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Directors’ report

The directors have pleasure in submitting the statutory financial statements of the Group for the year ended 31 December 2008.

Principal activities and business review

Anglo American plc is one of the world’s largest mining and natural resource groups. With its subsidiaries, joint ventures and associates, it is a global leader in platinum group metals and diamonds, with significant interests in coal, base and ferrous metals, as well as an industrial minerals business and a stake in AngloGold Ashanti. The Group is geographically diverse with operations in Africa, Europe, South and North America, Australia and Asia.

More detailed information about the Group’s businesses, activities and financial performance is incorporated into this report by reference and can be found in the Chairman’s and Chief executive’s statements and the Operating and financial review.

Going concern

The financial position of the Group, its cash flows, liquidity position and borrowing facilities are set out in the Group financial performance review of Group results. In addition, detail is given on the Group’s policy on managing credit and liquidity risk in the Principal risks and uncertainties section, with details of our policy on capital risk management being set out in note 24 to the financial statements. The Group’s gross debt at the 2008 year end was $14.0 billion. The gearing level was 37.8%. Details of borrowings and facilities are set out in notes 23 and 24 and net debt is set out in note 30.

Over the last 12 months, Anglo American has issued medium and long term debt in the euro and sterling bond markets, in addition to arranging new bank financing in both Europe and South Africa. At 31 December 2008, Anglo American had undrawn bank facilities of $6.1 billion, cash deposits of $2.7 billion and commercial paper maturing throughout 2009 of $1.1 billion. Anglo American’s only significant debt facility maturing in the next year is a $3 billion revolving bank facility (of which $1.1 billion was drawn at 31 December 2008) which matures in December 2009. In addition, a £300 million (approximately $500 million) euro bond matures in December 2010. With respect to the $3 billion facility, the intention is to refinance part or all of the facility, subject to requirements, taking into consideration proceeds from disposal of assets and cash flow from operations, using a variety of sources which may include the issue of public bonds in the European and US markets and new bank facilities.

The directors have considered the Group’s cash flow forecasts for the period to the end of March 2010. The Board is satisfied that the Group’s forecasts and projections, taking account of reasonably possible changes in trading performance and the intended refinancing of the facility above, show that the Group will be able to operate within the level of its current facilities for the foreseeable future. For this reason the Group continues to adopt the going concern basis (as interpreted by the Guidance on Going Concern and Financial Reporting for directors of listed companies registered in the UK, published in November 1994) in preparing its financial statements.

Dividends

An interim dividend of 44 US cents per ordinary share was paid on 18 September 2008. With no final dividend for the year, the total dividend for the year will therefore be 44 US cents per ordinary share.

Two shareholders have waived their rights to receive dividends. In both cases, these shareholders act as trustees/nominees holding shares for use solely in relation to the Group’s employee share plans. These shareholders and the value of dividends waived during the year were:

Greenwood Nominees Limited: $9,443,818.26
Security Nominees Limited: $35,357.26

Share capital

The Company’s authorised and issued share capital as at 31 December 2008, together with details of share allotments and purchases of own shares during the year, is set out in note 28.

The Company was authorised by shareholders at the AGM held on 15 April 2008 to purchase its own shares in the market up to a maximum of 14.99% of the issued share capital. This authority will expire at the 2009 AGM and in accordance with usual practice a resolution to renew it for another year will be proposed.

Material shareholdings

Details of interests of 3% or more in the ordinary share capital of the Company are shown within the Shareholder information section of the Notice of Meeting booklet.

Directors

Biographical details of the directors currently serving on the Board are given in The Board. Details of directors’ interests in shares and share options of the Company can be found in the Remuneration report.

Sir CK Chow was appointed to the Board at the AGM on 15 April 2008. Bobby Godsell retired from the Board at the conclusion of the AGM on 15 April 2008.

Sustainable development

The Report to Society 2008 will be available from the Company in April. This report focuses on the safety, sustainable development, health and environmental performance of the Group’s managed operations, their performance with regard to the Company’s Good Citizenship:

Our Business Principles, and the operational dimensions of their social programmes.

Payment of suppliers

Anglo American plc is a holding company and, as such, has no material trade creditors.

Businesses across the Group are responsible for agreeing the terms under which transactions with their suppliers are conducted, reflecting local and industry norms and group purchasing arrangements which may have been made with a supplier. The Group values its suppliers and recognises the benefits to be derived from maintaining good relationships with them. Anglo American acknowledges the importance of paying invoices, especially those of small businesses, promptly.

Value of land

Land is mainly carried in the financial statements at cost. It is not practicable to estimate the market value of land and mineral rights, since these depend on product prices over the next 20 years or more, which will vary with market conditions.

Post-balance sheet events

Post-balance sheet events are set out in note 41 to the financial statements.

Audit information

The directors confirm that, so far as they are aware, there is no relevant audit information of which the auditors are unaware and that all directors have taken all reasonable steps to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

Employment and other policies

The Group’s key operating businesses are empowered to manage, within the context of their own industry and the different legislative and social demands of the diverse countries in which those businesses operate, subject to the standards embodied in Anglo American’s Good Citizenship: Our Business Principles.

Within all the Group’s businesses, the safe and effective performance of employees and the maintenance of positive employee relations are of fundamental importance. Managers are charged with ensuring that the following key principles are upheld:

  • adherence to national legal standards on employment and workplace rights at all times;
  • adoption of fair labour practices;
  • prohibition of child labour;
  • prohibition of inhumane treatment of employees and any form of forced labour, physical punishment or other abuse;
  • continual promotion of safe and healthy working practices;
  • promotion of workplace equality and elimination of all forms of unfair discrimination;
  • provision of opportunities for employees to enhance their work-related skills and capabilities;
  • recognition of the right of our employees to freedom of association; and
  • adoption of fair and appropriate procedures for determining terms and conditions of employment.

Further, the Group is committed to treating employees at all levels with respect and consideration, to investing in their development and to ensuring that their careers are not constrained by discrimination or arbitrary barriers.

Copies of the Good Citizenship: Our Business Principles booklet are available from the Company and may be accessed on the Company’s website www.angloamerican.co.uk

As in previous years, numerous employee communication presentations and workshops took place at Group level, including a series of 70 workshops worldwide to embed the Group’s six core values, the training of more than 400 managers on the implementation of the Socio-Economic Assessment Toolbox and three management development programmes. The Group has a well-used enterprise information portal, theSource, which seeks to ensure that employees are regularly updated on developments within the Group, and feedback is encouraged.

In addition, the Company regularly publishes Optima (available on the Company’s website) and AngloWorld, which contain items of news, current affairs and information relevant to Group employees.

Charitable donations

During the year, Anglo American and its subsidiaries made donations for charitable purposes or wider social investments amounting to $76.2 million (1.11% of pre-tax profit of subsidiaries and joint ventures). Charitable donations of $4.7 million were made in the UK, consisting of payments in respect of education, sport and youth $0.9 million (19.1%); community development $1.9 million (40.4%); health and HIV/AIDS $0.4 million (8.5%); environment $0.1 million (2.1%); arts, culture and heritage $0.3 million (6.4%), and other charitable causes $1.1 million (23.5%). These figures were compiled with reference to the London Benchmarking Group model for defining and measuring social investment spending. A fuller analysis of the Group’s social investment activities can be found in the Report to Society 2008.

Political donations

No political donations were made during 2008. Anglo American has an established policy of not making donations to, or incurring expenses for the benefit of, any political party in any part of the world, including any political party or political organisation as defined in the Political Parties, Elections and Referendums Act 2000.

Annual General Meeting

The AGM will be held on 15 April 2009. A separate booklet enclosed with this report contains the notice convening the meeting together with a description of the business to be conducted.

Additional information for shareholders

Set out below is a summary of certain provisions of the Company’s current Articles of Association (the Articles) and applicable English law concerning companies (the Companies Act 1985 and the Companies Act 2006, together the Companies Acts) required as a result of the implementation of the Takeovers Directive in English law. This is a summary only and the relevant provisions of the Articles or the Companies Acts should be consulted if further information is required.

Dividends and distributions

Subject to the provisions of the Companies Acts, the Company may by ordinary resolution from time to time declare dividends not exceeding the amount recommended by the Board. The Board may pay interim dividends whenever the financial position of the Company, in the opinion of the Board, justifies such payment.

The Board may withhold payment of all or any part of any dividends or other monies payable in respect of the Company’s shares from a person with a 0.25% interest or more (as defined in the Articles) if such a person has been served with a notice after failing to provide the Company with information concerning interests in those shares required to be provided under the Companies Acts.

Rights and obligations attaching to shares

The rights and obligations attaching to the ordinary and preference shares are set out in the Articles. The Articles may only be changed by the shareholders by special resolution.

Voting

Subject to the Articles generally and to any special rights or restrictions as to voting attached by or in accordance with the Articles to any class of shares, on a show of hands every member who is present in person at a general meeting shall have one vote and, on a poll, every member who is present in person or by proxy shall have one vote for every share of which he/she is the holder. It is, and has been for some years, the Company’s practice to hold a poll on every resolution at Annual and Extraordinary shareholder meetings.

Where shares are held by trustees/ nominees in respect of the Group’s employee share plans and the voting rights attached to such shares are not directly exercisable by the employees, it is the Company’s practice that such rights are not exercised by the relevant trustee/nominee.

Under the Companies Acts, members are entitled to appoint a proxy, who need not be a member of the Company, to exercise all or any of their rights to attend and to speak and vote on their behalf at a general meeting or class meeting. A member may appoint more than one proxy in relation to a general meeting or class meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that member. A member that is a corporation may appoint one or more individuals to act on its behalf at a general meeting or class meetings as a corporate representative.

The Company is aware of the debate concerning section 323 of the Companies Act 2006, related to the voting rights of corporate representatives. Anglo American is committed to ensuring all investors have the opportunity to exercise their voting rights and, to this end, has adopted the guidance issued by the Institute of Chartered Secretaries and Administrators (available at www.icsa.org.uk).

Restrictions on voting

No member shall, unless the directors otherwise determine, be entitled in respect of any share held by him/her to vote either personally or by proxy at a shareholders’ meeting or to exercise any other right conferred by membership in relation to shareholders’ meetings if any call or other sum presently payable by him/her to the Company in respect of that share remains unpaid. In addition, no member shall be entitled to vote if he/she has been served with a notice after failing to provide the Company with information concerning interests in those shares required to be provided under the Companies Acts.

Issue of shares

Subject to the provisions of the Companies Acts relating to authority and pre-emption rights and of any resolution of the Company in a general meeting, all unissued shares of the Company shall be at the disposal of the directors and they may allot (with or without conferring a right of renunciation), grant options over or otherwise dispose of them to such persons, at such times and on such terms as they think proper.

Shares in uncertificated form

Directors may determine that any class of shares may be held in uncertificated form and title to such shares may be transferred by means of a relevant system or that shares of any class should cease to be held and transferred. Subject to the provisions of the Companies Acts, the CREST Regulations and every other statute, statutory instrument, regulation or order for the time being in force concerning companies and affecting the Company (together, the Statutes), the directors may determine that any class of shares held on the branch register of members of the Company resident in South Africa or any other overseas branch register of the members of the Company may be held in uncertificated form in accordance with any system outside the UK which enables title to such shares to be evidenced and transferred without a written instrument and which is a relevant system. The provisions of the Articles shall not apply to shares of any class which are in uncertificated form to the extent that the Articles are inconsistent with the holding of shares of that class in uncertificated form, the transfer of title to shares of that class by means of a relevant system or any provision of the CREST Regulations.

Deadlines for exercising voting rights

Votes are exercisable at a General Meeting of the Company in respect of which the business being voted upon is being heard. Votes may be exercised in person, by proxy, or in relation to corporate members, by corporate representative. The Articles provide a deadline for submission of proxy forms of not than less than 48 hours before the time appointed for the holding of the meeting or adjourned meeting.

Variation of rights

Subject to statute, the Articles specify that rights attached to any class of shares may be varied with the written consent of the holders of not less than three-quarters in nominal value of the issued shares of that class, or with the sanction of an extraordinary resolution passed at a separate General Meeting of the holders of those shares. At every such separate General Meeting the quorum shall be two persons holding or representing by proxy at least one-third in nominal value of the issued shares of the class (calculated excluding any shares held as treasury shares). The rights conferred upon the holders of any shares shall not, unless otherwise expressly provided in the rights attaching to those shares, be deemed to be varied by the creation or issue of further shares ranking pari passu with them.

Transfer of shares

All transfers of shares which are in certificated form may be effected by transfer in writing in any usual or common form or in any other form acceptable to the directors and may be under hand only. The instrument of transfer shall be signed by or on behalf of the transferor and (except in the case of fully-paid shares) by or on behalf of the transferee. The transferor shall remain the holder of the shares concerned until the name of the transferee is entered in the register. All transfers of shares which are in uncertificated form may be effected by means of the CREST system.

The directors may decline to recognise any instrument of transfer relating to shares in certificated form unless it:

(a) is in respect of only one class of share; and

(b) is lodged at the transfer office (duly stamped if required) accompanied by the relevant share certificate(s) and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer (and, if the instrument of transfer is executed by some other person on his/her behalf, the authority of that person so to do).

The directors may, in the case of shares in certificated form, in their absolute discretion and without assigning any reason therefor, refuse to register any transfer of shares (not being fully-paid shares) provided that, where any such shares are admitted to the Official List of the London Stock Exchange, such discretion may not be exercised in such a way as to prevent dealings in the shares of that class from taking place on an open and proper basis. The directors may also refuse to register an allotment or transfer of shares (whether fully paid or not) in favour of more than four persons jointly.

If the directors refuse to register an allotment or transfer, they shall send within two months after the date on which the letter of allotment or transfer was lodged with the Company, to the allottee or transferee, notice of the refusal.

A shareholder does not need to obtain the approval of the Company, or of other shareholders of shares in the Company, for a transfer of shares to take place.

Directors

Directors shall not be less than ten nor more than 18 in number. A director is not required to hold any shares of the Company by way of qualification. The Company may by ordinary resolution increase or reduce the maximum or minimum number of directors.

Powers of directors

Subject to the Articles, the Companies Acts and any directions given by special resolution, the business of the Company will be managed by the Board who may exercise all the powers of the Company.

The Board may exercise all the powers of the Company to borrow money and to mortgage or charge any of its undertaking, property and uncalled capital and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

The Company may by ordinary resolution declare dividends but no dividend shall be payable in excess of the amount recommended by the directors. Subject to the provisions of the Articles and to the rights attaching to any shares, any dividends or other monies payable on or in respect of a share may be paid in such currency as the directors may determine. The directors may deduct from any dividend payable to any member all sums of money (if any) presently payable by him/her to the Company on account of calls or otherwise in relation to shares of the Company. The directors may retain any dividends payable on shares on which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists.

Appointment of directors

The directors may from time to time appoint one or more directors.

The Board may appoint any person to be a director (so long as the total number of directors does not exceed the limit prescribed in the Articles). Any such director shall hold office only until the next AGM and shall then be eligible for election.

Retirement of directors

At each AGM all those directors who have been in office for three years or more since their election or last re-election shall retire from office. In addition, a director may at any AGM retire from office and stand for re-election. In accordance with the Combined Code, any director who has served more than three three-year terms is subject to annual re-election.

Significant agreements: Change of control

At 31 December 2008, Anglo American had committed bilateral and syndicated borrowing facilities totalling $15.7 billion with a number of relationship banks and a rand 20 billion South African Medium Term Note Programme which contain change of control clauses. In aggregate, these facilities are considered significant to the Group and in the event of a takeover (change of control) of the Company, these contracts may be cancelled, become immediately payable or be subject to acceleration.

In the event of a change of control, employee share plans would be affected.

No other agreements that take effect, alter or terminate on a change of control of the Company are considered significant in terms of the potential impact on the Group as a whole.

Purchases of own shares

At the AGM held on 15 April 2008, authority was given for the Company to purchase, in the market, up to 198 million Ordinary Shares of 5486/91 US cents each. Details of purchases made during the year are set out in note 28.

Indemnities

To the extent permitted by law and the Articles the Company has made qualifying third party indemnity provisions for the benefit of its directors during the year and which remain in force at the date of this report.

By order of the Board

Nicholas Jordan

Company Secretary
19 February 2009

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