Chairman’s introduction

2018 was a mixed year for our Company. While we delivered strong financial results and record cash returns to shareholders, at the same time we were faced with some material challenges

• In July we received a subpoena from the US Department of Justice (DOJ) to produce documents and other records with respect to compliance with the Foreign Corrupt Practices Act and US money laundering statutes. In 2017, the Board established a separate committee to oversee the OSC investigation from plc’s perspective. Following receipt of the DOJ subpoena, this committee was reconstituted as the Investigations Committee with an expanded remit to include management and oversight of the DOJ investigation so that it is entirely separate from the Group’s executives, who have no decision making power concerning the investigation 2. DRC Matters There were three significant matters which the Board had to address in connection with the DRC: Dear shareholders Your Board has overseen several I am pleased to present our corporate headwinds for the Group last year, • Katanga’s dispute with its DRC governance report for 2018. including: government-owned partner Gécamines which led to a On the financial side, although the 1. Regulatory Investigations $5.6 billion recapitalisation prices of most commodities ended • The investigation by the Ontario of the operating vehicle (KCC) the year significantly lower than at Securities Commission (OSC) and settlement costs for the beginning, average prices were concerning Katanga, which began Katanga totalling $248 million stronger than the prior year. This, in 2017, concluded in December combined with volume growth in with the execution of a settlement • The introduction of a new DRC copper and coal, was the main driver agreement by Katanga and Code which provides behind an 8% increase in Adjusted certain of its current and former for substantially increased taxes, EBITDA of $15.8 billion which in officers and directors. As part royalties and other onerous turn enabled us to make total cash of that settlement, Katanga provisions in contravention of returns (including distributions, share made a voluntary payment of pre-existing stabilisation terms buy backs and share trust purchases) $22 million to the OSC. Katanga • Litigation processes with affiliates in excess of $5.2 billion, while also acknowledged that it had of concerning net debt increased to $14.7 billion, misstated its financial position and the effect of US sanctions on mainly to fund current year business results, failed to maintain adequate Dan Gertler and his affiliates acquisitions. During the last year we disclosure controls and adequate on pre-existing payment have grown the business through internal controls and failed to obligations to those entities delivery of major brownfield capital adequately describe certain risks projects and corporate transactions concerning corruption in the 3. Rusal and En+ on both the buy-side and sell-side. DRC and reliance on associates • In April the US Government of Dan Gertler. The Board was designated Rusal and En+ as Our world-class portfolio of assets disappointed in the conduct that SDNs. Glencore had in place and marketing business stands us in led to this outcome and we have various contracts with Rusal for good stead for the uncertain market implemented significant remedial the purchase of Aluminium and conditions in the year ahead. actions as a consequence Alumina. It had also previously

96 Glencore Annual Report 2018 Strategic Report Strategic

signed a non-binding term sheet minister and official. Our latest to a low-carbon economy. We do this Governance with En+ regarding swapping external Board evaluation process, through our well-positioned portfolio shares in Rusal for an interest in which has just been completed, that includes copper, , nickel, En+. Glencore took various confirmed the effective operation vanadium and zinc – commodities measures to mitigate any risks to of the Board whose size and that underpin energy and mobility its business as a result of the Rusal composition I believe allows it to transformation. We believe this and EN+ designation, including function in an effective manner transition is a key part of the global determining not to proceed with for the benefit of the Group and response to the increasing risks the EN+ exchange at that time all its stakeholders. posed by climate change. We have engaged with investor signatories Given the number and scale of We are also acutely aware of the statements Financial of the Climate Action 100+ initiative these challenges, the Board worked obvious interest in management on the additional steps we are taking closely with management in order succession. In addition to previous to further our commitment to this to ensure that suitable solutions changes to the leadership of our critical transition (further details on could be found in order to deal with aluminium team, we have also this page 21). As an early supporter of the the relevant issues appropriately year seen the appointments of new voluntary guidance on consistent in order to achieve outcomes in the heads of the assets for copper, coal climate related financial disclosures long-term interests of the Group. and ferroalloys and new heads of produced by the Taskforce on marketing in copper and ferroalloys. During last year, a new 2018 UK Climate-related Financial Disclosures, Perhaps most significantly, Peter Corporate Governance Code was we continue to disclose the metrics, Freyberg has been appointed to information Additional published which is now in force. targets and scenarios we use to a new position of responsibility for Most of the changes appear to us assess and manage relevant climate- all of the Group’s industrial mining to be sensible and in particular the related risks and opportunities. assets. The Nomination Committee Board looks forward to a new and We also recognise the importance of is appropriately extending its remit broader focus on the Group’s values, continued reductions of greenhouse under the new Code with regard culture and purpose, and the greater gas emissions from our operations. to management succession. employee and other stakeholder We are developing new, longer-term engagement that the Code calls for. The HSEC Committee has continued targets based on policy and As a result of these changes and its considerable work on sustainability technological developments that the Board’s greater focus on ethics matters. Certain challenges remain support the goals of the Paris and compliance issues, we have at the forefront, particularly safety. Agreement. established a new permanent Last year the number of fatalities While our Group continues committee of the Board, the Ethics, at our operations rose to thirteen. to face legacy challenges, your Compliance and Culture Committee. While we do operate various difficult Board believes that our people, assets in challenging locations, this The new Code also requires greater our industrial assets and marketing is an unacceptable performance. disclosure of a number of issues. businesses are industry-leading Although the Committee has The 2019 Annual Report will reflect and we continue to have confidence overseen various developments all of these changes. in the long-term prospects of in order to improve our safety the Group for the benefit of all The Board continues to strengthen performance, clearly these have of its stakeholders. and evolve. We again wish to thank not been sufficient and accordingly, Peter Grauer for his five-year service we are looking at new ways to achieve to the Board which ended last year. a step change in performance. Martin Gilbert has been appointed The Committee has already begun as the Senior Independent Director, to engage with Peter Freyberg in bringing to that role his long order to support him in ensuring experience as both a leading career that real change is achieved. asset manager and his significant Anthony Hayward Considerable work has also non-executive director experience. Chairman been ongoing in relation to our In addition, Gill Marcus has brought 28 February 2019 carbon strategy. As one of the to the Board her long experience world’s largest diversified resource as first a political activist and latterly companies, Glencore has a key as a senior South African government role to play in enabling transition

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