Management & Governance

Performance of Rio Tinto and individual executives

2007 was another year of strong performance for the Group.

To illustrate the performance of the Companies relative to their markets, graphs showing the performance of Rio Tinto plc in terms of TSR over the last five years, compared to the FTSE 100 Index and Rio Tinto Limited compared to the ASX All Ordinaries Index are reproduced below. A graph showing Rio Tinto's performance relative to the HSBC Global Mining Index is also included to illustrate the performance of Rio Tinto relative to other mining companies.

The effect of this performance on shareholder wealth, as measured by TSR, is detailed in the table below and the relationship between TSR and executive remuneration is discussed in the Executive remuneration and Remuneration components sections.

Rio Tinto shareholder return 2003-2007

Year	Dividends per share paid during the year	Share price - Rio Tinto plc £ (pence)		Share price - Rio Tinto Limited A$		Total shareholder return (TSR) (US$)
	US cents per share	1 Jan	31 Dec	1 Jan	31 Dec	plc %	Ltd %	Group %
2007	116.0	2,718	5,317	74.30	133.95	99.5	82.9	91.8
2006	191.5	2,655	2,718	69.00	74.30	6.3	12.2	7.6
2005	83.5	1,533	2,655	39.12	69.00	77.5	81.3	78.4
2004	66.0	1,543	1,533	37.54	39.12	1.7	7.4	13.0
2003	60.5	1,240	1,543	33.95	37.54	27.9	14.7	24.8

Rio Tinto Group and product group performance during 2007, and over relevant performance periods ending at 31 December 2007, impacted executives' remuneration as follows:

Share based awards

• SOP - Rio Tinto TSR growth over the three years ending 31 December 2007 achieved the level required by the applicable performance condition to vest 100 per cent.
• MCCP - Rio Tinto ranked fifth in the ten company comparator group at the completion of the four-year performance period ending 31 December 2007, resulting in 35 per cent vesting of the conditional award made to executives who were directors or product group chief executives at the date of the conditional award. This group included Tom Albanese, Leigh Clifford, Guy Elliott, Oscar Groeneveld, Preston Chiaro, Keith Johnson, Andrew Mackenzie and Sam Walsh. The vesting shown in Executives' awards under long term incentive plans, is in accordance with the performance condition applicable to the 2004 award and represents 35 per cent of the original awards for those who were in executive director or product group chief executive roles at the time of grant of the conditional award.

Annual cash bonus

Cash bonuses (STIP) in respect of the 2007 performance period, to be paid in March 2008, are set out in Executives' and non executive directors' remuneration table and the percentages awarded to each executive is set out in the Bonuses and grants made during or in respect of 2007 table. These bonuses were approved by the committee on the basis of delivered performance against financial, safety and personal (including operational and strategic) targets and objectives for each executive.

Financial performance was assessed against underlying earnings targets for the Group and product groups as relevant and established by the committee at the commencement of the performance period. The potential impact of fluctuations in exchange rates and some prices are outside the control of the Group. The committee therefore compares, on an equal weighting basis, both actual results and underlying performance. This approach is designed to ensure that the annual bonus reflects financial results and addresses underlying performance excluding the impact of prices and exchange rates. The committee retains discretion to consider underlying business performance in deciding STIP awards.

The safety measures included Group or relevant product group lost time injury frequency rates (LTIFR) and overall assessment of progress against improvement targets in other safety measures, including all injury frequency rates (AIFR). These measures are chosen as they reflect the priority of safety at all Rio Tinto operations.

Personal performance targets and objectives were established for each executive at the start of the performance period. These comprise a balanced set of measures for each individual that reflect current operational performance, as well as progress on initiatives and projects designed to grow the value of each business unit and the Rio Tinto portfolio. The targets and objectives chosen enable personal performance and the benefit accruing to shareholders in the long term to be mirrored in each of the executives' "at risk" remuneration.

To achieve linkage between business/financial and personal/non financial performance and remuneration, each executive director's and the Group executive Business Resources STIP payment is calculated as a percentage of salary in accordance with the formula set out below:

Target STIP (60%)	X	Business/financial (score = 0% to 133%)		X	Personal/non financial (score = 0% to 150%)
		75% weight	25% weight		Personal targets and objectives
		Group net earnings	Group safety performance

For each product group chief executive, STIP payments are calculated as a percentage of salary in accordance with the formula set out below:

Target STIP (60%)	X	Business/financial (score = 0% to 133%)		X	Personal/non financial (score = 0% to 150%)
		40% weight	60% weight		25% weight	75% weight
		Group financial results	Product group financial results		Product group safety	Personal targets and objectives

Strong Group financial performance for 2007 resulted in a STIP score at 106 per cent of target for this component. Financial performance for each product group varied and the Remuneration committee approved STIP scores ranging from 70 per cent of target to 133 per cent of target (maximum is 133 per cent) for this component.

Group safety performance resulted in the Remuneration committee approving a score of 100 per cent of target (maximum is 133 per cent) for this component. Product group safety performance varied and STIP scores ranged from 85 per cent of target to 150 per cent of target (where 150 per cent is the maximum achievable) for this component.

Consequently, total STIP awards for executives ranged from 13 per cent to 93 per cent of salary (10.8 per cent to 77.5 per cent of maximum).

Each of the results set out below therefore reflect the above, strong operational performance and portfolio initiatives to secure future value for the business across the Group:

Tom Albanese

The committee assessed personal performance as above target and the overall STIP award was 141.6 per cent of target (70.8 per cent of maximum).

Guy Elliott

The committee assessed personal performance as above target and the overall STIP award was 136.6 per cent of target (68.3 per cent of maximum).

Dick Evans

Not eligible to participate in Rio Tinto STIP for 2007.

Preston Chiaro

The committee assessed product group financial and safety performance as below target and personal performance as on target. The overall STIP award was 83.3 per cent of target (41.6 per cent of maximum).

The committee awarded a special bonus in light of substantial additional portfolio responsibilities during the last quarter of 2007. For this pro rata bonus, product group financial performance was assessed as below target and safety and personal performance was on target. The overall pro rata STIP award was 93.1 per cent of target (46.5 per cent of pro rata maximum).

Bret Clayton

The committee assessed product group financial and personal performance as above target and safety performance as below target. The overall STIP award was 125 per cent of target (62.5 per cent of maximum).

The committee awarded a special bonus in light of substantial additional portfolio responsibilities during the last quarter of 2007. For this pro rata bonus product group financial and personal performance as above target and safety performance as below target. The overall pro rata STIP award was 123.1 per cent of target (61.5 per cent of pro rata maximum).

Leigh Clifford

Leigh Clifford retired on 30 September 2007 and is eligible to receive a pro rata bonus for the proportion of the performance period worked prior to retirement. The pro rata bonus is based on personal performance to the date of retirement and Group financial and safety performance for the year.

The committee assessed personal performance as above target and the overall STIP award was 118.4 per cent of target (59.2 per cent of maximum) for the period worked.

Oscar Groeneveld

The committee assessed product group financial performance as below target, personal performance as above target and safety performance as on target. The overall STIP award was 105 per cent of target (52.5 per cent of maximum).

Keith Johnson

The committee assessed pro rata product group financial and personal performance as above target and product group safety performance as below target. The overall STIP award was 118.3 per cent of target (59.1 per cent of maximum).

Andrew Mackenzie

The committee assessed product group financial and safety performance as well as personal performance as below target. The overall STIP award was 21.6 per cent of target (10.8 per cent of maximum).

Sam Walsh

The committee assessed product group financial performance as below target and safety and personal performance as above target. The overall STIP award was 126.6 per cent of target (63.3 per cent of maximum).

Retention

Tom Albanese and Oscar Groeneveld were each awarded a conditional one-off three year retention bonus in October 2004, prior to their appointments as an executive director and product group chief executive Aluminium respectively, with a view to retaining their services. These retention bonuses of 100 per cent of salary as at 1 March 2007 were paid in October 2007. The values for Tom Albanese and Oscar Groeneveld were US$1,232,232 and US$1,195,766 respectively. These amounts have been expensed over the three year period on an accrual basis, adjusted for exchange rate fluctuations and reported in the Executives' and non executive directors' remuneration table under 'Other long term benefits' as US$477,000 for Tom Albanese and US$478,000 for Oscar Groeneveld.

Share based payment - long term incentives granted in 2007

Options over either Rio Tinto plc or Rio Tinto Limited shares, as appropriate, were granted to each executive except Dick Evans under the SOP on 13 March 2007. The committee reviewed the performance condition applicable to this grant and confirmed that vesting will be dependent on Rio Tinto's TSR relative to the HSBC Global Mining Index over a three year performance period.

• Details of all options outstanding under SOP.

A conditional award of performance shares in either Rio Tinto plc or Rio Tinto Limited shares was made to each executive except Dick Evans under the MCCP on 13 March 2007. The committee reviewed the performance condition applicable to the conditional award and confirmed that vesting will be dependent on Rio Tinto's TSR relative to 15 other mining companies.

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