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Notes to the financial statements

38. Related party transactions

The Group has a related party relationship with its subsidiaries, joint ventures and associates (see note 39).

The Company and its subsidiaries, in the ordinary course of business, enter into various sales, purchase and service transactions with joint ventures and associates and others in which the Group has a material interest. These transactions are under terms that are no less favourable than those arranged with third parties. These transactions are not considered to be significant.

Dividends received from associates during the year totalled $616 million (2008: $609 million), as disclosed in the Consolidated cash flow statement.

At 31 December 2009 the Group had provided loans to joint ventures of $93 million (2008: $20 million). These loans are included in financial asset investments.

At 31 December 2009 the directors of the Company and their immediate relatives controlled 3% (2008: 3%) of the voting shares of the Company.

Remuneration and benefits received by directors are disclosed in the directors' remuneration report. Remuneration and benefits of key management personnel including directors are given in note 6.

Information relating to pension fund arrangements is disclosed in note 27.

Related party transactions with De Beers

At 31 December 2009 the Group held $88 million (2008: $88 million) of 10% non-cumulative redeemable preference shares in DB Investments, the holding company of De Beers Société Anonyme.

Set out below are details of certain transactions and arrangements entered into by the Group with, or for the benefit of, certain related parties of the Company for the purposes of the United Kingdom Listing Authority Listing rules, being Central Holdings Limited (and certain of its subsidiaries, together 'CHL') and DB Investments SA and De Beers SA (together, 'De Beers') which are related parties for the purposes of such rules by virtue of being companies in which Mr N.F. Oppenheimer, a director of the Company, has a relevant interest for the purposes of such rules.

It was agreed that the dividends declared by De Beers to the Group and the other shareholders in De Beers (including CHL) would be exchanged for loan obligations. The total amount of dividends exchanged amounted to $118 million in the year ended 31 December 2008. This total has increased during 2009 by $24 million. The loans are subordinated and are interest free for two years at which point they become interest bearing in line with market rates at the dates of the initial reinvestment.

In April 2009 the shareholders of De Beers provided an additional loan to De Beers, proportionate to their shareholdings, totalling $500 million. Anglo American holds a 45% interest and therefore provided a loan of $225 million. The loan is interest free for two years, at which point it reverts to a rate of interest equal to LIBOR plus 700 basis points until April 2016 and then, provided all interest payments are up to date, reduces to LIBOR plus 300 basis points. In the event of a rights issue or other share issue by De Beers, the Group would have the option to apply amounts outstanding under the loan in subscribing for ordinary shares in De Beers at the issue price applicable to the relevant share issue, which will be determined at the time of the relevant issue. The loan is subordinated in favour of third party banks/lenders and preference shareholders (including Anglo American) and is repayable after ten years. These loans are included in financial asset investments.

In February 2010 the shareholders of De Beers agreed, as part of the De Beers group's refinancing, including third party debt refinancing, that additional equity was required by De Beers. The shareholders of De Beers (including CHL) have accordingly all agreed to subscribe, in proportion to their current shareholding, for $1 billion of additional equity in De Beers, subject to the fulfilment of certain conditions. The Group's share of such additional equity, in line with its equity holding in De Beers, amounts to $450 million. CHL's share of such additional equity, in line with its equity holding in De Beers, amounts to $400 million. The shareholders have further agreed that the subscription does not constitute a subscription event under the 2009 arrangements.

Pursuant to the refinancing of De Beers and to satisfy the requirements of the lenders to De Beers, the shareholders of De Beers, including the Group, have, as applicable, agreed to:

(i)
defer the receipt of dividends or capital on their ordinary shares until certain financial tests ('Normalisation') are met and this is currently anticipated to be during 2011;
(ii)
defer the receipt of dividends and mandatory redemption under the preference shares in De Beers SA until Normalisation. The total amount deferred by Anglo American is approximately $96.5 million. The dividends (or interest in respect of such dividends) will continue to accrue on the preference shares until they are paid and the preference shares redeemed; and
(iii)
enter into an agreement which effectively formalises, in favour of the lenders to De Beers, the deferral of the rights to dividends or other distributions in respect of their respective ordinary shares, and, as applicable, preference shares and payments under the shareholder loans, until Normalisation; and the subordination thereof.

As part of the process of facilitating the agreed equity subscription by all the shareholders of De Beers, a temporary re-ranking of distribution rights was agreed which will result, following Normalisation, in a $20 million distribution to the shareholders of De Beers (including the Group and CHL), pro rata to their individual equity subscriptions as referred to above, which will be paid in priority to existing preferences on distributions under the terms of the preference shares in De Beers. The net effect of this re-prioritisation on Anglo American, in the event of there being insufficient cash to pay all dividends then due, is a deferral of approximately $8 million of dividends, which will continue to accrue interest until paid.

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Annual Report 2009