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Southern Africa Site visit - November 2016

Tax

The statements set out below are intended only as a general guide to current UK and South African tax law (in respect of the UK, as applied in England and Wales) and what is understood to be current practice as at 22 March 2011, both of which are subject to change, possibly with retrospective effect.

The comments relating to UK or South African resident shareholders apply only to shareholders of Anglo American plc (the “Company”) resident for tax purposes only in the UK or South Africa respectively (except where express reference is otherwise made) who hold ordinary shares in the Company (“Shares”) as an investment and who are the absolute beneficial owners of the Shares. Certain categories of shareholder, such as traders, broker-dealers, insurance companies, collective investment schemes and shareholders who have (or are deemed to have) acquired their shares by virtue of an office or employment, may be subject to special rules and this summary does not apply to such shareholders. If shareholders are in any doubt about their tax position, or are resident or otherwise subject to taxation in a jurisdiction other than the UK or South Africa, they should consult their own professional advisers.

The statements contained under the “UK resident shareholders” and “Non-UK resident shareholders” sections of the heading “Taxation of dividends and distributions” reflect the Company’s understanding of the correct interpretation of current UK tax law. However, there is currently some doubt as to whether HM Revenue & Customs (“HMRC”) agrees with this interpretation in relation to distributions made following a reduction of capital and other similar transactions. In such cases, there is a risk that HMRC may seek to argue, in relation to certain classes of shareholders, that such a distribution should not be taxed under the rules for income distributions, but is instead within the charge to tax on chargeable gains. In light of this uncertainty, shareholders are advised to consult their own professional advisers in relation to the implications of distributions from the Company.

Taxation of dividends and distributions

UK resident shareholders

This paragraph applies only to shareholders who receive dividends in pounds sterling and may not apply to shareholders who receive dividends in US dollars or euros.

The Company will not be required to withhold tax at source when paying a dividend.

Individual shareholders resident in the UK for tax purposes who receive a dividend from the Company will be entitled to a tax credit which such shareholders may set off against their total income tax liability on the dividend. The tax credit will be equal to 10% of the aggregate of the dividend and the tax credit (the gross dividend) which is also equal to one ninth of the cash dividend received. The tax credit will satisfy in full the liability of UK resident individual shareholders who are liable to income tax at the basic rate. UK resident individual shareholders who are not liable to income tax in respect of the gross dividend will not be entitled to repayment of the tax credit. In the case of a UK resident individual shareholder who is liable to income tax at the higher rate, the tax credit will be set against, but not fully match, such shareholder's tax liability on the gross dividend and he or she will have to account for additional income tax equal to 22.5% of the gross dividend (which is also equal to 25% of the cash dividend received) to the extent that the gross dividend, when treated as the top slice of his or her income, falls above the threshold for higher rate income tax. In the case of a UK resident individual shareholder who is subject to income tax at the additional rate, the tax credit will also be set against, but not fully match, the shareholder’s tax liability on the gross dividend and he or she will have to account for additional income tax equal to 32.5% of the gross dividend (which is also equal to approximately 36% of the cash dividend received) to the extent that the gross dividend, when treated as the top slice of the shareholder’s income, falls above the threshold for additional rate income tax.

UK resident taxpayers who are not liable to UK income tax on dividends, including pension funds and charities, will not be entitled to claim repayment of the tax credit attaching to dividends paid by the Company. Shareholders who are within the charge to corporation tax will be subject to corporation tax on dividends paid by the Company, unless (subject to special rules for such shareholders that are small companies) the dividends fall within an exempt class and certain other conditions are met. It is expected that the dividends paid by the Company would generally be exempt for such shareholders. Such shareholders will not be able to claim repayment of tax credits attaching to dividends.

Non-UK resident shareholders

Non-UK resident shareholders will not generally be able to claim repayment from HMRC of any part of the tax credit attaching to dividends paid by the Company. A shareholder resident outside the UK may also be subject to foreign taxation on dividend income under local law. A shareholder who is not resident in the UK (for tax purposes) should consult his or her own tax adviser concerning his or her tax liabilities on dividends received from the Company.

South African resident shareholders

A South African resident shareholder who is registered on the South African branch register is unlikely to be subject to South African income tax on any dividend from the Company under current income tax legislation. This is because such dividends are paid from South African reserves in terms of the Company's dividend access share arrangements, and such dividends do not fall within the definition of a foreign dividend in section 1 of the South African Income Tax Act, 1962 (Income Tax Act).Consequently, the general South African tax exemption for local (South African) dividends should apply. 

With effect from 1 April 2012, the secondary tax on companies regime will be replaced by a dividend tax (DT).  DT will be imposed on shareholders at the prevailing rate when dividends are paid.  The DT will be withheld by the company paying the dividend or by a regulated intermediary such as a transfer secretary or central securities depositary participant acting as a withholding agent. This will impact SA resident individual or trust shareholders, who will now suffer a tax charge on (i) dividends paid from South African reserves in terms of the Company's dividend access share arrangements or (ii) dividends paid  by the Company directly where the South African resident shareholder holds via the South African branch register.

DT will not apply to any dividend paid to a South African company or to any South African pension fund, provident fund, retirement annuity fund or other benefit fund which holds via the South African branch register, irrespective of how payment of the dividend is made. In these cases, the shareholders will generally be required to provide written declarations in the appropriate form to the regulated intermediaries making payment directly to them, to ensure that no DT is withheld from the dividend payments concerned.

Taxation of capital gains

UK resident shareholders

Shareholders who are resident or, in the case of individuals, ordinarily resident in the United Kingdom, or who cease to be resident or ordinarily resident in the United Kingdom for a period of less than five years of assessment, or individuals who carry on a trade, profession or vocation in the United Kingdom through a branch or agency, or companies which carry on a trade in the United Kingdom through a permanent establishment in the United Kingdom, in each case to which the shares are attributable, may depending on their circumstances (including the availability of exemptions or reliefs) be liable to United Kingdom taxation on chargeable gains in respect of gains arising from a sale or other disposal of Shares.

The UK tax rules governing the taxation of chargeable gains arising on the disposal of shares are complex and depend on the precise circumstances that apply in each case. It is not therefore possible to give individual advice to shareholders regarding their liability to United Kingdom taxation on chargeable gains. The amount of the liability will depend on a number of factors, the principal ones being the amount of actual or deemed disposal proceeds in respect of the shares, the amount of base cost in the shares, the amount of any indexation (for corporate shareholders only) and whether or not all or part of the holding is being disposed of. The following statements are intended as a general guide only to the calculation of a shareholder's base cost in Shares held by that shareholder, and is based on certain assumptions. Shareholders should consult their own professional advisers for further and more detailed information.

Where a shareholder holds Shares as a result of holding shares on 31 March 1982, for the purposes of United Kingdom taxation on chargeable gains, the base cost will normally be the market value of the shares as at 31 March 1982. Where a shareholder holds Shares as a result of an acquisition of shares after 31 March 1982, the base cost will normally be the acquisition cost of the shares. Shareholders who held Anglo American plc ordinary shares at 12.01am on 2 July 2007 (“Pre-Demerger Ordinary Shares”) will have received Shares, Mondi plc ordinary shares and Mondi Limited ordinary shares as a result of the demerger of the Mondi group, the Mondi plc reduction of capital, the Anglo American share consolidation and the Mondi plc share consolidation (together, the “Mondi Transactions”). The effect of the Mondi Transactions on shareholders' base cost is considered further below (see “Pre-Demerger Ordinary Shares held at 12.01am on 2 July 2007”).
The position of shareholders who acquired their Shares by virtue of holding shares in Minerals and Resources Corporation Limited, Minorco S.A. or Anglo American Corporation of South Africa Limited or by virtue of the De Beers transaction is considered below.

Pre-Demerger Ordinary Shares held at 12.01am on 2 July 2007
As a result of the Mondi Transactions, for every 100 Pre-Demerger Ordinary Shares held as at 12.01am on 2 July 2007, shareholders received (ignoring fractional entitlements) 91 Shares, 25 Mondi plc ordinary shares and 10 Mondi Limited ordinary shares.
The holders of Pre-Demerger Ordinary Shares at 12.01am on 2 July 2007 who, either alone, or together with persons connected with such holder, did not hold more than 5% of such shares, should not have been treated as making a disposal or part disposal of their Pre-Demerger Ordinary Shares for United Kingdom tax purposes as a consequence of the Mondi Transactions. Instead, such shareholders should have been treated as acquiring the Shares, the Mondi plc ordinary shares and the Mondi Limited shares for an aggregate amount equal to the amount for which their Pre-Demerger Ordinary Shares were acquired.

The base cost of a shareholder's holding in Pre-Demerger Ordinary Shares will therefore be apportioned between the Shares, the Mondi plc ordinary shares, and the Mondi Limited ordinary shares. HMRC have confirmed that an acceptable basis for making such apportionment in practice would be by reference to the opening quoted values of the Shares, the Mondi plc ordinary shares and the Mondi Limited ordinary shares on the first day of dealings in such shares.

The opening quoted values of these shares were such that a shareholder's base cost in the Shares would on that basis be approximately 94.25% of its original base cost in the Pre-Demerger Ordinary Shares (the exact percentage will depend on the amount of cash received by a shareholder in respect of fractional entitlements arising on the Mondi plc reduction of capital, the Mondi plc share consolidation and the Anglo American plc share consolidation and the stamp duty paid by Mondi plc in respect of the transfer of the Mondi Ltd ordinary shares pursuant to the Mondi plc reduction of capital).

This summary of the UK tax position on a disposal of Shares does not include any statement with regard to the tax position of shareholders in Mondi plc or Mondi Limited. Holders of such shares should, however, note that certain information regarding the base cost in these shares can be found in Related downloads.

Minorco and Minorco Bermuda
In 1988, the Directors of Minerals and Resources Corporation Limited (“Minorco Bermuda”) were advised that the exchange of Minorco Bermuda ordinary shares for Minorco S.A. (“Minorco”) ordinary shares should not constitute a disposal for the purposes of United Kingdom taxation of chargeable gains. The Minorco ordinary shares should effectively be treated as the same asset as the shares in Minorco Bermuda. In 1999, the holders of Minorco ordinary shares were advised that any holders who, either alone, or together with persons connected with such holder, did not hold more than 5% of Minorco ordinary shares, would not be treated as making a disposal for United Kingdom tax purposes as a consequence of receiving Anglo American plc ordinary shares in exchange for such Minorco ordinary shares. The Anglo American plc ordinary shares would effectively be treated as the same asset as the shares in Minorco.

On this basis, shareholders would have been treated as acquiring the Anglo American plc ordinary shares for an amount equal to the amount for which their Minorco ordinary shares were acquired (where the Minorco ordinary shares were acquired as a result of the exchange for Minorco Bermuda ordinary shares, this should be an amount equal to the amount for which their Minorco Bermuda ordinary shares were acquired).

The market value of a Minorco Bermuda ordinary share on 31 March 1982 was 344p per share (xd). On the above mentioned basis, ignoring the effects of indexation and fractional entitlements, for those shareholders who held Minorco Bermuda ordinary shares on 31 March 1982 and who participated in the share exchanges referred to above and in the three-for-one Bonus Issue in June 2001, the adjusted 31 March 1982 market value of an Anglo American plc ordinary share prior to the Mondi Transactions was 86p per share (to the nearest penny) (it is assumed that no other sales or purchases of the Minorco Bermuda, Minorco or Anglo American ordinary shares were made after 31 March 1982).
As discussed in further detail in “Pre-Demerger Ordinary Shares held at 12.01am on 2 July 2007” above, and on the basis set out there, a shareholder's total base cost in the Shares for the purposes of United Kingdom taxation of chargeable gains will be approximately 94.25% of its original base cost in the Anglo American plc ordinary shares (the Pre-Demerger Ordinary Shares). However, in consequence of the Anglo American plc share consolidation on 2 July 2007, the per share base cost of a shareholder will have increased (this is because the aggregate base cost of a shareholder's holding of shares will now be spread across 91 Shares rather than across the 100 Anglo American plc ordinary shares originally held).

Therefore, on the above mentioned basis (ignoring fractional entitlements), the adjusted 31 March 1982 market value of a Share acquired by virtue of a holding in Minorco Bermuda share will be 89p per share (to the nearest penny) (i.e. 94.25% of 86p x (100 ÷ 91)).

Anglo American Corporation of South Africa
The Company also acquired Anglo American Corporation of South Africa Limited (“AAC”) ordinary shares by way of a scheme of arrangement with effect from 24 May 1999. The holders of AAC ordinary shares who, either alone, or together with persons connected with such holder, did not hold more than 5% of the AAC ordinary shares, should not have been treated as making a disposal for the purposes of United Kingdom taxation of chargeable gains as a consequence of receiving Anglo American plc ordinary shares in exchange for such AAC ordinary shares. The Anglo American plc ordinary shares would effectively be treated as the same asset as the shares in AAC. On this basis, shareholders would have been treated as acquiring the Anglo American plc shares for an amount equal to the amount for which their AAC ordinary shares were acquired.

The market value of an AAC ordinary share on 31 March 1982 was 455p per share. On the above mentioned basis, ignoring the effects of indexation and fractional entitlements, for those shareholders who held AAC ordinary shares on 31 March 1982 and who participated in the share exchange referred to above and in the three-for-one Bonus Issue in June 2001, the adjusted 31 March 1982 market value of an Anglo American ordinary share prior to the Mondi Transactions was 114p per share (to the nearest penny) (it is assumed that no other sales or purchases of the AAC or Anglo American ordinary shares were made after 31 March 1982).

As discussed in further detail in “Pre-Demerger Ordinary Shares held at 12.01am on 2 July 2007” above, and on the basis set out there, a shareholder's total base cost in the Shares for the purposes of United Kingdom taxation of chargeable gains will be approximately 94.25% of its original base cost in the Anglo American plc ordinary shares (the Pre-Demerger Ordinary Shares). However, in consequence of the Anglo American plc share consolidation on 2 July 2007, the per share base cost of a shareholder will have increased (this is because the aggregate base cost of a shareholder's holding of shares will now be spread across 91 Shares rather than across the 100 Anglo American plc ordinary shares originally held).

Therefore, on the above mentioned basis (ignoring fractional entitlements), the adjusted 31 March 1982 market value of a Share acquired by virtue of a holding in AAC will be 118p per share (to the nearest penny) (i.e. 94.25% of 114p x (100 ÷ 91)).

De Beers
For those shareholders who became beneficial owners of Anglo American plc ordinary shares as a result of the De Beers Transaction(1) implemented on 8 June 2001 and who were and remain resident only in the UK for tax purposes and who held the De Beers linked units as an investment:
a) The acquisition price of an Anglo American plc ordinary share received as Scheme Consideration(2) was 1,165.5p per share; and
b) The acquisition price of an Anglo American plc ordinary share received under the Mix and Match election(2) was 1,099.5p per share.
As discussed in further detail in “Pre-Demerger Ordinary Shares held at 12.01am on 2 July 2007” above, a shareholder's base cost in the Shares for the purposes of United Kingdom taxation of chargeable gains will be approximately 94.25% of its original base cost in the Anglo American plc ordinary shares (the Pre-Demerger Ordinary Shares). However, in consequence of the Anglo American plc share consolidation on 2 July 2007, the per share base cost of a shareholder will have increased (this is because the aggregate base cost of a shareholder's holding of shares will now be spread across 91 Shares rather than across the 100 Anglo American plc ordinary shares originally held).

Therefore, on the above mentioned basis (ignoring fractional entitlements):

a) The adjusted acquisition price of an Anglo American plc ordinary share received as Scheme Consideration is 1,207p per share (to the nearest penny) (i.e. 94.25% of 1,165.5p x (100 ÷ 91)); and
b) The adjusted acquisition price of an Anglo American plc ordinary share received under the Mix and Match election was 1,139p per share (to the nearest penny) (i.e. 94.25% of 1,099.5p x (100 ÷ 91)).

South African resident shareholders

Shareholders will be liable to either CGT or income tax on any gains made on disposal of the shares purchased depending on their individual status (determined primarily by the intention with which they acquired their shares), the length of time they held the shares coupled with whether or not they have made or can make safe haven elections.
Section 9B of the Income Tax Act allows taxpayers to elect that the proceeds on the disposal of shares in listed companies be deemed to be of a capital nature, provided the shares in question are held for a continuous period of five years or more (Safe Haven Election). If a taxpayer has previously made such election with respect to any such listed shares held by him, that prior election automatically binds him in respect of the future disposal of listed shares. This provision only applies to disposals of listed shares prior to 1 October 2007.

During 2007 Section 9C was introduced and applies to any disposal of qualifying shares (which includes listed shares and unlisted SA resident shares) on or after 1 October 2007. In terms of section 9C the disposal of qualifying shares held for a period of three years prior to the date of disposal is deemed to be of a capital nature. Although section 9C departs from the election period of five years introduced by section 9B it does not alter the general principles.

If a shareholder has disposed of the shares, having held them for less than three years, then the treatment of any gain arising on the disposal of the Shares will be determined by reference to the individual circumstances of the taxpayer, and depending on the circumstances may be subject to income tax or CGT.

South Africa introduced CGT with effect from 1 October 2001 and it applies to any incremental growth in the value of assets from this date on the disposal of the assets. All South African residents are subject to CGT. The base cost of an Anglo American ordinary share held by a shareholder for CGT purposes on 1 October 2001 as determined by the tax authorities was R99.88 per ordinary share. This cost may not necessarily be the cost to use to determine any capital gain or loss as there are other methods which may be applicable in particular circumstances.

(1)The De Beers transaction was the recommended offer by DB Investments dated 10 April 2001 (as amended on 30 April 2001) to holders of De Beers linked units which was implemented on 8 June 2001.
(2)These terms are as defined in the DB Investments offer document dated 10 April 2001.

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