Annual Financial Report

Annual Financial Report

Tate & Lyle PLC

Tate & Lyle PLC

Annual Financial Report

Tate & Lyle PLC (the “Company”) confirms that copies of the following documents have been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.Hemscott.com/nsm.do.

1. Annual Report and Accounts 2012;

2. Notice of Annual General Meeting 2012;

3. Notice of Availability; and

4. Proxy Form.

The Annual Report and Accounts 2012, Notice of Annual General Meeting 2012 and Notice of Availability are also available on Tate & Lyle’s website at www.tateandlyle.com/annual_report.

The Company announced its full year results on 31 May 2012. Attached to this announcement is additional information for the purposes of compliance with the Disclosure and Transparency Rules which has been extracted from the Annual Report and Accounts 2012 and the page numbers in the text refer to the page numbers in that document.

Lucie Gilbert

Deputy Company Secretary

21 June 2012

APPENDIX A

RISK FACTORS

The following information is set out on pages 27 to 29 of the Annual Report 2012.

Risks

Tate & Lyle is exposed to a number of risks which might have a material adverse effect on our reputation, operations and financial performance.

The Board of directors has overall responsibility for the Group’s system of risk management and internal control. The schedule of matters reserved to the Board ensures that the directors control, among other matters, all significant strategic, financial and organisational issues.

Approach

The Group’s enterprise-wide risk management and reporting process helps management to identify, assess, prioritise and mitigate risk. The process involves an ongoing programme of workshops, facilitated by the risk management function, held around the Group. The risks identified are collated and reported through functional and divisional levels to the Group Executive Committee. This culminates in the identification of the Group’s key business, financial, operational and compliance risks with associated action plans and controls to mitigate them where possible (and to the extent deemed appropriate taking account of costs and benefits). The output is then reviewed by the Board. Responsibility for managing each key risk and the associated mitigating controls is allocated to an individual executive within each division. As part of the process, senior executive management formally confirms that these key risks are being managed appropriately within their operations and that controls have been examined and are effective. The confirmations and any exceptions are discussed at the Audit Committee and Corporate Responsibility Committee once a year.

During the year ended 31 March 2012, the Board of directors and the Group Executive Committee undertook an exercise to consider the nature and extent of the Group’s risk appetite. The results of this exercise are used as part of the Group’s strategic planning activities, and in considering ongoing mitigating actions. The Group’s risk management process continues to follow the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Enterprise Risk framework. The COSO framework provides a process to manage the risk of failure to achieve business objectives and assurance against material loss or misstatement.

KEY RISKS

Key risks and uncertainties identified as part of the risk management process undertaken during the year, together with some of the mitigating actions that we are taking, are set out below. It is not possible to identify or anticipate every risk that may affect the Group. Our overall success as a global business depends, in part, upon our ability to succeed in different economic, social and political environments and to manage and to mitigate these risks.

Failure to act safely and to maintain the safe and continuous operation of our facilities

The safety of our employees, contractors, suppliers, and the communities in which we operate is paramount. We must operate within local laws, regulations, rules and ordinances relating to health, safety and the environment, including emissions. The operation of plants involves many risks, including failure or sub-standard performance of critical equipment; improper installation or operation of equipment; failure of a critical supplier; industrial action; and natural disasters. If these risks cause a temporary or permanent stoppage in production, this could have a material adverse effect on the Group.

Examples of mitigating actions

• Board annual review of Group safety/environmental performance/policies
• Central global function, Group Operational Efficiency and Sustainability, outside business unit control, sets and monitors standards
• Health and safety policies and procedures at all facilities with dedicated staff to ensure policies are embedded and measured
• Annual review of policies and performance by the Corporate Responsibility Committee
• Environmental management systems at production facilities
• Internal global compliance audits on safety and environment performed
• Business continuity capabilities in place to enable supply, as quickly as practicable, of product to customers from alternative sources in the event of a natural disaster or major equipment or plant failure backed by appropriate insurance coverage against business interruption
• Periodic review of critical supply or supplier dependencies in principal manufacturing operations.

Failure to grow in Speciality Food Ingredients

The Group’s strategy is to become the leading global provider of speciality food ingredients and solutions. Failure to deliver on this strategy over the longer term would impact the Group’s credibility and reputation.

Examples of mitigating actions

• Non-core businesses have been sold in order that the Group’s resources and investment growth capital are focused on speciality food ingredients
• Three platforms have been established in Innovation and Commercial Development – sweeteners, texturants and health and wellness – to drive new product development and innovation in speciality food ingredients
• New global Commercial and Food Innovation Centre opened in Chicago to promote closer collaboration with speciality food ingredient customers and to link with the global network of applications and technical services laboratories
• Investments are being made to increase the Group’s sales and technical resources in emerging markets
• Internal capabilities have been enhanced to help promote growth through acquisition
• Open Innovation team actively involved in scouting for breakthrough technologies and opportunities across industries and universities
• Programmes in place to recruit new staff and develop existing staff to upgrade skill sets particularly in customer-facing areas and innovation.

Failure to identify important consumer trends and innovate could impact the business’s ability to grow

Falling behind the curve on emerging dietary trends and/or an inability to innovate could impact the delivery of the Group’s strategy. This would impact its performance and reputation.

Examples of mitigating actions

• Innovation and Commercial Development team works closely with customers and advisors to identify emerging trends
• Consumer-facing research to ensure we are aware of consumers’ needs and expectations
• Global key account managers in place for major customers
• New Commercial and Food Innovation Centre in Chicago enables scientists, marketing, sales and technical experts to collaborate more closely with customers and to link with the global network of applications and technical services laboratories
• Recruitment and training policies in place to strengthen and upgrade staff skill sets.

Failure to maintain the quality of our products and high standards of customer service

The safety of consumers of our products is critical. Poor quality or sub-standard products or poor customer service could have a negative impact on our reputation and relationships with customers.

Examples of mitigating actions

• Central global function, Group Operational Efficiency and Sustainability, manages Group-wide quality process and procedures
• Product safety and quality policies and procedures in place to prevent contamination
• Policies and procedures reviewed annually by the Corporate Responsibility Committee
• Dedicated staff at all locations to ensure policies are embedded and measured
• Third-party audits completed
• Internal global compliance audits on food safety undertaken
• Recall simulation exercises undertaken.

Failure to attract, develop and retain key personnel

Performance, knowledge and skills of employees are central to success. We must attract, integrate and retain the talent required to fulfil our ambitions and deliver the Group’s strategy. Inability to retain key knowledge and adequately plan for succession could have a negative impact on Company performance.

Examples of mitigating actions

• Remuneration policies designed to attract, retain and reward employees with ability and experience to execute Group strategy
• Talent strategy to provide opportunities for employees to develop careers
• Single global performance appraisal process and system in place.

Non-compliance with legislation and regulation

The Group operates in diverse markets and therefore is exposed to a wide range of legal and regulatory frameworks. We must understand and comply with all applicable legislation. Any breach could have a financial impact and damage our reputation.

Examples of mitigating actions

• Changes in law and regulation in such areas as health and safety, environment, quality, food and corporate governance are regularly monitored and reviewed
• Legal teams maintain compliance policies in areas such as antitrust, and anti-corruption laws; and provide ongoing training to employees
• External consultants provide quarterly reports on regulatory change.

Fluctuations in prices, offtake and availability of raw materials, energy, freight and other operating inputs

Margins may be affected by fluctuations in crop prices due to factors such as harvest and weather conditions, crop disease, crop yields, alternative crops and co-product values. In some cases, due to the basis for pricing in sales contracts, or due to competitive markets, we may not be able to pass on to customers the full amount of raw material price increases or higher energy, freight or other operating costs.

Examples of mitigating actions

• Strategic relationships with suppliers and trading companies
• Multiple-source supply agreements for key ingredient supplies
• Balanced portfolio of supply and tolling contracts in operation with customers to manage balance of raw material prices and product sales prices and volume risks
• Raw material and energy purchasing policies to provide security of supply
• Derivatives used where possible to hedge exposure to movements in future prices of commodities.

Failure to protect intellectual property

Our commercial success depends, in part, on obtaining and maintaining all kinds of protection including patents for certain products and technology.

Examples of mitigating actions

• Group legal department, supported by expert patent lawyers, monitors all patents
• Group Intellectual Property (IP) committee in place, chaired by the President of Innovation and Commercial Development, to oversee the Group’s IP management
• Dedicated Director of IP in place
• Organised and secure process for identifying and recording innovations, trade secrets and potential patentable ideas.

Competitors may achieve significant advantage through technological step change or higher service levels

Competitors could introduce a major technological step change, such as significantly improving the efficiency of a production process and lowering costs (and thereby commoditising products); or introduce a new product with better functionality which in turn could lead to a decline in our sales and/or profitability. We must ensure we exceed or at least match competitors’ service and quality performance.

Examples of mitigating actions

• Teams within the Global Business Units produce innovations in product development, applications, manufacturing technology and customer services
• Global key account managers in place for major customers
• Open Innovation team actively involved in scouting for breakthrough technologies and opportunities across industries and universities
• Improved customer relationship management capabilities as part of the programme to implement a common global IS/IT platform and global support services.

Failure to implement the Group’s programme to transform its operational capabilities

The Group has committed to a programme to transform its operational capabilities, primarily by implementing a common global IS/IT platform and global support services. If this programme is not implemented as planned, this would have an adverse impact on the Group’s ability to achieve its strategy.

Examples of mitigating actions

• Dedicated resources allocated to the project
• Programme subject to both internal and external audit and review
• Formal steering committee (executive management) and Board/Audit Committee review of project progress against agreed milestones and timelines.

Failure to counter negative perceptions of the Group’s products

We must be fully prepared to counter unexpected/ unfounded negative publicity about our products.

Examples of mitigating actions

• Innovation and Commercial Development and regulatory experts substantiate relevant product claims
• Media relations department monitors Group press coverage and has action plans to deal with any negative publicity
• Participation in trade organisations and industry-wide initiatives to promote and protect our products.

Failure to manage the balance sheet, particularly during periods of economic uncertainty, and deliver key projects

We must manage our finances within strictly controlled parameters, particularly when external financial conditions are uncertain and highly changeable. The change programme currently being undertaken by the Group consists of a number of projects which, if not delivered successfully, could impact the Group’s performance and reputation.

Examples of mitigating actions

• Capital expenditure procedures to control and monitor allocation and spend
• All new investments are evaluated against clear strategic and financial criteria with greater scrutiny and clear execution milestones for approved investments
• Significant projects approved and monitored by the Board
• Dedicated resources allocated to major or key projects
• External resources and expertise used where required or as appropriate
• Exposure to liquidity risk is managed by ensuring access is maintained to a wide range of funding sources, and effective management of our cash resources
• Net debt and working capital levels monitored constantly and reported monthly to the Board.

Failure to maintain an effective system of internal financial controls

Without effective internal financial controls, we could be exposed to financial irregularities and losses from acts which could have a significant impact on the ability of the business to operate. We must safeguard business assets and ensure accuracy and reliability of records and financial reporting.

Examples of mitigating actions

• Policies ensure that key tasks are segregated to safeguard assets
• Detailed internal finance and capital expenditure manuals set out procedure
• Full balance-sheet reconciliation process
• Group financial performance monitored with monthly Board reports and regular forecasting
• Chief Executive and Chief Financial Officer undertake detailed quarterly business and financial reviews
• Annual review of effectiveness of internal controls
• Internal audit function provides assurance.

APPENDIX B

DIRECTORS’ RESPONSIBILITY STATEMENT

The following statement is extracted from page 62 of the Annual Report 2012:

Each of the directors, whose names and functions are listed on pages 36 and 37, confirms that, to the best of his or her knowledge:

• the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, and the Parent company financial statements in accordance with UK Accounting Standards, give a true and fair view of the assets, liabilities, financial position and profit of the Group and Parent; and
• the business review contained in the directors’ report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principle risks and uncertainties that it faces.

APPENDIX C

RELATED PARTY DISCLOSURES

The following is extracted from Note 40 on page 111 of the Annual Report 2012:

Identity of related parties

The Group has related party relationships with its subsidiaries, joint ventures and associates, the Group’s pension schemes and with key management being its directors and executive officers. No related party relationships with close family members of the Group’s key management existed in the current or comparative year.

Subsidiaries, joint ventures and associates

Transactions entered into by the Company with subsidiaries and between subsidiaries as well as the resultant balances of receivables and payables are eliminated on consolidation and are not required to be disclosed. The Group’s share of transactions entered into by the Company and its subsidiaries with joint ventures and between joint ventures as well as the Group’s share of the resultant balances of receivables and payables are eliminated on consolidation. For transactions and balances with joint ventures, there is an element which is not eliminated on consolidation relating to the external joint venture partner which is required to be disclosed. Transactions and balances with joint ventures are as follows, there are no such transactions with associates:

	Â	Â	Â	31 March
Continuing		2012 £m		2011 £m
Sales of goods and services
– to joint ventures		164		150
Purchases of goods and services
– from joint ventures		289		221
Receivables
– due from joint ventures		23		15
Payables
– due to joint ventures		21		17
Financing
– loans to joint ventures		13		18
– deposits from joint ventures		36		25

The Group had no material related party transactions containing unusual commercial terms.

The Group provides guarantees in respect of banking facilities of a joint venture totalling £10 million (2011 – £10 million).

Key management

Key management compensation is disclosed in Note 9.

END