Part 1

Governance

Part 1

The directors are pleased to present their report to shareholders of Rio Tinto plc and Rio Tinto Limited, together with the Full financial statements for the year ended 31 December 2008.

Dual listed structure

An explanation of the dual listed companies structure (DLC), which unified Rio Tinto plc and Rio Tinto Limited in 1995, can be found on the Dual listed companies page. This section also provides a description of voting rights restrictions which may apply in respect of the shares of either Company under specified circumstances.

Memorandum and articles of association

Rio Tinto plc's articles of association were adopted by special resolution on 11 April 2002 and amended by special resolutions passed on 14 April 2005, 13 April 2007 and 17 April 2008. Rio Tinto Limited's constitution was adopted by special resolution passed on 24 May 2000 and amended by special resolutions passed on 18 April 2002, 29 April 2005, 27 April 2007 and 24 April 2008.

Activities and business review

Details of the Group's results, operations and principal activities, significant changes during the year, post balance sheet events and likely future developments are set out in the Chairman's statement the Chief executive's message and in the Performance and business review.

During 2008 and until 19 February 2009 the significant changes and events affecting the Group have been:

On 1 February 2008, Shining Prospect Pte. Ltd, owned by Chinalco (Aluminum Corporation of China) with funding from Alcoa Inc acquired twelve per cent of the issued share capital of RioTinto plc. Through the DLC voting arrangements it became a substantial shareholder in the Rio Tinto Group, holding 9.33 per cent of its voting power.
On 6 Febuary 2008 BHP Billiton announced its intention to acquire Rio Tinto plc and Rio Tinto Limited under the terms of a pre-conditional share exchange offer. The board of Rio Tinto rejected this offer which was ultimately withdrawn by BHP Billiton on 25 November 2008.
On 11 March 2008, a helicopter under charter to the La Granja copper project in Peru carrying two pilots and eight passengers crashed with no survivors.
Completion of the divestments of Greens Creek mine in Alaska for US$750 million, Rio Tinto's interest in the Cortez operation in Nevada for US$1,695 million, the Kintyre uranium project in Western Australia for US$495 million, and the Potasio Rio Colorado project in Argentina and Regina exploration assets in Canada for US$850 million.
The rapid and severe global economic downturn during the second half of the year caused sharp falls in commodity prices and a significantly weaker outlook. On 10 December 2008, a detailed set of measures was announced by Rio Tinto in response to the unprecedented rapidity and severity of the global economic downturn. These initiatives are aimed at preserving value for shareholders by conserving cashflow and reducing levels of debt.
Notice on 12 January 2009 by Dick Evans, exective director and chief executive, Rio Tinto Alcan, of his intention to retire and to step down from the board of Rio Tinto at the conclusion of the Rio Tinto Limited annual general meeting on 20 April 2009 and the appointment of Jacynthe Côté as chief executive, Rio Tinto Alcan, effective 1 February 2009.
The announcement on 14 January 2009 of the intention by Paul Skinner to retire as chairman of Rio Tinto at the conclusion of the Rio Tinto Limited annual general meeting on 20 April 2009, and the appointment of Jim Leng as chairman designate and a non executive director. Jim Leng resigned on 9 February 2009 and, at the request of the board, Paul Skinner agreed to remain as chairman until a successor is appointed.
The announcement on 20 January 2009 that Rio Tinto Alcan plans to implement further production curtailments to align market production with customer demand bringing the total production decrease to 450,000 tonnes or approximately 11 per cent of its total annualised aluminium capacity.
On 12 February 2009 a proposal for the formation of a strategic partnership with Chinalco was announced. The partnership, whereby Chinalco would invest US$12.3 billion in certain aluminium, copper and iron ore assets and also US$7.2 billion in convertible bonds will be recommended by the board, to shareholders, for their approval. The formation is subject to obtaining the necessary shareholder, government and regulatory approvals. For more information on this announcement see Recent developments - Chinalco strategic partnership.

As permitted by sections 299(3) and 299A(3) of the Australian Corporations Act 2001, information which is likely to result in unreasonable prejudice, regarding likely future developments in, and the expected results of the operations of the Group or its strategies and prospects, has been omitted. The Group's principal risks and uncertainties are described under Risk factors.

Share capital, buybacks and options

Details of the Group's share capital as at 31 December 2008 can be found at notes 28 and 29 to the financial statements. Details of the rights and obligations attached to each class of shares can be found on the Dual listed companies structure page under Voting rights.

Details of certain agreements triggered on a change of control can be found on the Dual listed companies structure page under Limitations on ownership of shares and merger obligations.

There are no other restrictions on the transfer of ordinary shares in Rio Tinto plc save for:

restrictions that may from time to time be imposed by laws and regulations (for example, those relating to market abuse and insider dealing);
restrictions that may be imposed pursuant to the Listing Rules of the UK Financial Services Authority whereby certain employees of the Group require approval to deal in shares;
restrictions on the transfer of shares that maybe imposed under Rio Tinto plc's articles of association or under Part 22 of the UK Companies Act 2006, in either case following a failure to supply information required to be disclosed following service of a request under section 793 of the UK Companies Act 2006; and
restrictions on transfer of shares held under certain of the Rio Tinto plc's employee share plans while they remain subject to the plan.

Details of substantial shareholders of Rio Tinto plc and Rio Tinto Limited can be found on the Substantial shareholders page.

At the annual general meetings held during April 2008 the shareholders:

renewed the general authority to buy back up to 101.7 million of Rio Tinto plc's ordinary shares, representing approximately ten per cent of its issued share capital for a further 12 month period;
approved buybacks by Rio Tinto Limited on-market over the 12 months following approval, provided that the number bought back did not exceed 28.57 million shares; and
renewed the shareholder authority to buy back up to all the Rio Tinto Limited shares held (indirectly) by Rio Tinto plc.

Under the authorities granted at the 2008 annual general meetings, Rio Tinto undertook a series of internal capital management transactions, whereby Rio Tinto plc issued shares held in treasury to Rio Tinto Limited for consideration equal to the market price at the time of issue, before repurchasing them all immediately for cancellation. The repurchases each took place for the aggregate amount of £5. This programme resulted in seventeen separate transactions with Rio Tinto plc issuing a total of 67,880,000 shares from treasury to Rio Tinto Limited for a total consideration of £2,598 billion. All shares were immediately bought back for an aggregate consideration of £85 and were cancelled.

It is immaterial to the shareholders of either Rio Tinto plc or Rio Tinto Limited if Rio Tinto Limited or any of its subsidiaries make a gain or a loss on such transactions as they have no effect on the Rio Tinto Group's overall resources. The underlying purpose of the transactions was to facilitate the Rio Tinto Group's ongoing capital management programme.

During 2008, Rio Tinto plc issued 947,633 ordinary shares of which 763,919 ordinary shares were issued from treasury, and Rio Tinto Limited purchased on market and transferred 1,566,382 shares to satisfy obligations under employee share plans.

Also during the year, the Companies' registrars purchased on market 507,611 Rio Tinto plc ordinary shares and 628,646 Rio Tinto Limited shares to satisfy obligations to shareholders under the dividend reinvestment plans.

No further shares were bought back between 1 January 2009 and 19 February 2009. During this period, Rio Tinto plc issued 241,552 shares in connection with employee share plans and Rio Tinto Limited's registrars purchased on market and delivered 165,860 shares.

Awards over 1,549,992 Rio Tinto plc ordinary shares and 833,904 Rio Tinto Limited shares were granted under employee share plans during 2008, and as at 19 February 2009 there were options outstanding over 5,907,043 Rio Tinto plc ordinary shares and 4,460,906 Rio Tinto Limited shares. Upon vesting, awards may be satisfied by the issue of new shares, the purchase of shares on market, or, in the case of Rio Tinto plc, from treasury shares.

There were no changes to the authorised share capital of Rio Tinto plc during the year.

**Purchases of Rio Tinto plc and Rio Tinto Limited shares**
	Rio Tinto plc			Rio Tinto Limited			Group
Period	(a) Total number of shares purchased	(b) Average price paid per share US$	(c) Total number of shares purchased as part of publicly announced plans or programmes	(a) Total number of shares purchased	(b) Average price paid per share US$	(c) Total number of shares purchased as part of publicly announced plans or programmes	(d) Approximate dollar value of shares that may yet be purchased under the plans or programmes US$m
2008
1 Jan to 31 Jan	-	-	-	283,994	106.59	-	-
1 Feb to 29 Feb	-	-	-	502,744	121.19	-	-
1 Mar to 31 Mar	-	-	-	97,041	113.41	-	-
1 Apr to 30 Apr	215,855	118.56	-	597,963	127.51	-	-
1 May to 31 May	-	-	-	248,601	143.77	-	-
1 Jun to 30 Jun	-	-	-	73,842	126.71	-	-
1 Jul to 31 Jul	8,795,496	0.00	-	4,575	115.03	-	-
1 Aug to 31 Aug	17,535,221	0.00	-	17,887	106.23	-	-
1 Sep to 30 Sep	10,890,294	0.00	-	8,752	93.13	-	-
1 Oct to 31 Oct	24,794,875	0.70	-	341,130	71.47	-	-
1 Nov to 30 Nov	6,155,870	0.00	-	14,806	45.98	-	-
1 Dec to 31 Dec	-	-	-	3,693	27.75	-	-
Total	68,387,611	0.63	-	2,195,028	114.78	-	-
2009
1 Jan to 31 Jan	-	-	-	26,530	27.36	-	-
1 Feb to 19 Feb	-	-	-	139,330	31.96	-	-

Notes

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Rio Tinto plc ordinary shares of 10p each; Rio Tinto Limited shares.
The average prices paid have been translated into US dollars at the exchange rate on the day of settlement.
The share buyback programme was suspended upon the announcement of the Alcan Inc acquisition on 12 July 2007 and did not operate in 2008.
Shares purchased by the Companies' registrars in connection with the dividend reinvestment plans and employee share plans are not deemed to form part of any publicly announced plan or programme.
Shares purchased by Rio Tinto plc in line with the Group's internal capital management programme are described above. These purchases do not form part of any publicly announced plan or programme.