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 2015;

2. Notice of Annual General Meeting 2015;

3. Notice of Availability; and

4. Proxy Form.

The Annual Report 2015, Notice of Annual General Meeting 2015 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 28 May 2015. 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 2015 and the page numbers in the text refer to the page numbers in that document.

Jaime Tham

Deputy Company Secretary

29 June 2015

APPENDIX A

RISK FACTORS

The following information is set out on pages 34 to 36 of the Annual Report 2015.

Risks

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

The Board 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 risks.

Approach

Annual process to identify risks

The Group-wide risk management and reporting process helps us to identify, assess, prioritise and mitigate risk. It follows the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Enterprise Risk framework.

Our process is both bottom-up and top-down. The bottom-up aspect of the process involves a rolling programme of workshops, facilitated by the risk management team, held around the Group. During these workshops, we identify current and forward-looking risks which are collated and reported through functional and divisional levels to the Group Executive Committee. The top-down aspect involves the Board assessing what it believes to be the key risks facing Tate & Lyle. We combine the results of these processes to identify the Group’s key business, financial, operational and compliance risks, and then develop action plans and controls to mitigate them as far as possible, to the extent deemed appropriate taking account of the Group’s risk appetite. These risks are then reviewed again by the Board. This process takes place annually. As part of this annual risk assessment process, the Board also reviews emerging and ‘black swan’ risks facing the Group. The process reviews risks over a time period of between two and five years.

Managing risks

Individual executives in each division are assigned responsibility for managing key risks and their associated mitigating controls. As part of the process, senior executive management formally confirms once a year 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, and, where appropriate, reported to the Board.

The Board and the Group Executive Committee undertake an annual exercise to consider the nature and extent of the Group’s risk appetite. The results of this exercise, which includes a review of how the previous year’s risk appetite had been applied in practice, are used as part of our strategic planning activities, and in setting ongoing mitigating actions.

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 we are taking, are set out on pages 35 and 36. However, it is not possible to identify or anticipate every risk that may affect the Group.

The individual risks in relation to the operational and supply chain disruption which occurred during the year were identified as part of the risk management process. However, the scale, velocity and combination of these risks significantly increased their overall impact on the Group. As a result, we reviewed our processes and made some enhancements, for example, by placing a greater focus on those areas and behaviours which could potentially trigger risk combinations in the future.

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 licence to operate, liability payments and costs arising from injuries or damage and damage to reputation.

How do 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

Following a challenging year, in mid-2014 we hired external safety auditors to carry out a thorough audit of safety at all our major locations. This allowed us to understand how each site was following our procedures and permit systems, and what improvements were needed. During the year we began carrying out their recommendations, particularly with regards to behavioural safety and leadership by example. This is helping our teams improve their understanding of and approach to safety.

Strategy

Failure to grow in speciality food ingredients

Tate & Lyle’s strategy is to become the leading global provider of speciality food ingredients and solutions. Our ability to deliver the strategy may be affected by a number of factors such as delivering growth in emerging markets, acquisitions, customer 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.

How do we manage the risk?

• Investments to increase our sales and technical resources, including in emerging markets
• New staff recruited and development of existing staff to upgrade skill sets, particularly in customer-facing areas and innovation
• Enhancement of internal capabilities to help promote growth through acquisition
• Establishment of a 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.

How do we manage the risk?

• Innovation and Commercial Development (ICD) team works closely with customers and other external organisations to identify emerging trends
• Open innovation team actively scouts for breakthrough technologies and opportunities across industries and universities
• Global Marketing organisation in place to provide support for new product launches as well as core business
• 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, other venture funds, universities and entrepreneurs

Quality

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.

How do we manage the risk?

• Strict quality control procedures and testing of all product lines to ensure products are released only with full quality control clearance
• Quality policies, procedures and performance reviewed regularly by the Corporate Responsibility Committee
• Third-party audit programme supplemented by internal global compliance audits
• Recall simulation exercises undertaken

People

Failure 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 on the Company’s performance.

How do 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 skill 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, IS/IT and compliance

Failure to comply with legislation and regulation and to protect the integrity of our data and information systems

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.

How do we manage the risk?

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

Operations (New key risk since last year’s Annual Report)

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 system to avoid disruption to the supply chain and an inability to service our customers. Failure to do so could have a material adverse effect on our performance.

How do we manage the risk?

• 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
• Programme in place to improve global supply chain processes
• New protocols implemented to enhance plants’ ability to operate in extreme cold conditions

Raw materials

Fluctuations in prices 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 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.

How do 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
• 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 possible) to hedge and manage raw materials and co-product price exposures

Food regulation/consumer concerns (New key risk since last year’s Annual Report)

Changes in consumer or government perception of our products and regulatory risks impacting freedom to operate

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, biotechnology in crops or other material for food use) is supported by credible sources, clearly communicated and understood by relevant regulatory authorities. Failure to do so may restrict the markets for our products.

How do 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 manage the balance sheet, particularly during periods of economic uncertainty

We must manage our finances within strictly controlled parameters, particularly when external financial conditions are uncertain and volatile. Our existing transformation programme consists of a number of capital expenditure projects which, if not delivered successfully, could negatively affect our performance and reputation.

How do we manage the risk?

• Capital expenditure procedures to control and monitor allocation and spend
• All new investments evaluated against clear strategic and financial criteria; those approved are reviewed for execution against milestones
• External resources and expertise used where required
• Exposure to liquidity risk is managed by maintaining access to a wide range of funding sources, and by effective management of our cash resources

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.

How do we manage the risk?

• Finance policies and standards are in place supported by procedures for key finance processes, for example, capital expenditure
• Finance risk assessments are undertaken and key finance risks monitored through the Treasury Risk Committee
• Chief Executive and Chief Financial Officer undertake detailed quarterly business and financial reviews
• Additional control oversight, monitoring and processes are introduced through periods of significant change, for example, the implementation of the new global IS/IT system
• Core controls embedded in systems and processes are routinely reviewed for effectiveness, for example, segregation of duties to control access rights within Group systems

Shareholder expectations (New key risk since last year’s Annual Report)

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 Company’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.

How do we manage the risk?

• Implementation of new business performance management capability and cycle to improve performance management and steer 2016 Annual Operating Plan delivery
• New forward disclosure framework to improve presentation of business results
• Investor Relations team in place with improved communications and disclosure framework

APPENDIX B

DIRECTORS’ RESPONSIBILITY STATEMENT

Each of the directors, whose names and functions are listed on pages 44 and 45, 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 and profit of the Group and Parent Company
• 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 38 on page 140 of the Annual Report 2015:

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 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.

Year ended 31 March
  Continuing operations	Â	2015 £m	Â	Restated* 2014 £m
Sales of goods and services	Â		Â
– to joint ventures	Â	142	Â	154
Purchases of goods and services
– from joint ventures	Â	265	Â	304

At 31 March
Â	Â	2015 £m	Â	Restated* 2014 £m
Receivables	Â		Â
– due from joint ventures	Â	24	Â	10
Payables
– due to joint ventures	Â	16	Â	21
Financing
– loans to joint ventures		-		8
– deposits from joint ventures	Â	40	Â	12

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 £8 million (2014 – £9 million).

Key management compensation

Key management compensation is disclosed in Note 8.

* Restated for the adoption of IFRS 11 ‘Joint Arrangements’ (see Note 42).

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