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28. Called-up share capital and share-based payments

Called-up share capital

  2008 2007
  Number of shares US$ million Number of shares US$ million
Authorised:
5% cumulative preference shares of £1 each 50,000 50,000
Ordinary shares of 5486/91 US cents each 1,820,000,000 1,000 1,820,000,000 1,000
    1,000   1,000
Called-up, allotted and fully paid:
5% cumulative preference shares of £1 each 50,000 50,000
Ordinary shares of 5486/91 US cents each:
At 1 January 1,342,911,897 738 1,541,653,607 771
Share consolidation (138,749,193)
Treasury share
cancellation
(60,000,050) (33)
Other 7,123 7,533
At 31 December 1,342,919,020 738 1,342,911,897 738

During 2008 7,123 ordinary shares of 5486/91 US cents each were allotted to certain non-executive directors by subscription of their after tax directors' fees (2007: 4,143 ordinary shares of 50 US cents each and 3,390 ordinary shares of 5486/91 US cents each).

In 2008 5,649,992 ordinary shares of 5486/91 US cents each were purchased by the Company and held in treasury (2007: 27,073,161 ordinary shares of 50 US cents each and 14,631,542 ordinary shares of 5486/91 US cents each). Excluding shares held in treasury (but including the shares held by the Group in other structures, as outlined in the Tenon and Employee benefit trust sections below) the number of called-up, allotted and fully paid ordinary shares as at 31 December 2008 was 1,316,485,510; $723 million (2007: 1,322,128,379; $726 million).

On 20 June 2007 the Company cancelled 50 ordinary shares of 50 US cents each previously held in treasury. On 3 August 2007 the Company cancelled 60,000,000 ordinary shares of 5486/91 US cents previously held in treasury. As at 31 December 2008 the Company held 26,433,510 ordinary shares of 5486/91 US cents in treasury (2007: 20,783,518 ordinary shares of 5486/91 US cents).

Following the demerger of Mondi on 2 July 2007, a share consolidation became effective with the result that for every 100 existing ordinary shares of 50 US cents each, shareholders received 91 new ordinary shares of 5486/91 US cents each. This resulted in a reduction in the number of ordinary shares held of 138,749,193.

At general meetings, every member who is present in person has one vote on a show of hands and, on a poll, every member who is present in person or by proxy has one vote for every ordinary share held.

In the event of winding up, the holders of the cumulative preference shares will be entitled to the repayment of a sum equal to the nominal capital paid up, or credited as paid up, on the cumulative preference shares held by them and any accrued dividend, whether such dividend has been earned or declared or not, calculated up to the date of the winding up.

No ordinary shares were allotted on exercise of employee share option plans (2007: nil).

Tenon

Tenon Investment Holdings (Pty) Limited (Tenon), a wholly owned subsidiary of Anglo American South Africa Limited (AASA), has entered into agreements with Epoch Investment Holdings Limited (Epoch), Epoch Two Investment Holdings Limited (Epoch Two) and Tarl Investments Holdings Limited (Tarl) (collectively the Investment Companies), each owned by independent charitable trusts whose trustees are independent of the Group. Under the terms of these agreements, the Investment Companies have purchased Anglo American plc shares on the market and have granted to Tenon the right to nominate a third party (which may include Anglo American plc but not any of its subsidiaries) to take transfer of the Anglo American plc shares each has purchased on the market. Tenon paid the Investment Companies 80% of the cost of the Anglo American plc shares including associated costs for this right to nominate which together with subscriptions by Tenon for non-voting participating redeemable preference shares in the Investment Companies provide all the funding required to acquire the Anglo American plc shares through the market. These payments by Tenon are sourced from the cash resources of AASA. Tenon is able to exercise its right of nomination at any time up to 31 December 2025 against payment of an average amount of $5.83 per share to Epoch, $9.07 per share to Epoch Two and $7.53 per share to Tarl which will be equal to 20% of the total costs respectively incurred by Epoch, Epoch Two and Tarl in purchasing shares nominated for transfer to the third party. These funds will then become available for redemption of the preference shares issued by the Investment Companies. The amount payable by the third party on receipt of the Anglo American plc shares will accrue to Tenon and, in accordance with paragraph 33 of IAS 32, any resulting gain or loss recorded by Tenon will not be recognised in the income statement of Anglo American plc.

Under the agreements, the Investment Companies will receive dividends on the shares they hold and have agreed to waive the right to vote those shares. The preference shares issued to the charitable trusts are entitled to a participating right of up to 10% of the profit after tax of Epoch and 5% of the profit after tax of Epoch Two and Tarl. The preference shares issued to Tenon will carry a fixed coupon of 3% plus a participating right of up to 80% of the profit after tax of Epoch and 85% of the profit after tax of Epoch Two and Tarl. Any remaining distributable earnings in the Investment Companies, after the above dividends, are then available for distribution as ordinary dividends to the charitable trusts.

The structure effectively provides Tenon with a beneficial interest in the price risk on these shares together with a participation in future dividend receipts. The Investment Companies will retain legal title to the shares until Tenon exercises its right to nominate a transferee.

At 31 December 2008 the Investment Companies together held 112,300,129 (2007: 106,356,408) Anglo American plc shares with a market value of $2,511 million (2007: $6,521 million) which represented 9% (2007: 8%) of the ordinary shares in issue (excluding treasury shares). The Investment Companies are not permitted to hold more than an aggregate of 10% of the issued share capital of Anglo American plc at any one time.

Although the Group has no voting rights in the Investment Companies and cannot appoint or remove trustees of the charitable trusts, the Investment Companies meet the accounting definition of a subsidiary in accordance with IAS 27 Consolidated and Separate Financial Statements. As a result, the Investment Companies are consolidated in accordance with the definitions of IAS 27 and the principles set out in SIC 12 Consolidation – Special Purpose Entities.

Employee benefit trust

The provision of shares to certain of the Company's share option and share incentive schemes is facilitated by an employee benefit trust. During 2008 5,248,591 (2007: 9,007,694) shares were sold to employees on exercise of their options, and provisional allocations were made to options already awarded. The cost of shares purchased by the trust is presented against retained earnings. The employee benefit trust has waived the right to receive dividends on these shares although the waiver was temporarily suspended in respect of the Mondi demerger dividend in specie. Immediately after the dividend was paid, the waiver was reinstated.

The market value of the 4,445,244 shares (2007: 9,693,835 shares) held by the trust at 31 December 2008 was $99 million (2007: $594 million).

The costs of operating the trust are borne by the Group but are not material.

Share-based payments

During the year ended 31 December 2008, the Group had six share-based payment arrangements with employees, the details of which are described in the remuneration report. All of the Group's schemes are equity settled, either by award of options to acquire ordinary shares (ESOS, SAYE and former AAC Executive Share Incentive Scheme) or award of ordinary shares (BSP, LTIP and SIP). The ESOS and former AAC Executive Share Incentive Scheme are now closed to new participants, having been replaced with the BSP.

The total share-based payment charge for continuing operations relating to Anglo American plc shares for the year was made up as follows:

US$ million 2008 2007
ESOS 3
BSP 50 41
LTIP 53 43
Other schemes 9 7
  112 94

The fair values of options granted under the ESOS and SAYE schemes, being the more material option schemes, were calculated using a Black Scholes model. No ESOS awards were granted in 2008 or 2007. The assumptions used in these calculations for the current and prior years are set out in the tables below:

Arrangement 2008
SAYE(1)
2007
SAYE(1)
Date of grant 24/04/08 26/04/07
Number of instruments 307,297 315,716
Exercise price (£) 24.16 21.42
Share price at the date of grant (£) 30.20 26.78
Contractual life (years) 3.5-7.5 3.5-7.5
Vesting conditions(2) 3-7 3-7
Expected volatility 35% 30%
Expected option life (years) 3.5-7.5 3.5-7.5
Risk free interest rate 4.6% 5.2%
Expected departures 5%pa 5%pa
Expected outcome of meeting performance criteria (at date of grant) n/a n/a
Fair value per option granted (weighted average) (£) 13.32 8.68

The fair value of ordinary shares awarded under the BSP and LTIP – ROCE, being the more material share schemes, was calculated using a Black Scholes model. The fair value of shares awarded under the LTIP – TSR scheme was calculated using a Monte Carlo model. The assumptions used in these calculations for the current and prior years are set out in the tables below:

  2008 2007
Arrangement BSP(1) LTIP – ROCE(1) LTIP – TSR(1) BSP(1) LTIP – ROCE(1) LTIP – TSR(1)
Date of grant 29/02/08 17/03/08 17/03/08 09/03/07 23/03/07 23/03/07
Number of instruments 1,690,350 795,465 795,465 1,642,336 841,211 841,211
Exercise price (£)
Share price at the date of grant (£) 28.21 31.35 31.35 24.73 24.63 24.63
Contractual life (years) 3 3 3 3 3 3
Vesting conditions (3) (4) (5) (3) (4) (5)
Expected volatility 35% 35% 35% 30% 30% 30%
Expected option life (years) 3 3 3 3 3 3
Risk free interest rate 4.0% 3.7% 3.7% 5.1% 5.2% 5.2%
Expected departures 5%pa 5%pa 5%pa 5%pa 5%pa 5%pa
Expected outcome of meeting performance criteria (at date of grant) 44-100% 100% n/a 44-100% 100% n/a
Fair value per option granted (weighted average) (£) 31.22 26.93 19.69 24.67 23.96 18.34
(1)
The number of instruments used in the fair value models differs to the total number of instruments awarded in the year due to awards made subsequent to the fair value calculations taking place. The fair value calculated per the assumptions above has been applied to the total number of awards. The difference in income statement charge is not considered significant.
(2)
Number of years continuous employment.
(3)
Three years continuous employment with enhancement shares having variable vesting based on non-market based performance conditions.
(4)
Variable vesting dependent on three years continuous employment and Group ROCE target being achieved.
(5)
Variable vesting dependent on three years continuous employment and market based performance conditions being achieved.

The expected volatility is based on historic volatility over the last five years. The expected life is the average expected period to exercise. The risk free rate of return is the yield on zero-coupon UK government bonds with a term similar to the expected life of the option.

The charges arising in respect of the other employee share schemes that the Group operated during the year are not considered material.

A progressive dividend growth policy has been assumed in all fair value calculations.

A reconciliation of option movements for the more significant share-based payment arrangements over the year to 31 December 2008 and the prior year is shown below. All options outstanding at 31 December 2008 with an exercise date on or prior to 31 December 2008 are deemed exercisable. Options were exercised regularly during the year and the weighted average share price for the year ended 31 December 2008 was £25.99 (2007: £29.09).

Executive Share Option Scheme(1)

Options to acquire ordinary shares of 5486/91 US cents were outstanding under the terms of this scheme as follows:

At 31 December 2008
Year of grant Date exercisable Option price
per share £
Options
outstanding
1 Jan 2008
Options
exercised
in year
Options
forfeited
in year
Options
outstanding
31 Dec 2008
1999 24 June 2002 to 23 June 2009 6.98 772,256 (247,973) (9,950) 514,333
1999 19 October 2002 to 18 October 2009 8.00 29,000 (22,000) 7,000
2000 23 March 2003 to 22 March 2010 7.66 1,056,732 (267,610) (73,000) 716,122
2000 12 September 2003 to 11 September 2010 10.19 15,000 (8,944) (3,000) 3,056
2001 2 April 2004 to 1 April 2011 10.03 1,251,064 (211,600) (159,844) 879,620
2001 13 September 2004 to 12 September 2011 8.00 26,750 (3,000) 23,750
2002 18 March 2005 to 17 March 2012 11.50 1,298,242 (220,781) (133,600) 943,861
2002 13 September 2005 to 12 September 2012 8.05 11,000 (4,000) 7,000
2003 5 March 2006 to 4 March 2013 9.28 2,350,685 (417,174) (170,500) 1,763,011
2003 13 August 2006 to 12 August 2013 11.41 32,937 (9,437) (1,000) 22,500
2004 1 March 2007 to 28 February 2014 13.43 2,641,345 (540,912) (173,266) 1,927,167
2004 10 August 2007 to 9 August 2014 11.52 84,373 (23,064) (4,000) 57,309
2004 29 November 2007 to 28 November 2014 12.73 11,147 (2,356) 8,791
2005 6 January 2008 to 4 January 2015 12.12 37,579 37,579
2005 1 August 2008 to 31 July 2015 14.40 18,000 18,000
2005 19 August 2008 to 18 August 2015 13.94 5,500 (2,750) 2,750
      9,641,610 (1,952,601) (757,160) 6,931,849
At 31 December 2007
Year of grant Date exercisable Option price
per share £
Options
outstanding
1 Jan 2007
Options
exercised
in year
Options
forfeited
in year
Options
outstanding
31 Dec 2007
1999 24 June 2002 to 23 June 2009 6.98 1,076,806 (288,550) (16,000) 772,256
1999 19 October 2002 to 18 October 2009 8.00 38,000 (9,000) 29,000
2000 23 March 2003 to 22 March 2010 7.66 1,446,216 (368,400) (21,084) 1,056,732
2000 26 June 2003 to 25 June 2010 7.66 5,000 (5,000)
2000 12 September 2003 to 11 September 2010 10.19 29,000 (14,000) 15,000
2001 2 April 2004 to 1 April 2011 10.03 1,745,658 (430,250) (64,344) 1,251,064
2001 13 September 2004 to 12 September 2011 8.00 26,750 26,750
2002 18 March 2005 to 17 March 2012 11.50 1,848,700 (451,295) (99,163) 1,298,242
2002 13 September 2005 to 12 September 2012 8.05 11,000 11,000
2003 5 March 2006 to 4 March 2013 9.28 4,022,398 (1,420,359) (251,354) 2,350,685
2003 13 August 2006 to 12 August 2013 11.41 59,760 (21,823) (5,000) 32,937
2003 1 October 2006 to 30 September 2013 10.81 10,000 (10,000)
2004 1 March 2007 to 28 February 2014 13.43 6,796,976 (3,955,583) (200,048) 2,641,345
2004 10 August 2007 to 9 August 2014 11.52 194,322 (87,949) (22,000) 84,373
2004 29 November 2007 to 28 November 2014 12.73 11,147 11,147
2005 6 January 2008 to 4 January 2015 12.12 37,579 37,579
2005 1 August 2008 to 31 July 2015 14.40 18,000 18,000
2005 19 August 2008 to 18 August 2015 13.94 5,500 5,500
      17,382,812 (7,062,209) (678,993) 9,641,610

SAYE Share Option Scheme(1)

Options to acquire ordinary shares of 5486/91 US cents were outstanding under the terms of this scheme as follows:

At 31 December 2008
Year of grant Date exercisable Option price
per share £
Options
outstanding
1 Jan 2008
Options
granted
in year
Options
exercised
in year
Options
forfeited
in year
Options
outstanding
31 Dec 2008
2000 1 July 2007 to 31 December 2007 4.85 5,528 (5,528)
2001 1 July 2008 to 31 December 2008 8.45 36,294 (35,392) (32) 870
2002 1 September 2007 to 29 February 2008 9.23 2,648 (429) (2,219)
2002 1 September 2009 to 28 February 2010 9.23 24,738 (333) (56) 24,349
2003 1 September 2008 to 28 February 2009 7.52 152,728 (147,206) (1,333) 4,189
2003 1 September 2010 to 28 February 2011 7.52 40,908 40,908
2004 1 September 2007 to 29 February 2008 10.81 2,506 (2,089) (417)
2004 1 September 2009 to 28 February 2010 10.81 72,162 (1,441) (1,426) 69,295
2004 1 September 2011 to 29 February 2012 10.81 18,324 (195) 18,129
2005 1 September 2008 to 28 February 2009 10.15 275,727 (262,405) (5,589) 7,733
2005 1 September 2010 to 28 February 2011 10.15 254,714 (7,419) (9,924) 237,371
2005 1 September 2012 to 28 February 2013 10.15 48,059 (162) (4,837) 43,060
2006 1 September 2009 to 28 February 2010 17.97 208,452 (2,459) (36,051) 169,942
2006 1 September 2011 to 29 February 2012 17.97 122,114 (288) (16,688) 105,138
2006 1 September 2013 to 28 February 2014 17.97 34,021 (133) (5,189) 28,699
2007 1 September 2010 to 28 February 2011 21.42 178,172 (501) (40,556) 137,115
2007 1 September 2012 to 28 February 2013 21.42 86,324 (64) (14,174) 72,086
2007 1 September 2014 to 28 February 2015 21.42 36,918 (5,927) 30,991
2008 1 September 2011 to 29 February 2012 24.16 194,711 (26,486) 168,225
2008 1 September 2013 to 28 February 2014 24.16 76,937 (7,706) 69,231
2008 1 September 2015 to 29 February 2016 24.16 35,649 (3,271) 32,378
      1,600,337 307,297 (460,321) (187,604) 1,259,709
At 31 December 2007
Year of grant Date exercisable Option price per share £ Options outstanding 1 Jan 2007 Options granted
in year
Options exercised
in year
Options forfeited
in year
Options outstanding 31 Dec 2007
1999 1 September 2006 to 28 February 2007 6.38 1,728 (1,728)
2000 1 July 2007 to 31 December 2007 4.85 330,023 (324,172) (323) 5,528
2001 1 July 2006 to 31 December 2006 8.45 1,531 (319) (1,212)
2001 1 July 2008 to 31 December 2008 8.45 45,037 (7,792) (951) 36,294
2002 1 September 2007 to 29 February 2008 9.23 105,884 (102,187) (1,049) 2,648
2002 1 September 2009 to 28 February 2010 9.23 33,704 (7,544) (1,422) 24,738
2003 1 September 2006 to 28 February 2007 7.52 6,940 (5,776) (1,164)
2003 1 September 2008 to 28 February 2009 7.52 176,698 (16,963) (7,007) 152,728
2003 1 September 2010 to 28 February 2011 7.52 49,827 (6,488) (2,431) 40,908
2004 1 September 2007 to 29 February 2008 10.81 167,708 (160,787) (4,415) 2,506
2004 1 September 2009 to 28 February 2010 10.81 92,595 (9,239) (11,194) 72,162
2004 1 September 2011 to 29 February 2012 10.81 24,050 (1,588) (4,138) 18,324
2005 1 September 2008 to 28 February 2009 10.15 323,567 (22,208) (25,632) 275,727
2005 1 September 2010 to 28 February 2011 10.15 288,080 (8,936) (24,430) 254,714
2005 1 September 2012 to 28 February 2013 10.15 60,555 (4,079) (8,417) 48,059
2006 1 September 2009 to 28 February 2010 17.97 265,498 (9,868) (47,178) 208,452
2006 1 September 2011 to 29 February 2012 17.97 146,950 (2,911) (21,925) 122,114
2006 1 September 2013 to 28 February 2014 17.97 47,708 (1,798) (11,889) 34,021
2007 1 September 2010 to 28 February 2011 21.42 185,798 (65) (7,561) 178,172
2007 1 September 2012 to 28 February 2013 21.42 90,656 (4,332) 86,324
2007 1 September 2014 to 28 February 2015 21.42 39,262 (2,344) 36,918
      2,168,083 315,716 (694,448) (189,014) 1,600,337

Former AAC Executive Share Incentive Scheme(1)


At 31 December 2008
Year of grant Date exercisable Weighted average
option price
per share £
Options
outstanding
1 Jan 2008
Options
exercised
in year
Options
expired
in year
Options
outstanding
31 Dec 2008
1998 1 January 2000 to 4 December 2008 679,800 (587,560) (92,240)
1999 4 January 2001 to 4 January 2009 38,700 (33,900) (4,800)
      718,500 (621,460) (97,040)
At 31 December 2007
Year of grant Date exercisable Weighted average
option price
per share £
Options
outstanding
1 Jan 2007
Options
exercised
in year
Options
outstanding
31 Dec 2007
1990-1997 1 January 1999 to 15 December 2007 49,800 (49,800)
1998 1 January 2000 to 4 December 2008 3.37 2,636,080 (1,956,280) 679,800
1999 4 January 2001 to 4 January 2009 2.94 95,500 (56,800) 38,700
      2,781,380 (2,062,880) 718,500

Long Term Incentive Plan(1)(2)

Ordinary shares of 5486/91 US cents may be awarded for no consideration under the terms of this scheme. The number of shares outstanding is shown below:

At 31 December 2008
Year of grant Vesting date Shares outstanding 1 Jan 2008 Shares conditionally awarded
in year
Shares vested
in year
Shares forfeited
in year
Shares outstanding 31 Dec 2008
2005 2 April 2008 1,806,992 (1,563,495) (243,497)
2005 1 June 2008 61,993 (61,993)
2006 29 March 2009 1,423,723 (14,375) (207,316) 1,202,032
2007 23 March 2010 1,760,571 (5,526) (150,100) 1,604,945
2008 17 March 2011 1,623,929 (47,911) 1,576,018
2008 18 August 2011 83,200 83,200
    5,053,279 1,707,129 (1,645,389) (648,824) 4,466,195
At 31 December 2007
Year of grant Date exercisable/Vesting date Shares outstanding 1 Jan 2007 Shares conditionally awarded
in year
Shares vested
in year
Shares forfeited
in year
Shares expired
in year
Shares outstanding 31 Dec 2007
2003 11 April 2006 to 10 April 2007 118,901 (116,351) (2,550)
2004 25 March 2007 1,572,479 (738,356) (834,123)
2004 26 April 2007 170,323 (79,975) (90,348)
2004 1 September 2007 10,000 (10,000)
2005 2 April 2008 2,058,193 (233,001) (18,200) 1,806,992
2005 1 June 2008 61,993 61,993
2006 29 March 2009 1,492,252 (31,618) (36,911) 1,423,723
2007 23 March 2010 1,766,921 (6,350) 1,760,571
    5,484,141 1,766,921 (1,209,301) (985,932) (2,550) 5,053,279

Bonus Share Plan(3)

Ordinary shares of 5486/91 US cents may be awarded under the terms of this scheme for no consideration. The number of shares outstanding is shown below:

At 31 December 2008
Year of grant Performance period end date Shares outstanding 1 Jan 2008 Shares conditionally awarded
in year
Shares vested
in year
Shares forfeited
in year
Shares outstanding 31 Dec 2008
2004 31 December 2006 5,684 (5,684)
2005 31 December 2007 1,847,813 (1,709,848) (137,139) 826
2006 31 December 2008 1,424,558 (75,498) (78,916) 1,270,144
2007 31 December 2009 1,544,288 (54,786) (92,889) 1,396,613
2008 31 December 2010 1,701,688 (28,623) (50,614) 1,622,451
    4,822,343 1,701,688 (1,874,439) (359,558) 4,290,034
At 31 December 2007
Year of grant Performance period end date Shares outstanding 1 Jan 2007 Shares conditionally awarded
in year
Shares vested
in year
Shares forfeited
in year
Shares outstanding 31 Dec 2007
2004 31 December 2006 459,737 (454,053) 5,684
2005 31 December 2007 2,293,706 (381,423) (64,470) 1,847,813
2006 31 December 2008 1,815,462 (283,839) (107,065) 1,424,558
2007 31 December 2009 1,643,559 (81,808) (17,463) 1,544,288
    4,568,905 1,643,559 (1,201,123) (188,998) 4,822,343

Share Incentive Plan

Ordinary shares of 5486/91 US cents may be awarded under the terms of this scheme for no consideration. The number of shares outstanding is shown below:

  Awards outstanding at 31 Dec 2008 Awards outstanding at 31 Dec 2007 Latest release date
Share Incentive Plan 968,341 921,574 7 December 2011
(1)
The early exercise of share options is permitted at the discretion of the Company upon the termination of employment, ill health or death.
(2)
The LTIP awards are contingent on pre-established performance criteria being met. Further information in respect of this scheme is shown in the Remuneration report.
(3)
The BSP was approved by shareholders in 2004 as a replacement for the ESOS and the Deferred Bonus Plan. Further information in respect of the BSP, including performance conditions, is shown in the Remuneration report.

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