# Directors' report

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/LSE_ELM.L_2020/LSE_ELM.L_2020.mmd` · pages 115-121_

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Directors' report

## DIRECTORS' REPORT

The Directors present the Annual Report and Accounts together with the audited consolidated financial statements of the Company, and the Group, for the year ended 31 December 2020.

The Directors' Report comprises of pages 114 to 115 of this report, together with the information required to be disclosed referred to below which are incorporated by reference, in accordance with the Companies Act 2006 and the Listing Rule 9.8.4R of the Financial Conduct Authority. The Company, in accordance with Section 414(C)(11) of the Companies Act 2006, has chosen to set out certain information required to be included in the Directors' Report in the Strategic Report, the Governance Report, set out on pages 64 to 117 and the Consolidated Financial Statements. The destinations for such information are also shown in the table below:

<table><tr><td>Carbon emissions, energy consumption and energy efficiency</td><td>Page 34</td></tr><tr><td>Corporate Governance Framework</td><td>Page 70</td></tr><tr><td>Directors&#x27; share interests and remuneration</td><td>Pages 105, 109</td></tr><tr><td>Directors&#x27; training and development</td><td>Page 77</td></tr><tr><td>Employee diversity, equality and inclusion</td><td>Page 40</td></tr><tr><td>Employee engagement</td><td>Page 74</td></tr><tr><td>Innovation, Growth &amp; Efficiency strategy</td><td>Page 24</td></tr><tr><td>Financial instruments and financial risk management</td><td>Page 56</td></tr><tr><td>Going concern statement</td><td>Page 63</td></tr><tr><td>Long term incentive plans</td><td>Page 88</td></tr><tr><td>Membership of Board</td><td>Page 66</td></tr><tr><td>Modern Slavery Statement</td><td>Page 41</td></tr><tr><td>Non-financial information</td><td>Page 44</td></tr><tr><td>Principal risks</td><td>Page 59</td></tr><tr><td>Results and Dividend</td><td>Page 45</td></tr><tr><td>Section 172 Statement</td><td>Page 20</td></tr><tr><td>Stakeholder engagement</td><td>Page 16</td></tr><tr><td>Statement of Directors&#x27; Responsibilities</td><td>Page 117</td></tr><tr><td>Viability Statement</td><td>Page 63</td></tr></table>

## DIRECTORS

## Board of Directors

The current Directors and their biographical details are detailed on pages 66 and 67. Sandra Boss stepped down from her role as Non-Executive Director 29 April 2020.

## 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' 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 Boards commitment to supporting the UK pension scheme. The Board's conflict authorisation is subject to annual review and, under the terms of the conflict authorisation, reciprocal provisions have been put in place with a view of 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 conflicts 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 the 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 been proven to have acted dishonestly or fraudulently. Similar arrangements also exist for Directors appointed to Group subsidiary entities.

## Directors' share interests

The Directors' interests in the ordinary shares and options of the Company can be found within the Directors' Remuneration report on pages 109 and 110.

## SHARES

## Share Capital

As at 31 December 2020, the Company's issued share capital was 580,801,241 ordinary shares of 5 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 2020, the ESOT held 621,236 shares in the Company (2019: 780,759). 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 17 to the accounts on page 151.

## Rights and obligations attaching to shares

The rights and obligations attaching to the shares are set out in the Articles. The Articles may only be changed by a special resolution passed by the shareholders.

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## Voting rights

Shareholders are entitled to attend and vote at any general meeting of the Company and a poll will be held on every resolution. Every member present in person or by proxy has, upon a poll, one vote for every share held. In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the Register of Members in respect of the joint holding.

## Dividends

The Directors are not recommending the payment of a final dividend this year.

## Authority to purchase own 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.

## Employee share plans

The Company operates a number of employee share plans, details of which are set out in note 26 to the consolidated financial statements and on page 108 of the Directors' Remuneration report. All of the Company's employee share plans contain provisions relating to change of control. On a change of control, options and awards granted to employees may vest and become exercisable, subject to the satisfaction of any applicable performance conditions at the time.

## Substantial shareholders

In accordance with the Disclosure Guidance and Transparency Rules (DTR), as at 31 December 2020 and 23 March 2021, the following interests in voting rights over the issued share capital of the Company had been notified: Information provided to the Company under the DTR is publicly available via the regulatory information service and on the Company's website.

<table><tr><td></td><td>Ordinary shares</td><td>Percentage of issued share capital</td></tr><tr><td>APG Asset Management N.V</td><td>61,362,335</td><td>10.56</td></tr><tr><td>Ameriprise Financial, Inc. and its group</td><td>57,916,440</td><td>9.98</td></tr><tr><td>SFM UK Management LLP</td><td>33,337,634</td><td>5.74</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><tr><td>FMR LLC</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 and participate in collective bargaining arrangements.

It is also a 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 prohibition on the use of child or forced labour.

Elementis supports the wider fundamental human rights of its employees worldwide, as well as those of our customers and suppliers, and further details set out in the ESG section on pages 38 and 41.

## Employee communications and involvement

The Company is committed to employee involvement throughout the business. Employees are kept informed of the performance and strategy of the Group via email. Telephone conference calls are held by the CEO to employees worldwide and these serve as an informal forum for employees to ask topical questions about the Group. Further information can be found on page 74.

## Research and development activities

Innovation is a core strategic priority. Our innovation expertise and capability is focused on delivering products that address our customers' needs.

As at 31 December 2020, 90 employees were engaged in global research and development activities. For further information on our approach to innovation, please refer to page 24.

During the year ended 31 December 2020, costs relating to research and development activities were \(7.2m (2019: \)7.8m).

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## 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 63.

## Audit Information

Each Director of the Company on 23 March 2021, the date this Directors' Report was approved, confirms that so far as they are aware, there is no relevant audit information of which the Company's auditor, Deloitte LLP, is unaware and that they have taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

## Auditors

Following recommendation by the Audit Committee, resolutions to re-appoint Deloitte LLP as auditors and to authorise the Audit Committee to fix their remuneration will be proposed at the forthcoming AGM. The remuneration of the auditors for the year ended 31 December 2020 is fully disclosed in note 7 to the Financial Statements on page 146.

## Annual General Meeting

The 2021 AGM will be held on Thursday 13 May 2021. 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 Company's website: www.elementis.com

## Amendments to the Company's articles of association

Any amendments to the Articles of Association of the Company may be made in accordance with the provisions of the Companies Act 2006 by way of special resolution.

Significant agreements – change of control and takeover bids
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.

The Company is required to disclose any significant agreements that take effect, alter or terminate on a change of control of the Company following a takeover bid. In the event of a takeover or other change of control (usually excluding an internal reorganisation), outstanding awards under the Group's incentive plans vest and become exercisable (including Deferred Bonus Share Plan (DBSP) cash awards and Long Term Incentive Awards (LTIP) awards), to the extent any performance conditions (if applicable) have been met, and subject to time pro-rating (if applicable) unless determined otherwise by the Board in its discretion, in accordance with the rules of the plans. In certain circumstances, the Board may decide (with the agreement of the acquiring company) that awards will instead be cancelled in exchange for equivalent awards over shares in the acquiring company.

## Political donations

The Group made no political donations during the year (2019: 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 the Group's financial risk management and exposure to financial market risks are set out in Note 23 to the financial statements on pages 158 to 161.

## Events after the balance sheet date

There were no significant events after the balance sheet date.

On behalf of the Board:

LAURA HIGGINS
COMPANY SECRETARY

23 March 2021