Tate & Lyle Annual Report 2003

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FY2003 Annual Report · Tate & Lyle

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ingredients of quality

Registered Office
Sugar Quay, Lower Thames Street
London EC3R 6DQ
Tel: 020 7626 6525
Fax: 020 7623 5213

Website
http://www.tateandlyle.com

Share Registrar
Lloyds TSB Registrars
The Causeway, Worthing
West Sussex BN99 6DA
For telephone enquiries please
phone 0870 600 3970
This is a Lloyds TSB Registrars
Helpline service which will
recognise the Company’s name.

ADR Depositary
The Bank of New York
Investor Relations Department
101 Barclay Street – 11th Floor
New York, NY 10286
Tel: 1 888 269 2377

North American Contact for
Annual Reports
Taylor Rafferty Associates, Inc.
205 Lexington Avenue
New York, NY 10016-6022
Tel: (212) 889 4350
Fax: (212) 683 2614

Stockbrokers
Hoare Govett Limited
250 Bishopsgate, London EC2M 4AA
Tel: 020 7678 8300

annual report 2003

Contents

1 introduction to Tate & Lyle
2 financial highlights

4 chairman’s statement
6 ingredients of quality
12 chief executive’s review
14 operating and financial review
21 corporate social responsibility
26 board of directors

28 directors’ report
30 corporate governance
33 directors’ remuneration report

41 financial contents
42 auditors’ report
50 notes to the financial statements
79 main subsidiaries and investments
81 information for investors
82 ten year review

84 index

Tate & Lyle PLC is a public limited company
listed on the London Stock Exchange
and registered in England. This is the report
and accounts for the year ended 31 March 2003.

Convenience

Efficiency

Taste

Texture

We add food
starches to
soups, gravies
and sauces.
page 6

We add food
starches and
sweeteners to
ready-made
meals. page 6

We add
sweeteners and
citric acid to
beverages.
page 8

We add
industrial
starches to
cardboard.
page 8

Health and
wellbeing

We add sorbitol
and zinc citrate
to toothpaste.
page 10

Designed and produced by Pauffley, www.pauffley.com
SPLENDA® is a trademark of McNeil-PPC., Inc.

Tate & Lyle annual report 2003

Tate & Lyle is a world leader in manufacturing ingredients
derived from carbohydrates. Our core competence is to take
corn, wheat or sugar and add value to these raw materials
through technology. As a result of continuous innovation
we offer an ever-wider product portfolio of versatile and
functional ingredients. These products include cereal
sweeteners, starches, sugars and citric acid.

Our customers include the world’s leading food and
beverage brands and our products also have wide applications
in the pharmaceutical, cosmetics, paper, packaging and
building industries. We offer quality products backed by strong
technical support. We help our customers differentiate their
products and brands from their competitors’ and make their
manufacturing processes more cost effective.

Tate & Lyle makes ingredients that touch people’s lives
in many ways. Our products help to add taste and texture to
everyday products used by millions of people. We help make
consumers’ lives more convenient and efficient, and our
ingredients contribute to their health and wellbeing.

Tate & Lyle operates more than 40 plants in 24 countries,
almost all in Europe and the Americas. We employ 6,700
people in our subsidiaries with a further 2,800 employed in
joint ventures. In the year to 31 March 2003, Tate & Lyle
achieved total sales of £3,167 million and profit1 of
£228 million.

1Profit before tax, exceptional items and goodwill amortisation.

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Tate & Lyle annual report 2003

financial highlights

The year to 31 March 2003 saw another significant
improvement in profitability building on the progress
the Group made last year.

Profit before tax, exceptional items and
goodwill amortisation
£ millions

Diluted earnings per share before exceptional
items and goodwill amortisation
pence

Dividends per share
pence

1Annualised.

228

159

113

209

171

18.3

17.8

17.8
17.81

17.2

Net debt
£ millions

22.1

14.8

33.0

29.9

28.4

471

639

805

963

986

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Tate & Lyle annual report 2003

performance

Total sales
Profit before tax, exceptional items
and goodwill amortisation
Profit before taxation
Diluted earnings per share before
exceptional items and goodwill amortisation
Diluted earnings per share
Dividend per share

2003
year

2002
year

£3 167m £3 944m - 20%

£228m
£187m

£159m
£159m

+ 43%
+ 18%

33.0p
27.7p
18.3p

22.1p
24.6p
17.8p

+ 49%
+ 13%
+ 2.8%

• Profit before tax, exceptional items and goodwill amortisation

increased by 43%

• Profit before tax increased by 18%
• Diluted earnings per share before exceptional items and goodwill

amortisation increased by 49% to 33.0p

• Diluted earnings per share increased by 13% to 27.7p
• Amylum integration benefits net of costs exceeded £25 million
• Interest cover increased from 3.3 times to 7.6 times (underlying 6.8 times)
• Net debt reduced by £168 million to £471 million
• Proposed dividend of 18.3p per share, an increase of 2.8%

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Tate & Lyle annual report 2003

chairman’s statement

Overview
The year to 31 March 2003 saw another
significant improvement in profitability
building on the progress made in the
year to 31 March 2002. The margin on
sales increased and the Group’s return
on net operating assets of more than
14% is starting to look respectable
although there is more to go for. The
balance sheet is stronger as a result
of a good cash flow performance and
net debt of £471 million was less than
half of what it was two years ago and
is lower than it has been at any time
in the last ten years. Interest cover at
6.8 times, excluding unusual interest
credits, was also much improved.

Results
Profit before tax, exceptional items
and goodwill amortisation increased to
£228 million (2002 – £159 million) with
a stronger performance from Amylum
and the full year benefit from the
disposal of our loss-making US sugar
businesses. Profit before tax after
exceptional items and goodwill
amortisation was £187 million (2002 –
£159 million). Exceptional items in the
year to 31 March 2003 amounted to
a net £33 million charge (2002 –
£8 million credit) and include an
operating exceptional charge of
£39 million primarily to write down
the US and Mexican citric acid assets
to their estimated recoverable value.
Goodwill amortisation was £8 million
(2002 – £8 million).

Diluted earnings per share before
exceptional items and goodwill
amortisation for the year to

tateandlyle.com

Sir David Lees Chairman

31 March 2003 were 33.0p
(2002 – 22.1p). Diluted earnings
per share after exceptional items
and goodwill amortisation were
27.7p (2002 – 24.6p). There was a
strong cash inflow of £189 million
(2002 – £318 million) after payment
of dividends of £84 million. Net debt
at 31 March 2003 was £471 million
(2002 – £639 million). Interest cover,
excluding unusual interest credits,
improved to an underlying 6.8 times
(2002 – 3.3 times).

Dividend
Although we have maintained the
dividend for the last two years the
Board has felt unable to recommend
an increase with a cover of less than
1.5 times and with relatively high net
debt. In the year just ended, the key
financial ratios have all improved
and the Board, therefore, feels it
appropriate to resume the progressive
dividend policy to which it is
committed in principle.

The total dividend proposed for the year
is 18.3p (2002 – 17.8p) and is covered
1.8 times by earnings before exceptional
items and goodwill amortisation. The
proposed final dividend of 12.8p will
be due and payable on 6 August 2003
to all shareholders on the register at
11 July 2003.

Directors
As previously announced, Larry Pillard
relinquished his position as Chief
Executive at the end of 2002 and
became a Non-Executive Director
on 1 January 2003. Larry joined

Tate & Lyle in 1992, became a Director
in 1994 and Chief Executive in 1996.
The Board is grateful to him for the
contribution he has made to the Group
as an Executive over the last ten
years. It is also grateful to John Walker
who retired from the Board on 2 April
2003. John joined the Group over
35 years ago and had been a member
of the Board since 1993.

Iain Ferguson joined the Board as
Chief Executive on 1 May 2003.
Iain was an Executive with Unilever
for 26 years and his most recent
appointment was as Senior Vice
President, Corporate Development,
prior to which he was Executive
Chairman of Birds Eye Walls. He has
considerable experience of the global
food industry and his background in
science and technology equips him
well to lead Tate & Lyle through the
next phase of its development. Stanley
Musesengwa was appointed to the
Board as an Executive Director on
2 April 2003 having joined Tate & Lyle
in 1979. He has held a number of
different executive positions in the
Group and on 1 May 2003 was
appointed to the new role of Chief
Operating Officer, reporting to the
Chief Executive.

This new management structure,
comprising a Chief Executive and
a Chief Operating Officer, has been
created to ensure that every
opportunity is taken to enhance
Group-wide operating efficiency
while at the same time facilitating
the development of our strategy.

Tate & Lyle annual report 2003

The challenge for our new management team is to improve
efficiency, to further reduce costs, and to continue the development
of the market for our value added and branded products.

Corporate Social Responsibility
Pages 21 to 25 of this Report set
out our performance and policies as
they relate to health and safety, the
environment, employees, commercial
partners and suppliers, and the
communities in which we are involved.
It is encouraging to note that in most
cases the Group continues to improve
its performance and although the
Group Safety Index for calendar year
2002 on page 21 shows some slippage
compared with 2001, this is due to a
rise in the severity of some accidents
rather than a rise in the overall number
of incidents, which continues to
decrease. The Group successfully met
the criteria for entry to FTSE4Good,
the UK Corporate Social Responsibility
Index. Progress in all areas of
corporate social responsibility depends
on the involvement and commitment
of our employees and our appreciation
for their efforts is recorded here.

Corporate Governance
In the last year, two further Reports
relating to the governance of
companies have become available
for comment. The Smith Report,
which provides guidance to assist
Company Boards in making suitable
arrangements for their Audit
Committees is uncontentious as far as
Tate & Lyle is concerned and we will
have no difficulty in being compliant
with all its main recommendations.
The Higgs Report on the Role and
Effectiveness of Non-Executive
Directors contains a number of
suggested changes to the Combined
Code on Corporate Governance.

Most of these suggestions are
uncontroversial but there are a few
which the Board believes should be
given further consideration by the
Financial Reporting Council whose
responsibility it is to make
amendments to the Combined Code.

In particular, the Board believes that
further consideration should be given
to the Higgs suggestion concerning
the relationship between the Senior
Non-Executive Director, the major
Institutional Shareholders and the
other Non-Executive Directors.
The Board also believes that further
thought should be given to the
proposals that the Chairman should
not chair the Nominations Committee,
that no individual Non-Executive
Director should sit on all three
principal Board Committees and
that it should be exceptional for a
Non-Executive Director to serve
on a Board for more than six years.
Notwithstanding the above,
Tate & Lyle continues to be a
strong supporter of high corporate
governance standards, fully
recognising the importance of
adherence to the spirit as well as
the letter of the law.

Strategy
Over the last two years the Group’s
balance sheet has been significantly
strengthened and our businesses
are now increasingly focused.
The Amylum integration project
has delivered net benefits ahead of
our original plans. Our value added
and branded products now form a

larger share of our total business.
Our strategy is to continue this
trend while never losing sight of the
opportunities available to us as a
high quality low cost global starch
and sweetener business.

Outlook
Most of our businesses continue to
perform well although the difficulties
experienced in our Eastern Sugar
and Citric Acid operations, which
worsened as last year progressed,
show no sign of abating.
Consequently, we expect a more
even split of profits in the current year
than in the previous year when the
first half was particularly strong.

We assess the outturn of the annual
US and European sweetener pricing
rounds concluded last March as being
sufficient to cover cost increases but
insufficient to impact on margins.
With profits last year having benefited
from £11 million of unusual income,
profit growth in the current year will
be primarily dependent on our ability
to improve efficiency, to further reduce
our cost base, and to continue the
development of the market for our
value added and branded products.
This is the challenge which our new
management team has accepted.

Sir David Lees Chairman
4 June 2003

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Tate & Lyle annual report 2003

ingredients of quality

Shake & Pour

Tate & Lyle Shake & Pour
offers convenience and
quality, keeping granulated
sugar dry and avoiding
spillage. Consumers have
responded well helping
to grow the brand.

Cardboard

Mylbond 280, introduced
by Amylum in May 2002,
is a modified starch that
improves glue application,
increases board strength
and accelerates
production, helping
cardboard manufacturers
reduce their energy use.

Detergents

Our citric acid and sodium
citrate help detergents
clean effectively by
increasing solubility,
raising enzyme stability
and enhancing soil
suspension.

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Soup

Campbell Soup Company
launched Campbell’s
‘Soup at Hand’ across the
US in October 2002.
These new ready-to-eat
soups have been specially
formulated for sipping
directly from their plastic
containers. With ‘Soup
at Hand’, busy consumers
can more conveniently
enjoy soup, whether
at work, at school
or in the car.

Staley modified starches
are important ingredients
in these new soups.
Campbell uses both cook-
up and instant starches to
thicken and provide
texture to varieties ranging
from traditional Cream of
Broccoli and Creamy
Tomato to teen-friendly
flavours like Pizza and
Mexican-Style Fiesta.

Tate & Lyle annual report 2003

Average US meal preparation time

MINUTES

1987

2002

2030

COOKING TIME

AUTO MINUTE/START

Data from the University of Florida Institute of Food and Agricultural
Services publication ‘Major Trends Driving Change in the US Food System’,
by Allen F Wysocki.

convenience and efficiency

We help our customers in the food, beverage, pharmaceutical,
cosmetics, paper & board, and building industries improve their
efficiency, cut manufacturing costs and compete commercially.
More than that, Tate & Lyle ingredients add value by helping
our customers differentiate their consumer products and
deliver convenience to millions of busy people.

Our global research and development
group pioneers new products and
applications that deliver efficiency
to customers and convenience to
consumers. Dedicated technical
teams support our versatile product
portfolio, improving solutions for
existing products and helping
launch new ones.

Tate & Lyle helps make life
convenient. This is epitomised
by ready-made meals where our
ingredients ensure cook-freeze

stability. To make sure consumers
get the quality food they deserve,
we test meals with up to 12 cook-
freeze cycles, checking on texture
and perfecting recipes.

We are built around meeting our
customers’ requirements, and one of
their greatest needs in today’s market
is to improve efficiency. We help them
achieve this in many ways: primarily
through a portfolio of ingredients
which improve their product
manufacturing efficiency.

But we also help through
understanding their processes.
For example, when sugar syrup
is delivered from our UK refinery
to a well-known UK manufacturer,
the temperature as well as the quality
of the product is carefully checked,
so that it reaches our customer’s plant
at the optimum temperature to enter
the manufacturing process – reducing
the amount of energy needed to
make a perfect product.

Cereal Sweeteners and Starch
Amylum and Staley are our global
cereal sweeteners and starches
businesses. Amylum, based in
seven West European countries and
five Central and East European
countries, processes wheat and
corn. Staley has seven plants in the
US and a joint venture in Mexico,
all processing corn (maize).

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The extraction process for wheat
involves grinding it and separating
out the wheat proteins (gluten),
while corn is steeped in water
before being ground and separated.
The native starches produced
from both cereals can be used in
two ways:

• They can be converted into liquid
or crystallised cereal sweeteners
such as high fructose syrup,
glucose syrup, fructose, dextrose
and maltodextrins – used in soft
drinks; ready-made meals; baking;
confectionery; brewing; fruit and
vegetable processing; and in the
dairy and pharmaceuticals sectors.

• The native starch slurry can be
modified to make speciality
starches. These add valuable
properties such as texture, sheen
and viscosity to our customers’
products in the food and beverage
industry, and the paper, packaging
and building industries.

Cereal Sweeteners

Starch

Sugar and Syrup

Sucralose

Fermentation Products Polyols

Wheat Protein

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Tate & Lyle annual report 2003

ingredients of quality

How we taste sweetness

Taste
intensity

Fructose

Sucrose

Sucralose

Dextrose

The time it takes to taste sweetness varies depending on
which sweetener is used.

Time to taste

taste and texture

We make things taste better and feel good. Our ingredients
create flavours and textures people like and expect,
delivering refreshing drinks and delicious meals.
But we don’t just work with food and beverages,
our products also add pleasing texture to products such
as paper and cardboard.

We go to great lengths to develop
products that provide the taste and
texture that people enjoy. At our
Technology Centre in the US a team
of people assess how our ingredients
can help improve the taste of our
customers’ products. Everyone
on the panel has been trained to
speak the same vocabulary as they
describe the taste of a huge range
of basic products and final foods.

Besides flavour, we often evaluate
texture, mouth feel, eye appeal
(clarity and opacity) and odour.

Growing diversity and complexity
in the food industry has increased
demand for the functionality our
ingredients deliver. Tate & Lyle’s
range of sweeteners is well known.
In addition, our acidulants offer
tartness in desserts and sourness
in confectionery and candies.

When it comes to texture we offer a
family of speciality starches that help
our customers deliver the texture,
stability and smoothness that their
consumers demand. Our starches
are also central to paper production,
determining smoothness as well as
absorbancy and strength.

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Sugar and Syrup
Tate & Lyle Sugars is the largest
cane sugar refiner in Europe and is
based in London, England. Other
leading sugar cane businesses in
their respective markets are
Redpath in Canada and Alcântara
in Portugal. Occidente in Mexico
and Nghe An in Vietnam are cane
refiners, while Eastern Sugar in
Central Europe processes beets.
To support these, our sugar trading

business sources and sells both
raw and white sugar for our own
refineries and third parties.

Natural sweetness, texture,
colour and flavour are delivered
to food and beverages through a
comprehensive range of functional
sugars, syrups and treacles.
Further uses are as diverse as
pharmaceutical, fermentation,
detergent and cement applications.

In the UK, Portugal and Canada,
Tate & Lyle’s leading consumer
brands have strong market
positions and high recognition.
Molasses produced during sugar
processing adds energy and
palatability to animal feed and
is a substrate for fermentation.

Sucralose
Sucralose is the no-calorie, high
intensity sweetener that is made

from sugar, tastes like sugar and
is 600 times sweeter than sugar.
It is also both heat- and shelf-stable.
It will not lose its sweetness when
foods are processed or stored for
prolonged periods, making it an
ideal sweetener for use in a wide
range of foods and beverages.
Sucralose is marketed by Splenda
Inc., a Tate & Lyle/McNeil
Nutritionals global alliance
company.

Cereal Sweeteners

Starch

Sugar and Syrup

Sucralose

Fermentation Products Polyols

Wheat Protein

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Tate & Lyle annual report 2003

Cherry Pie

The difference between
a cherry pie that everyone
wants to eat and the one
left on the plate could be
MIRA-THIK 606. This
starch is especially suited
for fruit fillings, helping
create appealing desserts.

Sweeteners

Tate & Lyle offers a
range of sweeteners to
ensure our customers
can create the
beverages their
consumers enjoy.

Sucralose

Approved in over 50
countries, sucralose
is used in a range of
products, including soft
drinks, confectionery
and dairy desserts.

Lyle’s Golden Syrup

Since August 2002, Lyle’s
Golden Syrup Squeezy
has made it easier to add
the distinctive flavour to
toast, pancakes or ice-
cream. The Lyle’s taste
and texture may now be
found in new McVitie’s
Lyle’s Golden Syrup
Cream Biscuits and
McVitie’s Lyle’s Black
Treacle Cream Biscuits.
Additionally, Hoppers has
launched individual
Traditional Flapjack and
Sultana Flapjack made
and cobranded with Lyle’s
Golden Syrup.

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Tate & Lyle annual report 2003

ingredients of quality

Jam for Diabetics

Diabetics are now able
to take advantage of
sucralose, launched in
UK shops during 2002 by
our global alliance partner
McNeil Nutritionals.
Sucralose offers the taste
of sugar without the
calories, but also stability
to heat in cooking. So
now home-made jam can
be enjoyed by everyone
in the family.

Sports Drinks

Our carbohydrates provide
the energy that active
people need through
sports drinks and other
fitness products.

Calcium Fortification

Tate & Lyle produces
several speciality citrates
including calcium
potassium, sodium and
zinc. These products can
be used to fortify and
supplement products
such as orange juice,
milk and tablets.

Toothpaste

The sorbitol we make
is used to help make
toothpaste creamy.
Our zinc citrate adds
tartar control and helps
oral hygiene.

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Tate & Lyle annual report 2003

Reduced calories in gravies
and sauces

CALORIES

Greater than 50% reduction in calorie
content by using Tate & Lyle starches
in low-fat products.

health and wellbeing

The food we eat and the lifestyle we lead contribute to
our health. Tate & Lyle helps make reduced-calorie meals,
offers fat-free energy for active people and provides
ingredients for health-care products such as mineral
supplements and toothpaste.

Tate & Lyle contributes in a variety
of ways toward healthy lifestyles.
Our products include sweeteners that
vary in type and nutritional effect from
a range of calorific sweeteners to the
non-calorific sweetener sucralose,
offering people the chance to choose
the sweetener best suited to their
needs. We also manufacture products
that are used to replace fat, add fibre
and enhance mineral content. Other
products we make are used in the
manufacture of health-care products

such as toothpaste; in the
pharmaceutical industry, they are
used in a variety of formulations
including syrups that contain drugs
and ointments.

Tate & Lyle supports programmes
to help people make decisions that
foster active healthy lifestyles. For
example, as members of the UK
Food & Drink Federation we support
the Activaters programme that helps
young people understand how to

balance intake with activity and
promotes healthy choices such as
the ‘five fruit and vegetables a day’
campaign.

On dental health, through its support
of the UK Sugar Bureau, Tate & Lyle
has helped to fund research and
promote regular brushing with fluoride
toothpaste, along with sensible eating
and drinking habits to ensure that
tooth decay is avoided.

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Fermentation Products
A Tate & Lyle core competency is
to ferment sugar, cereal sweeteners
or molasses into citric acid, ethanol
and grain alcohol. Our fermentation
expertise is also being applied to
produce natural ingredients to
replace artificial ones. The Group is a
world-leading producer of citric acid,
with plants in the US, UK, Brazil and
Mexico, and a joint venture in
Colombia. Ethanol and potable grain

alcohol are fermented at a number of
plants in Europe and North America.

Citric acid plays an important role
helping give virtually all carbonated
and non-carbonated beverages a
pleasant and thirst-quenching taste.
Its versatility also makes it ideal for
application across many other
sectors such as food,
pharmaceutical, detergent and
industrial products.

Potable grain alcohol, of which
Tate & Lyle is the largest manufacturer
in the European Union, is a major
ingredient for alcoholic beverages.
In the US we produce fuel ethanol,
which helps reduce greenhouse
gas emissions.

Polyols
Sorbitol is produced by
hydrogenating cereal syrups at our
plant in France. A versatile ingredient,

it is a low calorie and tooth-friendly
sweetener, and helps to hold moisture
and provide plasticity in food,
pharmaceutical, cosmetic and
chemical products.

Wheat Protein
Amylum is the world leader in wheat
protein technology. The protein or
gluten is washed from wheat flour and
sold as vital wheat gluten (commonly
used in bread) or for animal feed.

Cereal Sweeteners

Starch

Sugar and Syrup

Sucralose

Fermentation Products Polyols

Wheat Protein

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Tate & Lyle annual report 2003

chief executive’s review

Iain Ferguson Chief Executive

• The interim target is to restore

the overall Group Return on Net
Operating Assets (RONOA) to at
least 15%. We achieved 14.2%,
up from 10.5% in the year to
31 March 2002 and 8.5% in
the year to 31 March 2001.

• We have grown the contribution of
value added and branded products
as a percentage of Group profit
before interest, exceptional items
and goodwill amortisation to 52%,
exceeding our target of 50%.
• We have accelerated the delivery
of benefits from the Amylum
integration programme with gross
benefits this financial year
exceeding £35 million against our
target of £20 million.

• All businesses have been set a
target on both economic and
environmental grounds to reduce
energy consumption on a per unit
basis by 3% per year. Overall,
the Group has exceeded this
target in each of the last three
calendar years.

Focus on Key Activities
We generated £60 million in proceeds
from the sale of businesses and
assets in the year (2002 – £137 million)
and the programme to dispose of
non-core and underperforming
businesses is now largely complete.
The majority of the proceeds came
from the completion of the sale of
Western Sugar early in the year and
the sale of the North American
molasses and third party liquid
storage businesses.

Group Performance
I joined the Group after the year-end
and the improved financial results and
a much stronger balance sheet reflect
the performance of the management
team led by Larry Pillard until the end
of December 2002, and then by
Simon Gifford until the end of
April 2003.

Group profit before tax, exceptional
items and goodwill amortisation of
£228 million was a £69 million (43%)
improvement on the £159 million for
the year to 31 March 2002. Group
profit before tax after exceptional
items and goodwill amortisation was
£187 million (2002 – £159 million).

Net debt has been reduced by strong
cash generation to £471 million at
31 March 2003 from £639 million at
31 March 2002. The net debt to Group
EBITDA (earnings before interest, tax,
depreciation and goodwill amortisation)
multiple has improved from 2.1 times
to 1.4 times and gearing (net
borrowings as a percentage of net
assets) has reduced from 59% to 45%.

Group Targets
The Group set itself a number of
financial and other targets and has
made significant progress on all of
them in the year to 31 March 2003.
• Our target to return interest cover
to 4.0 times (from a low of 2.3
times in the year to March 2001)
has been exceeded with cover at
6.8 times after excluding unusual
interest credits.

12 tateandlyle.com

Performance of Main Businesses
Staley, our American cereal sweetener
and starch business, achieved margin
gains in high fructose corn syrup
(HFCS) pricing in the 2002 calendar
year and better by-product prices but
these were offset by lower citric acid
and ethanol margins.

Staley’s citric acid division operated
well and benefited from cost reduction
initiatives. However, these were
unable to keep pace with the
continuing decline in selling prices
due to global oversupply. Whilst the
business was profitable for the year,
we incurred a trading loss in the
second half year. We have taken a
£39 million operating exceptional
charge primarily for the impairment
of our citric acid assets in the USA
and Mexico. The Mexican factory
will close completely before the end
of the 2003 calendar year.

Ethanol margins were down, reflecting
lower average gasoline prices and
oversupply as the industry added
new capacity in anticipation of
increased demand.

There are early signs that the market
for industrial starches is beginning
to show some signs of recovery.
Speciality food starches were
again resilient.

Tate & Lyle annual report 2003

Amylum performed well and improved
sales of products with higher margins
offset price reductions in the 2002
calendar year. Eaststarch, our starch
joint venture in Central and Eastern
Europe had a good year, with the four
main plants increasing profitability.

Amylum also benefited from the earlier
than expected delivery of savings
resulting from its integration into the
Group. Benefits exceeded £35 million,
against our target of £20 million, with
costs of £10 million, in line with the
target. Whilst the majority of the net
benefits accrued directly to Amylum,
this is a Group-wide initiative and
some benefits are reported in
Tate & Lyle Europe, and in Staley.
This accelerated progress reflects
an excellent performance by the
integration team, which is drawn
from people throughout the Group.

The 2003/04 financial year will be
the final year of the formal integration
programme and we are confident
of reaching our benefits target of
£50 million per annum. We also
anticipate integration costs will
not exceed £10 million.

In the last quarter of the financial year
to 31 March 2003, industry pressures
meant that both Staley and Amylum
were unable to secure margin
increases in sweetener prices for the
calendar year 2003. Staley recovered
higher corn costs and increased
margins on basic starch and food
ingredient products but citric acid
prices continued to decline. In Europe,
small pricing gains at Amylum in
certain markets and products (such
as vital wheat gluten) have been
offset by price reductions elsewhere.

Our cane refineries in the UK and
Portugal continued to perform well.
Redpath, our Canadian refinery,
benefited from both good operations
and a small stock holding gain due
to higher world raw sugar prices.

Performance of Other Businesses
Eastern Sugar, our sugar joint
venture in Central Europe, which
was profitable in the previous year,
incurred losses overall. This was due
to the collapse of the sugar regime in
the Czech Republic, which caused a
significant erosion of sugar selling
prices in that country.

Whilst we believe this issue will be
resolved when the Czech Republic
accedes to the EU in May 2004, we do
not expect Eastern Sugar to return to
profit in the year to 31 March 2004.

Almex, our Mexican joint venture
corn wet miller, suffered lower profits
due to the continued imposition of a
tax on soft drinks containing HFCS.
A dispute with the Mexican
Government over import duties
was satisfactorily resolved.

Occidente, our Mexican cane sugar
miller, had an improved performance
due to increased demand for sugar as
a result of the same tax on drinks
containing HFCS.

NAT&L, our cane sugar factory in
Vietnam, continued to trade profitably
but was affected by lower domestic
sugar selling prices.

Sugar trading performed strongly and
had an exceptional year.

Tate & Lyle Sucralose received the
second annual US$10 million licence
payment under the Global Alliance
announced in September 2001.

Tate & Lyle Reinsurance, the Group’s
captive reinsurance company, had a
better year as the prior year included
a charge in respect of exposure to
the terrorist attacks in the USA on
11 September 2001.

Safety
Tate & Lyle believes that no business
activity is of such urgency or
importance that it may be carried out
in an unsafe manner and our aim is
continually to improve our safety
record.

We use a Group Safety Index to
compare safety performance across
the Tate & Lyle Group. This approach
highlights good practices and
indicates where further work is
needed. The Index covers calendar
years and we have a target to reduce
it to zero for every Tate & Lyle
operation.

In 2002, 63% of locations either
repeated or improved on their 2001
safety performance. However, the
Group Index for the calendar year
2002 rose slightly compared
with 2001.

This occurred because although we
maintained a pattern of continuously
reducing the number of recordable
and lost time injuries, serious injuries
in three locations resulted in a higher
overall severity rate than reported in
2001. All locations have redoubled
their efforts to improve our
performance in this important area.

Community Involvement
Tate & Lyle has operations in more
than 20 countries and we regard our
impact on the communities where we
work as being an important measure
of our performance.

We maintain strong and diverse
community involvement and we work
alongside community partners with
whom we enjoy shared objectives.
It is in our interests to operate in
strong, safe and healthy communities
and if we can help achieve this it
improves the quality of life for
employees as well as our neighbours.
I also believe that levels of
commitment and motivation are
increased if employees hold
Tate & Lyle in high esteem.

The community involvement policy
is reviewed annually by the Board.
The programmes are managed locally.

Conclusion
I am delighted to have joined
Tate & Lyle at this important point in
its development. Over the last three
years, the Group has substantially
improved its cost structure and
focused on its core activities.
The programme to dispose of non-
core and underperforming businesses
is now largely complete.

On behalf of the Board, I would like
to thank employees around the Group
for their efforts during the last year
that resulted in the improved
profitability. I look forward to working
with them and the Board to build on
this solid platform and to continue the
drive for efficiency and growth.

Iain Ferguson Chief Executive
4 June 2003

tateandlyle.com 13

Tate & Lyle annual report 2003

operating and financial review

Simon Gifford Group Finance Director

this, relating to interest received on tax
refunds and exchange gains on foreign
currency balances, in the results for
the six months to 30 September 2002.
In the second half of the financial year
this was reduced by a £1 million
exchange loss on foreign currency.
The balance was a £7 million credit for
a refund of duty in Mexico, of which
£4 million was interest received. Profit
before tax, after exceptional items and
goodwill amortisation was £187 million
compared with £159 million in the year
to 31 March 2002.

Diluted earnings per share before
exceptional items and goodwill
amortisation for the year to 31 March
2003 were 33.0p (2002 – 22.1p).
Diluted earnings per share after
exceptional items and goodwill
amortisation were 27.7p
(2002 – 24.6p).

The Board is recommending a 0.5p
per share increase in the final dividend
to bring the total dividend for the year
to 18.3p per share. The proposed
dividend is covered 1.8 times by
earnings before exceptional items and
goodwill amortisation, an improvement
from 1.2 times in the previous year.
Earnings after exceptional items and
goodwill amortisation covered the
dividend 1.5 times (2002 – 1.4 times).

Net debt reduced by £168 million from
£639 million to £471 million, assisted
by £60 million proceeds from
disposals.

Exceptional Items and Goodwill
Amortisation
Exceptional items totalled a net charge
of £33 million. An impairment charge
of £39 million was taken as an
operating exceptional item primarily
to write down the assets of the US
and Mexican citric acid operations
to their recoverable values, following
continued global pressure on selling
prices. The Mexican factory will be
closed completely before the end
of the calendar year 2003.

The balance was an exceptional
non-operating net profit of £6 million.
Included within this was a £14 million
profit following the disposal of the
US sugar businesses in November
2001 and April 2002 and a £12 million
anticipated loss on a planned disposal,
which was after a £9 million charge for
goodwill previously written off to
reserves. Amortisation of capitalised
goodwill totalled £8 million in the year
(2002 – £8 million).

Segmental Analysis of Profit Before
Interest
The following paragraphs refer to
profit before interest and exceptional
items but after the amortisation of
capitalised goodwill. The segmental
analysis of continuing and
discontinued activities for the year
to 31 March 2002 has been restated
to reflect disposals of companies
completed since the publication of
last year’s Annual Report. Exchange
rate translation reduced Group profit
before interest by £10 million.

Summary of Financial Results
Total sales decreased by £777 million
to £3,167 million. Discontinued
activities and exchange rate translation
on continuing activities reduced sales
by £552 million and £111 million
respectively. Sugar trading sales
reduced by £154 million. Sales from
other continuing activities increased
by £40 million.

Profit before interest, tax, exceptional
items and goodwill amortisation
increased by 18% from £216 million
to £254 million due mainly to
improvements at Amylum and the
completion of the disposal of the loss-
making US sugar businesses early
in the year. Profit before interest
and tax after exceptional charges
of £33 million (2002 – credits
of £8 million) and the goodwill
amortisation charge of £8 million
(2002 – £8 million) was £213 million,
compared with £216 million in the
year to 31 March 2002.

Interest costs reduced from
£57 million to £26 million. Of this
reduction, £8 million was due to
unusual interest income on tax and
duty. Interest cover improved from
3.3 times to 7.6 times, or 6.8 times
excluding the unusual credits.

Profit before tax, exceptional items and
goodwill amortisation was £228 million,
an improvement of 43%. Profit before
tax included unusual income of
£11 million. We reported £5 million of

14 tateandlyle.com

Tate & Lyle annual report 2003

Sweeteners & Starches – Americas:
continuing activities
Profits before exceptional items
and interest fell by £4 million to
£135 million. Exchange rate
translation reduced profits by
£11 million.

Staley
Despite continuing difficult market
conditions in Staley’s cereal sweetener
and starch business, growth was
experienced in nearly all major product
lines, particularly in higher value added
food ingredients.

Higher corn costs were covered by
price increases, and cost reduction
initiatives continue to enhance results.

Food ingredients generated improved
results, particularly through working
closely with our customers on product
development. Increased sales were
made to export markets and benefits
were seen from further integration with
Amylum in Europe, especially from
unifying research and development.

US sweetener market volumes
remained similar to the prior year, and
the trend continued of bottled water
and fruit-flavoured beverage sales
increasing at the expense of
carbonated soft drinks. Price increases
for the 2002 calendar year resulted in
stronger overall sweetener margins.
The paper industry showed signs of
recovery towards the end of the year
and margins on industrial starches
improved.

Corn costs rose during the year
following a drought which reduced the
crop, but this was partially mitigated
by higher corn oil and corn gluten
meal prices. In the 2003 calendar
pricing round we recovered the higher
net corn costs through selling price
increases. Ethanol selling prices fell
sharply in the year both in response to
lower average gasoline prices and as
the industry added new capacity.
Industry production has increased in
anticipation of increased demand from
the banning of methyl tertiary butyl
ether (MTBE), the alternative fuel
oxygenate, in California (now deferred
until January 2004) and the impact of
the US Energy Bill.

Manufacturing operations continued to
perform well, and both fixed and unit

costs were reduced. Energy costs
were lower and rising natural gas
prices underscored the importance of
our conservation programme. A small
potato starch plant was closed.

Much of the process development on
1,3-propanediol, which uses corn as
a feedstock, is complete. We continue
to work with DuPont to move this
fermentation project to the next stage
of development, providing we can
anticipate an adequate return on
further investment.

We are also building a xanthan gum
production facility, scheduled for
commissioning in 2004.

In Mexico, high fructose corn syrup
(HFCS) sales were significantly lower
at Almex, our joint venture, as the tax
on soft drinks containing HFCS
remains in place. Although the industry
is suffering from inefficient plant
utilisation, prices on the rest of the
product portfolio increased. A long-
running dispute with the government
over import duties was resolved and
a refund of £7 million has been
recognised in the accounts for the
year ended 31 March 2003, of which
£3 million is included in profit before
interest, with the balance reducing the
interest charge. Access into Mexico for
US HFCS under the North American
Free Trade Agreement remains
unresolved between the Mexican and
US governments.

There remains significant over-supply
to the global citric acid market. Prices
continued to decline under pressure
from Asian imports, and again we
managed only a small operating profit,
despite making further significant cost
reductions. Our Mexican plant will
close by the end of the calendar
year, and an impairment charge has
been taken against this and the US
operation. We anticipate a modest
exceptional charge for the closure,
which will be booked in the year to
31 March 2004. Plant closures have
been announced by competitors in
Ireland, China and the Czech Republic.
We announced that part of our UK
factory will be converted to produce
AstaXin®, a natural source of
astaxanthin, which is widely used in
the aquaculture industry. Despite these
signs of industry rationalisation, the
market is likely to remain difficult in

the near term, and we do not expect
to make a profit from citric acid in the
year to 31 March 2004.

North American Sugar
Redpath, in Canada, had an
exceptional year, once again achieving
record sales with strong growth in the
industrial sector. Food manufacturers
continue to relocate production from
the US to Canada, where the cost
base is lower. Profits improved due to
higher sales volumes, lower energy
costs and improved productivity.
The increase in the world price of
raw sugar resulted in a stockholding
gain of £2 million compared with a
£2 million loss in the previous year.

Occidente, our joint venture cane
sugar business in Mexico, achieved a
significant improvement in operating
profit despite an adverse movement
in exchange rates. Record sugar
production from the campaign that
ended in June 2002 exceeded 340,000
tonnes. Technical performance of all
three mills has improved under new
operational management.

In Mexico, sugar has replaced HFCS in
soft drinks since the imposition of the
tax on HFCS-containing soft drinks.
This has increased domestic demand
for sugar, with the consequence of
firmer pricing. The prospects for the
coming year are good with the
probability that most of the production
will be sold onto the higher price
domestic market with very little
exported at world prices.

A new sugar blending operation in
Mexico was commissioned, in
association with Redpath’s Canadian
blending operation, and Occidente has
begun to export sugar-containing
products to the USA.

Sweeteners and Starches – Europe:
continuing activities
Profit before exceptional items and
interest increased by 23% from
£87 million to £107 million. Exchange
rate translation increased profits
by £1 million.

Amylum
Amylum’s cereal sweetener and starch
business accounted for the majority of
the improvement in the sector.

tateandlyle.com 15

Tate & Lyle annual report 2003

operating and financial review

The integration and cost reduction
project delivered benefits exceeding
£35 million, well ahead of the
£20 million target. Costs of £10 million
were in line with expectations. The
benefits were primarily generated by
lower manning levels, and purchasing
and manufacturing efficiencies.

Volumes improved for both sweeteners
and starches. Wheat costs fell
following good harvests and increased
imports into the EU from Russia and
the Ukraine. Maize prices were also
reduced due to improved crops and
the initial impact of imports from
countries listed for the first wave of
accession to the EU. By-product
selling prices were also lower. Small
pricing gains in certain markets and
products (such as vital wheat gluten)
were offset by price reductions
elsewhere.

Monosodium glutamate pricing
continued to improve and even though
Orsan reported a small loss for the
year, it was less than in prior years.
Progress towards completing the sale
of Orsan France, particularly as
regards obtaining competition authority
approvals, remains satisfactory.

Manufacturing costs decreased despite
increased local taxes and higher
insurance and post-retirement costs.
Energy costs reduced and forward
cover mitigated price increases in
the second half of the year.

The Eaststarch joint venture
businesses in Central and Eastern
Europe had an excellent year with
higher volumes and improved selling
prices aided by lower maize costs.
Greater stability in Turkey and
improved operating efficiencies were
the primary drivers, including the
benefits of the integration programme.
The imposition of sweetener quotas in
Turkey will limit a repeat performance
in the coming year.

Tate & Lyle Europe
The UK and Portuguese sugar
businesses continued to perform
satisfactorily. The UK operations
benefited from the strengthening of
the euro. Energy costs were higher
following the expiry of a medium-term
contract in the year to 31 March 2002.

16 tateandlyle.com

Lyle’s Golden Syrup sales grew in new
export markets and franchises with
United Biscuits for McVitie’s Lyle’s
Golden Syrup Cream Biscuits and
McVitie’s Lyle’s Black Treacle Cream
Biscuits were established. Lyle’s
Coffee Syrups consolidated their
leading position in the UK retail market
and Tate & Lyle Sugars’ product range
was rationalised to concentrate on
higher added-value lines.

Sugar trading profits were exceptionally
strong and improved mainly through
sales of Brazilian raw sugar.
Building on the successful
implementation of specialist trading
software in the previous year, a
thorough review of sugar trading risk
management policies and procedures
was undertaken and recommended
actions successfully implemented
towards the end of the year.

Capital expenditure was below
depreciation with the businesses
contributing strong cash flow to
the Group.

As part of the integration programme,
an outsourcing agreement for the
provision of IT services in the UK was
terminated, and this function has been
re-absorbed by existing support
functions within the Group at
substantially lower cost.

Eastern Sugar
The Eastern Sugar Group, our European
beet sugar joint venture, experienced a
difficult year and made losses overall.
This was in contrast to a successful
previous campaign and profitable
year to 31 March 2002. In the Czech
Republic, the developing sugar regime
collapsed in November 2002 following
a successful challenge in the
constitutional court and selling prices
plummeted. The government is taking
steps to stabilise selling prices at more
normal levels but the volume of sugar
in the hands of traders may hinder its
effort. We do not anticipate a return
to profit in the short term prior to the
Czech Republic’s accession to the EU.

The Slovakian business had a
satisfactory year. Domestic sales in
Hungary were weak as imports of
sugar, sugar substitutes and sugar-
containing products took market share.

Hungary, Slovakia and the Czech
Republic will accede to the EU in May
2004 and will enter the EU sugar
regime. Preparations continue in all
countries for accession.

Sweeteners and Starches – Rest
of the World: continuing activities
Profits before exceptional items and
interest increased from £4 million to
£11 million. Exchange rate translation
reduced profits by £1 million.

Asian Sugar Businesses
Nghe An Tate & Lyle (NAT&L), the
Group’s cane sugar business in
Vietnam, achieved a further record
production of 95,870 tonnes of sugar
in the financial year, 13% higher than
the previous year. NAT&L is now the
largest sugar producer in Vietnam
and its quality is recognised in the
marketplace. Selling prices were under
pressure as Vietnam achieved surplus
production over local demand.

The remaining investment in Chinese
sugar factories, which were sold
during the year, did not have a material
impact on operating profit.

Animal Feed and Bulk Storage:
continuing activities
Profits before exceptional items and
interest on continuing activities fell
from £10 million to £4 million.

We announced in February 2002 that
we would pursue the sale of the
worldwide molasses and storage
businesses. However, negotiations
did not produce an offer for the
business as a whole that reflected its
contribution to the Group, and the
business was withdrawn from sale
as a single entity in September 2002.
We examined other opportunities to
maximise returns from the business,
including partial disposals, and sold
the North American molasses and
third party liquid storage businesses
during the year.

In the business retained, and in
contrast to the prior year, international
freight rates increased significantly.
This was as a result of the tensions
over Iraq and instability in Venezuela.
The limited availability of Thai
molasses and difficult feed markets
in both the UK and Germany were
contributory factors to the reduction
in profitability. The costs of the

Tate & Lyle annual report 2003

disposal process prior to withdrawing
the business as a whole from sale
were charged against operating profit
in the year to 31 March 2003.

Other Businesses and Activities:
continuing activities
This segment, which includes head
office activities, reduced costs
from £22 million to £10 million,
primarily because of the negative
impact in the prior year on our captive
reinsurance company of the terrorist
attacks of 11 September 2001.
Exchange rate translation reduced
losses by £1 million.

Tate & Lyle Sucralose
The global commercialisation of
sucralose, the no calorie sweetener
made from sugar, continues with sales
growth exceeding expectations.
This business is operated under a
Global Alliance Agreement with McNeil
Nutritionals, a Johnson & Johnson
company. Sucralose is now used as
an ingredient in over 2,000 products
worldwide. It was introduced as an
ingredient to the UK market last year
and is being used in a number of
carbonated beverages, flavoured
waters, alcoholic beverages and
dairy products.

Meanwhile, national approvals were
granted in the Republic of Ireland
and Netherlands, in advance of the
anticipated adoption of the EU
Sweeteners Directive.

A £7 million (US$10 million) licence fee
was received from McNeil Nutritionals
under the Global Alliance Agreement.

Tate & Lyle Process Technology
(TLPT)
TLPT, the Group’s sugar technology
company, improved its profitability
having previously disposed of its
chemical and filter businesses. TLPT
has developed technology for the
transformation of raw sugar to liquid
sugar that could find a ready market
with the worldwide beverage
manufacturers.

business and in particular our
exposure to the terrorist attacks
of 11 September 2001. Conditions
improved in the third party insurance
market and, together with good results
from internal exposures to the rest
of the Group, led to a positive
underwriting result.

The Company decided to discontinue
writing non-Group risks with effect
from 1 January 2003 and is now in
the process of running-off the existing
third party liabilities. To date, a third of
these liabilities have been commuted.
The Group continues to believe it
can minimise the effect of higher
insurance costs as well as provide
stability by continuing the policy of
retaining risk and premium in its own
reinsurance company.

Discontinued Activities
During the year, the major operating
profit impacts were caused by the
sales of Western Sugar and the North
American molasses and third party
liquid storage businesses.

The US sugar businesses lost
£18 million in the year to 31 March
2002. Western Sugar was sold in
April 2002 and contributed a small
operating profit in the year to
31 March 2003.

The US and Canadian molasses and
third party liquid storage businesses
made a loss prior to their disposal in
March 2003.

Interest, Tax and Dividend
Interest
The net Group interest charge was
£26 million compared with £57 million
in the year to 31 March 2002. Interest
income includes £4 million from the
loan notes issued to the purchasers
of Domino and Western. During the
year, interest receivable and similar
income benefited from a number of
unusual items totalling £8 million.
These included recoveries of tax
interest and, in the joint ventures,
from interest refunds on duty.

Tate & Lyle Reinsurance
The Group’s Bermuda-based captive
reinsurance company reported an
underwriting profit for the year ended
31 March 2003. The previous year’s
results were adversely affected by
increased claims from third party

Average net debt of Tate & Lyle PLC
and its subsidiaries was £530 million,
a reduction of £294 million on
£824 million the previous year.
The reduction in net debt accounted
for £20 million of the £31 million
reduction in the net interest charge.

The interest rate for subsidiaries in the
year when measured against average
net debt was 5.5% (2002 – 6.7%).
Interest cover based on profit before
exceptional items, goodwill
amortisation and interest of Tate & Lyle
PLC and its subsidiaries improved
from 3.3 times to 7.6 times. Excluding
the unusual interest receipts, interest
cover was 6.8 times.

Profit Before Tax
Profit before tax but after exceptional
items and goodwill amortisation
was £187 million, compared with
£159 million in the prior year.
Exchange rate movements reduced
profit before tax by £9 million.

Taxation
The Group taxation charge was
£57 million (2002 – £39 million).
The effective rate of tax, on profit
before exceptional items and goodwill
amortisation, was 30.7% (2002 – 32.1%).

Dividend
A final dividend of 12.8p will be
recommended as an ordinary dividend
to be paid on 6 August 2003 to
shareholders on the register on 11 July
2003. This is an increase of 0.5p per
share. An unchanged interim dividend
of 5.5p was paid on 14 January 2003.
Earnings before exceptional items and
goodwill amortisation covered the
proposed total dividend by 1.8 times.

Disposals
We received £60 million proceeds
from the disposal of businesses and
assets during the year to 31 March
2003, compared with £137 million
in the previous year.

The sale of Domino, the US cane
sugar refiner, was completed in
November 2001. Under the terms
of an earn-out clause in the sale
agreement, we received deferred
proceeds of £8 million in the year.

As reported in last year’s Annual
Report, Western, the US beet sugar
business, was sold to the Rocky
Mountain Sugar Growers Co-operative.
Sales proceeds total £51 million,
£17 million of which have been
received. Loan notes are outstanding
of £34 million, which will be repaid
through instalments by January 2007.
In anticipation of disposal, Western’s
assets were written down in previous

tateandlyle.com 17

Tate & Lyle annual report 2003

operating and financial review

financial years, and £9 million of this
was reversed as a profit on disposal.

The conditional sale of Orsan France,
the monosodium glutamate business,
was announced in November 2002 and
satisfactory progress is being made to
completion. The anticipated loss on
disposal charged in these accounts is
£12 million, of which £9 million results
from goodwill previously written off
to reserves.

In December 2002, the Group sold
Well Pure, the Hong Kong holding
company for the Group’s majority
interests in two cane sugar factories in
China. The company was bought by a
group of private Chinese investors and
a profit on disposal was made.

In December 2002 and March 2003
respectively, the molasses and third
party liquid storage terminals in the
USA and Canada were sold, but both
still remain subject to closing balance
sheet adjustments. Proceeds received
were £18 million and a further
£10 million was recovered from
retained receivables.

Retirement Benefits
The charge for retirement benefits,
calculated under SSAP24, was
£24 million, an increase of £11 million
over the prior year. The pension charge
has increased by £6 million on the
assumption that the main UK scheme
will no longer record a surplus when
the actuarial valuation at 31 March
2003 is completed.

The UK Tate & Lyle Group Pension
Scheme fund was valued at 31 March
2001 and a valuation as at 31 March
2003 is currently underway. The
results of the 2001 actuarial valuation
indicated no need to resume
contributions at that stage, but
informal valuations were performed
during the year to 31 March 2003, all
of which indicated that the fund had
gone into deficit.

Annual cash contributions of around
£8 million recommenced with effect
from 1 April 2002, and £32 million of
supplementary contributions have
been made in the year to 31 March
2003 to the fund to eliminate
estimated shortfalls, making a
total contribution of £40 million.

18 tateandlyle.com

The valuation of the fund at 31 March
2003 has still to be completed, but it
is not anticipated that the fund will
record a surplus. Accordingly, the
Group has not recognised any
amortisation of the surplus indicated
by the 31 March 2001 valuation, and
this has increased the pension charge
by £6 million in the year to 31 March
2003. From 1 April 2002, the UK
defined benefit scheme was closed
to new members, and a defined
contribution scheme has been
established.

SSAP24 spreads pension surpluses
and deficits over the service lives
of employees. Under SSAP24 the
net pension liability reduced by
£41 million to a net asset of £9 million
and the US healthcare provision
reduced by £12 million to £118 million.

Under FRS17 the current service cost
charged against profit each year is
calculated using corporate bond yields,
and any change in yields generates
volatility in the pensions charge.
The use of market values in the balance
sheet is likely to give rise to volatile
changes in the amounts reported as
pension assets and liabilities.

If the accounts had been prepared
under FRS17, the net position for
all Group defined benefit pension
schemes at 31 March 2003 would
have been a deficit of £196 million,
a movement of £146 million from the
deficit of £50 million that would have
been recorded under the new standard
at 31 March 2002, but an improvement
of £54 million from the deficit of
£250 million at 30 September 2002.
The potential US healthcare liability
would have reduced from £117 million
at 31 March 2002 and £111 million at
30 September 2002 to £104 million
at 31 March 2003.

After taking account of deferred tax, the
Group’s net assets at 31 March 2003
would have reduced by £138 million
from £1,044 million under SSAP24 to
£906 million if the financial statements
had been prepared under FRS17.

Profit before interest would have
increased by £5 million, compared with
a £9 million reduction in the previous
year, and the net interest charge would
have increased by £4 million.

The total charge to profit under FRS17
would have been £23 million compared
with £24 million under SSAP24.

Cash Flow and Balance Sheet
Cash Flow and Debt
Operating cash flow totalled
£323 million compared with
£445 million in the previous year.
There was an operating working
capital inflow of £36 million but, after
the reduction in pension provisions
due to supplementary contributions
of £42 million, there was a net
£6 million working capital outflow
(2002 – £143 million inflow). A net
£97 million (2002 – £140 million) was
paid to providers of finance as
dividends and interest. Net taxation
paid reduced from £35 million to
£7 million, reflecting a number of
refunds in the year in the UK and USA.
Contributions to the Group’s pension
funds, both regular and supplementary,
increased from £3 million in the
previous year to £61 million.

Plant replacement, improvement and
expansion expenditure of £75 million
was below underlying depreciation of
£110 million. Investment expenditure
was £15 million, being primarily an
injection of funds into the Tate & Lyle
Employee Benefit Trust which
purchases shares to satisfy options
granted under the Executive Share
Option Scheme. Disposals of fixed
assets and businesses generated cash
of £60 million. Exchange translation,
and other non-cash movements,
increased debt by £21 million.

The Group’s net borrowings fell from
£639 million to £471 million.

The ratio of net borrowings to earnings
before interest, tax, depreciation and
amortisation (EBITDA) (before
exceptional items) has improved from
2.1 times to 1.4 times and the gearing
ratio reduced to 45% at 31 March
2003 (2002 – 59%). During the year,
net debt peaked at £605 million in
April 2002 (April 2001 during the year
ended 31 March 2002 – £959 million).

Funding and Liquidity Management
The Group funds its operations
through a mixture of retained earnings
and borrowing facilities, including
capital markets and bank borrowings.

Tate & Lyle annual report 2003

In order to ensure maximum flexibility
in meeting changing business needs
the Group seeks to maintain access to
a wide range of funding sources. The
Group has a euro medium-term note
programme and a US commercial
paper programme. At 31 March 2003,
the Group’s long-term credit ratings
from Moody’s and Standard and Poor’s
were Baa2 and BBB respectively.

Capital markets borrowings include
the €300 million 5.75% bonds and the
€150 million Floating Rate Note which
mature in 2006 and 2007 respectively.
During the year, the Group issued
£200 million 6.50% Eurosterling bonds
which mature in 2012, which further
extends the maturity profile of
Group debt.

The Group ensures that it has
sufficient undrawn committed bank
facilities to provide liquidity back-up
for its US commercial paper and other
short-term money market borrowing
for the foreseeable future. During the
year, the Group arranged committed
bank facilities of US$510 million with
a core of highly rated banks. These
new facilities have a maturity date of
five years and they refinanced existing
undrawn committed bank facilities with
shorter maturity dates. These facilities
are unsecured and contain common
financial covenants for Tate & Lyle
and its subsidiary companies that the
interest cover ratio should not be less
than 2.5 times and the ratio of net debt
to EBITDA should not be greater than
four times.

The Group monitors compliance
against all its financial obligations
and it is Group policy to manage the
consolidated balance sheet so as
to operate well within covenanted
restrictions at all times.

The majority of the Group’s borrowings
are raised through the Group treasury
company and are then on-lent to the
business units on an arms-length basis.

years. At the end of the year after
subtracting total undrawn committed
facilities there was no debt maturing
within 12 months and all debt had a
maturity of two and a half years or
more (2002 – 0% and 51%). The
average maturity of the Group’s gross
debt was 5.4 years (2002 – 3.2 years).

At the year end the Group held cash
and current asset investments of
£172 million (2002 – £135 million) and
had undrawn committed facilities of
£348 million (2002 – £461 million). These
resources are maintained to provide
liquidity back-up and to meet the
projected maximum cash outflow from
debt repayment and seasonal working
capital needs foreseen for at least a
year into the future at any one time.

Funding not Treated as Debt
In respect of all financing transactions,
the Group seeks to optimise its
financing costs. The following items
are not included in net debt under
UK accounting conventions, although
disclosure is made in the notes to
these accounts.

At Amylum, the Group receives
cash from selling amounts receivable
from customers (note 18). The facility
allows the sale of up to US$85 million
(£53 million) of receivables and was
fully utilised at both 31 March 2003
and 31 March 2002. Where financially
beneficial, operating leases are
undertaken in preference to purchasing
assets. Commitments under operating
leases to pay rentals in future years
totalled £209 million (2002 – £166
million) and related primarily to railcar
leases in the USA.

Net debt of joint ventures and
associates totalling £60 million at
31 March 2003 (2002 – £145 million)
was not consolidated in the Group
balance sheet. Of Tate & Lyle’s
£29 million share of net debt of joint
ventures and associates, £9 million
was subject to recourse to the Group.

The Group manages its exposure to
liquidity risk by ensuring a diversity of
funding sources and debt maturities.
Group policy is to ensure that, after
subtracting the total of undrawn
committed facilities, no more than
30% of gross debt matures within
12 months and at least 50% has a
maturity of more than two and a half

Control and Governance
Management of Financial Risk
The main financial risks faced by
the Group are liquidity risk, interest
rate risk, currency risk and certain
commodity price risks. Tate & Lyle also
faces risks which are non-financial or
non-quantifiable, for example, country
and credit risk.

The Board of Tate & Lyle PLC regularly
reviews these risks and approves
written policies covering the use of
financial instruments to manage these
risks and sets overall risk limits. The
last review was in April 2003. All the
Group’s material financial instruments
are categorised as being held either for
trading or risk management. Trading of
financial instruments within the Group is
severely limited, confined only to tightly
controlled areas within the sugar and
maize pricing operations. The derivative
financial instruments approved by the
Board to manage financial risks include
swaps, both interest rate and currency,
swaptions, caps, forward rate
agreements, financial and commodity
forward contracts and options, and
commodity futures.

Control and Direction of Treasury
Tate & Lyle’s group treasury function
operates within a framework of clearly
defined Board approved policies and
procedures setting out permissible
funding and hedging instruments,
exposure limits and a system of
authorities for the approval of
transactions. Most of the Group’s
financing, interest rate and foreign
exchange risks and other treasury
activities are managed through a
central treasury company, Tate & Lyle
International Finance PLC, whose
operations are controlled by its Board.
The treasury company is chaired by
the Group Finance Director.

Group interest rate and currency
exposures are concentrated either in
the treasury company or in appropriate
holding companies through market-
related transactions with Group
subsidiaries. These acquired positions
are managed by the treasury company
within its authorised limits.

Interest Rates
The exposure to fluctuating interest
rates is managed by fixing or capping
portions of debt using interest rate
derivatives to achieve a target level of
fixed/floating rate net debt which aims
to optimise net interest costs and
reduce volatility in reported earnings.
The Group amended its policy during
the year, so that out-of-the-money
caps are excluded in the determination
of fixed rate debt. The Group’s policy
is that between 30% and 75% of
Group net debt is fixed for more than
one year and that no interest rate

tateandlyle.com 19

Commodities
Derivatives are used to hedge
movements in the future prices of
commodities in those domestic and
international markets where the Group
buys and sells sugar and maize.
Commodity futures and options are
used to hedge inventories and the
costs of raw materials for unpriced
and prospective contracts not covered
by forward product sales. The options
and futures hedging contracts
generally mature within one year and
all are with organised exchanges.

Credit Risk
The Group controls credit risk by
entering into financial instruments only
with highly credit-rated authorised
counterparties. Counterparty positions
are monitored on a regular basis.

Going Concern
After making enquiries, the directors
have a reasonable expectation that
the Company and the Group have
adequate resources to continue in
operational existence for the
foreseeable future. For this reason they
continue to adopt the going concern
basis in preparing the accounts.

Simon Gifford Group Finance Director
4 June 2003

Tate & Lyle annual report 2003

operating and financial review

fixings are undertaken for more than
12 years. At the year end the longest
term of any fixed rate debt held by
the Group was until June 2012. The
proportion of net debt which was fixed
for more than one year at the year
end was 49% (2002 – 66 %), which
excludes £121 million of out-of-the-
money interest rate options capping
euro rates at 5.0%.

If the interest rates applicable to the
Group’s floating rate debt rise from the
levels at the end of March 2003 by an
average of 1% over the year to March
2004, this would reduce Group profit
before tax by £1 million.

Foreign Currency
The Group has transactional foreign
currency exposures arising from sales
and purchases by subsidiaries in
currencies other than their functional
currencies. The Group’s foreign
currency exposure management
policy requires subsidiaries to hedge
transactional currency exposures
against their functional currency once
they are known mainly through the use
of forward foreign exchange contracts.

The Group’s accounting policy is to
translate profits of overseas companies
using average exchange rates. It is the
Group’s policy not to hedge exposures
arising from profit translation.

The Group has significant investment
in overseas operations, particularly in
the Americas and Europe. Movements
in exchange rates between balance
sheet dates can affect the sterling
value of the Group’s consolidated
balance sheet. The currency profile of
net debt is managed to mitigate the
effect of these translation exposures
arising on the Group’s net investment
in overseas operations. This is
achieved by borrowing in currencies,
where practicable and cost effective,
which provides a match for the
Group’s foreign currency assets and
which can be serviced from foreign
currency cash flows.

not represent more than 25%
and other currencies should not
exceed 10%.

At the year end, net debt was split
by currency: dollars 45%, euro 40%,
sterling 14%, and other currencies
1%.The weighted average exchange
rate used to translate US dollar profits
was US$1.54 (2002 – US$1.43),
compared with the year-end rate
of US$1.58 (2002 – US$1.42).
The only material risks from economic
foreign currency exposures are
to UK sugar refining from sterling
appreciation against the euro.

Use and Fair Value of Financial
Instruments
In the normal course of business
the Group uses derivative financial
instruments with off-balance sheet
risk, and non-derivative financial
instruments included on the
balance sheet.

The fair value of Group net borrowings
at year end was £525 million against
a book value of £471 million (2002 –
fair value £649 million, book value
£639 million). Financial instruments
used to manage the interest rate and
currency of borrowings had a fair value
of £4 million liability against a book
value of £2 million asset (2002 – fair
value £3 million liability, book value
£3 million asset). The main types
of instrument used are banker’s
acceptances, loans and deposits,
interest rate swaps, interest rate
options (caps or floors), cross-
currency interest rate swaps and
currency loans and deposits.

The fair value of other financial
instruments hedging future currency
and commodity transactions was
£10 million asset against a book
value of £9 million asset (2002 –
fair value £1 million liability, book
value £5 million liability). In currency
exposure management the instruments
used are spot and forward purchases
and sales, and options.

Given the current profile of the Group’s
net operating assets and operating
cash flows, the Group aims to maintain
a target currency profile of net debt
such that US and Canadian dollars
combined should exceed 40%, euro
should exceed 25%, sterling should

The fair value of financial instruments
held for trading was £2 million liability
(2002 – £3 million asset) arising in
the sugar trading. The net gain
included in operating profit from
trading financial instruments was
£3 million (2002 – £4 million profit).

20 tateandlyle.com

Tate & Lyle annual report 2003

corporate social responsibility

Introduction
Over the past year Tate & Lyle
has made progress in its Corporate
Social Responsibility activities:

• Making environmental performance

a central pillar of good
manufacturing practice has yielded
strong results and we met our
internal targets for improvement
in calendar year 2002.

In the first Business in the Community
(BitC) Corporate Responsibility Index,
Tate & Lyle was ranked in the third
quintile at 68%. The Group attracted
very strong ratings for Environmental
and Social Performances and rated
100% scores for Business Conduct,
Corporate Values, Leadership and
Policies, together with very high
scores for Product Safety and
Occupational Health and Safety.

• We continue to refine the

collection and reporting of data,
but more than that, we have put
in place more systems to ensure
that operations improve in the
light of that data.

• Our Code of Conduct – a summary
of the policies that we apply to
uphold the Group’s values – has
been communicated effectively
to a wide range of stakeholders.

• Employee communication has

broadened, with workshops and
an improved global intranet
enhancing two-way dialogue
across the Group.

• Community activity remains

strong, epitomising the central
role we play in many locations
and continuing our history of
social involvement.

The major disappointment has been
the increase in our Group Safety Index
in 2002, after two years of excellent
progress. This is due to a rise in the
severity of some accidents and not
an increase in the overall number
of incidents, which continues to
decrease. We are redoubling our
efforts to return the Safety Index
to a downward trend.

In September 2002, FTSE4Good,
the UK-based corporate social
responsibility index, announced
that Tate & Lyle met its entry criteria
to be added to the UK benchmark
index. FTSE4Good’s criteria are
based on internationally accepted
codes of conduct that have been
ratified through an extensive global
consultation exercise. They focus
on the positive efforts of companies
and are designed to be useful in
developing socially responsible
policies and practices.

This report sets out in detail our
policies and achievements in the
fields of Safety, Environment,
Employees, Commercial Partners
& Suppliers, and Communities.

Safety
The Group aims to improve safety
by focusing on the human aspects:
sharing and implementing best
practice; expanding employee safety
auditing at all levels; and promoting
active involvement of employees and
their families in all the Group’s safety
initiatives.

Tate & Lyle believes that no business
activity is of such urgency or
importance that it may be carried
out in an unsafe manner. Good safety
is good business and the Group is
committed to providing safe and
healthy conditions for its employees
and visitors. The aim is continually to
improve our safety record.

To deliver improvement we emphasise
the behavioural aspects of good
safety performance using Network
Safety Committees of employees to
reinforce this. This is a Group-wide
network that makes effective use of
resources, improves communications
and shares best practice. Systematic
auditing of safety and loss control
programmes, including the active
involvement of Company executives
underpins this process.

We also recognise and reward
outstanding safety performance with
awards that mark the passing of
significant milestones. Over the
course of the year, 19 plants
celebrated major safety achievements
and received recognition for passing
milestones in periods without lost
time accidents.

At the end of the financial year, the
record for the longest period was held
by the Houlton, Maine plant with
3,650 days.

We continue to encourage family
participation, distributing safety
promotional items to employee
homes, holding safety slogan
contests, publishing calendars
featuring the artwork of employees’
children and grandchildren,
organising safety fairs and picnics,
and offering plant tours for families.

The Board reviews Group safety
performance annually and the
Chief Executive is the accountable
Board member.

Target
To compare safety performance
across the Tate & Lyle Group, we
use a Group Safety Index. This is an
average derived from all the various
types of injury, from the least severe
to the most. This average is weighted
so that the most severe injuries
influence the Index more than
relatively minor ones: The lower the
number, the better our performance.
Our target is to reduce the Index to
zero for every Tate & Lyle operation.

Group Safety Index

0
4

0
1

2
9

7
0
.
4

5
7
.
3

9
9

0
0

1
0

2
0

tateandlyle.com 21

Tate & Lyle annual report 2003

corporate social responsibility

Tate & Lyle Compared to US Bureau of
Labour Safety Statistics 2002

Recordable Injury Rate
Number of injuries per 200,000 employee
hours requiring more than first aid

9
.
9

0
.
8

All US Private Sector

6.3

6
.
2

0
.
2

6
.
1

0
.
2

gar In

gars

ustry

Alcântara – Tate & Lyle
path – Tate & Lyle
Tate & Lyle S

All U

Staley – Tate & Lyle
m – Tate & Lyle
S Grain Millin

mylu

u
S S
All U
Red

Lost Time Accident Rate
Rate of recordable injuries sufficiently serious to
result in lost workdays or restricted work activities

All US Private Sector

3.0

9
.
1

0
.
1

6
.
0

9
.

7 0

.
0

gar In

gars

ustry

Alcântara – Tate & Lyle
path – Tate & Lyle
Tate & Lyle S

All U

Staley – Tate & Lyle
m – Tate & Lyle
S Grain Millin

mylu

u
S S
All U
Red

Results
Tate & Lyle operations are each
striving to reach their ultimate safety
goal of working throughout the year
without any lost time injuries. Safety
achievements were mixed in calendar
year 2002. Of our reporting locations,
63% either repeated or improved
on their 2001 safety performance,
including 19 that reported no lost time
injuries for the entire year. However,
although we maintained a pattern of
continuously improving recordable
and lost time accident rates, serious
injuries in three locations resulted in
a higher severity rate than reported in
2001. This has the effect of increasing
the Group Safety Index.

When comparing Group data to
the previous year’s statistics:

• Recordable Injury Rate decreased
by 29%. Recordable Injury is an
injury requiring treatment beyond
first aid.

• Lost Time Accident Rate

decreased by 20%. Lost Time
Accident is a recordable injury
sufficiently severe to result in lost
workdays or restrict the employee’s
ability to perform his/her job,
counted from the first day of
incapacitation.

• Severity Rate increased by 21%.
Severity Rate is the number of
workdays lost due to injuries
per 200,000 employee hours.

• Group Safety Index increased

by 8%.

Benchmark
Direct comparison between Europe
and the US is difficult as national
statistics are compiled in different
ways. However, we can compare the
most recent safety statistics published
by the US Bureau of Labour Statistics
with the performance of key Tate &
Lyle units converted into comparable
data. This shows that, although there
are never grounds for complacency,
Tate & Lyle units outperform their
peers both in their respective sectors
and the whole US private sector.

22 tateandlyle.com

Environment
Tate & Lyle’s operations are
conducted in recognition of the
Group’s responsibilities towards
the natural environment within which
we live and work, and comply with
relevant laws, regulations and
consents. Tate & Lyle continues to
subscribe to the principles of the
International Chamber of Commerce’s
Business Charter for Sustainable
Development.

Each operating unit is required to
assess its particular environmental
impacts and develop an improvement
programme based on identified areas
of priority, focus and opportunity.
The Board reviews environmental
performance annually and the
Chief Executive is the accountable
Board member.

Environment management system
Operating units must work towards
integrating environmental concerns
into their normal operating, training
and management procedures.
Each unit has an environmental
management system. In some cases,
this also involves working towards
external accreditation: for example,
most Amylum units have, or are
seeking, ISO 14001 accreditation.
Other parts of the Group operate
in-house systems.

Targets
Following a review of our
environmental footprint, three areas
have been identified where Tate & Lyle
has a significant impact: energy use,
water use and non-hazardous solid
waste production.

These are parameters over which we
have direct control, as opposed to
indirect measures such as biodiversity.
Improvement in these three areas has
a positive effect on the environment
and offers economic benefit to the
business. In 2000, the Chief Executive
set a target of reducing Group energy
consumption per unit of production by
3% per year every year. Additional
targets set last year were to reduce
the water use and solid waste
production indices year on year.

Tate & Lyle annual report 2003

Results
Data is collected Group-wide
on a quarterly basis, using a
comprehensive system to gather the
raw data that has been validated by
our Corporate Audit department.
Absolute data is highly competitive
information and open to
misinterpretation, so published data
is normalised to reflect the amount
of product that is manufactured.
This normalised index is then
aggregated to give a single set of
indices for the Group and is also
adjusted to take account of
acquisitions and disposals.
This process offers the opportunity
for one plant to be compared with
another, even when the product and
size varies substantially. We can also
make valid comparisons of successive
years, even when output changes.
Following analysis, results show
that the targets were met.

Energy Index

0
0

6
9

2
9

3
9

8
8

4
8

6
9

7
9

8
9

9
9

0
0

1
0

2
0

In the calendar year 2002, the Energy
Index was successfully cut by 4.5%
compared to 2001, beating by 50%
the 3% annual reduction target set
by the Chief Executive. The period
also saw a reduction of 4.5% in the
absolute amount of energy used by
the Tate & Lyle Group. Across the
Group, every pound or kilo of
Tate & Lyle ingredient manufactured
today uses 16% less energy than
was needed six years ago.

Water Use Index

0
0
.
1

5
9
.
0

9
8
.
0

4
8
.
0

8
9

9
9

0
0

1
0

2
0

Non-Hazardous Solid Waste Index

0
0
.
1

1
0
.
1

2
1
.
1

8
9
.
0

8
9

9
9

0
0

1
0

2
0

Reductions in the Water Use Index of
6% and in the Non-Hazardous Solid
Waste Index of 12.5% show the
success of focusing our efforts where
positive results to the environment
can be delivered. Calendar year 2003
targets are for the Energy Index to be
cut by a further 3% and for the Water
Use and Non-Hazardous Solid Waste
Indices to show further year-on-year
reductions. Across the Group,
improvement programmes have been
developed to help meet these targets
as well as meet changing local
regulatory needs.

Benchmarking environmental
performance
Tate & Lyle participated in the
seventh Business in the Environment
Index of Corporate Environmental
Engagement. In the Food Producers
& Processors sector, Tate & Lyle came
fourth out of a group of eight, with an
average score of 78% (increased from
72% last year). The Tate & Lyle score
for Environmental Management and
Performance exceeded both the
sector average and the average for
all participating companies.

Employees
The Company is committed to offering
equal opportunities for all, irrespective of
gender, sexual orientation, age, marital
status, disability, race, religion or other
beliefs, and ethnic or national origin.

We are committed to promoting equal
opportunities within the Group and our
recruitment, training and promotion
procedures reflect this and are based
on performance and the requirements
of the job.

These policies are reviewed by the
Board and amended periodically
in light of changes in legislation.
The Chief Executive is the Board
member accountable for employee
issues.

Training
Tate & Lyle believes that focused
training is in the interests of both
employee and Company and an
important element of realising full
employee potential. Employees
are strongly encouraged to take
responsibility for their own development,
with training provided to meet the
needs of their current or next job and
to improve personal performance.

In addition to job-specific, local
induction and safety training,
employees are able to raise their
personal efficiency through modules
to improve time management,
conduct in meetings and IT use.
To foster better communications,
training in languages, report
writing, presentation making and
interpersonal skills are all supported.
Line managers are encouraged to
take more responsibility for personnel
management. Leadership programmes
offer a strong emphasis on how to
improve results through teambuilding,
performance appraisal exercises and
interview skills.

In addition to these unit or local
training initiatives, programmes on
strategic decision-making, corporate
induction and advanced management
skills are provided at Group level.

Employee communication
Considerable work has been
undertaken to enhance two-way
communications within Tate & Lyle.
This takes many forms, from the
implementation of an improved global
intranet, TaLnet, to the holding of an
employee opinion survey covering
most UK and Portuguese employees.
Facilities to make unattributed
comments to management are also
provided on many sites and through
corporate communications channels.

tateandlyle.com 23

Tate & Lyle annual report 2003

corporate social responsibility

A major Group-wide employee
workshop-based programme
was implemented under the
name Ingredients of Success.
The programme was designed to
improve employees’ understanding
of the Group’s strategy for growth, to
focus efforts toward common goals,
facilitate change and aid integration.
Between August and December 2002
we held 126 facilitated workshops,
in 12 languages, 18 countries and at
37 locations. In all, 2,500 employees
attended and nearly 450 ideas for
improving the way we work were
logged on TaLnet by participants.
These actions have been discussed
with line managers and many have
been implemented. Detailed analysis
of the data logged on TaLnet is
helping develop other employee
communications.

A new global employee magazine,
Tate & Lyle today, has been launched.
This will replace regional publications
and for the first time will offer
employees news about Tate & Lyle
in ten languages.

Employee representatives meet
annually with Group Management
at the Tate & Lyle European Forum.
Financial results are presented and
the business outlook discussed,
which provides a platform for
questions. A summary of the meeting
is then distributed to European
employees. Similar presentations and
consultation take place in European
and national works councils on a
regular cycle of meetings.

Employee data
Implementation of a single Global
Human Resources data system is
well under way with some exciting
developments, providing HR-tools
to line managers and employee
self-service. All personnel and payroll
functions for US and UK-based
employees are now maintained and
processed through the new system.
A number of associated services,
which allow employees to take
responsibility for their personal
information and access their pay data,
are now being offered through TaLnet.
This is a major milestone in the goal
of implementing one HR system for all
employees, enabling us to collect and
analyse cross-Group data more easily.

24 tateandlyle.com

Ethical conduct
All employees are expected to be
aware of and follow the Group’s
policies on ethics and corporate
social responsibility. The Tate & Lyle
Code of Conduct was published
last year as a summary of the
basic policies by which we work
to uphold our corporate values.
This Code is applicable within the
Group and has sections covering
business ethics, health & safety,
environment, quality, legal compliance
and equal opportunities. It has been
extensively distributed and explained
to employees via employee magazines
and leaflets in a number of languages.

In addition, an extensive guide to
ensure employee compliance with
Competition (Anti-trust) Law has been
produced for all employees. This, the
Code of Conduct and all the Group’s
other key policies are also available
on TaLnet.

Commercial Partners and Suppliers
The Tate & Lyle Code of Conduct is
applicable to our wider commercial
partners as well as employees and
is also posted on our website.
Tate & Lyle believes that the greater
the level of management control a
company has over a set of operations,
the greater its responsibility to ensure
compliance with the Code, which
applies unconditionally to all operating
units and subsidiary companies that
are wholly owned by Tate & Lyle PLC.
The Group will also seek to apply
these policies in those operations in
which the Group has a stake of 50%
or more. Where Tate & Lyle has a
minority stake, the policies are made
known to our partners who are
encouraged by the Group to adopt
them and implement them rigorously.

Suppliers
Tate & Lyle has a long tradition of
working with the growers that deliver
our quality raw materials. Each day,
the Group processes corn grown
on approximately 4,500 acres
(1,800 hectares) of farmland, and we
use about 2-3% of the total European
Union (‘EU’) wheat production.

Tate & Lyle also acts as a bridge
into the European market for cane
sugar, predominantly from African,
Caribbean and Pacific countries.

The EU imports 1.7 million tonnes
of cane sugar annually from Least
Developed and Developing Countries
and some two-thirds of this total
(which amounts to just under 10%
of total EU sugar consumption) is
processed by Tate & Lyle.

The issue of supply chain ethics is
important and the Group is committed
to spreading best practice and to
improving standards amongst
suppliers. The Code of Conduct
has helped in this respect. Our
Americas and European purchasing
organisations attach the Code to
Purchase Orders and have put
suppliers on notice to notify us
immediately of any issues they may
have with it. In the latest annual
contracting round with suppliers, the
Code of Conduct has been attached
to agreements.

Tate & Lyle representatives have
also held meetings with a number
of non-governmental organisations,
establishing dialogue on a variety of
social and developmental issues.

Compliance
The Board reviews Corporate Social
Responsibility annually. The Chief
Executive is the Board member
accountable for ethical conduct.
Details of the Group’s system of
internal control, including its risk
management and compliance
procedures, are given in the statement
on internal control on pages 31 and
32. As part of those procedures,
each Tate & Lyle business is asked
to confirm twice a year that the
Group’s Code of Conduct is being
communicated to suppliers and
to report on any contravention.
Persistent contravention can
lead to termination of that supplier
relationship.

Communities
Tate & Lyle maintains strong and
diverse community involvement and
we work with community partners
with whom we enjoy shared
objectives. This is not merely altruism;
it yields benefits to the Company.
First, it is in our interests to operate in
strong, safe and healthy communities,
helping improve the quality of life for
employees as well as our neighbours.

Tate & Lyle annual report 2003

Second, levels of commitment and
motivation are increased if employees
hold Tate & Lyle in high esteem.

Rating for Tate & Lyle Community
Involvement Programme

POOR

EXCELLENT

Finally, there is increasing evidence
that new recruits are seeking jobs
in businesses that have a strong
focus on community involvement.
Community involvement policy is
reviewed annually by the Board and
overseen by a Corporate Committee
appointed by the Chief Executive.
The programmes are managed locally.

Targets and results
In the financial year to 31 March 2003,
total worldwide charitable donations
made by Tate & Lyle totalled
£667,000. Of that, £392,000 was
donated in the UK. In addition, our
global pro bono contribution in goods
and services made during the year is
estimated to have been £87,000.
The target for these allocations
remains 50% for Education, 25%
for Environment, 15% for Health
and 10% for Arts. We are members
of the Business in the Community
PerCent Club.

An area where Tate & Lyle contributes
to the community which is not easy
to measure is through advocacy.
For example, in Decatur Illinois,
our employees sit on committees for
the local university. In East London,
organisations such as the East London
Business Alliance and Newham
Education Business Partnership
are able to draw on commitment
from Tate & Lyle employees.
This commitment goes beyond offering
advice – it involves advocating the
organisations’ objectives at all levels,
in government or the community.

Measures
A separate annual report was
prepared for UK community
involvement in 2002. This is posted on
the website but was also distributed
in printed form to 250 organisations
and individuals. For the first time,
every UK organisation benefiting from
Tate & Lyle donations was also asked
to fill out a questionnaire to assess
the effectiveness of our programme.

With a 30% response rate, the
questionnaire asked recipients to rate
our community team’s performance.
We scored very highly.

Efficiency of response

Willingness to support

Overall contribution

3.8

Some 44% of respondents reported
that Tate & Lyle assistance, whether
through funding, consultancy or pro
bono support, enabled their
organisation to raise additional
funding from other third party sources.

Community activities
It is difficult to summarise Group
activity because the range is
huge. All over the world there are
communities that have benefited
from our support in the past year.
Here are some examples involving
young people which show the extent
and diversity of our activity:

UK
• 550 students visited the Thames

Refinery in Newham, East London,
for half-day lessons; a further
3,100 children aged between nine
and 11 participated in a half-day
safety awareness programme
involving a wide range of agencies
such as the police, fire brigade,
transport organisations and
health experts.

• 600 students benefited from

employees visiting their schools.
Some employees led a full-day
programme to help students
understand how to get jobs, some
carried out mock interviews, and
bilingual employees conducted a
language skills seminar (doubling
registrations for language courses
at the school).

• Dozens of students from three

schools participated in the ‘Ideas
Factory’ project, run jointly with
Tate Britain, which uses original
works of art to improve language
development and literacy skills.

A UK Community Report is published
separately and posted on the website.

USA
• Two public high schools and
four public middle schools in
Decatur, Illinois, have been given
support to purchase specialist
scientific equipment, improving
the scope of laboratory
experiments and enhancing
the learning environment.

• Two academically talented
students from minority
backgrounds are supported each
year via a four-week residential
educational programme (with
Illinois State University), aiming
to encourage them to pursue a
college degree.

• Tate & Lyle is sole sponsor of

the Staley Striders, a youth track
and field team organised by the
Decatur Park District. This team
travels throughout the USA to
compete, and several team
members qualify each year for
a national competition.

Bulgaria
• Support for the Karin Dom

Foundation helps maintain an
inspirational centre for children
with special needs set up by
Ivan Stancioff, former Bulgarian
Ambassador to the United
Kingdom and the Republic
of Ireland.

•

In Razgrad, over 60 aspiring
tennis players benefit from the
children’s tennis school we
support.

Italy
•

In Saluzzo, support for a local
youth organisation helps ensure
young people have a safe
environment to participate in
sports and cultural activities.

Belgium
• Co-sponsorship of an annual

athletic event in Aalst maintains
the local impetus for health
and fitness.

Slovakia
•

In Peistany, we support a ‘Family
Home’ that helps parents of
children with drug dependencies
cope, offering support, information
and advice from experts.

tateandlyle.com 25

Tate & Lyle annual report 2003

board of directors

Sir David Lees
Chairman

Iain Ferguson
Chief Executive

Richard Delbridge
Non-Executive Director

Joined the Board and was appointed
Chairman in October 1998. A director of
GKN plc since 1982, he was appointed
Group Managing Director in 1987 and then
Chairman and Chief Executive in 1988.
He retired as Chief Executive of GKN in
1996 but continues as Chairman. From
1991 to 1998 he served as a non-executive
director of Courtaulds plc, the last two
years as Chairman. He also served as a
non-executive director of the Bank of
England from 1991 to 1999. He is currently
joint Deputy Chairman of Brambles
Industries plc and Brambles Industries
Limited, a director of Royal Opera House,
Covent Garden Limited and a member
of the Panel on Takeovers and Mergers.
He is a Fellow of the Institute of Chartered
Accountants in England and Wales.
Aged 66.

Joined the Group and was appointed
Chief Executive in May 2003. Previously,
he worked for Unilever where he held
a number of senior positions including
Executive Chairman of Birds Eye Walls
and Senior Vice President, Corporate
Development. A former Commissioner on
the UK Government’s Policy Commission
on the Future of Farming and Food, he
is currently President of the Institute of
Grocery Distribution and a non-executive
director of Rothamsted Research Limited,
the British Nutrition Foundation and
Sygen International plc.
Aged 47.

Joined the Board in September 2000.
A Chartered Accountant, he is a former
Partner of Arthur Andersen & Co and
Managing Director and General Manager
of JP Morgan & Co in the UK. In 1989, he
was appointed Director, Group Finance, at
Midland Bank plc, later becoming Group
Finance Director, HSBC Holdings plc.
In 1996, he was appointed Director and
Group Chief Financial Officer of National
Westminster Bank Plc, a position he held
until April 2000. He is a non-executive
director of Balfour Beatty plc, Cazenove
Group plc, Egg plc and Gallaher Group Plc.
Aged 61.

Stanley Musesengwa
Chief Operating Officer

Larry Pillard
Non-Executive Director

Carole Piwnica
Non-Executive Director

Joined the Group in 1979 as a refinery
manager and subsequently performed a
number of roles in Africa before becoming
Regional Director, Tate & Lyle Africa in
1995. In December 1999, he was appointed
Chief Executive of Tate & Lyle Europe with
responsibility for the Group’s European
sugar refining businesses and its global
sugar and molasses trading activities.
He was appointed to the Tate & Lyle Board
in April 2003 and to his current position
of Chief Operating Officer in May 2003.
Aged 50.

Joined the Group in 1992 as Chief
Executive Officer of Staley. He was
appointed to the Tate & Lyle Board in
February 1994, became Chief Operating
Officer and Group Managing Director in
January 1996 and was appointed Chief
Executive in November 1996, a position he
held until December 2002. He became a
non-executive director of Tate & Lyle in
January 2003 when he took up his current
position as Executive Chairman of Tetra
Laval Group.
Aged 56.

Joined the Board in October 1996.
In August 2000, she was appointed
as ‘Non-Executive Vice-Chairman,
Governmental Affairs’ for Tate & Lyle.
She qualified as a lawyer at the New York
and Paris bars and has wide business
experience in agribusiness companies.
Appointed to the Amylum Board in 1991,
she served as Chairman from October 1996
to August 2000. She is a non-executive
director of Aviva PLC and S.A. Spadel N.V.
Aged 45.

26 tateandlyle.com

Tate & Lyle annual report 2003

Simon Gifford
Group Finance Director

Keith Hopkins
Non-Executive Director

Mary Jo Jacobi
Non-Executive Director

Joined the Group in 1969 having qualified
as a chartered accountant in that year.
He has held various senior financial and
general management roles including
Managing Director, Foreign Investment
Division from 1987 and Company Secretary
with responsibility for investor relations
from 1993. He was appointed to his current
position and joined the Tate & Lyle Board
in January 1996.
Aged 56.

Joined the Board in November 1994.
A PhD in Chemistry, he worked for Unilever
before joining Croda International Plc, the
speciality chemical company, in 1976.
He served as Group Chief Executive of
Croda from 1987 to 1998 and then as
non-executive Chairman from 1999 to
2001. He is a former non-executive
Chairman of Ellis & Everard Plc and
currently serves as non-executive
Chairman of Scapa Group plc.
Aged 58.

Joined the Board in October 1999. She has
had a varied career in both the public and
private sectors including positions in the
administrations of Presidents Ronald
Reagan and George H W Bush as well as
senior executive appointments with Drexel
Burnham Lambert Inc, HSBC Holdings plc
and Lehman Brothers. She is currently
Vice President Group External Affairs,
Shell International Limited and a member
of the Academic Council of Wilton Park.
Aged 51.

Board Committees
The specific responsibilities
delegated to the Board Committees
are described on pages 30 and 31.

Audit Committee
Keith Hopkins (Chairman)
Richard Delbridge
Mary Jo Jacobi
Sir David Lees
Carole Piwnica
Allen Yurko

Chairman’s Committee
Sir David Lees (Chairman)
Richard Delbridge
Iain Ferguson
Keith Hopkins
Mary Jo Jacobi
Larry Pillard
Carole Piwnica
Allen Yurko

Nominations Committee
Sir David Lees (Chairman)
Richard Delbridge
Iain Ferguson
Keith Hopkins
Mary Jo Jacobi
Larry Pillard
Carole Piwnica
Allen Yurko

Remuneration Committee
Allen Yurko (Chairman)
Richard Delbridge
Keith Hopkins
Mary Jo Jacobi
Sir David Lees
Carole Piwnica

tateandlyle.com 27

Stuart Strathdee
Managing Director, International Division

Allen Yurko
Non-Executive Director

Joined the Group in 1977. He has served in
a variety of senior management positions
including Group Treasurer, Managing
Director of United Molasses and Managing
Director of Tate & Lyle International.
He was appointed to the Tate & Lyle Board
in November 1994. He is a non-executive
director of James Finlay Limited.
Aged 51.

Joined the Board in April 1996. He joined
Siebe plc in 1989 becoming a director in
1991 and Chief Executive Officer in 1994.
Following the merger of Siebe and BTR in
1999, he was appointed Chief Executive
of the merged company, Invensys plc,
a position he held until September 2001.
He is currently a Partner of Compass
Partners International Limited, a trans-
Atlantic private equity business. Aged 51.

Company Secretary
Robert Gibber
A solicitor, he joined Tate & Lyle in 1990
as a commercial lawyer. He was appointed
General Counsel in 1997 and then also
Company Secretary in 2001. Aged 40.

Tate & Lyle annual report 2003

directors’ report

Principal Activities of the Group
The activities of Tate & Lyle PLC
and its subsidiary and associated
undertakings (the ‘Group’) are
principally processing carbohydrates
to provide a range of sweeteners,
starch products, food ingredients
and industrial products.

Financial Year
The accounting period under review
is for the year ended 31 March 2003.
Comparative figures used in this
report are for the year ended
31 March 2002.

Business Review
The Chairman’s Statement on
pages 4 and 5, the Chief Executive’s
Review on pages 12 and 13 and the
Operating and Financial Review on
pages 14 to 20 report on the activities
during the year, post balance sheet
events and likely future developments.

Dividend
A final dividend of 12.8p is
recommended for the year to
31 March 2003. If approved, it will be
due and payable on 6 August 2003
to shareholders on the register on
11 July 2003. This dividend amounts
to £61 million and makes a total
for the year of 18.3p per share,
compared with 17.8p for the year
to 31 March 2002.

Share Capital
The Company issued 264,586 ordinary
shares during the year on the exercise
of employee share options. The total
value of ordinary shares issued at the
issue price for cash was £727,095.

Offers made under the Group’s
executive share option scheme and
the UK sharesave scheme during the
year together resulted in the grant of
508 options to individuals to buy
3,872,750 shares. 84.6% of eligible
UK employees hold share options.
More information about options
granted under the schemes is given
on page 71.

Details of shares purchased by the Tate
& Lyle Employee Benefit Trust to satisfy
options granted under the Group’s
executive share option scheme are
given in the Directors’ Remuneration
Report on page 40 and in note 16 to
the financial statements on page 59.

28 tateandlyle.com

Details of substantial interests in
Tate & Lyle are given on page 72.
Apart from these holdings, the
directors have not been notified of
any material interest of 3% or more
or any non-material interest of 10%
or more of the issued voting capital
of the Company.

The Company was given authority
at the 2002 Annual General Meeting
(‘AGM’) to make market purchases of
up to 48,191,548 of its own ordinary
shares. This authority will expire at the
2003 AGM and approval will be
sought from shareholders at that
meeting for a similar authority
to be given for a further year. The
Company has not acquired any of
its own shares during the year.

Directors
The current members of the Board,
together with biographical details of
each director, are set out on pages
26 and 27.

Larry Pillard resigned as Chief
Executive from 31 December 2002
but continues to serve on the Board
as a non-executive director. Simon
Gifford was appointed Acting Chief
Executive on 1 January 2003, in
addition to his responsibilities as
Group Finance Director. He held that
position until 30 April 2003 when he
reverted to the sole position of Group
Finance Director.

Stanley Musesengwa joined the
Board as an executive director on
2 April 2003 and was appointed Chief
Operating Officer from 1 May 2003.
Iain Ferguson was appointed as
an executive director and Chief
Executive from 1 May 2003.
On 2 April 2003, John Walker,
an executive director, retired from
the Board.

In accordance with its Articles of
Association, one-third (or the nearest
whole number below one-third) of the
directors of Tate & Lyle PLC are
required to retire at each AGM,
together with directors appointed by
the Board since the previous AGM.
The directors retiring by rotation and
offering themselves for re-election at
the 2003 AGM are Carole Piwnica,
Stuart Strathdee and Allen Yurko.
Stanley Musesengwa and Iain

Ferguson, who were appointed as
directors since the last AGM, will also
be retiring and offering themselves for
re-election.

In addition to the requirements of the
Articles of Association, the directors
have agreed to submit themselves for
re-election where a director has
served for more than three years
without re-election. Keith Hopkins was
last re-elected at the 2000 AGM and,
accordingly, he will also retire and
seek re-election at the 2003 AGM.

Iain Ferguson, Stanley Musesengwa
and Stuart Strathdee are employed
under service contracts, the details
of which are set out in the Directors’
Remuneration Report on page 35.
Keith Hopkins, Carole Piwnica and
Allen Yurko do not have service
contracts. Carole Piwnica has a
consultancy agreement with the
Group, the details of which are given
in the Directors’ Remuneration Report
on page 36.

At no time during the year has any
director had any material interest in
a contract with the Group, being a
contract of significance in relation to
the Group’s business. A statement of
directors’ interests in shares of the
Company is given on page 40.

Annual General Meeting
The AGM will be held at the Royal
Lancaster Hotel, London W2 on
Thursday 31 July 2003 at 11.30 am.
Enclosed with this Report is a letter
from the Chairman to shareholders.
Attached as an appendix to the letter
is the Notice convening the meeting
which includes four items of special
business. The letter includes an
explanation of all the resolutions
to be proposed at the AGM.

Corporate Governance
The report on Corporate Governance
is on pages 30 to 32. The Directors’
Remuneration Report is on pages
33 to 40.

Research and Development
The Group spent £18 million
(2002 – £17 million) on research
and development during the year.

Tate & Lyle annual report 2003

Employment
The average number of employees in
the Group during the year is given on
page 54.

Group companies operate within
a framework of human resources
policies, practices and regulations
appropriate to their own market sector
and country of operation. Policies and
procedures for recruitment, training
and career development promote
equality of opportunity regardless
of gender, sexual orientation, age,
marital status, disability, race, religion
or other beliefs and ethnic or national
origin. The aim is to encourage a
culture in which all employees have
the opportunity to develop as fully
as possible in accordance with their
individual abilities and the needs
of the Group.

The Group is committed to effective
communication with employees,
including information on its
performance and business
environment. It follows appropriate
consultation procedures and has an
established European Forum.

Training is concentrated on multi-
skilling to encourage flexibility in
working practices. The Group runs
a series of international management
programmes to develop management
skills and create valuable
opportunities for the cross-
fertilisation of management ideas
across the Group.

Donations
Worldwide charitable donations
during the year totalled £667,000
(2002 – £831,000), of which £392,000
(2002 – £396,000) was donated in
the UK. More details of the Group’s
involvement in the community can
be found in the Corporate Social
Responsibility Report on pages 21
to 25.

During the year, in line with the
Group’s policy, no political donations
were made in the European Union
(‘EU’). Outside the EU, Staley, the
Group’s US cereal sweetener and
starch business, made contributions
during the year totalling US$34,000
(£22,000) to state and national
political party committees and to
the campaign committees of state
candidates affiliated to the major parties.

Contributions were only made
where allowed by state and federal
law. The total includes US$15,000
(£10,000) contributed by the Staley
Political Action Committee (‘PAC’).
The PAC is funded entirely by
employees. Employee contributions
are entirely voluntary and no pressure
is placed on employees to participate.
No funds are provided to the PAC
by Staley but under US law, an
employee-funded PAC must bear
the name of the employing company.

Payment to Suppliers
It is the Group’s policy that UK
operating companies should follow
the CBI Prompt Payers’ Code.
The Code requires the Company to
agree the terms of payment with its
suppliers, to ensure its suppliers are
aware of those terms and to abide by
them. It is the Group’s policy also to
apply the requirements of the Code to
wholly owned companies around the
world, wherever possible.

Tate & Lyle PLC is a holding company
and had no amounts owing to trade
creditors at 31 March 2003.

Directors’ Responsibilities for
the Accounts
The directors have a specific
responsibility for reporting to
shareholders and for the assets of the
Group. The directors are required by
the Companies Act 1985 to present
for each period financial statements
which give a true and fair view of the
state of affairs of the Company and
of the Group as at the end of the
accounting period and of the profit
or loss for that period. In preparing
the financial statements, suitable
accounting policies, framed by
reference to reasonable and prudent
judgements and estimates, have to
be used and applied consistently.
Applicable accounting standards have
been followed and the accounts have
been prepared on a going concern
basis. The directors are responsible
for the Group’s system of internal
financial control, for ensuring that
arrangements are made for the
maintenance of adequate accounting
records, for safeguarding the assets
of the Group, and for ensuring that
steps are taken with a view to
preventing and detecting fraud and
other irregularities.

Auditors
Following the conversion of
PricewaterhouseCoopers to a
Limited Liability Partnership (‘LLP’),
effective from 1 January 2003,
PricewaterhouseCoopers resigned
as auditors on 24 February 2003
and the Board appointed
PricewaterhouseCoopers LLP to fill
the casual vacancy created by the
resignation. PricewaterhouseCoopers
LLP have signified their willingness
to continue in office and an ordinary
resolution, with special notice,
reappointing them as auditors will
be proposed at the 2003 AGM.

On behalf of the Board
Robert Gibber, Company Secretary
4 June 2003

tateandlyle.com 29

Tate & Lyle annual report 2003

corporate governance

Combined Code
The Committee on Corporate
Governance issued the Combined
Code (‘the Code’) in June 1998.
The Listing Rules of the Financial
Services Authority require a narrative
statement of how the Company
applies the principles of the Code,
and a statement as to whether the
Company has complied with the
provisions of the Code throughout the
accounting period, giving reasons for
any non-compliance. The paragraphs
below, together with the Directors’
Remuneration Report on pages
33 to 40, describe how the Company
applies the principles and complies
with the provisions of the Code.

The Board
The Board currently comprises
the Chairman (which is a non-
executive position), four executive
directors and six other non-executive
directors. The non-executive directors
have a wide range of skills,
experience and outside business
interests. The roles of Chairman and
Chief Executive are separated and
clearly defined. The Chairman is
responsible for the working of the
Board and the Chief Executive for
the running of the business and the
implementation of Board strategy
and policy.

The Board considers the Chairman
and all the non-executive directors to
be independent of management, with
the exception of Carole Piwnica and
Larry Pillard. Carole Piwnica is a
former Chairman of Amylum Group
and is paid by the Group for
consultancy services which she
performs in addition to her duties as
a non-executive director. Details of
the terms of her consultancy
agreement are given in the Directors’
Remuneration Report on page 36.
Larry Pillard is a former executive
director of the Company (he ceased
to be Chief Executive on 31 December
2002). He has extensive knowledge
and experience of the starch industry
both in the US and Europe and was
asked to serve as a non-executive
director so that his considerable
knowledge and expertise would
continue to be available to the Board.

30 tateandlyle.com

The Board usually meets eight times
each year. At least one meeting takes
place at an operating subsidiary or
joint venture company. Ten Board
meetings were held during the year
and the directors’ overall rate of
attendance was 92%.

All substantive agenda items have
comprehensive briefing papers which
are circulated five days before the
meeting. The Board reviews regularly
the strategy of the Group and at most
Board meetings it reviews the strategy
of one of the major units.

During the year, the Board carried out
an evaluation of the effectiveness of
the Board and the Board Committees.
The evaluation covered issues such as
Board and Committee composition,
arrangements for and content of
meetings, access to information,
administrative procedures, director
training and visits to operating sites.
The results of the evaluation were
considered by the Board and
recommendations were made and
implemented.

Appropriate training and briefing
is available to all directors on
appointment to the Board, taking into
account their individual qualifications
and experience, and also on an
ongoing basis as required to meet
their individual needs.

The directors have access to the
advice and services of the Company
Secretary who is responsible for
advising the Board on procedures
and applicable rules and regulations.
The Company Secretary acts as
Secretary for all the Board Committees.
There is also a procedure in place
whereby, in the furtherance of their
duties, directors can obtain
independent professional advice at
the Company’s expense.

The Company’s Articles require the
re-election of one-third of the Board
(or the nearest whole number below
one-third) at each Annual General
Meeting. Where this would result in
a director serving for more than three
years without re-election, the directors
have agreed to submit themselves
for re-election.

The Board Committees
The Board has a formal schedule of
matters reserved to it for decision, but
also delegates specific responsibilities
to Board Committees, all of which
have written terms of reference.
The current Board Committee
structure is described below.

Chairman’s Committee
The Chairman’s Committee comprises
the Chairman, the other non-executive
directors and the Chief Executive,
under the chairmanship of the
Chairman. It meets before each
Board meeting as required, and
provides an opportunity for the
Chairman and Chief Executive to
brief and obtain the views of the
non-executive directors.

The Committee met eight times during
the year and the members’ overall
rate of attendance was 98%.

Audit Committee
The Audit Committee comprises the
Chairman and all the non-executive
directors (except Larry Pillard), under
the chairmanship of Keith Hopkins.
Following the Annual General Meeting
on 31 July 2003 (‘2003 AGM’), Keith
Hopkins will retire as Chairman of the
Committee and will be succeeded by
Richard Delbridge. Keith Hopkins will
continue to serve as a member of the
Committee, subject to his re-election
as a director at the 2003 AGM.

The Committee provides a facility for
discussing with the Group’s external
auditors their report on the annual
accounts, reviewing the scope and
results of the internal audit work
programme and considering any other
matters which might have a financial
impact on the Company. This includes
reviewing the Group’s system of
internal control and the process
for evaluating and monitoring risk.
The Committee also reviews the
objectivity of the external auditors,
including the level of non-audit
services supplied, and ensures
that there is an appropriate
audit relationship (see ‘Auditor
Independence’ on page 32).

Tate & Lyle annual report 2003

The Committee met three times during
the year with the Chief Executive,
Group Finance Director, Head of
Internal Audit and other members
of the senior management team,
together with the external auditors,
in attendance. Non-executive
directors who are not members of the
Committee are also invited to attend
meetings to provide advice as
required. The Committee meets
privately with the external auditors
and the Head of Internal Audit at least
once a year.

The members’ overall rate of
attendance at Committee meetings
during the year was 100%.

Remuneration Committee
The Remuneration Committee
comprises the Chairman and all the
non-executive directors (except Larry
Pillard) under the chairmanship of
Allen Yurko. It meets as required,
usually before each Board meeting.

The Committee makes
recommendations to the Board on
executive directors’ remuneration
policy and specifically approves the
remuneration and other detailed terms
of service, including the terms upon
which such service is terminated,
of the executive directors and the
Company Secretary. The Committee
also approves the salary and benefits
of members of the Executive
Committee and employees who
report directly to the Chief Executive.

During the year, the Committee met
ten times and the members’ overall
rate of attendance was 98%.

The Directors’ Remuneration Report
on pages 33 to 40 gives more
information on the Company’s
executive remuneration policy and
practice, and on the working of
the Committee.

Nominations Committee
The Nominations Committee
comprises the Chairman, the other
non-executive directors and the Chief
Executive under the chairmanship of
the Chairman. It meets periodically
as required.

The Committee considers and
recommends to the Board candidates
for appointment as executive and
non-executive directors and as
Company Secretary.

It also makes recommendations to the
Board on the processes for the
appointment of the Chairman of the
Board, the Board’s composition and
balance, the membership of the Board
Committees and material changes in
the responsibilities of Board Members.

During the year, with the help of
external recruitment consultants,
the Committee selected and made
recommendations to the Board for
the appointment of a new Chief
Executive and Chief Operating Officer.
Both recommendations were
approved by the Board.

The Committee met nine times during
the year and the members’ overall
rate of attendance was 93%.

Shareholder Communications
The Chief Executive and Group
Finance Director, supported by
the Chairman, maintain a regular
programme of visits and presentations
to major institutional shareholders.

Some 250 shareholders normally
attend the Annual General Meeting
and are invited to ask questions and
meet informally with the directors after
the formal proceedings have ended.

The Company aims to present
a balanced and understandable
assessment in all its reports to
the public and to regulators. Key
announcements and other information
may be found on the Company’s
website at www.tateandlyle.com.

Internal Control
The Board of Directors has overall
responsibility for the Group’s system
of internal control and for reviewing
its effectiveness. Such a system is
designed to manage rather than
eliminate risk, and can only provide
reasonable and not absolute
assurance against material
misstatement or loss.

The Audit Committee, on behalf of
the Board, reviews the effectiveness
of the system of internal control at
least annually and has confirmed to
the Board that this review has been
carried out twice during the year to
31 March 2003 and up to the date
of this Annual Report. This review
covered financial, operational and
compliance controls and risk
management procedures.

The processes described below,
which accord with the guidance
‘Internal Control: Guidance for
Directors on the Combined Code’
issued by the Institute of Chartered
Accountants in England and Wales
(the Turnbull guidance), have been
in place throughout the year and up
to the date of this Annual Report.
These processes are reviewed on
an ongoing basis by the Board
and the Audit Committee.

The Group operates a management
system that recognises the
appropriate balance of risk and
reward as a key part of the enterprise.
The system emphasises risk
management as a responsibility
of line executives, not only of staff
specialists. The process is flexible
and ongoing and is supported by a
formal procedure for identifying and
evaluating major business risks facing
the Group. Under this procedure,
senior executive management
confirms to the Chief Executive and
Group Finance Director, at least twice
a year, that these risks are being
managed appropriately within their
operations and controls have been
examined and are effective.

The Chief Executive requires his
senior managers to maintain regular
contact with him and he also receives
comprehensive reports monthly from
each major business group.

The Group has an internal audit
department that supports the Board
and the Audit Committee in
maintaining procedures through a
programme of regular reviews that
focus on key aspects of the business.
The Audit Committee receives regular
reports on the progress and work of
the internal audit department. It also
receives reports from the Group’s
external auditors on the effectiveness
of the system of internal control and
risk management.

An Executive Committee comprises
the executive directors, the Company
Secretary and other senior Group
managers. It is chaired by the Chief
Executive and meets at least nine
times during the year. Its members
are appointed by the Chief Executive
to assist him in managing the
activities of the Group.

tateandlyle.com 31

Developments in Corporate
Governance
The Board will continue to review its
existing arrangements in light of the
recommendations made in Derek
Higgs’ report on ‘Review of the role
and effectiveness of non-executive
directors’, Sir Robert Smith’s report
on ‘Audit Committees: Combined
Code guidance’, and, upon its
publication in final form, the new
Combined Code.

Tate & Lyle annual report 2003

corporate governance

The Chief Executive and the Group
Finance Director submit written
reports to each Board meeting
which include consideration of
changing threats and opportunities
within the business.

The standard Board review of
investments and disposals includes
identification of major risks that could
affect the outcome of each project,
with a sensitivity analysis.

Formal annual reports and
presentations are received by the
Board on certain areas of special risk.
These include insurance, treasury
management, commodity trading,
pensions management, safety and
environmental issues.

There is a comprehensive annual
planning and financial reporting
system comparing results with
plan and the previous year on a
monthly basis. Revised forecasts for
the year are produced at least
quarterly. Reports include a monthly
cash flow statement projected for
15 months. Additionally, quarterly
financial reviews of the major
operating units are undertaken.

The Company has defined procedures
for the authorisation of capital
expenditure and investment, granting
of guarantees, trading and hedging of
currencies and commodities and use
of treasury products.

The Group’s businesses operate
under mandatory written procedures
to provide an appropriate control
environment. The Group Policies and
Procedures set out the Group’s
commitment to competence, integrity
and ethical values. Each year, the
Group’s businesses are required
formally to confirm that they are in
compliance with these policies and
the results of this review are reported
to the Audit Committee.

32 tateandlyle.com

Auditor Independence
As stated in last year’s Annual Report,
the Board has adopted a policy that
excludes the Group’s external auditors
from assignments that are not closely
related to the audit function unless the
Audit Committee determine otherwise.

The Audit Committee has agreed
a schedule which categorises such
services between:

•

those which the external auditors
are permitted to provide;
those which the external auditors
are not permitted to provide; and
those for which the approval of the
Audit Committee is required before
the external auditors are permitted
to provide the services.

The schedule, which has been issued
by the Group Finance Director to all
Group companies, is reviewed by the
Audit Committee on an ongoing basis.

Details of the amounts paid to the
external auditors for audit, audit-
related work and non-audit work is
given in note 4 to the financial
statements on page 53.

Compliance with the Provisions
of the Code
The Company has complied
throughout the year with the
provisions of the Code, with the
following exceptions:

• Larry Pillard’s bonus for the

year ended 31 March 2003 is
pensionable, in accordance with
usual North American practice.
• The Board does not consider it
necessary to identify a single
senior non-executive director,
in addition to the Chairman, to
whom concerns may be conveyed.
The Chairmen of the Remuneration
and Audit Committees can be
consulted on any matters where
investors feel an approach to the
Chairman or Chief Executive would
be inappropriate.

• Carole Piwnica is a member of
the Remuneration Committee
and, consequently, it does not
exclusively comprise independent
non-executive directors.

Tate & Lyle annual report 2003

directors’ remuneration report

Remuneration Committee
The remuneration of the executive
directors is set by the Remuneration
Committee in accordance with a
remuneration policy determined by the
Board upon recommendation from the
Committee. The policy is reviewed
annually.

The members of the Committee
are Allen Yurko (Chairman), Richard
Delbridge, Keith Hopkins, Mary Jo
Jacobi, Sir David Lees and Carole
Piwnica, all of whom are non-
executive directors of the Company.
The Committee determines the
individual remuneration packages
of each executive director, including
base salary, bonus, long-term
incentives, benefits, and terms of
employment including those upon
which their service may be
terminated. The Committee also
approves the base salary, long-term
incentives and benefits of members
of the Executive Committee and
employees who report directly to the
Chief Executive. The Committee met
ten times during the year.

To ensure that the Group’s
remuneration practices remain market
competitive, the Committee receives
advice from independent remuneration
consultants. The Director of Group
Human Resources provides
administrative assistance to the
Committee in selecting external
advisers for appointment by the
Committee. During the year, the
Committee was advised by Towers
Perrin on executive pay and by Kepler
Associates on the proposed new
Performance Share Plan. Kepler
Associates provided no other services
to the Group during the year whilst
Towers Perrin acted as Scheme
Actuary for the Staley pension
schemes (for part of the year),
and also provided the Group with
insurance consultancy services and
salary survey information for some
employees below Executive
Committee level. Following the year-
end, the Committee adopted a policy
whereby an individual consultant
appointed to advise the Committee
on the remuneration of executive
directors and certain other senior
executives (as described above) shall
not also advise general management
on the remuneration of any other
executives in the Group.

The Chief Executive, Director
of Group Human Resources and
Company Secretary, who acts as
Secretary to the Committee, are
normally invited to attend meetings,
although not when their own
remuneration arrangements are
discussed. In addition, non-executive
directors who are not members of
the Committee are invited to attend
meetings to provide advice as
required. During the year, the
Committee also received advice from
the Group Pensions Manager and
the Deputy Company Secretary on
specific issues relating to pensions
and share schemes respectively.

Remuneration Policy
This section describes Tate & Lyle’s
policy for the remuneration of its
executive and non-executive directors
as at the date of this report and for
the foreseeable future.

The Group’s remuneration policy
for executive directors and senior
executives is to provide remuneration
packages which attract, retain and
motivate high-calibre individuals to
ensure that the Group is managed
successfully to the benefit of
shareholders. To achieve this, the
remuneration package is designed:

•

to be competitive and
commensurate with other
international businesses of similar
size, particularly those in the food
processing industry;
to align the interests of executives
and shareholders by rewarding the
creation of sustained growth in
shareholder value;
to reward above average
performance;
to ensure that performance
related elements form a
significant proportion of the total
remuneration package; and
to take into account local country
practice.

The fees of non-executive directors,
which are determined by the Board,
are set at a level which will attract
individuals with the necessary
experience and ability to make
a substantial contribution to the
Group’s affairs. The fees paid are
commensurate with those paid by
other UK listed companies.

The current remuneration package for
executive directors consists of short-
term rewards (base salary and annual
bonus), long-term rewards (share
options) and retirement and other
benefits. Each of these elements
is explained in more detail below.
The performance related elements,
when valued at target performance
levels, comprise approximately 50%
of the total remuneration package
(excluding post-retirement benefits).

Base salary and benefits
The Group’s policy is for base salaries
to take account of the median relative
to similar companies, and also to
reflect job responsibilities and the
sustained level of individual
performance. The Remuneration
Committee reviews the salary of
each executive director annually.

Base salaries for the current executive
directors following the most recent
annual salary review in April 2003 are:

Iain Ferguson
Simon Gifford
Stanley Musesengwa
Stuart Strathdee

£550,000
£405,000
£400,000
£250,000

Executive directors are provided
with a company car (or receive
a car allowance in lieu) and health
insurance. These benefits do not
form part of pensionable earnings.

Annual bonus scheme
The Group operates an annual cash
bonus scheme for executive directors
and senior executives which is
determined by reference to the
performance of the Group, or
appropriate division or subsidiary,
primarily against financial objectives.
The Group’s policy is that annual
bonuses are capped at 100% of base
salary or lower, dependent on the
executive’s responsibilities.

For the year ended 31 March 2003,
bonuses for executive directors were
based on predetermined levels of
Group profit before tax, exceptional
items and goodwill amortisation.
The maximum bonus that could be
earned in the year was 90% of base
salary for the Chief Executive, 80%
of base salary for the Group Finance
Director and 70% of base salary
for the other executive directors.

tateandlyle.com 33

Tate & Lyle annual report 2003

directors’ remuneration report

A maximum bonus payment would
only be made if exceptional financial
performance in excess of targets
were achieved. Bonuses awarded
to the executive directors based on
the Group’s financial performance
for the year ended 31 March 2003
are shown in the table on page 37.
The Remuneration Committee
reviewed the attainment of the
financial targets and agreed the
bonus payments. Bonuses paid to
executive directors do not form part
of pensionable earnings, with the
exception of the discretionary
bonus paid to Larry Pillard, which
is pensionable in line with usual
North American practice.

Long-term incentives
The Remuneration Committee believes
that performance-based long-term
incentive plans provide executive
directors and senior executives with
long-term rewards that closely align
with shareholders’ interests and are
an important component of the overall
executive remuneration package.

(i) 2000 Executive Share Option
Scheme
The Group operates a discretionary
Executive Share Option Scheme
under which options over the
Company’s ordinary shares may
be granted each year to executive
directors and other senior executives
and employees. The current Executive
Share Option Scheme (‘the 2000
Scheme’) was approved by
shareholders in July 2000.

Grants of options, which are made
annually, are approved by the
Remuneration Committee and do not
normally exceed 2.0 times base salary
for the Chief Executive and 1.5 times
for UK-based executive directors.
During the year, all option grants were
within these limits. The size of option
grants is based on individual
performance and also the potential
impact of the individual on the longer-
term business results.

Earnings per share performance
criteria need to be met before options
can be exercised. The Remuneration
Committee considers earnings per
share to be an important measure of
the Group’s profitability and provides
a suitable means of linking executive

34 tateandlyle.com

rewards with shareholders’ interests.
The Remuneration Committee
considers that the performance
condition is challenging and realistic.

The performance condition attached
to the exercise of options is scaled
such that, if over the first three
consecutive years, the growth in the
Company’s normalised earnings per
share has exceeded the growth in the
UK Retail Price Index excluding
mortgage interest payments (‘RPIX’)
by an average of:

• at least 3% per year (9.3% over
three years), then 50% of options
granted may be exercised;

• at least 4% per year (12.5% over

three years), then 100% of options
granted may be exercised.

Options not meeting the performance
condition in the third year may be
exercised in subsequent years (up to
ten years after the date the options
were granted at which time they will
lapse) but only if the appropriate
compound performance condition is
met. For example, in the fourth year
following grant, such options can be
exercised if the Company’s
normalised earnings per share has
exceeded the growth in RPIX by:

• at least 12.6%, then 50% of

options granted may be exercised;

• at least 17.0%, then 100% of

options granted may be exercised.

The achievement or otherwise of the
performance condition is assessed by
the Remuneration Committee. This
assessment is also reviewed by the
Company’s external auditors.

(ii) 1992 Executive Share Option
Schemes (closed)
Prior to the approval of the 2000
Scheme, options were granted under
UK and International Executive Share
Option Schemes which were approved
by shareholders in 1992 (‘the 1992
Schemes’). The exercise of executive
share options granted since November
1995 under the 1992 Schemes is
subject to the Group achieving an
increase in fully diluted earnings per
share of 6% more than the increase in
the UK Retail Price Index during any
period of three consecutive financial
years over the life of the option. Since

the approval of the 2000 Scheme,
no option grants have been made
under the 1992 Schemes.

(iii) 2003 Performance Share Plan
Shareholders will be asked to approve
the introduction of a new Performance
Share Plan (the ‘Plan’) at the Annual
General Meeting (‘AGM’) on 31 July
2003. A summary of the Plan is given
below and more details can be found
in appendix 4 attached to the letter
from the Chairman of the Company
which accompanies this Annual
Report. The Remuneration Committee
will be responsible for the operation
of the Plan which will supplement the
2000 Scheme.

Executive directors and other
selected senior executives will be
eligible to participate in the Plan at
the discretion of the Remuneration
Committee. Participants will be
awarded annually a conditional right
to receive a number of Tate & Lyle
PLC ordinary shares in value up to a
maximum of 100% of base salary and
calculated by reference to the average
of the daily closing prices of Tate &
Lyle PLC ordinary shares during the
six months preceding the beginning of
the measurement period. The number
of shares that the participant will
receive will depend on the Group’s
performance during the measurement
period which will be three years
commencing on 1 April in the year
of the award.

Performance will be measured by
comparing the Total Shareholder
Return, or ‘TSR’ (share price growth
plus reinvested dividends), from Tate
& Lyle PLC relative to a comparator
group of companies consisting of the
FTSE 100 Index at the start of the
measurement period excluding
companies in the telecommunications,
media, technology and financial
services sectors (‘the comparator
group’). The Remuneration Committee
chose relative TSR for the Plan as it
closely aligns executives’ and
shareholders’ interests and is an
objective measure of the value
created for shareholders. It also
considers that the comparator group
(consisting of about 60 companies) is
appropriate, robust and relevant for
Tate & Lyle but will review from time
to time its continued validity.

Tate & Lyle annual report 2003

If, at the end of the measurement
period, Tate & Lyle ranks in the upper
quartile of the comparator group,
participants in the Plan will receive all
of the shares conditionally awarded to
them. If the ranking is at the median
level, 25% of the shares will be
received. No shares will be received
for below median performance.
For intermediate rankings between
upper quartile and median,
participants will receive a
proportionate number of shares
reducing on a straight-line basis.
Irrespective of Tate & Lyle’s TSR,
before any shares become eligible
for release the Remuneration
Committee must be satisfied that this
is justified by the underlying financial
performance of the Group over the
measurement period.

At the end of the three-year
measurement period the conditional
award is converted into a deferred
right to acquire the appropriate
number of shares which will not be
released to the participant for one
further year other than in the specific
circumstances set out in the rules of
the Plan.

(iv) Sharesave scheme
The Company has a sharesave
scheme that is open to all employees
in the UK including executive
directors. No performance conditions
are attached to options granted under
the scheme as it is an all-employee
scheme. As permitted by the Finance
Act 1989, exercise prices are normally
set at a discount of 20% to the
market price at the time of grant.

Personal shareholding policy
To align the interests of executive
directors with those of shareholders,
a policy is in place under which
executive directors are expected to
build and maintain a shareholding in
the Company equivalent to one times
base salary. Executive directors who
have not met their target shareholding
are expected to retain a significant
proportion of shares acquired through
the Company’s long-term incentive
plans in order to meet their target.

Pensions
The Company’s policy is to provide
retirement and other benefits which
reflect local market practice at median
levels. Retirement benefits, in the form

of pension and/or lump sums, are
provided through tax-approved
schemes, covering executives in the
country and business sector in which
they perform their principal duties.
In certain circumstances where
individuals are transferred from
their home country to other Group
locations but are likely to retire in the
home country, pension benefits may
continue to be provided on a home
country basis. Where the promised
level of benefits cannot be provided
through tax-approved schemes,
appropriate provisions are made in
the Group accounts.

Simon Gifford, Stuart Strathdee and
John Walker are members of the Tate
& Lyle Group Pension Scheme and
are eligible at age 60 for a pension
equal to two-thirds of their basic
salary in the highest of their last five
completed tax years. Bonuses are not
pensionable. The benefit also includes
a widow’s pension payable on a
director’s death and a lump sum on
death in service. Once in payment to
a director or his widow, the pension
is increased each year in line with the
Retail Price Index up to a maximum
of 5%, with a minimum of 3%.

External appointments
The Board believes that the Company
can benefit from its executive
directors holding a non-executive
directorship. Such appointments are
subject to the approval of the Board
and are normally restricted to one for
each executive director. Fees may be
retained by the executive director
concerned.

Audited information
The tabular information on pages
37 to 40 has been audited by the
Group’s external auditor.

Service Contracts
Policy
Since 1999, the Company’s policy has
been that contracts for new executive
directors should be terminable by the
Company on a maximum of one
year’s notice, except in special
circumstances, and by the individual
director on up to six months’ notice.

In the event of early termination of
an executive director’s contract, the
Company’s policy is to seek to avoid
any liability to the executive director
in excess of his or her contractual
entitlement so as to encourage
mitigation.

Executive directors
Following the year-end, Stanley
Musesengwa was appointed an
executive director on 2 April 2003
and Iain Ferguson was appointed
an executive director (and Chief
Executive) on 1 May 2003. In
accordance with the Group’s policy,
both directors were appointed on
contracts which are terminable by the
Company on not more than one year’s
notice and by the individual director
on six months’ notice.

Simon Gifford and Stuart Strathdee,
who were appointed to the Board
before 1999, each have service
contracts terminable by the Company
on not less than two years’ notice and
by the individual director on six
months’ notice. The Remuneration
Committee does not consider it in
shareholders’ best interests to
renegotiate these contracts at
this time.

The details of the current executive
directors’ service contracts are given
in the table below:

Executive director

Simon Gifford
Iain Ferguson
Stanley Musesengwa
Stuart Strathdee

Notes

(a)
(b)
(b)
(a)

Date of service
contract

Unexpired
term

Notice
period

26 February 1996
15 April 2003
4 June 2003
1 November 1995

Two years
One year
One year
Two years

(a)

In the event of early termination of the director’s service contract (other than where summary
dismissal is appropriate), the Company is liable to provide compensation to the director equivalent
to the value of the salary and contractual benefits which he or she would have received during the
relevant notice period.

(b) In the event of early termination of the director’s service contract (other than where summary

dismissal is appropriate), the Company has the right to pay, in lieu of notice, salary and contractual
benefits which the director would have received during the relevant notice period.

tateandlyle.com 35

Tate & Lyle annual report 2003

directors’ remuneration report

Larry Pillard’s contract terminated
automatically on 31 December 2002
following his resignation as Chief
Executive. Under the terms of his
contract, no compensation was
paid to him.

by the Company or Sir David on not
less than one year’s notice. His fees,
which are reviewed annually, are
determined by the Board on the
recommendation of the Remuneration
Committee.

Committees receive an additional
12.5% of the basic fee (£4,063
per annum) to reflect the extra
responsibilities attached to these
positions.

John Walker
John Walker served as an executive
director throughout the year and
retired from the Board on 2 April
2003. As he was appointed to the
Board before 1999, during the year
he had a service contract (dated
1 October 1993) which, until
23 August 2002, was terminable by
the Company on not less than two
years’ notice and by himself on six
months’ notice. After that date, being
two years from his contractual
retirement date, the notice period
required to be given by the Company
began to reduce in line with the
unexpired term of the contract.
Accordingly, at 31 March 2003, the
unexpired term of his contract and
the notice period were both one year
and five months.

Following his retirement from the
Board, John Walker has remained
an employee of the Company and
is continuing to assist the Group’s
European sugar businesses until he
reaches his contractual retirement
age of 60 in August 2004. He
continues to be provided with a
company car and health insurance
but he is not eligible to participate
in the annual bonus scheme or the
Company’s long-term incentive plans.
His salary, which has been reduced
to £190,000 per annum, will not be
reviewed again before he retires.
His service contract continues to be
terminable by the Company on the
length of its unexpired term. The
notice period he is now required to
give the Company to terminate his
contract is three months.

Non-Executive Directors’ Terms
of Appointment
Chairman
Sir David Lees was appointed non-
executive Chairman on 1 October
1998 for an initial period of three
years. This appointment was
extended by the Board upon the
recommendation of the Nominations
Committee until 30 September 2002,
and continued thereafter terminable

36 tateandlyle.com

Carole Piwnica has a consultancy
agreement with the Group for which
she is paid €270,000 (£173,266) per
annum. This agreement, which was
entered into on 14 August 2000,
is for an initial three-year period and
thereafter until terminated by either
party giving not less than 12 months’
written notice, such notice to expire
no earlier than the end of the initial
three-year period. In recognition of
her consultancy services, she holds
the position of ‘Non-Executive Vice
Chairman, Government Affairs’ for
Tate & Lyle. She also receives £4,063
per annum in addition to her basic
fee as a non-executive director.

Performance graph
The graph below, as required under
the Directors’ Remuneration Report
Regulations 2002, illustrates the
cumulative total shareholder return
performance (share price growth plus
reinvested dividends) of Tate & Lyle
PLC against a ‘broad equity market
index’ over the past five years.
The FTSE 100 is considered to
be the most appropriate benchmark
for this purpose as, although the
Company is not a constituent of the
FTSE 100, during the relevant period
it has remained in or just outside the
UK’s top 100 companies by market
capitalisation.

Tate & Lyle PLC
FTSE 100 Index

Non-executive directors
The non-executive directors do not
participate in the Group’s incentive
schemes, nor do they receive other
benefits except as described below.
With the exception of Larry Pillard,
they do not participate in the Group’s
pension schemes. Larry Pillard is in
receipt of a pension from the Tate &
Lyle North America retirement plan
following his retirement from
executive service having elected to
draw his pension early in accordance
with the terms of the plan’s rules.

The non-executive directors do not
have service contracts, but under
the terms of their appointment they
are usually expected to serve on the
Board for between three and nine
years. The appointment of Keith
Hopkins, who joined the Board in
November 1994, has been extended
until the 2004 AGM, subject to his
re-election at the 2003 AGM.

The fees received by the non-
executive directors are determined
by the Board. The basic fee was
increased from £27,500 per annum
to £32,500 per annum on 1 April
2002, the previous increase having
been in October 1999. The Chairmen
of the Audit and Remuneration

n
r
u
t
e
R

r
e
d
o
h
e
r
a
h
S

a
t
o
T

40%

20%

-20%

-40%

-60%

March 1998

March 1999

March 2000

March 2001

March 2002

March 2003

Source: Bloomberg

Tate & Lyle annual report 2003

Directors’ Emoluments
Emoluments of the directors of Tate & Lyle PLC for the year ended 31 March 2003, contained within staff costs, were:

Chairman
Sir David Lees

Executive directors
Simon Gifford
Stuart Strathdee
John Walker

Non-executive directors
Richard Delbridge
Keith Hopkins
Mary Jo Jacobi
Larry Pillard4
Carole Piwnica
Allen Yurko
Directors who retired before 31 March 2002

Totals

Salary
and fees
£000

Benefits1
£000

Allowances
£000

Annual
bonus
£000

Total
year to
31 March
2003
£000

Total
year to
31 March
2002
£000

231

380
235
270

33
37
33
503
2103
37
–

1 969

13
9
8

–
–
–
19
–
–
–

–

–
–
–

–
–
–
67
–
–
–

–

248

228

3882
159
183

–
–
–
431
–
–
–

1 161

781
403
461

33
37
33
1 020
210
37
–

3 263

532
333
387

28
30
28
1 101
197
29
13

2 906

1. Executive directors’ benefits include the provision of a car (or cash allowance) and health insurance. Details of Larry Pillard’s benefits and allowances for the

year are given below. Benefits for the Chairman include the use of a car, the running and associated costs of which are borne partially by the Company.
2. In addition to the bonus payable under the executive bonus scheme based on the Group’s financial performance for the year ended 31 March 2003, Simon

Gifford’s bonus includes an amount of £93,750 in respect of a discretionary payment awarded by the Remuneration Committee in recognition of his additional
responsibilities as Acting Chief Executive relating to the period from 1 January 2003 to 31 March 2003.

3. Carole Piwnica’s total salary is made up of her fee of £36,563 (2002 – £30,250) for serving as a non-executive director, and €270,000 (2003 – £173,266)

(2002 – £166,656) paid to her under her consultancy agreement with the Group, the details of which are given on page 36.

4. The total emoluments for Larry Pillard relate to the period from 1 April 2002 to 31 December 2002 when he served as Chief Executive, and from 1 January

2003 to 31 March 2003 when he served as a non-executive director. No compensation was payable to Larry Pillard under the terms of his contract upon his
resignation as Chief Executive. A breakdown of Mr Pillard’s total emoluments for the year is as follows:

Larry Pillard

As Chief Executive from 1 April 2002 to 31 December 2002
As a non-executive director from 1 January 2003 to 31 March 2003

Totals

Salary
and fees
£000

495
8

503

Benefits5
£000

Allowances6
£000

19
–

67
–

Annual7
bonus
£000

431
–

431

Total
year to
31 March
2003
£000

1 012
8

1 020

5.Benefits whilst serving as Chief Executive related to a car allowance, health insurance and other minor benefits.
6. Allowances whilst serving as Chief Executive related to a housing allowance and a travel allowance for his family, both of which he received as an expatriate.
7. Larry Pillard was awarded a discretionary bonus payment by the Remuneration Committee, pro-rated for his time served as Chief Executive during the year,

based on the Group’s financial performance for the year ended 31 March 2003.

No remuneration was paid to former directors in the year ended 31 March 2003.

tateandlyle.com 37

Tate & Lyle annual report 2003

directors’ remuneration report

Pension Provision
In previous years’ accounts, disclosures of pension benefits have been made under the requirements of the Listing Rules of
the Financial Services Authority. These Rules are still in place, but it is now also necessary to make disclosure in accordance
with the Directors' Remuneration Report Regulations 2002. The information below sets out the disclosures under the two
sets of requirements.

Age at
31 March
2003

Accumulated
total accrued
pension at
year-end1
£000

56
55
51
58

253
374
133
180

Defined benefit schemes

Increase in
accrued
pension
during the
year2
£000

Increase
in accrued
pension
during the
year (net of
inflation)3
£000

20
62
15
10

16
59
13
7

Transfer
value of
increase
in accrued
pension
(net of
inflation)4
£000

251
510
133
132

Transfer
value of
accrued
pension at
start of
period5
£000

3 683
2 360
1 488
2 956

Transfer
value of
accrued
pension at
year-end6
£000

3 961
3 253
1 359
3 343

(Decrease)/
increase in
transfer
value for
the period7
£000

278
893
(129)
387

Defined
contribution
schemes8

£000

–
3
–
–

Simon Gifford
Larry Pillard9
Stuart Strathdee
John Walker

1. With the exception of Larry Pillard, the figure shown represents the amount of pension benefits, based on service, pensionable earnings and, where

appropriate, transferred pension rights, which would have been preserved for each director had he left service on 31 March 2003. For Larry Pillard the figure
shown represents the corresponding amount based on service to his actual retirement date of 31 December 2002.

2. For each director, the figure represents the difference between the total accrued pension at 31 March 2003 (31 December 2002 for Larry Pillard) and the

corresponding pension as at 31 March 2002. No allowance is made for inflation.

3. For each director, the figure represents the difference between the accrued pension at 31 March 2003 (31 December 2002 for Larry Pillard) and the

corresponding pension as at 31 March 2002. The figures quoted include an adjustment for inflation in accordance with the Listing Rules of the Financial
Services Authority.

4. For Simon Gifford, Stuart Strathdee and John Walker, the figures shown represent the transfer value, calculated in accordance with Guidance Note 11 issued

by the Institute and Faculty of Actuaries, of the inflation adjusted increase in the total accrued pension for the year. For Larry Pillard, the figure shown
represents the Accrued Benefit Obligation, that is the present value on 31 March 2003 of the increase during the part year from 1 April 2002 to 31 December
2002, based on market conditions on 31 March 2003.

5. For Simon Gifford, Stuart Strathdee and John Walker, the figures shown represent the transfer value, calculated in accordance with Guidance Note 11 issued
by the Institute and Faculty of Actuaries, of the accumulated total accrued pension at 1 April 2002. For Larry Pillard, the figures shown represent the Accrued
Benefit Obligation of the total accrued pension at 1 April 2002.

6. For Simon Gifford, Stuart Strathdee and John Walker, the figures shown represent the transfer value, calculated in accordance with Guidance Note 11 issued

by the Institute and Faculty of Actuaries, of the accumulated total accrued pension at 31 March 2003. For Larry Pillard, the figures shown represent the
Accrued Benefit Obligation of the total accrued pension at 31 March 2003.

7. The figures shown represent the increase/(decrease) in the transfer values from 1 April 2002 to 31 March 2003. For Stuart Strathdee, the effect of market

movements in the transfer values has more than offset the value of the additional benefits accrued, resulting in a decrease in the transfer value over the year
to 31 March 2003.

8. The figure shown represents the amount of matching contributions paid during the year by the Company to the 401(K) plans of Larry Pillard.
9. No changes were made during the year to Larry Pillard’s pension rights under the US pension plans under which he was covered. The transfer values shown
in the above table for Larry Pillard are based on the accrued benefits which would normally come into payment at age 60. On leaving, Larry Pillard elected
to exercise his right under the US pension plans to draw his pension early with effect from 1 January 2003. The pension he is entitled to from this date was
£311,000 per annum (reduced from the figure of £374,000 per annum shown in the table above). The actuarial value of this early retirement pension as at
31 March 2003 amounted to £3,860,000, representing an increase in value of £1,500,000 compared with the transfer value of his accrued benefits as at
31 March 2002 (which assumed that the pension would go into payment later). This difference in value reflects the capital value of paying the whole pension
early (arising from his total period of employment not just his employment during the financial year), in accordance with the terms of the US pension plans.

38 tateandlyle.com

Tate & Lyle annual report 2003

Directors’ Options over Ordinary Shares in Tate & Lyle PLC

Directors at 31 March 2003

Simon Gifford

Stuart Strathdee

John Walker

Granted

Lapsed

At 31 March
2003

Exercise price
(pence)

Earliest
exercise date

Latest
exercise date

Notes

At 1 April
2002

8 500
7 000
4 000
13 500
20 000
30 000
46 912
68 175
46 357
14 945
134 378
139 860
–
9 271

–
–
–
–
–
–
–
–
–
–
–
–
152 202
–

(8 500)
–
–

–
–
–
–
–
–
–
–
–
–

–
7 000
4 000
13 500
20 000
30 000
46 912
68 175
46 357
14 945
134 378
139 860
152 202
9 271

542 898

152 202

(8 500)

686 600

20 000
20 000
15 000
20 000
40 000
10 000
4 500
23 939
16 110
98 126
89 160
–
3 522
–

360 357

20 000
30 000
25 000
20 000
16 000
5 500
10 910
28 102
33 461
19 855
97 451
104 985
4 403

415 667

–
–
–
–
–
–
–
–
–
–
–
94 125
–
625

94 750

–
–
–
–
–
–
–
–
–
–
–
–
–

–

(20 000)
–
–
–
–
–
–
–
–
–
–
–
–
–

–
20 000
15 000
20 000
40 000
10 000
4 500
23 939
16 110
98 126
89 160
94 125
3 522
625

(20 000)

435 107

(20 000)
–
–
–
–
–
–
–
–
–
–
–
–

–
30 000
25 000
20 000
16 000
5 500
10 910
28 102
33 461
19 855
97 451
104 985
4 403

(20 000)

395 667

390
404
425
463
473
483
470.50
336
428.25
274
293.50
286
374.50
182

390
385
404
425
463
483
470.50
336
428.25
293.50
286
374.50
220
304

390
385
404
425
463
483
470.50
336
428.25
274
293.50
286
220

–
26.11.96
28.11.97
04.12.98
30.01.99
29.11.99
28.11.00
17.12.01
01.12.02
12.06.03
05.08.03
15.06.04
17.06.05
01.03.06

–
10.05.96
26.11.96
28.11.97
04.12.98
29.11.99
28.11.00
17.12.01
01.12.02
05.08.03
15.06.04
17.06.05
01.08.03
01.08.05

–
10.05.96
26.11.96
28.11.97
04.12.98
29.11.99
28.11.00
17.12.01
01.12.02
12.06.03
05.08.04
15.06.04
01.08.03

–
25.11.03
27.11.04
03.12.05
29.01.06
28.11.06
27.11.07
16.12.08
30.11.09
11.06.10
04.08.10
14.06.11
16.06.12
31.08.06

–
09.05.03
25.11.03
27.11.04
03.12.05
28.11.06
27.11.07
16.12.08
30.11.09
04.08.10
14.06.11
16.06.12
31.01.04
31.01.06

–
09.05.03
25.11.03
27.11.04
03.12.05
28.11.06
27.11.07
16.12.08
30.11.09
11.06.10
04.08.11
14.06.11
31.01.04

1
1
1
3
3
3
3
3
3
3
4
4
4
5

1
1,2
1
1
3
3
3
3
3
4
4
4
5
5

1
1,2
1
1
3
3
3
3
3
3
4
4
5

1. Options granted under the 1992 Executive Scheme with no performance conditions attached.
2. Total includes options granted in May 1993 which were exercisable at a discount of 15% subject to the satisfaction of performance criteria (all of which, as at

the date of this report, have expired unexercised).

3. Options granted under the 1992 Executive Scheme with performance conditions attached. The performance conditions are described on page 34.

These options are not exercisable as the performance conditions attached to the options have not been met.

4. Options granted under the 2000 Executive Scheme with performance conditions attached. The performance conditions are described on page 34.

These options are not exercisable as they are less than three years old.

5. Options held or granted under the sharesave scheme. As the sharesave scheme is an all-employee share scheme, no performance conditions are attached.

No executive or sharesave options were exercised during the year. Under the rules of the sharesave and the executive option
schemes, all options held by Larry Pillard lapsed when he ceased to be employed as Chief Executive from 31 December 2002.

The aggregate gain made by directors on the exercise of all options during the year was nil (2002 – nil). The closing market price
of the Company’s shares on 31 March 2003 was 299p and the range during the year to 31 March 2003 was 268.5p to 379p.

tateandlyle.com 39

Tate & Lyle annual report 2003

directors’ remuneration report

Directors’ Interests in Ordinary Shares of Tate & Lyle PLC

Richard Delbridge
Simon Gifford
Keith Hopkins
Mary Jo Jacobi
Sir David Lees
Larry Pillard
Carole Piwnica
Stuart Strathdee
John Walker
Allen Yurko

Ordinary shares

2003

2002

30 000
160 833
6 610
3 000
35 000
17 374
6 612
31 398
25 508
5 000

20 000
155 316
6 610
3 000
30 000
9 374
6 612
17 689
25 257
5 000

All the above interests are beneficially held.

Simon Gifford, Stuart Strathdee and John Walker, together with all employees, had beneficial interests in 4,519,339 ordinary
shares at 1 April 2002 and 8,528,318 ordinary shares at 31 March 2003, acquired by the Tate & Lyle Employee Benefit Trust
to satisfy options granted under the 2000 Executive Share Option Scheme.

There were no changes in directors’ interests in the period from 1 April 2003 to 4 June 2003.

No director had interests in any class of shares other than ordinary shares.

The Register of Directors’ Interests, which is open to inspection, contains full details of directors’ shareholdings and options
to subscribe for shares.

By order of the Board
Robert Gibber Company Secretary
4 June 2003

40 tateandlyle.com

Tate & Lyle annual report 2003

Financial contents

42 auditors’ report

43 group profit and loss account
44 balance sheet
45 group statement of cash flows
46 group statement of total recognised gains and losses,

group reconciliation of movements in shareholders’ funds, analysis of shareholders’ funds

47 segmental analysis of total sales
48 segmental analysis of profit before taxation
49 segmental analysis of net operating assets

50 notes to the financial statements, accounting policies
52 exchange rates, analysis of continuing and discontinued activities
53 group operating profit
54 exceptional items, staff costs
55 interest receivable and similar income, interest payable and similar charges, taxation
56 dividends paid and proposed, earnings per share
57 intangible fixed assets, tangible fixed assets
58 investments in subsidiary undertakings
59 investments in joint ventures and associates, other fixed asset investments
60 stocks, debtors, current asset investments
61 creditors – due within one year
62 borrowings – due after more than one year
63 other creditors – due after more than one year
64 provisions for liabilities and charges
65 retirement benefits
70 contingent liabilities, financial commitments
71 share capital
72 reserves
73 reconciliation of operating profit to operating cash flows, change in working capital,

reconciliation of net cash flow to movement in net debt

74 analysis of net debt, fair value of financial assets and liabilities
75 currency and interest rate exposure of financial assets and liabilities
78 currency analysis of net assets, disposals

79 main subsidiaries and investments
81 information for investors
82 ten year review

84 index

tateandlyle.com 41

We planned and performed our audit
so as to obtain all the information and
explanations which we considered
necessary in order to provide us with
sufficient evidence to give reasonable
assurance that the financial
statements and the auditable part of
the Directors’ Remuneration Report
are free from material misstatement,
whether caused by fraud or other
irregularity or error. In forming our
opinion we also evaluated the overall
adequacy of the presentation of
information in the financial statements.

Opinion
In our opinion:

• The financial statements give a
true and fair view of the state of
affairs of the Company and the
Group at 31 March 2003 and of
the profit and cash flows of the
Group for the year then ended;

• The financial statements have
been properly prepared in
accordance with the Companies
Act 1985; and

• Those parts of the Directors’

Remuneration Report required
by Part 3 of Schedule 7A to the
Companies Act 1985 have been
properly prepared in accordance
with the Companies Act 1985.

PricewaterhouseCoopers LLP
Chartered Accountants and
Registered Auditors
1 Embankment Place
London WC2N 6RH
4 June 2003

Tate & Lyle annual report 2003

auditors’ report

Independent Auditors’ Report to the
Members of Tate & Lyle PLC
We have audited the financial
statements which comprise the profit
and loss account, the balance sheet,
the cash flow statement, the
statement of total recognised gains
and losses and the related notes
which have been prepared under the
historical cost convention (as modified
by the revaluation of certain fixed
assets) and the accounting policies
set out in the statement of accounting
policies. We have also audited the
disclosures required by Part 3 of
Schedule 7A to the Companies
Act 1985 contained in the
Directors’ Remuneration Report
(‘the auditable part’).

Respective Responsibilities of
Directors and Auditors
The directors’ responsibilities for
preparing the Annual Report, the
Directors’ Remuneration Report and
the financial statements in accordance
with applicable United Kingdom law
and accounting standards are set
out in the statement of directors’
responsibilities.

Our responsibility is to audit the
financial statements and the auditable
part of the Directors’ Remuneration
Report in accordance with relevant
legal and regulatory requirements and
United Kingdom Auditing Standards
issued by the Auditing Practices
Board. This report, including the
opinion, has been prepared for and
only for the Company’s members as a
body in accordance with Section 235
of the Companies Act 1985 and for no
other purpose. We do not, in giving
this opinion, accept or assume
responsibility for any other purpose
or to any other person to whom this
report is shown or into whose hands
it may come, save where expressly
agreed by our prior consent in writing.

We report to you our opinion as to
whether the financial statements give
a true and fair view and whether the
financial statements and the auditable
part of the Directors’ Remuneration
Report have been properly prepared
in accordance with the Companies
Act 1985. We also report to you if,
in our opinion, the Directors’ Report
is not consistent with the financial
statements, if the Company has not

42 tateandlyle.com

kept proper accounting records, if we
have not received all the information
and explanations we require for our
audit, or if information specified by
law regarding directors’ remuneration
and transactions is not disclosed.

We read the other information
contained in the Annual Report and
consider the implications for our
report if we become aware of any
apparent misstatements or material
inconsistencies with the financial
statements. The other information
comprises only: the Financial
Highlights, the Directors’ Report,
the unaudited part of the Directors’
Remuneration Report, the Chairman’s
Statement, the Chief Executive’s
Review, the Operating and Financial
Review, the Corporate Social
Responsibility Report, the biographies
of the Board of Directors and the
Corporate Governance Statement.

We review whether the Corporate
Governance Statement reflects the
Company’s compliance with the seven
provisions of the Combined Code
specified for our review by the Listing
Rules of the Financial Services
Authority, and we report if it does
not. We are not required to consider
whether the Board’s statements on
internal control cover all risks and
controls, or to form an opinion on
the effectiveness of the Company’s
or Group’s corporate governance
procedures or its risk and
control procedures.

Basis of Audit Opinion
We conducted our audit in
accordance with auditing standards
issued by the Auditing Practices
Board. An audit includes examination,
on a test basis, of evidence relevant
to the amounts and disclosures in the
financial statements and the auditable
part of the Directors’ Remuneration
Report. It also includes an
assessment of the significant
estimates and judgements made by
the directors in the preparation of the
financial statements, and of whether
the accounting policies are
appropriate to the Company’s
circumstances, consistently applied
and adequately disclosed.

Tate & Lyle annual report 2003

group profit and loss account

Notes

Group sales
Share of sales of joint ventures and associates

Total sales

Group operating profit:
Before goodwill amortisation and operating exceptional items
Goodwill amortisation

5 Operating exceptional items – impairment of assets

4 Group operating profit

Share of operating profits of joint ventures and associates

Total operating profit
Non-operating exceptional items:

5 Write-downs on planned sales of businesses
5 Profit/(loss) on sale of businesses
5 (Loss)/profit on sale of fixed assets

Profit before interest

7 Interest receivable and similar income
8 Interest payable and similar charges

Share of net interest receivable/(payable) of joint ventures and associates

Profit before taxation

9 Taxation

Profit after taxation
Minority interests – equity

Profit for the period

10 Dividends paid and proposed – including on non-equity shares

Retained profit for the period

Earnings per share

11 Basic
11 Diluted

Before goodwill amortisation and exceptional items
Profit before taxation
11 Diluted earnings per share

Year to 31 March 2003

Continuing
activities
£ million

Discontinued
activities
£ million

2 758
318

3 076

220
(8)
(39)

173
35

208

(12)
4
(1)

199

91
–

(1)
–
–

(1)
–

(1)

–
15
–

Total
£ million

2 849
318

3 167

Year to
31 March 2002
£ million

3 616
328

3 944

219
(8)
(39)

172
35

207

(12)
19
(1)

213

31
(60)
3

187
(57)

130
2

132
(86)

180
(8)
–

172
36

208

–
(5)
13

216

47
(102)
(2)

159
(39)

120
(2)

118
(85)

27.8p
27.7p

24.7p
24.6p

228
33.0p

159
22.1p

There is no material difference between the Group’s results as stated above and its results prepared on a historical cost basis.

tateandlyle.com 43

Tate & Lyle annual report 2003

balance sheet

Notes

Fixed assets
12 Intangible assets
13 Tangible assets
14 Investments in subsidiary undertakings
15 Investments in joint ventures:

– Share of gross assets
– Share of gross liabilities

15 Investments in associates
16 Other investments

Current assets

17 Stocks
18 Debtors – due within one year

– Subject to financing arrangements:

– Debtors
– Less: Non-returnable amounts received

– Other debtors due within one year
18 Debtors – due after more than one year
19 Investments

Cash at bank and in hand

Creditors – due within one year

20 Borrowings
20 Other creditors

Net current assets/(liabilities)

Total assets less current liabilities
Creditors – due after more than one year

21 Borrowings, including convertible debt
22 Other creditors
23 Provisions for liabilities and charges

Total net assets

Capital and reserves
27 Called up share capital
28 Share premium account
28 Revaluation reserve
28 Other reserves
28 Profit and loss account

Shareholders’ funds (including non-equity interests)
Minority interests – equity

As at
31 March 2003

As at
31 March 2002

Group
£ million

As at
31 March 2003
Tate &
Lyle PLC
£ million

As at
31 March 2002
Tate &
Lyle PLC
£ million

154
1 176
–

300
(128)

172
2
61

158
1 303
–

330
(152)

178
3
57

–
–
2 397

–
–
2 299

–
–

–
–
28

–
–

–
–
13

1 565

1 699

2 425

2 312

310

400

66
(53)

13
354
31
127
45

880

(100)
(493)

287

58
(52)

6
434
27
63
72

1 002

(151)
(502)

349

–

–
–

–
32
3
–
–

–

–
–

–
68
3
–
–

(1 182)
(70)

(1 217)

(976)
(69)

(974)

1 852

2 048

1 208

1 338

(543)
(4)
(261)

(623)
(3)
(341)

1 044

1 081

123
381
32
74
402

1 012
32

1 044

123
380
31
78
431

1 043
38

1 081

(419)
–
–

789

123
381
–
–
285

789
–

789

(436)
–
(4)

898

123
380
–
–
395

898
–

898

The financial statements were approved by the Board of Directors on 4 June 2003 and signed on its behalf by:

Sir David Lees
Iain Ferguson

Simon Gifford }

Registered No. 76535

Directors

44 tateandlyle.com

Tate & Lyle annual report 2003

group statement of cash flows

Notes

29 Net cash inflow from operating activities

Dividends received from joint ventures

Returns on investments and servicing of finance
Interest paid
Interest received
Dividends paid to minority interests in subsidiary undertakings

Taxation paid

Capital expenditure and financial investment
Purchase of tangible fixed assets
Sale of tangible fixed assets
Purchase of fixed asset investments
Sale of fixed asset investments

Acquisitions and disposals
Sale of subsidiaries
Net overdrafts of subsidiaries sold
Sale of interests in joint ventures and associates
Refinancing of existing joint ventures

Equity dividends paid

Net cash inflow before financing and management of liquid resources

Management of liquid resources
Increase in current asset investments

Net cash inflow before financing

Financing
Repayment of borrowings due after one year
New borrowings due after one year
Decrease in short-term borrowings

Net cash outflow from financing

Year to
31 March 2003
£ million

Year to
31 March 2002
£ million

323

(51)
30
(2)

(23)

(7)

(75)
1
(15)
4

(85)

55
–
–
–

(84)

189

(67)

122

(245)
195
(104)

(154)

445

(109)
48
(1)

(62)

(35)

(76)
15
(12)
12

(61)

103
2
7
(3)

109

(85)

318

(2)

316

(246)
220
(272)

(298)

31 (Decrease)/increase in cash in the period

(32)

Net cash inflows of £56 million were received in respect of exceptional items.

tateandlyle.com 45

Tate & Lyle annual report 2003

group statement of total recognised gains and losses

Profit for the period
– Group
– Joint ventures and associates

Exchange difference on foreign currency net investments
Taxation on exchange difference on foreign currency net investments

Total recognised gains and losses for the period

group reconciliation of movements in shareholders’ funds

Opening shareholders’ funds
Movements during the period:
– Total recognised gains and losses for the period
– Dividends
– Issue of shares
– Goodwill on disposals transferred to the profit and loss account

Closing shareholders’ funds

analysis of shareholders’ funds

Non-equity interests
– 61/2% cumulative preference shares

Equity interests

Shareholders’ funds

Year to
31 March 2003
£ million

Year to
31 March 2002
£ million

116
16

132
(66)
(21)

99
19

118
(3)
1

116

Year to
31 March 2003
£ million

Year to
31 March 2002
£ million

1 043

1 008

45
(86)
1
9

(31)

116
(85)
–
4

1 012

1 043

As at
31 March 2003
£ million

As at
31 March 2002
£ million

1 010

1 012

1 041

1 043

46 tateandlyle.com

Tate & Lyle annual report 2003

segmental analysis of total sales

By activity

Sweeteners and starches
– Americas
– Europe
– Rest of the World

Animal feed and bulk storage
Other businesses and activities

Sweeteners and starches
– Americas
– Europe
– Rest of the World

Animal feed and bulk storage
Other businesses and activities

Year to 31 March 2003

Continuing
activities
£ million

Discontinued
activities
£ million

1 137
1 331
354

2 822
227
27

3 076

10
–
–

10
81
–

Year to 31 March 2002*

Continuing
activities
£ million

Discontinued
activities
£ million

1 269
1 323
422

3 014
248
39

3 301

428
–
50

478
130
35

643

Total
£ million

1 147
1 331
354

2 832
308
27

3 167

Total
£ million

1 697
1 323
472

3 492
378
74

3 944

*Comparative figures have been reclassified to include within discontinued activities not only the results of businesses that are shown as discontinued
activities in 2002, but also of businesses that are now discontinued but last year were classified as continuing activities.

Sales analyses in the above tables include only sales to third parties. Inter-segmental sales totalled £167 million (2002 – £187 million).

Included in the analysis of total sales are the following amounts relating to joint ventures and associates. In the year to 31 March
2002, the Group sold its investments in African and Thai cane sugar and included their results for that year in discontinued activities.
In the year under review, all sales in joint ventures and associates arose from continuing activities.

Sales of joint ventures and associates

Sweeteners and starches
– Americas
– Europe
– Rest of the World

Animal feed and bulk storage
Other businesses and activities

Year to
31 March 2003
£ million

Year to
31 March 2002
£ million

145
167
2

314
4
–

318

155
149
20

324
4
–

328

During the year, the Group changed the definition of its geographic segments. Activity within Canada and Mexico, previously
included within the ‘Rest of the World’ segment, has been combined with activity within the US to create a new geographical
segment of ‘North America’. This change reflects the closer economic alignment of businesses operating in these countries.
Information on both bases is disclosed for both years.

Geographic – by destination

United Kingdom
Other European countries
North America (of which US totals £869 million; 2002: £1,340 million)
Rest of the World

Year to
31 March 2003
£ million

Year to
31 March 2002
£ million

614
951
1 207
395

3 167

554
955
1 697
738

3 944

tateandlyle.com 47

Tate & Lyle annual report 2003

segmental analysis of total sales continued

Geographic – by origin

United Kingdom
Other European activities
North America (of which US totals £942m; 2002: £1,438 million)
Rest of the World

segmental analysis of profit before taxation

By class of business

Sweeteners and starches
– Americas
– Europe
– Rest of the World

Animal feed and bulk storage
Other businesses and activities

Total profit/(loss) before interest

Net interest expense

Profit/(loss) before taxation

Year to
31 March 2003
£ million

Year to
31 March 2002
£ million

194
778
1 298
897

3 167

198
759
1 825
1 162

3 944

Year to 31 March 2003

Continuing
activities
£ million

Discontinued
activities
£ million

Before
exceptional
items
£ million

Exceptional
items
£ million

After
exceptional
items
£ million

135
107
11

253
4
(10)

247

1
–
–

1
(2)
–

(1)

136
107
11

254
2
(10)

246

(26)

220

(25)
(12)
4

(33)
1
(1)

(33)

–

(33)

111
95
15

221
3
(11)

213

(26)

187

Included within exceptional items above is an operating exceptional charge of £39 million taken primarily to write-down the assets
of the US and Mexican citric acid businesses to their recoverable values. The operating exceptional item is included within the
segments ‘Sweeteners and Starches – Americas’ (£38 million) and ‘Other businesses and activities’ (£1 million).

Sweeteners and starches
– Americas
– Europe
– Rest of the World

Animal feed and bulk storage
Other businesses and activities

Total profit/(loss) before interest

Net interest expense

Profit before taxation

Year to 31 March 2002*

Continuing
activities
£ million

Discontinued
activities
£ million

Before
exceptional
items
£ million

Exceptional
items
£ million

After
exceptional
items
£ million

139
87
4

230
10
(22)

218

(18)
–
1

(17)
3
4

(10)

121
87
5

213
13
(18)

208

(57)

151

1
4
1

6
(1)
3

–

122
91
6

219
12
(15)

216

(57)

159

*Comparative figures have been reclassified to include within discontinued activities not only the results of businesses that are shown
as discontinued activities in 2002, but also of businesses that are now discontinued but last year were classified
as continuing activities.

The above figures include goodwill amortisation charged to the ongoing activities of the sweeteners and starches business as
follows: Americas – £4 million (2002 – £4 million); Europe – £4 million (2002 – £4 million).

48 tateandlyle.com

Tate & Lyle annual report 2003

segmental analysis of profit before taxation continued

During the year, the Group changed the definition of its geographic segments. Activity within Canada and Mexico, previously
included within the ‘Rest of the World’ segment, has been combined with activity within the US to create a new geographical
segment of ‘North America’. The change reflects the closer economic alignment of businesses operating in these countries.
Information on both bases is disclosed for both years.

By geographical segment

United Kingdom
Other European countries
North America
Rest of the World

Total profit/(loss) before interest

Net interest expense

Profit/(loss) before taxation

Included within the ‘North America’ segment
are the following amounts relating to US

Year to 31 March 2003

Year to 31 March 2002

Before
exceptional
items
£ million

Exceptional
items
£ million

After
exceptional
items
£ million

Before
exceptional
items
£ million

Exceptional
items
£ million

After
exceptional
items
£ million

48
54
123
21

246

(26)

220

(1)
(12)
(24)
4

(33)

–

(33)

(10)

47
42
99
25

213

(26)

187

46
43
109
10

208

(57)

151

10
13
(5)
(10)

–

56
56
104
–

216

(57)

159

(5)

segmental analysis of net operating assets

By class of business

Sweeteners and starches
– Americas
– Europe
– Rest of the World

Animal feed and bulk storage
Other businesses and activities

Unallocated net liabilities – dividends and tax
Net borrowings

Total net assets

By geographical segment

United Kingdom
Other European countries
North America (including £515 million relating to US; 2002: £646 million)
Rest of the World

As at
31 March 2003
£ million

As at
31 March 2002
£ million

691
870
57

1 618
42
(1)

1 659

(144)
(471)

870
792
100

1 762
83
(32)

1 813

(93)
(639)

1 044

1 081

As at
31 March 2003
£ million

As at
31 March 2002
£ million

345
541
687
86

314
463
882
154

1 659

1 813

tateandlyle.com 49

Tate & Lyle annual report 2003

notes to the financial statements

1 Accounting policies

Basis of preparation
a) Accounting policies
The accounts are prepared under the historical cost convention, as modified by the revaluation of certain tangible fixed assets, and in
accordance with the Companies Act 1985 and applicable UK accounting standards.

The Group’s accounting policies are unchanged compared with the year ended 31 March 2002.

b) Discontinued activities
Discontinued activities represents the results of businesses now sold that were individually significant to their segment and include
Western, the US beet sugar producer, and the North American molasses and storage businesses, which were sold in 2003 and
Domino, the US cane sugar refiner, the African and Thai sugar assets and the storage businesses in East Africa and the Caribbean
which were sold in 2002.

Basis of consolidation
The Group’s financial statements comprise the financial statements of the Company and its subsidiary undertakings. An undertaking
is regarded as a subsidiary undertaking if the Company has control over its operating and financial policies.

As permitted by Section 230 of the Companies Act 1985, the Company’s own profit and loss account is not presented in these

financial statements.

An undertaking is regarded as a joint venture if the Group has joint control over its operating and financial policies and an
associate if the Group holds a participating interest and has significant influence, but not control, over its operating and financial
policies. Significant influence generally exists where the Group holds more than 20% and less than 50% of the shareholders’ voting
rights. Joint ventures and associates are accounted for under the equity method whereby the Group’s profit and loss account
includes its share of their profits and losses and the Group’s balance sheet includes its share of their net assets (shown gross in the
case of joint ventures).

Unless stated otherwise, business combinations are accounted for by the acquisition method of accounting whereby the Group’s

results include the results of the acquired business from the effective date of acquisition. Where a business is sold, its results are
included in the Group’s results to the effective date of disposal.

Goodwill
Goodwill arises under the acquisition method of accounting for business combinations and represents the difference between the fair
value of the purchase consideration and the interest acquired by the Group in the fair value of the identifiable assets and liabilities of
the acquired business at the date of acquisition.

On acquisitions completed after 26 September 1998, goodwill is capitalised and amortised to the profit and loss account over its

useful economic life not exceeding 20 years.

Goodwill arising on the acquisition of subsidiary undertakings is shown within intangible fixed assets. Goodwill arising on the

acquisition of joint ventures and associates is included in their carrying value on the Group’s balance sheet.

On acquisitions completed on or before 26 September 1998, goodwill was written off directly to reserves and has not

been reinstated.

Goodwill not previously recognised in the profit and loss account is taken into account when calculating the profit or loss on the

subsequent disposal or termination of acquired businesses.

Sales
Sales comprise the amount receivable in the ordinary course of business, net of value added and sales taxes, for goods and services
provided. By-product revenues are credited to the cost of raw materials.

Stock
Stock is valued at the lower of direct cost together with attributable overheads and net realisable value and is transferred to the profit
and loss account on a ‘first in, first out’ basis.

Tangible fixed assets
Certain tangible fixed assets are carried at amounts based upon valuations recognised before the adoption of FRS15 ‘Tangible Fixed
Assets’. As is permitted by the transitional provisions of FRS15, these revaluations have not been updated.

Finance costs directly attributable to the construction of tangible fixed assets are capitalised as part of the cost of those assets.
The depreciation charge is calculated so as to allocate the cost or revalued amount of tangible fixed assets systematically over
their remaining useful economic lives using the straight line method. These asset lives are reviewed at the end of each financial year.

50 tateandlyle.com

Tate & Lyle annual report 2003

1 Accounting policies continued

The following asset lives are used:
:
:
:
:
:

Freehold land
Freehold buildings
Leasehold property
Bulk liquid storage tanks
Plant and machinery

No depreciation
20 to 50 years
Period of the lease
12 to 20 years
3 to 28 years

Leases
Assets held under finance leases are capitalised and depreciated in accordance with the Group’s depreciation policy. Operating lease
costs are charged to profit as incurred.

Research and development
All expenditure on research and development is charged to profit as incurred.

Advertising
Advertising costs are charged to profit when the advertising first takes place.

Retirement benefits
The Group operates a number of defined benefit pension schemes and, in the USA, provides retirement healthcare and life assurance
benefits. The expected cost of these arrangements is charged to the profit and loss account, on the advice of actuaries, so as to
accrue the cost over the service lives of employees on the basis of a constant percentage of earnings. Variations from the regular
cost are spread over the expected remaining service lives of current employees in the scheme.

Deferred tax
Deferred tax is recognised on a full provision basis on timing differences between the recognition of gains and losses in the accounts
and their recognition for tax purposes that have arisen but not reversed at the balance sheet date.

Deferred tax is not recognised on permanent differences or on timing differences arising on property revaluation surpluses where

there is no commitment to sell the asset, gains on asset sales that are rolled over into replacement assets for tax purposes or on
unremitted profits of overseas subsidiaries.

Deferred tax assets are recognised only to the extent that it is considered more likely than not that there will be sufficient future

taxable profits to permit tax relief of the underlying timing differences.

Where appropriate, deferred tax assets and liabilities are stated on a discounted basis.

Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling on the last day of the financial
period (the closing rate) except when they are hedged by an open foreign exchange contract, in which case the rate of exchange
specified in the contract is used.

The profits of overseas companies are translated at the annual average of daily exchange rates and the difference when
compared with that arising from the use of closing rates, together with differences on exchange arising from the translation of the
opening balance sheets of overseas companies at year end rates are taken directly to distributable reserves. Other profits and losses
on exchange are credited or charged to the profit and loss account.

Financial instruments and their derivatives
Financial instruments and their derivatives are categorised as held for trading or held as hedges.

Financial instruments held for trading
The fair value of all instruments held for trading is recognised in the balance sheet and all unrealised profits and losses are taken to
operating profit.

tateandlyle.com 51

Tate & Lyle annual report 2003

notes to the financial statements

1 Accounting policies continued

Financial instruments held as hedges
All hedging instruments are matched with their underlying hedged item. Each instrument’s gain or loss is brought into the profit and
loss account and its fair value into the balance sheet, at the same time and in the same place as is the matched underlying asset,
liability, income or cost. For foreign exchange and commodity instruments this will be in operating profit matched against the relevant
purchase or sale, and for interest rate instruments within interest payable or receivable over the life of the instrument or relevant
interest period. The profit or loss on an instrument may be deferred if the hedged transaction is expected to take place or would
normally be accounted for in a future period.

The finance costs of debt instruments are charged to the profit and loss account over the term of the debt at a constant rate on
the carrying amount. Such costs include the costs of issue and any discount to face value arising on issue, or any premium payable
on maturity.

Differences arising from the movement in exchange rates during the year from the translation to sterling of the foreign currency
borrowings and similar instruments used to finance long-term foreign equity investments are taken direct to distributable reserves
and reported in the statement of total recognised gains and losses.

Changes in the fair value of most financial instruments or the underlying hedged item are not usually recognised in the profit
and loss account. However, if unrealised changes in the fair value of the hedged item are included in the profit and loss account,
changes in the fair value of the instrument are also included.

Initial margin deposits and variation margin deposits and receipts for futures contracts are included in current assets or current

liabilities while the position is open. Unamortised premiums are also held in similar accounts.

All premiums or fees, paid or received, in respect of a financial instrument are accounted for over the life of the matched

underlying asset, liability, income or cost, even if the instrument has been sold. If the matched underlying asset, liability, income or
cost ceases to exist, or is no longer considered likely to exist in the future, the hedging instrument is sold. Any profit or loss on the
sale is recognised in the profit and loss account as part of operating profit.

2 Exchange rates

The exchange rates used to translate the results, assets and liabilities and cash flows of the Group’s principal overseas operations
were as follows:

Average rate

Period end rate

Year to
31 March 2003

Year to
31 March 2002

As at
31 March 2003

As at
31 March 2002

Canadian dollar
Euro
US dollar

3 Analysis of continuing and discontinued activities

Group sales
Share of sales of joint ventures
Share of sales of associates

Total sales

Group operating profit:
Before goodwill amortisation and operating exceptional items
Goodwill amortisation
Operating exceptional items – impairment of assets

Group operating profit
Share of operating profits of joint ventures
Share of operating profits of associates

Total operating profit
Exceptional items:
Write downs on planned sales of businesses
Profit on sale of businesses
Loss on sale of fixed assets

Profit before interest

52 tateandlyle.com

2.40
1.56
1.54

2.24
1.62
1.43

2.33
1.45
1.58

Year to 31 March 2003

Continuing
activities
£ million

Discontinued
activities
£ million

2 758
312
6

3 076

220
(8)
(39)

173
35
–

208

(12)
4
(1)

199

91
–
–

(1)
–
–

(1)

–
15
–

2.27
1.63
1.42

Total
£ million

2 849
312
6

3 167

219
(8)
(39)

172
35
–

207

(12)
19
(1)

213

Tate & Lyle annual report 2003

3 Analysis of continuing and discontinued activities continued

Group sales
Share of sales of joint ventures
Share of sales of associates

Total sales

Group operating profit:
Before goodwill amortisation
Goodwill amortisation

Group operating profit
Share of operating profits of joint ventures
Share of operating profits of associates

Total operating profit
Exceptional items:
Profit/(loss) on sale of businesses
Profit on sale of fixed assets

Profit/(loss) before interest

Year to 31 March 2002

Continuing
activities
£ million

Discontinued
activities
£ million

2 989
306
6

3 301

191
(8)

183
35
–

218

1
11

230

627
6
10

643

(11)
–

(11)
–
1

(10)

(6)
2

(14)

4 Group operating profit

The following have been charged/(credited) in

Year to 31 March 2003

Year to 31 March 2002

Continuing
activities
£ million

Discontinued
activities
£ million

Total
£ million

Continuing
activities
£ million

Discontinued
activities
£ million

1 613
279
246
8
108
10

arriving at operating profit:
Raw materials and consumables
Other external charges
Staff costs (note 6)
Goodwill amortisation
Depreciation of tangible fixed assets
Reorganisation costs
Operating lease rentals and other hire charges
– Plant and machinery
– Other
Auditors’ fees and expenses
2
– Audit
–
– Audit related
–
– Other – UK
1
– Other – Overseas
Exchange (gains)/losses on foreign currency net operating assets (1)
–
Provisions against fixed asset investments
1
Advertising
292
Other operating charges
(46)
Other operating income
39
Operating exceptional items – impairment of assets

26
7

2 585

70
4
6
–
2
–

1
1

–
–
–
–
–
–
–
10
(2)
–

1 683
283
252
8
110
10

27
8

2
–
–
1
(1)
–
1
302
(48)
39

1 790
337
243
8
117
16

28
8

2
–
1
–
2
–
2
281
(29)
–

492
34
60
–
4
–

5
1

–
–
–
–
(1)
1
1
47
(6)
–

Total
£ million

3 616
312
16

3 944

180
(8)

172
35
1

208

(5)
13

216

Total
£ million

2 282
371
303
8
121
16

33
9

2
–
1
–
1
1
3
328
(35)
–

2 677

2 806

638

3 444

Reorganisation costs incurred during the year largely arise from the ongoing integration of Amylum into the Group following the
acquisition of the Amylum and Staley minority interests in August 2000.

Research and development expenditure amounted to £18 million (2002 – £17 million).

Audit fees disclosed above include £0.4 million (2002 – £0.3 million) relating to the audit of Tate & Lyle PLC.

Total fees for worldwide audit-related and non-audit services in 2003 paid to the auditor PricewaterhouseCoopers LLP (‘PwC’) were
£1.7 million (2002 – £0.9 million). Audit-related fees were £0.4 million and non-audit fees were £1.3 million. We sought assistance
with the disposal of the United Molasses business, and after a competitive bidding process awarded this assignment to PwC in
2001. This was before the implementation of the Group’s revised auditor independence policy, with more restricted scope for the
provision of non-audit services, as set out in the Corporate Governance report on page 32. Of the £1.7 million, the disposal
assignment cost £1.5 m, of which £0.9 million has been included within the profit on the sale of businesses and £0.6 million included
within operating profit, as it related to the part of the business which was ultimately retained.

tateandlyle.com 53

(23)
(12)
19
(1)

(17)

10
10

Total
£ million

257
33

5
2
6

303

Tate & Lyle annual report 2003

notes to the financial statements

5 Exceptional items

Year to 31 March 2003
Operating exceptional items – impairment of assets
Write-down on planned sale of business
Profit on sale of businesses
Loss on sale of fixed assets

Year to 31 March 2002
(Loss)/profit on sale of businesses
Profit on sale of fixed assets

Profit/(loss)
before goodwill
and tax
£ million

Goodwill
re-instated
£ million

Profit/(loss)
before tax
£ million

Tax
£ million

Minority
interests
£ million

Profit/(loss)

for the period
£ million

(39)
(3)
19
(1)

(24)

(1)
13

–
(9)
–
–

(9)

(4)
–

(4)

(39)
(12)
19
(1)

(33)

(5)
13

13
–
–
–

15
(3)

3
–
–
–

–
–

–

An operating exceptional charge of £39 million was taken primarily to write-down the assets of the US and Mexican citric acid
businesses to their recoverable values. The impairment review was performed using a discount rate of 12%, being the Group’s
pre-tax weighted average cost of capital adjusted to reflect specific industry risks.

6 Staff costs

Wages and salaries
Social security costs
Pension costs
– Defined benefit schemes
– Defined contribution schemes
Retirement healthcare benefits

Year to 31 March 2003

Year to 31 March 2002

Continuing
activities
£ million

Discontinued
activities
£ million

Total
£ million

Continuing
activities
£ million

Discontinued
activities
£ million

194
28

15
2
7

246

6
–

–
–
–

200
28

15
2
7

252

200
31

5
2
5

243

57
2

–
–
1

Details of directors’ remuneration are given in the Directors’ Remuneration Report on pages 33 to 40.

Segmental analysis of employees

Sweeteners and starches
– Americas
– Europe
– Rest of the World

Animal feed and bulk storage
Other businesses and activities

Average

Year to
31 March 2003
Employees

Year to
31 March 2002
Employees

2 141
2 627
1 512

6 280
468
270

7 018

4 046
2 934
1 405

8 385
591
271

9 247

The average number of employees represents a monthly average and excludes employees of joint ventures and associates.

Geographical analysis of employees

UK
Other European countries
North America (of which 1 825 relate to US; 2002 – 3 499)
Rest of the World

54 tateandlyle.com

Average

Year to
31 March 2003

Year to
31 March 2002

1 258
1 693
2 415
1 652

7 018

1 460
1 903
4 014
1 870

9 247

Tate & Lyle annual report 2003

7 Interest receivable and similar income

Interest receivable
– Loans and deposits
– Other

Interest receivable – total

Income from fixed asset investments
– Listed investments
– Unlisted investments

Income from fixed asset investments – total

8 Interest payable and similar charges

On bank loans and overdrafts
On all other loans
On working capital balances

Interest capitalised as part of tangible fixed asset additions (note 13)

Share of net interest (receivable)/payable of joint ventures

Year to
31 March 2003
£ million

Year to
31 March 2002
£ million

5
21

1
4

4
43

–
–

–

Year to
31 March 2003
£ million

Year to
31 March 2002
£ million

7
46
8

61
(1)

(3)

34
60
9

103
(1)

102

The capitalisation rate used to determine the amount of finance costs capitalised during the period was 6.1% (2002 – 6.4%).

9 Taxation

Analysis of tax charge for the period
Current tax
– UK corporation tax at 30.0% (2002 – 30.0%)
– Double taxation relief
– Adjustments to tax charged in previous periods

Overseas tax

Total current tax

Deferred tax
Origination of timing differences
Change in tax rates and legislation
Adjustments to deferred tax assets recognised in previous periods

Movement on discount

Total deferred tax

Group tax charge
Share of tax of joint ventures

Total tax charge

Year to
31 March 2003
£ million

Year to
31 March 2002
£ million

21
(16)
4

9
34

(15)
2
1

(12)
14

45
12

8
(4)
12

16
30

2
(5)
(3)

(6)
(8)

(14)

32
7

tateandlyle.com 55

Tate & Lyle annual report 2003

notes to the financial statements

9 Taxation continued

Profit before tax
Less: Share of profit before tax of joint ventures and associates

Corporation tax charge/(credit) thereon at the standard rate of 30% (2002 – 30%)

Adjusted for the effects of:
Expenses not deductible for tax purposes (including goodwill amortisation)
Losses not recognised
Different tax rates on overseas earnings
Capital allowances for the period in excess of depreciation
Other timing differences
Adjustments to tax charged in respect of previous periods

Current tax charge for the period

10 Dividends paid and proposed

Dividends on ordinary equity shares
– Paid
– Proposed

The total ordinary dividend is 18.3p (2002 – 17.8p) made up as follows:
First interim dividend
Final dividend

Year to
31 March 2003
£ million

Year to
31 March 2002
£ million

187
(38)

149

3
8
(13)
9
(2)
(7)

159
(34)

125

20
13
(18)
(5)
(9)
7

Year to
31 March 2003
£ million

Year to
31 March 2002
£ million

25
61

5.5p
12.8p

18.3p

26
59

5.5p
12.3p

17.8p

Dividends on non-equity shares comprised £0.2 million (2002 – £0.2 million) in respect of the 61/2% Cumulative Preference Shares.

11 Earnings per share

Basic earnings per share is calculated by dividing profit after taxation, minority interests and preference dividends of £132 million
(2002 – £118 million), by the weighted average number of ordinary shares in issue during the period of 474.3 million shares (2002 –
478.0 million shares). For this purpose, the weighted average number of ordinary shares in issue excludes an average of 7.7 million
shares (2002 – 3.7 million shares) held by an ESOP trust that have not vested unconditionally in the participating employees.

Diluted earnings per share take into account the dilutive effect of share options outstanding under the Company’s employee

share schemes.

Diluted earnings per share before the amortisation of capitalised goodwill and exceptional items is presented in order to assist in

the understanding of the underlying performance of the Group’s business.

Year to 31 March 2003

Year to 31 March 2002

Earnings
£ million

132
–

132
8
17

Shares
millions

474.3
2.0

476.3
–
–

Earnings
per share
pence

Earnings
£ million

27.8
(0.1)

27.7
1.7
3.6

118
–

118
8
(20)

Shares
millions

478.0
1.0

479.0
–
–

Earnings
per share
pence

24.7
(0.1)

24.6
1.7
(4.2)

157

476.3

33.0

106

479.0

22.1

Basic
Dilutive effect of share options

Diluted
Goodwill amortisation
Exceptional items (note 5)

Diluted before goodwill amortisation
and exceptional items

56 tateandlyle.com

Tate & Lyle annual report 2003

12 Intangible fixed assets

Cost
At 31 March 2002
Disposals
Exchange differences

At 31 March 2003

Amortisation
At 31 March 2002
Charge for period
Exchange differences

At 31 March 2003

Net book value at 31 March 2003

Net book value at 31 March 2002

13 Tangible fixed assets

Gross book value
At 31 March 2002
Exchange differences
Businesses sold and write-downs on planned sales of businesses
Additions
Transfers on completion
Disposals

At 31 March 2003

Depreciation
At 31 March 2002
Exchange differences
Businesses sold and write-downs on planned sales of businesses
Exceptional items – impairment of assets
Charge for period
Disposals

At 31 March 2003

Net book value at 31 March 2003

Net book value at 31 March 2002

Analysis of land and buildings

Gross book value
Depreciation

Net book value at 31 March 2003

Net book value at 31 March 2002

Land and
buildings
£ million

Plant and
machinery
£ million

Assets in
course of
construction
£ million

557
(20)
(44)
1
8
(3)

499

213
(8)
(36)
–
13
(2)

180

319

344

2 085
(53)
(119)
12
55
(38)

1 942

1 192
(32)
(105)
38
97
(37)

1 153

789

893

66
1
–
64
(63)
–

–
–
–
–
–
–

–

Freehold

Land
£ million

Buildings
£ million

Leasehold

Long
£ million

Short
£ million

Bulk liquid
storage
£ million

42
–

402
(153)

249

263

–
–

–

22
(8)

33
(19)

Goodwill
£ million

172
1
4

177

14
8
1

154

158

Total
£ million

2 708
(72)
(163)
77
–
(41)

2 509

1 405
(40)
(141)
38
110
(39)

1 333

1 176

1 303

Total
£ million

499
(180)

319

344

tateandlyle.com 57

Tate & Lyle annual report 2003

notes to the financial statements

13 Tangible fixed assets continued

Analysis of gross book value
Assets held at cost (or earliest ascribed value)
Assets held at a valuation:
Last valued in 1977
Last valued in 1989
Last valued in 1993

At 31 March 2003

Analysis of net book value on historical cost basis
Cost (or earliest ascribed value)
Depreciation

Net book value at 31 March 2003

Assets in course of construction are held at cost.

Land and
buildings
£ million

Plant and
machinery
£ million

Assets in
course of
construction
£ million

421

1 932

–
47
31

10
–
–

499

1 942

–
–
–

Land and
buildings
£ million

Plant and
machinery
£ million

Assets in
course of
construction
£ million

471
(178)

293

1 940
(1 149)

791

68
–

Total
£ million

2 421

10
47
31

2 509

Total
£ million

2 479
(1 327)

1 152

Finance costs
The aggregate amount of finance costs included in the cost of tangible fixed assets is £46 million (2002 – £53 million). During the year,
finance costs capitalised in previous periods recognised in the profit and loss account amounted to £2 million (2002 – £3 million).

Leased assets
Included in the tangible fixed assets are the following amounts in respect of assets held under finance leases:

Capitalised value
Depreciation

Net book value at 31 March 2003

Land and
buildings
£ million

Plant and
machinery
£ million

1
(1)

–

18
(15)

During the year, depreciation of £1 million (2002 – £1 million) was charged in respect of assets acquired under finance leases.

14 Investments in subsidiary undertakings

Tate & Lyle PLC

At 31 March 2002
Exchange differences
Additions

At 31 March 2003

Shares in
subsidiary
undertakings
£ million

Loans to
subsidiary
undertakings
£ million

2 058
12
92

2 162

241
(6)
–

235

Shares in subsidiary undertakings are stated at cost or earliest ascribed value less amounts provided of £70 million
(2002 – £70 million).

Loans to subsidiary undertakings are stated net of amounts provided of £9 million (2002 – £9 million).

Total
£ million

19
(16)

Total
£ million

2 299
6
92

2 397

58 tateandlyle.com

Tate & Lyle annual report 2003

15 Investments in joint ventures and associates

Group

At 31 March 2002
Exchange differences
Share of retained profits
Other movements

At 31 March 2003

Shares owned by the Group in joint ventures and associates are unlisted.

The Group’s share of the gross assets and liabilities of its joint ventures was as follows:

Share of fixed assets
Share of current assets

Share of gross assets
Share of creditors due within one year
Share of creditors due after more than one year

Share of gross liabilities

Share of net assets

16 Other fixed asset investments

Group
At 31 March 2002
Exchange
Additions
Disposals
Amounts redeemed during the year
Businesses sold
Movement in provisions

At 31 March 2003

Joint
ventures
£ million

178
(22)
16
–

172

Associates
£ million

Total
£ million

3
–
–
(1)

181
(22)
16
(1)

174

2003
£ million

2002
£ million

153
147

300
(105)
(23)

(128)

172

178
152

330
(131)
(21)

(152)

178

Own
shares
£ million

Other equity
investments
£ million

Loans
£ million

Total
£ million

13
–
15
–
–
–
–

18
(1)
–
(4)
–
–
(2)

26
(1)
40
–
(4)
(11)
(28)

57
(2)
55
(4)
(4)
(11)
(30)

Other equity investments comprise listed securities amounting to £3 million (2002 – £7 million) and unlisted securities amounting to
£8 million (2002 – £11 million).

Listed securities are stated above at cost. At 31 March 2003, the market value of listed securities was £29 million (2002 – £25 million).

Unlisted securities are stated above at cost less amounts provided of £4 million (2002 – £5 million). The directors’ valuation of the
unlisted securities is £8 million (2002 – £10 million).

Loans are stated above at cost less amounts provided of £32 million (2002 – £6 million) and include amounts due from joint ventures
and associates of £4 million (2002 – £15 million). Also included are the loan notes received as part of the consideration on the sale of
Domino and Western. The provisions taken are to show these notes at fair value.

Tate & Lyle PLC

At 31 March 2002
Additions

At 31 March 2003

Own
shares
£ million

13
15

Own shares held by Tate & Lyle PLC and the Group comprise 8,528,318 Tate & Lyle PLC ordinary shares held in an Employee Share
Ownership Plan (‘ESOP’) trust of which 6,873,469 shares are under option to employees. Tate & Lyle PLC controls the ESOP trust
and accordingly its assets and liabilities and income and expenses are included in Tate & Lyle PLC’s accounts. All but 0.001p per
share of the dividends arising on the shares have been waived by the trust.

At 31 March 2003, the market value of own shares held was £25 million (2002 – £16 million).

tateandlyle.com 59

Tate & Lyle annual report 2003

notes to the financial statements

17 Stocks

Raw materials, consumables and in-process stocks
Finished goods and goods held for resale
New crop expenditure

18 Debtors

Due within one year
UK taxation
Overseas taxation
Trade debtors
Owed by subsidiary undertakings
Owed by joint ventures and associates
Other debtors
Prepayments and accrued income

Subject to financing arrangements
– Debtors
– Less: Non-returnable amounts received

Due after one year
Deferred taxation
Pension prepayment
Other debtors
Prepayments and accrued income

2003
Group
£ million

175
135
–

310

2002
Group
£ million

164
233
3

400

2003
Group
£ million

2002
Group
£ million

2003
Tate &
Lyle PLC
£ million

2002
Tate &
Lyle PLC
£ million

–
58
221
–
12
37
26

354

66
(53)
13

367

–
26
3
2

16
39
298
–
19
44
18

434

58
(52)
6

440

–
20
5
2

28
–
–
2
–
–
2

–
–
–

1
2
–
–

63
–
–
3
–
1
1

–
–
–

1
–
–
2

At 31 March 2003, £66 million (2002 – £58 million) of trade debtors had been sold to a third party. Non-returnable proceeds of
£53 million had been received (2002 – £52 million). No profit or loss arose on the sale of these debtors. The Group is not obliged
(and does not intend) to support any credit-related losses arising from the debts against which cash has been advanced. The
providers of the finance have confirmed in writing that, in the event of default by a debtor, they will only seek repayment of cash
advanced from the remainder of the pool of debts in which they hold an interest, and that repayment will not be sought from the
Group in any other way.

19 Current asset investments

Listed on overseas exchanges
Loans, short-term deposits and unlisted fixed interest securities

2003

Group
£ million

30
97

127

2002

Group
£ million

31
32

2003
Tate &
Lyle PLC
£ million

2002
Tate &
Lyle PLC
£ million

–
–

–

–
–

–

Included in the above are deposits of £6 million (2002 – £5 million) pledged as security for loans to other subsidiaries.

60 tateandlyle.com

Tate & Lyle annual report 2003

20 Creditors – due within one year

Borrowings
Bank overdrafts
– Secured
– Unsecured
Other bank loans
– Secured
– Unsecured
Short-term loans
– Secured
– Unsecured

Add: Current portion of long-term borrowings (note 21)
Owed to subsidiary undertakings

2003

Group
£ million

2002

Group
£ million

2003
Tate &
Lyle PLC
£ million

2002
Tate &
Lyle PLC
£ million

2
21

1
49

4
4

81
19
–

100

1
16

–
14

5
4

40
111
–

151

–
–

–
–
1 182

1 182

–
–

–
–
976

976

Lenders of secured loans have a charge over certain tangible fixed assets.

The €53 million Variable Convertible Bonds 2005 carried at £49 million within ‘Unsecured bank loans’ were issued by Orsan SA,
a subsidiary in which the Group has an 80.4% interest. Unless the options referred to below are exercised, the bonds will be
redeemed in April 2005 for €58 million. At the option of the bondholders, each bond is convertible into four shares in Orsan in
April 2005. Since the year-end, as part of the terms for the sale of Orsan which require their elimination prior to the completion of
that sale, these bonds were acquired by the Group for a payment representing their nominal value plus accrued unpaid coupon.

Due to management’s intention, at the balance sheet date, to redeem these bonds within the next 12 months, they have been
classified within ‘Creditors – due within one year’.

Other creditors
Trade creditors
Accruals and deferred income
Owed to subsidiary undertakings
Payments received on account
Other creditors
Social security
Owed to joint ventures and associates

Overseas taxation
UK taxation
Proposed dividends
– Tate & Lyle PLC shares
– Minority interests in subsidiary undertakings

2003

Group
£ million

2002

Group
£ million

2003
Tate &
Lyle PLC
£ million

2002
Tate &
Lyle PLC
£ million

175
113
–
1
20
15
19

343

53
35

61
1

150

493

300
78
–
1
24
11
7

421

21
–

59
1

502

–
5
4
–
–
–
–

–
–

61
–

–
4
5
–
1
–
–

–
–

59
–

tateandlyle.com 61

Tate & Lyle annual report 2003

notes to the financial statements

21 Borrowings – due after more than one year

Debenture loans
Industrial Revenue Bonds 2002-2023 (US$23,700,000)
Convertible Bonds 2005 (€53,000,000)
53/4% Guaranteed Bonds 2006 (€298,443,000)
Floating Rate Note 2007 (€148,960,000)
6.5% Guaranteed Note 2012 (£200,000,000)
Other variable unsecured loans
Other fixed unsecured loans
Obligations under finance leases

Bank loans
Variable unsecured loans

Less: Current portion of long-term borrowings (note 20)
Owed to subsidiary undertakings

Finance lease obligations are secured against the assets concerned.

Maturity of borrowings
Over one year and up to two years
Over two years and up to three years
Over three years and up to four years
Over four years and up to five years
Over five years

2003

Group
£ million

2002

Group
£ million

2003
Tate &
Lyle PLC
£ million

2002
Tate &
Lyle PLC
£ million

15
–
206
103
199
1
2
–

526

562
(19)
–

543

18
42
183
91
–
1
10
1

346

388

734
(111)
–

623

–
–
–
–
–
–
2
–

–

2
–
417

419

–
–
–
–
–
–
2
–

–

2
–
434

436

2003

Group
£ million

2002

Group
£ million

2003
Tate &
Lyle PLC
£ million

2002
Tate &
Lyle PLC
£ million

7
12
313
1
210

543

251
7
55
279
31

623

–
–
120
–
299

419

–
–
–
107
329

436

Included above are borrowings that are repayable by instalments amounting to £24 million (2002 – £29 million) and borrowings
maturing after five years that are repayable other than by instalments amounting to £208 million (2002 – £31 million).

The Group has further undrawn committed multicurrency facilities of £348 million (2002 – £461 million), which expire as follows:

Within one year
Over one year and up to two years
Over two years and up to five years

2003
£ million

2002
£ million

25
–
323

348

158
184
119

461

62 tateandlyle.com

Tate & Lyle annual report 2003

21 Borrowings – due after more than one year continued

These facilities incur commitment fees at market rates. The facilities may only be withdrawn in the event of specified events of
default. In addition, the Group has substantial uncommitted facilities.

At 31 March 2003, a US subsidiary had an outstanding bank borrowing of US$525 million, the principal amount of which is

guaranteed by another Group company by way of letters of credit issued by banks backed by its assets. The guarantee is such as to
make this borrowing in substance non-recourse to the Group as to principal in the event of default and accordingly the borrowing
and deposit are offset in these accounts.

At 31 March 2003, the same US subsidiary also had outstanding a five-year bank borrowing of US$275 million drawn down in
March 2001 in the form of a registered loan note issuance. Repayment of the loan note is secured on a portfolio of sovereign debt
in the same principal amount owned by a third party, the purchase of which was financed indirectly by another Group company
subscribing to a five-year loan note which will, in the event of a default, be exchangeable for the US subsidiary’s loan note. In a
similar manner to the transaction described in the previous paragraph, the agreements involved are such that this borrowing is in
substance non-recourse to the Group as to principal in the event of default and accordingly the borrowing and note subscription are
offset in these accounts.

22 Other creditors – due after more than one year

Accruals and deferred income
Other

Falling due as follows:
Over one year and up to two years
Over two years and up to five years
Over five years

2003

Group
£ million

2002

Group
£ million

2003
Tate &
Lyle PLC
£ million

2002
Tate &
Lyle PLC
£ million

2
2

1
1
2

2
1

–
1
2

–
–

–

–
–
–

–

–
–

–

–
–
–

–

tateandlyle.com 63

Tate & Lyle annual report 2003

notes to the financial statements

23 Provisions for liabilities and charges

Group
At 31 March 2002
Exchange differences
Businesses sold
(Credited)/charged to the profit and loss account
Utilised in period

At 31 March 2003

Deferred
taxation
£ million

Insurance
funds
£ million

Pensions
(note 24)
£ million

67
(5)
(11)
2
–

63
(6)
–
(10)
–

52
–
–
9
(44)

Retirement
medical
benefits
(note 24)
£ million

130
(13)
–
8
(7)

118

Other
provisions
£ million

Total
£ million

29
2
–
2
(7)

341
(22)
(11)
11
(58)

261

Insurance funds represents amounts provided by the Group’s captive third party insurance subsidiary in respect of the expected level
of insurance claims.

Other provisions principally comprise costs arising from recent restructuring initiatives, including £12 million relating to the

integration of Amylum. Largely in respect of staff-related costs, these provisions are expected to be utilised over the next few years.

Tate & Lyle PLC

At 31 March 2002
Charged to profit and loss account
Utilised in period

At 31 March 2003

Analysis of deferred tax liability/(asset)

Capital allowances in excess of depreciation
Retirement benefits
Other timing differences

Undiscounted provision for deferred tax
Effect of discount

Discounted provision for deferred tax

Pensions
(note 24)
£ million

4
1
(5)

–

2003

Group
£ million

2002

Group
£ million

2003
Tate &
Lyle PLC
£ million

2002
Tate &
Lyle PLC
£ million

181
(56)
(35)

90
(37)

224
(63)
(48)

113
(46)

–
(1)
–

(1)
–

(1)

–
(1)
–

(1)
–

(1)

Certain Group companies have unutilised tax losses of £149 million (2002 – £130 million) that have not been recognised since it is
not sufficiently certain that there will be suitable future taxable profits against which they may be offset.

64 tateandlyle.com

Tate & Lyle annual report 2003

24 Retirement benefits

a) Retirement benefit schemes
The Group maintains pension plans for its operations throughout the world. Most of these arrangements are defined benefit pension
schemes with retirement, disability, death and termination income benefits. The retirement income benefits are generally a function of
years of employment and final salary.

On 1 April 2002, the scheme was closed to new members. A defined contribution pension scheme has been established to

provide pension benefits to new employees.

The principal schemes are funded and their assets held in separate trustee-administered funds. The schemes are funded in line
with local practice and contributions are assessed in accordance with local actuarial advice. The schemes operated by the Group are
subject to independent actuarial valuation at regular intervals using consistent assumptions appropriate to conditions prevailing in the
relevant country.

The Group also maintains defined contribution pension schemes and some fully insured pension schemes and multi-employer

pension arrangements.

The Group’s subsidiaries in the USA provide unfunded retirement medical and life assurance benefits to their employees.

b) Accounting and disclosures
The Group accounts for retirement benefits in accordance with SSAP24 ‘Accounting for Pensions’ and the related disclosures are set
out in section c) below.

The Group has adopted the transitional disclosure requirements of FRS17 ‘Retirement Benefits’. It differs from SSAP24 principally

with regard to the choice of assumptions and in that differences between the market value of the assets and liabilities of the
retirement benefit schemes are recognised immediately in the balance sheet whereas they are recognised on a smoothed basis
through the profit and loss account under SSAP24. The Group is not required to account for retirement benefits under FRS17 as full
implementation has been deferred, but is required to present certain transitional disclosures which are set out in section d) below.

c) SSAP24 disclosures
i) Pensions
The main scheme is the Tate & Lyle Group Pension Scheme which provides benefits related to service and final salary. The most
recent valuation of the scheme was prepared as at 31 March 2001 by a qualified actuary using the projected unit method.
The method differed from that used previously in that the investments were taken at their market value and the discount rate used to
assess the level of the liabilities was set by reference to the expected return on the current market value of the assets. The principal
actuarial assumptions made were that, over the long term, the total return on investments currently held by the scheme will be 5.5%
per annum, the total return on future investments will be 6.1% per annum, pensionable salaries will increase at 4.3% per annum and
the rate of future retail price inflation will be 2.5% per annum. Provision was made for pension increases of 2.5% provided under the
rules of the scheme. The valuation showed a surplus which the actuary advised was sufficient to support the continued suspension
of contributions.

Overall, at the date of their most recent actuarial valuations, the market value of the assets of the Group’s defined benefit pension

schemes in surplus was £1,110 million and of those schemes in deficit was £39 million. The actuarial value of the assets was
sufficient to cover 104% and 74% respectively of the benefits accrued to members, after allowing for future salary increases.

However, the UK Group scheme actuaries have estimated, for the purposes of SSAP24, that the surplus arising at 31 March 2001

had been replaced by a small deficit by 31 March 2002. At the beginning of the 2003 financial year, a small injection was made into
the fund and contributions were recommenced. During 2003, the scheme actuaries estimated that the fund had fallen further into
deficit due to adverse market movements in fiscal 2003 and the Company made an additional contribution bringing the total to
£32 million during the year. The Group has, therefore, not recognised any amortisation of the surplus identified at 31 March 2001 in
the year ended 31 March 2003.

An actuarial valuation as at 31 March 2003 is currently underway, but has still to be completed.

ii) Healthcare
Valuations of the retirement healthcare schemes operated by the Group’s US subsidiaries are conducted annually by a qualified
actuary using the projected unit method. The principal actuarial assumptions used in the most recent valuation as at 1 April 2002
were that medical costs would increase by 9.0% in 2003 reducing ultimately to 5.0% and a discount rate of 7.25% was used.

tateandlyle.com 65

Tate & Lyle annual report 2003

notes to the financial statements

24 Retirement benefits continued

d) FRS17 disclosures
The information provided below has been prepared by independent qualified actuaries based on the most recent actuarial valuations
of the schemes concerned updated to take account of the valuations of assets and liabilities as at 31 March 2003.

i) Pensions
Principal assumptions at 31 March 2003

Inflation rate
Salary increases
Pension increases
Discount rate

Long-term expected rate of return on assets
– Equities
– Bonds
– Other assets

UK
%

2.5
4.2
2.5
5.4

8.1
4.5
4.0

US
%

3.5
4.5
n.a.
6.4

9.8
7.0
n.a.

Others
%

2.5
4.6
1.6
5.8

7.8
5.0
5.0

Valuation of pension scheme assets and liabilities at 31 March 2003

UK
£ million

US
£ million

Others
£ million

Total
£ million

Equities
Bonds
Other assets

Total market value of assets
Present value of scheme liabilities

Deficit in the scheme
Related deferred tax asset

Net pension liability

Principal assumptions at 31 March 2002

Inflation rate
Salary increases
Pension increases
Discount rate

Long-term expected rate of return on assets
– Equities
– Bonds
– Other assets

259
349
32

640
(737)

(97)
29

(68)

106
65
7

178
(270)

(92)
37

(55)

UK
%

2.8
4.5
2.8
5.8

7.9
5.0
4.0

20
22
16

58
(65)

(7)
2

(5)

US
%

3.5
4.5
n.a.
7.3

9.5
7.0
n.a.

385
436
55

876
(1 072)

(196)
68

(128)

Others
%

2.7
4.6
1.3
6.2

7.2
5.0
5.0

Valuation of pension scheme assets and liabilities at 31 March 2002

UK
£ million

US
£ million

Others
£ million

Total
£ million

Equities
Bonds
Other assets

Total market value of assets
Present value of scheme liabilities

(Deficit)/surplus in the scheme
Related deferred tax asset

Net pension (liability)/asset

66 tateandlyle.com

362
318
17

697
(714)

(17)
5

(12)

148
83
–

231
(266)

(35)
14

(21)

26
23
9

58
(56)

2
–

536
424
26

986
(1 036)

(50)
19

(31)

Tate & Lyle annual report 2003

24 Retirement benefits continued

ii) Healthcare
Principal assumptions at 31 March 2003

Inflation rate
Discount rate

Valuation of healthcare scheme liabilities at 31 March 2003

Present value of scheme liabilities
Related deferred tax asset

Net scheme liability

Principal assumptions at 31 March 2002

Inflation rate
Discount rate

Valuation of healthcare scheme liabilities at 31 March 2002

Present value of scheme liabilities
Related deferred tax asset

Net scheme liability

3.5
6.4

£ million

(104)
41

(63)

3.5
7.5

£ million

(117)
47

(70)

iii) Financial impact of FRS17 at 31 March 2003
If retirement benefits had been accounted for under FRS17 in these financial statements, the Group’s net assets at 31 March 2003
would have been as follows:

Net assets
£ million

As reported under current accounting policies
Adjust for amounts stated under current accounting policies:
– Pension provision (note 23)
– Pension prepayment (note 18)
– Healthcare provision (note 23)
– Related deferred tax asset

Adjust for amounts calculated in accordance with FRS17:
– Pension deficit
– Healthcare liability
– Related deferred tax asset

As stated in accordance with FRS17

1 044

17
(26)
118
(56)

(196)
(104)
109

(191)

906

The reduction in the Group’s net assets at 31 March 2003 would have been reflected in the Group’s profit and loss account reserve
which would have been reduced by £138 million from £402 million to £264 million.

tateandlyle.com 67

Tate & Lyle annual report 2003

notes to the financial statements

24 Retirement benefits continued

If retirement benefits had been accounted for under FRS17 in these financial statements, the Group’s net assets at 31 March 2002
would have been as follows:

Net assets
£ million

Adjust for amounts calculated in accordance with FRS17:
– Pension deficit
– Healthcare liability
– Related deferred tax asset

As stated in accordance with FRS17

1 081

52
(20)
130
(63)

(50)
(117)
66

(101)

1 079

The reduction in the Group’s net assets at 31 March 2002 would have been reflected in the Group’s profit and loss account reserve
which would have been reduced by £2 million from £431 million to £429 million.

iv) Analysis of the amount that would be charged to operating
profit on an FRS17 basis

UK
£ million

US
£ million

Other
£ million

Total
£ million

Pensions
Current service cost
Past service cost
Settlement, curtailment and special termination benefits

Total operating charge

Healthcare
Current service cost
Past service cost
Settlement, curtailment and special termination benefits

Total operating charge

10
1
–

5
–
–

3
–
–

18
1
–

£ million

1
–
(1)

–

v) Analysis of the amount that would be credited/(charged) to other
finance income on an FRS17 basis

UK
£ million

US
£ million

Other
£ million

Total
£ million

Pensions
Expected return on pension plan assets
Interest on pension plan liabilities

Net return

Healthcare
Interest on liabilities

Net expense

68 tateandlyle.com

45
(41)

18
(18)

–

3
(3)

–

66
(62)

£ million

(8)

Tate & Lyle annual report 2003

24 Retirement benefits continued

vi) Analysis of the amount that would be recognised in the statement
of total recognised gains and losses on an FRS17 basis

UK
£ million

US
£ million

Other
£ million

Total
£ million

Pensions
Actual return less expected return on pension plan assets
Experience gains and losses arising on the plan liabilities
Change in assumptions underlying the present value of the plan liabilities
Exchange

Actuarial loss recognised in statement of total recognised
gains and losses

(116)
5
(15)
–

(126)

(38)
–
(28)
7

(59)

(7)
1
(1)
(2)

(9)

Healthcare
Experience gains and losses arising on the healthcare liabilities
Change in assumptions underlying the present value of the healthcare liabilities
Exchange

Actuarial loss recognised in statement of total recognised
gains and losses

(161)
6
(44)
5

(194)

£ million

12
(9)
12

vii) History of experience gains and losses which would be
recognised on an FRS17 basis

Pensions
Difference between the expected and actual return on plan assets:
Amount (£ million)
Percentage of plan assets

Experience gains and losses on plan liabilities:
Amount (£ million)
Percentage of the present value of plan liabilities

Other

Total

(116)
18.1%

(38)
21.1%

(7)
12.4%

(161)
18.3%

5
0.7%

–
0.1%

1
1.0%

6
0.6%

Total amount recognised in statement of total recognised gains and losses:
Amount (£ million)
Percentage of the present value of the plan liabilities

(126)
17.0%

(59)
22.0%

(9)
13.6%

Healthcare
Experience gains and losses on healthcare liabilities:
Amount (£ million)
Percentage of the present value of healthcare liabilities

Total amount recognised in statement of total recognised gains and losses:
Amount (£ million)
Percentage of the present value of the plan liabilities

Analysis of the movement in deficit in the scheme during the year

Deficit as at 31 March 2002
Contributions (or benefits paid for unfunded plans)
Current service cost
Past service cost
Settlement/curtailment cost
Other finance charge
Actuarial loss
Currency gain

Deficit as at 31 March 2003

(194)
18.1%

£ million

12
12.0%

15
14.8%

£ million

(167)
67
(17)
(1)
1
(4)
(196)
17

(300)

tateandlyle.com 69

Tate & Lyle annual report 2003

notes to the financial statements

25 Contingent liabilities

Loans and overdrafts of subsidiaries, joint ventures, associates

and former subsidiaries guaranteed

Trade guarantees

2003

Group
£ million

9
10

2002

Group
£ million

11
6

2003
Tate &
Lyle PLC
£ million

524
–

2002
Tate &
Lyle PLC
£ million

645
–

Guarantees given in respect of loans and overdrafts are limited as follows: guarantees given by the Group may not exceed
£11 million (2002 – £23 million); guarantees given by Tate & Lyle PLC may not exceed £1,505 million (2002 – £1,808 million).

Other trade guarantees have been given in the normal course of business by the Group and by Tate & Lyle PLC at both 31 March
2003 and 31 March 2002. These are excluded from the figures given above and are in respect of Customs and Excise and
Intervention Board for Agricultural Produce bonds, ECGD recourse agreements, letters of credit and tender and performance bonds.

The Group is subject to claims and litigation generally arising in the ordinary course of its business, some of which are for substantial
amounts. All such actions are strenuously defended but provision is made for liabilities that are considered likely to arise on the basis
of current information and legal advice and after taking into account the Group’s insurance arrangements. Outstanding claims include
the class actions against, inter alia, AE Staley in the Illinois and Oregon Federal District Courts which arose after the grand jury
investigation concerning high fructose corn syrup pricing. Those actions were filed in 1995 and are proceeding to trial despite the
disbanding of that grand jury in 1999 with no indictments being brought.

While there is always uncertainty as to the outcome of any claim or litigation, it is not expected that claims and litigation existing at
the balance sheet date will have a material adverse effect on the Group’s future results or financial position.

26 Financial commitments

The Group leases railway wagons, vehicles, plant and equipment and office buildings through non-cancellable operating leases.
Certain of these leases contain escalation clauses, renewal options and purchase options.

a) Annual rentals payable on operating leases
i) Plant and machinery
Leases which expire:
– Within one year
– Between second and fifth years
– Over five years

ii) Land and buildings
Leases which expire:
– Within one year
– Between second and fifth years
– Over five years

b) Total future rentals payable on operating leases
Rentals payable:
– Within one year
– In second year
– In third year
– In fourth year
– In fifth year
– More than five years

c) Contracts for capital expenditure
Expenditure contracted for but not provided for in the accounts

70 tateandlyle.com

2003

Group
£ million

2002

Group
£ million

2003
Tate &
Lyle PLC
£ million

2002
Tate &
Lyle PLC
£ million

1
3
16

–
1
4

25
20
19
16
15
114

209

2
2
17

1
1
5

28
23
19
18
16
62

166

–
–
–

–

–
–
3

3
3
3
3
3
19

–

–
–
–

–

–
–
3

3
3
3
3
3
19

–

Tate & Lyle annual report 2003

27 Share capital

Authorised share capital of Tate & Lyle PLC
2,394,000 61/2% cumulative preference shares of £1 each
790,424,000 ordinary shares of 25p each (2002 – 790,424,000)

Allotted and fully paid
2,394,000 61/2% cumulative preference shares of £1 each (2002 – 2,394,000)
482,106,146 ordinary shares of 25p each (2002 – 481,841,560)

2003
£ million

2002
£ million

2
198

200

2
121

123

2
198

200

2
121

123

Details of shares allotted during the year are given in the Directors’ Report on page 28.

On a return of capital on a winding-up, the holders of 61/2% cumulative preference shares shall be entitled to £1 per share, in
preference to all other classes of shareholders. Holders of these shares are entitled to vote at meetings, except on the following
matters: any question as to the disposal of the surplus profits after the dividend on these shares has been provided for, the election
of directors, their remuneration, any agreement between the directors and the Company, or the alteration of the Articles of
Association dealing with any of such matters.

At 31 March 2003, options had been granted and were still outstanding under the Company’s share option schemes as follows:

Options over ordinary shares of 25p each

Outstanding at 31 March 2002
Granted
Exercised
Lapsed

Outstanding at 31 March 2003

Options exercisable at 31 March 2002
Options exercisable at 31 March 2003

Range of option exercise prices (pence)
Weighted average exercise price (pence)
Weighted average remaining life (months)

Savings related
schemes

Executive
schemes

Total

2 781 787 12 253 957 15 035 744
4 006 435
3 709 090
(324 147)
(264 665)
(2 751 040)
(2 280 512)

297 345
(59 482)
(470 528)

2 549 122 13 417 870 15 966 992

78 200
46 313

929 750
1 036 968

1 007 950
1 083 281

182 – 387
220.3
33.1

274 – 494
335.6
88.5

182 – 494
317.2
79.7

At 31 March 2003, 37,022,988 ordinary shares were available to be granted as options (2002 – 29,750,795 ordinary shares).

Rights associated with options granted under the executive share option scheme vest three years after the date of grant and are
exercisable within ten years after date of grant, at a price equal to market price on the grant date. Exercises of executive share
options granted after November 1995 are subject to performance conditions. Rights associated with options granted under the
SAYE share option scheme vest three, five or seven years after the date of grant, the period being specified at the grant date. SAYE
options are exercisable within six months after the date on which rights are vested, generally at a price 20% below market price on
the grant date.

Analysis of ordinary shareholders

At 31 March 2003 by size of holding
Up to 500 shares of 25p each
1 000
501 –
1 500
1 001 –
2 000
1 501 –
2 001 –
5 000
5 001 – 10 000
10 001 – 200 000
200 001 – 500 000
Above 500 000

No. of
holdings

5 368
4 590
2 705
1 838
3 467
841
710
94
100

Total shares
thousands

27.2
23.3
13.7
9.3
17.6
4.3
3.6
0.5
0.5

1 474
3 595
3 398
3 312
10 913
5 929
32 034
30 519
390 932

0.3
0.8
0.7
0.7
2.3
1.2
6.6
6.3
81.1

19 713

100.0

482 106

100.0

tateandlyle.com 71

Tate & Lyle annual report 2003

notes to the financial statements

27 Share capital continued

Substantial interests in share capital
The following notifications of significant shareholders’ interests had been received by 4 June 2003 under the provisions of the
Companies Act 1985.

Material interest
Archer-Daniels-Midland Company (‘ADM’)*
Compagnie Industrielle et Financière des Produits Amylaces SA (‘CIP’)
Barclays PLC
Legal and General Group plc

Number of
shares

% of ordinary
issued share
capital notified

75 951 086
48 183 913
28 968 069
14 557 855

15.75
9.99
6.01
3.02

*The material interest of 15.75% disclosed by ADM includes all of the 9.99% material interest disclosed by CIP as ADM has an
unspecified interest in the share capital of CIP. ADM’s direct interest is 5.76%.

28 Reserves

Share
premium
£ million

Revaluation
reserve
£ million

Merger
reserve
£ million

Other
reserves
£ million

Profit and
loss account
£ million

Total
£ million

Group
At 31 March 2002
Exchange differences
Tax on exchange differences
Issue of new shares
Retained profit for the period
Goodwill transferred to the profit and loss account
Other transfers

At 31 March 2003

380
–
–
1
–
–
–

381

31
2
–
–
–
–
(1)

63
–
–
–
–
–
–

15
(1)
–
–
–
–
(3)

431
(67)
(21)
–
46
9
4

402

920
(66)
(21)
1
46
9
–

889

Cumulative post-acquisition retained profits of joint ventures and associates included within the profit and loss account reserve
amount to £64 million (2002 – £66 million).

Cumulative goodwill written-off to the profit and loss account reserve amounted to £309 million (2002 – £345 million).

The revaluation reserve represents the depreciated value of revaluation surpluses recognised prior to the adoption of FRS15 ‘Tangible
Fixed Assets’. In each period, depreciation relating to these revaluation surpluses is charged to operating profit and a corresponding
transfer is made from the revaluation reserve to the profit and loss account reserve. In 2003, the depreciation charge was £1 million
(2002 – £1 million).

The merger reserve arose on the acquisition of the minority interests in Amylum and Staley in 2000 and is non-distributable.

Other reserves represent the statutory reserves of certain overseas subsidiaries and are non-distributable.

Tate & Lyle PLC

At 31 March 2002
Issue of new shares
Loss for the period

At 31 March 2003

Share
premium
£ million

Profit and
loss account
£ million

380
1
–

381

395
–
(110)

285

Total
£ million

775
1
(110)

666

The loss for the period before dividends dealt with in the accounts of the Company amounted to £23 million (2002 – £73 million loss).

After allowing for the proposed final dividend of £61 million, the remaining amount available for the payment of dividends by the
Company at 31 March 2003 was £285 million.

72 tateandlyle.com

Tate & Lyle annual report 2003

29 Reconciliation of operating profit to operating cash flows

Operating profit
Depreciation of tangible fixed assets
Operating exceptional items – impairment of assets
Amortisation of goodwill
(Increase)/decrease in working capital (note 30)
Provisions against fixed asset investments

Net cash inflow from operating activities

30 Change in working capital

Decrease in stocks (note 17)
Decrease in debtors due within one year (note 18)
(Increase)/decrease in debtors due after more than one year (note 18)
(Decrease)/increase in creditors due within one year (note 20)
Increase in creditors due after more than one year (note 22)
(Decrease)/increase in provisions for liabilities and charges (note 23)

Movement during period
Exchange differences
Acquisitions and disposals during period
Other items

(Increase)/decrease in working capital

Year to
31 March
2003
£ million

Year to
31 March
2002
£ million

172
110
39
8
(6)
–

323

172
121
–
8
143
1

445

Year to
31 March
2003
£ million

Year to
31 March
2002
£ million

90
76
(4)
(78)
1
(66)

19
(7)
(23)
5

(6)

97
89
3
4
–
10

203
(7)
(55)
2

143

Working capital includes provisions and excludes taxation, dividends and items affecting total Group borrowings. Other movements
represent the elimination of balances within debtors and creditors attributable to interest, tangible fixed assets and fixed asset
investments.

31 Reconciliation of net cash flow to movement in net debt

Decrease in cash during the period
Cash outflow from reduction in debt
Cash outflow from management of liquid resources

Decrease in net debt resulting from cash flows

Changes in net debt not involving cash flows:
– Net debt of subsidiaries sold
– Amortisation of bond discount – Convertible Bond 2005

Exchange differences

Decrease in net debt during the period
Net debt at start of period

Net debt at end of period

Liquid resources comprise current asset investments.

Year to
31 March
2003
£ million

Year to
31 March
2002
£ million

(32)
154
67

189

–
(2)

187
(19)

168
(639)

(471)

18
298
2

318

1
(2)

317
7

324
(963)

(639)

tateandlyle.com 73

Tate & Lyle annual report 2003

notes to the financial statements

32 Analysis of net debt

Current asset investments
Cash at bank and in hand
Overdrafts

Cash and liquid resources

Other borrowings due within one year
Borrowings due after one year

Borrowings

Net debt

At 31 March
2002
£ million

Cash
flow
£ million

Non-cash
movements
£ million

Exchange
movements
£ million

At 31 March
2003
£ million

63
72
(17)

118

(134)
(623)

(757)

(639)

67
(28)
(4)

104
50

154

189

–
–
–

–

(49)
47

(2)

(3)
1
(2)

(4)

2
(17)

(15)

(19)

127
45
(23)

149

(77)
(543)

(620)

(471)

33 Fair value of financial assets and liabilities

Financial assets and liabilities analysed below exclude short-term debtors and creditors.

Fair value is defined as the amount at which a financial instrument could be exchanged in an arm’s-length transaction between
informed and willing parties, excluding accrued interest, and is calculated by reference to market rates discounted to current value.
Where market values are not available, fair values have been calculated by discounting cash flows at prevailing interest and
exchange rates. All debt and financial instruments used to manage the interest rate and currency of borrowings with a maturity of
less than three months after the balance sheet date are assumed to have a fair value equal to the book value. The book values are
the amounts recorded in the balance sheet and include premium payments or receipts which are recognised over the period to which
the relevant instrument relates. Initial margin deposits held by brokers as collateral in respect of open futures positions are excluded
from the currency risk disclosures. The major financial risks facing the Group and the objectives and policies for holding financial
instruments are discussed in the Operating and Financial Review on pages 14 to 20.

The fair value of the Group’s financial instruments at 31 March 2003 was:

Financial instruments held or issued to finance the Group’s operations:
Fixed asset investments
Cash at bank and in hand
Current asset investments
Borrowings
Non-equity shares
Loans to associates and joint ventures

Financial instruments used to manage the interest rate and currency
of borrowings:
Interest and currency-related derivatives

Financial instruments used to hedge future transactions:
Commodity and currency-related instruments

2003
Book
value
£ million

2003
Fair
value
£ million

2002
Book
value
£ million

2002
Fair
value
£ million

18
45
127
(643)
(2)
4

18
45
127
(697)
(2)
4

(4)

11
72
63
(774)
(2)
15

(5)

11
72
63
(784)
(2)
15

(3)

(1)

74 tateandlyle.com

Tate & Lyle annual report 2003

34 Currency and interest rate exposure of financial assets and liabilities

Financial assets and liabilities analysed below exclude short-term debtors and creditors.

After taking into account the various interest rate and cross currency interest rate swaps entered into by the Group, the currency and
interest rate exposure of the financial liabilities of the Group was:

At 31 March 2003
Sterling
US dollars
Canadian dollars
Euro
Others

Total

Of which:
– Gross borrowings
– Non-equity shares

At 31 March 2002
Sterling
US dollars
Canadian dollars
Euro
Others

Total

Of which:
– Gross borrowings
– Non-equity shares

At 31 March 2003
Sterling
US dollars
Euro

Average

Fixed rate
£ million

Floating rate
£ million

Non-interest
bearing
£ million

Total
£ million

50
294
–
155
–

499

499
–

499

2
(168)
1
308
–

143

143
–

143

2
–
–
1
–

1
2

54
126
1
464
–

645

643
2

645

Fixed rate
£ million

Floating rate
£ million

Non-interest
bearing
£ million

Total
£ million

2
265
–
137
–

404

404
–

404

70
45
(30)
262
22

369

369
–

369

2
–
–
1
–

1
2

74
310
(30)
400
22

776

774
2

776

Average
interest rate
of fixed
rate liabilities

Average years
to maturity
of fixed
rate liabilities

Average years
to maturity of
non-interest
bearing
liabilities

6.5%
4.9%
5.7%

5.6%

9.2
2.6
3.5

4.8

–
–
2.2

2.2

tateandlyle.com 75

Tate & Lyle annual report 2003

notes to the financial statements

34 Currency and interest rate exposure of financial assets and liabilities continued

At 31 March 2002
Sterling
US dollars
Euro

Average

Average
interest rate
of fixed
rate liabilities

Average years
to maturity
of fixed
rate liabilities

Average years
to maturity of
non-interest
bearing
liabilities

8.0%
5.9%
5.7%

5.7%

5.3
0.2
4.3

4.3

–
–
1.0

1.0

The floating rate borrowings, cash and current asset investments bear interest based on relevant national LIBOR equivalents or
government bond rates.

The maturity of the Group’s financial liabilities was:

Within 1 year
Between 1 and 2 years
Between 2 and 5 years
More than 5 years

Total financial liabilities

Gross borrowings

Net borrowings

2003
£ million

2002
£ million

2003
£ million

2002
£ million

2003
£ million

2002
£ million

100
7
326
212

645

151
251
341
33

776

100
7
326
210

643

151
251
341
31

774

(72)
7
326
210

471

16
251
341
31

639

Financial liabilities maturing after more than five years include £2 million (2002 – £2 million) in respect of non-redeemable 61/2%
cumulative preference shares.

The currency and interest rate exposure of the financial assets of the Group was:

At 31 March 2003
Sterling
US dollars
Canadian dollars
Euro
Others

Total

Of which:
– Fixed asset investments
– Current asset investments
– Working capital
– Cash at bank and in hand

Fixed rate
£ million

Floating rate
£ million

Non-interest
bearing
£ million

Total
£ million

–
18
–
–
–

18
–
–
–

(15)
(137)
54
275
(1)

176

4
127
–
45

176

(1)
9
1
2
–

–
–
11
–

(16)
(110)
55
277
(1)

205

22
127
11
45

205

The Group also has financial assets relating to cross currency swaps with a nominal value of £150 million, an average interest
rate of 6.5% and average maturity of 9.3 years. These fixed rate instruments have been shown on a net basis within the financial
liabilities table.

76 tateandlyle.com

Tate & Lyle annual report 2003

34 Currency and interest rate exposure of financial assets and liabilities continued

Fixed rate
£ million

Floating rate
£ million

Non-interest
bearing
£ million

Total
£ million

At 31 March 2002
Sterling
US dollars
Canadian dollars
Euro
Others

Total

Of which:
– Fixed asset investments
– Current asset investments
– Working capital
– Cash at bank and in hand

–
11
–
–
–

11
–
–
–

3
84
2
51
10

150

15
63
–
72

150

–
(3)
(1)
2
–

(2)

–
–
(2)
–

(2)

3
92
1
53
10

159

26
63
(2)
72

159

The instruments used for hedging Group exposure to movements in interest rates, exchange rates and commodity prices are detailed
in the Operating and Financial Review on pages 14 to 20. Changes in the fair value of instruments used as hedges are not
recognised in the financial statements until the hedged position matures. An analysis of these unrecognised gains and losses is as
follows:

Unrecognised gains and losses on hedges at 31 March 2002
Transferred from losses to gains
Transferred from gains to losses
Deduct: Gains and losses arising in previous years that were recognised in 2003

Gains and losses arising before 31 March 2002 that were not recognised in 2003
Gains and losses arising in 2003 that were not recognised in 2003

Unrecognised gains and losses on hedges at 31 March 2003

Of which:
– Gains and losses expected to be recognised in 2004 financial year
– Gains and losses expected to be recognised in 2005 financial year or later

Gains
£ million

Losses
£ million

Total net
gains/(losses)
£ million

18
(1)
(3)
(15)

(1)
19

10
8

(20)
1
3
13

(3)
(20)

(23)

(9)
(14)

(23)

(2)
–
–
(2)

(4)
(1)

(5)

1
(6)

(5)

Gains and losses on certain financial instruments are recognised on the Group’s balance sheet but their recognition in the Group’s
profit and loss account is deferred until future periods. Deferred gains at 31 March 2002 were £6 million, of which £5 million was
recognised in 2003. A further £8 million of deferred gains arose in the period. £8 million of these gains are expected to be recognised
in the 2004 financial year. Deferred losses at 31 March 2002 were £10 million, of which £9 million was recognised in 2003. £22 million
of deferred losses arose in the period, £21 million of these losses are expected to be recognised in 2004.

tateandlyle.com 77

Tate & Lyle annual report 2003

notes to the financial statements

35 Currency analysis of net assets

The Group’s borrowings and net assets by currency at 31 March 2003 were:

Sterling
US dollars
Canadian dollars
Euro
Others

Total net assets

Net operating
assets, dividends
and tax balances
£ million

Net
borrowings
£ million

2003
Total
net assets
£ million

2002
Total
net assets
£ million

273
536
45
474
187

1 515

(67)
(262)
53
(190)
(5)

(471)

206
274
98
284
182

242
489
88
70
192

1 044

1 081

The amounts shown above for net borrowings and total net assets are after taking into account various cross currency interest rate
swaps and forward foreign exchange contracts entered into by the Group.

There are no material transactional currency exposures in the Group.

36 Disposals

During 2003, the Group continued to pursue the disposal of non-core and non-performing businesses.

The profit recognised during the period on disposal of businesses was as follows:

Sale proceeds
Net assets sold:
Intangible fixed assets
Tangible fixed assets
Other fixed asset investments
Stock
Debtors
Net debt
Other liabilities
Provisions

Profit on disposal

Sale proceeds recognised during the period comprised:

Cash (net of sundry costs of £3 million)
Loan notes
Deferred consideration

The businesses sold contributed the following amounts to cash flows during the year prior to disposal:

Cash flow from operating activities
Returns on investment and servicing of finance
Taxation paid
Capital expenditure and financial investment

Net cash inflow before financing

78 tateandlyle.com

£ million

1
(19)
(11)
(98)
(15)
–
90
11

£ million

55
7
(2)

£ million

8
1
(2)
5

Tate & Lyle annual report 2003

main subsidiaries and investments at 31 March 2003

Subsidiaries based in the UK1

Amylum UK Limited
Redpath (UK) Limited
The Molasses Trading Company Limited
Tate & Lyle Holdings Limited2, 3
Tate & Lyle Industrial Holdings Limited2
Tate & Lyle Industries Limited
Tate & Lyle International Finance PLC2
Tate & Lyle Investments Limited2
Tate & Lyle Investments (USA) Limited
Tate & Lyle Sugar Quay Investments Limited2
Tate & Lyle Ventures Limited2
United Molasses (Ireland) Ltd4

Percentage of
equity attributable
Type of business to Tate & Lyle PLC

Cereal sweeteners & starches
Holding company
Holding company
Holding company
Holding company
See below
In-house banking
Holding company
Holding company
Holding company
Holding company
Molasses

100
100
100
100
100
100
100
100
100
100
100
50

1. Registered in England and Wales, except United Molasses (Ireland) Ltd, which is registered in Northern Ireland.
2. Direct subsidiaries of Tate & Lyle PLC.
3. Tate & Lyle PLC holds directly 78.5% of Tate & Lyle Holdings Limited.
4. Non-coterminus year-end.

Main operating units of Tate & Lyle Industries Limited

Tate & Lyle Sucralose
Tate & Lyle Citric Acid
Tate & Lyle Process Technology
Tate & Lyle Europe

Subsidiaries operating overseas

Barbados
Belgium

Bermuda

British Virgin Islands
Brazil
Canada
China
Denmark
France

Germany
Greece
Guyana
India
Italy
Mauritius
Mexico

Morocco
Mozambique
Netherlands

Norway
Portugal

Caribbean Antilles Molasses Company Limited
Amylum Europe NV
Tameco NV
Tate & Lyle Management & Finance Limited
Tate & Lyle Reinsurance Limited
Anglo Vietnam Sugar Investments Limited
Mercocitrico Fermentações S.A.1
Tate & Lyle North American Sugars Limited
Orsan Guangzhou Gourmet Powder Company Limited1
Nordisk Melasse A/S
Amylum France SAS
France Melasse SA1
Orsan SA
Société Européenne des Mélasses SA1
Hansa Melasse – Handelsgesellschaft mbH
Amylum Hellas SA
Caribbean Molasses Company Inc
Tate & Lyle Investments (India) Pvt Ltd
Melitalia SpA
The Mauritius Molasses Company Limited
Mexama, SA de CV1
Tate & Lyle Mexico SA de CV1
Amylum Maghreb SA
Companhia Exportadora de Melaços
Amylum Nederland BV
Nederlandsche Melasse Handel Maatschappij BV
Tate & Lyle Holland BV
Tate & Lyle Norge A/S
Alcântara Empreendimentos SGPS, SA1
Alcântara Refinarias – Açucares, SA1
Tate & Lyle (Portugal) Importaçao e Exportaçao Ltda1

Type of business

High intensity sweeteners
Citric acid
Sugar technology
Sugar refining and trading,
molasses and bulk liquid storage

Percentage of
equity attributable
Type of business to Tate & Lyle PLC

Molasses
Cereal sweeteners & starches
Molasses
Management & finance
Reinsurance
Holding company
Citric acid and sugar trading
Sugar refining
Glutamate producer
Molasses
Cereal sweeteners & starches
Molasses
Glutamate producer
Holding company
Molasses
Cereal sweeteners & starches
Molasses
Holding company
Molasses
Molasses
Citric acid
Holding company
Cereal sweeteners & starches
Molasses
Cereal sweeteners & starches
Molasses
Holding company
Sugar distribution
Holding company
Sugar refining
Molasses

100
100
100
100
100
60
100
100
(51) 41
100
100

(61.6) 40.6
80.4
66
100
99
100
100
100

66.7
65.4

100

(100) 97.4

100
(100) 98
100
100
100
100
100
100

tateandlyle.com 79

Tate & Lyle annual report 2003

main subsidiaries and investments at 31 March 2003

Subsidiaries operating overseas continued

South Africa
Spain

Trinidad
USA

Vietnam

The Pure Cane Molasses Company (Durban) (Pty) Ltd
Amylum Ibérica SA
United Molasses (España) SA
Caribbean Bulk Storage and Trading Company Ltd1
A E Staley Manufacturing Company
Staley Grain Inc
Staley Holdings Inc
Tate & Lyle Finance, Inc
Tate & Lyle LLC
Tate & Lyle Holdings (US) LLP
TLI Holdings Inc
Nghe An Tate & Lyle Sugar Company Limited

1. Non-coterminus year-end.

Joint ventures

Bulgaria
Colombia
Czech Republic
Hungary

Ireland
Italy
Mexico

Netherlands

Romania
Slovakia

Spain
Turkey

Amylum Bulgaria AD1, 3
Sucromiles SA3
Eastern Sugar Ceska Republica as2, 3
Hungrana kft1, 3
Eastern Sugar Rt2, 3
Premier Molasses Company Ltd3
Sedamyl SpA
Almidones Mexicanos SA3
Grupo Industrial Azucarero de Occidente SA de CV3
Eastern Sugar BV3
Eaststarch CV
Amylum Romania SA1, 3
Amylum Slovakia spol sro1, 3
Eastern Sugar Slovensko as2, 3
Compania de Melazas SA3
Amylum Nisasta1

The share capital held is of ordinary shares.

1. Share capital held by Eaststarch CV.
2. Share capital held by Eastern Sugar BV.
3. Non-coterminus year-end.

Associate

Thailand

Tapioca Development Corporation1

1. Non-coterminus year-end.

Percentage of
equity attributable
Type of business to Tate & Lyle PLC

Molasses
Cereal sweeteners & starches
Molasses
Molasses
Cereal sweeteners & starches
Cereal sweeteners & starches
Holding company
In-house banking
Holding company
Holding company
In-house banking
Cane sugar manufacture

100

97.4

100
100
100
100
100
100
100
100
100

(80.9) 48.5

Percentage of
equity attributable
Type of business to Tate & Lyle PLC

Cereal sweeteners & starches
Citric acid
Sugar beet processing (94.5) 47.3

(96.9) 48.5

Cereal sweeteners & starches
Sugar beet processing
Molasses
Cereal sweeteners & starches
Cereal sweeteners & starches
Cane sugar manufacture
Holding company
Holding company
Cereal sweeteners & starches
Cereal sweeteners & starches

(50) 25
(100) 50
50
50
50
49
50
50

(81.3) 40.6
(100) 50

Sugar beet processing (95.6) 47.8
Molasses
Cereal sweeteners & starches

50
(100) 50

Percentage of
equity attributable
Type of business to Tate & Lyle PLC

Starch production

33.3

Particulars of other subsidiaries and associated undertakings which are either not material or are dormant will be included in the
forthcoming Annual Return.

The proportion of shares held by Tate & Lyle PLC, its subsidiaries, joint ventures and associates is shown in brackets where it is

different from the percentage of equity attributable to Tate & Lyle PLC.

80 tateandlyle.com

Tate & Lyle annual report 2003

information for investors

Addresses and telephone numbers

Relevant addresses and telephone numbers are given on the back cover.

Dividends on Ordinary shares

Two payments were made during the tax year 2002/03 as follows.

Payment date

Dividend description

Dividend per share

7 August 2002
14 January 2003

Final 2002
Interim 2003

12.3p
5.5p

Services

Single Company Individual Savings Account (ISA)
Tate & Lyle’s ordinary shares can be held in a Single Company ISA. For information, please call Lloyds TSB Registrars ISA Helpline on
0870 24 24 244.

Share dealing service
Hoare Govett Limited offers an execution only, ‘Low Cost Postal Sharedealing Service’ which enables UK resident investors to buy or
sell Tate & Lyle’s ordinary shares. Details can be obtained by writing to Hoare Govett Limited, 250 Bishopsgate, London EC2M 4AA, or
calling their Service Helpline on 020 7661 6617. Transactions are executed and settled by Pershing Securities Limited.

Shareholding enquiries
Queries on shareholdings should be addressed to Tate & Lyle’s Registrar, Lloyds TSB Registrars (see back cover for contact details).

Tate & Lyle’s website (tateandlyle.com) and share price information
Tate & Lyle’s website provides direct links to other Group company sites and to sites providing financial and other information relevant to
the Company. The share price is available on the website with a 20-minute delay. Similar information is available on many specialist
websites, on Teletext and in several national newspapers.

Capital gains tax

The market values on 31 March 1982 for the purposes of indexation up to April 1998 in relation to capital gains tax of Tate & Lyle PLC
shares then in issue were:

Ordinary shares of £1 each
Equivalent value per ordinary share of 25p
61/2% cumulative preference shares

201.00p
50.25p
43.50p

Tate & Lyle American Depositary Shares (‘ADSs’)

The Company’s shares trade in the United States on the NASDAQ over the counter (‘OTC’) market in the form of ADSs and these are
evidenced by American Depositary Receipts (ADRs). The shares are traded under the symbol TATYY. Each ADS is equivalent to four
ordinary shares. For more information, contact The Bank of New York at the address on the back cover.

Financial calendar (dates are provisional except those in italics)

2003 Annual General Meeting
Announcement of interim results for six months to 30 September 2003
Announcement of preliminary results for year ended 31 March 2004
2004 Annual General Meeting

Dividend on Ordinary shares
Announced
Payment date

1. Subject to the approval of shareholders.

Dividends on 61/2% Cumulative Preference shares
Paid 31 March and 30 September

31 July 2003
6 November 2003
3 June 2004
29 July 2004

2003 Final
5 June 2003
6 August 20031

2004 Interim
6 November 2003
13 January 2004

2004 Final
3 June 2004
4 August 20041

Interest on Unsecured Loan Stocks
8% Unsecured Loan Stock 2003/2008 and
10.75% Unsecured Loan Stock 2003/2008
Paid 31 March and 30 September

tateandlyle.com 81

Tate & Lyle annual report 2003

ten year review financial years to March

Share information

Pence per 25p ordinary share
Closing share price
Earnings – basic

basic, before goodwill amortisation
and exceptional items

Earnings – diluted

diluted, before goodwill amortisation
and exceptional items

Dividend

Closing market capitalisation £m
Including convertible redeemable
preference shares £m

Business ratios

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

434.0
40.7

440.0
48.1

487.5
50.6

434.0
18.8

522.0
31.1

401.0
30.4

227.0
24.3

228.8
(50.0)

349.2
24.7

299.0
27.8

38.0
34.7

33.1
13.3

43.9
40.3

38.1
14.8

54.1
44.8

47.2
16.3

40.5
19.7

38.3
17.0

35.7
30.6

35.1
17.0

28.5
30.4

28.4
17.2

30.0
24.2

29.9
17.8

14.8
(49.8)

14.8
17.8

22.2
24.6

22.1
17.8

33.1
27.7

33.0
18.3

1 934

1 960

2 203

1 968

2 378

1 832

1 039

1 102

1 683

1 441

375

234

–

6.5

7.9

6.5

4.5

4.0

3.0

3.6

2.3

3.3

7.6

Interest cover – times
Profit before goodwill amortisation, exceptional items
and interest of Tate & Lyle PLC and its subsidiaries
divided by net interest charge
Gearing
Net borrowings as a percentage of total net assets
Net margin
Profit before interest and exceptional items as
a percentage of total sales
Return on net operating assets
Profit before interest and exceptional items as
a percentage of average net operating assets
Dividend cover – times
Basic earnings per share divided by dividends
per share
– before exceptional items and

84% 75% 75% 84% 92% 84% 64% 91% 59% 45%

7.9% 8.7% 8.3% 5.6% 6.4% 5.9% 7.0% 4.3% 5.3% 7.8%

17.7% 20.4% 20.3% 13.3% 13.7% 11.9% 13.5% 8.5% 10.5% 14.2%

3.1

3.3

3.1

1.1

1.8

1.4

(2.8)

1.4

1.5

goodwill amortisation

2.9

3.0

3.3

2.4

2.1

1.7

0.8

1.2

1.8

In 2000, the Group changed its accounting reference date from 30 September to 31 March resulting in an extended accounting period
of 18 months to March 2000.

Results presented above are for years to March and have been calculated using the Group’s published interim and full year financial
statements.

In order to show the underlying trend of dividend payments, dividends shown in the above table have been adjusted as follows:

a) to exclude from the dividend for the year to March 1997, the Foreign Income Dividend enhancement of 1.325p per share included in

the Interim 1997 dividend; and

to exclude from the dividend of 26.9p per share paid in respect of the 18 months to March 2000, the Final Dividend of 9.1p per
share paid in respect of the transitional six-month period to March 2000 with the effect that the dividend of 17.8p per share for the
year to March 2000 shown above is presented on an annualised basis.

82 tateandlyle.com

Tate & Lyle annual report 2003

Employment of capital

Fixed assets
Working capital

1994
£ million

1995
£ million

1996
£ million

1997
£ million

1998
£ million

1999
£ million

2000
£ million

2001
£ million

2002
£ million

2003
£ million

1 366
324

1 484
320

1 718
454

1 764
326

1 821
319

1 892
288

1 854
211

1 860
307

1 699
114

1 565
94

1 659
(471)
(144)

Net operating assets
Net borrowings
Net (liabilities)/assets for dividends and tax

1 690
(745)
(63)

1 804
(743)
(66)

2 172
(915)
(36)

2 090
(955)
(4)

2 140
(1 030)
7

2 180
(986)
(23)

2 065
(805)
4

2 167
(963)
(142)

1 813
(639)
(93)

Total net assets

Capital employed
Called up share capital
Reserves

Minority interests

Profit summary

Total sales

882

995

1 221

1 131

1 117

1 171

1 264

1 062

1 081

1 044

115
659

774
108

882

115
736

851
144

116
909

1 025
196

116
844

960
171

117
846

963
154

117
904

117
984

123
885

123
920

123
889

1 021
150

1 101
163

1 008
54

1 043
38

1 012
32

995

1 221

1 131

1 117

1 171

1 264

1 062

1 081

1 044

3 715

4 095

4 896

5 047

4 560

4 359

4 090

4 146

3 944

3 167

Group operating profit:
Before goodwill amortisation and exceptional items 278
–
Goodwill amortisation
–
Operating exceptional items

Group operating profit
Share of profits of joint ventures and associates

Total operating profit
Non-operating exceptional items:
Write-downs on planned sale of business
Profit/(loss) on sale of businesses
Profit/(loss) on sale of fixed assets

Profit/(loss) before interest
Net interest
Net interest of joint ventures and associates

Profit/(loss) before taxation
Taxation

Profit/(loss) after taxation
Minority interests

Profit/(loss) for the period
Dividends

Retained profit/(loss) for the period

278
15

293

–
–
–

293
(43)
(3)

247
(65)

182
(22)

160
(62)

340
–
(13)

327
17

344

–
–
–

344
(43)
(5)

296
(81)

215
(29)

186
(67)

119

377
–
(13)

364
27

391

–
–
–

391
(58)
(6)

327
(84)

243
(34)

209
(73)

136

253
–
(83)

170
30

200

–
–
–

200
(56)
(5)

139
(39)

100
(14)

86
(83)

260
–
(9)

251
30

281

–
–
–

281
(65)
(10)

206
(60)

146
(7)

139
(77)

220
–
(5)

215
37

252

–
–
18

270
(73)
(13)

184
(49)

135
4

139
(79)

237
–
–

237
47

284

(50)
25
7

266
(65)
(10)

191
(63)

128
(17)

111
(99)

156
(5)
–

151
29

180

(307)
9
–

(118)
(67)
(5)

(190)
(40)

(230)
(6)

(236)
(86)

180
(8)
–

172
36

208

–
(5)
13

216
(55)
(2)

159
(39)

120
(2)

118
(85)

(322)

219
(8)
(39)

172
35

207

(12)
19
(1)

213
(29)
3

187
(57)

130
2

132
(86)

Profit before tax, exceptional items and
goodwill amortisation

247

309

340

222

215

171

209

113

159

228

tateandlyle.com

Tate & Lyle annual report 2003

index

Subject

Page Number

Subject

Page Number

Accounting Policies
ADS Investors
Almex
Amylum
Amylum Integration Programme
Animal Feed and Bulk Storage
Annual General Meeting
Asian Sugar Businesses
Associates
Auditor Independence
Auditors’ Report
Balance Sheet
Board Committee Membership
Capital Gains Tax Information
Cash Flow and Debt Management
Cash Flow/Net Debt Reconciliation
Cash Flow Statement
Chairman’s Statement
Change in Working Capital
Chief Executive’s Review
Code of Conduct
Commitments
Commodities
Community
Contingent Liabilities
Control and Direction of Treasury
Corporate Governance
Corporate Social Responsibility
Credit Risk
Creditors – Borrowings
Creditors – Other
Currency Analysis of Net Assets
Currency and Interest Rate Exposure of
Financial Assets and Liabilities

Current Asset Investments
Debtors
Directors’ Biographies
Directors’ Emoluments
Directors’ Interests in Tate & Lyle shares
Directors’ Options to Acquire Tate & Lyle shares
Directors’ Pension Provision
Directors’ Remuneration Report
Directors’ Report
Directors’ Responsibilities
Directors’ Service Contracts
Disposals of Businesses
Dividend Cover
Dividends
Domino Sugar
Donations
Earnings per share
Eastern Sugar
Eaststarch
Employee Share Option Schemes
Employee numbers
Energy
Environment
Ethical Conduct
Exceptional Items
Exchange Rates
Executive Directors’ and Senior Executives’

75
60
60
26
37
40
39
38
33
28
29
29
17, 78
4, 14, 82
2, 3, 4, 14, 28, 56, 81, 82
17
25, 29
2, 3, 4, 14, 56, 82
5, 13, 16
13, 16
28, 71
54
23
22
24
14, 54
52

Remuneration Policy

Fair Value of Financial Instruments used for

Risk Management

Financial Calendar
Financial Targets

20, 74
81
12

84 tateandlyle.com

50
81
15
13, 15
13, 16
16
28, 81
16
59, 80
32
42
44
27
81
18
73
45
4
73
12
24
70
20
13, 24
70
19
5, 30
5, 21
20
62, 63
61, 63
78

Financial Instruments
Fixed Asset Investments
Foreign Currency
Funding
Funding not Treated as Debt
Gearing
Going Concern
Goodwill
Individual Savings Account (ISA)
Interest Payable and Similar Charges
Interest Cover
Interest Rates
Internal Control
Joint Ventures
Management of Financial Risk
Molasses and Liquid Storage
Net Cash Inflow from Operating Activities
Net Operating Assets – Segmental Analysis
Nghe An Tate & Lyle
Non-Executive Directors’ Terms of Appointments
North American Sugar
Occidente
Operating and Financial Review
Operating Profit
Other Businesses and Activities
Payment to Suppliers
Principal subsidiaries
Profit and Loss Account
Profit Before Taxation – Segmental Analysis
Profit Summary
Provisions for Liabilities and Charges
Reconciliation of Movements in Shareholders’ Funds
Redpath
Research and Development
Reserves
Retirement Benefits
Safety
Sales – Segmental Analysis
Share Capital
Share Dealing Service
Share Price Information
Share Registration
Shareholder Communication
Shareholders’ Funds
Sucralose
Staff Costs
Staley
Statement of Cash Flows
Statement of Recognised Gains and Losses
Stocks
Strategy
Sweeteners & Starches – Americas
Sweeteners & Starches – Europe
Sweeteners & Starches – Rest of the World
Tangible Fixed Assets
Tate & Lyle Citric Acid
Tate & Lyle Europe
Tate & Lyle Process Technology
Tate & Lyle Reinsurance
Taxation
Ten Year Review
Training/People
Website
Western Sugar

20, 74, 51
58, 59
20
18, 63
19
18, 82
20
56, 72
81
17, 55
3, 4, 12, 14
17, 19
31
59, 80
19
16, 18
73
49
13, 16
36
15
13, 15
14
53
17
29
79
43
48
83
64
46
13, 15
28
72
18, 65
5, 13, 21
47
28, 71
81
81, 82
81
31
46
13, 17
54
12, 15
45
46
60
5
15
15
16
57
5, 12, 14, 15
16
17
13, 17
17, 55, 81
82
23, 29
81
17

Contents

1 introduction to Tate & Lyle
2 financial highlights

4 chairman’s statement
6 ingredients of quality
12 chief executive’s review
14 operating and financial review
21 corporate social responsibility
26 board of directors

28 directors’ report
30 corporate governance
33 directors’ remuneration report

41 financial contents
42 auditors’ report
50 notes to the financial statements
79 main subsidiaries and investments
81 information for investors
82 ten year review

84 index

Tate & Lyle PLC is a public limited company
listed on the London Stock Exchange
and registered in England. This is the report
and accounts for the year ended 31 March 2003.

Convenience

Efficiency

Taste

Texture

We add food
starches to
soups, gravies
and sauces.
page 6

We add food
starches and
sweeteners to
ready-made
meals. page 6

We add
sweeteners and
citric acid to
beverages.
page 8

We add
industrial
starches to
cardboard.
page 8

Health and
wellbeing

We add sorbitol
and zinc citrate
to toothpaste.
page 10

Designed and produced by Pauffley, www.pauffley.com
SPLENDA® is a trademark of McNeil-PPC., Inc.

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ingredients of quality

Registered Office
Sugar Quay, Lower Thames Street
London EC3R 6DQ
Tel: 020 7626 6525
Fax: 020 7623 5213

Website
http://www.tateandlyle.com

ADR Depositary
The Bank of New York
Investor Relations Department
101 Barclay Street – 11th Floor
New York, NY 10286
Tel: 1 888 269 2377

North American Contact for
Annual Reports
Taylor Rafferty Associates, Inc.
205 Lexington Avenue
New York, NY 10016-6022
Tel: (212) 889 4350
Fax: (212) 683 2614

Stockbrokers
Hoare Govett Limited
250 Bishopsgate, London EC2M 4AA
Tel: 020 7678 8300

annual report 2003