# Directors' report

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/LSE_ELM.L_2019/LSE_ELM.L_2019.mmd` · pages 102-108_

---

Directors' report

## DIRECTORS' REPORT

## Additional disclosures

The Directors present their report and the audited financial statements of the Company and the Group for the year ended 31 December 2019.

Information required to be disclosed in the Directors' report may be found below and in the following sections of the Annual Report and Accounts, in accordance with the Companies Act 2006 and the Listing Rule 9.8.4R of the Financial Conduct Authority.

<table><tr><td>Business model</td><td>Pages 20 to 21</td></tr><tr><td>Innovation, Growth &amp; Efficiency strategy</td><td>Pages 14 to 19</td></tr><tr><td>Dividend</td><td>Page 41</td></tr><tr><td>Results</td><td>Pages 38 to 43</td></tr><tr><td>Financial assets and liabilities</td><td>Page 134</td></tr><tr><td>Financial instruments</td><td>Page 134</td></tr><tr><td>Principal risks</td><td>Pages 50 to 52</td></tr><tr><td>R&amp;D activities</td><td>Pages 14 to 15</td></tr><tr><td>People</td><td>Pages 33 to 35</td></tr><tr><td>Greenhouse gas emissions</td><td>Page 30</td></tr><tr><td>Going concern</td><td>Page 53</td></tr><tr><td>Viability statement</td><td>Page 53</td></tr><tr><td>Long term incentive plans</td><td>Pages 153 to 155</td></tr></table>

## DIRECTORS

## Directors

The current Directors and their biographical details are detailed on pages 55 to 57. Nick Salmon will be stepping down from his role as Senior Independent Director at the AGM on 29 April 2020. John O'Higgins was appointed Non-Executive Director on 4 February 2020 and will be become Senior Independent Director after the AGM. Further information regarding the SID recruitment process can be found on page 73.

## Appointment and replacement of directors

The Articles give the Directors power to appoint and replace Directors. Under the terms of reference of the Nomination Committee, appointments are recommended by the Nomination Committee for approval by the Board. In line with the UK Corporate Governance Code, the Articles also require Directors to retire and submit themselves for election at the first annual general meeting ("AGM") following appointment and to retire at each subsequent AGM and to submit themselves for re-election at the following AGM. The service contracts of the Executive Directors and letters of appointment of the Non-Executive Directors are available for inspection at the Company's registered office.

## Directors' interests

Details of the Directors' interests in shares can be found in the Directors' remuneration report on pages 90 and 91.

## Directors' Powers

The Directors' powers are conferred on them by UK legislation and by the Company's Articles of Association (Articles). The Articles may only be amended by special resolution of the Company at general meeting of its shareholders.

## Directors' conflicts of interest

Ralph Hewins is in receipt of a conflict authorisation from the Company in respect of him acting as a trustee of the Elementis Group Pension Scheme.
The conflict authorisation enables Ralph Hewins to continue to act as a trustee notwithstanding that this role could give rise to a situation in which there is a conflict of interest. The Board considers that it is appropriate for the trustees of the UK pension scheme to benefit from the financial expertise of the CFO and that his contribution at trustees' meetings demonstrates the Board's commitment to supporting the UK pension scheme. The Board's conflict authorisation is subject to annual review and, under the terms of the conflict resolution, reciprocal provisions have been put in place with a view to safeguarding information that is confidential to the Group as well as to the trustees. Were a conflict of interest to arise, Ralph Hewins is required to excuse himself from reading the relevant papers and absent himself from participating in relevant discussions. Procedures are in place to ensure compliance with the Companies Act 2006. These procedures have been complied with during the year. Details of any new conflicts or potential conflict matters are submitted to the Board for consideration and where appropriate are approved. Authorised conflicts and potential conflict matters are reviewed on an annual basis.

## Directors' indemnities

In addition to the indemnity granted by the Company to Directors in respect of their liabilities incurred as a result of their office, a Directors' and Officers' liability insurance policy is maintained throughout the year. Neither the indemnity nor the insurance provides cover in the event that a Director has proven to have acted dishonestly or fraudulently. Similar arrangements also exist for Directors appointed to Group subsidiary entities.

## SHARES

## Share capital

As at 31 December 2019, the Company's issued share capital was 580,518,327 ordinary shares of £0.05 pence in issue, which carries voting rights of one vote per share. All of the Company's issued shares are fully paid up and rank equally in all respects. The rights attached to the shares, in addition to those conferred on their holders by law, are set out in the Company's Articles.

From time to time the ESOT holds shares in the Company for the purposes of various share incentive plans and the rights attaching to them are exercised by independent trustees, who may take into account any recommendation by the Company. As at 31 December 2019, the ESOT held 780,759 shares in the Company (2018: 828,787). A dividend waiver is in place in respect of all shares that may become held by the Trust.

Further details of the authorised and issued share capital during the financial year are provided in note 9 to the accounts on page 169.

## Purchase of shares

The Board has the power conferred on it by shareholders to purchase its own shares and is seeking renewal of that power at the forthcoming AGM within the limits set out in the Notice of Meeting.

## Save as you earn schemes

The UK savings-related share option scheme was launched in August 2016 and matured on 1 October 2019. The US savings-related share option scheme was launched in September 2017 and matured on 7 September 2019.

All permanent employees who had completed at least six months' continuous service were invited to participate and make monthly savings contributions over a period of either two years for US participants and three or five years for UK participants. At the end of the savings term ('maturity date'), participants are given the choice of taking their money back, or to purchase shares at a 20% discount

<--- Page Split --->

of the market price set at the date of invitation and have six months in which to exercise their options.

## Substantial shareholders

As at 31 December 2019 and 4 March 2020, the following interests in voting rights over the issued share capital of the Company had been notified.

<table><tr><td></td><td>Ordinary shares</td><td>Percentage of issued share capital</td></tr><tr><td>APG Asset Management NV.</td><td>58,010,079</td><td>9.99</td></tr><tr><td>Ameriprise Financial, Inc. and its group</td><td>57,916,440</td><td>9.98</td></tr><tr><td>FMR LLC</td><td>51,605,069</td><td>8.89</td></tr><tr><td>Aberdeen Asset Managers Limited</td><td>23,056,448</td><td>4.97</td></tr><tr><td>Schroders plc</td><td>22,517,387</td><td>4.91</td></tr><tr><td>AXA Investment Managers S.A.</td><td>23,515,878</td><td>4.05</td></tr><tr><td>BlackRock, Inc.</td><td>Below 5%</td><td>Below 5%</td></tr></table>

## EMPLOYEES

## Employment policies and equal opportunities

Elementis policies seek to create a workplace that has an open atmosphere of trust, honesty and respect. Harassment or discrimination of any kind based on race, colour, religion, gender, age, national origin, citizenship, mental or physical disabilities, sexual orientation, veteran status, or any other similarly protected status is not tolerated. This principle applies to all aspects of employment, including recruitment and selection, training and development, promotion and retirement.

Employees are free to join a trade union or participate in collective bargaining arrangements.

It is also Group policy for employees who have a disability to reasonably accommodate them, where practicable, and to provide training, career development and promotion, as appropriate.

It is Group policy not to discriminate on the basis of any unlawful criteria and its practices include the prohibition on the use of child or forced labour.

Elements supports the wider fundamental human rights of its employees worldwide, as well as those of our customers and suppliers, and further details are set out on pages 31 to 35.

## Employee communications and involvement

The Company is committed to employee involvement throughout the business. Further information regarding employee engagement can be found on page 34 and 63.

## ADDITIONAL INFORMATION

## Going concern and viability statement

The Directors consider that the Group and the Company have adequate resources to remain in operation for the foreseeable future and have therefore continued to adopt the going concern basis in preparing the financial statements. The Code requires the Directors to assess and report on the prospects of the Group over a longer period. This longer term viability statement is set out on page 53.

## Significant agreements – change of control

There are few significant agreements which the Company is party to that take effect, alter or terminate in the event of change of control of the Company. The Company is a guarantor under the Group's $200m and €172m long term loans and $375m revolving credit facility and, in the event of a change of control, any lender among the facility syndicate, of which there are 12 with commitments ranging from $25m to $93m, may withdraw from the facility and that lender's participation in any loans drawn down are required to be repaid.

The rules of the Company's various share incentive schemes set out the consequences of a change of control of the Company on the rights of the participants under those schemes. Under the rules of the respective schemes, participants would generally be able to exercise their options on a change of control, provided that the relevant performance conditions have been satisfied and, where relevant, options are not exchanged for new options granted by an acquiring company.

## Auditors

Deloitte LLP have indicated their willingness to remain in office as our auditors and following recommendation by the Audit Committee, a resolution regarding their re-appointment will be included within the Notice of Meeting for the 2020 AGM.

The Directors confirm that, so far as they are aware, there is no relevant audit information of which the Company's auditors are unaware and each Director has taken all steps they are ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

## Annual General Meeting

The 2020 AGM will be held at 9.00am on Wednesday 29 April 2020 at the offices of Herbert Smith Freehills LLP, Exchange House, Primrose Street, London, EC2A 2EG. Details of the resolutions to be proposed at the AGM are set out in the Notice of AGM which has been sent to shareholders and is available on the Elementis corporate website: www.elementis.com

## Political donations

The Group made no political donations during the year (2018: nil).

## Branches

As a global Group, Elementis' interests and activities are held or operated through subsidiaries, branches, joint arrangements or associates which are established in, and subject to the laws and regulations of, many different jurisdictions.

## Other information

Information about financial risk management and exposure to financial market risks are set out in Note 23 to the financial statements on pages 139 to 142.

## Events after the balance sheet date

There were no significant events after the balance sheet date.

On behalf of the Board.

## Laura Higgins

Group Company Secretary
4 March 2020