Anglo American Annual Report 2012

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FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS29. CALLED-UP SHARE CAPITAL AND SHARE-BASED PAYMENTS continuedIn 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, orcredited 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 (2011: nil).Own sharesNumber of ordinary shares of 54 86 /91 US cents 2012 2011Own sharesTreasury shares 14,505,120 19,538,911Own shares held by subsidiaries and employee benefit trusts 115,970,790 115,226,079Total own shares 130,475,910 134,764,990The movement in treasury shares during the year is as follows:Number of ordinary shares of 54 86 /91 US cents 2012 2011Treasury sharesAt 1 January 19,538,911 22,880,468Transferred to employees in settlement of share awards (5,033,791) (3,341,557)At 31 December 14,505,120 19,538,911TenonTenon Investment Holdings (Pty) Limited (Tenon), a wholly owned subsidiary of Anglo American South Africa Limited (AASA), has entered into agreementswith Epoch Investment Holdings Limited (Epoch), Epoch Two Investment Holdings Limited (Epoch Two) and Tarl Investment Holdings Limited (Tarl)(collectively the Investment Companies), each owned by independent charitable trusts whose trustees are independent of the Group. Under the terms of theseagreements, the Investment Companies have purchased Anglo American plc shares on the market and have granted to Tenon the right to nominate a thirdparty (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 themarket. Tenon paid the Investment Companies 80% of the cost of the Anglo American plc shares including associated costs for this right to nominate, whichtogether with subscriptions by Tenon for non-voting participating redeemable preference shares in the Investment Companies, provided all the fundingrequired to acquire the Anglo American plc shares through the market. These payments by Tenon were sourced from the cash resources of AASA. Tenon isable to exercise its right of nomination at any time up to 31 December 2025 against payment of an average amount of $6.41 per share to Epoch, $9.96 pershare to Epoch Two and $8.27 per share to Tarl which will be equal to 20% of the total costs respectively incurred by Epoch, Epoch Two and Tarl in purchasingshares nominated for transfer to the third party. These funds will then become available for redemption of the preference shares issued by the InvestmentCompanies. 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 ofIAS 32, any resulting gain or loss recorded by Tenon will not be recognised in the Consolidated 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 on 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 aftertax 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 ofEpoch and 85% of the profit after tax of Epoch Two and Tarl. Any remaining distributable earnings in the Investment Companies, after the above dividends, arethen 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 2012 the Investment Companies together held 112,300,129 (2011: 112,300,129) Anglo American plc shares, which represented 8.1%(2011: 8.5%) of the ordinary shares in issue (excluding treasury shares) with a market value of $3,455 million (2011: $4,125 million). The InvestmentCompanies 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 InvestmentCompanies continue to meet the accounting definition of a subsidiary in accordance with IAS 27. As a result, the Investment Companies are consolidated inaccordance with the definitions of IAS 27 and the principles set out in SIC-12.Employee benefit trustThe provision of shares to certain of the Company’s share option and share incentive schemes may be facilitated by an employee benefit trust or settled bythe issue of treasury shares. During 2012 no shares (2011: nil) from the trust were transferred to employees in settlement of share awards. The employeebenefit trust has waived the right to receive dividends on these shares.The market value of the 985 shares (2011: 985 shares) held by the trust at 31 December 2012 was $30,000 (2011: $36,000).The costs of operating the trust are borne by the Group but are not material.Share-based paymentsDuring the year ended 31 December 2012 the Group had share-based payment arrangements with employees relating to shares of the Company, the detailsof which are described in the Remuneration report. All of these Company schemes are equity settled, either by award of ordinary shares (BSP, LTIP and SIP)or award of options to acquire ordinary shares (ESOS, DOP and SAYE). The ESOS is now closed to new participants, having been replaced with the BSP. TheDOP has since replaced the ESOS for use in special circumstances, relating to the recruitment or retention of key executives. No options have been grantedunder the DOP.178 Anglo American plc Annual Report 2012
29. CALLED-UP SHARE CAPITAL AND SHARE-BASED PAYMENTS continuedThe total share-based payment charge relating to Anglo American plc shares for the year is split as follows:US$ million 2012 2011BSP 103 92LTIP 46 36Other schemes 8 15Share-based payment charge relating to Anglo American plc shares (1) 157 143(1)In addition, there are equity settled employee share-based payment charges of $89 million (2011: $47 million) relating to Kumba Iron Ore Limited shares and $72 million (2011: $72 million)relating to Anglo American Platinum Limited shares. Certain business units also operate cash settled employee share-based payment schemes. These schemes had a net charge of $3 million(2011: credit of $2 million).Schemes settled by award of ordinary sharesThe fair value of ordinary shares awarded under the BSP, LTIP and LTIP – AOSC, being the more material share schemes, was calculated using a BlackScholes model. The fair value of shares awarded under the LTIP – TSR scheme was calculated using a Monte Carlo model. The assumptions used in thesecalculations are set out below:2012 2011Arrangement (1) BSP LTIP LTIP – AOSC LTIP – TSR BSP LTIP LTIP – AOSC LTIP – TSRDate of grant 02/03/12 02/03/12 02/03/12 02/03/12 04/03/11 04/03/11 04/03/11 04/03/11Number of instruments 4,579,741 1,044,808 329,665 329,665 3,364,610 879,630 267,407 267,407Share price at the date of grant (£) 26.41 26.41 26.41 26.41 32.08 31.99 31.99 31.99Contractual life (years) 3 3 3 3 3 3 3 3Vesting conditions(2) (3) (4) (5) (2) (3) (4) (5)Expected volatility 40% 40% 40% 40% 40% 40% 40% 40%Risk free interest rate 0.5% 0.5% 0.5% 0.5% 1.9% 1.9% 1.9% 1.9%Expected departures 5% pa 5% pa 5% pa 5% pa 5% pa 5% pa 5% pa 5% paExpected outcome of meeting performancecriteria (at date of grant) 100% 100% 100% n/a 100% 100% 100% n/aFair value at date of grant (weightedaverage) (£) 25.78 26.41 26.41 15.24 33.25 33.25 33.25 21.80(1)The number of instruments used in the fair value models may differ from the total number of instruments awarded in the year due to awards made subsequent to the fair value calculations. Thefair 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)Three years of continuous employment with enhancement shares having variable vesting based on non-market based performance conditions.(3)Three years of continuous employment.(4)Variable vesting dependent on three years of continuous employment and Group AOSC target being achieved.(5)Variable vesting dependent on three years of continuous employment and market based performance conditions being achieved.The expected volatility is based on historic volatility over the last five years. The risk free interest rate is the yield on zero-coupon UK government bonds witha term similar to the expected life of the award.The charges arising in respect of the other Anglo American plc employee share schemes that the Group operated during the year are not considered material.The movements in the number of shares for the more significant share-based payment arrangements are as follows:Financial statementsBonus Share Plan (1)Ordinary shares of 54 86 /91 US cents may be awarded under the terms of this scheme for no consideration.2012 2011Outstanding at 1 January 10,106,373 9,020,260Conditionally awarded in year 4,579,239 3,366,076Vested in year (4,264,598) (1,052,193)Forfeited in year (764,181) (1,227,770)Outstanding at 31 December 9,656,833 10,106,373(1)The BSP was approved by shareholders in 2004 as a replacement for the ESOS. Further information in respect of the BSP, including performance conditions, is shown in the Remuneration report.Long Term Incentive Plan (1)(2)Ordinary shares of 54 86 /91 US cents may be awarded under the terms of this scheme for no consideration.2012 2011Outstanding at 1 January 3,720,535 4,012,568Conditionally awarded in year 1,704,138 1,414,444Vested in year (1,060,822) (730,807)Forfeited in year (378,080) (975,670)Outstanding at 31 December 3,985,771 3,720,535(1)The early vesting of share awards is permitted at the discretion of the Company upon, inter alia, 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.Share Incentive PlanOrdinary shares of 54 86 /91 US cents may be awarded under the terms of this scheme for no consideration.Awards outstanding atAwards outstanding at31 December 201231 December 2011 Latest release dateShare Incentive Plan 1,115,426 1,016,074 7 December 2015Anglo American plc Annual Report 2012 179
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A BALANCEDPORTFOLIOWITH THE FUTURE
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HeadquartersLondon,United KingdomCo
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OVERVIEW CHAIRMAN’S STATEMENTCHAI
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Anglo American plc20 Carlton House
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