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 2016;

2. Notice of Annual General Meeting 2016;

3. Notice of Availability; and

4. Proxy Form.

The Annual Report 2016, Notice of Annual General Meeting 2016 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 26 May 2016. 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 2016 and the page numbers in the text refer to the page numbers in that document.

Lucie Gilbert

Company Secretary

20 June 2016

APPENDIX A

RISK FACTORS

The following information is set out on pages 31 to 33 of the Annual Report 2016.

Principal risks

Principal risks and uncertainties identified as part of the risk management process undertaken during the year, together with some of the mitigating actions we are taking, are described on pages 32 and 33. However, it is not possible to identify or anticipate every risk that may affect the Group.

Safety

Failure to act safely and to maintain the safe 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. Failure to act safely may give rise to fines or penalties for breach of safety laws, interruptions in operations or loss of license to operate, liability payments and costs arising from injuries or damage and damage to reputation.

Examples of how we manage the risk

• Health and safety policies and procedures at all facilities with dedicated staff to ensure they are embedded and measured
• Regular review of performance and policies by the Corporate Responsibility Committee
• Maintenance of suitable insurance programme
• Programme of global compliance audits; senior executives also undertake annual executive audits at most sites
• Process safety management system in place to manage use of hazardous chemicals
• SafeStart^® behavioural safety training programme rolled out across plants, offices and labs

Strategy

Failure to grow in speciality food ingredients

Tate & Lyle’s strategy is to become a leading global provider of speciality food ingredients and solutions. Our ability to deliver that strategy may be affected by a number of factors such as delivering growth in emerging markets, acquisitions, customers’ readiness to adopt new ingredients and incorporate them in new product launches, competitor actions, and growing key product or product families. Failure to deliver our strategy over the longer term would negatively affect our credibility, reputation and profitability.

Examples of how we manage the risk

• Investments to increase sales and technical resources, particularly in emerging markets
• New staff recruited and existing staff developed to upgrade skill sets in customer-facing areas and innovation
• Enhancement of internal capabilities to promote growth through acquisition and partnerships
• Global programme to enhance customer account management, planning and execution

Innovation

Failure to innovate and commercialise new products

Failure to identify important consumer trends and provide innovative solutions, and the inability to successfully commercialise new products, could impact the delivery of our strategy. This would affect our performance and reputation.

Examples of how we manage the risk

• Innovation and Commercial Development team conducts research and works closely with customers and other external organisations to identify emerging consumer trends
• Open innovation team actively scouts for breakthrough technologies and opportunities across industries and universities
• Global marketing organisation provides support for new product launches and consumer and category insight
• Prioritisation of ‘partnership’ opportunities with customers to accelerate development cycles and time to market for new ingredients
• Tate & Lyle Ventures invests in early-stage companies in the areas of food sciences and technologies by partnering with research institutions, entrepreneurs and other venture funds

Quality

Failure to maintain the quality and safety 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 consumer safety or our reputation and relationships with customers.

Examples of how we manage the risk

• Strict quality control and product testing procedures to ensure products are released only with full quality control clearance
• Quality policies, procedures and performance reviewed regularly by the Corporate Responsibility Committee
• Immediate response Recall Committee that would meet within hours in case of a potential recall event
• Third-party audit programme supplemented by internal global compliance audits
• Regular recall simulation exercises
• Global Operations manages customer service as part of integrated end-to-end supply chain process

People

Inability to attract, develop, engage and retain key personnel

Performance, knowledge and skills of employees are central to our success. We must attract, integrate, engage and retain the talent required to deliver our strategy, and have the appropriate processes and culture in place. Being unable to retain key people and adequately plan for succession could have a negative impact our performance.

Examples of how we manage the risk

• Remuneration policies designed to attract, retain and reward employees with ability and experience to execute Group strategy
• Talent development strategy to provide opportunities for employees, as well as training to close skills gaps
• Single global performance management system and talent planning processes in place
• Greater focus by the Board on succession planning for business-critical roles
• Measurement of progress against cultural objectives, for example, global employee surveys

Legal and compliance

Breach of legal or regulatory requirements

We operate in a variety of markets and are therefore 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 how we manage the risk

• Regular monitoring and review of changes in law and regulation in areas such as health and safety, environment, quality, food safety, corporate governance and data protection
• Legal teams maintain compliance policies in areas such as anti-trust and anti-corruption law; and provide ongoing training to employees

Operations

Failure to maintain the continuous operation of our plant network and supply chain

The operation of plants involves many risks which could cause temporary or permanent breaks in production. We must have a robust sales and operations planning process to avoid disruption to the supply chain and negative impacts on our ability to service our customers. Failure to do so could have a material adverse effect on our performance and reputation.

Examples of how we manage the risk

• Preventive maintenance programme in place across plant network
• Programme in place to improve global supply chain processes
• 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
• Dedicated internal resources allocated to key projects in conjunction with business teams to ensure business continuity is not compromised. External resources and expertise used where required

Cyber security (new Principal risk since last year’s Annual Report)

Cyber security breach leads to the misuse of information systems, or data

A cyber security breach, whether as a result of human error, deliberate action or the failure of technology systems, could result in unauthorised access to information systems, technology and data or data belonging to an employee, customer or other third party. This could cause harm to our assets, loss or misuse of data or sensitive information, business disruption, legal liabilities and damage to our reputation.

Examples of how we manage the risk

• Cyber security enhancement programme in place focused on strengthening people, process and technology defences
• Continuous compulsory cyber security training
• Cyber security breach scenario exercises undertaken
• Advanced perimeter defences in place
• Continuous vulnerability detection and defences
• Separation of systems within plant network
• Third-party Security Operations Centre providing 24/7 security monitoring, security event correlation and threat counter-measures

Raw materials

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

Our margins may be affected by fluctuations in crop prices due to factors such as alternative crops, co-product values and the variability of local or regional harvests caused by, for example, weather conditions, crop disease, climate change, and crop yields. 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 increase in raw material prices or higher energy, freight or other operating costs. Additionally, margins may be affected by customers not taking expected volumes.

Examples of how we manage the risk

• Strategic relationships with suppliers and trading companies including multi-year agreements
• 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
• Continuously evaluating expanding network of corn elevators to enhance security of supply
• New or back-up supply sources in place in case primary suppliers face localised challenges
• Use of derivatives and forward contracts where practical, to hedge and manage raw material and co-product price exposures

Food regulation and consumer concerns

Changes in consumer or government perception of our products and regulatory risks

Our freedom to operate may be affected by changes in food regulation, consumer concerns, political campaigns targeted at specific ingredients or technologies or other factors that may impact the regulatory status or perception of our products or of their functionality, efficacy or use. We must ensure that the science behind our ingredients (for example, health claims, nutritional impact) is supported by credible sources, clearly communicated and understood by relevant regulatory authorities. Failure to do so may restrict the markets for our products.

Examples of how we manage the risk

• Global regulatory team, supported by external consultants, monitors local regulatory requirements affecting our products
• Global nutrition team initiates and monitors research and publications concerning the use and functionality of our ingredients and maintains global network of health and nutrition clinicians, academics and experts
• Membership of trade organisations to provide access to broader sources of information and to ensure, where appropriate, a single voice for the industry on regulatory and public interest issues affecting our ingredients
• Maintenance of relations with regulatory authorities
• Providing clear information on ingredients’ provenance and traceability
• Research Advisory Group chaired by a non-executive director comprising leading scientific experts to review selected critical aspects of the Group’s innovation activities and provide guidance

Finance

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 the accuracy and reliability of our records and financial reporting.

Examples of how we manage the risk

• Finance policies and standards are in place supported by procedures for key finance processes, for example, capital expenditure
• Finance risks are monitored and managed through a number of forums, for example, the Treasury Risk Committee
• Chief Executive and Chief Financial Officer undertake detailed quarterly business and financial reviews
• Core controls were reviewed during the year for existence and effectiveness

Shareholder expectations

Failure to manage shareholders’ expectations

We must communicate a clear strategic vision, deliver the annual operating plan and provide accurate and timely information to the market to enable the investment community to efficiently assess the Group’s value and reduce the risk of uncertainty and volatility in the share price. Failure to do so could impact our reputation and credibility with shareholders.

Examples of how we manage the risk

• New business performance management process in place to improve performance management and steer 2017 Annual Operating Plan delivery
• Revised disclosure framework to improve presentation of business results implemented
• Investor Relations team in place with improved communications and disclosure framework
• Capital Markets Days held to provide more detail of strategy execution and how the business works

APPENDIX B

DIRECTORS’ RESPONSIBILITY STATEMENT

Each of the directors, whose names and functions are listed on pages 42 and 43, confirm that, to the best of his or her knowledge:

• The Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s and the Group’s performance, business model and strategy
• 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 of the Group and Parent Company and of the profit of the Group
• The Strategic Report and the Directors’ Report include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

APPENDIX C

RELATED PARTY DISCLOSURES

The following is extracted from Note 36 on page 145 of the Annual Report 2016:

Identity of related parties

The Group has related party relationships with its joint ventures and associates, the Group’s pension schemes and with key management being its directors and executive officers. No related party transactions with close family members of the Group’s key management occurred 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. Transactions and balances with and between joint ventures are as shown below. There are no such transactions with associates.

Â	Â	Year ended 31 March
Â		2016 £m	Â	2015 £m
Sales of goods and services
– to joint ventures		137		142
Purchases of goods and services
– from joint ventures		132		265

	Â
Â		At 31 March
Â		2016 £m	Â	2015 £m
Receivables
– due from joint ventures		12		24
Payables
– due to joint ventures		-		16
Financing
– deposits from joint ventures		-		40

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

In 2015, the Group provided guarantees in respect of banking facilities of the Eaststarch joint venture totalling £8 million. There were no such arrangements in the current year as the joint venture had been disposed of.

Key management compensation

Key management compensation is disclosed in Note 10.

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