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Independent remuneration report review

This letter contains the findings and conclusions from our review of the processes followed by the Anglo American Remuneration Committee (the Committee) during 2008. The review was undertaken at your request as Chairman of the Committee in order to provide shareholders with assurance that the processes followed by the Committee supported the policy stated in Anglo American's Remuneration Report.

It is our view that the processes followed by the Committee during 2008 fully supported the Company's remuneration policy. Please find below a description of the process that we followed in coming to our conclusion, along with our detailed observations and recommendations.

Review process

In order to reach our view we undertook the following:

  • A review of the Committee's terms of reference;
  • A review of the minutes of the Committee covering the period from January to December 2008;
  • A review of any briefing materials prepared for the Committee during the year;
  • An interview with Chris Corrin in his capacity as Secretary to the Committee; and
  • An interview with the Chairman of the Committee.

Findings

The Committee consists entirely of independent non-executive directors. It met formally on six occasions in 2008.

We reviewed the minutes of each meeting along with any supporting papers or documentation that was tabled. We found that the decisions taken by the Committee were in line with Anglo American’s stated remuneration policy, namely that levels of reward, whilst competitive, require demanding performance conditions to be met which are consistent with shareholder interests. We are satisfied that the Committee closely adheres to the stated policy of setting base pay levels at the median of comparable companies, that at least 50% of remuneration for the executive directors is performance-related and that variable pay is consistent with business performance, market conditions and retention of talent.

We are satisfied that the Committee challenges the proposals put forward by executive management and adopts a rigorous and robust approach to decision-making.

We are also satisfied that the Committee seeks the advice of external consultants on technical issues where appropriate and gives careful consideration to the information and recommendations that it receives, before reaching an informed decision.

Conclusions

On the basis of the document review referred to above and the interviews with the Chairman and Secretary of the Committee, we are comfortable that the Committee has discharged its duties in line with the Policy on Executive Director Remuneration stated in the Anglo American Annual Report.

As noted in previous years we consider that the members of the Committee continue to be an effective and cohesive team and that the Committee is an exemplar of best practice.

We understand that consideration has been given to refreshing the membership of the Committee in line with the requirements of the Combined Code and that the composition of the Committee will continue to be reviewed periodically.

Further detail regarding the Mercer Review is included in a letter of this date addressed to the Committee Chairman which we understand will be made available on the Company's website.

Yours sincerely,

Mark Hoble

Principal
Mercer Limited
Tower Place
London EC3R 5BU
30 January 2009

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