance and that of its Committees and of its individual directors in accordance with the Code. The process was devised and conducted internally under the direction of the Senior Independent Director, following the previous year’s external process. In general, directors were very satisfied with the Board’s performance and the Board is considered to be fit for purpose. Medium-term succession planning was identified as an area of some concern, whilst there was agreement on the Group’s long-term strategy. It was agreed that Board evaluations, which are conducted annually, will be conducted by external evaluators every three years.

A.7 Re-election of Directors

Under the Articles, one-third of all directors are required to retire by rotation at each AGM and any director who, at the start of an AGM, has been in office for more than three years since his election must retire. Retiring directors may offer themselves for re-election. The succession plan was updated and approved by the Board during the year to ensure there was a balance of skills and experience on the Board and to plan for an orderly refreshing of Board membership. It is proposed that Messrs Glasenberg, MacDonnell, Reid and Zaldumbide will retire and Messrs Glasenberg, Reid and Zaldumbide will offer themselves for re-election at the AGM on 5 May 2009. Following the appraisal of the non-executive directors, the Board was satisfied that each director’s performance continues to be effective and that each director continues to demonstrate commitment to the role, and recommended the re-election of the three directors.

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B. Remuneration

Remuneration is covered in the Corporate Governance Report and, with regard to the Remuneration Committee.

C. Accountability and Audit

C.1 Financial Reporting

The Board is mindful of its responsibility to present a balanced and clear assessment of the Company’s position and prospects and the Board is satisfied that it has met this obligation. This assessment is primarily provided in the Chairman’s Statement, the Chief Executive’s Report, and the Operating and Financial Review contained in this Report. The Statement of Directors’ Responsibilities in respect of the Consolidated Financial Statements are set out in the PDF of Statement of directors’ responsibilities in relation to the Group financial statements.

C.2 Internal Control

General

An ongoing process in accordance with the Guidance of the Turnbull Committee on internal control has been established for identifying, evaluating and managing the significant risks faced by the Group. This process has been in place throughout the year under review and up to the date of the approval of the Annual Report and Financial Statements.

The Audit Committee reviews this process and the effectiveness of the system of internal control by considering the regular reports from management on key risks, mitigating actions and internal controls, management representations and assertions and the reports on risk management and internal control from Internal Audit, the External Auditors and other assurance providers such as Health, Safety, Environmental and Community Management.

The principal aim of the system of internal control is the management of business risks that are significant to the fulfilment of the Group’s business objectives with a view to enhancing the value of the shareholders’ investment and safeguarding of assets. The internal control systems have been designed to manage rather than eliminate the risk of failure to achieve business objectives and provide reasonable but not absolute assurance against material misstatement or loss.

The directors confirm that they have reviewed the effectiveness of the system of internal control.

Control Environment

The key elements and procedures that have been established to provide an effective system of internal control are as follows:

(i) Organisational Structure

There is a well-defined organisational structure with clear operating procedures, lines of responsibility and delegated authority.

The way the Group conducts its business, expectations of management and key accountabilities are embodied in the Group’s policies, its Statement of Business Principles and Board Level Authority Limits.

The Group operates a decentralised management model with appropriate authority delegated to Commodity Business Unit Boards for the Alloys, Coal, Copper, Nickel and Zinc/Lead businesses. The Business Units are responsible for profitability to the level of earnings before interest and taxation (EBIT). Business Unit Boards meet regularly and either the Group CEO or CFO attend as representatives of Head Office.

The Board sets overall policy and delegates the authority to implement that policy to its commodity business units and supporting functions.

Group policies are established by head office management for application across the whole Group.

(ii) Risk Identification and Evaluation

The Board considers effective risk management as essential to the achievement of the Group’s objectives and has implemented a structured and comprehensive system across the Group. The Group Risk Management Policy is published on the Xstrata website at www.xstrata.com as part of the Governance section.

The Xstrata approach to risk management is value driven and has the stated objective of ensuring “an environment where we can confidently grow shareholder value through developing and protecting our people, our assets, our environment and our reputation”. The process is thorough and robust and is an essential element of the Group’s approach to business planning.

Each commodity business unit and the head office carry out a comprehensive annual risk review and update its risk register accordingly. Objectives in the business plan are aligned with risks and a summary of the key risks, related internal controls, accountabilities and further mitigating actions that are planned is appended to the business plan that is reviewed and approved by the Executive Committee.

Progress against plans, significant changes in the business risk profile and actions taken to address controls and mitigate risks are reported quarterly to the Business Unit and Xstrata plc Audit Committees, as well as to the Executive Committee and the Board as and when necessary.

The output of the process has been reviewed by the Group and commodity business unit audit committees, and accords with the Turnbull Guidance.

(iii) Information and Financial Reporting Systems

The Group’s comprehensive planning and financial reporting procedures include detailed operational budgets for the year ahead and a three-year rolling plan. The Board reviews and approves the budget and plan. Plans and budgets are prepared on the basis of consistent economic assumptions determined by the Group Finance function. Performance is monitored and relevant action taken throughout the year through the monthly reporting of key performance indicators, updated forecasts for the year together with information on the key risk areas.

Comprehensive monthly management reports on a divisional and consolidated basis, including updated forecasts for the year, are prepared and presented to the Executive Committee by the Group Controller. Detailed consolidated management accounts, together with an executive summary from the Chief Executive, are circulated to all directors on a monthly basis.

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(iv) Investment Appraisal

A budgetary process and authorisation levels regulate capital expenditure. For expenditure beyond specified levels, detailed written proposals are submitted to the Executive Committee in accordance with Board delegated authority limits. A standardised format is used that includes a detailed calculation of return on equity. Economic assumptions are consistent with those included in management reports and budgets and are agreed with Group Finance. Reviews are carried out after the project is complete, and for some projects during the construction period, to monitor progress against plan; major overruns are investigated. Commercial, legal, sustainable development and financial due diligence work, using outside consultants, is undertaken in respect of acquisitions as appropriate.

(v) Treasury Committee

A Treasury Committee operates as a sub-committee of the Executive Committee of Xstrata (Schweiz) AG. Its membership consists of the Chief Executive, the Chief Financial Officer, the Group Treasurer and Group Controller. The Committee recommends Group policy, which is submitted to the Group Board for approval, relating to all aspects of funding, management of interest rate and foreign exchange exposures and it coordinates relationships with banks, rating agencies and other financial institutions. The Committee monitors all significant treasury activities undertaken by Group companies and ensures compliance with Group policy.

(vi) Internal Audit

Internal Audit is an important element of the overall process by which the Executive Committee and the Board obtains the assurance it requires that risks are being properly identified, managed and controlled. Risk-based internal audit plans, prepared on an annual basis, are approved by the Audit Committee.

Internal Audit completed a full programme of work in 2008, covering the Business Units and Head Office, focusing in particular on the more significant risks and related internal controls identified in the risk self-assessment process. Findings and agreed actions were reported to management and to the Audit Committee.

The Group-wide internal audit function is supplemented by services provided as required by KPMG LLP as an outsourced service provider.

(vii) Fraud Management

There is a formal Group policy relating to fraud management, including reporting and investigation arrangements and, in line with best practice, includes whistleblowing procedures. There are independently operated confidential hotlines in various countries in which the Group operates, through which employees or contractors or any other parties can report any breach of Xstrata’s Business Principles, including fraud. The contact details are published in the Statement of Business Principles which can be found on the Xstrata website at www.xstrata.com/sustainability/policies/businessprinciples. All incidents reported are fully investigated and the results are reported to the Audit Committee.

C.3 Audit Committee and Auditors

A principle of the Code is that the Board should establish formal and transparent arrangements for considering how it should apply the financial reporting and internal control principles and for maintaining an appropriate relationship with the external auditors, Ernst & Young LLP. These responsibilities are delegated to and are discharged by the Audit Committee whose work is described in Board Committees.

The Audit Committee undertakes annually a comprehensive evaluation of the external auditor’s performance across the Group for the purpose of making a recommendation to the Board regarding the re-election of the external auditor at the AGM.

D. Relations with Shareholders

D.1 Dialogue with shareholders

The Company is required to have a dialogue with shareholders, based on the mutual understanding of objectives, and it is the responsibility of the Board as a whole to ensure that a satisfactory dialogue does take place. The Code recognises that most shareholder contact is with the Chief Executive and the Chief Financial Officer. However, the Chairman, the Senior Independent Director, and other directors as appropriate, should maintain contact with major shareholders in order to understand their issues and concerns.

The Board places considerable importance on effective communication with shareholders. The Chief Executive and Chief Financial Officer, assisted by the Executive General Manager of Corporate Affairs, maintain regular dialogue with and give briefings throughout the year to analysts and institutional investors and are involved in a structured programme of investor, analyst and media site visits. Presentations are given by the Chief Executive and Chief Financial Officer after Xstrata’s preliminary announcements of the year-end results and at the half year. Care is taken to ensure that any price-sensitive information is released to all shareholders, institutional and private, at the same time in accordance with the Disclosure Rules and Swiss Stock Exchange requirements.

The Senior Independent Director was available to shareholders for any concern which contact with the Group Chairman, Chief Executive or Chief Financial Officer failed to resolve or for which such contact was inappropriate.

All shareholders can obtain access to the Annual Report and Accounts and other current information about the Company through Xstrata’s website at www.xstrata.com. The Operating and Financial Reviews include a detailed report on the business and future developments.

D.2 Constructive use of the Annual General Meeting

All directors normally attend Xstrata’s AGM and shareholders are invited to ask questions during the meeting and to meet directors after the formal proceedings have ended. Shareholders at the meeting are advised as to the level of proxy votes received including percentages for and against and the abstentions in respect of each resolution following each vote on a show of hands.

At the time of the listing in March 2002, shareholders in the old Xstrata AG were informed that the Company would offer shareholders the opportunity to attend general meetings in Switzerland where the head office resides, even though the Company was incorporated and has its registered office in England. Given this history and the number of shares still held in or through Switzerland, the Board continues to consider it is appropriate for the AGM to be held in Zug, Switzerland. A live webcast will be provided of the AGM through Xstrata’s website www.xstrata.com. A telephone dial-in facility will also be provided on a listen-only basis.

The Board uses the AGM to communicate with institutional and private investors and welcomes their participation. At the AGM on 6 May 2008, the Chairman and the Chairmen of the Audit, Remuneration, Nominations and HSEC Committees were present to answer questions. Details of the resolutions to be proposed at the Annual General Meeting on 5 May 2009 can be found in the Notice of the Meeting.

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Board Committees

The terms of reference of the Audit, Remuneration, Nominations and HSEC Committees are available on the Company’s website www.xstrata.com.

Audit Committee

The Audit Committee assists the Company’s Board in discharging its responsibilities with regard to financial reporting, external and internal audits and controls, including reviewing Xstrata’s annual financial statements, considering the scope of the Company’s annual external audit and the extent of non-audit work undertaken by external auditors, approving the Company’s internal audit programme, advising on the appointment of external auditors and reviewing the effectiveness of the Company’s internal control systems, risk management systems, risk registers and the Group’s whistleblowing procedures.

The Code recommends that all members of the Audit Committee should be non-executive directors, all of whom are independent in character and judgement and free from relationships or circumstances which are likely to affect, or could appear to affect, their judgement and that at least one member should have recent and relevant financial experience. The Audit Committee comprises four independent non-executive directors: Sir Steve Robson (Chairman of the Audit Committee), Claude Lamoureux, David Rough and Ian Strachan. The Board considered membership of the Committee during the year and, while bearing in mind the Combined Code provision that at least one member of the Audit Committee should have recent and relevant financial experience, declared its satisfaction that the members of the Committee have requisite skills and attributes, and collectively have sufficient recent and relevant financial experience to discharge its role and responsibilities. The Board therefore considers that it complies with Combined Code recommendations regarding the composition of the Audit Committee and is consistent with the main principle in C.3 of the Code and contributes to good governance.

The Chief Executive, the Chief Financial Officer, the Group Controller, representatives of Xstrata’s external auditors and the Head of Internal Audit normally attend the meetings. Other directors of the Company and senior management may also, on invitation by the Committee, attend and speak, but not vote at any meeting of the Audit Committee. In order to further enhance communication and best practice, the chairmen of the Company’s Business Unit Audit Committees and the chief executives of the business units are also invited to attend the Audit Committee meetings on a rotational basis.

The Audit Committee reports its activities and makes recommendations to the Board of Directors of Xstrata. The Audit Committee met four times during the year ended 31 December 2008. During that year the Committee:

1. (a) reviewed for submission to Xstrata’s Board, the 2007 annual financial statements and the 2008 interim financial statements and reviewed the external auditor’s detailed reports thereon;
2. (b) approved the form in which interim management statements will be released by the Company;
3. (c) reviewed the appropriateness of the Xstrata Group’s accounting policies;
4. (d) regularly reviewed the potential impact on the Xstrata Group’s financial statements of a range of matters which involve significant judgement, estimation or uncertainty, and the possible impairment of fixed asset values;
5. (e)assessed and concluded that there was nothing of any materiality in the Litigation Report;
6. (f)reviewed the external auditor’s plan and scope for the audit of the Xstrata Group accounts, and approved their remuneration both for audit and non-audit work, and their terms of engagement. In February 2008, the Audit Committee looked at the relation between audit and non-audit fees over the last six years. There was some volatility in non-audit fees which reflected years of major acquisitions. Otherwise the audit fees were in line with Xstrata’s peers. Non-audit fees paid to the auditors were higher than the peer group due to a number of major acquisitions;
7. (g)recommended to the Board the reappointment of the external auditors following an evaluation of their effectiveness and confirmation of auditor objectivity and independence;
8. (h)examined the effectiveness of the Company’s risk management system including its risk management process and profile, the Company’s internal control systems and operations which were examined and tested by the internal auditors. The Audit Committee reviewed counterparty risk management processes. Counterparty risk is monitored weekly to identify any concentration of risk;
9. (i)reviewed the structure and limits of the Xstrata Group insurance policies, and these were considered to be appropriate;
10. (j)reviewed and approved the internal audit plans for 2008, the effectiveness of the internal audit function and, at each meeting, reviewed the reports on findings and on progress against recommendations. The Audit Committee also requested a report at each meeting in respect of major projects in terms of achievement of agreed control objectives and project management delivery targets;
11. (k)reviewed a Statement of Reserves and Resources, reviewed by an independent expert to ensure consistency of reporting across the Group and with international standards;
12. (l)approved a statement on the process by which the Audit Committee and Xstrata’s Board review the effectiveness of internal control; and
13. (m)reviewed the whistleblowing arrangements, the report on whistleblowing and fraud related matters.

Following each Committee meeting, separate meetings were held by the Committee with the external auditors in the absence of executive management, with executive management in the absence of the external auditors and with the internal auditor in the absence of executive management and the external auditors.

The Group has a specific policy governing the conduct of non-audit work by the external auditors which ensures that the Company is in compliance with the requirements of the Combined Code and the Ethical Standards for Auditors published by the Auditing Practices Board.

The auditors are permitted to provide non-audit services that are not in conflict with auditor independence. Six-monthly reports are made to the Audit Committee detailing non-audit fees paid to both the external and internal auditors. However, prior approval of the Audit Committee is required for each specific service provided by the external auditors. A range of non-audit services has been pre-approved in principle by the Audit Committee. However, where the fee is likely to be in excess of $100,000 for such services, specific re-approval is required, while prior approval of the Chief Financial Officer is required for those pre-approved services where the fee is likely to be less than $100,000.

The Audit Committee is supported and assisted in its work by separate Audit Committees for each Commodity Business Unit in line with the decentralised commodity business unit model. The Business Unit Audit Committees are independent of the executive management of the Business Unit and are chaired by suitably qualified individuals independent of Xstrata. The terms of reference of these Committees follow those of Xstrata’s Audit Committee. Meeting dates precede those of Xstrata’s Audit Committee and minutes of their meetings are circulated to Xstrata’s Audit Committee.

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Remuneration Committee

The principal roles of the Remuneration Committee are: (i) to consider and determine all elements of the remuneration of the Chief Executive and Chief Financial Officer and of the heads of the major operating subsidiaries or business units of the Company (the ’Executive Group’) as defined by the Chief Executive; and (ii) to determine targets for any performance-related pay schemes operated by the Company. At its meetings, the Remuneration Committee makes recommendations to the Board in regard to all elements of the remuneration for the executive directors and the members of the Executive Group. The Remuneration Committee receives independent advice on benchmarking and best practice. The terms of reference of the Remuneration Committee conform with the terms of reference set out in the Code. The recommended revision of the fee structure for non-executive directors was approved by the Board as a whole.

The Remuneration Committee is chaired by Willy Strothotte. As Chairman of Xstrata and Chairman of Glencore, he is not considered to be an independent director and therefore is not compliant with the Code. The Board regards Willy Strothotte’s membership as critical to the work of the Committee due to his extensive knowledge and experience of the global mining resources sector. The Board considers that this is consistent with the main principle in Code B.2 of the Code and contributes to good governance. David Rough and Paul Hazen, the other members of the Committee, are both non-executive directors and independent. The Committee met three times during the year. The Chief Executive attends meetings by invitation but does not participate at a meeting of the Committee (or during the relevant part) at which any part of his remuneration is being discussed or participate in any recommendation or decision concerning his remuneration.

The Remuneration Committee’s activities in respect of the year ended 31 December 2008 included:

1. (a)determining the bonuses for 2007 performance and salaries for 2009 for the executive directors and members of the Executive Committee;
2. (b)recommending for approval by the Board, a revised fee structure for non-executive directors to apply from 1 January 2008;
3. (c)determining the vesting percentage applicable to awards under the Long Term Incentive Plan 2005 which vested in March 2008, approving the number of share options and contingent share awards to be awarded under the 2008 Long Term Incentive Plan awards and the individual awards to members of the Executive Committee;
4. (d)agreeing a policy in respect of the vesting of awards under the Long Term Incentive Plan for scheme participants who retire from employment with the Group;
5. (e)approving an award under the Added Value Incentive Plan to the Chief Executive;
6. (f)approving proposed amendments to the Added Value Incentive Plan and the text of a circular submitted to the 2008 AGM for approval by the shareholders;
7. (g)clarifying the rules regarding the treatment of deferred bonuses in the event of a change of control;
8. (h)approving the amount of the total award to be granted under the Long Term Incentive Plan in 2009; and
9. (i)agreeing to changes to the Comparator Group of mining companies against which TSR performance will be measured in respect of future grants under the Long Term Incentive Plan.

Details of Xstrata’s remuneration for executive directors, benefits, share options, pensions entitlements, service contracts and compensation payments are given in the Remuneration Report. A resolution to approve the Remuneration Report will be proposed at the AGM.

Nominations Committee

The Nominations Committee assists Xstrata’s Board in discharging its responsibilities relating to the composition of the Board. The Nominations Committee is responsible for reviewing, from time-to-time, the structure of Xstrata’s Board, identifying, evaluating and recommending candidates for Board vacancies and making recommendations on the continuation of existing directors in office to ensure there is a balanced Board in terms of skills, knowledge and experience. The Committee also determines succession plans for the chairman and chief executive officer, and assesses directors’ potential conflict of interest situations and makes recommendations thereon to the Board.

The Committee comprises David Rough (Committee Chairman), Ivan Glasenberg and Robert MacDonnell. Of these non-executive directors, Ivan Glasenberg is not considered independent.

During the year ended 31 December 2008, the Nominations Committee met five times. Its activities in respect of that year included:

1. (a)reviewing the plan for the retirement by rotation and re-election of directors of Xstrata and the framework for Board succession planning for 2009/11 and recommending that all independent non-executive directors appointed in 2002 should be replaced by 2011;
2. (b)appointing an executive search consultancy to identify and propose a shortlist of potential candidates for appointment to the Board in 2009 and making recommendations thereon to the Board. This is designed to take into account matters such as the size of Xstrata, product diversity and geographical spread, as well as maintaining a balance to the Board in relation to independent/non-independent members, their skills and experience;
3. (c)overseeing the annual evaluation of the Board’s performance, its committees and directors; and
4. (d)assessing directors’ potential conflict of interest situations, proposing terms on which those situations might be authorised and recommending these for authorisation by the Board.

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Health, Safety, Environment and Community Committee

The principal roles of the Health, Safety, Environment & Community (HSEC) Committee are to review and make recommendations to the Board on the appropriateness and effectiveness of health, safety, environment and community strategy, systems and methodology. It also reviews the results of any investigation into significant health, safety, environment and community incidents and keeps the Board informed of new developments, trends and/or forthcoming significant legislation on health, safety, environment and community matters which may be relevant to the Xstrata Group’s operations, its assets or employees.

The HSEC Committee comprises Ian Strachan, who chairs the HSEC Committee, Mick Davis, Claude Lamoureux and David Rough.

During the year ended 31 December 2008, the HSEC Committee met four times. Its activities in respect of that year included:

1. (a)monitoring and evaluating reports on the implementation and effectiveness of the Sustainable Development (SD) Policy, SD management standards, SD strategy and the SD Assurance Programme;
2. (b)monitoring and evaluating the implementation and effectiveness of Xstrata Coal, Xstrata Alloys and Xstrata Zinc’s SD and HSEC strategies, plans and performance;
3. (c)monitoring and evaluating reports on high potential risk HSEC incidents and the results of investigations into critical HSEC incidents, including facilities;
4. (d)receiving a report on 2007 HSEC performance against targets and 2008 monthly performance;
5. (e)monitoring and evaluating new developments, issues and/or relevant legislation on HSEC matters; and
6. (f)approving a policy on SD governance, SD performance in 2008 and approving the Sustainability Report.

Executive Committee

The Executive Committee is a Committee of the Board of Xstrata (Schweiz) AG, the main direct subsidiary of Xstrata plc. The Executive Committee obtains its responsibility and authority from the Xstrata (Schweiz) AG Board and is directly accountable to the Xstrata plc Board. It is chaired by Mick Davis and comprises executive directors, Trevor Reid and Santiago Zaldumbide (also Chief Executive of Xstrata Zinc) together with the Chief Executives of the other Business Units, Charlie Sartain (Xstrata Copper), Peter Freyberg (Xstrata Coal), Ian Pearce (Xstrata Nickel), Peet Nienaber (Xstrata Alloys), Benny Levene (Chief Legal Counsel) and Thras Moraitis (Executive General Manager, Group Strategy and Corporate Affairs). Other members of senior management are invited to attend Executive Committee meetings as required. The Executive Committee is responsible for implementing strategy, approval of matters consistent with its delegated levels of authority and overseeing the various businesses which comprise the Group. It meets regularly during the year and no meetings are held in the UK.

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