IMPORTANT INFORMATION FOR OWNERS OF
RIO TINTO SHAREHOLDERS
Organisational structure
The Rio Tinto Group consists of Rio Tinto plc, which is registered in England and Wales under company number 719885, and is listed on the London Stock Exchange, and Rio Tinto Limited, which is registered in Australia under ABN 96 004 458 404, and is listed on the Australian Securities Exchange. Rio Tinto is headquartered in London and has executive offices in Melbourne.
Rio Tinto plc has a sponsored ADR facility and the underlying shares are registered with the US Securities and Exchange Commission and are listed on the New York Stock Exchange.
Nomenclature and financial data
Rio Tinto plc and Rio Tinto Limited operate together and are referred to in this report as Rio Tinto, the Rio Tinto Group or, more simply, the Group. These collective expressions are used for convenience only, since both Companies, and the individual companies in which they directly or indirectly own investments, are separate and distinct legal entities.
“Limited”, “plc”, “Pty”, “Inc.”, “Limitada”, “L.L.C.”, “A.S.” or “SA” have generally been omitted from Group company names, except to distinguish between Rio Tinto plc and Rio Tinto Limited. Financial data in US dollars (US$) is derived from, and should be read in conjunction with, the 2013 financial statements. In general, financial data in pounds sterling (£) and Australian dollars (A$) have been translated from the consolidated financial statements and have been provided solely for convenience; exceptions arise where data can be extracted directly from source records. Certain key information has been provided in all three currencies in the 2013 financial statements.
History
Rio Tinto plc was incorporated on 30 March 1962 (then called The Rio Tinto-Zinc Corporation Limited (RTZ)) and was formed by the merger of The Rio Tinto Company and The Consolidated Zinc Corporation. The Rio Tinto Company was incorporated in 1873 to reopen ancient copper workings in Spain. The Consolidated Zinc Corporation’s origins trace back to the Australian mining industry in the early twentieth century. Operating out of Broken Hill in New South Wales, it came to prominence with the mining of silver, lead and zinc deposits and later expanded into lead and zinc smelting.
Rio Tinto Limited was incorporated on 17 December 1959 (then called The Rio Tinto Mining Company of Australia Limited) and in 1962 the Australian interests of Consolidated Zinc Corporation and the Rio Tinto Company Limited of the United Kingdom were merged to form Conzinc Riotinto of Australia Limited as a limited liability company under the laws of the State of Victoria, Australia. In 1980, Conzinc Riotinto of Australia Limited changed its name to CRA Limited.
Between 1962 and 1995, both RTZ and CRA discovered important mineral deposits, developed major mining projects and also grew through acquisition.
RTZ and CRA began operating in 1995 through a dual listed companies structure. In 1997, the RTZ Corporation became Rio Tinto plc and CRA Limited became Rio Tinto Limited, together known as the Rio Tinto Group.
In 2007, Rio Tinto completed an agreed takeover of the Canadian aluminium producer Alcan Inc.
Dual listed companies structure
In 1995, Rio Tinto shareholders approved the terms of the dual listed companies merger (the DLC structure) which was designed to place the shareholders of both Companies in substantially the same position as if they held shares in a single entity owning all of the assets of both Companies.
Following the approval of the DLC structure, both Companies entered into a DLC Merger Sharing Agreement (the Sharing Agreement) through which each Company agreed to ensure that the businesses of Rio Tinto plc and Rio Tinto Limited are managed together, to ensure that the boards of directors of each Company are the same, and to give effect to certain arrangements designed to provide shareholders of each Company with a common economic interest in the DLC structure.
In order to achieve this third objective, the Sharing Agreement provided for the ratio of dividend, voting and capital distribution rights attached to each Rio Tinto plc share and to each Rio Tinto Limited share to be fixed in an Equalisation Ratio which has remained unchanged at 1:1. The Sharing Agreement has provided for this ratio to be revised in special circumstances where, for example, certain modifications are made to the share capital of one Company, such as rights issues, bonus issues, share splits and share consolidations, but not to the share capital of the other. Outside these specified circumstances, the Equalisation Ratio can only be altered with the approval of shareholders under the Class Rights Action approval procedure described under Voting rights. In addition, any adjustments are required to be confirmed by the Group’s external auditors.
Consistent with the creation of the DLC structure, directors of each Company seek to act in the best interests of Rio Tinto as a whole. The Class Rights Action approval procedure is intended to deal with instances where there may be a conflict of interest between the shareholders of each Company.
To ensure that the boards of both Companies are identical, resolutions to appoint or remove directors must be put to shareholders of both Companies as a joint electorate (as Joint Decisions as described under Voting rights). It is a requirement that a person can only be a director of one Company if that person is also a director of the other Company. So, for example, if a person was removed as a director of Rio Tinto plc, he or she would also cease to be a director of Rio Tinto Limited.
One consequence of the DLC merger is that Rio Tinto is subject to a wide range of laws, rules and regulatory review across multiple jurisdictions. Where these rules differ, Rio Tinto, as a Group, aims to comply with the strictest applicable level.
Dividend rights
The Sharing Agreement provides for dividends paid on Rio Tinto plc and Rio Tinto Limited shares to be equalised on a net cash basis, that is without taking into account any associated tax credits. Dividends are determined in US dollars and are then, except for ADR holders, translated and paid in sterling and Australian dollars. The Companies are also required to announce and pay their dividends and other distributions as close in time to each other as possible.
In the unlikely event that one Company did not have sufficient distributable reserves to pay the equalised dividend or the equalised capital distribution, it would be entitled to receive a top-up payment from the other Company. The top-up payment could be made as a dividend on the DLC Dividend Share, or by way of a contractual payment.
If the payment of an equalised dividend would contravene the law applicable to one of the Companies, then they may depart from the Equalisation Ratio. However, should such a departure occur, then the relevant Company will put aside reserves to be held for payment on the relevant shares at a later date.
Rio Tinto shareholders have no direct rights to enforce the dividend equalisation provisions of the Sharing Agreement.
The DLC Dividend Shares can also be utilised to provide the Group with flexibility for internal funds management by allowing dividends to be paid between the two parts of the Group. Such dividend payments are of no economic significance to the shareholders of either Company, as they will have no effect on the Group’s overall resources.
Voting rights
In principle, the Sharing Agreement provides for the shareholders of Rio Tinto plc and Rio Tinto Limited to vote as a joint electorate on all matters which affect shareholders of both Companies in similar ways. These are referred to as Joint Decisions. Such Joint Decisions include the creation of new classes of share capital, the appointment or removal of directors and auditors and the receiving of the annual financial statements. All shareholder resolutions including Joint Decisions are voted on a poll.
The Sharing Agreement also provides for the protection of shareholders of each Company by requiring their separate approval for decisions that do not affect the shareholders of both Companies equally. Matters requiring this approval procedure are referred to as Class Rights Actions and are voted on a poll. For example, fundamental elements of the DLC merger cannot be changed unless approved separately by shareholders of both Companies under the Class Rights Action approval procedure.
Exceptions to these principles can arise in situations such as where legislation requires the separate approval of a decision by the appropriate majority of shareholders in one Company, and approval of the matter by shareholders of the other Company is not required.
Where a matter has been expressly categorised as either a Joint Decision or a Class Rights Action, the directors do not have the power to change that categorisation. If a matter falls within both categories, it is treated as a Class Rights Action. In addition, the directors can determine that matters not expressly listed in either category should be put to shareholders for their approval under either procedure.
To facilitate the joint voting arrangements, each Company has entered into shareholder voting agreements. Each Company has issued a Special Voting Share to a special purpose company held in trust by a common Trustee.
Rio Tinto plc has issued its Special Voting Share (RTP Special Voting Share) to RTL Shareholder SVC and Rio Tinto Limited has issued its Special Voting Share (RTL Special Voting Share) to RTP Shareholder SVC. The total number of votes cast on Joint Decisions by the shareholders of one Company are voted at the parallel meeting of the other Company. The role of these special purpose companies in achieving this is described below.
In exceptional circumstances, certain shareholders of the Companies can be excluded from voting at the respective Company’s general meetings because they have acquired shares in one Company in excess of a given threshold without making an offer for all the shares in the other Company. If this should occur, the votes cast by these excluded shareholders will be disregarded.
Following the Companies’ general meetings the overall results of the voting are announced to the stock exchanges, to the media in the UK and Australia, and published on the Rio Tinto website.
At a Rio Tinto plc shareholders’ meeting at which a Joint Decision is considered, each Rio Tinto plc share carries one vote and the holder of its Special Voting Share has one vote for each vote cast by the public shareholders of Rio Tinto Limited. The holder of the Special Voting Share is required to vote strictly, and only, in accordance with the votes cast by public shareholders for and against the equivalent resolution at the parallel Rio Tinto Limited shareholders’ meeting.
The holders of Rio Tinto Limited ordinary shares do not actually hold any voting shares in Rio Tinto plc by virtue of their holding in Rio Tinto Limited and cannot enforce the voting arrangements relating to the Special Voting Share.
At a Rio Tinto Limited shareholders’ meeting at which a Joint Decision is considered, each Rio Tinto Limited share carries one vote and the holder of its Special Voting Share will have one vote for each vote cast by the public shareholders of Rio Tinto plc in their parallel meeting. The holder of the Special Voting Share is required to vote strictly, and only, in accordance with the votes cast for and against the equivalent resolution at the parallel Rio Tinto plc shareholders’ meeting.
The holders of Rio Tinto plc ordinary shares do not actually hold any voting shares in Rio Tinto Limited by virtue of their holding in Rio Tinto plc and cannot enforce the voting arrangements relating to the Special Voting Share.
Capital distribution rights
If either of the Companies goes into liquidation, the Sharing Agreement provides for a valuation to be made of the surplus assets of both Companies. If the surplus assets available for distribution by one Company on each of the shares held by its shareholders exceed the surplus assets available for distribution by the other Company on each of the shares held by its shareholders, then an equalising payment between the two Companies shall be made, to the extent permitted by applicable law, such that the amount available for distribution on each share held by shareholders of each Company conforms to the Equalisation Ratio. The objective is to ensure that the shareholders of both Companies have equivalent rights to the assets of the combined Group on a per share basis, taking account of the Equalisation Ratio.
The Sharing Agreement does not grant any enforceable rights to the shareholders of either Company upon liquidation of a Company.
Limitations on ownership of shares and merger obligations
The laws and regulations of the UK and Australia impose restrictions and obligations on persons who control interests in publicly listed companies in excess of defined thresholds that, under certain circumstances, include obligations to make a public offer for all of the outstanding issued shares of the relevant company. The threshold applicable to Rio Tinto plc under UK law and regulations is 30 per cent and to Rio Tinto Limited under Australian law and regulations is 20 per cent (on a standalone basis or, taking into account only Rio Tinto plc interests, on a Joint Decision basis).
As part of the DLC merger, the Articles of Association of Rio Tinto plc and the Constitution of Rio Tinto Limited were amended with the intention of extending these laws and regulations to the combined enterprise and, in particular, to ensure that a person cannot exercise control over one Company without having made offers to the public shareholders of both Companies. It is consistent with the creation of the single economic enterprise, and the equal treatment of the two sets of shareholders, that these laws and regulations should operate in this way. The Articles of Association of Rio Tinto plc and the Constitution of Rio Tinto Limited impose restrictions on any person who controls, directly or indirectly, 20 per cent or more of the votes on a Joint Decision. If, however, such a person only has an interest in either Rio Tinto Limited or Rio Tinto plc, then the restrictions will only apply if they control, directly or indirectly, 30 per cent or more of the votes at that Company’s general meetings.
If one of the thresholds specified above is breached then, subject to certain limited exceptions and notification by the relevant Company, such persons may not attend or vote at general meetings of the relevant Company, may not receive dividends or other distributions from the relevant Company, and may be divested of their interest by the directors of the relevant Company. These restrictions continue to apply until such persons have either made a public offer for all of the publicly held shares of the other Company, or have reduced their controlling interest below the thresholds specified, or have acquired through a permitted means at least 50 per cent of the publicly held shares of each Company.
These provisions are designed to ensure that offers for the publicly held shares of both Companies would be required to avoid the restrictions set out above, even if the interests which breach the thresholds are only held in one of the Companies. The directors do not have the discretion to exempt a person from the operation of these rules.
Under the Sharing Agreement, the Companies agree to co-operate to enforce the restrictions contained in their Articles of Association and Constitution.
Guarantees
In 1995, each Company entered into a Deed Poll Guarantee in favour of creditors of the other Company. Pursuant to the Deed Poll Guarantees, each Company guaranteed the contractual obligations of the other Company and the obligations of other persons which are guaranteed by the other Company, subject to certain limited exceptions. Beneficiaries under the Deed Poll Guarantees may make demands upon the guarantor thereunder without first having recourse to the Company or persons whose obligations are being guaranteed. The obligations of the guarantor under each Deed Poll Guarantee expire upon termination of the Sharing Agreement and under other limited circumstances, but only in respect of obligations arising after such termination and, in the case of other limited circumstances, the publication and expiry of due notice. The shareholders of the Companies cannot enforce the provisions of the Deed Poll Guarantees.
Markets
Rio Tinto plc
The principal market for Rio Tinto plc shares is the London Stock Exchange with the shares trading through the Stock Exchange Electronic Trading Service (SETS) system.
Rio Tinto plc shares are also listed on NYSE Euronext Brussels and its American depositary receipts are listed on the New York Stock Exchange. As at 17 February 2014, there were 45,231 holders of record of Rio Tinto plc’s shares. Of these holders, 396 had registered addresses in the US and held a total of 479,526 Rio Tinto plc shares, representing 0.03 per cent of the total number of Rio Tinto plc shares issued and outstanding as at such date. In addition, 106,501,038 Rio Tinto plc shares were registered in the name of a custodian account in London which represented 7.47 per cent of Rio Tinto plc shares issued and outstanding. These shares were represented by 106,501,038 Rio Tinto plc ADRs held of record by 400 ADR holders. In addition, certain accounts of record with registered addresses other than in the US hold shares, in whole or in part, beneficially for US persons.
Rio Tinto Limited
Rio Tinto Limited shares are listed on the Australian Securities Exchange (ASX). The ASX is the principal trading market for Rio Tinto Limited shares. The ASX is a national stock exchange with an automated TRADING SYSTEM
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As at 17 February 2014, there were 206,768 holders of record of Rio Tinto Limited shares. Of these holders, 314 had registered addresses in the US, representing approximately 0.043 per cent of the total number of Rio Tinto Limited shares issued and outstanding as of such date. In addition, nominee accounts of record with registered addresses other than in the US may hold Rio Tinto Limited shares, in whole or in part, beneficially for US persons.
| Fees and charges payable by a holder of American Depositary Shares (ADSs) | ||
| Category | Depositary actions | Associated fee |
|---|---|---|
| Depositing or substituting the underlying shares | Issuance of ADSs against the deposit of shares, including deposits and issuance in respect of:
| US$5.00 per 100 ADSs (or portion thereof) evidenced by the new ADSs delivered |
| Selling or exercising rights | Distribution or sale of securities, the fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities | US$5.00 for each 100 ADSs (or portion thereof) |
| Withdrawing an underlying share | Acceptance of ADSs surrendered for withdrawal of deposited securities | US$5.00 for each 100 ADSs (or portion thereof) evidenced by the ADSs surrendered |
| Transferring, splitting or grouping receipts | Transfers, combining or grouping of depositary receipts | US$2.50 per ADS |
| General depositary services, particularly those charged on an annual basis |
| US$0.02 per ADS (or portion thereof) not more than once each calendar year and payable at the sole discretion of the depositary by billing holders or deducting such charge from one or more cash dividends or other cash distributions |
| Expenses of the depositary | Expenses incurred on behalf of holders in connection with:
| Expenses payable at the sole discretion of the depositary by billing holders or by deducting charges from one or more cash dividends or other cash distributions |
American depositary receipts (ADRs)
Rio Tinto plc has a sponsored ADR facility with JPMorgan Chase Bank NA (JPMorgan) under a Deposit Agreement, dated 13 July 1988, as amended on 11 June 1990, as further amended and restated on 15 February 1999, 18 February 2005 (when JPMorgan became Rio Tinto plc’s depositary) and on 29 April 2010. The ADRs evidence Rio Tinto plc American Depositary Shares (ADSs), each representing one ordinary share. The shares are registered with the US Securities and Exchange Commission (SEC), are listed on the NYSE and are traded under the symbol RIO.
Fees and charges payable by a holder of ADSs
In accordance with the terms of the Deposit Agreement, JPMorgan may charge holders of Rio Tinto ADSs, either directly or indirectly, fees or charges up to the amounts described in the table above.
Fees and payments made by the depositary to the issuer
JPMorgan has agreed to reimburse certain company expenses related to the Rio Tinto plc ADR programme and incurred by the Group in connection with the programme. The Group received US$1.05 million in respect of expenses incurred by the Group in connection with the ADR programme for the year ended 31 December 2013. JPMorgan did not pay any amount on the Group’s behalf to third parties. JPMorgan also waived certain of its standard fees and expenses associated with the administration of the programme relating to routine programme maintenance, reporting, distribution of cash dividends, annual meeting services and report mailing services.
Under certain circumstances, including removal of JPMorgan as depositary or termination of the ADR programme by the Company, the Company is required to repay JPMorgan any amounts of administrative fees and expenses waived during the 12-month period prior to notice of removal or termination.
Share ownership
Substantial shareholders
Under the UK Disclosure and Transparency Rules and the Australian Corporations Act, any shareholder of Rio Tinto plc with voting rights of three per cent or more, or any person with voting power of five per cent or more in Rio Tinto Limited, is required to provide the Companies with notice.
The shareholders who have provided such, or an equivalent, notice are:
| Rio Tinto plc | Date of notice | Number of shares | Percentage of issued share capital |
|---|---|---|---|
| AXA S.A. | 29 Jan 2008 | 48,493,873 | 4.86 |
| BlackRock Inc. | 4 Dec 2009 | 127,744,871 | 8.38 |
| Shining Prospect Pte. Ltd | 13 Mar 2012 | 182,550,329 | 12.7 |
| The Capital Group Companies, Inc. | 21 Jan 2014 | 57,950,440 | 4.10 |
| Rio Tinto Limited | |||
|---|---|---|---|
| Shining Prospect Pte. Ltd (a) | 4 Feb 2008 | – | – |
- (a)Shining Prospect Pte. Ltd, a Singapore-based entity owned by Chinalco (Aluminium Corporation of China) holds 182,550,329 Rio Tinto plc shares. Through the operation of the Australian Corporations Act as modified, this interest gives these entities and their associates voting power of 9.8 per cent in the Rio Tinto Group on a Joint Decision matter, making them substantial shareholders of Rio Tinto Limited, as well as of Rio Tinto plc.
As far as is known, Rio Tinto plc and Rio Tinto Limited are not directly or indirectly owned or controlled by another corporation or by any government or natural person. Rio Tinto is not aware of any arrangement which may result in a change in control. No shareholder possesses voting rights that differ from those attaching to Rio Tinto plc’s and Rio Tinto Limited’s securities.
As of 17 February 2014, the total amount of the Group’s voting securities owned by the directors in Rio Tinto plc was 94,081 ordinary shares of 10p each or ADRs and in Rio Tinto Limited was 107,586 ordinary shares, in aggregate representing less than one per cent of the Group’s total number of shares in issue.
Analysis of ordinary shareholders
| Rio Tinto plc | Rio Tinto Limited | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| As at 17 February 2014 | No. of accounts | % | Shares | % | No. of accounts | % | Shares | % | |
| 1 to 1,000 shares | 34,307 | 75.85 | 11,121,342 | 0.79 | 173,818 | 84.06 | 51,625,736 | 11.85 | |
| 1,001 to 5,000 shares | 8,515 | 18.83 | 16,893,956 | 1.2 0 | 29,538 | 14.29 | 58,484,856 | 13.42 | |
| 5,001 to 10,000 shares | 790 | 1.75 | 5,473,944 | 0.39 | 2,288 | 1.11 | 15,844,505 | 3.64 | |
| 10,001 to 25,000 shares | 450 | 0.99 | 6,988,461 | 0.49 | 851 | 0.41 | 12,414,627 | 2.85 | |
| 25,001 to 125,000 shares | 563 | 1.24 | 33,848,104 | 2.39 | 216 | 0.10 | 9,951,677 | 2.28 | |
| 125,001 to 250,000 shares | 195 | 0.43 | 35,398,021 | 2.50 | 15 | 0.01 | 2,639,435 | 0.61 | |
| 250,001 to 1,250,000 shares | 279 | 0.62 | 160,443,609 | 11.35 | 29 | 0.01 | 13,659,893 | 3.13 | |
| 1,250,001 to 2,500,000 shares | 54 | 0.12 | 94,126,086 | 6.67 | 1 | 0.00 | 1,661,239 | 0.38 | |
| 2,500,001 shares and over (a) | 77 | 0.17 | 1,048,572,919(b) | 74.22 | 12 | 0.01 | 269,476,752 | 61.84 | |
| 1,425,376,675(c) | 100.00 | 435,758,720(d) | 100.00 | ||||||
| Number of holdings less than marketable parcel of A$500 | 3,716 | ||||||||
- (a)Excludes shares held in Treasury
- (b)This includes 106,501,038 shares held in the name of a nominee on the share register. The shares are listed on the NYSE in the form of American Depositary Receipts (ADRs).
- (c)The total issued share capital is made up of 1,412,866,442 publicly held shares; 12,510,233 shares held in Treasury.
- (d)Publicly held shares in Rio Tinto Limited.
Twenty largest registered shareholders
In accordance with the ASX Listing Rules, below are the names of the 20 largest registered holders of Rio Tinto Limited shares and the number of shares and the percentage of issued capital each holds as at 17 February 2014:
| Rio Tinto Limited | Number of shares | Percentage of issued share capital |
|---|---|---|
| HSBC Custody Nominees (Australia) Limited | 90,282,676 | 20.72 |
| J. P. Morgan Nominees Australia Limited | 61,272,310 | 14.06 |
| National Nominees Limited | 51,486,464 | 11.82 |
| Citicorp Nominees Pty Limited | 22,456,989 | 5.15 |
| BNP Paribas Noms Pty Ltd (DRP) | 11,589,957 | 2.66 |
| J.P. Morgan Nominees Australia Limited (Cash Income A/C) | 10,701,504 | 2.46 |
| Citicorp Nominees Pty Limited (Colonial First State Inv A/C) | 6,462,290 | 1.48 |
| Australian Foundation Investment Company Limited | 3,651,753 | 0.84 |
| AMP Life Limited | 3,238,223 | 0.74 |
| HSBC Custody Nominees (Australia) Limited (NT-Comnwlth Super Corp A/C) | 2,955,099 | 0.68 |
| UBS Wealth Management Australia Nominees Pty Ltd | 2,868,748 | 0.66 |
| Argo Investments Limited | 2,510,739 | 0.58 |
| BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C) | 1,661,239 | 0.38 |
| RBC Investor Services Australia Nominees Pty Limited (PI Pooled A/C) | 1,115,949 | 0.26 |
| Navigator Australia Ltd (MLC Investment Sett A/C) | 932,896 | 0.21 |
| Australian United Investment Company Limited | 849,918 | 0.20 |
| RBC Investor Services Australia Nominees Pty Limited (MBA A/C) | 629,439 | 0.14 |
| UBS Nominees Pty Ltd | 617,500 | 0.14 |
| Custodial Services Limited (Beneficiaries Holding A/C) | 609,094 | 0.14 |
| Nulis Nominees (Australia) Limited (Navigator Mast Plan Sett A/C) | 570,333 | 0.13 |
| 276,463,120 | 63.44 |
Large registered shareholders are nominees who hold securities on behalf of beneficial shareholders.
Share price information
The following table shows share prices for the period indicated, the reported high and low middle market quotations, which represent an average of bid and asked prices, for Rio Tinto plc’s shares on the London Stock Exchange based on the Daily Official List, the highest and lowest sale prices of the Rio Tinto plc ADRs as reported on the NYSE composite tape and the high and low closing sale prices of Rio Tinto Limited shares based upon information provided by the ASX. There is no established trading market in the US for Rio Tinto Limited’s shares.
| Pence per Rio Tinto plc share | US$ per Rio Tinto plc ADS(a) | A$ per Rio Tinto Limited share | ||||||
|---|---|---|---|---|---|---|---|---|
| High | Low | High | Low | High | Low | |||
| 2009 (b) | 3,420 | 1,140 | 55.93 | 19.63 | 74.89 | 29.38 | ||
| 2010 | 4,584 | 2,812 | 72.65 | 39.30 | 87.94 | 61.70 | ||
| 2011 | 4,712 | 2,713 | 76.67 | 40.50 | 88.68 | 59.00 | ||
| 2012 | 3,988 | 2,716 | 62.70 | 42.32 | 72.30 | 48.63 | ||
| 2013 | 3,757 | 2,583 | 59.92 | 39.90 | 72.07 | 50.24 | ||
| Aug 2013 | 3,263 | 2,913 | 50.14 | 45.11 | 62.62 | 57.94 | ||
| Sep 2013 | 3,218 | 3,023 | 51.89 | 45.11 | 64.2 | 59.22 | ||
| Oct 2013 | 3,262 | 2,958 | 52.87 | 47.49 | 64.38 | 60.00 | ||
| Nov 2013 | 3,331 | 3,110 | 53.52 | 50.18 | 66.06 | 63.54 | ||
| Dec 2013 | 3,410 | 3,180 | 56.43 | 51.78 | 68.18 | 64.91 | ||
| Jan 2014 | 3,410 | 3,115 | 56.43 | 51.18 | 68.71 | 63.35 | ||
| 2012 – First quarter | 3,988 | 3,331 | 62.70 | 51.24 | 72.30 | 61.40 | ||
| – Second quarter | 3,556 | 2,772 | 57.25 | 42.32 | 66.79 | 52.90 | ||
| – Third quarter | 3,282 | 2,716 | 53.18 | 43.00 | 58.97 | 48.63 | ||
| – Fourth quarter | 3,568 | 2,915 | 58.22 | 46.81 | 66.53 | 53.36 | ||
| 2013 – First quarter | 3,757 | 3,070 | 59.92 | 46.68 | 72.07 | 46.68 | ||
| – Second quarter | 3,140 | 2,582 | 48.60 | 40.34 | 58.90 | 50.24 | ||
| – Third quarter | 3,263 | 2,636 | 51.89 | 39.90 | 64.20 | 51.50 | ||
| – Fourth quarter | 3,410 | 2,958 | 56.43 | 47.49 | 68.18 | 60.00 | ||
- (a)On 12 April 2010, Rio Tinto announced a ratio change for the Rio Tinto plc ADR programme. With effect from 30 April 2010, one ADR represents one ordinary share of 10p in Rio Tinto plc. Prior to this date one ADR represented four ordinary shares of 10p. To effect this change ADR holders received three additional ADRs for every one ADR held as of 22 April 2010, the ADR record date.
- (b)None of these prices have been restated to take account of the rights issues undertaken in 2009.
Dividends
Both Companies have paid dividends on their ordinary shares every year since incorporation in 1962. The rights of Rio Tinto shareholders to receive dividends are explained under the description of the Dual listed companies structure.
Dividend policy
The aim of Rio Tinto’s progressive dividend policy is to increase the US dollar value of ordinary dividends over time. The rate of the total annual dividend, in US dollars, is determined taking into account the results for the past year and the outlook. Under Rio Tinto’s dividend policy, the interim dividend is set at one half of the total ordinary dividend for the previous year and the final ordinary dividend is expected to be at least equal to the previous interim dividend.
Dividend determination
The majority of the Group’s sales are transacted in US dollars, making this the most reliable measure of the Group’s global business performance. It is Rio Tinto’s main reporting currency and consequently the natural currency for dividend determination. Dividends determined in US dollars are translated at exchange rates prevailing two days prior to the announcement and are then declared payable in sterling by Rio Tinto plc and in Australian dollars by Rio Tinto Limited. On request, shareholders of Rio Tinto plc can elect to receive dividends in Australian dollars and shareholders of Rio Tinto Limited can elect to receive dividends in sterling. These dividend amounts are calculated by converting the declared dividend using currency exchange rates applicable five business days prior to the dividend payment date.
Shareholders who wish to receive their dividends in any other currencies should contact the Companies’ share registrars, who also offer payment services in other currencies, subject to a fee.
2013 dividends
The 2013 interim and final dividends were determined at 83.50 US cents and at 108.50 US cents per share respectively and the applicable conversion rates for the interim and final dividend were US$1.5384 and US$1.6484 to the pound sterling and US$0.89785 and US$0.90315 to the Australian dollar respectively. For those Rio Tinto plc shareholders who elected to receive their interim dividend in Australian dollars the applicable conversion rate was A$1.70816 and for Rio Tinto Limited shareholders who elected to receive their dividend in sterling the applicable conversion rate was £0.58543.
Final dividends of 65.82 pence or 120.14 Australian cents per share will be paid on 10 April 2014. For those Rio Tinto plc shareholders requesting the 2013 final dividend be paid in Australian dollars, those holders of Rio Tinto plc ADRs (each representing one share) and those Rio Tinto Limited shareholders requesting the 2013 final dividend be paid in pounds sterling, the applicable conversion rates will be announced on 3 April 2014.
The chart below sets out the amounts of interim and final dividends paid or payable on each share or ADR in respect of each financial year, but before deduction of any withholding tax.
These have been restated for the impact of the 2009 rights issues and the ADR ratio change.
| 2013 | 2012 | 2011 | 2010 | 2009 | |
|---|---|---|---|---|---|
| Rio Tinto Group – US cents per share | |||||
| Interim | 83.50 | 72.50 | 54.00 | 45.00 | – |
| Final | 108.5 | 94.50 | 91.00 | 63.00 | 45.00 |
| Total | 192.00 | 167.00 | 145.00 | 108.00 | 45.00 |
| Rio Tinto plc – UK pence per share | |||||
| Interim | 54.28 | 46.43 | 33.14 | 28.21 | – |
| Final | 65.82 | 60.34 | 57.33 | 39.14 | 28.84 |
| Total | 120.10 | 106.77 | 90.47 | 67.35 | 28.84 |
| Rio Tinto Limited – Australian cents per share | |||||
| Interim | 93.00 | 68.51 | 49.81 | 49.27 | – |
| Final | 120.14 | 91.67 | 84.20 | 61.94 | 51.56 |
| Total | 213.14 | 160.18 | 134.01 | 111.21 | 51.56 |
| Rio Tinto plc – US cents per ADR | |||||
| Interim | 84.62 | 73.99 | 53.55 | 43.45 | – |
| Final (a) | – | 91.60 | 91.56 | 63.25 | 45.00 |
| Total (a) | – | 165.59 | 145.11 | 106.70 | 45.00 |
- (a)The final dividend payable to holders of ADRs for the 2013 financial year will be announced on 3 April 2014 when the GBP:USD currency conversion rate is determined. The ADR dividend for 2010 is restated from the 2010 Annual report and reflects the dividend after currency conversion.
Dividend reinvestment plan (DRP)
Rio Tinto offers a DRP to registered shareholders, which provides the opportunity to use cash dividends to purchase Rio Tinto shares in the market. Due to local legislation the DRP cannot be extended to shareholders in the US, Canada and certain other countries.
Exchange rates
The following tables show, for the periods and dates indicated, certain information regarding the exchange rates for the pound sterling and Australian dollar, based on the Noon Buying Rates for pounds sterling and Australian dollars expressed in US dollars per £1.00 and per A$1.00.
Pounds sterling
| Year ended 31 December(a) | Period end | Average rate | High | Low |
|---|---|---|---|---|
| Jan 2014 | 1.65 | 1.64 | 1.65 | 1.64 |
| Dec 2013 | 1.63 | 1.62 | 1.63 | 1.61 |
| Nov 2013 | 1.61 | 1.61 | 1.61 | 1.61 |
| Oct 2013 | 1.61 | 1.60 | 1.61 | 1.58 |
| Sep 2013 | 1.58 | 1.56 | 1.58 | 1.55 |
| Aug 2013 | 1.55 | 1.53 | 1.55 | 1.52 |
| 2013 | 1.63 | 1.56 | 1.63 | 1.51 |
| 2012 | 1.63 | 1.59 | 1.63 | 1.53 |
| 2011 | 1.55 | 1.60 | 1.67 | 1.67 |
| 2010 | 1.56 | 1.55 | 1.64 | 1.43 |
| 2009 | 1.62 | 1.57 | 1.70 | 1.35 |
- (a)The Noon Buying Rate on such dates differed slightly from the rates used in the preparation of Rio Tinto’s financial statements as of such date. No representation is made that pound sterling and Australian dollar amounts have been, could have been or could be converted into dollars at the Noon Buying Rate on such dates or at any other dates.
Australian dollars
| Year ended 31 December(a) | Period end | Average rate | High | Low |
|---|---|---|---|---|
| Jan 2014 | 0.89 | 0.89 | 0.90 | 0.89 |
| Dec 2013 | 0.90 | 0.92 | 0.94 | 0.90 |
| Nov 2013 | 0.94 | 0.95 | 0.95 | 0.94 |
| Oct 2013 | 0.95 | 0.94 | 0.95 | 0.92 |
| Sep 2013 | 0.92 | 0.91 | 0.92 | 0.91 |
| Aug 2013 | 0.91 | 0.91 | 0.92 | 0.91 |
| 2013 | 0.90 | 0.98 | 1.05 | 0.90 |
| 2012 | 1.04 | 1.04 | 1.08 | 0.97 |
| 2011 | 1.02 | 1.03 | 1.10 | 0.94 |
| 2010 | 1.02 | 0.92 | 1.02 | 0.81 |
| 2009 | 0.89 | 0.79 | 0.94 | 0.62 |
- (a)The Noon Buying Rate on such dates differed slightly from the rates used in the preparation of Rio Tinto’s financial statements as of such date. No representation is made that pound sterling and Australian dollar amounts have been, could have been or could be converted into dollars at the Noon Buying Rate on such dates or at any other dates.
Material contracts
Articles of Association and Constitution, and DLC Merger Sharing Agreement
As explained above, under the terms of the DLC structure the shareholders of Rio Tinto plc and of Rio Tinto Limited entered into certain contractual arrangements which are designed to place the shareholders of both Companies in substantially the same position as if they held shares in a single entity which owned all of the assets of both Companies. Please refer to the section on Guarantees for further information. Generally, and as far as is permitted by the UK Companies Act and the Australian Corporations Act and ASX Listing Rules, this principle is reflected in the Articles of Association of Rio Tinto plc and in the Constitution of Rio Tinto Limited. The summaries below include descriptions of material rights of the shareholders of both Rio Tinto plc and Rio Tinto Limited.
Objects
At the 2009 annual general meetings, shareholders of Rio Tinto plc and Rio Tinto Limited approved amendments to the constitutional documents whereby the object clauses were removed to allow the Companies to have the widest possible scope of activities.
Directors
Under Rio Tinto plc’s Articles of Association, a director may not vote in respect of any proposal in which he, or any other person connected with him, has any material interest, other than by virtue of his interests in shares or debentures or other securities of, or otherwise in or through, the Company, except where resolutions:
- indemnify him or a third party in respect of obligations incurred by the director on behalf of, or for the benefit of, the Company, or in respect of obligations of the Company, for which the director has assumed responsibility under an indemnity, security or guarantee;
- relate to an offer of securities in which he may be interested as a holder of securities or as an underwriter;
- concern another body corporate in which the director is beneficially interested in less than one per cent of the issued shares of any class of shares of such a body corporate;
- relate to an employee benefit in which the director will share equally with other employees; and
- relate to liability insurance that the Company is empowered to purchase for the benefit of directors of the Company in respect of actions undertaken as directors (or officers) of the Company.
Under Rio Tinto Limited’s Constitution, except where a director is constrained by Australian law, a director may be present at a meeting of the board while a matter in which the director has a material personal interest is being considered and may vote in respect of that matter.
The directors are empowered to exercise all the powers of the Companies to borrow money, to charge any property or business of the Companies or all, or any, of their uncalled capital and to issue debentures or give any other security for a debt, liability or obligation of the Companies or of any other person. The directors shall restrict the borrowings of Rio Tinto plc to the limitation that the aggregate amount of all moneys borrowed by the Company and its subsidiaries shall not exceed an amount equal to one and one half times the Company’s share capital plus aggregate reserves unless sanctioned by an ordinary resolution of the Company.
Directors are not required to hold any shares of either Company by way of qualification. The Remuneration Report (PDF) provides information on shareholding policies relating to executive and non-executive directors. Please refer to the Corporate governance section (PDF) for information on appointment of directors.
Rights attaching to shares
Under English law, dividends on shares may only be paid out of profits available for distribution, as determined in accordance with generally accepted accounting principles and by the relevant law. Shareholders are entitled to receive such dividends as may be declared by the directors. The directors may also pay shareholders such interim dividends as appear to them to be justified by the financial position of the Group.
Any Rio Tinto plc dividend unclaimed after 12 years from the date the dividend was declared, or became due for payment, will be forfeited and returned to the Company. Any Rio Tinto Limited dividend unclaimed may be invested or otherwise used by the board for the benefit of the Company until claimed or otherwise disposed of according to Australian law.
Voting rights
Voting at any general meeting of shareholders on a resolution on which the holder of the Special Voting Share is entitled to vote shall be decided by a poll, and any other resolution shall be decided by a show of hands unless a poll has been duly demanded. On a show of hands, every shareholder who is present in person or by proxy or other duly authorised representative and is entitled to vote has one vote regardless of the number of shares held. The holder of the Special Voting Share is not entitled to vote on a show of hands. On a poll, every shareholder who is present in person or by proxy or other duly authorised representative and is entitled to vote has one vote for every ordinary share for which he or she is the holder and, in the case of Joint Decisions, the holder of the Special Voting Share has one vote for each vote cast by the shareholders at the parallel meeting of the other Company’s shareholders.
A poll may be demanded by any of the following:
- the chairman of the meeting;
- at least five shareholders entitled to vote on the resolution;
- any shareholder or shareholders representing in the aggregate not less than one tenth (Rio Tinto plc) or one 20th (Rio Tinto Limited) of the total voting rights of all shareholders entitled to vote on the resolution;
- any shareholder or shareholders holding shares conferring a right to vote at the meeting on which there have been paid-up sums in the aggregate equal to not less than one tenth of the total sum paid up on all the shares conferring that right (Rio Tinto plc); or
- the holder of the Special Voting Share.
A proxy form will be treated as giving the proxy the authority to demand a poll, or to join others in demanding one.
The necessary quorum for a Rio Tinto plc general meeting is three members present (in person or by proxy or other duly authorised representative) and entitled to vote, and for a Rio Tinto Limited general meeting is two members present in person or by proxy or other duly authorised representative.
Matters are transacted at general meetings by the proposing and passing of resolutions:
- ordinary resolutions, which require the affirmative vote of a majority of the votes of those persons voting at a meeting at which there is a quorum, for example the election of directors; and
- special resolutions, which require the affirmative vote of not less than three-fourths of the persons voting at a meeting at which there is a quorum, for example amending the Articles of Association of Rio Tinto plc or the Constitution of Rio Tinto Limited.
The DLC Merger Sharing Agreement further classifies resolutions as “Joint Decisions” and “Class Rights Actions” as explained under Voting rights.
Annual general meetings must be convened with 21 days’ written notice for Rio Tinto plc and with 28 days’ notice for Rio Tinto Limited. Other meetings of Rio Tinto plc must be convened with 21 days’ written notice for the passing of a special resolution and with 14 days’ notice for any other resolution, depending on the nature of the business to be transacted. All meetings of Rio Tinto Limited require 28 days’ notice. In calculating the period of notice the days of delivery or receipt of the notice and the date of the meeting are not included. Among other things, the notice must specify the nature of the business to be transacted.
Variation of rights
If, at any time, the share capital is divided into different classes of shares, the rights attached to any class may be varied, subject to the provisions of the relevant legislation, with the consent in writing of holders of three-fourths in value of the shares of that class or upon the adoption of an extraordinary resolution passed at a separate meeting of the holders of the shares of that class. At every such separate meeting, all of the provisions of the Articles of Association and Constitution relating to proceedings at a general meeting apply, except that the quorum for Rio Tinto plc should be two or more persons who hold or represent by proxy not less than one-third in nominal value of the issued shares of the class.
Rights in a winding-up
Except as the shareholders have agreed or may otherwise agree, upon a winding-up, the balance of assets available for distribution:
- after the payment of all creditors including certain preferential creditors, whether statutorily preferred creditors or normal creditors; and
- subject to any special rights attaching to any class of shares
is to be distributed among the holders of ordinary shares according to the amounts paid-up on the shares held by them. This distribution is generally to be made in cash. A liquidator may, however, upon the adoption of a special resolution of the shareholders, divide among the shareholders the whole or any part of the assets in kind.
The DLC Merger Sharing Agreement further sets out the rights of ordinary shareholders in a liquidation as explained under Capital distribution rights.
Facility agreement
Details of the Group’s US$7.5 billion multi-currency committed revolving credit facilities are set out in note 30 (PDF)to the 2013 financial statements.
Exchange controls and foreign investment
Rio Tinto plc
There are no UK foreign exchange controls or other UK restrictions on the import or export of capital or on the payment of dividends to non-resident holders of Rio Tinto plc shares or that materially affect the conduct of Rio Tinto plc’s operations. It should be noted, however, that various sanctions, laws, regulations or conventions may restrict the import or export of capital by, or the payment of dividends to, non-resident holders of Rio Tinto plc shares. There are no restrictions under Rio Tinto plc’s Articles of Association or under UK law that limit the right of non-resident owners to hold or vote Rio Tinto plc shares.
Rio Tinto Limited
Under current Australian legislation, no permission is required for the movement of funds into or out of Australia, except that there is a prohibition on, or in some cases the specific prior approval of the Department of Foreign Affairs and Trade or Minister for Foreign Affairs must be obtained for, certain payments or other dealings connected with parties identified with terrorism, or to whom United Nations or autonomous Australian sanctions apply.
Rio Tinto Limited may be required to deduct withholding tax from foreign remittances of dividends, to the extent that they are unfranked, and from payments of interest.
Acquisitions of interests in shares, voting power or certain other equity instruments in Australian companies by foreign interests are subject to review and approval by the Treasurer of the Commonwealth of Australia under the Foreign Acquisitions and Takeovers Act 1975 (the Takeovers Act). The Takeovers Act applies to acquisitions of 15 per cent or more, by several foreign persons (and any associates) of 40 per cent or more of the actual or potential shares of, or voting power in, an Australian company, and to other transaction that results in such persons controlling such interests. The Takeovers Act also applies to direct investments by foreign government investors, including acquisition of interests of ten per cent or more. Persons who are proposing such acquisitions or transactions are required to notify the Treasurer of their intention. The Treasurer has the power to order divestment in cases where such acquisitions or transactions have already occurred. The Takeovers Act does not affect the rights of owners whose interests are held in compliance with the legislation.
Limitations on voting and shareholding
Except for the provisions of the Takeovers Act 1975 there are no limitations imposed by law, Rio Tinto plc’s Articles of Association or Rio Tinto Limited’s Constitution, on the rights of non-residents or foreign persons to hold or vote the Group’s ordinary shares or ADSs that would not apply generally to all shareholders.
Taxation
The following information is provided to meet the reporting obligations of the Annual report on Form 20-F. This is not tax advice and you should not rely on it as such. Rio Tinto accepts no liability for any such reliance.
UK resident individuals’ shareholdings in Rio Tinto plc
Taxation of dividends
Dividends carry a tax credit equal to one-ninth of the dividend. Individuals who are liable to income tax at the basic rate will have no further tax to pay. Higher rate tax payers are liable to tax on UK dividends at 32.5 per cent, which after taking account of the tax credit produces an effective tax liability of 25 per cent of the dividend received. Additional rate tax payers are liable to tax on UK dividends at 42.5 per cent until 5 April 2013 and 37.5 per cent thereafter, which after taking account of the tax credit produces an effective tax liability of 36.1 per cent of any dividend received up to 5 April 2013 and 30.5 per cent thereafter.
Dividend reinvestment plan (DRP)
The taxation effect of participation in the DRP will depend on individual circumstances. Shareholders will generally be liable to tax on dividends reinvested in the DRP on the same basis as if they had received the cash and arranged the investment. The dividend should, therefore, be included in the annual tax return.
The shares acquired should be added to shareholdings at the date and at the net cost shown on the share purchase advice. The actual cost of the shares for Rio Tinto plc shareholders, including the stamp duty/stamp duty reserve tax and broker’s commission, will form the base cost for capital gains tax purposes.
Capital gains tax
Shareholders who have any queries on capital gains tax issues are advised to consult their financial adviser.
Details of relevant events since 31 March 1982 and adjusted values for Rio Tinto plc securities as at that date are available on the Group’s website.
Australian resident individuals’ shareholdings in Rio Tinto Limited
Taxation of dividends
The basis of the Australian dividend imputation system is that when Australian resident shareholders receive dividends from Rio Tinto Limited they may be entitled to a credit for the Australian tax paid by the Group in respect of that income, depending on the tax status of the shareholder.
The application of the system results in the Australian tax paid by the Group being allocated to shareholders by way of franking credits attaching to the dividends they receive. Such dividends are known as franked dividends. A dividend may be partly or fully franked. The current Rio Tinto Limited dividend is fully franked and the franking credits attached to the dividend are shown in the distribution statement provided to shareholders.
The extent to which a company can frank a dividend depends on the credit balance in its franking account. Credits to this account can arise in a number of ways, including when a company pays company tax or receives a franked dividend from another company. The dividend is required to be included in a resident individual shareholder’s assessable income. In addition, an amount equal to the franking credit attached to the franked dividend is also included in the assessable income of the resident individual, who may then be entitled to a rebate of tax equal to the franking credit amount included in their income. Should the franking credits exceed the tax due, the excess is refunded to the resident individual.
The effect of the dividend imputation system on non-resident shareholders is that, to the extent that the dividend is franked, no Australian tax will be payable and there is an exemption from dividend withholding tax.
A withholding tax is normally levied at the rate of 15 per cent when unfranked dividends are paid to non-resident shareholders residing in a country with which Australia has a taxation treaty. Most Western countries have a taxation treaty with Australia. A rate of 30 per cent applies to countries where there is no taxation treaty.
Since 1988, all dividends paid by Rio Tinto Limited have been fully franked. It is the Group’s policy to pay fully franked dividends whenever possible. The boards expect Rio Tinto Limited to be able to pay fully franked dividends for the foreseeable future.
Dividend reinvestment plan
Shareholders will generally be liable for tax on dividends reinvested in the DRP on the same basis as if they had received the cash and arranged the investment. The dividend should therefore be included in the annual tax return as assessable income.
The shares acquired should be added to the shareholding at the date of acquisition at the actual cost of the shares, which is the amount of the dividend applied by the shareholder to acquire shares and any incidental costs associated with the acquisition will form part of the cost base or reduced cost base of the shares for capital gains tax purposes.
Capital gains tax
The Australian capital gains tax legislation is complex. If shareholders have acquired shares after 19 September 1985 they may be subject to capital gains tax on the disposal of those shares.
Generally, disposal of shares held on capital account would give rise to a capital gain or loss. A capital gain arises when the proceeds on disposal are greater than the cost base of shares. A capital loss arises when the proceeds on sale are less than the cost base or reduced cost base. Where a capital gain arises on shares held for at least 12 months, individual, trust and superannuation fund shareholders may be eligible for a capital gains tax discount.
Shareholders are advised to seek the advice of an independent taxation consultant on any possible capital gains tax exposure.
US residents
The following is a summary of the principal UK tax, Australian tax and US Federal income tax consequences of the ownership of Rio Tinto plc ADSs, Rio Tinto plc shares and Rio Tinto Limited shares, “the Group’s ADSs and shares”, by a US holder as defined below. It is not intended to be a comprehensive description of all the tax considerations that are relevant to all classes of taxpayer. Future changes in legislation may affect the tax consequences of the ownership of the Group’s ADSs and shares.
It is based in part on representations by the Group’s depositary bank as depositary for the ADRs evidencing the ADSs and assumes that each obligation in the deposit agreements will be performed in accordance with its terms.
You are a US holder if you are a beneficial owner of the Group’s ADSs and shares and you are: a citizen or resident of the US; a domestic corporation; an estate whose income is subject to US federal income tax regardless of its source; or a trust if a US court can exercise primary supervision over the trust’s administration and one or more US persons are authorised to control all substantial decisions of the trust.
This section applies to US holders only if shares or ADSs are held as capital assets for tax purposes. This section does not apply to shareholders who are members of a special class of holders subject to special rules, including a dealer in securities, a trader in securities who elects to use a mark-to-market method of accounting for securities holdings, a tax exempt organisation, a life insurance company, a person liable for alternative minimum tax, a person that actually or constructively owns ten per cent or more of Rio Tinto’s voting stock, a person that holds shares or ADSs as part of a straddle or a hedging or conversion transaction, or a person whose functional currency is not the US dollar.
This section is based on the US Internal Revenue Code of 1986, as amended (the Code), its legislative history, existing and proposed regulations, published rulings and court decisions, and on the convention between the US and UK, and the convention between the US and Australia which may affect the tax consequences of the ownership of the Group’s ADSs and shares. These laws and conventions are subject to change, possibly on a retroactive basis.
For the purposes of the Conventions and of the Code, US holders of ADSs are treated as the owners of the underlying shares.
The summary describes the treatment applicable under the conventions in force at the date of this report.
UK taxation of shareholdings in Rio Tinto plc
Taxation of dividends
US holders are not liable to UK withholding tax on dividends paid by Rio Tinto plc. Dividends carry a tax credit equal to one-ninth of the net dividend, or ten per cent of the net dividend plus the tax credit. The tax credit is not repayable to US holders.
Capital gains
A US holder will not normally be liable to UK tax on capital gains realised on the disposition of Rio Tinto plc ADSs or shares unless the holder carries on a trade, profession or vocation in the UK through a permanent establishment in the UK and the ADSs or shares have been used for the purposes of the trade, profession or vocation or are acquired, held or used for the purposes of such a permanent establishment.
Inheritance tax
Under the UK/US Estate Tax Treaty, a US holder, who is domiciled in the US and is not a national of the UK, will not be subject to UK inheritance tax upon the holder’s death or on a transfer during the holder’s lifetime, unless the ADSs and shares form part of the business property of a permanent establishment in the UK or pertain to a fixed base situated in the UK used in the performance of independent personal services. In the exceptional case where ADSs or shares are subject both to UK inheritance tax and to US Federal gift or estate tax, the UK Estate Tax Treaty generally provides for tax payments to be relieved in accordance with the priority rules set out in the Treaty.
Stamp duty and stamp duty reserve tax
Transfers of Rio Tinto plc ADSs will not be subject to UK stamp duty provided that the transfer instrument is not executed in, and at all times remains outside, the UK. Electronic “paperless” purchases of Rio Tinto plc shares are subject to stamp duty reserve tax (SDRT) at a rate of 0.5 per cent (rounded to the nearest penny). Purchases of Rio Tinto plc shares using a stock transfer form are subject to Stamp Duty at a rate of 0.5 per cent on transactions over £1,000 (rounded up to the nearest £5). Conversions of Rio Tinto plc shares into Rio Tinto plc ADSs will be subject to additional Stamp Duty or SDRT at a rate of 1.5 per cent (rounded to the nearest penny) on all transfers to the depositary or its nominee.
Australian taxation of shareholdings in Rio Tinto Limited
Taxation of dividends
US holders are not normally liable to Australian withholding tax on dividends paid by Rio Tinto Limited because such dividends are normally fully franked under the Australian dividend imputation system, meaning that they are paid out of income that has borne Australian income tax. Any unfranked dividends would suffer Australian withholding tax which under the Australian income tax convention is limited to 15 per cent of the gross dividend.
Capital gains
US holders are not normally subject to any Australian tax on the disposal of Rio Tinto Limited ADSs or shares unless they have been used in carrying on a trade or business wholly or partly through a permanent establishment in Australia, or the gain is in the nature of income sourced in Australia.
Gift, estate and inheritance tax
Australia does not impose any gift, estate or inheritance taxes in relation to gifts of shares or upon the death of a shareholder.
Stamp duty
An issue or transfer of Rio Tinto Limited shares does not require the payment of Australian stamp duty.
US federal income tax
In general, taking into account the earlier assumptions that each obligation of the Deposit Agreement and any related agreement will be performed according to its terms, for US federal income tax purposes, if you hold ADRs evidencing ADSs, you will be treated as the owner of the shares represented by those ADRs. Exchanges of shares for ADRs, and ADRs for shares, generally will not be subject to US federal income tax.
Taxation of dividends
Under the US federal income tax laws, and subject to the Passive Foreign Investment Company (PFIC) Rules discussed below, if you are a US holder, the gross amount of any dividend the Group pays out of its current or accumulated earnings and profits (as determined for US federal income tax purposes) is subject to US federal income taxation.
If you are a non-corporate US holder, dividends paid to you in taxable years beginning after 31 December 2012 will be taxed at ordinary income rates on dividends.
You must include any Australian tax withheld from the dividend payment in this gross amount even though you do not in fact receive it. The dividend is taxable to you when you, in the case of shares, or the depositary, in the case of ADSs, receive the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to US corporations in respect of dividends received from other US corporations. The amount of the dividend distribution that you must include in your income as a US holder will be the US dollar value of the non-US dollar payments made, determined at the spot UK pound/US dollar rate (in the case of Rio Tinto plc) or the spot Australian dollar/US dollar rate (in the case of Rio Tinto Limited) on the date the dividend distribution is includible in your income, regardless of whether the payment is in fact converted into US dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into US dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the US for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the shares or ADSs and thereafter as capital gain.
Subject to certain limitations, any Australian tax withheld in accordance with the Australia/United States Tax Treaty and paid over to Australia will be creditable or deductible against your US federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 20 per cent tax rate beginning after 31 December 2012.
For foreign tax credit purposes, dividends will generally be income from sources outside the US and will, depending on your circumstances, generally be either “passive” or “general” income which, in either case, is treated separately from other types of income for purposes of computing the foreign tax credit allowable to you.
Taxation of capital gains
Subject to the PFIC Rules discussed below, if you are a US holder and you sell or otherwise dispose of the Group’s ADSs or shares, you will recognise capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount that you realise and your tax basis, determined in US dollars, in your shares or ADSs. Capital gain of a non-corporate US holder is generally taxed at preferential rates where the holder has a holding period greater than one year. The gain or loss will generally be income or loss from sources within the US for foreign tax credit limitation purposes.
Passive Foreign Investment Company Rules
We believe that the Group’s shares or ADSs should not be treated as stock of PFIC for US federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. If we were to be treated as a PFIC, unless the shares or ADSs are “marketable stock” and a US holder elects to be taxed annually on a mark-to-market basis with respect to the shares or ADSs, gain realised on the sale or other disposition of the shares or ADSs would in general not be treated as capital gain. Instead, if you are a US holder, you would be treated as if you had realised such gain and certain “excess distributions” rateably over your holding period for the shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. In addition, dividends that you receive from us will not be eligible for the special tax rates applicable to qualified dividend income if we are a PFIC either in the taxable year of the distribution or the preceding taxable year, but instead will be taxable at rates applicable to ordinary income.
Documents on display
Rio Tinto is subject to the Securities and Exchange Commission reporting requirements for foreign companies. A Form 20-F, which corresponds with the Form 10-K for US public companies, was filed with the SEC on 14 March 2014. Rio Tinto’s Form 20-F and other filings can be viewed on the Rio Tinto website as well as the SEC website at www.sec.gov. ADR holders may also read without charge and copy at prescribed rates any document filed at the public reference facilities of the SEC’s principal office at 100 F Street NE, Washington, DC 20549, US. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.
