Laird PLC. (Incorporated and registered in England and Wales with registered number 55513)

Transcription

1 THIS DOCUMENT AND ANY ACCOMPANYING DOCUMENTS ARE IMPORTANT AND REQUIRE YOUR IMMEDIATE ATTENTION. If you are in any doubt as to what action you should take, you are recommended to seek immediately your own financial advice from your stockbroker, bank manager, solicitor, accountant, fund manager or other appropriate independent financial adviser, who is authorised under the Financial Services and Markets Act 2000 if you are resident in the UK or, if not, from another appropriately authorised independent financial adviser. LR (4) LR (1) This document comprises (i) a circular prepared in accordance with the Listing Rules of the FCA made under section 73A of the FSMA and (ii) a prospectus relating to Laird PLC prepared in accordance with the Prospectus Rules of the FCA made under section 73A of the FSMA. This document has been approved by the FCA in accordance with section 85 of the FSMA, will be made available to the public and has been filed with the FCA in accordance with the Prospectus Rules. This document together with the documents incorporated into it by reference (as set out in Part X Documentation Incorporated by Reference of this document) will be made available to the public in accordance with Prospectus Rule by the same being made available, free of charge, at and at the Company s registered office at 100 Pall Mall, London SW1Y 5NQ, United Kingdom. If you sell or have sold or have otherwise transferred all of your Shares (other than ex-rights) held in certificated form before 8.00 a.m. (London time) on 17 March 2017 (the Ex-Rights Date ) please send this document, together with any Provisional Allotment Letter, if and when received, at once to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for delivery to the purchaser or transferee except that such documents should not be sent to any jurisdiction where to do so might constitute a violation of local securities laws or regulations, including but not limited to the United States or Australia, Canada, the People s Republic of China, Hong Kong, the Republic of India, Japan, the Republic of Korea, Malaysia, Mexico, New Zealand,the Republic of South Africa, Singapore, Switzerland and Taiwan. If you sell or have sold or have otherwise transferred all or some of your Existing Shares (other than ex-rights) held in uncertificated form before the Ex-Rights Date, a claim transaction will automatically be generated by Euroclear which, on settlement, will transfer the appropriate number of Nil Paid Rights to the purchaser or transferee. If you sell or have sold or otherwise transferred only part of your holding of Existing Shares (other than ex-rights) held in certificated form before the Ex-Rights Date, you should refer to the instruction regarding split applications in Part III Terms and Conditions of the Rights Issue of this document and in the Provisional Allotment Letter. LR (6) LR (8) The distribution of this document, the Provisional Allotment Letter and the transfer of Nil Paid Rights, Fully Paid Rights and New Shares into jurisdictions other than the UK may be restricted by law and therefore persons into whose possession this document comes should inform themselves about and observe any such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws or regulations of such jurisdictions. In particular, subject to certain exceptions, this document, the enclosures and the Provisional Allotment Letter and any other such documents should not be distributed, forwarded to or transmitted in or into the United States, any of the Excluded Territories or any other jurisdictions where the extension and availability of the Rights Issue would breach any applicable law. Laird PLC (Incorporated and registered in England and Wales with registered number 55513) (i) (i) (i) (iii) 4.1 (iii) 4.2 (iii) 4.4 (iii) for 5 Rights Issue of 217,156,300 New Shares at 85 pence per New Share Notice of General Meeting Sole Global Coordinator, Joint Sponsor and Joint Bookrunner J.P. Morgan Cazenove Joint Sponsor and Financial Adviser Rothschild Joint Bookrunner Numis

2 A Notice of General Meeting of the Company, to be held at a.m. on 16 March 2017 at the offices of Freshfields Bruckhaus Deringer LLP at 65 Fleet Street, London EC4Y 1HS, is set out at the end of this document. Whether or not you intend to be present at the General Meeting, if you hold your shares directly you are asked to complete and return the enclosed Form of Proxy in accordance with the instructions printed on it as soon as possible and, in any event, so as to be received by the Registrar, Capita Asset Services at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, by not later than a.m. on 14 March 2017 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting). As an alternative to completing and returning the printed Form of Proxy, Shareholders can also submit their proxy electronically by accessing the Registrar s website at To be valid, the electronic submission must be registered by not later than a.m. on 14 March 2017 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting). CREST members may also choose to utilise the CREST electronic proxy appointment service in accordance with the procedures set out in the Notice of General Meeting at the end of this document, as soon as possible and in any event no later than a.m. on 14 March 2017 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting). Completion and return of a Form of Proxy (or the electronic appointment of a proxy) will not preclude you from attending and voting in person at the General Meeting, should you so wish. The Shares are listed on the premium listing segment of the Official List maintained by the FCA and traded on the main market for listed securities of London Stock Exchange plc (the London Stock Exchange ). Application will be made to the UK Listing Authority and to the London Stock Exchange for the New Shares to be admitted to the premium listing segment of the Official List of the UK Listing Authority and to trading on the main market for listed securities of the London Stock Exchange, respectively. It is expected that Admission will become effective and that dealings on the London Stock Exchange in the New Shares (nil paid) will commence at 8.00 a.m. (London time) on 17 March Your attention is drawn to the letter of recommendation from the Chairman which is set out in Part I Letter from the Chairman of Laird PLC of this document. Your attention is also drawn to the section headed Risk Factors at the beginning of this document which sets out certain risks and other factors that should be considered by Shareholders when deciding on what action to take in relation to the Rights Issue, and by others when deciding whether or not to purchase Nil Paid Rights, Fully Paid Rights or New Shares. The Nil Paid Rights, the Fully Paid Rights and the New Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act ) or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from or in a transaction not subject to the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offer of the Nil Paid Rights, the Fully Paid Rights or the New Shares in the United States. The Nil Paid Rights, the Fully Paid Rights, the New Shares and the Provisional Allotment Letters have not been approved or disapproved by the United States Securities and Exchange Commission, any state s securities commission in the United States or any US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the Nil Paid Rights, the Fully Paid Rights or the New Shares or the accuracy or adequacy of this document. Any representation to the contrary is a criminal offence. The Nil Paid Rights, the Fully Paid Rights, the Provisional Allotment Letters and the New Shares will not be registered or qualified for distribution to the public under the securities laws of any Excluded Territory and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within any Excluded Territory or in any other jurisdictions where the extension and availability of the Rights Issue would breach any applicable law, except pursuant to an applicable exemption from, and in compliance with, any applicable securities laws. There will be no public offer in any of the Excluded Territories or in any other jurisdictions where the extension and availability of the Rights Issue would breach any applicable law. LR (9)(a) LR (9)(e) LR (9)(h) (iii) 4.7 (iii) 6.1 (iii) 6.2 LR (5) LR (2) 2

3 J.P. Morgan Securities plc (which conducts its UK investment banking services as J.P. Morgan Cazenove ) is authorised in the United Kingdom by the PRA and regulated in the United Kingdom by the FCA and the PRA. N M Rothschild & Sons Limited ( Rothschild ) and Numis Securities Limited ( Numis ) are each authorised and regulated in the United Kingdom by the FCA. J.P. Morgan Cazenove and Numis (together, the Underwriters ) and Rothschild are acting exclusively for Laird and are acting for no one else in connection with the Rights Issue and will not regard any other person as a client in relation to the Rights Issue and will not be responsible to anyone other than Laird for providing the protections afforded to their respective clients, nor for providing advice in connection with the Rights Issue or any other matter, transaction or arrangement referred to in this document. Apart from the responsibilities and liabilities, if any, which may be imposed on the Underwriters or Rothschild by the FSMA or the regulatory regime established thereunder, or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of the Underwriters or Rothschild, nor any of their respective affiliates, directors, officers, employees or advisers, accepts any responsibility whatsoever for, or makes any representation or warranty, express or implied, as to the contents of this document, including its accuracy, completeness or verification, or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Nil Paid Rights, the Fully Paid Rights, the New Shares or the Rights Issue. The Underwriters and Rothschild and their respective affiliates, directors, officers, employees and advisers accordingly disclaim to the fullest extent permitted by law any and all liability whatsoever, whether arising in tort, contract or otherwise, which they might otherwise have in respect of this document or any such statement. In making an investment decision, each investor must rely on their own examination, analysis and enquiry of the Company and the terms of the Rights Issue, including the merits and risks involved. The investors also acknowledge that: (i) they have not relied on the Underwriters or Rothschild or any person affiliated with the Underwriters or Rothschild in connection with any investigation of the accuracy of any information contained in this document or their investment decision; and (ii) they have relied only on the information contained in this document and that no person has been authorised to give any information or to make any representation concerning the Company or its subsidiaries or the Nil Paid Rights, the Fully Paid Rights or the New Shares (other than as contained in this document) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company, the Underwriters or Rothschild. Subject to the passing of the Resolution, it is expected that Provisional Allotment Letters will be dispatched to Qualifying Non-CREST Shareholders on 16 March 2017, and that Qualifying CREST Shareholders will receive a credit to their appropriate stock accounts in CREST in respect of the Nil Paid Rights to which they are entitled on 17 March The Nil Paid Rights so credited are expected to be enabled for settlement by Euroclear as soon as practicable after Admission. The Underwriters may, in accordance with applicable legal and regulatory provisions and subject to the Underwriting Agreement, engage in transactions in relation to the Nil Paid Rights, the Fully Paid Rights, the Shares and/or related instruments for their own account for the purpose of hedging their underwriting exposure or otherwise. Except as required by applicable law or regulation, the Underwriters do not propose to make any public disclosure in relation to such transactions. The latest time and date for acceptance and payment in full for the New Shares by holders of the Nil Paid Rights is expected to be a.m. on 3 April The procedures for delivery of the Nil Paid Rights, acceptance and payment are set out in Part III Terms and Conditions of the Rights Issue of this document and, for Qualifying Non-CREST Shareholders only, also in the Provisional Allotment Letter. Qualifying CREST Shareholders should refer to paragraph 2.5 of Part III Terms and Conditions of the Rights Issue of this document. This document does not constitute an offer of Nil Paid Rights, Fully Paid Rights or New Shares to any person with a registered address, or who is located, in the United States or the Excluded Territories or in any other jurisdiction in which such an offer or solicitation is unlawful. The Nil Paid Rights, the Fully Paid Rights, the New Shares and the Provisional Allotment Letters have not been and will not be registered or qualified for distribution to the public under the relevant laws of any state, province or territory of the United States or any Excluded Territory and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States or any Excluded Territory or in any other jurisdictions where the extension and availability of the Rights Issue would breach any applicable law, except pursuant to an applicable exemption. (iii)

4 The Underwriters may arrange for the offer of New Shares in the United States not taken up in the Rights Issue only to persons reasonably believed to be qualified institutional buyers ( QIBs ) within the meaning of Rule 144A under the Securities Act ( Rule 144A ) in reliance on an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The New Shares, the Nil Paid Rights and the Fully Paid Rights offered outside the United States are being offered in reliance on Regulation S under the Securities Act ( Regulation S ). Prospective investors are hereby notified that sellers of the Nil Paid Rights, the Fully Paid Rights or the New Shares may be relying on the exemption from registration provisions under Section 5 of the Securities Act, provided by Rule 144A thereunder. In addition, until 40 days after the commencement of the Rights Issue, an offer, sale or transfer of the Nil Paid Rights, the Fully Paid Rights, the Provisional Allotment Letters or the New Shares within the United States by a dealer (whether or not participating in the Rights Issue) may violate the registration requirements of the Securities Act. All Shareholders and any person (including, without limitation, a nominee or trustee) who has a contractual or legal obligation to forward this document or any Provisional Allotment Letter, if and when received, or other document to a jurisdiction outside the UK should read the information set out in paragraph 2.5 of Part III Terms and Conditions of the Rights Issue of this document. Notice to all investors Any reproduction or distribution of this document, in whole or in part, and any disclosure of its contents or use of any information contained in this document for any purpose other than considering an investment in the Nil Paid Rights, the Fully Paid Rights or the New Shares is prohibited. By accepting delivery of this document, each offeree of the Nil Paid Rights, the Fully Paid Rights and/or the New Shares agrees to the foregoing. The distribution of this document and/or the Provisional Allotment Letters and/or the transfer of the Nil Paid Rights, the Fully Paid Rights and/or the New Shares into jurisdictions other than the UK may be restricted by law. Persons into whose possession these documents come should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. In particular, such documents should not be distributed, forwarded to or transmitted in or into the United States, any of the Excluded Territories or in any other jurisdictions where the extension and availability of the Rights Issue would breach any applicable law. The Nil Paid Rights, the Fully Paid Rights, the New Shares and the Provisional Allotment Letters are not transferable, except in accordance with, and the distribution of this document is subject to, the restrictions set out in paragraph 2.5 of Part III Terms and Conditions of the Rights Issue of this document. No action has been taken by the Company or by the Underwriters that would permit an offer of the New Shares or rights thereto or possession or distribution of this document or any other offering or publicity material or the Provisional Allotment Letters, the Nil Paid Rights, or the Fully Paid Rights in any jurisdiction where action for that purpose is required, other than in the UK. No person has been authorised to give any information or make any representations other than those contained in this document and, if given or made, such information or representations must not be relied upon as having been authorised by the Company or by the Underwriters. Neither the delivery of this document nor any subscription or sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Group since the date of this document or that the information in this document is correct as at any time subsequent to its date. Unless explicitly incorporated by reference herein, the contents of the websites of the Group do not form part of this document. Capitalised terms have the meanings ascribed to them, and certain technical terms are explained, in Part XI Definitions of this document. 4

5 WHERE TO FIND HELP Part II Some Questions and Answers about the Rights Issue of this document answers some of the questions most often asked by shareholders about rights issues. If you have further questions, please call the Shareholder Helpline at Capita Asset Services on Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. Please note that, for legal reasons, the Shareholder Helpline is only able to provide information contained in this document and information relating to the Company s register of members and is unable to give advice on the merits of the Rights Issue. This document is dated 28 February

6 CONTENTS Summary... 7 Risk Factors Important Information Rights Issue Statistics Expected Timetable for the Rights Issue Directors, Company Secretary and Advisers Part I Letter from the Chairman of Laird PLC Part II Some Questions and Answers about the Rights Issue Part III Terms and Conditions of the Rights Issue Part IV Business Overview of the Group Part V Operating and Financial Review Part VI Financial Information of the Group Part VII Unaudited Pro Forma Financial Information Part VIII Taxation Part IX Additional Information Part X Documentation Incorporated by Reference Part XI Definitions and Glossary Notice of General Meeting

7 SUMMARY Summaries are made up of disclosure requirements known as Elements. These Elements are numbered in Sections A-E (A.1 E.7). This summary contains all the Elements required to be included in a summary for this type of security and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of not applicable. A.1 Warning SECTION A INTRODUCTION AND WARNINGS This summary should be read as an introduction to this document. Any decision to invest in the securities should be based on consideration of this document as a whole by the investor. Where a claim relating to the information contained in this document is brought before a court, the plaintiff investor might, under the national legislation of the Member States of the European Economic Area, have to bear the costs of translating this document before the legal proceedings are initiated. Civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of this document or it does not provide, when read together with the other parts of this document, key information in order to aid investors when considering whether to invest in the securities. A.2 Consent for intermediaries Not applicable. No consent has been given by the Company or any person responsible for drawing up this document to use this document for subsequent sale or placement of securities by financial intermediaries. B.1 Legal and commercial name SECTION B ISSUER Laird PLC (the Company and together with its subsidiary undertakings and, where the context requires, its associated undertakings Laird or the Group ). B.2 Domicile and legal form The Company is a public limited company incorporated and registered in England and Wales with registered number The principal legislation under which the Company operates is the Companies Act 2006 and the regulations made thereunder. B.3 Current operations and principal activities Laird PLC is a global technology company focused on providing systems, components and solutions that enable connectivity in mission-critical wireless applications and antenna systems and that protect electronics from electromagnetic interference ( EMI ) and heat. Laird s aim is to be a trusted partner to its customers by creating innovative customer solutions, providing high quality engineering and manufacturing processes and enabling accelerated new product launches for its customers by providing speed and access throughout the design process in which there are high levels of customer engagement. As at 31 December 2016, Laird had 9,836 employees in 53 locations covering 4 continents and 17 countries. The Group has 24 engineering and manufacturing sites in different locations around the world and 21 design centres. 7

8 Laird designs, manufactures and supplies products which are used in a wide range of applications, from smartphones, automotive and medical applications, to large scale installations for railways, ports, mines and military uses. The end markets which the Group currently targets are Connected Transport (representing 38% of revenue in 2016), Telecom/Computing (representing 22% of revenue in 2016), Mobile Devices (representing 15% of revenue in 2016), Connected Industry (representing 10% of revenue in 2016) and Connected Medical (representing 4% of revenue in 2016), with recent entry into the Connected Car end market. The Group s customers primarily include large North American and European original equipment manufacturers ( OEMs ) across these end markets. Historically, Laird s operations have operated as two divisions (i) the Wireless Systems division, which designs, manufactures and supplies a broad range of solutions that enable wireless communication such as antennas, embedded wireless modules, telematics products, machine-to-machine ( M2M ) devices, wireless automation and control systems, along with software solutions to support asset management systems in industrial applications, and (ii) the Performance Materials division, which designs and supplies a full range of EMI shielding materials, thermal management solutions and signal integrity products. Effective from 1 January 2017, the Group has begun operating in a three divisional structure, comprising: the new Connected Vehicle Solutions ( CVS ) division, the new Wireless and Thermal Systems ( WTS ) division and the new Performance Materials ( PM ) division. Each of these divisions now has its own executive who is also a member of the Group executive committee. For 2017 and onwards, Laird intends to report on the three new divisions as individual financial segments. B.4a Significant recent trends affecting the Group and the industry in which it operates While 2014 and 2015 were positive years for Laird, supported by strong growth in the global smartphone and wireless technology markets as well as the acquisition of a 51% interest in Model Solution Co., Ltd ( Model Solution ) in 2014 and the acquisition of LS Research, LLC ( LS Research ) in 2015, the Group s performance in 2016 was disappointing due to a combination of pricing and margin pressures from a key customer, reduced volumes due to a customer s later than expected ramp-up on smartphones, challenging trading conditions in the US rail freight markets and higher than expected investment related to the acquisition of Novero GmbH ( Novero ) in January Despite the challenging conditions leading to a disappointing performance in 2016, the Directors believe that there are a number of factors that leave Laird well placed in These factors include the completed integration of Novero, which the Directors expect to deliver modest profitability in 2017, the previously announced operational improvement programme and associated annualised cost-savings, and the actions that have been taken to gradually improve operational efficiency and profitabililty in the Performance Materials division, specifically within the precision metals business. The Directors believe that the Enterprise Internet of Things ( EIoT ) is emerging as the next technology mega trend that will have an impact on every market and business. As everyday devices become internet-enabled, new opportunities will emerge, offering new ways in which these items can be used and increasing demand for the Group s products. Smartphone technology has led to the rise of the tablet and is now leading the wearables revolution. Whilst these types of consumer devices have low security and non-critical reliability, the (EIoT) solutions, such as medical and industrial applications, have much more stringent security, high reliability and large-scale provisioning requirements. EIoT markets are expected to grow to approximately double the size of consumer markets, in the next decade, as enterprises begin to realise additional value through a connected infrastructure. 8

9 Within the automotive space, the emergence of 4G/LTE and the evolution to 5G are driving automotive OEMs to upgrade their antennas to include multiple input, multiple output ( MIMO ) technology. The healthcare industry is experiencing a transformation which is driven by the requirement to find ways to improve patient care and safety through improvements in workflow as well as by leveraging data from multiple sources, which is driving a need for wireless connectivity in the medical market. The Directors believe that the need for wireless connectivity and increasing functionality is the driving force behind connecting the home, automobile, outside environment and other networks together and that the demand for more powerful devices and ubiquitous connectivity within the electronics environment creates opportunities to underpin a return to long-term growth of the business. B.5 Group structure Laird PLC is the ultimate parent company of the Group, which comprises the Company and its subsidiary undertakings. B.6 Major Shareholders Insofar as is known to the Company, the name of each person who, directly or indirectly, has an interest in 3.0% or more of the Company s issued share capital, and the amount of such person s interest, as at 27 February 2017 (being the latest practicable date prior to the publication of this document) are as follows: Shares Name No. % Artemis Investment Management Limited... 48,827, Mondrian Investment Partners Limited... 14,038, J O Hambro Capital Management Limited... 13,611, Insofar as is known to the Company, the Company is not directly or indirectly owned or controlled by another corporation, any foreign government, or any other natural or legal person, severally or jointly. None of the major Shareholders referred to above has different voting rights from other Shareholders. B.7 Historical financial information of Laird The tables below set out the Group s summary financial information for the periods indicated reported in accordance with IFRS as adopted by the EU. Except as otherwise indicated, the consolidated summary financial information for the Group for the year ended 31 December 2016 has been extracted without material adjustment from the Laird Final Results for the year ended 31 December 2016 and the consolidated summary financial information for the years ended 31 December 2014 and 2015 has been extracted without material adjustment from the Laird Annual Report and Accounts for the years ended 31 December 2014 and 2015, respectively. The summary historical financial information presented below reflects the Group s audited financial information inclusive of acquisition and amortisation expenses and other non-recurring items over the periods described. 9

10 Summary consolidated income statement ( millions, unless otherwise indicated) Revenue Performance Materials Wireless Systems Operating profit before impairment of goodwill, amortisation of acquired intangible assets and exceptional items Impairment of goodwill... (155.5) Amortisation of acquired intangible assets... (17.2) (13.2) (13.3) Exceptional items (45.0) 0.7 Operating (loss)/profit... (109.6) Finance income Finance costs... (11.1) (8.4) (8.5) Financial instruments fair value adjustments... (1.9) 0.5 (2.5) Other net finance income pension (Loss)/profit before tax... (122.3) Taxation (23.0) 2.1 (Loss)/profit for the year... (110.8) (7.6) 50.2 Attributable to: Equity shareholders of the parent company... (111.7) (8.3) 50.1 Non-controlling interests (110.8) (7.6) 50.2 Basic earnings per share on (loss) for the year... (41.3)p (3.1)p 18.8p Diluted earnings per share on (loss) for the year. (41.3)p (3.1)p 18.8p Underlying profit before tax (1) Underlying basic earnings per share (2) p 19.1p (1) The Group defines underlying profit before tax as (loss)/profit before tax, adding back financial instruments fair value of adjustments, impairment of goodwill, amortisation of acquired intangible assets and exceptional items. (2) Underlying basic earnings per share is calculated as underlying earnings attributable to shareholders of the parent divided by the weighted average number of shares. Underlying earnings attributable to the parent is defined (loss)/profit for the year attributable to equity shareholders of the parent company, adding back financial instruments fair value of adjustments, impairment of goodwill, amortisation of acquired intangible assets less amortisation of acquired intangible assets attributable to non-controlling interests, exceptional items, tax on exceptional items, deferred tax on goodwill, acquired intangible assets and US capitalised development costs, 10

11 Summary consolidated statement of financial position As at 31 December (1)(2) (1) (reported) (restated unaudited) ( millions) (reported) (restated, unaudited) Non-current assets Current assets Total assets... 1, Current liabilities... (255.1) (180.5) (205.9) (117.3) (140.9) Non-current liabilities... (545.2) (397.6) (368.0) (367.7) (344.1) Total liabilities... (800.3) (578.1) (573.9) (485.0) (485.0) Net assets (1) The consolidated statement of financial position for 2015 and 2014 has been restated to reclassify all income tax provisions from non-current liabilities to current liabilities. See Note 2 to the Laird Final Results for the year ended 31 December Restated figures have been extracted without material adjustment from the Laird Final Results for the year ended 31 December (2) The consolidated statement of financial position for 2015 has been restated for changes to the fair value of identifiable assets and liabilities of LS Research acquired. See Note 17 to the Laird Final Results for the year ended 31 December Restated figured have been extracted without material adjustment from the Laird Final Results for the year ended 31 December Summary consolidated cash flow statement ( millions) Net cash flows from operating activities Net cash flows from investing activities... (104.2) (66.0) (52.5) Net cash flows from financing activities (15.5) 2.9 Effects of movements in foreign exchange rates (Decrease)/increase in cash and cash equivalents for the year... (4.3) Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December Certain significant changes to the Group s financial condition and results of operations occurred during years ended 31 December 2014, 2015 and These changes are set out below. Revenue increased by 65.5 million, or 11.6%, from million in 2014 to million in This was primarily due to strong performance in the automotive segment, the acquisition of LS Research and the impact of foreign exchange movements. Revenue increased by million, or 27.2%, to million in This was primarily due to foreign currency movements, in particular the value of pounds sterling compared to the US dollar, as well as contributions from the acquisitions of LS Research and Novero and strong performance in most of the business units within the Wireless Systems division. However, excluding the impact of foreign exchange movements, revenue was negatively impacted by pricing pressures from a key customer, reduced volumes due to a customer s later than expected ramp-up cycle on smartphones and an unexpected and substantial downturn in sales in the US rail freight markets. 11

12 Operating profit decreased by 36.1 million, or 61.6%, from 58.6 million in 2014 to 22.5 million in This was primarily due to the exceptional charge of 45.0 million in 2015, compared to an exceptional credit of 0.7 million in 2014, which was partly offset by the increase in revenue over the period. The exceptional items in 2015 included 30.9 million in restructuring costs and 8.2 million of asset write downs. Operating profit decreased by million, to a loss of million in 2016, primarily due to an impairment to goodwill of million as well as pricing and margin pressures from a key customer, reduced volumes due to a customer s later than expected ramp-up on smartphones and a downturn in sales in the US rail freight markets as well as losses and increased costs associated with the turnaround of the Novero business. Profit for the year decreased by 57.8 million, from a profit of 50.2 million in 2014 to a loss of 7.6 million in This was primarily due to the reasons set out above and a tax charge of 23 million in 2015 compared to a credit of 2.1 million in Loss for the year increased by million, to a loss of million in 2016, primarily due to the reasons set out above. On 25 January 2017, Laird and JPMorgan Chase Bank, N.A., London Branch, among others, entered into a 20 million bilateral facility agreement, thereby increasing the Group s available headroom. Otherwise there has been no significant change in the financial condition or results of operations since 31 December 2016, the date to which the last audited consolidated financial information of Laird was prepared. B.8 Pro forma financial information Selected key unaudited pro forma financial information is set out below, extracted without material adjustment from Part VII Unaudited Pro Forma Financial Information of this document, to illustrate the impact of the Rights Issue on the net assets of the Group as at 31 December 2016 as if it had taken place at that date. No adjustment has been made to reflect Group trading since 31 December The unaudited pro forma net assets statement has been prepared for illustrative purposes only and, because of its nature, addresses a hypothetical situation and does not, therefore, represent Laird s actual financial position or results. Selected unaudited pro forma net assets statement Adjustments As at 31 December 2016 (Note 1) Proceeds of Rights Issue (Note 2) Use of proceeds (Note 3) ( millions) Unaudited pro forma as at 31 December 2016 Non-current assets Current assets (175.0) Total assets... 1, (175.0) 1,152.8 Current liabilities Non-current liabilities Total liabilities Net assets Notes: 1. The net assets of the Group as at 31 December 2016 have been extracted, without material adjustment, from the Group s audited consolidated financial statements incorporated by reference from the Laird Final Results as described in Part X Documentation Incorporated by Reference of this document. 2. This adjustment reflects the net proceeds of the Rights Issue receivable by the Company of 175 million (being gross proceeds of approximately 185 million less estimated fees relating to the Rights Issue of approximately 10 million), as detailed in the section headed Rights Issue Statistics of this document. 3. This adjustment reflects the use of net proceeds of the Rights Issue: to reduce borrowings under its revolving credit facilities, as detailed in Part I Letter from the Chairman of Laird PLC of this document. 12

13 B.9 Profit forecast or estimate Not applicable. There is no profit forecast or profit estimate. B.10 Qualifications in the audit report on the historical financial information Not applicable. There are no qualifications in the audit reports in respect of the consolidated annual accounts for the years ended 31 December 2014, 2015 and B.11 Insufficient working capital Not applicable. The Company is of the opinion that, taking into account the net proceeds of the Rights Issue, the Group has sufficient working capital for its present requirements, that is, for at least 12 months from the date of publication of this document. C.1 Type and class of securities C.2 Currency SECTION C SECURITIES Pursuant to the Rights Issue, the Company will issue 217,156,300 new ordinary shares of pence each in the capital of the Company (the New Shares ). Each New Share is expected to be issued at a premium of pence to its nominal value of pence. When admitted to trading, the New Shares will be registered with ISIN number GB00B1VNST91 and SEDOL number B1VNST9. The ISIN number for the Nil Paid Rights is GB00BDCJPH73 and the ISIN number for the Fully Paid Rights is GB00BDCJPJ97. United Kingdom pounds sterling. C.3 Issued share capital On 27 February 2017 (being the last practicable date prior to the publication of this document), the Company had 271,445,376 Shares of pence each (fully paid) and the nominal share capital of the Company amounted to 76,344,012. C.4 Rights attaching to the Shares The New Shares will, when issued and fully paid, rank equally in all respects with the Existing Shares, including the right to receive all dividends and other distributions made, paid or declared after the date of issue of the New Shares. C.5 Restrictions on transfer C.6 Admission There are no restrictions on the free transferability of the Shares. Applications will be made to the FCA and to the London Stock Exchange for the New Shares to be admitted to the premium listing segment of the Official List and to trading on the London Stock Exchange s main market for listed securities respectively. It is expected that Admission of the New Shares (nil paid) will become effective on 17 March 2017 and that dealings in New Shares will commence, nil paid, as soon as practicable after 8.00 a.m. on that date. C.7 Dividend policy In light of the proposed Rights Issue, the Board intends that no final dividend will be paid in respect of the year to 31 December The total dividend in respect of the 2016 financial year will therefore be the interim dividend of 4.53p (2015: 13.0p). The Board understands the importance of optimising value for shareholders and believes in balancing returns to shareholders with investment in the business to support future growth. To this end, the Board intends to resume dividends in 2017 based on a dividend per share that is covered three times by underlying basic earnings per share, with the interim dividend equal to approximately one third of the full year dividend. Thereafter, consistent with the anticipated improvement in earnings and of cash generation in 2018 and beyond, and subject to prevailing market conditions, the Board expects to reduce dividend cover towards two times underlying basic earnings per share over the medium term. 13

14 SECTION D RISKS D.1 Key information on the key risks specific to the Group If the Rights Issue is not successfully completed, there is a risk that Laird may experience a liquidity shortfall of up to 13.5 million in May 2017 and Laird is highly likely to be in default under its Existing Financing Arrangements on 30 June 2017, the next covenant testing date. In the event of such a default, the Lenders will be entitled to demand immediate payment of amounts then due under such facilities, currently estimated to be up to approximately 410 million (based on 31 December 2016 drawings), subject to amounts then drawn and exchange and interest rates, and the Group would be unlikely to obtain the funds necessary to pay such amounts at that time. Furthermore, even if the liquidity shortfall in May 2017 and default at the 30 June 2017 testing date were avoided, if the Rights Issue is not successfully completed, it is highly likely that Laird will not have sufficient liquidity/cash headroom to operate the Group from the third quarter of 2017, with a potential liquidity shortfall of up to 50 million before the end of the next 12 months. As a result, if the Rights Issue does not proceed to completion and then the Group is unable to avoid a breach of its financial covenants and a liquidity shortfall by renegotiating the terms of its Existing Financing Arrangements, securing alternative long-term financing, cutting costs and capital investment throughout the Group, or disposing of certain of the Group s assets, the Company would be at risk of entering into administration or receivership from the 30 June 2017 covenant testing date and thereafter, at which point Shareholders would lose all or part of the value of their investment in the Company. 34% of the Group s total revenue in 2016 (35% in 2015) was represented by sales to five customers (including revenue invoiced indirectly through their suppliers) with one customer comprising 13% of the Group s total 2016 revenue (13% in 2015). As the Group does not have long-term purchase commitments from these customers they could cease purchasing the Group s products, reduce their purchase levels or insist on reduced pricing structures on short notice. The Group s future success is dependent on the level of demand for its products from its customers, which in turn is affected by the markets in which the Group s customers operate, including telecommunications and computing, mobile devices, infrastructure and transport, industrial services and healthcare services. These markets are affected by factors such as the overall saturation and maturity of the market as well as economic climate and consumer confidence both within the end markets and generally. The Group operates in markets which are characterised by a high level of competition and by changing industry dynamics such as the increased competition from vertically integrated companies and increasing commoditisation of electronics hardware components, which are driven by rapidly evolving technology, industry standards, product offerings and customer demand. D.3 Key information on the key risks specific to the Shares, the Nil Paid Rights or the Fully Paid Rights The market value of the Shares may fluctuate significantly as a result of factors beyond the Group s control and may not always reflect the operating results or prospects of the Group. The market price for Shares may decline below the Issue Price and Shareholders may not be able to sell Shares at a favourable price after the Rights Issue. The implementation of the Rights Issue will result in the dilution of ownership of Existing Shares for Qualifying Shareholders who do not take up their rights in full. 14

15 E.1 Net proceeds and costs SECTION E OFFER The net proceeds of the Rights Issue (assuming take-up in full of all New Shares) are expected to be approximately 175 million (net of expenses). The total costs, charges and expenses payable by the Company in connection with the Rights Issue are estimated to be approximately 10 million (inclusive of VAT). No expenses will be charged by the Company to the acquirers of the New Shares. E.2a Reasons for the Rights Issue and use of proceeds Reasons for the Rights Issue On 2 December 2016, in order to proactively address the Group s financial position and to significantly reduce its structural indebtedness, the Board announced it was targeting a capital structure of between 1.0x to 2.0x net debt to Covenant EBITDA in the medium term and indicated that it intended to undertake a Rights Issue, underwritten on a standby basis by J.P. Morgan Cazenove in the first quarter of 2017 at the time of publication of the full year financial results. The Board also announced that it was in discussion with the Lenders under its Existing Financing Arrangements. Whilst Laird did not believe that it would breach any of the covenants under those arrangements at 31 December 2016 (and in fact has not breached them), it successfully obtained amendments to the Existing Financing Arrangements to ensure that was the case. The leverage covenants will be tested again at 30 June 2017 and thereafter at their original levels. The net proceeds from the Rights Issue will reduce borrowings under its revolving credit facilities and provide sufficient covenant headroom going forward such that the Company will not need to seek further amendments to the Existing Financing Arrangements for subsequent testing dates. In addition, the benefits of a strengthened financial position for Laird are that it: (i) (ii) enables the continued investment in 2017 to deliver the previously announced operational improvement programme and the associated benefits of annualised savings of at least 15 million (US$20 million) from 2018 with 12 million (US$15 million) expected in 2017, according to unaudited Company estimates; enables the continued investment in opportunities for future growth, in particular in relation to the CVS division which was formed at the beginning of 2017 and in which the Group is targeting revenue in excess of 405 million (US$500 million) by 2020, with improving profitability, according to unaudited Company estimates; (iii) provides the financial strength required to demonstrate Laird s ability to support customers; and (iv) provides a strong foundation from which to assess the optimal route to maximise shareholder value in Performance Materials and particularly precision metals. Use of proceeds The Rights Issue is expected to raise approximately 185 million in gross proceeds and approximately 175 million of net proceeds, which the Group expects to use to reduce borrowings under its revolving credit facilities. E.3 Terms and conditions of the Rights Issue The Company proposes to issue 217,156,300 New Shares in connection with the Rights Issue. Pursuant to the Rights Issue, New Shares will be offered by way of rights to Qualifying Shareholders on the terms and conditions set out in this document and, in the case of Qualifying Non-CREST Shareholders, only the Provisional Allotment Letter. The offer is to be made at 85 pence per New Share, payable in full on acceptance by no later than a.m. on 3 April The Rights Issue is expected to raise approximately 175 million, net of expenses. The Issue Price represents a 37.0% discount to the theoretical ex-rights price of pence per Share based on the closing middlemarket price of pence per Share on 27 February 2017 (being the last Business Day before the announcement of the terms of the Rights Issue). 15

16 The Rights Issue will be made on the basis of 4 New Shares at 85 pence per New Share for every 5 Existing Shares held on the Record Date (and so in proportion for any other number of Existing Shares then held) and otherwise on the terms and conditions as set out in this document and, in the case of Qualifying Non CREST Shareholders, the Provisional Allotment Letters. Entitlements to New Shares will be rounded down to the nearest whole number (or to zero in the case of shareholders holding fewer than 2 Existing Shares on the Record Date) and fractions of Shares will not be allotted to Shareholders but will be aggregated and issued into the market for the benefit of the Company. Holdings of Existing Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Rights Issue. The Rights Issue is fully underwritten by the Underwriters pursuant and subject to the Underwriting Agreement. The Rights Issue will result in 217,156,300 New Shares being issued (representing approximately 80.0% of the existing issued share capital and 44.4% of the enlarged issued share capital immediately following completion of the Rights Issue). The Rights Issue is conditional, among other things, upon: (i) (ii) (iii) the Underwriting Agreement having become unconditional in all respects save for the condition relating to Admission; Admission becoming effective by not later than 8.00 a.m. on 17 March 2017 (or such later time and date as the parties to the Underwriting Agreement may agree); and the passing of the Resolution. The New Shares, when issued and fully paid, will rank pari passu in all respects with the Existing Shares, including the right to receive dividends or distributions made, paid or declared after the date of issue of the New Shares. Application will be made to the FCA and to the London Stock Exchange for the New Shares to be admitted to the premium listing segment of the Official List and to trading on the London Stock Exchange. It is expected that Admission will occur and that dealings in the New Shares (nil paid) on the London Stock Exchange will commence at 8.00 a.m. on 17 March E.4 Material interests Not applicable. There are no interests, including conflicting interests, which are material to the Rights Issue, other than those disclosed in B.6 above. E.5 Selling Shareholder/Lock-up agreements E.6 Dilution Not applicable. The Rights Issue comprises an offer of New Shares to be issued by the Company. Pursuant to the Underwriting Agreement, the Company has agreed, subject to customary exceptions, not to issue any Shares or rights to subscribe for or acquire Shares during the period of 180 days from Admission, without the prior written consent of the Underwriters. Shareholders who do not take up any entitlements to New Shares will have their proportionate shareholdings in the Company diluted by approximately 44.44% as a consequence of the Rights Issue. E.7 Expenses charged to the investor Shareholders will not be charged expenses by the Company in respect of the Rights Issue, except in the following circumstance. Any Qualifying Non-CREST Shareholder who is an individual whose registered address is in the United Kingdom or in any other jurisdiction in the EEA may elect to sell all of their Nil Paid Rights, or effect a Cashless Take-up, using the Special Dealing Service. Capita Assets Services will charge a commission of 0.75% of the gross proceeds of sale of the Nil Paid Rights which are the subject of the sale, subject to a minimum of per holding. 16

17 RISK FACTORS The Rights Issue and any investment in the New Shares, the Nil Paid Rights and/or the Fully Paid Rights are subject to a number of risks. Accordingly, Shareholders and prospective investors should carefully consider the factors and risks associated with any investment in the New Shares, the Nil Paid Rights and/or the Fully Paid Rights, the Group s business and the industry in which it operates, together with all other information contained in this document and all of the information incorporated by reference into this document, including, in particular, the risk factors described below, and their personal circumstances prior to making any investment decision. Some of the following factors relate principally to the Group s businesses. Other factors relate principally to the Rights Issue and an investment in the New Shares, the Nil Paid Rights and/or the Fully Paid Rights. The Group s businesses, operating results, financial condition and prospects could be materially and adversely affected by any of the risks described below. In such case, the market price of the Nil Paid Rights, the Fully Paid Rights and/or New Shares may decline and investors may lose all or part of their investment. Prospective investors should note that the risks relating to the Group, its industry and the New Shares, the Nil Paid Rights and/or the Fully Paid Rights summarised in the section of this document headed Summary are the risks that the Directors believe to be the most essential to an assessment by a prospective investor of whether to consider an investment in the New Shares, the Nil Paid Rights and/ or the Fully Paid Rights. However, as the risks which the Group faces relate to events and depend on circumstances that may or may not occur in the future, prospective investors should consider not only the information on the key risks summarised in the section of this document headed Summary but also, among other things, the risks and uncertainties described below. The following is not an exhaustive list or explanation of all risks which investors may face when making an investment in the New Shares, the Nil Paid Rights and/or the Fully Paid Rights and should be used as guidance only. Additional risks and uncertainties relating to the Group that are not currently known to the Group, or that it currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Group s business, prospects, operating results and financial position and, if any such risk should occur, the price of the New Shares, the Nil Paid Rights and/or the Fully Paid Rights may decline and investors could lose all or part of their investment. Investors should consider carefully whether an investment in the New Shares, the Nil Paid Rights and/or the Fully Paid Rights is suitable for them in the light of the information in this document and their personal circumstances. Risks relating to the business of the Group (i) 4 If the Rights Issue is not successfully completed, absent alternative measures, the Group may default under its Existing Finance Arrangements and may also experience a liquidity shortfall, which could result in Shareholders losing all or part of the value of their investment in the Company If the Rights Issue is not successfully completed, absent successful implementation of the measures described below, there is a risk that Laird may experience a liquidity shortfall of up to 13.5 million in May 2017 and Laird is highly likely to be in default under its Existing Financing Arrangements on 30 June 2017, the next covenant testing date. In the event of such a default, the Lenders will be entitled to demand immediate payment of amounts then due under such facilities, currently estimated to be up to approximately 410 million (based on 31 December 2016 drawings), subject to amounts then drawn and exchange and interest rates, and the Group would be unlikely to obtain the funds necessary to repay such amounts at that time. Furthermore, even if the liquidity shortfall in May 2017 and default at the 30 June 2017 testing date were avoided, if the Rights Issue is not successfully completed, it is highly likely that Laird will not have sufficient liquidity/cash headroom to operate the Group from the third quarter of 2017, with a potential liquidity shortfall of up to 50 million before the end of the next 12 months. If the Rights Issue is not successfully completed, the Group would put in place an action plan to avoid the initial liquidity shortfall, covenant default and ongoing liquidity shortfall, which would first involve attempting to renegotiate the terms of the Existing Financing Arrangements to secure further amendments of the financial covenants and increases to the amounts available under the Existing Financing Arrangements. The Directors believe that such amendments would only be agreed to by the Lenders, if at all, at a significant cost to the Group in the form of additional fees payable to the Lenders, increased coupon payments and/or additional restrictions on, or commitments to engage in, corporate 17

18 actions (e.g. acquisitions and disposals), each of which would adversely affect or delay implementation of the Group s strategies. In addition, in the case of the Group s revolving and Schuldschein facilities, failure by one relevant Lender to agree further amendments could result in the non-consenting Lender accelerating the amounts owed to it. In the case of the Group s US private placement notes ( US PP Notes ), failure by the holders of a majority of the outstanding principal amount to agree further amendments could result in all obligations under the US PP Notes, plus a make-whole amount, becoming immediately due and payable. Furthermore, the Existing Finance Arrangements are subject to cross-default provisions across all facilities which are likely to be triggered in such circumstances. If the relevant Lenders were not to agree to commercially acceptable amendments of the Group s financial covenants and increases to the amounts available under the Existing Financing Arrangements, the Group would then seek alternative long-term committed financing arrangements to replace or refinance the amounts outstanding under those arrangements including, in the case of the US PP Notes, the make-whole amount. The Directors have not had any discussions with potential lenders about such arrangements and they believe that the terms of such new arrangements, if available at all, would be likely to be significantly more expensive and onerous than those which apply under the Existing Financing Arrangements. The Company could also seek other forms of funding, such as a new equity restructuring, which may result in a dilution of the equity interests of Shareholders in the Company immediately prior to any further issue of Shares. Whilst simultaneously seeking amendments to the Existing Financing Arrangements and/or seeking alternative financing arrangements, the Group would institute Group-wide cost-saving initiatives by reducing capital and headcount investments and tightly managing discretionary spending. Such costsaving initiatives, in the absence of other mitigating actions, would, however, only provide a short-term solution to avoid the initial liquidity shortfall in May 2017 and preserve cash headroom under the Group s financial covenants, and would likely not provide sufficient liquidity/cash headroom to operate the Group during the third quarter of In addition to cost-saving initiatives and to provide additional cash headroom, the Group may take action to effect disposals of assets, such as the disposal of one or more of the Group s businesses to facilitate a reduction of the Group s outstanding indebtedness. The Directors believe they may be able to secure a disposal of assets in an acceptable timeframe, however there can be no guarantee that the Directors would be able to dispose of assets at a price which they believe is reflective of the full value of the assets being disposed and the Existing Financing Arrangements (and possibly any new financing arrangements) restrict the Group s ability to make disposals without the consent of the relevant Lenders, which could be withheld. While disposals of assets would likely provide the Group with enough cash headroom to enable it to avoid a breach of its financial covenants at the testing date of 30 June 2017 and sufficient liquidity to meet the Group s present requirements in order to operate the Group throughout 2017, such measures would restrict the Group s future growth opportunities and would likely impact the Group s ability to maintain or improve its competitive positioning. As a result, if the Rights Issue is not successfully completed and the Group is unable to avoid a breach of its financial covenants and a liquidity shortfall by renegotiating the terms of its Existing Financing Arrangements, securing alternative long-term financing, cutting costs and capital investment throughout the Group, or disposing of certain of the Group s assets before a liquidity shortfall occurs or a default occurs at the 30 June 2017 testing date, the Company would be likely to enter into administration or receivership shortly thereafter, at which point Shareholders would lose all or part of the value of their investment in the Company. The Group is dependent on a small number of large global customers with whom it does not have any contractual guarantees for a significant portion of its sales and a decrease in or the loss of business from one or more of these customers or increased pricing pressure from one or more of these customers would have a material adverse effect on the Group s business, results of operations and financial condition 34% of the Group s total revenue in 2016 (35% in 2015) was represented by sales to five customers (including revenue invoiced indirectly through their suppliers), with one customer comprising 13% of the Group s total 2016 revenue (17% in 2015). As the Group does not have long-term purchase commitments from these customers, as described more fully below in The Group s customers in certain business units within its Performance Materials division typically do not commit to long-term purchase contracts, 18

19 which results in low visibility on future orders in those business units, they could cease purchasing the Group s products, reduce their purchase levels or insist on reduced pricing structures on short notice. The Group s pricing and marketing strategies must therefore be responsive to the demands of these major customers, who may exert considerable pricing pressure or seek other concessions, including, for example, rebates, long payment terms, upside production flexibility, unfavourable product risk allocation and restrictive compliance clauses, in return for their continued or increased business. The loss of a major customer, in particular the Group s largest customer, a significant reduction in purchase orders from a major customer or a reduction in prices due to excessive pricing pressure would have a material adverse effect on the Group s business, financial condition and results of operations. In addition, the Group works in close co-operation with certain of its customers in developing new products and on product innovation generally, and some of these customers require the Group to site or place a premium on the Group siting its manufacturing plants in close proximity to theirs or purchase specialised manufacturing equipment for production of a component or product. The loss of a major customer or significant reductions in order volume from a major customer could result in a loss of the value of the investment in that plant, as well as result in costs being incurred in relation to the decommissioning of certain of the Group s premises, plant or equipment and inventory losses, which would have a material adverse effect on the Group s business, financial condition and results of operations. The Group s customers in certain business units within its Performance Materials division typically do not commit to long-term purchase contracts, which results in low visibility on future orders in those business units As is typical in the industry, the Group does not have a long-term order book and regularly experiences short lead times on many of its customer orders, particularly in certain business units within the Performance Materials division, which comprised 53% of the Group s revenue in Sales to the Group s customers in the Performance Materials division are typically made through shortterm purchase orders and often these customers do not commit to firm purchase schedules in advance. The timing and placing of these orders and the amounts of these orders are at the customers discretion and customers may change order quantities or delay order deliveries with little lead time or advance notice. In the past, the Group has experienced both increases and decreases in orders within the same quarter and with limited advance notice. The volume and timing of sales may vary due to, for example, consumer demand, economic conditions and competitive pricing. Certain businesses in the Performance Materials division must thus plan the manufacturing of their products in advance of receiving firm purchase orders. These businesses do this based on an analysis of the customers end product market forecasts and indicative production share allocations through framework agreements, past orders and some advance orders, as well as contractual commitments to maintain capacity levels. However, as these are not binding purchase commitments, it can be difficult to schedule production and manage inventory. There can be no assurance that the Group will be able to completely offset an unexpected reduction in orders through operational cost-reduction and costsavings initiatives, and a significant reduction in orders could have a material adverse effect on the Group s business, financial condition and results of operations. The Group s future success is dependent on the level of demand for its products from its customers, which in turn is affected by the end markets in which the Group s customers operate, including telecommunications and computing, mobile devices, infrastructure and transport, industrial services and healthcare services The markets in which the Group s customers operate are affected by factors such as the overall saturation and maturity of the market as well as economic climate and consumer confidence both within the end markets and generally. Certain of the markets in which the Group s customers operate, in particular the markets for consumer devices, are highly saturated, maturing markets characterised by intense competition and consumer demand driven by technological innovation and pricing. As a result, the Group s customers may experience reduced demand for their products if they are unable to release technologically innovative products at price points attractive enough to convince existing consumers to purchase new devices, which in turn can cause customers to apply pressure to the Group s prices and reduce the volume of orders, which could have a material adverse effect on the Group s business, financial condition and results of operations. 19

20 In addition, macroeconomic or political events may have an impact on the conditions of the markets of the Group s customers, which in turn can have an impact on the demand for the Group s products. For example, during a general macroeconomic slowing or downturn, customers may cancel, reduce or postpone anticipated orders. A downturn may also cause customers and competitors to apply pressure to prices and this pressure can lead to lasting changes in terms of pricing policies, delivery capabilities and market expectations. An extended period of economic downturn could lead to some or all of these consequences, which in turn could have a material adverse impact on the results of operations and business of the Group. The Group may be adversely impacted by a move towards protectionist international trade policies Recent political events in the United States, Europe and elsewhere have signalled increasing support for a move toward protectionist international trade policies such as the abandonment by the United States of its participation in the Trans-Pacific Partnership ( TPP ). The Group s customers, many of whom are international businesses, may be adversely impacted if protectionist international trade policies are introduced, including increased tariffs on exports and imports in the countries where the Group or its customers have significant operations or through the weakening of existing international trade agreements such as the North American Free Trade Agreement ( NAFTA ). This in turn may result in reduced demand for, or increased pricing pressure on, the Group s products, which may have a materially adverse effect on the Group s business, financial condition and results of operation. Moreover, restrictions on or rising costs of global free trade may require the Group to relocate manufacturing activities, which could entail significant costs and could have a material adverse effect on the Group s business, financial condition and results of operations in the short-term. The Group s markets are highly competitive and if the Group is unable to anticipate and keep pace with rapidly evolving market requirements and technology trends by developing new or enhanced products and services that achieve market acceptance, its business performance and operating results could be materially adversely affected The Group operates in markets which are characterised by a high level of competition and by changing industry dynamics, such as the increased competition from vertically integrated companies and increasing commoditisation of electronics hardware components, which are driven by rapidly evolving technology, industry standards, product offerings and customer demand. The Group will be unable to compete successfully if it is unable to anticipate these rapid changes and develop, introduce and market commercially competitive and innovative products in a timely manner. The Group invests a substantial amount in research and development in order to remain competitive, and if the Group is unable to continue to develop differentiated products, it may not have a competitive advantage and may increasingly have to compete with other suppliers based on price, which may have a materially adverse effect on the Group s profitability. In addition, investments in research and development carry the risks associated with any new product or service development effort, including cost overruns, delays in delivery or a failure to achieve market acceptance, and it may take longer to generate revenue, or the Group may generate less revenue than anticipated from newly developed or enhanced products or services. Certain of the Group s competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, to devote greater resources than the Group to the development, promotion and sale of new products or to better withstand price pressure from larger customers or due to rising costs of labour or raw materials. There can be no assurance that in the future the Group will be able to compete successfully against its current or future competitors or that the competitive pressures it faces will not result in reduced revenue, profitability or market share. Any reduction in the Group s revenue or market share due to increased competition could have a material adverse effect on the Group s business, financial condition and results of operations. Actual, possible or perceived defects, failures or quality issues associated with the Group s products could lead to product recalls and litigation, including product liability claims, or negative publicity that could materially adversely affect the Group s reputation, business, financial condition and results of operations The Group s products are either whole system solutions or component parts of complex systems and as such the products including the Group s components or the Group s components themselves have contained and may in the future contain design or manufacturing defects or errors, which may subject 20

21 the Group to liability claims relating to its products. The Group insures, where possible, its exposure to product liability claims, though it typically self-insures against the cost of product failure recalls as management believes that currently the cost of obtaining this specialist insurance line typically outweighs the benefits of obtaining cover in most jurisdictions. Although the Group attempts to reduce the risk of exposure to product liability claims and to the cost of product recalls by its design and quality control processes, there can be no assurance that these processes will prevent claims being made or recalls being necessary. A significant product liability claim or product recall scenario, whether or not it results in any liability to the Group, could have a materially adverse effect on the Group s reputation, business, financial condition and results of operation. If the Group s products, systems or solutions are found to infringe the intellectual property rights of others, the Group may be required to change its business practices and may also become liable for damages and face invalidation of the Group s intellectual property rights The electronics manufacturing industry is characterised by frequent claims and litigation regarding patents, copyrights and other intellectual property rights. These claims may be asserted by operating companies as well as companies which do not manufacture or sell products and whose sole purpose is to assert patent rights against third parties in an attempt to collect licence fees. Third parties have in the past asserted and may in the future assert their intellectual property rights against the Group or the Group s customers and the Group may be required to indemnify its customers against such intellectual property claims. Such claims, whether with or without merit, are time-consuming, may result in costly litigation and may not be resolved on terms favourable to the Group. Successful claims of infringement, misuse or misappropriation by a third party against the Group or a third party that the Group indemnifies could prevent the Group from selling certain products or require the Group to pay substantial damages (including in the United States where, for example, treble damages may apply if the Group is found to have wilfully infringed patents and where increased statutory damages may apply if the Group is found to have wilfully infringed copyrights), an account of profits, royalties or other fees. Such claims could also require the Group to cease making, licensing or using products that are alleged to infringe or misappropriate the intellectual property rights of others, to expend additional developmental resources to attempt to redesign the Group s products or otherwise to develop alternative technology. Defending against claims of infringement of, or being deemed to be infringing the intellectual property rights of others or challenges to the validity of the Group s intellectual property rights could, in each case, impair the Group s ability to innovate, develop, distribute and sell the Group s current and planned products, which could materially impact the operation of the Group. In addition, even claims of infringement, misuse or misappropriation that ultimately are unsuccessful could cause reputational harm, result in expenditure of funds in litigation and divert management s time and other resources, any of which could materially adversely affect the Group s business, financial condition and results of operations. Failure to protect the Group s intellectual property rights could adversely affect the Group s financial condition and results of operations The success of the Group s business depends in part on its ability to protect and enforce its patents, copyrights, and other intellectual property rights. The Group attempts to protect its intellectual property under patent and copyright and through a combination of confidentiality procedures, contractual provisions and other methods, all of which offer only limited protection. Despite the Group s best efforts to protect its intellectual property rights, unauthorised parties may not be deterred from misuse, theft or misappropriation of information the Group regards as proprietary. The Group has filed various applications for certain aspects of its intellectual property. Valid patents may not be issued from pending applications, and the claims eventually allowed on any patents may not be sufficiently broad to protect the Group s technology or products. Any issued patents may be challenged, invalidated or circumvented, and any rights granted under these patents may not actually provide adequate defensive protection or competitive advantages. Patent applications in the United States are typically not published until 18 months after filing, or, in some cases, not at all, and publications of discoveries in industry-related literature lag behind actual discoveries. The Group cannot be certain that it was the first to make the inventions claimed in its pending patent applications or that it was the first to file for patent protection, which could prevent patent applications from issuing as patents or invalidate patents following issuance. Additionally, the process of obtaining patent protection is expensive and time consuming, and the Group may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. 21

22 Moreover, policing unauthorised use of the Group s intellectual property is difficult, expensive and time consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United Kingdom and United States and where mechanisms for enforcement of intellectual property rights may be weak. Attempts to enforce the Group s rights against third parties could also provoke these third parties to assert their own intellectual property or other rights against the Group, or take unilateral steps to invalidate the Group s intellectual property rights, which could result in a holding or official action that invalidates or narrows the scope of its rights, in whole or in part. If the Group is unable to protect its proprietary rights (including aspects of its products protected other than by patent rights), it may be at a competitive disadvantage compared to others who need not incur the additional expense, time, and effort required to create the innovative products that have enabled the Group to be successful to date. Any of these events could materially adversely affect the Group s financial condition, operating results and prospects. The Group is investing in an on-going re-design and streamlining of its operational model and a failure to effectively manage this change programme could lead to a failure to realise planned cost savings As announced in October 2015, the Group has initiated a restructuring programme aimed at consolidating the Group s footprint and cost base. The total cash cost of this project is 44 million (US$60 million), much of which was provided for in 2015, with approximately 22 million (US$30 million) paid in 2016 and the balance of 22 million (US$30 million) to be spent in 2017, according to unaudited Company estimates. The restructuring actions are expected to result in cost savings of 12 million in 2017 (US$15 million) and at least 15 million (US$20 million) annually beginning in 2018, according to unaudited Company estimates. If the Group does not continue to complete investment plans and effectively manage this change programme, there is a risk that costs will exceed present expectations or that planned savings will not be realised. Additionally, the cost savings may take longer to realise than expected. If the costs of the change programme escalate and/or the Group fails to achieve the expected savings in the expected timeframe, this could adversely impact the Group s future prospects and results of operations. The Group is reliant on its operations in China 60% of the Group s employees are located in China and 49% of the Group s revenue in 2016 was generated by the Group s subsidiaries in China. As a result, the Group s operations, prospects and financial condition could be adversely affected if there is a deterioration in or disruption to the legal, political, economic or social conditions in China. In particular, the Group faces continued pressure on the costs of labour in China, particularly with reference to base pay and increasing social costs. The results of these pressures may lead to decreased profitability of the business and may have a materially adverse effect on the business, financial condition and results of operations. In addition, although the Directors believe that political conditions in China are generally stable, changes may occur, for example, in exchange control regulations, in government and in legislative and regulatory regimes. The Group may encounter difficulty in managing operations due to unfavourable political or economic factors or unexpected legal or regulatory changes. If the effects of this instability disrupt the Group s operations in this region, this could have a material adverse effect on the Group s business, financial condition and results of operations. Any delays, disruptions or failures in the Group s supply chain could have a material adverse effect on the Group s ability to meet its production requirements As is typical in the industry, the Group s business depends on its ability to source a range of components and raw materials from third party suppliers on commercially reasonable terms and in a timely manner. The relationships between the Group and its suppliers typically are not based on long-term supply contracts and typically permit termination without cause on short notice. In addition, certain of the specialist components used by the Group are available only from a single or a predominant supplier or in some cases, certain of the Group s customers may require the Group to source components or raw materials from particular suppliers or require prior approval of suppliers from whom the Group proposes to order raw materials or components. The Group s suppliers thus may exert pricing pressure on the Group, cease selling products or components to the Group on terms acceptable to it, fail to deliver sufficient quantities of products in a timely manner for any reason, encounter financial difficulties, terminate their relationship with the Group or experience shortages or price volatility in relation to labour or raw materials, in particular in relation to commodities such as copper, beryllium copper, steel, aluminium, silver and zinc. In addition, despite the Group s efforts to select its suppliers and manage its 22

23 supplier relationships with scrutiny, a component supplier may fail to meet the Group s requirements, including in relation to product quality, safety and other corresponding standards, which could have a material adverse impact on the Group s reputation and brand value. Moreover, significant disruptions in the supply of the Group s products to its customers and components and materials to the Group as a result of transportation or import/export issues could result in the Group incurring costs or damages which are not covered by insurance and which could have a material adverse effect on the Group s business, financial condition or results of operations. A failure in the Group s supply chain could harm the Group s ability to meet its contractual obligations to its customers. Any disruption to the availability or supply of components and materials to the Group, any deterioration to the terms on which products are supplied to the Group or any delays or disruptions in the transportation of the Group s raw materials or finished products could thus have a material adverse effect on the Group s business, financial condition and results of operations. Disruptions of operations at the Group s key factories or sites due to disasters or other business continuity events could impact the Group s ability to meet its production requirements and a failure to successfully recover from such an event could have a material adverse effect on the Group s business The ability of the Group to perform the services and to deliver the goods it provides to its customers depends upon its ongoing ability to occupy its premises, and the continued normal operation of these premises and its plant and equipment. Whilst the Group maintains insurance to cover property damage, if one or more of the Group s main factories or sites were to suffer major disruption such as fire, flooding, pandemic, regulatory action, loss of IT systems following a cyber or similar incident, this may have a material adverse effect on the Group s ability to manufacture and bring its products to market, which would in turn have a material adverse effect on its business, financial condition and results of operations. A cybersecurity incident could negatively impact the Group s business and may harm its relationships with customers The successful operation of the Group s business depends in part upon maintaining the integrity of its operational systems, including its computer, communication and information technology systems. The Group utilises IT systems in the operation of business and uses such systems to store customer information, private information about employees and financial and strategic information about the Group. In addition, part of the Group s strategy involves investing in the EIoT and this may increase the Group s dependency on information technology as well as the classes of sensitive and/or confidential information and intellectual property stored on the Group s IT systems in the future. Such practices give rise to cybersecurity risks, including security breaches, system disruption, theft and inadvertent release of information. If the Group fails to assess and identify cybersecurity risks and evolving threats, it may become increasingly vulnerable to such risks. Additionally, while the Group has implemented measures to prevent security breaches and cyber incidents, there can be no assurance that these measures will be effective. The theft, destruction, loss, misappropriation or unauthorised release of sensitive and/ or confidential information or intellectual property, or the disruption of the Group s IT systems, could result in business disruption, negative publicity or potential liability under data protection laws, any of which could have a material adverse effect on the Group s business, financial condition and results of operations. The Group is exposed to currency exchange risk in the conduct of its business The Group generates the majority of its revenue in US dollars and incurs the majority of its costs in either US dollars or RMB, with 68% of revenues negotiated in US dollars and 34% of costs incurred in US dollars in In 2016, 11% of revenues were negotiated and 33% of costs were incurred in RMB and 18% of revenues and 17% of costs were negotiated in Euros. In most currencies (other than US dollars and Euros), costs exceed revenues. Further, as of 31 December 2016, the Group s sterling-denominated external borrowings were 13 million, representing 3% of the Group s total external borrowings, (excluding finance leases) its US dollar-denominated external borrowings were US$383 million, representing 77% of the Group s total external borrowings, and its Euro-denominated external borrowings were 91 million, representing 19% of the Group s total external borrowings. The Group is thus subject to currency exchange risk, including both translation risk and economic risk. The Group is exposed to translation risk because its reporting currency is in pounds sterling and hence fluctuations in foreign exchange rates impact the consolidation into pounds sterling of foreign currency 23

24 denominated assets, liabilities and earnings. Transactions are typically measured in the currency in which they occur and the accounts of subsidiaries are then translated into pounds sterling for presentation of the Group s consolidated operating results. In 2016, 99.9% of the Group s total revenue was generated in currencies other than pounds sterling and 95% of the Group s operating costs were incurred in currencies other than pounds sterling. As currency exchange rates fluctuate, translation of operating results affects the Group s reported results of operations. The Group is exposed to transactional foreign exchange rate fluctuation when a Group subsidiary enters into a sale or purchase transaction in a currency other than that subsidiary s functional currency. Whilst the Group partially naturally hedges certain transactional exposures by matching the currency of revenue to the relevant cost, where possible, the Group s sales from certain jurisdictions, such as China, are often denominated in dollars as a feature of that jurisdictions export market. The Group aims to cover forward at least 75% of the unmatched cash flows on a quarterly basis and the Group s foreign currency borrowings are used to partially hedge the currencies of the Group s principal assets and cash flows, but to the extent the Group is unable to hedge its foreign exchange risk, fluctuations in the value of currencies in which it operates may have a material adverse impact on the Group s business, financial condition and results of operations. The Group relies on the performance of highly skilled personnel including the senior management team The Group s future success depends, in part, on its ability to continue to attract and retain highly skilled personnel, particularly technical professionals, in order to deliver its growth objectives. Further, the Group s future performance depends on the continued services and continuing contributions of its senior management to execute on its business plan and to identify and pursue new opportunities and product innovations. Additionally, competition for suitably qualified individuals with the relevant technical expertise in some countries in which the Group operates, such as China, is intense, whereas in other countries or regions, there may be a lack of individuals with relevant technical expertise and the Group may be required to incentivise technically qualified individuals to relocate, which in each case can increase the Group s cost of labour. The loss of the services of any of the Group s key personnel, the inability to attract, retain and integrate qualified personnel, or delays in or increased expenses related to hiring required personnel could significantly delay or prevent the achievement of the Group s development and strategic objectives, and may materially adversely affect its financial condition, operating results and prospects. The Group may in the future make strategic acquisitions and disposals, which could cause it to incur substantial expenses, could divert management s attention from other business concerns and may not yield anticipated returns The Group has selectively pursued acquisitions and undertaken disposals in the past as part of its strategy, and may do so in the future where such acquisitions or disposals form part of the group s strategy or offer significant scope for operational synergies and cost reduction. If the Group does acquire additional businesses, it may experience difficulties in integrating the newly-acquired businesses or in developing familiarity with new geographical or product markets. The anticipated benefits of such acquisitions may not be realised fully, or at all, and may take longer to realise than expected. Even if the Group is able to integrate newly-acquired businesses successfully, as it has done with Novero, it nevertheless may not realise the synergies, transfer of brand loyalty, cost savings, revenue and cash flow enhancements, growth, operational efficiencies and other benefits that it expects. Acquired businesses may also have unexpected liabilities for which the Group will be responsible. In addition, the Group s ability to successfully dispose of businesses depends on a number of factors, many of which are outside of the Group s control, and the Group may not be able to dispose of a business in a timely manner. For example, a buyer may not be available, or the Group may not be successful in negotiating satisfactory terms with prospective buyers. Even if a disposal is successful, the Group may face indemnity and other liability claims by the acquirer or other parties. As a result, the costs associated with the pursuit of potential acquisitions or disposals, whether successful or not, and the costs of business integration, if successful, may cause a decrease in the Group s short-term profitability or an increase in the Group s indebtedness. Additionally, the time required to pursue such acquisitions or disposals and/or integrate new businesses into the Group could divert management s attention from other business concerns. Any of the above factors could have a material adverse effect on the Group s business, financial condition and results of operations. 24

25 The Group is subject to evolving governmental trade compliance regimes that could subject it to liability, restrictions on sales, and/or impair the Group s ability to compete in international markets The Group is subject to complex governmental trade compliance regimes in the jurisdictions in which it operates or into which it sells its products, including in particular the US International Traffic in Arms Regulation ( US ITAR ) and equivalent regulation in the European Union, which impose controls, export licence requirements and restrictions on the import or export of certain technologies, including those involving encryption. Although the Group employs a Global Logistics and Trade Compliance Director and maintains policies, procedures and systems to prevent sales to customers which would violate the applicable export control and economic sanctions laws, if any such sales are found not to be compliant, any such non-compliant sale could have negative consequences, including government investigations, penalties and reputational harm. Any change in export or import regulations, economic sanction or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of the Group s products by, or in the Group s decreased ability to export or sell its products to, existing or potential customers with operations involving such countries, governments, persons or technologies. Any decreased use of the Group s products or limitation on the Group s ability to export or sell its products could materially adversely affect the Group s business, financial condition and results of operations. The Group is subject to a wide range of environmental, health and safety regulations and may be materially adversely affected by breaches of these regulations or by accidents or incidents which occur during the course of operations The Group is subject to certain environmental and health and safety laws and regulations that affect its operations, facilities and products in each of the jurisdictions in which it operates. The Group is committed to operating in compliance with all environmental, health and safety laws and regulations relating to its products, operations and business activities. However, there is a risk that the Group may have to incur expenditures to cover environmental and health liabilities, to maintain compliance with current or future environmental and health and safety laws and regulations or to undertake any necessary remediation. It is difficult to estimate reasonably the future impact of environmental matters, including potential liabilities, with any certainty, due to a number of factors especially the lengthy time intervals often involved in resolving them. Due to the nature of the Group s business as a manufacturer of component parts, accidents and incidents have occurred and may occur during the course of its business even though the Group has implemented and continually improves upon its safety measures, policies, procedures and processes. Such accidents may result in harm to the Group s employees and could disrupt the Group s operations. Such accidents or incidents may result in reputational damage as well as potential liability for workplace injuries. Any accident or incident could adversely affect commercial acceptance of the Group s products and could result in claims for damages resulting from injuries. Further, in the event there are any significant claims for damages due to accidents or incidents suffered which are not covered by the Group s insurance policies, the Group s financial condition and results of operations may be materially adversely affected. The United Kingdom s anticipated withdrawal from the European Union could adversely affect the Group On 23 June 2016, a majority of UK voters voted in favour of the UK s withdrawal from the EU (commonly referred to as Brexit ) in a national referendum, and on 2 October 2016, Prime Minister Theresa May indicated that the UK will begin formal withdrawal negotiations by the end of March 2017, provided that this is approved by a majority of the members of the UK Parliament. While the Group does not have significant trading activities in the United Kingdom, Brexit has created significant political, social and macroeconomic uncertainty for the UK and Europe and any deterioration in the economic conditions in the United Kingdom and the EU could also result in diminished consumer confidence, leading to reduced spending and demand for the Group s products, with limitations on its ability to increase or maintain its pricing, which could have a material adverse effect on the Group s business, financial condition and results of operations. The Group is subject to risks associated with its international business activities As at 31 December 2016, had 9,836 employees in 53 locations covering 17 countries. The Group s business is thus subject to numerous risks inherent in international business operations. Among others, these risks include: 25

26 difficulties in staffing including immigration laws and foreign operations; the complexity of managing competing and overlapping tax regimes; unexpected or unfavourable changes in foreign laws, regulatory requirements and related interpretations; differing import and export licensing requirements; difficulty of conducting business in a country or region due to international economic sanctions regulations or action by the EU, the US, or other governments that may restrict the Group s ability to transact business in a foreign country or with certain foreign individuals or entities; fluctuations in currency exchange rates and restrictions on the repatriation of capital; operational difficulties in countries with a high corruption perception index; limited protection for intellectual property rights in some countries; difficulties enforcing intellectual property rights and contractual rights in certain jurisdictions; differing data protection and privacy laws; political and economic instability, outbreaks of hostilities, international embargos, sanctions and boycotts; and longer accounts receivable payment cycles or bad debt. In some countries in which the Group operates or has customers, particularly in those with developing economies, certain business practices may exist that are prohibited by laws and regulations applicable to the Group, such as the US Foreign Corrupt Practices Act, the UK Bribery Act 2010 and other business ethics regulations. The Group has policies and procedures requiring compliance with these laws and sanctions that are designed to facilitate compliance with these laws. If a Group employee or third party sales or distribution partners were to take actions in violation of applicable laws, any such violation, even if prohibited by the Group s policies, could have a material adverse effect on the Group s business and reputation. Compliance with changing and divergent laws and regulations in the various jurisdictions in which the Group operates may involve significant management time and costs and may require costly changes to products and/or business practices. Non-compliance could result in the imposition of penalties or cessation of orders due to alleged non-compliant activity. One or more of these factors could have an adverse effect on the Group s operations globally or in one or more countries or regions, as well as its reputation, which could have an adverse effect on the Group s business, financial condition and results of operations. Changes in tax legislation or the interpretation of tax legislation, as well as to increases in the rate of corporate and other taxes in the jurisdictions in which it operates could have a materially adverse effect on the Group s results of operations The Group operates in various jurisdictions with varied tax regimes and is subject to taxes that are computed in accordance with local legislation, policy and practice. Changes in the laws or administrative practices relating to taxation (including in relation to transfer pricing), the imposition of additional taxes (including withholding tax), increases in the rate of corporate and other taxes, the removal of any tax incentives from which the Group currently benefits (for example, in China), or the retrospective application of taxes may increase the Group s effective tax rate and reduce its profitability. Revisions to tax legislation or to its interpretation or changes in any applied policy or practice might also affect the Group s past results (where such changes apply retrospectively) or results in the future. Any such change could have an adverse effect on the Group s financial affairs and its ability to receive funds from its subsidiaries without incurring additional tax liabilities. The Group s future results of operations may differ materially from forward-looking financial targets included in this document and investors should not place undue reliance on such information The forward-looking information included in this document includes financial targets which are not assurances as to future results. The targets are based on a number of assumptions, which the Directors believe are appropriate but which may turn out to be incorrect or different than expected. The key 26

27 assumptions the Group has made when formulating these targets include, among others, no significant changes in existing political, legal, fiscal, market or economic conditions or in applicable legislation, regulations or rules (including, but not limited to, accounting policies and accounting treatments) except as otherwise already announced or movements in foreign exchange rates which, individually or in the aggregate, would be material to the Group s results of operations. Accordingly, the assumptions may change or may not materialise. In addition, unanticipated events may adversely affect the Group s actual results of operations in future periods whether or not the Group s assumptions otherwise prove to be correct. There is therefore a risk that the Group s actual results of operations could differ from those expressed or implied by these forward-looking financial targets as a result of many factors, many of which may be outside of the Group s control, including significant business, operational and economic risks and the risks described in this section Risk Factors, and these differences could be material. Such forward looking financial targets should therefore be read in this context and construed accordingly, and investors should not place undue reliance on them. Risks relating to the Rights Issue and investment in Shares (iii) 2 The market price of the Nil Paid Rights, Fully Paid Rights and/or Shares could be subject to volatility The market price of the Nil Paid Rights, the Fully Paid Rights and/or the Shares could be subject to significant fluctuations due to a change in sentiment in the market regarding the Nil Paid Rights, the Fully Paid Rights and/or the Shares (or securities similar to them), including, in particular, in response to various facts and events, including any regulatory changes affecting the Group s operations, variations in the Group s operating results and/or business developments of the Group and/or its competitors. Stock markets have from time to time experienced significant price and volume fluctuations that have affected the market prices for securities and which may be unrelated to the Company s operating performance or prospects. Furthermore, the Group s operating results and prospects from time to time may be below the expectations of market analysts and investors. Any of these events could result in a decline in the market price of the Nil Paid Rights, the Fully Paid Rights and/or the Shares. An active trading market for the New Shares, Nil Paid Rights and Fully Paid Rights may not develop Application has been made to admit the New Shares (nil and fully paid) to trading on the London Stock Exchange s main market for listed securities. It is expected that dealings in rights to acquire the New Shares on the London Stock Exchange s main market for listed securities will commence at 8.00 a.m. on 17 March There can be no assurance, however, that an active trading market in Nil Paid Rights or Fully Paid Rights will develop upon or following Admission. The market price for the Shares may decline below the Issue Price and Shareholders may not be able to sell Shares at a favourable price after the Rights Issue The public trading market price of the Shares may decline below the Issue Price. Should that occur prior to the latest time and date for acceptance under the Rights Issue, Qualifying Shareholders or renouncees who exercise their rights in the Rights Issue will suffer an immediate loss as a result. Moreover, following the exercise of their rights, Shareholders may not be able to sell their New Shares at a price equal to or greater than the acquisition price for those shares. Although the Group has no current plans for a subsequent offering of Shares, it is possible that it may decide to undertake such an offering in the future. An additional offering could have an adverse effect on the market price of the outstanding Shares. Investors in the Nil Paid Rights, Full Paid Rights and/or New Shares may be subject to exchange rate risk The New Shares, Nil Paid Rights and Fully Paid Rights are priced in pounds sterling. Accordingly, any investor outside the United Kingdom is subject to adverse movements to their local currency against pounds sterling. It may not be possible to effect service of process upon the Company or the Directors or enforce court judgments against the Company or the Directors The Company is incorporated in England and Wales. As a result, it may not be possible for investors outside of the UK to effect service of process outside the UK against the Company or the Directors or to enforce the judgement of a court outside the UK against the Company or the Directors. 27

28 The Company s ability to continue to pay dividends on the Shares will depend on the availability of distributable reserves The Company s ability to pay dividends is limited under English company law, which limits a company to only paying cash dividends to the extent that it has distributable reserves and cash available for this purpose. As a holding company, the Company s ability to pay dividends in the future is affected by a number of factors, principally its ability to receive sufficient dividends from subsidiaries. The payment of dividends to the Company by its subsidiaries is, in turn, subject to restrictions, including certain regulatory requirements and the existence of sufficient distributable reserves and cash in the Company s subsidiaries. The ability of these subsidiaries to pay dividends and the Company s ability to receive distributions from its investments in other entities are subject to applicable local laws and regulatory requirements and other restrictions, including, but not limited to, applicable tax laws and covenants in some of the Company s debt facilities. These laws and restrictions could limit the payment of future dividends and distributions to the Company by its subsidiaries, which could restrict the Company s ability to fund other operations or to pay a dividend to holders of the Existing Shares or the New Shares. Shareholders who do not acquire New Shares in the Rights Issue will experience dilution in their ownership of the Company If a Shareholder does not take up the offer of New Shares under the Rights Issue, either because the Shareholder is in the United States or another jurisdiction where their participation is restricted for legal, regulatory and other reasons or because the Shareholder does not respond to the Rights Issue by a.m. (London Time) on 3 April 2017, the expected latest time and date for acceptance and payment in full for that Shareholder s provisional allotment of New Shares, and that Shareholder s Nil Paid Rights to acquire New Shares lapse, the Shareholder s proportionate ownership and voting interests as well as the percentage that their shares will represent of the total share capital of the Company will be reduced accordingly. Even if a Shareholder elects to sell their unexercised Nil Paid Rights, or such Nil Paid Rights are sold on their behalf, the consideration the Shareholder receives may not be sufficient to compensate them fully for the dilution of their percentage ownership of the Company s share capital that may be caused as a result of the Rights Issue. The Company has made arrangements under which the Underwriters, within the two Business Day period following the expiration of the latest time and date for acceptance and payment, will endeavour, as agents for the Company, to find acquirers for New Shares not taken up by Shareholders. If, however, the Underwriters are unable to find acquirers for such New Shares or are unable to achieve a specified premium over the Issue Price and the related expenses of procuring such acquirers, Shareholders will not receive any consideration for the Nil Paid Rights they have not taken up. Furthermore, to the extent that Shareholders do not exercise their Nil Paid Rights to acquire New Shares, their proportionate ownership and voting interest in the Shares of the Company (upon the issue of New Shares) will, accordingly, be reduced, and the percentage that their Existing Shares represent of the Company s increased share capital after the issue of New Shares will accordingly be reduced. Shareholders outside the United Kingdom may not be able to acquire New Shares in the Rights Issue Securities laws of certain jurisdictions may restrict the Company s ability to allow participation by Shareholders in the Rights Issue. In particular, holders of Shares who are located in the United States may not be permitted to take up their entitlements under the Rights Issue unless an exemption from the registration requirements is available under the Securities Act. The Rights Issue will not be registered under the Securities Act. Securities laws of certain other jurisdictions may restrict the Company s ability to allow participation by Shareholders in such jurisdictions in any future issue of shares carried out by the Company. Qualifying Shareholders who have a registered address in or who are resident in, or who are citizens of, countries other than the United Kingdom should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their Nil Paid Rights or to acquire Fully Paid Rights or acquire New Shares. 28

29 IMPORTANT INFORMATION Market and industry information Unless the source is otherwise stated, the market, economic and industry data in this Prospectus constitute the Directors estimates, using underlying data from independent third parties. The Company obtained market data and certain industry forecasts used in this Prospectus from internal surveys, reports and studies, where appropriate, as well as market research and publicly available information. The Underwriters make no representation or warranty as to the accuracy or completeness of such information as set forth in this Prospectus. The Company confirms that all third-party data contained in this Prospectus has been accurately reproduced and, so far as the Company is aware and able to ascertain from information published by that third-party, no facts have been omitted that would render the reproduced information inaccurate or misleading. Any industry forecasts are forward-looking statements. See Cautionary Note Regarding Forward-Looking Statements below. Where third-party information has been used in this Prospectus, the source of such information has been identified. (i) 23.2 (iii) 10.4 Cautionary note regarding forward-looking statements This Prospectus contains forward-looking statements, including with respect to financial information, that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could, is confident, or other words of similar meaning. Undue reliance should not be placed on any such statements because they speak only as at the date of this document and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Laird s plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. There are a number of factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are; increased competition, the loss of or damage to one or more key customer relationships, changes to customer ordering patterns, delays in obtaining customer approvals for engineering or price level changes, the failure of one or more key suppliers, the outcome of business or industry restructuring, the outcome of any litigation, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in raw material or energy market prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, or the key timing and success of future acquisition opportunities or major investment projects. You are advised to read this document and the information incorporated by reference into this document in their entirety, and, in particular, the section of this document headed Risk Factors, for a further discussion of the factors that could affect the Group s future performance and the industry in which it operates. In light of these risks, uncertainties and assumptions, the events described in the forward looking statements, including statements regarding prospective financial information, in this document and/or the information incorporated by reference into this document may not occur. These statements are not fact and should not be relied upon as being necessarily indicative of future results, and readers of this Prospectus are cautioned not to place undue reliance on the forward-looking statements, including those regarding prospective financial information. The prospective financial information included in this Prospectus is based on internal Company estimates and was not prepared with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. The Company s auditors have not compiled, audited or examined such information and accept no responsibility for the prospective financial information. No statement in this Prospectus is intended as a profit forecast for 2017 and no statement in this Prospectus should be interpreted to mean that statutory operating (loss)/profit or underlying profit before tax for the current or future financials years would necessarily be above a minimum level, or match or exceed the historical published operating profit or set a minimum level of operating profit. 29

30 Neither the Company nor the Underwriters are under any obligation to update or revise publicly any forward-looking statement contained within this Prospectus, whether as a result of new information, future events or otherwise, other than in accordance with their legal or regulatory obligations (including under the Listing Rules, the Disclosure and Transparency Rules and the Prospectus Rules). The contents of this section Cautionary Note Regarding Forward Looking Statements relating to forward-looking statements in no way seek to qualify or negate the statement relating to the Group s working capital set out in paragraph 19 of Part IX Additional Information. Presentation of Financial Information Financial information, unless otherwise stated, has been extracted without material adjustment from the Laird Final Results for the year ended 31 December 2016 and from the Laird Annual Report and Accounts for each of the years ended 31 December 2014 and 2015, each of which is incorporated by reference into this document. Unless otherwise indicated, financial information for the Group in this document and the information incorporated by reference into this document is presented in pounds sterling and has been prepared in accordance with IFRS as adopted by the EU. This document includes financial information relating to expected synergies to be realised from the Group s on-going operational improvement programme and financial information relating to the Group s new divisional structure effective from 1 January This financial information is based on internal Company estimates and historical data and is unaudited. Non-IFRS information This document contains certain financial measures that are not defined or recognised under IFRS, including Covenant EBITA and Covenant EBITDA, net debt, cash interest expense, underlying profit before tax, underlying basic earnings per share, operating cash flow, free cash flow, organic constant currency metrics and figures relating to the reorganisation of the Group s division. These measures are unaudited and are not measures of financial performance under IFRS and should not be considered as alternatives to other indicators of the Group s operating performance, cash flows or any other measure of performance derived in accordance with IFRS. Accordingly, these non-ifrs measures should be viewed as supplemental to, but not as a substitute for, measures presented in the Laird Final Results and Laird Annual Report and Accounts, which are prepared in accordance with IFRS as adopted by the EU. Information regarding these measures is sometimes used by investors to evaluate the efficiency of a company s operations and its ability to employ its earnings toward repayment of debt, capital expenditures and working capital requirements. However, there are no generally accepted principles governing the calculation of these measures and the criteria upon which these measures are based can vary from company to company. These measures, by themselves, do not provide a sufficient basis to compare the Company s performance with that of other companies and should not be considered in isolation or as a substitute for operating profit or any other measure as an indicator of operating performance, or as an alternative to cash generated from operating activities as a measure of liquidity. The Group is subject to two key financial covenants, which are tested semiannually on 30 June and 31 December of each year. These covenants relate to the leverage ratio, being the ratio between Covenant EBITDA and net debt, and the interest cover ratio between Covenant EBITA and cash interest expense. The calculation of these ratios, which are contained in this document, involves the translation of non-sterling denominated debt using average, rather than closing, rates of exchange and adjustments for removal of the 49% of Model Solution that the Group does not own from the calculation. Covenant EBITA and Covenant EBITDA Covenant EBITA is defined as operating profit before impairment of goodwill, amortisation of acquired intangible assets and exceptional items, adding back amortisation of software, amortisation and impairment of capitalised development costs, share based payments and pre-acquisition gains/(losses), less the amounts attributable to the 49% of Model Solution that the Group does not own. Covenant EBITDA is defined as Covenant EBITA adding back depreciation of property, plant and equipment. The Group uses Covenant EBITA and Covenant EBITDA in the calculation of its interest cover and leverage ratios under its financing arrangements, respectively. 30

31 Covenant EBITA and Covenant EBITDA eliminate potential differences in performance caused by variations in capital structures (affecting net finance costs), tax positions (such as the availability of net operating losses against which to relieve taxable profits), the cost and age of tangible assets (affecting relative depreciation expense), the extent to which intangible assets are identifiable (affecting relative amortisation expense) and other specific items that are considered to hinder comparison of the trading performance of the Group s businesses either year-on-year or with other businesses. For the periods under review, other specific items represent items defined by management are exceptional items and share based charges. Covenant EBITA and Covenant EBITDA have limitations as an analytical tool. Some of these limitations are: does not reflect the Group s cash expenditures or future requirements for capital expenditures or contractual commitments; does not reflect changes in, or cash requirements for, the Group s working capital needs; does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Group s indebtedness; although depreciation and amortisation are non-cash charges, the assets being depreciated and amortised will often have to be replaced in the future, and Covenant EBITA and Covenant EBITDA do not reflect any cash requirements for such replacements; it is not adjusted for all non-cash income or expense items that are reflected in the Group s statements of cash flows; and the further adjustments made in calculating Covenant EBITA and Covenant EBITDA are those that management consider are not representative of the underlying operations of the Group and therefore are subjective in nature. The table below sets out the reconciliation of the Group s total Covenant EBITA and Covenant EBITDA from operating profit before impairment of goodwill, amortisation of acquired intangible assets and exceptional items for the periods indicated: (unaudited) ( millions) Operating profit before impairment of goodwill, amortisation of acquired intangible assets and exceptional items Amortisation of software Amortisation of capitalised development costs Impairment of capitalised development costs Share based payment Pre-acquisition gains/(losses) (1)... (1.2) 2.7 (1.6) Adjustment for non-controlling interest (2)... (3.2) (3.0) Covenant EBITA Depreciation of property, plant & equipment Covenant EBITDA (1) As required by the Group s Existing Finance Arrangments, the calculation of Covenant EBITA and Covenant EBITDA includes the profit or loss before tax of businesses or assets acquired during the year for the part of the year prior to the acquisition by the Group of that business asset. (2) As required by the Group s Existing Finance Arrangements, the calculation of Covenant EBITA and Covenant EBITDA is adjusted to exclude amounts attributable to the 49% of Model Solution that the Group does not own. 31

32 Net debt The Group uses net debt, defined as total borrowings less cash and cash equivalents, as a supplemental measure in evaluating its liquidity, as it indicates the level of the Group s borrowings after taking account of cash and cash equivalents within the Group s business that could be utilised to pay down the outstanding borrowings, as well as in the calculation of the leverage ratio under its financing arrangements. The table below sets out the reconciliation of the Group s net debt from borrowings for the periods indicated: (unaudited) ( millions) Borrowings current liabilities Borrowings non-current liabilities Borrowings Less cash and cash equivalents... (64.5) (68.8) (64.0) Net Debt In calculating its leverage ratio under its financing arrangements, the Group adjusts net debt to exclude the impact of foreign exchange movements ( 28.2 million in 2016) and the 49% of the external debt of Model Solution that the Group does not own ( 2.1 million in 2016). In 2016, the Group s net debt for purposes of covenant calculation was million. Cash interest expense The Group uses cash interest expense, defined as finance costs, adding back finance income and other net finance income pension, in the calculation of its interest cover ratio under its financing arrangements (unaudited) ( millions) Finance costs... (11.1) (8.4) (8.5) Finance income Other net finance income pension Cash interest expense... (10.8) (7.6) (8.0) Underlying profit before tax The Group uses underlying profit before tax, defined as profit before tax, adding back financial instruments fair value of adjustments, impairment of goodwill, amortisation of acquired intangible assets and exceptional items, as supplemental measures of the Group s profitability which the Group considers useful due to the exclusion of specific items that are considered to hinder comparison of the underlying profitability of the Group s businesses either year-on-year or with other businesses. 32

33 The table below sets out the reconciliation of the Group s underlying profit before tax from profit before tax for the periods indicated: (unaudited) ( millions) (Loss)/profit before tax... (122.3) Financial instruments fair value of adjustments (0.5) 2.5 Impairment of goodwill Amortisation of acquired intangible assets Exceptional items... (1.2) 45.0 (0.7) Underlying profit before tax Underlying basic earnings per share Underlying basic earnings per share is calculated as underlying earnings attributable to shareholders of the parent divided by the weighted average number of shares. Underlying earnings attributable to the parent is defined (loss)/profit for the year attributable to equity shareholders of the parent company, adding back financial instruments fair value of adjustments, impairment of goodwill, amortisation of acquired intangible assets less amortisation of acquired intangible assets attributable to non-controlling interests, exceptional items, tax on exceptional items, deferred tax on goodwill, acquired intangible assets and US capitalised development costs, exceptional US tax loss movement/(recognition), less tax on amortisation of acquired intangible assets attributable to non-controlling interests. The Group uses underlying basic earnings per share as a supplemental measure of the Group s profitability. The table below sets out the reconciliation of the Group s underlying basic earnings per share from (loss)/profit before tax for the periods indicated: (unaudited) ( millions) (Loss)/profit for the year attributable to equity shareholders of the parent company... (111.7) (8.3) 50.1 Financial instruments fair value of adjustments (0.5) 2.5 Impairment of goodwill Amortisation of acquired intangible assets Amortisation of acquired intangible assets attributable to non-controlling interests... (0.9) (0.8) (0.6) Exceptional items... (1.2) 45.0 (0.7) Tax (credit)/charge on exceptional items... (3.6) Deferred tax on goodwill, acquired intangible assets and US capitalised development costs... (19.4) Exceptional US tax loss (recognition)/ movement... (1.2) 1.2 (20.1) Tax on amortisation of acquired intangible assets attributable to non-controlling interests Underlying earnings attributable to shareholders of parent Weighted average number of shares (in millions) Underlying basic earnings per share (in pence)

34 Reorganisation of the Group s divisions The table below shows the reconciliation of revenue for the new three divisional structure from revenue for the original divisional structure for the years ended 31 December 2014, 2015 and The figures for the original divisions are extracted without material adjustment from Note 3 to the Laird Final Results for the year ended 31 December 2016 and from the Laird Annual Report and Accounts for each of the years ended 31 December 2014 and The figures for the new divisional structure are derived from unaudited Company data. Revenue (unaudited) ( millions) Performance Materials Less: ETS... (33.4) (27.3) (26.5) PM Wireless Systems Less: CVS... (252.1) (131.1) (103.2) Add: ETS WTS CVS Total The table below shows the reconciliation of segment profit before amortisation and impairment of acquired intangible assets and exceptional items for the new divisional structure from segment profit before amortisation and impairment of acquired intangible assets and exceptional items the original divisional structure for the years ended 31 December 2014, 2015 and The figures for the original divisions are extracted without material adjustment from Note 3 to the Laird Final Results for the year ended 31 December 2016 and from the Laird Annual Report and Accounts for each of the years ended 31 December 2014 and The figures for the new divisional structure are derived from unaudited Company data. Segment profit before amortisation and impairment of acquired intangible assets and exceptional items (unaudited) ( millions) Performance Materials Less: ETS... (2.0) (1.4) (0.7) PM Wireless Systems Less: CVS... (13.0) (13.6) (10.8) Add: ETS WTS CVS Total Operating cash flow and free cash flow pre and post dividend The Group defines operating cash flow as cash generated from operations, adding back exceptional items, exceptional pension curtailment gain, exceptional change in valuation of put and call options, exceptional property, plant and equipment writedowns, exceptional software writedowns, exceptional capitalised development cost writedowns, exceptional inventory writedowns, movements in exceptionals within working capital, purchase of intangible assets (internally developed), purchase of property, plant 34

35 and equipment, purchase of software and other exceptional cash items. The Group defines free cash flow pre dividend as operating cash flow less exceptional costs, interest received, interest and other finance costs paid and tax paid. The Group defined free cash flow post dividend as free cash flow pre dividend less dividends. The Group uses operating cash flow, free cash flow pre dividend and free cash flow post dividend as supplemental measures of the Group s trading cash flow. The table below sets out the reconciliation of the Group s operating cash flow and free cash flow pre and post dividend to cash generated for operations for the periods indicated (unaudited) ( millions) Cash generated from operations Exceptional items... (1.2) 45.0 Exceptional pension curtailment gain Exceptional change in valuation of put and call options (1.8) Exceptional property, plant and equipment writedowns... (2.9) Exceptional software writedowns... (0.5) Exceptional capitalised development cost write downs... (3.2) Exceptional inventory writedowns... (1.6) Movement in exceptionals within working capital (27.4) Purchase of intangible assets (internally developed)... (19.9) (14.7) Purchase of property, plant and equipment... (41.4) (15.9) Purchase of software... (3.3) (2.5) Other Operating cash flow Exceptional costs... (16.8) (7.6) Interest received Interest and other finance costs paid... (10.5) (8.3) Tax paid... (14.4) (15.3) Free cash flow pre dividend... (13.5) 45.8 Dividends paid... (35.5) (33.8) Free cash flow post dividend... (49.0) 12.0 Bridge to operating profit before impairment of goodwill, amortisation of acquired intangible assets and exceptional items The table below sets out a bridge of the Group s operating cash flow and free cash flow pre and post dividend to operating profit before impairment of goodwill, amortisation of acquired intangible assets and exceptional items for the periods indicated, which the Group considers useful as a supplemental measure in evaluating the Group s ability to convert profits to cash (unaudited) ( millions) Operating profit before impairment of goodwill, amortisation of acquired intangible assets and exceptional items Depreciation of property, plant and equipment Amortisation of software Amortisation of capitalised development costs Impairment of capitalised development costs Share based payments (Increase)/decrease in working capital... (10.2) 0.9 Capitalised research and development expenditure... (19.9) (14.7) Purchase of property, plant and equipment... (41.4) (15.9) Purchase of software... (3.3) (2.5) Other

36 (unaudited) ( millions) Operating cash flow Exceptional costs... (16.8) (7.6) Interest received Interest and other finance costs paid... (10.5) (8.3) Tax paid... (14.4) (15.3) Free cash flow pre dividend... (13.5) 45.8 Dividends paid... (35.5) (33.8) Free cash flow post dividend... (49.0) 12.0 Organic constant currency metrics The Group uses organic constant currency metrics because the Directors believe that these measures provide investors with useful supplemental information regarding the underlying performance of the Group as they eliminate the effect of acquisitions and the translation effect of currency exchange movements from period to period. The following tables provide reconciliations of Group and segmental revenue on an actual basis to revenue on an organic constant currency basis for the periods indicated as reported Acquisition Adjustment (1) Currency Adjustment (2) 2016 at organic constant currency (unaudited) ( millions) Revenue (100.1) (75.2) Performance Materials (45.4) Wireless Systems (100.1) (29.8) (1) Acquisitions are eliminated from 2016 and 2015 revenue to allow a comparison of organic performance. (2) Revenue is converted to constant currency by applying prior year exchange rates to convert current year revenues to GBP as reported Acquisition Adjustment (1) Currency Adjustment (2) 2015 at organic constant currency (unaudited) ( millions) Revenue (1.4) Performance Materials Wireless Systems (1.4) (1) Acquisitions are eliminated from 2016 and 2015 revenue to allow a comparison of organic performance. (2) Revenue is converted to constant currency by applying prior year exchange rates to convert current year revenues to GBP. Rounding Percentages and certain amounts included in this document have been rounded for ease of presentation. Therefore, the sum of the numbers in certain tables may not conform exactly to the total figure given for the figures that precede them. In addition, certain percentages in this document reflect calculations based upon the underlying information prior to rounding, and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based on the rounded numbers. 36

37 Currencies In this document and the information incorporated by reference into this document, references to, sterling, pounds sterling, pence, pounds or GBP are to the lawful currency of the United Kingdom and references to US dollars, US$, $US, US or cents are to the lawful currency of the United States. The abbreviation represents the euro, the European single currency. References to RMB are to the lawful currency of the People s Republic of China and references to KRW are to the lawful currency of the Republic of Korea. Average rate against sterling Year US dollar Period End Average High Low January February 2017 (up to 24 February) Source: Bloomberg No Profit Forecast No statement in this document is intended as a profit forecast and no statement in this document should be interpreted to mean that earnings per share for the current or future financial years would necessarily match or exceed the historical published earnings per share. Notice to investors in the United States of America Subject to certain exceptions, neither this document nor the Provisional Allotment Letter constitutes, or will constitute, or forms part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or acquire, New Shares, Nil Paid Rights and/or Fully Paid Rights to any Shareholder with a registered address in, or who is resident of, the United States. If you are in the United States, you may not exercise your Nil Paid Rights or Fully Paid Rights and/or acquire any New Shares offered hereby. Notwithstanding the foregoing, the Company reserves the right to offer and deliver the Nil Paid Rights to, and the Fully Paid Rights and the New Shares may be offered to and acquired by, a limited number of Shareholders in the United States reasonably believed to be QIBs, within the meaning of Rule 144A, in offerings exempt from or in a transaction not subject to, the registration requirements under the Securities Act. The Nil Paid Rights, the Fully Paid Rights and the New Shares being offered outside the United States are being offered in reliance on Regulation S. If you are a QIB located in the United States, in order to exercise your Nil Paid Rights or Fully Paid Rights and/or acquire any New Shares upon exercise thereof, you must sign and deliver an investor letter. If you sign such an investor letter, you will be, amongst other things: representing that you and any account for which you are acquiring the New Shares, the Nil Paid Rights or the Fully Paid Rights are a QIB; and agreeing not to reoffer, sell, pledge or otherwise transfer the New Shares, the Nil Paid Rights, the Fully Paid Rights or the Provisional Allotment Letters, except: in an offshore transaction in accordance with Rule 904 of Regulation S under the Securities Act (which, for the avoidance of doubt, includes a sale over the London Stock Exchange), and neither the seller nor any person acting on its behalf knows that the transaction has been pre-arranged with a buyer in the United States; to a QIB in a transaction in accordance with Rule 144A; with respect to the New Shares only, pursuant to Rule 144 under the Securities Act (if available); or in another transaction pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, and, in each case, in compliance with any applicable securities laws of any state or other jurisdiction of the United States. No representation has been, or will be, made by the Company or the Underwriters as to the availability of Rule 144 under the Securities Act or any other exemption under the Securities Act or any applicable 37

38 securities laws of any state or other jurisdiction of the United States for the reoffer, pledge or transfer of the New Shares. Any envelope containing a Provisional Allotment Letter and post-marked from the United States will not be valid unless it contains a duly executed investor letter in the appropriate form as described above, any Provisional Allotment Letter in which the exercising holder requests New Shares to be issued in registered form and gives an address in the United States will not be valid unless it contains a duly executed investor letter. The payment paid in respect of Provisional Allotment Letters that do not meet the foregoing criteria will be returned without interest. Any person in the United States who obtains a copy of this document and who is not a QIB will be unable to purchase, or acquire, Nil Paid Rights, Fully Paid Rights and/or New Shares and is required to disregard this document. Overseas territories Shareholders who have registered addresses in or who are resident in, or who are citizens of, all countries other than the UK should refer to paragraph 2.5 of Part III Terms and Conditions of the Rights Issue of this document. Notice to All Shareholders Any reproduction or distribution of this document or the Provisional Allotment Letters, in whole or in part, and any disclosure of its contents or use of any information contained in this document for any purpose other than considering an investment in the Nil Paid Rights, the Fully Paid Rights or the New Shares is prohibited. By accepting delivery of this Prospectus and, where applicable, the Provisional Allotment Letters, each offeree of the Nil Paid Rights, the Fully Paid Rights and the New Shares agrees to the foregoing. The distribution of this document and any accompanying documents into jurisdictions other than the UK may be restricted by law. Persons into whose possession these documents come should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. For further information on the Excluded Territories, please see Part III Terms and Conditions of the Rights Issue of this document. No action has been taken by the Company or by the Underwriters or Rothschild that would permit an offer of the Nil Paid Rights, the Fully Paid Rights or the New Shares or possession or distribution of this document, the Provisional Allotment Letters or any other offering or publicity material in any of the Excluded Territories or in any other jurisdictions where the extension and availability of the Rights Issue would breach any applicable law. Available Information If, at any time, the Company is neither subject to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act ), nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, the Company will furnish, upon request, to any holder or beneficial holder of the Nil Paid Rights, the Fully Paid Rights or the New Shares, or any prospective purchaser designated by any such holder or beneficial owner, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. In such cases, the Company will also furnish to each such owner all notices of general Shareholders meetings and other reports and communications that the Group generally makes available to Shareholders. Enforcement of civil liabilities The ability of an Overseas Shareholder to bring an action against the Company may be limited under law. The Company is a public limited company incorporated in England and Wales. The rights of holders of Shares are governed by English law and by the Company s memorandum and articles of association. These rights differ from the rights of shareholders in typical US corporations and some other non-uk corporations. An Overseas Shareholder may not be able to enforce a judgment against some or all of the Directors and executive officers. The majority of the Directors and executive officers are residents of the UK. 38

39 Consequently, it may not be possible for an Overseas Shareholder to effect service of process upon the Directors and executive officers within that Shareholder s country of residence or to enforce against the Directors and executive officers judgments of courts of that Shareholder s country of residence based on civil liabilities under that country s securities laws. There can be no assurance that an Overseas Shareholder will be able to enforce any judgments in civil and commercial matters or any judgments under the securities laws of countries other than the UK against the Directors or executive officers who are residents of the UK or countries other than those in which judgment is made. In addition, English or other courts may not impose civil liability on the Directors or executive officers in any original action based solely on the foreign securities laws brought against the Company or the Directors in a court of competent jurisdiction in England or other countries. 39

40 RIGHTS ISSUE STATISTICS Price per Share... Basis of Rights Issue pence 4 New Shares for every 5 Existing Shares Number of Shares in issue at 27 February 2017 (1) ,445,376 Number of New Shares to be issued by the Company (2) ,156,300 Number of Shares in issue immediately following completion of the Rights Issue (3) ,601,676 New Shares as a percentage of enlarged issued share capital of the Company immediately following completion of the Rights Issue (3) % Estimated net proceeds receivable by the Company after expenses... Estimated expenses in connection with the Rights Issue million 10 million (iii) 8.1 Notes: (1) Being the latest practicable date prior to the date of the document. (2) Assuming that no Shares are issued as a result of the exercise of any options between 27 February 2017, being the latest practicable date prior to the publication of this document, and Admission becoming effective. (3) Assuming that no Shares are issued as a result of the exercise of any options between 27 February 2017, being the latest practicable date prior to the publication of this document, and the completion of the Rights Issue. 40

41 EXPECTED TIMETABLE FOR THE RIGHTS ISSUE (1)(2) Publication and posting of this document, the notice of General Meeting and the Form of Proxy February 2017 Record Date for entitlements under the Rights Issue...close of business on 14 March 2017 Latest time and date for receipt of General Meeting Forms of Proxy, submission of CREST Proxy Instructions or registration to vote electronically a.m. on 14 March 2017 General Meeting a.m. on 16 March 2017 Date of dispatch of Provisional Allotment Letters (to Qualifying non-crest Shareholders only (3) ) March 2017 Publication of notice in the London Gazette March 2017 Special Dealing Service open for applications 16 March 2017 Dealings in New Shares, nil paid, commence on the London Stock Exchange a.m. on 17 March 2017 Existing Shares marked ex-rights (the Ex-Rights Date ) a.m. on 17 March 2017 CREST Stock accounts credited with Nil Paid Rights as soon as practicable after 8.00 a.m. (for Qualifying CREST Shareholders only (3) )... on 17 March 2017 Nil Paid Rights and Fully Paid Rights enabled in CREST as soon as practicable after 8.00 a.m. (for Qualifying CREST Shareholders only (3) )... on 17 March 2017 Latest time for receipt of instructions under Special Dealing Service in respect of Cashless Take-up or disposal of Nil Paid Rights p.m. on 23 March 2017 Recommended latest time for requesting withdrawal of Nil Paid Rights or Fully Paid Rights from CREST (i.e. if your Nil Paid Rights or Fully Paid Rights are in CREST and you wish to convert them into certificated form) p.m. on 27 March 2017 Dealings carried out in relation to the Cashless Take-up or disposal of Nil Paid Rights under the Special Dealing Service March 2017 Latest time and date for depositing renounced Provisional Allotment Letters, nil paid or fully paid, into CREST or for dematerialising Nil Paid Rights into a CREST stock account p.m. on 28 March 2017 Latest time and date for splitting Provisional Allotment Letters p.m. on 29 March 2017 Despatch of cheques in relation to net proceeds of disposal of Nil Paid Rights under the Special Dealing Service March 2017 Latest time and date for acceptance and payment in full and registration of renounced Provisional Allotment Letters a.m. on 3 April 2017 Expected date of announcement of results of the Rights Issue through a Regulatory Information Service... 4 April 2017 Dealings in the New Shares, fully paid, commence on the London Stock Exchange fully paid a.m. on 4 April 2017 New Shares credited to CREST stock accounts as soon as practicable after 8.00 a.m. (for Qualifying CREST Shareholders only (3) )... on 4 April 2017 Despatch of definitive share certificates for New Shares in certificated form (to Qualifying non-crest Shareholders only (3) ) and Premium Payments (if applicable) of Nil Paid Rights not taken up... by no later than 11 April 2017 LR (9)(a) LR (9)(e) (iii) LR (8 (iii) 5.2.3(g) (iii) (iii) 4.7 Notes: (1) The times and dates set out in the expected timetable of principal events above and mentioned throughout this document, by announcement through a Regulatory Information Services, and in the Provisional Allotment Letter may be adjusted by the Company, in which event details of the new dates will be notified to the FCA and to the London Stock Exchange and, where appropriate, to Shareholders. (2) References to times in this document are to London time unless otherwise stated. (3) Subject to certain restrictions relating to Overseas Shareholders. See paragraph 2.5 of Part III Terms and Conditions of the Rights Issue. 41

42 DIRECTORS, COMPANY SECRETARY AND ADVISERS Board of Directors A list of the members of the Company s Board is set forth in the table below. (i) 1.1 Name Position (i) 16 (i) 14.1 Dr Martin Read, CBE... Chairman (iii) 1.1 Tony Quinlan... Chief Executive Kevin Dangerfield... Chief Financial Officer Paula Bell... Non-Executive Director Wu Gang... Non-Executive Director Sir Christopher Hum, KCMG... Non-Executive Director Mike Parker, CBE... Senior Independent Director Nathalie Rachou... Non-Executive Director Kjersti Wiklund... Non-Executive Director Each of the Directors business address is the Company s registered office address at 100 Pall Mall, London SW1Y 5NQ, United Kingdom. Telephone: +44 (0) Company Secretary: Gerhard du Plessis (i) Registered Office: Sole Global Coordinator, Joint Sponsor and Joint Bookrunner: Joint Sponsor and Financial Adviser: Joint Bookunner: Reporting Accountant: Auditors: Legal advisers to the Company as to English and US law: Legal advisers to the Joint Sponsors and the Underwriters as to English and US law: 100 Pall Mall, London SW1Y 5NQ, United Kingdom J.P. Morgan Securities plc 25 Bank Street Canary Wharf London E14 5JP Rothschild New Court St Swithin s Lane London EC4N 8AL Numis Securities Limited 10 Paternoster Square London EC4M 7LT Deloitte LLP Athene Place 66 Shoe Lane London EC4A 3BQ Deloitte LLP Abbots House Reading RG1 3BD Freshfields Bruckhaus Deringer LLP 65 Fleet Street London EC4Y 1HS Simmons & Simmons LLP CityPoint One Ropemaker Street London EC2Y 9SS (iii) (iii) (iii) 10.1 (i) 2.1 (iii)

43 Registrar: Receiving Agent: Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Capita Asset Services Corporate Actions The Registry 34 Beckenham Road Beckenham Kent BR3 4TU (iii)

44 PART I LETTER FROM THE CHAIRMAN OF LAIRD PLC Directors: Dr Martin Read, CBE Tony Quinlan Kevin Dangerfield Paula Bell Wu Gang Sir Christopher Hum, KCMG Mike Parker, CBE Nathalie Rachou Kjersti Wiklund Registered Office: 100 Pall Mall London SW1Y 5NQ United Kingdom 28 February 2017 To holders of Laird PLC ordinary shares Dear Shareholder Proposed 4 for 5 Rights Issue of 217,156,300 New Shares at 85 pence per New Share and Notice of General Meeting LR (1) LR (2) LR (3) 1. Introduction On 2 December 2016, the Company announced an intention to raise up to 185 million by way of a Rights Issue during the first quarter of 2017, underwritten on a standby basis by J.P. Morgan Cazenove. The purpose of this document is to explain the background to and reasons for the Rights Issue, set out the terms and conditions of the Rights Issue and provide you with a Notice of General Meeting to be held to consider and, if thought fit, to pass the Resolution required to authorise the Company to carry out the Rights Issue. This document also explains why the Board considers that the Resolution to be proposed at the General Meeting is in the best interests of Shareholders and why the Board unanimously recommends that Shareholders vote in favour of the Resolution. 2. Background to and reasons for the Rights Issue 2.1 Background Laird is a global technology company providing systems, components and solutions that enable connectivity in mission-critical wireless applications and antenna systems and protect electronics from electromagnetic interference and heat. (iii) 3.4 (i) 12.1 (i) 12.2 During the period from 2009 to 2015, Laird s revenue grew from million to million, both organically and through acquisition, benefiting from, amongst other things, the growth of the global smartphone and wireless technology markets was a positive year for Laird, which saw the Group widen its range of offerings (especially in the space of connected cars) and further diversify its customer base. Laird announced in October 2015 that it was redesigning its operating model to simplify its manufacturing capabilities in Europe and North America into its largest facilities. This redesign of the operating model is expected to streamline the business to deliver efficiency savings as well as to enable Laird to become a more effective partner to its customers. Laird also acquired LS Research, a wireless product design business providing near field, local area and wide area products and services to enable wireless connectivity and EIoT capabilities into the commercial and light industrial markets. Performance in 2016 was disappointing. Profit before tax and underlying profit before tax were adversely impacted by principally three factors, the first two of which particularly impacted the first half of The first factor was an unexpected reduction in activity in the US rail freight sector, a key market for Laird s wireless automation systems business ( WACS ), due to the collapse of oil prices, which materially 44

45 affected Laird s performance in This was a significant external headwind, but the Directors believe Laird s commercial forecasting should have been better at predicting the impact of commodity pricing on key end markets. The second factor, which primarily impacted margins, was the higher level of investment and remedial action required in relation to the acquisition of Novero, which completed in January When the business was acquired, the price and terms reflected that it was an operational and financial turnaround, with substantial prospects. Although no new issues were identified, it became clear that the turnaround actions and associated costs would be at the high end of expectations. The Directors believe that Novero remains an important strategic acquisition, but that expectations for the business should have been more conservative and cautious, given the poor state of records and management controls pre acquisition. The third factor impacted the precision metals business within the Performance Materials division, where pricing and margin pressures from Laird s largest customer, reduced volumes due to a customer s later than expected ramp-up on smartphones and operational issues led to a significant decline in the division s performance. The other Laird businesses traded in line with the Board s expectations for the financial year ended 31 December However, the reduced performance of the Group meant that full year (loss)/profit before tax was a loss of million, as compared to a profit of 15.4 million for the prior financial year, while underlying profit before tax was 51.1 million, as compared to 73.1 million for the prior financial year. The significant reduction in profitability together with the Group s investments (both organic and the acquisition of Novero) and the weakness of sterling increased the Group s net debt to Covenant EBITDA ratio for the year to 3.2x, materially reducing the covenant headroom under Laird s Existing Financing Arrangements. Management has taken the appropriate steps to reduce costs in its wireless automation systems business while maintaining capability in order to enable the Group to manage the profitability of this business, including headcount reduction and lower discretionary spend, and has also taken actions to stabilise and improve the financial performance of the Performance Materials division, including the recruitment of a new President for the division. Actions have also been taken to manage costs and cash across the Group. Furthermore, the decision was made to move from a two division to a three division structure effective from 1 January The new structure comprises: the new CVS division, the new WTS division and the new PM division, each with its own executive who will also sit on the Group executive committee. Further details are provided in paragraph 7 below. The Directors believe that this structure is simpler than the historic divisional/business unit model and will enable a greater focus on complementary products and end markets. For 2017 and onwards, Laird intends to report on the three new divisions as individual segments while all reporting covering 2016 and before will be on the basis of two segments, unless otherwise stated. 2.2 Reasons for the Rights Issue On 2 December 2016, in order to proactively address the Group s financial position and to significantly reduce its structural indebtedness, the Board announced it was targeting a capital structure of between 1.0x to 2.0x net debt to Covenant EBITDA in the medium term and indicated that it intended to undertake a Rights Issue in the first quarter of 2017 at the time of publication of the full year financial results. The Board also announced that it was in discussions with the Lenders under its Existing Financing Arrangements. Whilst Laird did not believe that it would breach any of the covenants under those arrangements at 31 December 2016 (and in fact has not breached them), it successfully obtained amendments to the Existing Financing Arrangements to ensure that was the case as at 31 December The leverage covenants will be tested at 30 June 2017 and thereafter at their original levels. The net proceeds from the Rights Issue will be used to reduce borrowings under its revolving credit facilities and create sufficient covenant headroom going forward such that the Company will not need to seek further amendments to the Existing Financing Arrangements for subsequent testing dates. In addition, the benefits of a strengthened financial position for Laird are that it: (i) enables the continued investment in 2017 to deliver the previously announced operational improvement programme and the associated benefits of annualised savings of at least 15 million (US$20 million) from 2018 with 12 million (US$15 million) expected in 2017, according to unaudited Company estimates; 45

46 (ii) (iii) enables the continued investment in opportunities for future growth, in particular in relation to the new CVS division; provides the financial strength required to demonstrate Laird s ability to support customers; and (iv) provides a strong foundation from which to assess the optimal route to maximise shareholder value in Performance Materials and particularly precision metals. 3. Use of proceeds The Rights Issue is expected to raise approximately 185 million in gross proceeds and approximately 175 million of net proceeds, which the Group expects to use to reduce borrowings under its revolving credit facilities. (iii) 8.1 (iii) Financial impact of the Rights Issue Had the Rights Issue taken place as at the last balance sheet date, being 31 December 2016, (and had the proceeds of the Rights Issue been used to reduce the Group s borrowings) the effect on the balance sheet would have been no change to cash and cash equivalents and a decrease in borrowings of 175 million. Your attention is also drawn to Part VII Unaudited Pro Forma Financial Information of this document which contains an unaudited pro forma statement of net assets that illustrates the effect of the Rights Issue on the Group s net assets and borrowings as at 31 December 2016 as if the Rights Issue and application of proceeds had been undertaken at that date. 5. Terms of the Rights Issue and of the New Shares The Company is proposing to raise proceeds of approximately 175 million (net of expenses) pursuant to the Rights Issue. The Rights Issue is being fully underwritten by the Underwriters, subject to certain customary conditions. The principal terms of the underwriting agreement are summarised in paragraph 15 of Part IX Additional Information of this document. (iii) 4.4 (iii) (iii) (iii) (iii) 8.1 The Company proposes to issue 217,156,300 New Shares in connection with the Rights Issue. Subject to the fulfilment of, among other things, the conditions set out below, New Shares will be offered to Qualifying Shareholders at an Issue Price of 85 pence per Share, payable in full on acceptance. The Rights Issue will be offered on the basis of: 4 New Shares at 85 pence per New Share for every 5 Existing Shares held on the Record Date (and so in proportion for any other number of Existing Shares then held) and otherwise on the terms and conditions as set out in this document and, in the case of Qualifying Non- CREST Shareholders, the Provisional Allotment Letters. (iii) (iii) The Issue Price of 85 pence per New Share represents a discount of approximately 51.4% to the closing middle market price of pence per Existing Share on 27 February 2017, the latest Business Day prior to the announcement of the Rights Issue and an approximate 37.0% discount to the theoretical ex-rights price of pence per New Share by reference to the closing middle market price on the same basis. Entitlements to New Shares will be rounded down to the nearest whole number (or to zero) and fractions of New Shares will not be allocated to Shareholders but will be aggregated and issued into the market for the benefit of the Company. Holdings of Existing Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Rights Issue. LR (9)(f) LR (9)(g) The Rights Issue is conditional, among other things, upon: (i) the Underwriting Agreement having become unconditional in all respects save for the condition relating to Admission; (iii) (iii) 5.2.3(g) (ii) (iii) Admission becoming effective by not later than 8.00 a.m. on 17 March 2017 (or such later time and/or date as the Sole Global Coordinator may agree); and the passing of the Resolution at the General Meeting without material amendment. The Rights Issue will result in 217,156,300 New Shares being issued (representing approximately 80.0% of the existing issued share capital and 44.4% of the enlarged issued share capital immediately following completion of the Rights Issue). (iii) 9.1 (iii)

47 The New Shares, when issued and fully paid, will rank pari passu in all respects with the Existing Shares, including the right to receive dividends or distributions made, paid or declared after the date of issue of the New Shares. Application will be made to the FCA and to the London Stock Exchange for the New Shares to be admitted to the premium listing segment of the Official List and to trading on the main market of the London Stock Exchange. It is expected that Admission will occur and that dealings in the New Shares (nil paid) on the London Stock Exchange will commence at 8.00 a.m. on 17 March Some questions and answers, together with details of further terms and conditions of the Rights Issue, including the procedure for acceptance and payment and the procedure in respect of rights not taken up, are set out in Parts II and III of this document and where relevant will also be set out in the Provisional Allotment Letter. Overseas Shareholders should refer to paragraph 2.5 of Part III Terms and Conditions of the Rights Issue of this document for further information on their ability to participate in the Rights Issue. LR (9)(b) LR (9)(c) LR (9)(a) LR (9)(h) (iii) Intentions of the Directors The Directors, who hold in aggregate 201,230 Existing Shares, representing approximately 0.074% of the Company s existing issued ordinary share capital as at 27 February 2017 (being the last practicable date prior to the publication of this document), each intend to take up their rights in full or in part in respect of the New Shares to which they are entitled or, where their Shares are held in trust or with nominees, such Directors intend to recommend that such rights be taken up in full or in part. (iii) (iii) 3.3 LR (3) 7. Information relating to Laird and the reorganisation of the Group s divisions Laird is a global technology company providing systems, components and solutions that enable connectivity in mission-critical wireless applications and antenna systems and protect electronics from electromagnetic interference and heat. Laird s aim is to be a trusted partner to its customers by creating innovative customer solutions, ensuring high quality engineering and manufacturing processes, enabling accelerated new product launches by delivering speed and access throughout the customer design process and driving higher levels of customer engagement. As at 31 December 2016, Laird had 9,836 employees in 53 locations covering 4 continents and 17 countries. The Group has 24 engineering and manufacturing sites in different locations around the world and 21 design centres. In 2016, Laird reported revenue of million (2015: million; 2014: million), loss before tax of million (2015: profit before tax of 15.4 million, 2014: profit before tax of 48.1 million) and underlying profit before tax of 51.1 million (2015: 73.1 million; 2014: 63.2 million). Net assets as at 31 December 2016 were million (as at 31 December 2015: million; as at 31 December 2014: million). Cash and cash equivalents as at 31 December 2016 were 64.5 million (as at 31 December 2015: 68.8 million, as at 31 December 2014: 64.0 million), total borrowings as at 31 December 2016 were million (as at 31 December 2015: million, as at 31 December 2014: million) and net debt as at 31 December 2016 was million (as at 31 December 2015: million; as at 31 December 2014: million). Historically, the Group has reported as two divisions: Wireless Systems and Performance Materials, described below. Wireless Systems In 2016, the Wireless Systems division s revenue was million (2015: million; 2014: million) and its segment profit before amortisation and impairment of acquired intangible assets and exceptional items was 25.3 million (2015: 30.4 million; 2014: 24.5 million). The Group is an established leader in automotive telematics. The Telematics/M2M section of the Wireless Systems division comprised the Group s Novero and Telematics businesses. Combined, these businesses design, manufacture and sell antennas, automotive-grade connectivity devices and smart device integration ( SDI ) products into the vehicle connectivity market. Customers include original equipment manufacturers ( OEMs ) in automotive, commercial trucking, construction equipment and agricultural equipment, as well as fleet management companies. This section of the division benefits from fast-growing end markets and high sales visibility. The Group is also a market leader in wireless connectivity outside of the vehicle. Prior to the divisional reorganisation, the Wireless Systems division focused on industrial and commercial antennas, commercial wireless connectivity (including Bluetooth and Wi-Fi radios) and industrial control systems. The Directors believe that in this market the Wireless Systems division is well placed to prosper from 47

48 longer-term macro trends, including the development of the EIoT and 5G roll-out and, with value add technologies, systems and products, has significant potential for growth and higher margins in this market. During 2016, Laird s existing businesses in the Wireless Systems division, other than WACS and Novero, performed well. Despite the previously described operational challenges, Novero is now fully integrated, the turnaround programme is on track and it is expected to make a modest profit in This investment in key automotive platforms will mean that the combined Novero and Telematics businesses are well positioned to take advantage of the significant growth potential in the connected automotive market. It is on this basis that, from 1 January 2017, Laird has repositioned these businesses into a standalone CVS division. Performance Materials In 2016, Performance Materials s revenue was million (2015: million; 2014: million) and its segment profit before amortisation and impairment of acquired intangible assets and exceptional items was 44.2 million (2015: 57.5 million; 2014: 54.1 million). The Group s Performance Materials division is a leading global designer and supplier of precision metals, EMI shielding materials (performance coatings and Radio Frequency ( RF ) polymers), thermal materials and magnetic and ceramic products. These products isolate and protect sensitive electronics from EMI, allowing them to function and connect effectively, as well as improving electronic performance through efficient management of heat. The ever-increasing demand for more portable and more powerful devices, and the continuing growth in connected devices, create numerous challenges for Laird s customers who rely on its expertise to create innovative solutions tailored to their needs. Laird s customers include global industry leaders in its target market segments. In addition, Model Solution, Laird s South Korean joint venture created in 2014, which specialises in prototype design, forms part of the Performance Materials division as it is strategically aligned to Performance Materials. Performance in this division was disappointing in Pricing and margin pressures from a key customer, reduced volumes due to a customer s later than expected ramp-up on smartphones and operational issues, have led to a significant decline in the precision metals business within the Performance Materials division. As a first step in the stabilisation of Performance Materials, a new President of the division has been recruited and has joined the Group with effect from 6 February The Group is taking action to improve commercial and operational performance within precision metals to stabilise the business unit and the financial performance of the division as a whole, while also reviewing the growth and value creation options for the division. Laird will then seek to optimise what the Directors consider is a strong portfolio across the division, to navigate a path to long-term sustainable growth. The remaining businesses within this division performed as expected in the year. Reorganisation of the Group s divisions As from 1 January 2017, the Company is operating in three divisions: CVS, WTS and PM. The changes from the old structure can be summarised as follows: The Telematics business of Laird, together with Novero, have separated from the original Wireless Systems division to create the new CVS division; Engineered Thermal Systems ( ETS ) which used to form part of the Performance Materials division and which provides heat protection and temperature control to maintain peak performance of larger electronic and mechanical sub-systems and components, has combined with the rest of the original Wireless Systems division to create the new WTS division; and The remainder of the original Performance Materials division remains as the new PM division. The table below shows the revenue and segment profit before amortisation and impairment of acquired intangible assets and exceptional items for each of the years ended 31 December 2014, 2015 and 2016 for each of the original divisions, as well as the revenue and segment profit before amortisation and impairment of acquired intangible assets and exceptional items for such years based on the new divisional structure. The figures for the original divisions are extracted without material adjustment from Note 3 to the Laird Final Results for the year ended 31 December 2016 and from the Laird Annual Report and Accounts for each of the years ended 31 December 2014 and The figures for the new divisional structure are derived from unaudited Company data. For a reconciliation of the revenue and segment profit before amortisation and impairment of intangible assets and exceptional items to the 48

49 original divisional structure, see Important Information Non-IFRS Information Reorganisation of the Group s divisions. Old division structure New division structure 2014 Wireless Systems Performance Materials Total CVS WTS PM Total ( millions) (Unaudited) Revenue Segment profit before amortisation and impairment of acquired intangible assets and exceptional items Revenue Segment profit before amortisation and impairment of acquired intangible assets and exceptional items Revenue Segment profit before amortisation and impairment of acquired intangible assets and exceptional items Connected Vehicle Solutions The new CVS division comprises the combination of the Telematics business and Novero. The Directors believe this combination will mean that the division will be well placed to take advantage of the significant growth potential in the connected automotive market. With the telematics control technology from Novero, combined with the vehicle antenna systems from the Telematics business, CVS will create smart antenna systems that differentiate the Group as one of the leaders in this technology. As a result, the potential content per vehicle has expanded and sales opportunities have also increased. The focus of the division is on automotive antennas and telematics control units for cars, trucks and fleets with a broad product offering of automotive antennas, telematics control unit ( TCUs ), signal enhancement systems, wireless charging, fleet tracking and automotive USB hubs. The Directors believe that CVS is a growing business which has taken a step change through recent investment and that separating Novero and Telematics into a standalone division will enable CVS to take advantage of fast growing end markets and high sales visibility, which the Group is already seeing in its order book and pipeline for The Directors expect to see superior growth and margin progression in this division and are targeting revenue in excess of 405 million (US$500 million) by 2020, with improving profitability according to the Company s unaudited estimates. (i) (i) 12.1 (i) 12.2 The CVS division designs, manufactures and sells a range of products into the vehicle connectivity market, including: Automotive antennas; Telematics Control Units; Automotive grade connectivity devices; and Smart device integration. According to unaudited Company data, in 2016, the CVS division s revenue would have been million (2015: million; 2014: million) and its segment profit before amortisation and impairment of acquired intangible assets and exceptional items would have been 13.0 million (2015: 13.6 million; 2014: 10.8 million). 49

50 Wireless and Thermal Systems The new WTS division represents several discrete businesses with related technologies across a range of end markets: Industrial and commercial antennas; Commercial wireless connectivity, including Bluetooth and Wi-Fi radios; Industrial control systems; and Active engineered thermal management systems. The four businesses have largely been driven independently and can generally be characterised as offering low volume, high value add products and systems, with modest growth and limited examples of valuable collaboration between the areas. The WTS division comprises engineered solutions businesses serving specific wireless markets. These businesses aim to be commercially focused to drive growth, deep market and competitive insights and new product execution into target markets. The Directors believe that combining these businesses will allow the Group to leverage a multitude of complementary capabilities and technologies, improve the cross-fertilisation of ideas, become smarter about customer integration and reduce costs. In the medium to long term, the Directors believe the WTS division is well placed to benefit from global trends, including the development of the EIoT and the 5G roll-out. According to unaudited Company data, in 2016, the WTS division s revenue would have been million (2015: million; 2014: million) and its segment profit before amortisation and impairment of acquired intangible assets and exceptional items would have been 14.3 million (2015: 18.2 million; 2014: 14.4 million). Performance Materials The new PM division represents a cluster of material technologies and end markets: Precision Metals (c.55% of revenue); EMI Materials Performance Coatings and RF Polymers; Thermal materials, including dispensables, adhesives and heat spreader products; and Magnetic and Ceramic Products. In recent years, Performance Materials has been a key growth driver of Group profitability, delivering healthy margins and good cash generation by leveraging innovation and reliable fulfilment. However, much of Performance Materials is a short cycle business with a natural volatility linked to certain end markets, most notably consumer devices. The relative scale of Performance Materials coupled with this volatility and short sales visibility can create uncertainty and the intention is to deliver a more sustainable business model and profit performance. In order to achieve this, as a first step, a new President of the division has been recruited and joined the Group with effect from 6 February Additionally, the Group is taking action to improve commercial and operational performance within precision metals to stabilise the financial performance of the Performance Materials division as a whole, whilst also reviewing growth and value creation options. Model Solution remains part of this division, as this prototype model business remains adjacent to Performance Materials. By moving the ETS business from this division into the new WTS division, Laird has created a more focused material technologies business which the Directors believe is better able to address the high value-add opportunities within existing markets. According to unaudited Company data, in 2016, the new PM division s revenue would have been million (2015: million; 2014: million) and its segment profit before amortisation and impairment of acquired intangible assets and exceptional items would have been 42.2 million (2015: 56.1 million; 2014: 53.4 million). 8. Current trading and prospects in respect of Laird Trading for 2016 was in line with the Board s expectations as set out in the statements made on 19 October 2016, 2 December 2016 and 24 January Despite the challenging conditions leading to a disappointing performance in 2016, the Directors believe there are a number of factors that leave Laird well placed in These factors include the completed integration of Novero, which the Directors expect to deliver modest profitability in 2017, the previously announced operational improvement programme and associated annualised cost-savings 50

51 and the actions that have been taken to gradually improve operational efficiency and profitabililty in the Performance Materials division, specifically within the precision metals business. In 2017, the Group expects interest costs of approximately 12 million, exceptional items including an approximately 5 million charge to operating (loss)/profit and an approximately 30 million cash cost relating primarily to the divisional reorganisation and operational improvement programme, an effective tax rate of between 28-30%, capital expenditure of approximately 40 million and capitalised research and development expenditure of approximately 24 million. The Directors believe that the need for wireless connectivity and increasing functionality is the driving force behind connecting the home, automobile, outside environment and other networks together and that the demand for more powerful devices and ubiquitous connectivity within the electronics environment creates opportunities to underpin a return to long-term growth of the business. 9. Dividends and dividend policy In light of the proposed Rights Issue, the Board intends that no final dividend will be paid in respect of The total dividend in respect of the 2016 financial year will therefore be the interim dividend of 4.53p (full year 2015: 13.0p). (i) 20.7 (i) The Board understands the importance of optimising value for shareholders and believes in balancing returns to shareholders with investment in the business to support future growth. To this end, the Board intends to resume dividends in 2017 based on a dividend per share that is covered three times by underlying basic earnings per share with the interim dividend at approximately one third of the full year dividend. Thereafter, consistent with the anticipated improvement in earnings and of cash generation in 2018 and beyond, and subject to prevailing market conditions, the Board expects to reduce dividend cover towards two times underlying basic earnings per share over the medium term. 10. General Meeting and Resolution You will find set out at the end of this document a notice convening a general meeting of the Company to be held at a.m. on 16 March 2017 at the offices of Freshfields Bruckhaus Deringer LLP at 65 Fleet Street, London EC4Y 1HS. This general meeting is being held for the purpose of considering and, if thought fit, passing the Resolution. A summary and explanation of the Resolution is set out below, but please note that this does not contain the full text of the Resolution and you should read this section in conjunction with the Resolution in the Notice of General Meeting at the end of this document. The Resolution is an ordinary resolution authorising the Board to allot up to 217,156,300 Shares, representing 80.0% of the Company s current issued share capital as at 27 February 2017 (being the latest practicable date prior to the publication of this document). This authority will be limited to the allotment of New Shares in connection with the Rights Issue (on the terms and conditions set out in this document) and, if granted, will enable the Company to allot sufficient New Shares to undertake the Rights Issue. This authority will expire at the conclusion of the Company s next AGM expected to be held on 28 April 2017 (or adjournment thereof). The authority granted under the Resolution is in addition to the authority to allot Shares which was granted to the Board at the Company s last AGM in 2016, which the Board has no present intention of exercising and which will expire at the conclusion of the Company s next AGM expected to be held on 28 April Accordingly, the New Shares to be issued in connection with the Rights Issue will be created, allotted and issued pursuant to the authority to be granted under the Resolution proposed at the General Meeting. LR (1) LR (4) 11. Structure of the Rights Issue The Rights Issue has been structured in a way that is expected to have the effect of providing the Company with the ability to realise distributable reserves approximately equal to the net proceeds of the Rights Issue less the nominal value of the New Shares issued by the Company. LR (1) LR (2) (iii) The Company and J.P Morgan Cazenove (the JerseyCo Subscriber ) have agreed to subscribe for ordinary shares in JerseyCo. Monies received from Shareholders or renouncees taking up New Shares under the Rights Issue and from persons procured by the Underwriters, as agents for the Company, to acquire New Shares not taken up, or, if applicable, the Underwriters, will be paid to an account with the Receiving Agent. The JerseyCo Subscriber (acting as principal), will apply the monies in such account (less any premium above the Issue Price) to subscribe for redeemable preference shares in JerseyCo. 51

52 The Company will allot and issue the New Shares to those persons entitled thereto in consideration for the JerseyCo Subscriber transferring its holdings of ordinary shares and redeemable preference shares in JerseyCo to the Company. Accordingly, instead of receiving cash consideration for the issue of New Shares, following completion of the Rights Issue, the Company will own the entire issued share capital of JerseyCo, whose only asset will be the cash reserves representing an amount equal to the net proceeds of the Rights Issue. The Company should be able to access those funds by redeeming the redeemable preference shares it holds in JerseyCo, or, alternatively, during any interim period prior to redemption, by procuring that JerseyCo lends the amount to the Company. The ability to realise distributable reserves in the Company will facilitate any potential distribution to Shareholders made by the Company in the future. Accordingly, by taking up New Shares under the Rights Issue and submitting a valid payment in respect thereof, a Shareholder (or renouncee, as the case may be) instructs the Receiving Agent to hold such payment on behalf of the JerseyCo Subscriber and (i) to the extent of a successful application under the Rights Issue (which has not been subsequently validly withdrawn), to apply such payment on behalf of the JerseyCo Subscriber solely for the JerseyCo Subscriber to subscribe (as principal) for redeemable preference shares in JerseyCo; and (ii) to the extent of an unsuccessful or validly withdrawn application under the Rights Issue, to return the relevant payment without interest to the applicant. The Company may elect to implement the Rights Issue without using the structure above if it deems it to be in the Company s interest to do so. Further details of the documents relating to this structure are set out in paragraph 15.2 of Part IX Additional Information. 12. Overseas Shareholders The attention of Shareholders who have registered addresses outside the United Kingdom, or who are citizens or residents of countries other than the United Kingdom, or who are holding Shares for the benefit of such persons (including, without limitation, custodians, nominees, trustees and agents) or who have a contractual or other legal obligation to forward this document, a Provisional Allotment Letter and any other document in relation to the Rights Issue to such persons, is drawn to the information which appears in paragraph 2.5 of Part III Terms and Conditions of the Rights Issue of this document. New Shares will be provisionally allotted (nil paid) to all Shareholders on the register on the Record Date, including Overseas Shareholders. However, Provisional Allotment Letters will not be sent to Shareholders with registered addresses, or who are resident or located, in an Excluded Territory or, subject to certain exceptions, the United States, nor will the CREST stock account of Shareholders with registered addresses, or who are resident or located, in an Excluded Territory, or, subject to certain exceptions, the United States, be credited with Nil Paid Rights. The notice in the London Gazette referred to in paragraph of Part III Terms and Conditions of the Rights Issue of this document will state where a Provisional Allotment Letter may be inspected or obtained. Any person with a registered address, or who is resident or located, in the United States or an Excluded Territory who obtains a copy of this document or a Provisional Allotment Letter is required to disregard them, except with the consent of the Company. Notwithstanding any other provision of this document or the Provisional Allotment Letter, the terms of the Rights Issue relating to Overseas Shareholders may be waived, varied or modified as regards specific Shareholders or on a general basis by the Company in its absolute discretion. In addition, Overseas Shareholders should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their entitlements to the Rights Issue. 13. Taxation Your attention is drawn to Part VIII Taxation of this document. If you are in any doubt as to your tax position, you should consult your own professional adviser without delay. 14. Share Schemes Outstanding options and awards granted under the Share Schemes may be adjusted in accordance with the rules of the relevant Share Scheme for any effect that the Rights Issue may have on those options and awards. Participants in the Share Schemes will be contacted separately with further information on their rights and how their options and awards will be affected by the Rights Issue. LR (2) 52

53 15. Actions to be taken Shareholders will find enclosed with this document a Form of Proxy for use at the General Meeting. You are requested to complete and sign the Form of Proxy whether or not you propose to attend the General Meeting in person in accordance with the instructions printed on it so as to be received by the Registrar, Capita Asset Services, at the return address on the enclosed Form of Proxy, as soon as possible, and in any event no later than a.m. on 14 March If you hold Existing Shares in CREST, you may appoint a proxy by completing and transmitting a CREST Proxy Instruction in accordance with the procedures set out in the notice convening the General Meeting at the end of this document on page 185. The completion and return of a Form of Proxy (or the electronic appointment of a proxy) will not preclude you from attending and voting in person at the General Meeting or any adjournment thereof, if you wish to do so and are so entitled. If you are a Qualifying Non-CREST Shareholder, a Provisional Allotment Letter will be dispatched to you giving you details of your Nil Paid Rights by post on or about 16 March If you are a Qualifying CREST Shareholder, you will not be sent a Provisional Allotment Letter. Instead, you will receive a credit to your appropriate stock accounts in CREST in respect of Nil Paid Rights, which it is expected will take place as soon as practicable after 8.00 a.m. on 17 March Such crediting does not in itself constitute an offer of New Shares. If you sell or have sold or otherwise transferred all of your Shares held (other than ex-rights) in certificated form before 8.00 a.m. on 17 March 2017, please forward this document and any Provisional Allotment Letter, if and when received, at once to the purchaser or transferee or the bank, stockbroker or other agent through whom the sale or transfer was effected for delivery to the purchaser or transferee, except that such documents should not be sent to any jurisdiction where to do so might constitute a violation of local securities laws or regulations, including, but not limited to, the United States and the Excluded Territories. If you sell or have sold or otherwise transferred only part of your holding of Existing Shares (other than ex-rights) held in certificated form before the Ex-Rights Date, you should refer to the instruction regarding split applications in Part III Terms and Conditions of the Rights Issue of this document and in the Provisional Allotment Letter. If you sell or have sold or otherwise transferred all or some of your Shares (other than ex-rights) held in uncertificated form before the Ex-Rights Date, a claim transaction will automatically be generated by Euroclear which, on settlement, will transfer the appropriate number of Nil Paid Rights to the purchaser or transferee. The latest time and date for acceptance and payment in full in respect of the Rights Issue is expected to be a.m. on 3 April 2017, unless otherwise announced by the Company. The procedure for acceptance and payment is set out in Part III Terms and Conditions of the Rights Issue of this document and, if applicable, in the Provisional Allotment Letter. (iii) For Qualifying Non-CREST Shareholders who take up their rights in the Rights Issue, the New Shares will be issued in certificated form and will be represented by definitive share certificates, which are expected to be despatched by no later than 11 April 2017 to the registered address of the person(s) entitled to them. For Qualifying CREST Shareholders who take up their rights, the Receiving Agent will instruct CREST to credit the stock accounts of the Qualifying CREST Shareholders with their entitlements to New Shares. It is expected that this will take place as soon as practicable after 8.00 a.m. on 4 April Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsor regarding the action to be taken in connection with this document and the Rights Issue. If you are in any doubt as to the action you should take, you should immediately seek your own financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the FSMA or, if you are outside the United Kingdom, by another appropriately authorised independent financial adviser. LR (4) 53

54 16. Special Dealing Service The Company has engaged Capita Asset Services to make available the Special Dealing Service in order for Qualifying Non-CREST Shareholders (who are private individuals and whose registered addresses are in the United Kingdom or any other jurisdiction in the EEA) to sell all of the Nil Paid Rights to which they are entitled or to effect a Cashless Take-up should they wish. Further information about the Special Dealing Service is set out in paragraph of Part III Terms and Conditions of the Rights Issue of this document and the Special Dealing Service Terms and Conditions will be posted to Qualifying Non-CREST Shareholders together with the Provisional Allotment Letter. 17. Further information Your attention is drawn to the further information set out in Part II Some Questions and Answers about the Rights Issue to Part XI Definitions and Glossary (inclusive) of this document. Shareholders should read the whole of this document and not rely solely on the information set out in this letter. In addition, you should consider the risk factors on pages 17 to 28 of this document. LR (3) 18. Importance of your vote Your attention is again drawn to the fact that the Rights Issue is conditional and dependent upon, amongst other things, the Resolution being passed at the General Meeting. LR (1) LR (2) Shareholders are asked to vote in favour of the Resolution at the General Meeting in order for the Rights Issue to proceed. The Directors believe that, in addition to avoiding the covenant default at the next testing date and the liquidity shortfalls described below, the successful completion of the Rights Issue will significantly strengthen the Group s balance sheet and this will enable the Group to make planned investments to deliver the previously announced operational improvement programme and realise opportunities for future growth, which will be important to the future success of the Group. In December 2016, while the Group believed that it would be in compliance with the leverage covenants under its Existing Financing Arrangements for the (then upcoming) 31 December 2016 testing date, it obtained amendments from the Lenders permitting an increase in leverage to 4.0x from 3.5x as at the 31 December 2016 testing date. It obtained these amendments so as to avoid any risk of default at a time when final year end results were not available and work was ongoing in respect of its plans for the Rights Issue. Ultimately, the Group was in compliance with the 3.5x leverage covenant as of 31 December However, if the Resolution is not passed and the Rights Issue therefore does not proceed, absent successful implementation of the measures described below, there is a risk that Laird may experience a liquidity shortfall of up to 13.5 million in May 2017 and Laird is highly likely to be in default under its Existing Financing Arrangements on 30 June 2017, the next covenant testing date. In the event of such a default, immediate payment of amounts then due under such facilities, currently estimated to be up to approximately 410 million (based on 31 December 2016 drawings), subject to amounts then drawn and exchange and interest rates, and the Group would be unlikely to obtain the funds necessary to pay such amounts at that time. Furthermore, even if the liquidity shortfall in May 2017 and default at the 30 June 2017 testing date were avoided, if the Rights Issue does not proceed to completion, it is highly likely that Laird will not have sufficient liquidity/cash headroom to operate the Group from the third quarter of 2017, with a potential liquidity shortfall of up to 50 million before the end of the next 12 months. If the Rights Issue does not proceed, the Group would put in place an action plan to avoid the initial liquidity shortfall, covenant default and ongoing liquidity shortfall, which would first involve attempting to renegotiate the terms of the Existing Financing Arrangements to secure further amendments of the financial covenants and increases to the amounts available under the Existing Financing Arrangements. The Directors believe that such amendments would only be agreed to by the Lenders, if at all, at a significant cost to the Group in the form of additional fees payable to the Lenders, increased coupon payments and/or additional restrictions on, or commitments to engage in, corporate actions (e.g. acquisitions and disposals), each of which would adversely affect or delay implementation of the Group s strategies. If the relevant Lenders were not to agree to commercially acceptable amendments of the Group s financial covenants and increases to the amounts available under the Existing Financing Arrangements, the Group would then seek alternative long-term committed financing arrangements to replace or refinance the amounts outstanding under those arrangements including, in the case of the US PP Notes, the make-whole amount. The Directors have not had any discussions with potential lenders about 54

55 such arrangements and they believe that the terms of such new arrangements, if available at all, would be likely to be significantly more expensive and onerous than those which apply under the Existing Financing Arrangements. The Company could also seek other forms of funding, such as a new equity restructuring, which may result in a dilution of the equity interests of Shareholders in the Company immediately prior to any further issue of Shares. Whilst simultaneously seeking amendments to the Existing Financing Arrangements and/or seeking alternative financing arrangements, the Group would institute Group-wide cost-saving initiatives by reducing capital and headcount investments and tightly managing discretionary spending. Such cost saving initiatives would, however, only provide a short-term solution to avoid an initial liquidity shortfall in May 2017 and preserve cash headroom under the Group s financial covenants, and would likely not provide sufficient liquidity/cash headroom to operate the Group during the third quarter of In addition to cost-saving initiatives and to provide additional cash headroom, the Group may take action to effect disposals of assets, such as the disposal of one or more of the Group s businesses to facilitate a reduction of the Group s outstanding indebtedness. The Directors believe they may be able to secure a disposal of assets in an acceptable timeframe, however there can be no guarantee that the Directors would be able to dispose of assets at a price which they believe is reflective of the full value of the assets being disposed and the Existing Financing Arrangements (and possibly any new financing arrangements) restrict the Group s ability to make disposals without the consent of the relevant Lenders, which could be withheld. While disposals of assets would likely provide the Group with enough cash headroom to enable it to avoid a breach of its financial covenants at the testing date of 30 June 2017 and sufficient liquidity to meet the Group s present requirements in order to operate the Group throughout 2017, such measures would restrict the Group s future growth opportunities and would likely impact the Group s ability to maintain or improve its competitive positioning. As a result, if the Rights Issue does not proceed to completion and the Group is unable to avoid a breach of its financial covenants and a liquidity shortfall by renegotiating the terms of its Existing Financing Arrangements, securing alternative long-term financing, cutting costs and capital investment throughout the Group, or disposing of certain of the Group s assets before a liquidity shortfall occurs or a default occurs at the 30 June 2017 testing date, the Company would be likely to enter into administration or receivership shortly thereafter, at which point Shareholders would lose all or part of the value of their investment in the Company. 19. Recommendation and voting intentions The Board believes the Rights Issue and the Resolution to be in the best interests of the Shareholders as a whole. Accordingly, the Board unanimously recommends that the Shareholders vote in favour of the Resolution to be proposed at the General Meeting to approve the Rights Issue, as the Directors each intend to do in respect of their own legal and beneficial holdings, amounting to 201,230 Existing Shares (representing approximately 0.074% of the Company s existing issued ordinary share capital as at 27 February 2017 (being the last practicable date prior to the publication of this document)). LR (5) Yours faithfully, for and on behalf of Laird PLC Dr Martin Read, CBE Chairman 55

56 PART II SOME QUESTIONS AND ANSWERS ABOUT THE RIGHTS ISSUE The questions and answers set out in this Part II are intended to be in general terms only and, as such, you should read Part III Terms and Conditions of the Rights Issue of this document for full details of what action you should take in connection with the Rights Issue. If you are in any doubt as to what action you should take, you are recommended to seek immediately your own financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser, duly authorised under the FSMA if you are resident in the UK or, if not, from another appropriately authorised independent financial adviser. LR (1) This Part II deals with general questions relating to the Rights Issue and more specific questions relating to Shares held by persons resident in the UK who hold their Shares in certificated form only. If you are an Overseas Shareholder, you should read paragraph 2.5 of Part III Terms and Conditions of the Rights Issue of this document and you should take professional advice as to whether you are eligible and/or you need to observe any formalities to enable you to take up your rights. If you hold your Shares in uncertificated form (that is, through CREST) you should read Part III Terms and Conditions of the Rights Issue of this document for full details of what action you should take. If you are a CREST sponsored member, you should also consult your CREST sponsor. If you do not know whether your Shares are in certificated or uncertificated form, please call the Shareholder Helpline at Capita Asset Services on Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. 1. What is a rights issue? A rights issue is a way for companies to raise money. Companies do this by giving their existing shareholders a right to buy further shares in proportion to their existing shareholdings. The offer under this Rights Issue is at a price of 85 pence per New Share. If you hold Shares on the Record Date, subject to certain exceptions, you will be entitled to buy New Shares under the Rights Issue unless you have sold or otherwise transferred those Shares (other than ex-rights) prior to the Ex-Rights Date. If you hold your Existing Shares in certificated form, your entitlement will be set out in your Provisional Allotment Letter. New Shares are being offered to Qualifying Shareholders in the Rights Issue at a discount to the share price on the last dealing day before the details of the Rights Issue were announced on 27 February The Issue Price of 85 pence per New Share represents a pence discount to the theoretical ex-rights price of pence per Share based on the closing middle-market price of an Existing Share as derived from the London Stock Exchange s Daily Official List of pence per Share on 27 February 2017, the last Business Day prior to the date of announcement of the terms of the Rights Issue. As a result of this discount and while the market value of the Existing Shares exceeds the Issue Price, the right to buy the New Shares is potentially valuable. (iii) 4.4 (iii) (iii) The Rights Issue is on the basis of 4 New Shares for every 5 Existing Shares held by Qualifying Shareholders on the Record Date. If you are a Qualifying Shareholder and you do not want to buy the New Shares to which you are entitled, you can instead sell or transfer your rights (called Nil Paid Rights) to those New Shares and receive the net proceeds, if any, of the sale or transfer in cash. This is referred to as dealing nil paid. 2. What happens next? The Company has called a General Meeting to be held at a.m. on 16 March 2017 at the offices of Freshfields Bruckhaus Deringer LLP at 65 Fleet Street, London EC4Y 1HS. Please see the Notice of General Meeting at the end of this document. As you will see from the contents of the notice of the General Meeting, the Directors are seeking shareholder approval for the allotment of the New Shares. Unless you hold your Shares indirectly, you will find enclosed with this document a Form of Proxy for use in relation to the General Meeting. You are requested to complete and sign the Form of Proxy whether or not you propose to attend the General Meeting in person in accordance with the instructions printed 56

57 on it so as to be received by the Registrar, Capita Asset Services, at the return address on the enclosed Form of Proxy, as soon as possible, and in any event no later than a.m. on 14 March As an alternative to completing and returning the printed Form of Proxy, you can also submit your proxy electronically by accessing the Registrar s website at Alternatively, if you hold Existing Shares in CREST, you may appoint a proxy by completing and transmitting a CREST Proxy Instruction in accordance with the procedures set out in the notice convening the General Meeting at the end of this document on page 185. To be valid, the electronic submission or CREST Proxy Instruction should be received no later than a.m. on 14 March 2017 or not later than 48 hours before the time appointed for any adjourned meeting. The completion and return of a Form of Proxy (or the electronic appointment of a proxy) will not preclude you from attending and voting in person at the General Meeting or any adjournment thereof, if you wish to do so and are so entitled. If the Resolution is approved at the General Meeting, the Rights Issue will proceed (subject to certain conditions). The Provisional Allotment Letters are due to be despatched on 16 March 2017 to Qualifying non-crest Shareholders and the Nil Paid Rights are due to be credited to the CREST stock accounts of Qualifying CREST Shareholders as soon as practicable after 8.00 a.m. on 17 March Can I sell some rights and use the proceeds to take up my other rights? This is known as a Cashless Take-up or tail-swallowing. You should contact your stockbroker who may be able to help if you wish to do this. Alternatively, if you are an individual certificated shareholder whose registered address is in the UK or any other EEA country, you can use the Special Dealing Service (see paragraph 6(e) below). Please note that your ability to sell your rights is dependent on demand for such rights and that the price for Nil Paid Rights may fluctuate. Please ensure that you allow enough time so as to enable the person acquiring your rights to take all necessary steps in connection with taking up the entitlement prior to a.m. on 3 April I hold my Existing Shares in certificated form. How do I know if I am able to acquire New Shares under the Rights Issue? If you receive a Provisional Allotment Letter and are not a holder, subject to certain exceptions, with a registered address in the Excluded Territories or in the United States, then you should be eligible to acquire New Shares under the Rights Issue (as long as you have not sold all of your Existing Shares before 8.00 a.m. on 17 March 2017 (the time when the Existing Shares are expected to be marked ex-rights by the London Stock Exchange) in which case you will need to follow the instructions on the front page of this document). Overseas Shareholders should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their entitlements to the Rights Issue. 5. I hold my Existing Shares in certificated form. How will I be informed of how many New Shares I am entitled to buy? Subject to Shareholders approving the Resolution at the General Meeting to be held at a.m. on 16 March 2017 at the offices of Freshfields Bruckhaus Deringer LLP at 65 Fleet Street, London EC4Y 1HS, if you hold your Existing Shares in certificated form and do not have a registered address in the United States or one of the Excluded Territories (subject to certain exceptions), you will be sent a Provisional Allotment Letter that shows: how many Existing Shares you held at the close of business on 14 March 2017 (the Record Date for the Rights Issue); how many New Shares you are entitled to buy; and how much you need to pay if you want to take up your right to buy all the New Shares provisionally allotted to you in full. Subject to certain exceptions, if you have a registered address in one of the Excluded Territories or in the United States, you will not receive a Provisional Allotment Letter. 57

58 6. I am a Qualifying Shareholder and I hold my Existing Shares in certificated form. What are my choices and what should I do with the Provisional Allotment Letter? (a) If you want to take up all of your rights If you want to take up all of your rights to acquire the New Shares to which you are entitled, all you need to do is send the Provisional Allotment Letter, together with your cheque or banker s draft for the full amount, payable to Capita Registrars Limited Re Laird PLC Rights Issue A/C and crossed A/C payee only, by post to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or by hand (during normal business hours only) to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU to arrive by no later than a.m. on 3 April Within the UK only, you can use the reply-paid envelope which will be enclosed with the Provisional Allotment Letter. Full instructions are set out in Part III Terms and Conditions of the Rights Issue of this document and will be set out in the Provisional Allotment Letter. Please note third party cheques may not be accepted other than building society cheques or banker s drafts. If payment is made by building society cheque (not being drawn on an account of the applicant) or a banker s draft, the building society or bank must endorse on the back of the cheque or draft the applicant s name and the account number of an account held in the applicant s name at the building society or bank, such endorsement being validated by a stamp and an authorised signature. A definitive share certificate will then be sent to you for the New Shares that you take up. Your definitive share certificate for New Shares is expected to be despatched to you by no later than 11 April You will need your Provisional Allotment Letter to be returned to you if you want to deal in your Fully Paid Rights. Your Provisional Allotment Letter will not be returned to you unless you tick the appropriate box on the Provisional Allotment Letter. (b) If you do not want to take up your rights at all If you do not want to take up your rights, you do not need to do anything. If you do not return your Provisional Allotment Letter subscribing for the New Shares to which you are entitled by a.m. on 3 April 2017, the Group has made arrangements under which the Joint Bookrunners, as agent for the Company, will try to find investors to take up your rights and the rights of others who have not taken up their rights. If the Joint Bookrunners do find investors who agree to pay a premium above the Issue Price and the related expenses of procuring those investors (including any applicable brokerage and commissions and amounts in respect of value added tax), you will be sent a cheque for your share of the amount of that premium provided that this is 5.00 or more. Cheques are expected to be despatched by no later than 11 April 2017 and will be sent to your existing address appearing on the Company s register of members (or to the first-named holder if you hold your Existing Shares jointly). If the Joint Bookrunners cannot find investors who agree to pay a premium over the Issue Price and related expenses so that your entitlement would be 5.00 or more, you will not receive any payment, and any amounts of less than 5.00 will be aggregated and will be for the account of the Company. Alternatively, if you do not want to take up your rights, you can sell or transfer your Nil Paid Rights (see paragraph 6(d) below). (c) If you want to take up some but not all of your rights If you want to take up some but not all of your rights and wish to sell some or all of those you do not want to take up, you should first apply to have your Provisional Allotment Letter split by completing Form X on the Provisional Allotment Letter (unless you wish to use the Special Dealing Service), and returning it by post to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or by hand (during normal business hours only) to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU to be received by 3.00 p.m. on 29 March 2017, together with a covering letter stating the number of split Provisional Allotment Letters required and the number of Nil Paid Rights to be comprised in each split Provisional Allotment Letter. You should then deliver the split Provisional Allotment Letter representing the New Shares that you wish to accept together with your cheque or banker s draft to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU at either of the addresses detailed above to be received by a.m. on 3 April Shareholders who wish to effect a Cashless Take-up of their Nil Paid Rights (which may be achieved through the sale of such portion of their Nil Paid Rights as will raise sufficient funds to allow the relevant Shareholder to take up their remaining Nil Paid Rights) should either use the Special Dealing Service or, alternatively, contact their broker, who may be able to assist with 58

59 such arrangements. Please note that your ability to sell your rights is dependent on demand for such rights and that the price for Nil Paid Rights may fluctuate. Please ensure that you allow enough time so as to enable the person acquiring your rights to take all necessary steps in connection with taking up the entitlement prior to a.m. on 3 April Alternatively, if you only want to take up some of your rights (but not sell some or all of the rest), you should complete Form X on the Provisional Allotment Letter and return it with a cheque or banker s draft together with an accompanying letter indicating the number of Nil Paid Rights that you wish to take up, in accordance with the provisions set out in the Provisional Allotment Letter. Further details are set out in Part III Terms and Conditions of the Rights Issue and will be set out in the Provisional Allotment Letter. (d) If you want to sell all of your rights If you want to sell all of your rights other than through the Special Dealing Service, you should complete and sign Form X on the Provisional Allotment Letter (if it is not already marked Original Duly Renounced ) and pass the entire letter to Capita Asset Services. Alternatively you can sell your rights via your stock broker by contacting your stockbroker, bank manager or other appropriate financial adviser or to the transferee (provided they are not in the United States, any of the Excluded Territories or any other jurisdictions where the extension and availability of the Rights Issue would breach any applicable law). Please ensure that you allow enough time so as to enable the person acquiring your rights to take all necessary steps in connection with taking up the entitlement prior to a.m. on 3 April (e) If you want to use the Special Dealing Service If you are an individual certificated shareholder whose registered address is in the United Kingdom or any other EEA country, you can use the Special Dealing Service to either (i) sell all of your Nil Paid Rights or (ii) sell a sufficient number of Nil Paid Rights to raise money to take up the remainder (that is, effect a Cashless Take-up). If you want to use the Special Dealing Service to sell all of your Nil Paid Rights, you should tick Box C on the front page of your Provisional Allotment Letter, sign and date it and return the Provisional Allotment Letter by 3.00 p.m. on 23 March If you want to effect a Cashless Take-up, you should tick Box D on the front page of your Provisional Allotment Letter, sign and date it and return the Provisional Allotment Letter by 3.00 p.m. on 23 March Capita Asset Services will charge a commission of 0.75% of the gross proceeds of any sale of Nil Paid Rights effected using the Special Dealing Service, subject to a minimum of per holding. You should be aware that by returning your Provisional Allotment Letter and electing to use the Special Dealing Service, you will be deemed to be agreeing to the terms and conditions of the Special Dealing Service and make a legally binding agreement with Capita Asset Services on those terms. The terms and conditions of the Special Dealing Service will be posted to you together with the Provisional Allotment Letter if you hold your Ordinary Shares in certificated form. If you have any questions relating to the Special Dealing Service, please telephone the Shareholder Helpline at Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. Please note that, for legal reasons, the Shareholder Helpline is only able to provide information contained in this document and information relating to the Company s register of members and is unable to give advice on the merits of the Rights Issue. Further details about the Special Dealing Service are set out in paragraph of Part III Terms and Conditions of the Rights Issue. 7. I acquired my Existing Shares prior to the Record Date and hold my Existing Shares in certificated form. What if I do not receive a Provisional Allotment Letter? If Shareholders approve the Resolution at the General Meeting to be held at a.m. on 16 March 2017 at the offices of Freshfields Bruckhaus Deringer LLP at 65 Fleet Street, London EC4Y 1HS, and you do not receive a Provisional Allotment Letter but hold your Existing Shares in certificated form, this 59

60 probably means that you are not permitted to acquire New Shares under the Rights Issue. Some Non- CREST Shareholders, however, will not receive a Provisional Allotment Letter but may still be eligible to acquire New Shares under the Rights Issue, namely: Qualifying CREST Shareholders who held their Existing Shares in uncertificated form at close of business on 14 March 2017 and who have converted them to certificated form; Shareholders who bought Existing Shares before close of business on 14 March 2017 and who hold such Shares in certificated form but were not registered as the holders of those Shares at the close of business on 14 March 2017; and certain Overseas Shareholders. If you do not receive a Provisional Allotment Letter but think that you should have received one, please call the Shareholder Helpline at Capita Asset Services on Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. 8. If I buy Shares after the Record Date will I be eligible to participate in the Rights Issue? If you bought Shares after the Record Date but prior to 8.00 a.m. on 17 March 2017 (the time when the Existing Shares are expected to start trading ex-rights on the London Stock Exchange), you may be eligible to participate in the Rights Issue. If you are in any doubt, please consult your stockbroker, bank or other appropriate financial adviser, or whoever arranged your share purchase, to ensure you claim your entitlement. If you buy Shares on or after 8.00 a.m. on 17 March 2017, you will not be eligible to participate in the Rights Issue in respect of those Shares. 9. I hold my Existing Shares in certificated form. If I take up my rights, when will I receive the certificate representing my New Shares? If you take up your rights under the Rights Issue, share certificates for the New Shares are expected to be posted by no later than 11 April What if the number of New Shares to which I am entitled is not a whole number? Am I entitled to fractions of New Shares? Your entitlement to New Shares will be calculated at the Record Date (other than in the case of those who bought shares after the Record Date but prior to 8.00 a.m. on 17 March 2017 who may be eligible to participate in the Rights Issue). If the result is not a whole number, you will not be provisionally allotted a New Share in respect of the fraction of a New Share and your entitlement will be rounded down to the nearest whole number. The New Shares representing the aggregated fractions that would otherwise be allotted to Shareholders will be issued in the market nil paid for the benefit of the Company. 11. Will I be taxed if I take up or sell my rights or if my rights are sold? If you are resident in the UK for tax purposes, you should not have to pay UK tax when you take up your rights, although the Rights Issue will affect the amount of UK tax you may pay when you subsequently sell your Shares. However you may be subject to UK tax on chargeable gains on any proceeds that you receive from the sale of your rights. Further information for certain Qualifying Shareholders is contained in Part VIII of this document. Qualifying Shareholders who are in any doubt as to their tax position, or who are subject to tax in any other jurisdiction, should consult an appropriate professional adviser as soon as possible. Please note that the Shareholder Helpline will not be able to assist you with taxation issues. If you are a US citizen or otherwise resident in the United States for US federal tax purposes, you should not have to pay US federal income tax on the take up of your rights, but the proceeds, if any, from a sale 60

61 of your rights (or from a sale of rights on your behalf) generally will be subject to US federal income tax. Further information for persons subject to US federal income tax is also included in Part VIII Taxation of this document. 12. I understand that there is a period when there is trading in the Nil Paid Rights. What does this mean? If you do not want to buy the New Shares being offered to you under the Rights Issue, you can instead sell or transfer your rights (called Nil Paid Rights ) to those New Shares and receive the net proceeds of the sale or transfer in cash. This is referred to as dealing nil paid. This means that, during the Rights Issue offer period (being between 8.00 a.m. 17 March 2017 and a.m. on 3 April 2017) you can either purchase Shares (which will not carry any entitlement to participate in the Rights Issue) or you can trade in the Nil Paid Rights. 13. I hold my Existing Shares in certificated form. What if I want to sell the New Shares for which I have paid? Provided the New Shares have been paid for and you have requested the return of the receipted Provisional Allotment Letter, you can transfer the Fully Paid Rights by completing Form X (the form of renunciation) on the receipted Provisional Allotment Letter in accordance with the instructions set out in the Provisional Allotment Letter until a.m. on 3 April After that time, you will be able to sell your New Shares in the normal way. The share certificate relating to your New Shares is expected to be despatched to you by no later than 11 April Pending despatch of the share certificate, instruments of transfer will be certified by the Registrar against the register. Further details are set out in Part III Terms and Conditions of the Rights Issue of this document. 14. What should I do if I live outside the UK? Your ability to take up or sell rights to New Shares may be affected by the laws of the country in which you live and you should take professional advice as to whether you require any governmental or other consents or need to observe any other formalities to enable you to take up your rights. Subject to certain exceptions, Shareholders with registered addresses in, or located or resident in, the Excluded Territories or the United States are not permitted to acquire New Shares under the Rights Issue. Shareholders who have registered addresses in or who are resident in, or who are citizens of, all countries other than the UK should refer to paragraph 2.5 of Part III Terms and Conditions of the Rights Issue of this document. If you are not permitted to acquire New Shares under the Rights Issue, the Company has made arrangements under which the Joint Bookrunners will try to find investors to take up your rights and those of other Shareholders who have not taken up their rights. If the Joint Bookrunners do find investors who agree to pay a premium above the Issue Price and the related expenses of procuring those investors (including any applicable brokerage and commissions and amounts in respect of value added tax), you will be sent a cheque for your share of the amount of that premium provided that this is 5.00 or more. Cheques are expected to be despatched by no later than 11 April 2017 and will be sent to your address appearing on the Company s register of members (or to the first-named holder if you hold your Shares jointly). If the Joint Bookrunners cannot find investors who agree to pay a premium over the Issue Price and related expenses so that your entitlement would be 5.00 or more, you will not receive any payment. 15. Will the Rights Issue affect the future dividends the Company pays? Following completion of the Rights Issue, future dividend payments will be adjusted for the Rights Issue to reflect the higher number of Shares in issue. 16. What if I hold awards and options under the Share Schemes? Participants in the Share Schemes will be contacted separately and in due course with further information on how their awards and options granted under such plans may be affected by the Rights Issue. 61

62 17. How do I transfer my rights into the CREST system? If you are a Qualifying Non-CREST Shareholder, but are a CREST member and want your New Shares to be in uncertificated form, you should complete Form X and the CREST Deposit Form (both on the Provisional Allotment Letter), and ensure they are delivered to CREST Courier and Sorting Service ( CCSS ) to be received by 3.00 p.m. on 28 March 2017 at the latest. CREST sponsored members should arrange for their CREST sponsors to do this. If you have transferred your rights into the CREST system, you should refer to paragraph 2.2 of Part III Terms and Conditions of the Rights Issue for details on how to pay for the New Shares. 18. What should I do if I think my holding of Shares is incorrect? If you have recently bought or sold Shares, your transaction may not be entered on the register of members in time to appear on the register at the Record Date. If you are concerned about the figure in the Provisional Allotment Letter or otherwise concerned that your holding of Shares is incorrect, please call the Shareholder Helpline at Capita Asset Services on Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. 62

63 PART III TERMS AND CONDITIONS OF THE RIGHTS ISSUE 1. Introduction The Company is proposing to raise proceeds of approximately 175 million (net of expenses) by way of a rights issue of 217,156,300 New Shares. Subject to the fulfilment of the conditions of the Underwriting Agreement, the New Shares will be offered under the Rights Issue by way of rights at 85 pence per New Share. This Rights Issue will be made on the basis of: 4 New Shares at 85 pence per New Share for every 5 Existing Shares (iii) (iii) (iii) (iii) 8.1 held on the Record Date (and so in proportion for any other number of Existing Shares then held) and otherwise on the terms and conditions as set out in this document and, in the case of Qualifying Non CREST Shareholders, the Provisional Allotment Letters. Times and dates referred to in this Part III Terms and Conditions of the Rights Issue have been included on the basis of the expected timetable for the Rights Issue set out on page 41. The Issue Price of 85 pence per New Share represents a 37.0% discount to the theoretical ex-rights price of pence per Existing Share based on the closing middle-market price of an Existing Share as derived from the London Stock Exchange Daily Official List of pence per Existing Share on 27 February 2017, the last Business Day prior to the date of announcement of the terms of the Rights Issue. Shareholders who do not or are not permitted to take up their entitlements to New Shares will have their proportionate shareholdings in the Company diluted by approximately 44.44%. Those Shareholders who take up the New Shares provisionally allotted to them in full will, subject to the rounding down of any fractions, retain the same proportionate voting and distribution rights as held by them on the Record Date. In each case, it is assumed that no Shares are issued to satisfy the vesting of awards or the exercise of options under the Share Schemes before the date of this document, and Admission becoming effective. The Nil Paid Rights (also described as New Shares, nil paid) are entitlements to acquire the New Shares subject to payment of the Issue Price. The Fully Paid Rights are entitlements to receive the New Shares, for which a subscription and payment has already been made. Holdings of Existing Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Rights Issue. Entitlements to New Shares will be rounded down to the nearest whole number (or to zero in the case of shareholders holding fewer than 2 Existing Shares on the Record Date) and fractions of New Shares will not be allotted to Shareholders, but will be aggregated and issued into the market for the benefit of the Company. Shareholders or any person (including, without limitation, custodians, nominees and trustees) who has a contractual or other legal obligation to forward this document into a jurisdiction other than the UK should consider paragraph 2.5 below. The offer of New Shares under the Rights Issue will not be made into certain territories. Subject to the provisions of paragraph 2.5 below, Shareholders with a registered address in the United States or an Excluded Territory are not being sent this document and will not be sent Provisional Allotment Letters. Applications will be made to the UK Listing Authority and to the London Stock Exchange for the New Shares (nil paid and fully paid) to be admitted to the premium listing segment of the Official List and to trading on the London Stock Exchange s main market for listed securities, respectively. It is expected that Admission will become effective on 17 March 2017 and that dealings in the New Shares, nil paid, will commence on the London Stock Exchange by 8.00 a.m. on that date. The Existing Shares are already admitted to CREST. No further application for admission to CREST is required for the New Shares and all of the New Shares when issued and fully paid may be held and transferred by means of CREST. Applications will be made for the Nil Paid Rights and the Fully Paid Rights to be admitted to CREST. Euroclear requires the Company to confirm to it that certain conditions (imposed by the CREST Manual) have been satisfied before Euroclear will admit any security to CREST. It is expected that these conditions will be satisfied, in respect of the Nil Paid Rights and the Fully Paid Rights, on Admission. As soon as practicable after satisfaction of the conditions, the Company will confirm this to Euroclear. The ISIN for the New Shares will be the same as that of the Existing Shares, being GB00B1VNST91. The ISIN for the Nil Paid Rights will be GB00BDCJPH73 and for the Fully Paid Rights will be GB00BDCJPJ97. (iii) 4.4 (iii) (iii) (iii) 9.1 (iii) 9.2 LR (9)(f) LR (9)(f) LR (9)(g) (iii) LR (6) LR (9)(a) LR (9)(d) LR (9)(g) (iii) 4.3 (iii) 6.1 (iii)

64 None of the New Shares are being offered to the public other than pursuant to the Rights Issue. The Rights Issue has been fully underwritten by the Underwriters and is conditional, inter alia, upon: (i) (ii) (iii) the Underwriting Agreement having become unconditional in all respects (save for the condition relating to Admission) and not having been terminated in accordance with its terms; Admission becoming effective by not later than 8.00 a.m. on 17 March 2017 (or such later date as the parties to the Underwriting Agreement may agree); and the passing of the Resolution. The Underwriting Agreement is conditional upon certain matters being satisfied or not breached prior to the General Meeting and may be terminated by the Sole Global Coordinator prior to Admission upon the occurrence of certain specified events, in which case the Rights Issue will not proceed. The Underwriting Agreement is not capable of termination following Admission. The Underwriters may arrange subunderwriting for some, all or none of the New Shares. A summary of certain terms and conditions of the Underwriting Agreement is contained in paragraph 15.1 of Part IX Additional Information of this document. The Underwriters and any of their respective affiliates may engage in trading activity in connection with their roles under the Underwriting Agreement and, in that capacity, may retain, purchase, sell, offer to sell or otherwise deal for their own account in securities of the Company and related or other securities and instruments (including Shares, Nil Paid Rights and Fully Paid Rights) for the purpose of hedging their underwriting exposure or otherwise. Accordingly, references in this document to Nil Paid Rights, Fully Paid Rights or New Shares being issued, offered, subscribed, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or subscription, acquisition, placing or dealing by, the Underwriters and any of their affiliates acting as investors for their own account. Except as required by applicable law or regulation, none of the Underwriters propose to make any public disclosure in relation to such transactions. In addition certain of the Underwriters or their affiliates may enter into financing arrangements (including swaps or contracts for differences) with investors in connection with which such Underwriters (or their affiliates) may from time to time acquire, hold or dispose of Shares. In addition, the Company reserves the right to decide not to proceed with the Rights Issue if the Underwriting Agreement is terminated at any time prior to Admission and commencement of dealings in the New Shares (nil paid). Subject, inter alia, to the conditions referred to above being satisfied (other than the condition relating to Admission) and save as provided in paragraph 2.5 below, it is intended that: (i) (ii) (iii) Provisional Allotment Letters in respect of Nil Paid Rights will be despatched to Qualifying Non CREST Shareholders on 16 March 2017; the Receiving Agent will instruct Euroclear to credit the appropriate stock accounts of Qualifying CREST Shareholders with such Shareholders entitlements to Nil Paid Rights with effect from 8.00 a.m. on 17 March 2017; the Nil Paid Rights and the Fully Paid Rights will be enabled for settlement by Euroclear as soon as practicable after the Company has confirmed to Euroclear that all the conditions for admission of such rights to CREST have been satisfied, which is expected to be at 8.00 a.m. on 17 March 2017; (iv) New Shares will be credited to the appropriate stock accounts of the relevant Qualifying CREST Shareholders and/or acquirers of Nil Paid Rights (or their renouncees) who validly take up their rights, and the acquirers of Fully Paid Rights, as soon as practicable after 8.00 a.m. on 17 March 2017; and (v) share certificates for the New Shares will be despatched to relevant Qualifying Non-CREST Shareholders or their renouncees by no later than 11 April The offer will be made to Qualifying Non-CREST Shareholders by way of the Provisional Allotment Letter (as described in step (i) above) and to Qualifying CREST Shareholders by way of the enablement of the Nil Paid Rights and the Fully Paid Rights (as described in step (iii) above) (such Shareholders stock accounts having been credited as described in step (ii) above). Subject to certain exceptions, the offer is not being made to Shareholders with registered addresses in, or who are residents or citizens of, an Excluded Territory, the United States or any other jurisdictions where the extension and availability of the Rights Issue would breach any applicable law. Pursuant to the Companies Act, the offer by way (iii) (iii)

65 of rights to Shareholders will be made through a notice in the London Gazette, details of which are provided in paragraph of this Part III Terms and Conditions of the Rights Issue. The New Shares will, when issued and fully paid, rank pari passu in all respects with the Existing Shares, including the right to receive all dividends or other distributions made, paid or declared after the date of issue of the New Shares. There will be no restrictions on the free transferability of the New Shares save as provided in the Articles. The rights attaching to the New Shares are governed by the Articles, a summary of which is set out in paragraph 4 of Part IX Additional Information of this document. All documents, including Provisional Allotment Letters (which constitute temporary documents of title) and cheques and certificates posted to, by or from Qualifying Shareholders and/or their transferees or renouncees (or their agents, as appropriate) will be posted at their own risk. Shareholders taking up their rights by completing a Provisional Allotment Letter or by sending a Many-To-Many ( MTM ) instruction to Euroclear will be deemed to have given the representations and warranties set out in paragraph 2.6 of this Part III Terms and Conditions of the Rights Issue, unless the requirement is waived by the Company. LR (9)(b) LR (9)(c) (iii) Action to be taken The action to be taken in respect of the New Shares depends on whether, at the relevant time, the Nil Paid Rights or the Fully Paid Rights in respect of which action is to be taken are in certificated form (that is, are represented by Provisional Allotment Letters) or are in uncertificated form (that is, are in CREST). If you are a Qualifying Non-CREST Shareholder, please refer to paragraph 2.1 and paragraphs 2.3 to 2.10 below. If you are a Qualifying CREST Shareholder, please refer to paragraphs 2.2 to 2.10 below and to the CREST Manual for further information on the CREST procedures referred to below. If you are a Shareholder with a registered address in the United States or holding Shares on behalf of, or for the account or benefit of any person on a non-discretionary basis who is in the United States or any state or other jurisdiction of the United States, please refer to paragraph 2.5 and, in particular, paragraph 2.5.2, below. If you are a Shareholder with a registered address in, or who is a citizen or resident of, an Excluded Territory or any other jurisdictions where the extension and availability of the Rights Issue would breach any applicable law, the offer of New Shares is not, subject to certain exceptions, being made to you. Please refer to paragraph 2.5 and, in particular, paragraph 2.5.3, below. CREST sponsored members should refer to their CREST sponsors, as only their CREST sponsors will be able to take the necessary actions specified below to take up the entitlements or otherwise to deal with the Nil Paid Rights or Fully Paid Rights of CREST sponsored members. All enquiries in relation to the Provisional Allotment Letters should be addressed to the Shareholder Helpline at Capita Asset Services on Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. (iii) Action to be taken by Qualifying Non-CREST Shareholders in relation to the Nil Paid Rights represented by Provisional Allotment Letters General Provisional Allotment Letters are expected to be despatched to Qualifying Non-CREST Shareholders on 16 March Each Provisional Allotment Letter will set out: (i) (ii) the holding on the Record Date of Existing Shares in certificated form on which a Qualifying Non CREST Shareholder s entitlement to New Shares has been based; the aggregate number of New Shares which have been provisionally allotted to that Qualifying Non-CREST Shareholder with respect to the Existing Shares referred to in (i); (iii) (iii)

66 (iii) the amount payable by a Qualifying Non-CREST Shareholder at the Issue Price to take up his or her entitlement in full; (iv) the procedures to be followed if a Qualifying Non-CREST Shareholder wishes to dispose of all or part of his or her entitlement or to convert all or part of his or her entitlement into uncertificated form; (v) the procedures to be followed if a Qualifying Non-CREST Shareholder who is eligible to use the Special Dealing Service wishes to sell all of his or her Nil Paid Rights or to effect a Cashless Take-up using the Special Dealing Service; and (vi) instructions regarding acceptance and payment, consolidation, splitting and registration of renunciation (where applicable). On the basis that Provisional Allotment Letters are posted on 16 March 2017, and that dealings in Nil Paid Rights commence on 17 March 2017: (iii) 5.2.3(g) the latest time and date for acceptance and payment in full will be a.m. on 3 April 2017; and the latest time and date for receipt of instructions under the Special Dealing Service in respect of the sale of all Nil Paid Rights or a Cashless Take-up will be 3.00 p.m. on 23 March If the Rights Issue is delayed so that Provisional Allotment Letters cannot be despatched on 16 March 2017 or if the timetable for the Rights Issue is otherwise amended, the expected timetable, as set out at the front of this document, will be adjusted accordingly and the revised dates will be set out in the Provisional Allotment Letters and announced through a Regulatory Information Service. All references to times and/or dates in this Part III Terms and Conditions of the Rights Issue should be read as being subject to such adjustment Procedure for acceptance and payment (i) Qualifying Non-CREST Shareholders who wish to take up their entitlement in full Holders of Provisional Allotment Letters who wish to take up all of their entitlement must complete and return the Provisional Allotment Letter, together with a cheque or banker s draft in pounds sterling, made payable to Capita Registrars Limited Re Laird PLC Rights Issue A/C and crossed A/C payee only, for the full amount payable on acceptance, in accordance with the instructions printed on the Provisional Allotment Letter, by post to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or by hand (during normal business hours only) to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, so as to arrive as soon as possible and in any event so as to be received by not later than a.m. on 3 April A reply-paid envelope will be enclosed with the Provisional Allotment Letter for this purpose and for use in the UK only. If you post your Provisional Allotment Letter within the UK by first-class post, it is recommended that you allow at least four days for delivery. (iii) (iii) (iii) (ii) Qualifying Non-CREST Shareholders who wish to take up some (but not all) of their entitlement Holders of Provisional Allotment Letters who wish to take up some but not all of their Nil Paid Rights and wish to sell some or all of those rights which they do not want to take up should (other than by effecting a Cashless Take-up using the Special Dealing Service described in paragraph below) first apply for split Provisional Allotment Letters by completing Form X on the Provisional Allotment Letter and returning it, together with a covering letter stating the number of split Provisional Allotment Letters required and the number of Nil Paid Rights or Fully Paid Rights (if appropriate) to be comprised in each split Provisional Allotment Letter, by post to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or by hand (during normal business hours only) to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU by 3.00 p.m. on 29 March 2017, the last date and time for splitting Provisional Allotment Letters. The Provisional Allotment Letter will then be cancelled and exchanged for the split Provisional Allotment Letters required. Such holders of Provisional Allotment Letters should then deliver the split Provisional Allotment Letter representing the rights they wish to take up together with a cheque or banker s draft in pounds sterling for this number of rights, payable to Capita Registrars Limited Re Laird PLC Rights Issue A/C and crossed A/C payee only by a.m. on 3 April 2017, the last date and time for acceptance. The further split Provisional Allotment Letters (representing the New Shares the Shareholder does not wish to take up) will be required in order to sell those rights not being taken up. 66

67 Shareholders who wish to effect a Cashless Take-up of their Nil Paid Rights (which may be achieved through the sale of such portion of their Nil Paid Rights as will raise sufficient funds to allow the relevant Shareholder to take up their remaining Nil Paid Rights) should use the Special Dealing Service (described in paragraph below) or, alternatively, contact their broker, who may be able to assist with such arrangements. Please note that your ability to sell your rights is dependent on demand for such rights and that the price for Nil Paid Rights may fluctuate. Please ensure that you allow enough time so as to enable the person acquiring your rights to take all necessary steps in connection with taking up the entitlement prior to a.m. on 3 April Alternatively, Qualifying Non-CREST Shareholders who wish to take up some of their rights, without selling or transferring the remainder, should complete Form X on the original Provisional Allotment Letter and return it, together with a covering letter confirming the number of rights to be taken up and a cheque or banker s draft in pounds sterling to pay for this number of Shares, by post to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or by hand (during normal business hours only) to the address above. In this case, the Provisional Allotment Letter and payment must be received by a.m. on 3 April 2017, the last date and time for acceptance. (iii) Company s discretion as to validity of acceptances If payment is not received in full by a.m. on 3 April 2017, the provisional allotment will (unless the Company has exercised its right to treat as valid an acceptance, as set out below) be deemed to have been declined and will lapse. The Company may elect, with the agreement of the Sole Global Coordinator, but shall not be obliged, to treat as valid Provisional Allotment Letters and accompanying remittances for the full amount due which are received prior to 5.00 p.m. on 3 April The Company may elect, but shall not be obliged, to treat as a valid acceptance the receipt of appropriate remittance by 5.00 p.m. on 3 April 2017, from an authorised person (as defined in the FSMA) specifying the number of New Shares to be acquired and containing an undertaking by that person to lodge the relevant Provisional Allotment Letters, duly completed, in due course. The Company may also (in its sole discretion) treat a Provisional Allotment Letter as valid and binding on the person(s) by whom or on whose behalf it is lodged even if it is not completed in accordance with the relevant instructions or is not accompanied by a valid power of attorney where required. The Company reserves the right to treat as invalid any acceptance or purported acceptance of the New Shares that appears to the Company to have been executed in, despatched from or that provided an address for delivery of definitive share certificates for New Shares in the United States, an Excluded Territory or any other jurisdictions where the extension and availability of the Rights Issue would breach any applicable law unless the Company is satisfied that such action would not result in the contravention of any registration or other legal requirement in any jurisdiction. The provisions of this paragraph 2.1.2(iii) and any other terms of the Rights Issue relating to Qualifying Non-CREST Shareholders may be waived, varied or modified as regards specific Qualifying Non CREST Shareholder(s) or on a general basis by the Company, with the agreement of the Underwriters. A Qualifying Non-CREST Shareholder who makes a valid acceptance and payment in accordance with this paragraph is deemed to request that the New Shares to which they will become entitled be issued to them on the terms and conditions set out in this document and subject to the Articles. (iv) Payments All payments must be in pounds sterling and made by cheque or banker s draft made payable to Capita Registrars Limited Re LAIRD Rights Issue A/C and crossed A/C payee only. Cheques or banker s drafts must be drawn on a bank or building society or branch of a bank or building society in the UK or Channel Islands which is either a settlement member of the Cheque and Credit Clearing Company Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques and banker s drafts to be cleared through the facilities provided by any of those companies or committees and must bear the appropriate sort code in the top right-hand corner. Cheques must be drawn on the personal account to which the Qualifying Non-CREST Shareholder (or their nominee) has sole or joint title to the funds. Third party cheques may not be accepted with the exception of building society cheques or banker s drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the back of the cheque or draft to such effect. The account name should be the same as that shown on the application. Post-dated cheques will not be accepted. Cheques or 67

68 banker s drafts will be presented for payment upon receipt. The Company reserves the right to instruct the Receiving Agent to seek special clearance of cheques and banker s drafts to allow the Company to obtain value for remittances at the earliest opportunity. No interest will be paid on payments made before they are due. It is a term of the Rights Issue that cheques shall be honoured on first presentation and the Company may elect to treat as invalid acceptances in respect of which cheques are not so honoured. Return of a completed Provisional Allotment Letter will constitute a warranty that the cheque will be honoured on first presentation. All documents, cheques and banker s drafts sent through the post will be sent at the risk of the sender. Payments via CHAPS, BACS or electronic transfer will not be accepted. If the New Shares have already been allotted to a Qualifying Non-CREST Shareholder prior to any payment not being so honoured upon first presentation or such acceptances being treated as invalid, the Company may (in its absolute discretion as to manner, timing and terms) make arrangements for the sale of such New Shares on behalf of such Qualifying Non-CREST Shareholder and hold the proceeds of sale (net of the Company s reasonable estimate of any loss it has suffered as a result of the same and of the expenses of the sale, including, without limitation, any stamp duty or SDRT payable on the transfer of such New Shares, and of all amounts payable by such Qualifying Non-CREST Shareholder pursuant to the terms of the Rights Issue in respect of the acquisition of such New Shares) on behalf of such Qualifying Non-CREST Shareholder. Neither the Company nor the Underwriters nor any other person shall be responsible for, or have any liability for, any loss, expense or damage suffered by such Qualifying Non-CREST Shareholder as a result. Holders of Provisional Allotment letters who wish to take up any of their entitlements must make the representations and warranties set out in paragraph 2.6 below Money Laundering Regulations It is a term of the Rights Issue that, to ensure compliance with the Money Laundering Regulations, the Registrar, Capita Asset Services, may require verification of the identity of the person by whom or on whose behalf a Provisional Allotment Letter is lodged with payment (which requirements are referred to below as the verification of identity requirements ). If an application is made by a UK regulated broker or intermediary acting as agent and which is itself subject to the Money Laundering Regulations, any verification of identity requirements is the responsibility of such broker or intermediary and not of the Receiving Agent. In such case, the lodging agent s stamp should be inserted on the Provisional Allotment Letter. The person(s) (the acceptor ) who, by lodging a Provisional Allotment Letter with payment, and in accordance with the other terms as described above, accept(s) directly or indirectly, the allotment of the New Shares (the relevant shares ) comprised in such Provisional Allotment Letter (being the provisional allottee or, in the case of renunciation, the person named in such Provisional Allotment Letter) shall thereby be deemed to agree to provide the Receiving Agent and/or the Company with such information and other evidence as they or either of them may require to satisfy the verification of identity requirements Receiving Agent. If the Receiving Agent determines that the verification of identity requirements apply to an acceptance of an allotment and the verification of identity requirements have not been satisfied (which the Receiving Agent shall in its absolute discretion determine) by a.m. on 3 April 2017, the Company may, in its absolute discretion, and without prejudice to any other rights of the Company, treat the acceptance as invalid, in which event the application monies will be returned (at the applicant s risk) without interest to the account of the bank or building society on which the relevant cheque or banker s draft was drawn, or may confirm the allotment of the relevant shares to the acceptor but (notwithstanding any other term of the Rights Issue) such shares will not be issued to him or her or registered in his or her name until the verification of identity requirements have been satisfied (which the Receiving Agent shall in its absolute discretion determine). If the acceptance is not treated as invalid and the verification of identity requirements are not satisfied within such period, being not less than seven days after a request for evidence of identity is despatched to the acceptor, as the Company may in its absolute discretion allow, the Company will be entitled to make arrangements (in its absolute discretion as to manner, timing and terms) to sell the relevant shares (and for that purpose the Company will be expressly authorised to act as agent of the acceptor). Any proceeds of sale (net of the Company s reasonable estimate of any loss it has suffered as a result of the same and of the expenses of the sale, including, without limitation, any stamp duty or SDRT payable on the transfer of such Shares) of the relevant shares which shall be issued to and registered in the name of the purchaser(s) or an amount equivalent to the original payment, whichever is the lower, will be held by the Company on trust for the acceptor, subject to the requirements of the Money Laundering Regulations. The Receiving Agent is entitled in its absolute discretion to determine whether the identity verification requirements apply to any acceptor and whether 68

69 such requirements have been satisfied. Neither the Company, the Underwriters, Rothschild nor the Receiving Agent will be liable to any person for any loss suffered or incurred as a result of the exercise of any such discretion or as a result of any sale of relevant shares. Return of a Provisional Allotment Letter with the appropriate remittance will constitute a warranty from the acceptor that the Money Laundering Regulations will not be breached by acceptance of such remittance and an undertaking to provide promptly to the Receiving Agent such information as may be specified by the Registrar as being required for the purpose of the Money Laundering Regulations. If the verification of identity requirements apply, failure to provide the necessary evidence of identity may result in your acceptance being treated as invalid or in delays in the despatch of a receipted fully paid Provisional Allotment Letter, share certificate or other documents relating to the Rights Issue (as applicable). The verification of identity requirements will not usually apply: (i) if the acceptor is an organisation required to comply with the Money Laundering Directive 2005/60/ EC of the European Parliament and of the EC Council of 26 October 2005 on the prevention of the United States of the financial system for the purpose of money laundering and terrorist financing; or (ii) (iii) if the acceptor is a regulated UK broker or intermediary acting as agent and is itself subject to the Money Laundering Regulations; or if the acceptor (not being an acceptor who delivers his or her acceptance in person) makes payment by way of a cheque drawn on an account in the name of such acceptor; or (iv) if the aggregate subscription price for the relevant shares is less than 15,000 (approximately 12,500). Where the verification of identity requirements apply, please note the following as this will assist in satisfying the requirements. Satisfaction of the verification of identity requirements may be facilitated in the following ways: (a) (b) (c) if payment is made by cheque or banker s draft in pounds sterling drawn on a branch in the UK of a bank or building society and bears a UK bank sort code number in the top right-hand corner, the following applies. Cheques or banker s drafts should be made payable to Capita Registrars Limited Re Laird PLC Rights Issue A/C and crossed A/C payee only. Third party cheques may not be accepted with the exception of building society cheques or banker s drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the back of the building society cheque/banker s draft to such effect. The account name should be the same as that shown on the application; if the Provisional Allotment Letter is lodged with payment by an agent which is an organisation of the kind referred to in (a) above or which is subject to anti money-laundering regulation in a country which is a member of the Financial Action Task Force (the non-european Union members of which are Argentina, Australia, Brazil, Canada, Hong Kong, Iceland, Japan, Mexico, New Zealand, Norway, the Russian Federation, Singapore, South Africa, Switzerland, Turkey, the United States of America and, by virtue of their membership of the Gulf Co-operation Council, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), the agent should provide written confirmation with the Provisional Allotment Letter that it has that status and a written assurance that it has obtained and recorded evidence of the identity of the persons for whom it acts and that it will on demand make such evidence available to the Registrar or the relevant authority; or if a Provisional Allotment Letter is lodged by hand by the acceptor in person, he or she should ensure that he or she has with him or her evidence of identity bearing his or her photograph (for example, his or her passport) and evidence of his or her address (for example, a recent bank statement). In order to confirm the acceptability of any written assurance referred to in (b) above or any other case, the acceptor should contact the Receiving Agent. The Shareholder Helpline is available on Capita Asset Services on Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. 69

70 2.1.4 Dealings in Nil Paid Rights Assuming the Rights Issue becomes unconditional, dealings on the London Stock Exchange in the Nil Paid Rights are expected to commence at 8.00 a.m. on 17 March A transfer of Nil Paid Rights can be made by renunciation of the Provisional Allotment Letter in accordance with the instructions printed on it and delivery of the letter to the transferee or to a stockbroker, bank or other appropriate financial adviser. The latest time and date for registration of renunciation of Provisional Allotment Letters, nil paid, is expected to be a.m. on 3 April (iii) In addition, Qualifying Non-CREST Shareholders who are individuals with a registered address in the United Kingdom or in any other jurisdiction in the EEA can elect to sell all of their Nil Paid Rights or to effect a Cashless Take-up in each case using the Special Dealing Service, details of which are set out in paragraph below Special Dealing Service (i) Qualifying Non-CREST Shareholders who wish to sell all of their entitlement using the Special Dealing Service Qualifying Non-CREST Shareholders who are individuals with a registered address in the United Kingdom or in any other jurisdiction in the EEA and who wish to sell all of the Nil Paid Rights to which they are entitled may elect to do so using the Special Dealing Service. Such Qualifying Non-CREST Shareholders should complete and return the Provisional Allotment Letter in accordance with the instructions printed thereon, by post or by hand (during normal business hours only) to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, by not later than 3.00 p.m. on 23 March 2017, the latest time and date for requesting the sale of Nil Paid Rights through the Special Dealing Service. A reply-paid envelope will be enclosed with the Provisional Allotment Letter for this purpose. If you post your Provisional Allotment Letter within the United Kingdom by first-class post, it is recommended that you allow at least four days for delivery. Please note that Capita Asset Services will charge a commission of 0.75% of the gross proceeds of sale of all of the Nil Paid Rights to which the Qualifying Non-CREST Shareholder is entitled, subject to a minimum of 15.00, for effecting such sale through the Special Dealing Service. Under the Special Dealing Service, Capita Asset Services will collate all the instructions from Qualifying Non-Crest Shareholder Shareholders wishing to use the service to sell all their Nil Paid Rights up to 3.00 p.m. on 23 March 2017 and instruct a broker to sell all such Nil Paid Rights on 28 March Capita Asset Services will aggregate instructions from all Qualifying Non-CREST Shareholders who have elected to sell all of their Nil Paid Rights under the Special Dealing Service that are received (or are treated as having been received). Such Nil Paid Rights in respect of which an instruction is received may be sold in several transactions and on separate days. Qualifying Non-CREST Shareholders would receive the average price obtained for the sale of all of the Nil Paid Rights aggregated for sale purposes in accordance with the above. This may result in Qualifying Non-CREST Shareholders who choose to sell all of their Nil Paid Rights through the Special Dealing Service receiving a higher or lower price than if their Nil Paid Rights were sold separately. This may also result in Qualifying Non-CREST Shareholders who choose to sell all of their Nil Paid Rights through the Special Dealing Service receiving a higher or lower price for their Nil Paid Rights than if all of their Nil Paid Rights had been sold in a single transaction or on a single day and such Qualifying Non-CREST Shareholders may receive the proceeds of sale later than if their Nil Paid Rights had been sold by another broker on an individual basis. A Qualifying Non-CREST Shareholder who is considering giving an instruction to sell all of their Nil Paid Rights under the Special Dealing Service should note that there is no guarantee that the sale of Nil Paid Rights will be effected under the Special Dealing Service in relation to their Nil Paid Rights. Whether such Qualifying Non-CREST Shareholder s Nil Paid Rights will be sold under the Special Dealing Service will depend on whether it is expected that the proceeds from the sale of the Nil Paid Rights of the majority of the Qualifying Non-CREST Shareholders who elect to sell all of their Nil Paid Rights and whose instructions are aggregated for sales purposes will exceed the commissions referred to above. If a Qualifying Non-CREST Shareholder s Nil Paid Rights are sold but the proceeds obtained for the sale of such Nil Paid Rights are less than the commissions referred to above, such Qualifying Non-CREST Shareholder will not receive any proceeds. 70

71 (ii) Qualifying Non-CREST Shareholders who wish to effect a Cashless Take-up using the Special Dealing Service Qualifying Non-CREST Shareholders who are individuals with a registered address in the United Kingdom or in any other jurisdiction in the EEA and who wish to effect a Cashless Take-up may elect to do so using the Special Dealing Service. Such Qualifying Non-CREST Shareholders should complete and return the Provisional Allotment Letter in accordance with the instructions printed thereon, by post or by hand (during normal business hours only) to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, by not later than 3.00 p.m. on 23 March 2017, the latest time and date for requesting a Cashless Take-up through the Special Dealing Service. A reply-paid envelope will be enclosed with the Provisional Allotment Letter for this purpose. If you post your Provisional Allotment Letter within the United Kingdom by first-class post, it is recommended that you allow at least four days for delivery. Please note that Capita Asset Services will charge a commission of 0.75% of the gross proceeds of sale of such number of Nil Paid Rights as is required to effect a Cashless Take-up for a Qualifying Non-CREST Shareholder is entitled, subject to a minimum of Under the Special Dealing Service, Capita Asset Services will collate all the instructions from Qualifying Shareholders wishing to use the service to effect a Cashless Take-Up up to 3.00 p.m. on 23 March 2017 and instruct a broker to sell sufficient Nil Paid Rights for Qualifying Non-Crest Shareholders to take up the remainder of their Nil Paid Shares on 28 March Capita Asset Services will aggregate instructions from all Qualifying Non-CREST Shareholders who elect a Cashless Take-up under the Special Dealing Service that are received (or are treated as having been received). Such number of Nil Paid Rights which need to be sold to effect a Cashless Take-up for a Qualifying Non-CREST Shareholders under the Special Dealing Service may be sold in several transactions and on separate days. Qualifying Non-CREST Shareholders would receive the average price obtained for the sale of all of the Nil Paid Rights aggregated for sale purposes in accordance with the above. This may result in Qualifying Non-CREST Shareholders who elect a Cashless Take-up under the Special Dealing Service receiving a higher or lower price than if their Nil Paid Rights were sold separately. This may also result in Qualifying Non-CREST Shareholders who choose to effect a Cashless Take-up under the Special Dealing Service receiving a higher or lower price for their Nil Paid Rights than if such Nil Paid Rights had been sold in a single transaction or on a single day. A Qualifying Non-CREST Shareholder who is considering giving an instruction for Cashless Take-up under the Special Dealing Service should note that there is no guarantee that Cashless Take-up will be effected under the Special Dealing Service in relation to his Nil Paid Rights. Whether such Qualifying Non-CREST Shareholder s Nil Paid Rights will be sold under the Special Dealing Service will depend on whether it is expected that the proceeds from the sale of the Nil Paid Rights of the majority of the Qualifying Non-CREST Shareholders (the Majority Shareholders ) who elect for a Cashless Take up under the Special Dealing Service and whose instructions are aggregated for sales purposes will be sufficient, after deducting the commissions referred to above, to take-up one New Share for each of the Majority Shareholders. If a Qualifying Non-CREST Shareholder s Nil Paid Rights are sold but the proceeds obtained for the sale of the Nil Paid Rights are not sufficient, after the deduction of the commissions referred to above, to acquire any New Shares at the Issue Price, such Qualifying Non CREST Shareholder will not receive any New Shares. (iii) General By giving an instruction under the Special Dealing Service, a Qualifying Non-CREST Shareholder will be deemed to have represented, warranted and undertaken that they will not thereafter seek to take any action in respect of their Provisional Allotment Letter. By giving your instruction under the Special Dealing Service, you will be deemed to have renounced your Nil Paid Rights, as applicable to your instruction. The Special Dealing Service Terms and Conditions will be posted to Qualifying Non-CREST Shareholders together with the Provisional Allotment Letter. A Qualifying Non-CREST Shareholder who is eligible for and elects to use the Special Dealing Service agrees to the terms and conditions of the Rights Issue set out in this document and the Special Dealing Service Terms and Conditions (including how the price for the sale of their Nil Paid Rights is calculated and the commissions that will be deducted from the proceeds of their sale of such Nil Paid Rights). Qualifying Non-CREST Shareholders using the Special Dealing Service should note that they will be clients of Capita Asset Services and not of the Company when using such service. Capita Asset Services liability to such a Qualifying Non-CREST Shareholder and its responsibility for providing the protections afforded by the UK regulatory regime to clients for 71

72 whom such services are provided is as set out in the Special Dealing Service Terms and Conditions and neither Capita Asset Services nor the Company shall have any liability or responsibility to a Qualifying Non-CREST Shareholder using the Special Dealing Service, except as set out in those Special Dealing Service Terms and Conditions. None of the Company, Capita Asset Services or their agents shall be responsible for any loss or damage (whether actual or alleged) arising from the terms or timing of any sale, any settlement issues arising from any sale, any exercise of discretion in relation to any sale, or any failure to procure any sale, of Nil Paid Rights pursuant to the Special Dealing Service. The Company, Capita Asset Services and/or their agents shall each have sole discretion to determine the eligibility of Qualifying Non-CREST Shareholders and may each in their sole discretion interpret instructions (including handwritten markings) on the Provisional Allotment Letter, and none of the Company, Capita Asset Services or their agents shall be responsible for any loss or damage (whether actual or alleged) arising from any such exercise of discretion. All remittances will be sent by post, at the risk of the Qualifying Non-CREST Shareholder entitled there to, to the registered address of the relevant Qualifying Non-CREST Shareholder (or, in the case of joint holders, to the address of the joint holder whose name stands first in the register of Shareholders). No interest will be payable on any proceeds received from the sale of Nil Paid Rights under the Special Dealing Service. The Company, Capita Asset Services and/or their agents cannot offer financial, legal, tax or investment advice on the Special Dealing Service. The Special Dealing Service is an execution only service and not a recommendation to buy, sell the Nil Paid Rights. The Special Dealing Service Terms and Conditions apply to the Special Dealing Service. The value of Shares and any income from them can fluctuate and, when sold, investors may receive less than the original amount invested. Past performance is not a guide to future returns. The Special Dealing Service is provided by Capita Asset Services, a trading name of Capita IRG Trustees Limited, which is authorised by the FCA Dealings in Fully Paid Rights After acceptance of the provisional allotment and payment in full in accordance with the provisions set out in this document and the Provisional Allotment Letter, the Fully Paid Rights may be transferred by renunciation of the relevant Provisional Allotment Letter and delivering it, by post to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or by hand (during normal business hours only) to the address above, by not later than a.m. on 3 April To do this, Qualifying Non-CREST Shareholders will need to have their fully paid Provisional Allotment Letters returned to them after acceptance has been effected by the Receiving Agent. However, fully paid Provisional Allotment Letters will not be returned to Qualifying Non-CREST Shareholders unless their return is requested by ticking the appropriate box on the Provisional Allotment Letter. After 8.00 a.m. on 4 April 2017, the New Shares will be in registered form and transferable in the usual way (see paragraph below) Renunciation and splitting of Provisional Allotment Letters Qualifying Non-CREST Shareholders who wish to transfer all of their Nil Paid Rights or, after acceptance of the provisional allotment and payment in full, Fully Paid Rights comprised in a Provisional Allotment Letter may (save as required by the laws of certain overseas jurisdictions) renounce such allotment by completing and signing Form X on the Provisional Allotment Letter (if it is not already marked Original Duly Renounced ) and passing the entire Provisional Allotment Letter to their stockbroker or bank or other appropriate financial adviser or to the transferee. Once a Provisional Allotment Letter has been renounced, the letter will become a negotiable instrument in bearer form and the Nil Paid Rights or Fully Paid Rights (as appropriate) comprised in the Provisional Allotment Letter may be transferred by delivery of the Provisional Allotment Letter to the transferee. The latest time and date for registration of renunciation of Provisional Allotment Letters, fully paid, is a.m. on 3 April If a holder of a Provisional Allotment Letter wishes to have only some of the New Shares registered in his or her name and to transfer the remainder, or wishes to transfer all the Nil Paid Rights or (if appropriate) Fully Paid Rights but to different persons, he or she may have the Provisional Allotment Letter split, for which purpose he or she or his or her agent must complete and sign Form X on the Provisional Allotment Letter. The Provisional Allotment Letter must then be delivered by post to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or by hand (during normal business hours only) to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU by not later than 3.00 p.m. on 29 March 2017, to be cancelled and exchanged for the number of split Provisional Allotment Letters required. The number of split Provisional Allotment Letters required and the number of Nil Paid Rights or (if appropriate) Fully Paid Rights to be 72

73 comprised in each split letter should be stated in an accompanying letter. Form X on split Provisional Allotment Letters will be marked Original Duly Renounced before issue. The aggregate number of Nil Paid Rights or (as appropriate) Fully Paid Rights comprised in the split Provisional Allotment Letters must equal the number of New Shares set out in the original Provisional Allotment Letter (less the number of New Shares representing rights that the holder wishes to take up if taking up his or her entitlement in part). The split Provisional Allotment Letter(s) (representing the New Shares the Shareholder does not wish to take up) will be required in order to sell those rights not being taken up. The Company reserves the right to refuse to register any renunciation in favour of any person in respect of which the Company believes such renunciation may violate applicable legal or regulatory requirements, including (without limitation) any renunciation in the name of any person with an address outside the UK. Alternatively, Qualifying Non-CREST Shareholders who wish to take up some of their rights, without transferring the remainder, should complete Form X on the original Provisional Allotment Letter and return it, together with a covering letter confirming the number of rights to be taken up and a cheque or banker s draft in pounds sterling to pay for this number of New Shares, by post to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or by hand (during normal business hours only) to the address above. In this case, the Provisional Allotment Letter and payment must be received by the Receiving Agent by a.m. 3 April Registration in names of Qualifying Shareholders A Qualifying Shareholder who wishes to have all the New Shares to which he or she is entitled registered in his or her name must accept and make payment for such allotment in accordance with the provisions set out in this document and the Provisional Allotment Letter but need take no further action. A share certificate in respect of the New Shares acquired is expected to be sent to such Qualifying Shareholders by no later than 11 April Registration in names of persons other than Qualifying Shareholders originally entitled In order to register Fully Paid Rights in certificated form in the name of someone other than the Qualifying Shareholder(s) originally entitled, the renouncee or his or her agent(s) must complete Form Y on the Provisional Allotment Letter (unless the renouncee is a CREST member who wishes to hold such New Shares in uncertificated form, in which case Form X and the CREST Deposit Form must be completed (see paragraph 2.2 below)) and deliver the entire Provisional Allotment Letter, when fully paid, by post or by hand (during normal business hours only) to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or by hand (during normal business hours only) to the address above, by not later than the latest time for registration of renunciations, which is expected to be a.m. on 3 April Registration cannot be effected unless and until the New Shares comprised in a Provisional Allotment Letter are fully paid. The New Shares comprised in several renounced Provisional Allotment Letters may be registered in the name of one holder (or joint holders) if Form Y on the Provisional Allotment Letter is completed on one Provisional Allotment Letter (the Principal Letter ) and all the Provisional Allotment Letters are delivered in one batch. Details of each Provisional Allotment Letter (including the Principal Letter) should be listed in a separate letter Deposit of Nil Paid Rights or Fully Paid Rights into CREST The Nil Paid Rights or Fully Paid Rights represented by the Provisional Allotment Letter may be converted into uncertificated form, that is, deposited into CREST (whether such conversion arises as a result of a renunciation of those rights or otherwise). Similarly, Nil Paid Rights or Fully Paid Rights held in CREST may be converted into certificated form, that is, withdrawn from CREST. Subject as provided in the next following paragraph or in the Provisional Allotment Letter, normal CREST procedures and timings apply in relation to any such conversion. You are recommended to refer to the CREST Manual for details of such procedures. The procedure for depositing the Nil Paid Rights represented by the Provisional Allotment Letter into CREST, whether such rights are to be converted into uncertificated form in the name(s) of the person(s) whose name(s) and address appear on page 1 of the Provisional Allotment Letter or in the name of a person or persons to whom the Provisional Allotment Letter has been renounced, is as follows: Form X and the CREST Deposit Form (both on the Provisional Allotment Letter) will need to be completed and the Provisional Allotment Letter deposited with the CREST Courier and Sorting Service ( CCSS ). In addition, the normal CREST Stock Deposit procedures will need to be carried out, except that (a) it will 73

74 not be necessary to complete and lodge a separate CREST Transfer Form (prescribed under the Stock Transfer Act 1963) with the CCSS and (b) only the whole of the Nil Paid Rights or the Fully Paid Rights represented by the Provisional Allotment Letter may be deposited into CREST. If you wish to deposit some only of the Nil Paid Rights or the Fully Paid Rights represented by the Provisional Allotment Letter into CREST, you must first apply for split Provisional Allotment Letters by following the instructions in paragraph above. If the rights represented by more than one Provisional Allotment Letter are to be deposited, the CREST Deposit Form on each Provisional Allotment Letter must be completed and deposited. The Consolidation Listing Form (as defined in the CREST Regulations) must not be used. A holder of the Nil Paid Rights (or, if appropriate, the Fully Paid Rights) represented by a Provisional Allotment Letter who is proposing to convert those rights into uncertificated form (whether following a renunciation of such rights or otherwise) is recommended to ensure that the conversion procedures are implemented in sufficient time to enable the person holding or acquiring the Nil Paid Rights (or, if appropriate, the Fully Paid Rights) in CREST following the conversion to take all necessary steps in connection with taking up the entitlement prior to a.m. on 3 April In particular, having regard to processing times in CREST and on the part of the Receiving Agent, the latest recommended time for depositing a renounced Provisional Allotment Letter (with Form X and the CREST Deposit Form on the Provisional Allotment Letter duly completed) with the CCSS (to enable the person acquiring the Nil Paid Rights (or, if appropriate, the Fully Paid Rights) in CREST as a result of the conversion to take all necessary steps in connection with taking up the entitlement prior to a.m. on 3 April 2017) is 3.00 p.m. on 28 March When Form X and the CREST Deposit Form (on the Provisional Allotment Letter) have been completed, the title to the Nil Paid Rights or the Fully Paid Rights represented by the Provisional Allotment Letters will cease to be renounceable or transferable by delivery, and, for the avoidance of doubt, any entries in Form Y will not subsequently be recognised or acted upon by the Receiving Agent. All renunciations or transfers of Nil Paid Rights or Fully Paid Rights must be effected through the CREST system once such Nil Paid Rights or Fully Paid Rights have been deposited into CREST. CREST sponsored members should contact their CREST sponsor as only their CREST sponsor will be able to take the necessary action to take up the entitlement or otherwise to deal with the Nil Paid Rights or Fully Paid Rights of the CREST sponsored member Issue of New Shares in definitive form Definitive share certificates in respect of the New Shares to be held in certificated form are expected to be despatched by post by no later than 11 April 2017 at the risk of the persons entitled thereto to Qualifying Non-CREST Shareholders (or their transferees who hold Fully Paid Rights in certificated form), or in the case of joint holdings, to the first-named Shareholders, at their registered address (unless lodging agent details have been completed on the Provisional Allotment Letter). After despatch of the definitive share certificates, Provisional Allotment Letters will cease to be valid for any purpose whatsoever. Pending despatch of definitive share certificates, instruments of transfer of the New Shares will be certified by the Receiving Agent against the register. 2.2 Action to be taken by Qualifying CREST Shareholders in relation to Nil Paid Rights and Fully Paid Rights in CREST General It is expected that each Qualifying CREST Shareholder will receive a credit to his or her stock account in CREST of his or her entitlement to Nil Paid Rights as soon as practicable after 8.00 a.m. on 17 March It is expected that such rights will be enabled shortly thereafter. The CREST stock account to be credited will be an account under the participant ID and member account ID that apply to the Existing Shares in uncertificated form held on the Record Date by the Qualifying CREST Shareholder in respect of which the Nil Paid Rights are provisionally allotted. The maximum number of New Shares that a Qualifying CREST Shareholder may take up is that which has been provisionally allotted to that Qualifying CREST Shareholder and for which he or she receives a credit of entitlement into his or her stock account in CREST. The minimum number of New Shares a Qualifying CREST Shareholder may take up is one. (iii) (iii) The Nil Paid Rights will constitute a separate security for the purposes of CREST and can accordingly be transferred, in whole or in part, by means of CREST in the same manner as any other security that is admitted to CREST. 74

75 If, for any reason, it is impracticable to credit the stock accounts of Qualifying CREST Shareholders, or to enable the Nil Paid Rights shortly after 8.00 a.m. on 17 March 2017, Provisional Allotment Letters shall, unless the Company determines otherwise, be sent out in substitution for the Nil Paid Rights which have not been so credited or enabled and the expected timetable as set out in this document will be adjusted as appropriate. References to dates and times in this document should be read as subject to any such adjustment. The Company will make an appropriate announcement to a Regulatory Information Service giving details of any revised dates but Qualifying CREST Shareholders may not receive any further written communication. CREST members who wish to take up their entitlements in respect of or otherwise to transfer Nil Paid Rights or Fully Paid Rights held by them in CREST (including CREST members who wish to effect a Cashless Take-up of their Nil Paid Rights) should refer to the CREST Manual for further information on the CREST procedures referred to below. If you are a CREST sponsored member, you should consult your CREST sponsor if you wish to take up your entitlement as only your CREST sponsor will be able to take the necessary action to take up your entitlements or otherwise to deal with your Nil Paid Rights or Fully Paid Rights (including effecting a Cashless Take-up of Nil Paid Rights) Procedure for acceptance and payment (i) MTM instructions CREST members who wish to take up all or some of their entitlement in respect of Nil Paid Rights in CREST must send (or, if they are CREST sponsored members, procure that their CREST sponsor sends) an MTM instruction to Euroclear that, on its settlement, will have the following effect: (iii) (iii) (iii) (a) the crediting of a stock account of the Receiving Agent under the participant ID and member account ID specified below, with the number of Nil Paid Rights to be taken up; (b) (c) the creation of a settlement bank payment obligation (as this term is defined in the CREST Manual), in accordance with the RTGS payment mechanism (as this term is defined in the CREST Manual), in favour of the RTGS settlement bank (as this term is defined in the CREST Manual) of the Receiving Agent in pounds sterling in respect of the full amount payable on acceptance in respect of the Nil Paid Rights referred to in paragraph 2.2.2(i)(a) above; and the crediting of a stock account of the accepting CREST member (being an account under the same participant ID and member account ID as the account from which the Nil Paid Rights are to be debited on settlement of the MTM instruction) of the corresponding number of Fully Paid Rights to which the CREST member is entitled on taking up his or her Nil Paid Rights referred to in paragraph 2.2.2(i)(a) above. (ii) Contents of MTM instructions The MTM instruction must be properly authenticated in accordance with Euroclear s specifications and must contain, in addition to the other information that is required for settlement in CREST, the following details: (a) (b) (c) (d) (e) (f) (g) the number of Nil Paid Rights to which the acceptance relates; the participant ID of the accepting CREST member; the member account ID of the accepting CREST member from which the Nil Paid Rights are to be debited; the participant ID of the Receiving Agent, in its capacity as a CREST receiving agent. This is 7RA33; the member account ID of the Receiving Agent, in its capacity as a CREST receiving agent. This is 29040LAI; the number of Fully Paid Rights that the CREST member is expecting to receive on settlement of the MTM instruction. This must be the same as the number of Nil Paid Rights to which the acceptance relates; the amount payable by means of the CREST assured payment arrangements on settlement of the MTM instruction. This must be the full amount payable on acceptance in respect of the number of Nil Paid Rights referred to in paragraph 2.2.2(ii)(a) above; 75

76 (h) the intended settlement date. This must be on or before a.m. on 3 April 2017; (i) (j) (k) (l) the Nil Paid Rights ISIN number, which is GB00BDCJPH73; the Fully Paid Rights ISIN number, which is GB00BDCJPJ97; the Corporate Action Number for the Rights Issue. This will be available by viewing the relevant corporate action details in CREST; and a contact name and telephone number in the shared note field. (iii) Valid acceptance An MTM instruction complying with each of the requirements as to authentication and contents set out in paragraph 2.2.2(ii) above will constitute a valid acceptance where either: (a) (b) the MTM instruction settles by not later than a.m. on 3 April 2017; or at the discretion of the Company: (I) (II) the MTM instruction is received by Euroclear by not later than a.m. on 3 April 2017; and a number of Nil Paid Rights at least equal to the number of Nil Paid Rights inserted in the MTM instruction is credited to the CREST stock member account of the accepting CREST member specified in the MTM instruction at a.m. on 3 April 2017; and (III) the relevant MTM instruction settles by a.m. on 3 April 2017 (or such later time and/or date as the Company may determine). An MTM instruction will be treated as having been received by Euroclear for these purposes at the time at which the instruction is processed by the Network Providers Communications Host (as this term is defined in the CREST Manual) at Euroclear of the network provider used by the CREST member (or by the CREST sponsored member s CREST sponsor). This will be conclusively determined by the input time stamp applied to the MTM UK instruction by the Network Providers Communications Host. The provisions of this paragraph 2.2.2(iii) and any other terms of the Rights Issue relating to Qualifying CREST Shareholders may be waived, varied or modified as regards specific Qualifying CREST Shareholder(s) or on a general basis by the Company. (iv) Representations, warranties and undertakings of CREST members A CREST member or CREST sponsored member who makes a valid acceptance in accordance with this paragraph represents, warrants and undertakes to the Company and the Underwriters that he or she has taken (or procured to be taken), and will take (or will procure to be taken), whatever action is required to be taken by him or her or by his or her CREST sponsor (as appropriate) to ensure that the MTM instruction concerned is capable of settlement at a.m. on 3 April In particular, the CREST member or CREST sponsored member represents, warrants and undertakes that, at a.m. on 3 April 2017 (or until such later time and date as the Company may determine), there will be sufficient Headroom within the Cap (as those terms are defined in the CREST Manual) in respect of the cash memorandum account to be debited with the amount payable on acceptance to permit the MTM instruction to settle. CREST sponsored members should contact their CREST sponsor if they are in any doubt. Such CREST member or CREST sponsored member taking up entitlements must make the representations and warranties set out in paragraph 2.6 below. If there is insufficient Headroom within the Cap (as those terms are defined in the CREST Manual) in respect of the cash memorandum account of a CREST member or CREST sponsored member for such amount to be debited or the CREST member s or CREST sponsored member s acceptance is otherwise treated as invalid and New Shares have already been allotted to such CREST member or CREST sponsored member, the Company may (in its absolute discretion as to the manner, timing and terms) make arrangements for the sale of such New Shares on behalf of that CREST member or CREST sponsored member and hold the proceeds of sale (net of the Company s reasonable estimate of any loss that it has suffered as a result of the acceptance being treated as invalid and of the expenses of sale, including, without limitation, any stamp duty or SDRT payable on the transfer of such New Shares, and of all amounts payable by the CREST member or CREST sponsored member pursuant to the Rights Issue in respect of the acquisition of such New Shares) on behalf of such CREST member or CREST sponsored member. Neither the Company nor any other person shall be responsible for, or have 76

77 any liability for, any loss, expense or damage suffered by such CREST member or CREST sponsored member as a result. (v) CREST procedures and timings CREST members and CREST sponsors (on behalf of CREST sponsored members) should note that Euroclear does not make available special procedures in CREST for any particular corporate action. Normal system timings and limitations will therefore apply in relation to the input of an MTM instruction and its settlement in connection with the Rights Issue. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST sponsored member, to procure that its CREST sponsor takes) the action necessary to ensure that a valid acceptance is received as stated above by a.m. on 3 April In connection with this, CREST members and (where applicable) CREST sponsors are referred in particular to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. (vi) CREST member s undertaking to pay A CREST member or CREST sponsored member who makes a valid acceptance in accordance with the procedures set out in this paragraph undertakes to pay to the Receiving Agent, or procure the payment to the Receiving Agent of, the amount payable in pounds sterling on acceptance in accordance with the above procedures or in such other manner as the Receiving Agent may require (it being acknowledged that, where payment is made by means of the RTGS payment mechanism (as defined in the CREST manual), the creation of a RTGS payment obligation in pounds sterling in favour of the Receiving Agent s RTGS settlement bank (as defined in the CREST Manual) in accordance with the RTGS payment mechanism shall, to the extent of the obligation so created, (a) discharge in full the obligation of the CREST member (or CREST sponsored member) to pay the amount payable on acceptance and (b) requests that the Fully Paid Rights and/or New Shares to which he or she will become entitled be issued to him or her on the terms set out in this document and subject to the Articles of the Company. If the payment obligations of the relevant CREST member or CREST sponsored member in relation to such New Shares are not discharged in full and such New Shares have already been allotted to the CREST member or CREST sponsored member, the Company may (in its absolute discretion as to manner, timing and terms) make arrangements for the sale of such Shares on behalf of the CREST member or CREST sponsored member and hold the proceeds of sale (net of the Company s reasonable estimate of any loss it has suffered as a result of the same and of the expenses of the sale, including, without limitation, any stamp duty or SDRT payable on the transfer of such Shares, and of all amounts payable by such CREST member or CREST sponsored member pursuant to the terms of the Rights Issue in respect of the acquisition of such Shares) or an amount equal to the original payment of the CREST member or CREST sponsored member. Neither the Company nor the Underwriters nor any other person shall be responsible for, or have any liability for, any loss, expense or damage suffered by the CREST member or CREST sponsored member as a result. (vi) Company s discretion as to rejection and validity of acceptances The Company may agree in its absolute sole discretion to: (a) reject any acceptance constituted by an MTM instruction, which is otherwise valid, in the event of breach of any of the representations, warranties and undertakings set out or referred to in this paragraph Where an acceptance is made as described in this paragraph 2.2.2, which is otherwise valid, and the MTM instruction concerned fails to settle by a.m. on 3 April 2017 (or by such later time and date as the Company has determined), the Company shall be entitled to assume, for the purposes of its right to reject an acceptance contained in this paragraph 2.2.2, that there has been a breach of the representations, warranties and undertakings set out or referred to in this paragraph unless the Company is aware of any reason outside the control of the CREST member or CREST sponsor (as appropriate) for the failure to settle; (b) (c) treat as valid (and binding on the CREST member or CREST sponsored member concerned) an acceptance which does not comply in all respects with the requirements as to validity set out or referred to in this paragraph 2.2.2; accept an alternative properly authenticated dematerialised instruction from a CREST member or (where applicable) a CREST sponsor as constituting a valid acceptance in substitution for, or in 77

78 addition to, an MTM instruction and subject to such further terms and conditions as the Company and the Underwriters may determine; (d) treat a properly authenticated dematerialised instruction in this paragraph 2.2.2(vii)(d) (the first instruction ) as not constituting a valid acceptance if, at the time at which the Receiving Agent receives a properly authenticated dematerialised instruction giving details of the first instruction, either the Company or the Receiving Agent has received actual notice from Euroclear of any of the matters specified in Regulation 35(5)(a) of the CREST Regulations in relation to the first instruction. These matters include notice that any information contained in the first instruction was incorrect or notice of lack of authority to send the first instruction; and (e) accept an alternative instruction or notification from a CREST member or CREST sponsored member or (where applicable) a CREST sponsor, or extend the time for acceptance and/or settlement of an MTM instruction or any alternative instruction or notification, if, for reasons or due to circumstances outside the control of any CREST member or CREST sponsored member or (where applicable) CREST sponsor, the CREST member or CREST sponsored member is unable validly to take up all or part of his or her Nil Paid Rights by means of the above procedures. In normal circumstances, this discretion is only likely to be exercised in the event of any interruption, failure or breakdown of CREST (or of any part of CREST) or on the part of facilities and/or systems operated by the Receiving Agent in connection with CREST Money Laundering Regulations If you hold your Nil Paid Rights in CREST and apply to take up all or part of your entitlement as agent for one or more persons and you are not a UK or EU regulated person or institution (e.g. a UK financial institution), then, irrespective of the value of the application, the Registrar is entitled to take reasonable measures to establish the identity of the person or persons (or the ultimate controller of such person or persons) on whose behalf you are making the application and any submission of a MTM instruction constitutes agreement for the Registrar to make any search deemed necessary. You must therefore contact the Registrar before sending any MTM instruction or other instruction so that appropriate measures may be taken. Submission of an MTM instruction which constitutes, or which may on its settlement constitute, a valid acceptance as described above constitutes a warranty and undertaking by the applicant to provide promptly to the Receiving Agent any information the Receiving Agent may specify as being required for the purposes of the verification of the identity requirements in the Money Laundering Regulations or the FSMA. Pending the provision of such information and other evidence as the Registrar may require to satisfy the verification of identity requirements, the Receiving Agent, having consulted with the Company, may take, or omit to take, such action as it may determine to prevent or delay settlement of the MTM instruction. If such information and other evidence of identity has not been provided within a reasonable time, then the Receiving Agent will not permit the MTM instruction concerned to proceed to settlement but without prejudice to the right of the Company and/or the Underwriters to take proceedings to recover any loss suffered by any of them as a result of failure by the applicant to provide such information and other evidence Dealings in Nil Paid Rights in CREST Assuming the Rights Issue becomes unconditional, dealings in the Nil Paid Rights on the London Stock Exchange are expected to commence at 8.00 a.m. on 17 March A transfer (in whole or in part) of Nil Paid Rights can be made by means of CREST in the same manner as any other security that is admitted to CREST. The Nil Paid Rights are expected to be disabled in CREST after the close of CREST business on 3 April (iii) Dealings in Fully Paid Rights in CREST After acceptance of the provisional allotment and payment in full in accordance with the provisions set out in this document, the Fully Paid Rights may be transferred by means of CREST in the same manner as any other security that is admitted to CREST. The last time for settlement of any transfer of Fully Paid Rights in CREST is expected to be a.m. on 3 April The Fully Paid Rights are expected to be disabled in CREST after the close of CREST business on 3 April From 8.00 a.m. on 4 April 2017, the New Shares will be registered in the name(s) of the person(s) entitled to them in the Company s register of members and will be transferable in the usual way (see paragraph of this Part III below). 78

79 2.2.6 Withdrawal of Nil Paid Rights or Fully Paid Rights from CREST Nil Paid Rights or Fully Paid Rights held in CREST may be converted into certificated form, that is, withdrawn from CREST. Normal CREST procedures (including timings) apply in relation to any such conversion. (iii) The recommended latest time for receipt by Euroclear of a properly authenticated dematerialised instruction requesting withdrawal of Nil Paid Rights or, if appropriate, Fully Paid Rights from CREST is 4.30 p.m. on 27 March 2017, so as to enable the person acquiring or (as appropriate) holding the Nil Paid Rights or, if appropriate, Fully Paid Rights following the conversion to take all necessary steps in connection with taking up the entitlement prior to a.m. on 3 April You are recommended to refer to the CREST Manual for details of such procedures Issue of New Shares in CREST Fully Paid Rights in CREST are expected to be disabled in CREST after the close of CREST business on 3 April 2017 (the latest date for settlement of transfers of Fully Paid Rights in CREST). New Shares (in definitive form) will be issued in uncertificated form to those persons registered as holding Fully Paid Rights in CREST no later than the close of business on the Business Day after the date on which the Fully Paid Rights are disabled. The Receiving Agent will instruct Euroclear to credit the appropriate stock accounts of those persons (under the same participant ID and member account ID that applied to the Fully Paid Rights held by those persons) with their entitlements to New Shares with effect as soon as practicable after 8.00 a.m. on 4 April (iii) Right to allot/issue in certificated form Despite any other provision of this document, the Company reserves the right to allot and/or issue any Nil Paid Rights, Fully Paid Rights or New Shares in certificated form. In normal circumstances, this right is only likely to be exercised in the event of an interruption, failure or breakdown of CREST (or of any part of CREST) or on the part of the facilities and/or systems operated by the Receiving Agent in connection with CREST. 2.3 Procedure in respect of rights not taken up (whether certificated or in CREST) and withdrawal Procedure in respect of New Shares not taken up If an entitlement to New Shares is not validly taken up by a.m. on 3 April 2017, in accordance with the procedure laid down for acceptance and payment, then the relevant Provisional Allotment Letter or Nil Paid Rights in uncertificated form (as applicable) will be deemed to have been declined and will lapse. The Underwriters will endeavour, as agents for the Company, to procure, by not later than 5.00 p.m. on the second dealing day after the last date for acceptance under the Rights Issue, acquirers for all (or as many as possible) of those New Shares not taken up at a price per New Share which is at least equal to the aggregate of the Issue Price and the expenses of procuring such acquirers (including any applicable brokerage fees and commissions and amounts in respect of value added tax). (iii) Notwithstanding the above, the Underwriters may cease to endeavour to procure any such acquirers if, in their opinion, it is unlikely that any such acquirers can be procured at such a price and by such a time. If and to the extent that acquirers for New Shares cannot be procured on the basis outlined above, the relevant New Shares will be purchased by the Underwriters or sub-underwriters (if any) at the Issue Price pursuant to the terms of the Underwriting Agreement. Any premium over the aggregate of the Issue Price and the expenses of procuring acquirers (including any applicable brokerage fees and commissions and amounts in respect of value added tax) shall be paid (subject as provided in this paragraph 2.3): (i) (ii) where the Nil Paid Rights were, at the time they were not taken up, represented by a Provisional Allotment Letter, to the person whose name and address appeared on the Provisional Allotment Letter; where the Nil Paid Rights were, at the time they were not taken up, in uncertificated form, to the person registered as the holder of those Nil Paid Rights at the time of their disablement in CREST; and (iii) where an entitlement to New Shares was not taken up by an Overseas Shareholder, to that Overseas Shareholder. 79

80 New Shares for which acquirers are procured on this basis will be reallotted to the acquirers and the aggregate of any premiums (being the amount paid by the acquirers after deducting the Issue Price and the expenses of procuring the acquirers, including any applicable brokerage fees and commissions and amounts in respect of value added tax), if any, will be paid (without interest) to those persons entitled (as referred to above) pro rata to the relevant provisional allotments not taken up, save that amounts of less than 5.00 per holding will not be so paid but will be aggregated and will be for the account of the Company. For the avoidance of doubt, no amounts under (i) to (iii) above will be for the account of the Company other than amounts of less than 5.00 per holding as described above. Cheques for the amounts due will be sent by post, at the risk of the person(s) entitled, to their registered addresses (the registered address of the first-named holder in the case of joint holders), provided that, where any entitlement concerned was held in CREST, the amount due will, unless the Company (in its absolute discretion) otherwise determines, be satisfied by the creation of an assured payment obligation in favour of the relevant CREST member s (or CREST sponsored member s) CREST settlement bank in respect of the cash amount concerned in accordance with the CREST payment mechanism. Any transactions undertaken pursuant to this paragraph 2.3 or paragraph below shall be deemed to have been undertaken at the request of the persons entitled to the rights not taken up or other entitlements and neither the Company nor the Underwriters nor any other person procuring acquirers shall be responsible for any loss, expense or damage (whether actual or alleged) arising from the terms or timing of any such acquisition, any decision not to endeavour to procure acquirers or the failure to procure acquirers on the basis so described. The Underwriters will be entitled to retain any brokerage fees, commissions or other benefits received in connection with these arrangements. It is a term of the Rights Issue that all New Shares validly taken up by acquirers under the Rights Issue may be allotted to such acquirers in the event that not all of the New Shares offered for purchase under the Rights Issue are taken up Withdrawal rights Persons who have the right to withdraw their acceptances under Section 87Q(4) of the FSMA after a supplementary prospectus (if any) has been published and who wish to exercise such right of withdrawal must do so by lodging a written notice of withdrawal by sending an to withdraw@capita.co.uk, which must include the full name and address of the person wishing to exercise such statutory withdrawal rights and, if such person is a CREST member, the participant ID and the member account ID of such CREST member, by post to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, or by hand (during normal business hours only) to Capita Asset Services at the address above so as to be received no later than two Business Days after the date on which the supplementary prospectus was published, withdrawal being effective as at posting of the written notice of withdrawal. Notice of withdrawal given by any other means or which is deposited with or received by Capita Asset Services after the expiry of such period will not constitute a valid withdrawal. Furthermore, based on advice received by the Company as to the effect of statutory withdrawal rights where the allotment contract is fully performed, the Company will not permit the exercise of withdrawal rights after payment by the relevant Shareholder of its subscription amount in full and the allotment of the New Shares to such Shareholder becoming unconditional. In such circumstances, Shareholders are advised to consult their professional advisers including their legal advisers as this may be a matter of law. (iii) Provisional allotments of entitlements to New Shares which are the subject of a valid withdrawal notice will be deemed to be declined. Such entitlements to New Shares will be subject to the provisions of paragraph above as if the entitlement had not been validly taken up. 2.4 Taxation Information on taxation in the United Kingdom and the United States with regard to the Rights Issue is set out in Part VIII Taxation of this document. The information contained in Part VIII Taxation of this document is intended only as a general guide to the current tax position in the UK and the United States and Qualifying Shareholders should consult their own tax advisers regarding the tax treatment of the Rights Issue in light of their own circumstances. Shareholders who are in any doubt as to their tax position or who are subject to tax in any other jurisdiction should consult an appropriate professional adviser immediately. 80

81 2.5 Overseas Shareholders General This document has been approved by the FCA, being the competent authority in the UK. The making or acceptance of the proposed offer of Nil Paid Rights, Fully Paid Rights and/or New Shares to persons who have registered addresses outside the UK, or who are resident in, or citizens of, countries other than the UK may be affected by the laws of the relevant jurisdiction. Those persons should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their rights. It is also the responsibility of any person (including, without limitation, custodians, nominees and trustees) outside the UK wishing to take up rights under or otherwise participate in the Rights Issue to satisfy himself or herself as to the full observance of the laws of any relevant territory in connection therewith, including the obtaining of any governmental or other consents which may be required, the compliance with other necessary formalities and the payment of any issue, transfer or other taxes due in such territories. The comments set out in this paragraph 2.5 are intended as a general guide only and any Overseas Shareholder who is in doubt as to his or her position should consult his or her professional adviser without delay. Having considered the circumstances, the Directors have formed the view that it is necessary or expedient to restrict the ability of persons in the Excluded Territories, subject to certain exceptions, and the United States, to take up rights to New Shares or otherwise participate in the Rights Issue due to the time and costs involved in the registration of this Prospectus and/or compliance with the relevant local legal or regulatory requirements in those jurisdictions. Receipt of this document and/or a Provisional Allotment Letter or the crediting of Nil Paid Rights to a stock account in CREST will not constitute an offer in those jurisdictions in which it would be illegal to make an offer and, in those circumstances, this document and/or a Provisional Allotment Letter must be treated as sent for information only and should not be copied or redistributed. New Shares will be provisionally allotted (nil paid) to all Shareholders on the register at the Record Date, including Overseas Shareholders. However, Provisional Allotment Letters will not be sent to, and Nil Paid Rights will not be credited to CREST accounts of, Shareholders with registered addresses in the United States or the Excluded Territories or their agent or intermediary, except where the Company is satisfied that such action would not result in the contravention of any registration or other legal requirement in any jurisdiction. Although Nil Paid Rights will be credited to the CREST accounts of all Qualifying CREST Shareholders, such crediting of Nil Paid Rights does not constitute an offer to Shareholders and, specifically, no offer is being made to Shareholders (i) with a registered address, or resident or located, in any of the Excluded Territories or (ii) in any other jurisdiction in which it is unlawful to make or accept an offer to acquire the Shares. CREST Shareholders will be entitled to take up rights in the Rights Issue only if such action would not result in the contravention of any registration or other legal requirement in any jurisdiction. No person receiving a copy of this document and/or a Provisional Allotment Letter and/or receiving a credit of Nil Paid Rights to a stock account in CREST in any territory other than the UK may treat the same as constituting an invitation or offer to him or her nor should he or she in any event use the Provisional Allotment Letter or deal in Nil Paid Rights or Fully Paid Rights in CREST unless, in the relevant territory, such an invitation or offer could lawfully be made to him or her in respect of the Nil Paid Rights and Fully Paid Rights. In such circumstances, this document and the Provisional Allotment Letter are to be treated as sent for information only and should not be copied or redistributed. Persons (including, without limitation, custodians, nominees and trustees) receiving a copy of this document and/or a Provisional Allotment Letter or whose stock account is credited with Nil Paid Rights or Fully Paid Rights should not, in connection with the Rights Issue, distribute or send the same or transfer Nil Paid Rights or Fully Paid Rights in or into any jurisdiction where to do so would or might contravene local security laws or regulations. If a Provisional Allotment Letter or a credit of Nil Paid Rights or Fully Paid Rights is received by any person in any such territory, or by his or her agent or nominee, he or she must not seek to take up the rights referred to in the Provisional Allotment Letter or in this document or renounce the Provisional Allotment Letter or transfer the Nil Paid Rights or Fully Paid Rights unless the Company determines that such actions would not violate applicable legal or regulatory requirements. Any person (including, without limitation, custodians, nominees and trustees) who does forward this document or a Provisional Allotment Letter or transfer Nil Paid Rights or Fully Paid Rights 81

82 into any such territories (whether pursuant to a contractual or legal obligation or otherwise) should draw the recipient s attention to the contents of this paragraph 2.5. Subject to paragraphs to below, any person (including, without limitation, agents, nominees and trustees) outside the UK wishing to take up his or her rights under the Rights Issue must satisfy himself as to full observance of the applicable laws of any relevant territory, including obtaining any requisite governmental or other consents, observing any other requisite formalities and paying any issue, transfer or other taxes due in such territories. The comments set out in this paragraph 2.5 are intended as a general guide only and any Overseas Shareholders who are in any doubt as to their position should consult their professional advisers without delay. The Company reserves the right to treat as invalid and will not be bound to allot or issue any New Shares in respect of any acceptance or purported acceptance of the offer of New Shares which: (i) (ii) (iii) appears to the Company or its agents to have been executed, effected or despatched from the United States or an Excluded Territory or any other jurisdiction outside the UK in which it would be unlawful to execute, effect or despatch such acceptance or purported acceptance unless the Company is satisfied that such action would not result in the contravention of any registration or other legal requirement; or in the case of a Provisional Allotment Letter, provides an address for delivery of the share certificates or other statements of entitlement or advice in an Excluded Territory or any other jurisdiction outside the UK in which it would be unlawful to deliver such certificates, statements or advice or if the Company or its agents believe that the same may violate applicable legal or regulatory requirements; or in the case of a credit of New Shares in CREST, to a CREST member or CREST sponsored member whose registered address would be in the United States or an Excluded Territory or any other jurisdiction outside the UK in which it would be unlawful to make such a credit or if the Company or its agents believe that the same may violate applicable legal or regulatory requirements. The attention of Overseas Shareholders with registered addresses outside the UK is drawn to paragraphs to below. The provisions of paragraph above will apply to Overseas Shareholders who do not take up New Shares provisionally allotted to them or are unable to take up New Shares provisionally allotted to them because such action would result in a contravention of applicable law or regulatory requirements. Accordingly, such Shareholders will be treated as Shareholders that have not taken up their entitlement for the purposes of paragraph above and the Underwriters will use reasonable endeavours, as agents for the Company, to procure acquirers for the relevant New Shares. The net proceeds of such sales (after deduction of expenses) will be paid to the relevant Shareholders pro rata to their holdings of Existing Shares on the Record Date as soon as practicable after receipt, except that (i) individual amounts of less than 5.00 per holding will not be distributed but will be aggregated and will be for the account of the Company and (ii) amounts in respect of fractions will not be distributed. None of the Company, the Underwriters or any other person shall be responsible or have any liability whatsoever for any loss or damage (actual or alleged) arising from the terms or the timing of the acquisition or the procuring of it or any failure to procure acquirers. Notwithstanding any other provision of this document or the Provisional Allotment Letter, the Company reserves the right to permit any Shareholder to participate in the Rights Issue on the terms and conditions set out in this document as if it were a Qualifying Shareholder if the Company in its sole and absolute discretion is satisfied that the transaction in question is exempt from or not subject to the legislation or regulations giving rise to the restrictions in question. If the Company is so satisfied, the Company will arrange for the relevant Shareholder to be sent a Provisional Allotment Letter if he or she is a Qualifying Non-CREST Shareholder or, if he or she is a Qualifying CREST Shareholder, arrange for Nil Paid Rights to be credited to the relevant CREST stock account. Those Overseas Shareholders who wish, and are permitted, to take up their entitlement should note that payments must be made as described in paragraphs (Qualifying Non-CREST Shareholders) and (Qualifying CREST Shareholders) above. Overseas Shareholders should note that all subscription monies must be paid in pounds sterling by cheque or banker s draft and should be drawn on a bank in the UK, made payable to Capita Registrars Limited Re Laird PLC Rights Issue A/C and crossed A/C payee only. 82

83 2.5.2 United States of America The Nil Paid Rights, the Fully Paid Rights, the New Shares and the Provisional Allotment Letters have not been and will not be registered under the Securities Act or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. Prospective investors are hereby notified that sellers of the Nil Paid Rights, the Fully Paid Rights or the New Shares may be relying on the exemption from registration provisions under Section 5 of the Securities Act provided by Rule 144A thereunder. The offer by way of rights will be made to Shareholders by means of notice in the London Gazette, details of which are provided in paragraph of this Part III Terms and Conditions of the Rights Issue. The Company is not extending the offer under the Rights Issue into the United States unless an exemption from the registration requirements of the Securities Act is available and, subject to certain exceptions, none of this document and the Provisional Allotment Letter constitutes or will constitute an offer or an invitation to apply for or an offer or an invitation to acquire any Nil Paid Rights, Fully Paid Rights or New Shares in the United States. Subject to certain exceptions, neither this document nor a Provisional Allotment Letter will be sent to any Shareholder with a registered address in the United States. Subject to certain exceptions, Provisional Allotment Letters or renunciations thereof sent from or post-marked in the United States will be deemed to be invalid and all persons acquiring New Shares and wishing to hold such Shares in registered form must provide an address for registration of the New Shares issued upon exercise thereof outside the United States. Subject to certain exceptions, any person who acquires New Shares, Nil Paid Rights or Fully Paid Rights will be deemed to have declared, warranted and agreed, by accepting delivery of this document or the Provisional Allotment Letter taking up their entitlement or accepting delivery of the New Shares, the Nil Paid Rights or the Fully Paid Rights, that they are not, and that at the time of acquiring the New Shares, the Nil Paid Rights or the Fully Paid Rights they will not be, in the United States or acting on behalf of, or for the account or benefit of a person on a non-discretionary basis in the United States or any state or other jurisdiction of the United States. The Company reserves the right to treat as invalid any Provisional Allotment Letter (or renunciation thereof) that appears to the Company or its agents to have been executed in or despatched from the United States, or that provides an address in the United States for the acceptance or renunciation of the Rights Issue, or which does not make the warranty set out in the Provisional Allotment Letter to the effect that the person accepting and/or renouncing the Provisional Allotment Letter does not have a registered address and is not otherwise located in the United States and is not acquiring the Nil Paid Rights, the Fully Paid Rights or the New Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such Nil Paid Rights, Fully Paid Rights or New Shares in the United States or where the Company believes acceptance of such Provisional Allotment Letter may infringe applicable legal or regulatory requirements. The Company will not be bound to allot (on a non-provisional basis) or issue any New Shares, Nil Paid Rights, or Fully Paid Rights to any person with an address in, or who is otherwise located in, the United States in whose favour a Provisional Allotment Letter or any Nil Paid Rights, Fully Paid Rights or New Shares may be transferred or renounced. In addition, the Company and the Underwriters reserve the right to reject any MTM instruction sent by or on behalf of any CREST member with a registered address in the United States in respect of the Nil Paid Rights. In addition, until 40 days after the commencement of the Rights Issue, an offer, sale or transfer of the New Shares, the Nil Paid Rights, the Fully Paid Rights or the Provisional Allotment Letters within the United States by a dealer (whether or not participating in the Rights Issue) may violate the registration requirements of the Securities Act. The provisions of paragraph 2.3 above will apply to any rights not taken up. Accordingly, Shareholders with a registered address in the United States who are not eligible to take up their rights will be treated as unexercising holders and the Underwriters will endeavour to procure on behalf of the Company acquirers for the New Shares, as agents for the Company. 83

84 2.5.3 Australia, Canada, the People s Republic of China, Hong Kong, the Republic of India, Japan, the Republic of Korea, Malaysia, Mexico, New Zealand, the Republic of South Africa, Singapore, Switzerland and Taiwan Having considered the circumstances, the Directors have formed the view that it is necessary or expedient to restrict the ability of persons in Australia, Canada, the People s Republic of China, Hong Kong, the Republic of India, Japan, the Republic of Korea, Malaysia, Mexico, New Zealand, the Republic of South Africa, Singapore, Switzerland and Taiwan, to take up rights to New Shares or otherwise participate in the Rights Issue due to the time and costs involved in the registration of this Prospectus and/or compliance with the relevant local legal or regulatory requirements in those jurisdictions. Therefore, subject to certain exceptions, no Provisional Allotment Letters in relation to the New Shares will be sent to Shareholders, and no Nil Paid Rights or Fully Paid Rights will be credited to a stock account in CREST of, persons with registered addresses in Australia, Canada, the People s Republic of China, Hong Kong, the Republic of India, Japan, the Republic of Korea, Malaysia, Mexico, New Zealand, the Republic of South Africa, Singapore, Switzerland or Taiwan and the Nil Paid Rights to which they are entitled will be sold if possible in accordance with the provisions of paragraph above. Subject to certain exceptions, the Provisional Allotment Letters, the Nil Paid Rights, the Fully Paid Rights and the New Shares may not be transferred or sold to, or renounced or delivered in, Australia, Canada, the People s Republic of China, Hong Kong, the Republic of India, Japan, the Republic of Korea, Malaysia, Mexico, New Zealand, the Republic of South Africa, Singapore, Switzerland or Taiwan. No offer of New Shares is being made by virtue of this document or the Provisional Allotment Letters into Australia, Canada, the People s Republic of China, Hong Kong, the Republic of India, Japan, the Republic of Korea, Malaysia, Mexico, New Zealand, the Republic of South Africa, Singapore, Switzerland or Taiwan. Supplemental information relating to Canada Canadian Shareholders are prohibited from receiving or taking up rights in the Rights Issue (unless the Company approves additional procedures to permit such participation). The Underwriters may procure subscribers in Canada for New Shares not taken up in the Rights Issue pursuant to exemptions from the prospectus requirements of Canadian securities law and otherwise in compliance with all applicable requirements of those securities laws. The New Shares may be sold in Canada only to purchasers resident or located in the Provinces of Ontario, Québec, Alberta and British Columbia, purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the New Shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws. Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser s province or territory for particulars of these rights or consult with a legal advisor. Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non- Canadian jurisdiction, section 3A.4) of National Instrument Underwriting Conflicts ( NI ), the international joint lead managers are not required to comply with the disclosure requirements of NI regarding underwriter conflicts of interest in connection with this offering. Supplemental information relating to Switzerland The Nil Paid Rights, the Fully Paid Rights and the New Shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange ( SIX ) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the Nil Paid Rights, the Fully Paid Rights and the New Shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland. 84

85 Neither this document nor any other offering or marketing material relating to the offering, the Issuer, the Nil Paid Rights, the Fully Paid Rights and the New Shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of Nil Paid Rights, the Fully Paid Rights and the New Shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA Overseas territories other than the United States, Australia, Canada, the People s Republic of China, Hong Kong, the Republic of India, Japan, the Republic of Korea, Malaysia, Mexico, New Zealand, the Republic of South Africa, Singapore, Switzerland and Taiwan Provisional Allotment Letters will be posted to Overseas Shareholders who are Qualifying Non-CREST Shareholders and Nil Paid Rights will be credited to the CREST stock accounts of Overseas Shareholders who are Qualifying CREST Shareholders. Such Overseas Shareholders may, subject to the laws of the relevant jurisdictions, participate in the Rights Issue in accordance with the instructions set out in this document and, if relevant, the Provisional Allotment Letter. In cases where Overseas Shareholders do not take up Nil Paid Rights, their entitlements will be sold if possible in accordance with the provisions of paragraph above. Qualifying Shareholders who have registered addresses in or who are resident in, or who are citizens of, all countries other than the UK should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their rights. (i) Member States of the European Economic Area (other than the United Kingdom) In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (as defined below) (except the UK) (each, a Relevant Member State ), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, none of the New Shares, the Nil Paid Rights or the Fully Paid Rights may be offered or sold to the public in that Relevant Member State prior to the publication of this Prospectus in relation to the New Shares, the Nil Paid Rights and the Fully Paid Rights, which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, other than the offers contemplated in this Prospectus in a Relevant Member State after the date of such publication or notification, and except that an offer of such Nil Paid Rights, Fully Paid Rights or New Shares may be made to the public in that Relevant Member State: (i) (ii) (iii) to any legal entity which is a qualified investor as defined in the Prospectus Directive; to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the Sole Global Coordinator for any such offer; or in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of New Shares, the Nil Paid Rights or the Fully Paid Rights shall require the Company to publish a prospectus pursuant to Article 3 of the Prospectus Directive or any measure implementing the Prospectus Directive in a Relevant Member State and each person who initially acquires any New Shares, Nil Paid Rights or Fully Paid Rights or to whom any offer is made under the Rights Issue will be deemed to have represented, acknowledged, and agreed that it is a qualified investor within the meaning of Article 2(1)(e) of the Prospectus Directive. For the purposes of this selling restriction, the expression an offer of New Shares, the Nil Paid Rights or the Fully Paid Rights to the public in relation to any New Shares, the Nil Paid Rights or the Fully Paid Rights in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the New Shares, the Nil Paid Rights or the Fully Paid Rights to be offered so as to enable an investor to decide to acquire the New Shares, the Nil Paid Rights or the Fully Paid Rights, as the same may be varied in that Relevant Member State, and the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State, and the expression 2010 PD Amending Directive means Directive 2010/73/EU. In the case of the New Shares, the Nil Paid Rights or the Fully Paid Rights being offered to a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, such financial intermediary 85

86 will also be deemed to have represented, acknowledged and agreed that the New Shares, the Nil Paid Rights or the Fully Paid Rights acquired by it have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any New Shares, Nil Paid Rights or Fully Paid Rights to the public other than their offer or resale in a Relevant Member State to qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive. The Company, the Underwriters and their respective affiliates will rely upon the truth and accuracy of the foregoing representation, acknowledgement and agreement Notice in the London Gazette In accordance with section 562(3) of the Companies Act, the offer to Shareholders who have no registered address in an EEA State and who have not given to the Company an address in an EEA State for the service of notices, will be made by the Company causing a notice to be published in the London Gazette on 16 March 2017 stating where copies of this document and the Provisional Allotment Letters may be obtained or inspected on personal application by or on behalf of such Shareholders. Any person with a registered address, or who is resident or located, in the United States, any of the Excluded Territories or any other jurisdictions where the extension and availability of the Rights Issue would breach any applicable law who obtains a copy of this document or a Provisional Allotment Letter is required to disregard them, except with the consent of the Company. However, in order to facilitate acceptance of the offer made to such Shareholders by virtue of such publication, Provisional Allotment Letters will also be posted to Overseas Shareholders who are Qualifying Shareholders. Such Shareholders, if it is lawful to do so, may accept the offer either by returning the Provisional Allotment Letter posted to them or by obtaining a copy thereof from the place stated in the notice and returning it in accordance with the instructions set out therein. Similarly, Nil Paid Rights are expected to be credited to stock accounts in CREST of Overseas Shareholders who are Qualifying CREST Shareholders Waiver The provisions of this paragraph 2.5 and of any other terms of the Rights Issue relating to Overseas Shareholders may be waived, varied or modified as regards specific Shareholders or on a general basis by the Company in its absolute discretion. Subject to this, the provisions of this paragraph 2.5 supersede any terms of the Rights Issue inconsistent herewith. References in this paragraph 2.5 to Shareholders shall include references to the person or persons executing a Provisional Allotment Letter and, in the event of more than one person executing a Provisional Allotment Letter, the provisions of this paragraph 2.5 shall apply to them jointly and to each of them. 2.6 Representations and warranties relating to Shareholders (i) Qualifying Non-CREST Shareholders Any person accepting and/or renouncing a Provisional Allotment Letter or requesting registration of the New Shares comprised therein represents and warrants to the Company and the Underwriters that, except where proof has been provided to the Company s satisfaction that such person s use of the Provisional Allotment Letter will not result in the contravention of any applicable regulatory or legal requirement in any jurisdiction, (a) such person is not accepting and/or renouncing the Provisional Allotment Letter, or requesting registration of the relevant New Shares, from within the United States or the Excluded Territories; (b) such person is not in any territory in which it is unlawful to make or accept an offer to acquire New Shares or to use the Provisional Allotment Letter in any manner in which such person has used or will use it; (c) such person is not acting on a non-discretionary basis on behalf of, or for the account or benefit of, a person located within the United States or any Excluded Territory or any territory referred to in (b) above at the time the instruction to accept or renounce was given; and (d) such person is not acquiring Nil Paid Rights, Fully Paid Rights or New Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such Nil Paid Rights, Fully Paid Rights or New Shares into the United States or any Excluded Territory or any territory referred to in (b) above. The Company may treat as invalid any acceptance or purported acceptance of the allotment of New Shares comprised in, or renunciation or purported renunciation of, a Provisional Allotment Letter if it (a) appears to the Company to have been executed in or despatched from the United States or any Excluded Territory or otherwise in a manner which may involve a breach of the laws of any jurisdiction or if it believes the same may violate any applicable legal or regulatory requirement; (b) provides an address in the United States or any Excluded Territory (or any jurisdiction outside the UK in which it 86

87 would be unlawful to deliver share certificates or sales advice); or (c) purports to exclude the warranty required by this paragraph 2.6. (ii) Qualifying CREST Shareholders A CREST member or CREST sponsored member who makes a valid acceptance in accordance with the procedures set out in this Part III represents and warrants to the Company and the Underwriters that, except where proof has been provided to the Company s satisfaction that such person s acceptance will not result in the contravention of any applicable regulatory or legal requirement in any jurisdiction, (a) he or she is not within the United States or any of the Excluded Territories; (b) he or she is not in any territory in which it is unlawful to make or accept an offer to acquire New Shares; (c) he or she is not accepting on a non-discretionary basis for, on behalf of, or for the account or benefit of, a person located within the United States or any Excluded Territory or any territory referred to in (b) above at the time the instruction to accept was given; and (d) he or she is not acquiring Nil Paid Rights, Fully Paid Rights or New Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such Nil Paid Rights, Fully Paid Rights or New Shares into the United States or any Excluded Territory or any territory referred to in (b) above. 2.7 Structure of the Rights Issue The Rights Issue has been structured in a way that is expected to have the effect of providing the Company with the ability to realise distributable reserves approximately equal to the net proceeds of the Rights Issue less the nominal value of the New Shares issued by the Company. The Company and J.P. Morgan Cazenove (the JerseyCo Subscriber ) have agreed to subscribe for ordinary shares in JerseyCo. Monies received from Shareholders or renouncees taking up New Shares under the Rights Issue and from persons procured by the Underwriters, as agents for the Company to acquire New Shares not taken up, or, if applicable, the Underwriters, will be paid to an account with the Receiving Agent. The JerseyCo Subscriber (acting as principal), will apply the monies in such account (less any premium above the Issue Price) to subscribe for redeemable preference shares in JerseyCo. The Company will allot and issue the New Shares to those persons entitled thereto in consideration for the JerseyCo Subscriber transferring its holdings of ordinary shares and redeemable preference shares in JerseyCo to the Company. Accordingly, instead of receiving cash consideration for the issue of New Shares, following completion of the Rights Issue, the Company will own the entire issued share capital of JerseyCo, whose only asset will be the cash reserves representing an amount equal to the net proceeds of the Rights Issue. The Company should be able to access those funds by redeeming the redeemable preference shares it holds in JerseyCo, or, alternatively, during any interim period prior to redemption, by procuring that JerseyCo lends the amount to the Company. The ability to realise distributable reserves in the Company will facilitate any potential distribution to Shareholders made by the Company in the future. Accordingly, by taking up New Shares under the Rights Issue and submitting a valid payment in respect thereof, a Shareholder (or renouncee, as the case may be) instructs the Receiving Agent to hold such payment on behalf of the JerseyCo Subscriber and (i) to the extent of a successful application under the Rights Issue (which has not been subsequently validly withdrawn), to apply such payment on behalf of the JerseyCo Subscriber solely for the JerseyCo Subscriber to subscribe (as principal) for redeemable preference shares in JerseyCo; and (ii) to the extent of an unsuccessful or validly withdrawn application under the Rights Issue, to return the relevant payment without interest to the applicant. The Company may elect to implement the Rights Issue without using the structure above if it deems it to be in the Company s interest to do so. Further details of the documents relating to this structure are set out in paragraph 15.2 of Part IX Additional Information. 2.8 Times and dates The Company shall, in its discretion and after consultation with its financial and legal advisers, be entitled to amend the dates that Provisional Allotment Letters are despatched or dealings in Nil Paid Rights commence or amend or extend the latest time and date for acceptance under the Rights Issue and all related times and dates set out in this document and in such circumstances shall notify the UK Listing Authority, and make an announcement via a Regulatory Information Service approved by the UK Listing Authority. In the event such an announcement is made, Qualifying Shareholders may 87

88 not receive any further written communication in respect of such amendment or extension of the dates included in this document. If a supplementary prospectus is issued by the Company two or fewer Business Days prior to the latest time and date for acceptance and payment in full under the Rights Issue specified in this document (or such later date as may be agreed between the Company and the Underwriters), the latest date for acceptance under the Rights Issue shall be extended to the date that is three Business Days after the date of issue of the supplementary prospectus (and the dates and times of principal events due to take place following such date shall be extended accordingly). 2.9 Governing law The terms and conditions of the Rights Issue as set out in this document and the Provisional Allotment Letter and any non-contractual obligations arising out of or in relation to the Rights Issue shall be governed by, and construed in accordance with, English law Jurisdiction The courts of England and Wales are to have exclusive jurisdiction to settle any dispute which may arise out of or in connection with the Rights Issue, this document or the Provisional Allotment Letter and any non-contractual obligations arising out of or in connection with them. By accepting rights under the Rights Issue in accordance with the instructions set out in this document and, in the case of Qualifying Non-CREST Shareholders, the Provisional Allotment Letter, Qualifying Shareholders irrevocably submit to the jurisdiction of the courts of England and Wales and waive any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum. 88

89 PART IV BUSINESS OVERVIEW OF THE GROUP Overview Laird PLC is a global technology company focused on providing systems, components and solutions that enable connectivity in mission-critical wireless applications and antenna systems and that protect electronics from electromagnetic interference ( EMI ) and heat. Laird s aim is to be a trusted partner to its customers by creating innovative customer solutions, providing high quality engineering and manufacturing processes and enabling accelerated new product launches for its customers by providing speed and access throughout the design process in which there are high levels of customer engagement. As at 31 December 2016, Laird had 9,836 employees in 53 locations covering 4 continents and 17 countries. The Group has 24 engineering and manufacturing sites in different locations around the world and 21 design centres. Laird designs, manufactures and supplies products which are used in a wide range of applications, from smartphones, automotive and medical applications, to large scale installations for railways, ports, mines and military uses. The end markets which the Group currently targets are Connected Transport (representing 38% of revenue in 2016), Telecom/Computing (representing 22% of revenue in 2016), Mobile Devices (representing 15% of revenue in 2016), Connected Industry (representing 10% of revenue in 2016) and Connected Medical (representing 4% of revenue in 2016), with recent entry into the Connected Car end market. The Group s customers primarily include large North American and European original equipment manufacturers ( OEMs ) across these end markets. In October 2015, Laird announced an operational improvement programme to simplify manufacturing capabilities in Europe and North America into the largest facilities in order to reinforce the Group s ability to deliver reliable fulfilment and speed, while leveraging its cost base. By aligning and consolidating the Group s regional design, engineering, sales and distribution activities closer to where the Group s customers are located, the Directors believe Laird can drive innovation and further improve time to market. While 2014 and 2015 were positive years for Laird, supported by strong growth in the global smartphone and wireless technology markets as well as the acquisition of a 51% interest in Model Solution in 2014 and the acquisition of LS Research, LLC ( LS Research ) in 2015, the Group s performance in 2016 was disappointing due to a combination of pricing and margin pressures from a key customer, reduced volumes due to a customer s later than expected ramp-up on smartphones, challenging trading conditions in the US rail freight markets and higher than expected investment related to the acquisition of Novero GmbH ( Novero ) in January In 2016, Laird reported revenue of million (2015: million; 2014: million), loss before tax of million (2015: profit before tax of 15.4 million, 2014: profit before tax of 48.1 million) and underlying profit before tax of 51.1 million (2015: 73.1 million; 2014: 63.2 million). Despite the challenging conditions leading to a disappointing performance in 2016, the Directors believe that the need for connectivity and increasing functionality is the driving force behind connecting the home, automobile, outside environment and other networks together and that the demand for more powerful devices and ubiquitous connectivity within the electronics environment creates opportunities to underpin a return to long-term growth of the business. History of the Group Laird was founded over 140 years ago. For many years its principal activities were based in heavy engineering in the United Kingdom. By the start of the 1970s, the prolonged downturn in this industry required a radical change to Laird s activities, leading to Laird s move away from major heavy engineering activities. Laird subsequently entered the electronics business in the mid-1990s with a range of EMI shielding products. In 2000, Laird completed the divestment of its automotive components businesses and throughout the 2000s, Laird grew its electronics business through the acquisitions of specialist electronics businesses across the world. By 2007, Laird had become a focused electronics and technology company with the divestment of the Laird Security Systems division. Since 2007, Laird has concentrated on developing leading positions in high growth electronic markets through investments in technical capabilities and further strategic acquisitions, including the recent acquisitions of a 51% stake in Model Solution, a South Korean company specialising in prototype design and manufacturing, LS Research, a wireless product design and development company based in North America, and Novero, a leading integrated vehicle connectivity systems provider based in Germany. (i) (i) (i) 6.2 (i) 7.1 (i) 12.1 (i) 12.2 (i)

90 Competitive Strengths The Directors believe that the Group s competitive strengths are as follows: RF engineering expertise and range of understanding of material technologies The Directors believe that Laird s technical expertise in RF engineering and material technologies enables Laird to be a design partner to its customers, providing solutions through all stages of their wireless product development and design, across a variety of markets and in particular in relation to wireless connectivity and material technologies. Engineering and combination solutions provider The Directors believe there is a growing trend of customers seeking complex combination solutions rather than separate components or simple combination products. Relative to the competition, the Directors believe Laird is in a strong position because its core competencies span both material development and metal forming capabilities. Global footprint and scale The Directors believe that Laird s high standards of quality engineering, precision manufacturing expertise and manufacturing facilities located in close proximity to key customers enable Laird to deliver consistent quality throughout the peaks of production demand. In addition, the Directors believe that the recent simplification of Laird s manufacturing capabilities in Europe and North America into the largest and most strategically located facilities in Liberec, Czech Republic and Reynosa, Mexico reinforces the Group s ability to deliver reliable fulfilment and speed while leveraging the cost base. Customer relationships, reliable fulfilment and speed to market The Directors believe that the differentiation Laird offers through innovation, reliable fulfilment and speed means that customers can trust the Laird brand. The Directors believe that the confidence customers have in the Group as innovative design partners and consultants, combined with Laird s position as an essential supply chain supplier, sets it apart from the competition. It is this customer mindshare that underpins Laird s business model. Manufacturing efficiencies and process automation The Directors believe that the speed with which Laird can service customers is highly valued by its customers. Laird aims to ensure that its production capabilities match customers needs so that customers are not required to wait for components. Through its Model Solution joint venture, Laird has the ability to create rapid prototypes, which help customers accelerate their product development. Strategy To deliver mission critical connectivity in harsh environments across a diverse customer base As the use of wireless products across industries grows, the Directors believe that customers are seeking wireless solutions that enable connectivity in dense, complex signal and extreme environments to power communications and data which accelerate the customers critical workflows. Laird intends to utilise its capabilities in connectivity and further leverage its global footprint and market leading positions to broaden the customer base within and between market sectors. To deliver high quality and fine tolerance precision materials and innovative products across a diverse customer base By capitalising on product and operations quality control processes and the embedded high standards of quality engineering and precision manufacturing, the Directors aim to deliver high quality and fine tolerance precision materials and innovative products across a diverse customer base in order to further drive Laird s differentiation within the industry and enable the Group to consolidate its positions in growing EIoT markets such as the automotive sector. (i) (i) (i) 6.4 (i) 11 (i) (i) (i) (i) 6.4 (i) 6.5 (i) 11 (i) 12.1 (i) 12.2 Business Description Historically, Laird s operations have operated as two divisions (i) the Wireless Systems division, which designs, manufactures and supplies a broad range of solutions that enable wireless communication such as antennas, embedded wireless modules, telematics products, machine-to-machine ( M2M ) devices, wireless automation and control systems, along with software solutions to support asset management systems in industrial applications, and (ii) the Performance Materials division, which designs and supplies a full range of EMI shielding materials, thermal management solutions and signal integrity products. Effective from 1 January 2017, the Group has begun operating in a three divisional structure, comprising: the new CVS division, the new WTS division and the new PM division. Each of these divisions now has its own executive who is also a member of the Group executive committee. For 2017 and onwards, Laird intends to report on the three new divisions as individual financial segments. 90

91 The divisional reorganisation and these new divisions are discussed in more detail below under Reorganisation of the Group s divisions. The below discussion focuses on the two divisional structure which was in effect for the period under review. Wireless Systems Laird s Wireless Systems division is a market leader in wireless connectivity, telematics and control systems and software which designs and manufactures products that enable connectivity across a range of enterprise and commercial applications. The key markets in which Wireless Systems operates are the Connected Transport, Telecom/Computing and Connected Industry markets. These markets accounted for 72%, 9% and 10% of the Wireless Systems division s revenue in 2016, respectively, with recent entry into the Connected Car and Connected Medical end markets. In 2016, revenue from Wireless Systems was million, or 46.6% of the Group s total revenue, of which million or 31.4% of the Group s total revenue was generated in the Telematics and Novero businesses, which has formed the standalone CVS division since 1 January Laird is an established global leader in automotive connectivity, supplying its products to approximately 60% of the major global automotive original equipment manufacturers. In addition, Laird supplies connectivity, control software and data management platforms to major rail companies, with more than 5,000 installations worldwide. Laird has continued to be a technology leader in the Connected Car sector by developing early engineering solutions for self-driving platforms and combining its technologies to offer industry unique combined antenna enhancement devices and wireless charging modules for multiple OEMs. In late 2015, Laird completed the acquisition of LS Research, which was successfully integrated into the existing M2M business within three months. The acquisition has helped Laird further penetrate the EIoT market by expanding capabilities in design and testing. It has also opened up new markets in the light industrial and commercial sectors. The acquisition of Novero in early 2016 provided the Group with access to new capabilities and customers that the Directors believe will help position Laird as a leading global provider of end-to-end connectivity services both into and within the vehicle, providing a broad portfolio of integrated connectivity solutions to the automotive, transportation and heavy equipment OEMs. The acquisition has increased Laird s global market share by creating new routes to market and strengthened relationships with major OEMs. It has further provided Laird with the reach, presence and capability to establish a leading position in mission-critical vehicle connectivity solutions and furthered growth in the EIoT market. Products and technologies With nine manufacturing centres and twelve design centres located in eight countries, the Wireless Systems division delivers a diverse range of secure and reliable wireless solutions that provide anywhere, anytime information and controls for mission-critical applications in the harshest environments. Product offerings within the Wireless Systems division include wireless charging, compenser and antenna coupling and USB hubs, which enable the integration of drivers smartphones into the in-car environment. For example, antenna couplers allow the cell phone to access the antenna external to the metal shell of the vehicle, the compenser mitigates cable coupling losses between the phone and antenna and the USB hub charges and provides data exchange to the phone. These products, collectively known as Smart Device Integration products, can be sold alone or combined and provide the system components which are necessary to receive, process and distribute data into and from the vehicle. As an industry leader in enabling wireless connectivity, Laird offers a broad spectrum of products and services that accelerate customers product development. Laird has expertise in packaging multiple antennas in a single housing with the ability to add radios, processors and embedded firmware into the antenna or in an under roof module to create a smart antenna. Laird s market-leading radio frequency ( RF ) products include Wi-Fi, Bluetooth, Zigbee and ISM modules, antennas, gateways and accessories. The division s Wi-Fi solutions comprise hardware, software, certifications, and support services to ensure optimum performance in all business-critical mobile devices, however challenging the environment. Laird s certified RF modules enable secure, reliable wireless connectivity in the harshest RF environments in medical, industrial and commercial settings. The division offers a wide range of high-performance 91

92 classic Bluetooth and Bluetooth Low Energy ( BLE ) modules for data and audio applications, helping to support the vision of delivering uninterrupted connectivity, productivity and safety by utilising highly skilled RF engineering resources to provide ubiquitous communication across targeted market segments. Additionally, Range Amplified MultiPoint ( RAMP ) modules provide solutions for M2M applications where there is a requirement to wirelessly transmit serial data over long distances with the highest degree of reliability. RAMP modules utilise Frequency Hopping Spread Spectrum ( FHSS ) technology to provide immunity from interference and multipath in industrial applications. They are capable of operating in a point-to-point or point-to-multipoint network and can support a virtually unlimited number of nodes in a network. In automation and control, Laird provides material handling solutions through ergonomic handheld devices where the equipment operator can be moved to a safer, more efficient location. Applications include overhead crane systems, material handling equipment, mining machinery and mobile equipment. The Wireless Systems division has also designed a communication system (known as SIAMnet) used in underground mines where the performance of radio waves quickly deteriorates due to small mine tunnels. The SIAMnet communication system distributes radio wave signals throughout the mine reestablishing communication amongst users whether they are located at the surface or underground. The high data communication capabilities of SIAMnet mean the system is easy to configure, install and service. Laird s remote control and data management solutions are designed to provide OEMs and rail operators improved safety, increased productivity and expanded control of yard operations around the world. The Wireless Systems division sells a variety of antenna designs to the Wireless LAN ( WLAN ), Land Mobile Radio ( LMR ), Telecom, and Internet of Things infrastructure ( IoTi ) markets. The proprietary design tools, RF expertise and manufacturing excellence provide custom solutions for customers in these markets. Customers and markets The markets Laird s Wireless Systems division broadly operates in are: the Connected Transport, Connected Medical, Connected Industry and Telecom/Computing markets. Connected Transport market There are a number of macro trends driving changes across the Connected Transport markets, particularly in the automotive space. These include a widespread increase in the deployment of connectivity solutions in passenger cars, heavy equipment and fleets. Additionally, the emergence of 4G/LTE and the evolution to 5G is driving automotive OEMs to upgrade their antennas to include multiple input, multiple output ( MIMO ) technology. Within the Connected Transport market, Laird s core customers are North American and European automotive OEMs. Six of these automotive OEMs are either currently producing in Brazil or have announced plans to launch products in Brazil. A high tax on imported automotive components means automotive OEMs give preference to component suppliers who can provide local content. Following the opening of its plant in Brazil, Laird believes that integrating the core telematics control unit ( TCU ) platform and complementing it with new technologies is the key to success in this high potential market and that Laird has a competitive advantage. Target growth areas in the North American market are communication devices, smart antennas and device integration products. Proposed regulation in the United States supporting Dedicated Short Range Communication ( DSRC ), or vehicle-to-everything ( V2X ), technology, is expected to drive increased adoption for vehicle connectivity products. European market growth drivers are similar to North America and the European emergency call ( ecall ) mandate will require a communication device to be installed in all new vehicles beginning in April Connected Medical market The healthcare industry is experiencing a transformation which is driven by the requirement to find ways to improve patient care and safety through improvements in workflow as well as by leveraging data from multiple sources, which is driving a need for wireless connectivity in the medical market. Laird provides this connectivity for mission critical devices within hospitals and clinician offices. Whilst wireless connectivity is not new to the institutional medical market, the ways in which wireless is implemented and the standards being used are new and provide an increased opportunity for Laird. Real time location services ( RTLS ) are also seen as playing a major role in the advancement of patient care and whilst 92

93 there are companies delivering RTLS systems, there remain gaps in the solutions available today as their price makes them prohibitively expensive for small to medium sized hospitals. Connected Industry market In the Connected Industry market, wireless automation solutions are increasingly required when wired communications are impractical, too expensive or not maintainable, agile or scalable enough for the demands of the market. Laird s current product portfolio provides the core wireless technology to enable these industrial automation applications. Going forward, Laird s focus will be to leverage the highly secure, low latency and fast roaming technologies, which have been successfully deployed in the medical market, for the industrial market. Within the Connected Industry market, the Wireless Systems division currently focuses on material handling, transportation and mining and metals, providing highly engineered solutions and customisable products which can be configured by the customer. In the material handling market, the Wireless Systems division supplies industrial remote controls for overhead crane applications. The majority of sales are made in North America, with a smaller proportion in Europe, to capital and labour intensive companies, such as steel and aluminium producers. In this market, the Wireless Systems division provides systems for equipment such as conveyors, transfer cars and other machinery used in the production process. In the transportation market, remote control systems designed to replace the locomotive engineer are sold to freight rail operators in North America and Europe. The Directors believe there are opportunities in this market to expand the adoption of current engineered solutions into new regions where Laird already has established production facilities, such as Brazil and China. In the metals and mining market, the Wireless Systems division supplies and supports industrial remote control systems and underground mining communication infrastructure. The primary application on the remote control side is the control of load haul dump machines for hard rock mining applications. Within the logistics market, Laird provides Wi-Fi radios which are utilised in a range of harsh RF environments in the overall logistics sector including factories, warehouses, distribution depots and material handling. The radios are typically used in embedded devices for automatic identification and data capture. Telecom market Within the Telecom market, Laird currently participates in a subset of the following markets: WLAN, Telecom, LMR and IoTi. Due to the nature of products in this market, customer numbers are in the thousands with many smaller suppliers buying off-the-shelf solutions through distribution channels. The channel footprint for antennas is global, with the majority of revenue coming from North America, followed by Europe. Competitive landscape Competition in the vehicle connectivity space is increasing as the size of the market continues to grow rapidly. Laird believes that growth from TCU products will come when they are combined with antennas to create what are known as smart antennas. Certain competitors are reliant on partnering with other parties to provide antenna solutions, but Laird can take advantage of its technical capabilities in the field of combination products to leverage its position in providing the full solution. Within the fleet management and vehicle tracking industries, there are two main competitors who offer a complete hardware product line and have a large market presence. Competitors tend to combine their hardware with a software services element, although the Directors believe Laird s willingness to work with customers to customise products is a strength in this market. The competitive landscape within the medical market falls into two main categories: enterprise and non enterprise grade Wi-Fi modules. Following the acquisition of LS Research and the expanded product portfolio, Laird believes it is well positioned as a supplier capable of offering the full complement of connectivity solutions. Within the industrial market, the competitive landscape is diverse and is generally based on the network level under consideration. The Directors believe that Laird has a competitive advantage as it possesses the core wireless building blocks used in its products and does not rely on competitors to supply those components. Furthermore, competitors may not have the breadth of wireless options available to Laird, 93

94 which include LoRa, Wi-Fi, Bluetooth, Zigbee and proprietary options and they therefore may lack the combined antenna and design services capabilities. The antenna market is highly fragmented, with some segments containing over 200 competitors. Route to market Laird now supports the development of automotive products in the area of communication devices, smart antennas, and device integration. To achieve an accelerated market presence in the vehicle connectivity space, full solutions are provided to the high volume automotive OEMs based on existing and new combinations of the product portfolio. The division is also able to provide differentiated products, such as antennas that integrate advanced technology, such as dedicated short range communications capability, entirely within the antenna and wireless chargers that are combined with compensers. The Directors believe that key product offerings that will spur business growth include communication devices, smart antennas, and smart device integration products. The Directors also believe that industry leading profitability can be achieved through value pricing of new product categories and technologies such as 4G LTE, 5G, BLE, and DSRC. A product platform strategy ensures fast time to market with high confidence in the feasibility and cost figures. The division will continue to build on the success in China by growing with local customers through enhancement of the local engineering, programme management and sales, leading to new customers and more programmes with existing customers. New geographical markets will be a significant portion of the growth, including Brazil and South Korea. Laird believes there is an opportunity to introduce products in the current portfolio to markets with low or no penetration. For example, the new facility in Brazil provides local content advantages to Laird as it competes for connectivity products in South America. Laird has also secured a research and development contract with a multinational automotive manufacturer, which provides the opportunity to showcase capabilities as well as develop relationships that Laird believes will be key to future success. In the fleet management market, there are OEM s who are starting to deploy vehicle connectivity solutions and Laird will leverage its existing products along with its global automotive footprint to capture these opportunities. Fleet management customers will be targeted with communication device products and selective smart antennas. These devices favour customers who will be dealing with difficult connectivity environments, such as the cab of a heavy truck or on a heavy piece of equipment. Embedded devices need to be designed into OEMs products at an early stage. The Enterprise Wi-Fi business model does not use a broad distribution channel, but favours direct engagement with OEMs. This is due to several factors, but the core differentiators and drivers of value are in the complex Wi-Fi software suites, industrial RF design, and customer specific implementation/integration support pre and post sales. To successfully apply these differentiators and best capture value, Wi-Fi teams require direct access to the engineering and product support teams at the OEM, sometimes precluding a one or two step removed distribution approach. The Professional Wi-Fi, Bluetooth/BLE and RAMP product portfolios lend themselves more to a broader channel approach where a lower touch, product and application support model can be successfully implemented. The product sets are designed, marketed, and sold on the concept of enabling the customer to capture value in their own design cycles by being simple and easy to use, reducing development risk, and significantly reducing time to market without requiring an in-depth internal wireless knowledge base. To support this market approach, Laird has several levels of access to the OEM customer base: direct for volume; online and catalogue distributors; broad line distribution in Europe and Americas; boutique, design-in distributors across EMEA and APAC. The overall route to market is supported by a sales and support structure that is regionally balanced on a global stage with focused teams in Europe, North America, and Asia. The infrastructure antenna business within the Wireless Systems division sells both directly and through distribution partners to OEMs, system integrators and others across the industry. In distribution, the Company utilises the services of a worldwide telecoms distributor focused primarily on the LMR market. Laird believes a key to success in this business will be to continue expanding this channel and providing them with quality marketing support to gain maximum awareness and reach. In terms of promoting general platform products, indirect channels are used whilst leveraging direct resources to focus on key OEM s, which often requires custom development and a high-touch, high-tech sales and field application engineer support processes. Going forward, Laird intends to supplement these channels 94

95 with a representative sales force in key locations where a more technical sales process is required but difficult for Laird s direct channel to reach. In automation and control, the delivery of solutions depends not only on the market or industry segment but also the geography. There are two main approaches: the first being Customisable Offerings where the well-established system integrator network is leveraged to perform end customer required programming or configuration with development kits, tools, guides, training and support providing increased reach, differentiation and deep industry and market knowledge. The second approach focuses on progression on current engineered products, packaged as an Engineered Solution. Such solutions include products, managed data services/monitoring, installation and training that increase value for the user through the entire lifecycle. Performance Materials The Group s Performance Materials division is a leading global designer and supplier of precision metals, EMI shielding materials (performance coatings and RF polymers), thermal materials and magnetic and ceramic products. These products isolate and protect sensitive electronics from EMI, allowing them to function and connect effectively, as well as improving electronic performance through efficient management of heat. In the year ended 31 December 2016, revenue from Performance Materials was million, or 53.4% of the Group s total revenue. Laird s Performance Materials division aims to foster close partnerships with customers, delivering leapfrog technology and responding to customers challenging requirements within tight timeframes, on a consistent basis. With the proliferation of the IoT and EIoT and as more connected devices enter the market, the trend toward smaller, thinner and lighter electronics with more functionality continues. This trend is challenging design engineers to continue to develop creative solutions to manage EMI while reducing board space, as well as managing increasing thermal loads. Products and technologies With nine design centres located in three countries focused on Performance Materials, the Performance Materials business designs and delivers products which manage temperature and provide EMI shielding in a variety of electronic and mechanical components in high tech devices. The Performance Materials division also designs and supplies structural components that protect electronics from each other and from the surrounding environment. Precision metals Laird is a global precision metals supplier and innovator for electronic devices, providing thin gauge parts with precision features as viable alternatives to traditionally etched, die cast and machined parts. Differentiation is achieved through tighter tolerances, shorter development cycles, low cost of ownership, scale and speed. Precision metals product solutions include board-level shields ( BLS ), fingerstock and vent panels. Precision structural metals include cowlings, brackets, camera housings, drawn components and stiffeners. Stamped precision structural metals are characterised by high precision features with the ability to integrate with other materials for multi-functional properties. Stamping is more cost effective than traditionally etched, die cast or machined parts. EMI material Laird s EMI protection solutions include performance coatings, such as fabric-over-foam and conductive foam gaskets, conductive fabric, wire mesh gaskets and conductive tapes. Additional EMI products include RF/microwave absorbers, electrical conductive elastomers and dispensable form-in-place, a dispensed electrically conductive elastomer. Laird s performance coatings utilise in house technology to apply different coatings to a variety of flexible substrates. The benefits of performance coatings are dependent upon the type of coating. For example, metal plating supports good electrical performance with good corrosion resistance, wrapped conductive fabrics and foams create soft, reliable and repeatable EMI shielding gaskets and complex die cuts, the value of this process being extremely low electrical resistance, which in turn improves signal and provides security. 95

96 Hybrid absorbers contribute to lighter, denser devices. The absorbers silicone gel binder imparts natural inherent tack and the absorber functions as both a thermal pad and EMI radiation barrier by absorbing electromagnetic energy. Microwave absorbers provide excellent near field performance as they have high magnetic permeability, strong dielectric permittivity and outstanding temperature stability. Electrically conductive elastomers provide EMI and environmental shielding effectiveness and with the ability to mold compounds, there is flexibility for custom designs. Magnetic and Ceramic Products ( MCP ) Laird s MCP solutions enable faster and longer distance wireless charging, improving the overall user experience. The MCP solutions include ferrite shielding and wireless charging, utilising flexible ferrite sheets and solid ferrite plates. The board level components include high frequency ceramic inductors, ferrite chip bead and surface mount device power common mode choke. The benefits of these components result in higher frequency, higher power efficiency and multi-functional higher power designs with better thermal performance. Thermal materials The Performance Materials division also provides heat protection and temperature control to maintain peak performance. Thermal material solutions include thermal interface materials, gap fillers and pads, dispensables such as greases and putty along with thermoelectric modules, temperature controllers, custom liquid cooling systems, recirculating chillers and thermoelectric assemblies, for the protection of larger electronic and mechanical sub-systems and components. Model Solution The Model Solution joint venture is a solutions provider that helps customers develop industry-leading designs and accelerate their product to market. This business is a high quality provider of precision prototyping, tooling and lower volume manufacturing services. Utilising quick-turn tools and sophisticated modelling technology, Model Solution provides reduced costs and shorter manufacturing lead-times for metal injection molded and soft-good parts. The high quality and fast turnaround prototyping adds value at an early stage in the design cycle. The wide range of colours, finishes, materials and processes help customers develop their own broad range of products serving a multitude of markets and applications. In addition to modelling and virtual prototyping, the division provides product design and validation and electromagnetic compatibility testing. Model Solution s 3D Photo System allows customers to view their appearance models online in virtual 3D. This all-in-one service is not widely available in any other model shop. The system allows customers to request modification to their models and approve final designs for production. Customers and markets The Performance Materials division serves the Telecom/Computing, Connected Transport, Mobile Devices and Connected Medical markets. Within these broad markets, there are segments including: automotive, handset and tablets, wearables, connected devices, medical/healthcare and mobile and data infrastructure. Performance Materials has also been moving towards higher levels of customer engagement in key vertical markets associated with the IoT. The trend of strong growth in automotive electronics is projected to continue, driven by advanced driver assist systems ( ADAS ), infotainment, onboard charging, including instrument cluster/display panels, and safety systems which include electronics control units, camera modules, EV/Hybrid vehicles, and LED headlamps. For example, revenue from two large automotive customers has nearly doubled since 2013, growing from US$10 million to US$21 million in 2016, primarily due to programme wins in ADAS, which the Directors believe will continue to be a primary source of growth in automotive electronics for the next three years. The Directors believe additional future growth will come from penetrating the infotainment segment with further opportunities in areas such as wireless charging. Other market drivers include security and safety (resulting in opportunities for technology related to driver assist systems, vehicle-to-vehicle and vehicle-to-infrastructure communications and autonomous driving), and environmental (resulting in technologies related to fuel efficiency, weight reduction, hybrid/electric vehicles and wireless vehicle charging). Within the handset/tablets market, which has historically been the largest segment of the Laird business, positions primarily exist with the precision metals product lines with three large customers. With recent changes in the top five smartphone vendors, significant opportunities for growth exist with 96

97 Tier 2 manufacturers, primarily in China, as well as in sales of electronic materials in Tier 1 and Tier 2 markets. Trends in the handset/tablets market include increasing functionality, for example, wireless charging, integrated EMI/Thermal challenges or 5G frequencies, ruggedness (with a focus on waterproof technology), as well as trends related to appearance in the form of thinner, lighter devices and curved, foldable or flexible form factors. The wearables market is an emerging market that spans a variety of end segments, such as consumer, healthcare and medical and fitness and wellness. Market trends in wearables include an increased number and variety of sensors, multiple communication protocols for connecting to the network, miniaturisation of electronics and a move towards 3G packages and advances in power (efficiency and availability). Revenue in Laird s wearables business is primarily driven by smart watches, sold by Laird s largest customer, together with new design opportunities with other leading consumer electronics OEMs. The Directors believe that diversifying the application base beyond watches will present the largest near term growth opportunities for Laird. The data and mobile infrastructure market has historically been a strong source of growth, resulting from the broad deployment of 4G networks. The Directors believe that demand for data continues to grow strongly but that overall total addressable market growth is now predicted to decline by approximately 1.8% CAGR through 2019, according to internal commercial forecasting. This is due in part to the mobile infrastructure market s shift from a focus on coverage to a focus on capacity, meaning large traditional base station deployment will decrease while smaller flexible cell solutions will increase. The market is expected to resume to growth mode and return to an innovation cycle with the deployment of 5G networks beginning in , according to a January 2016 briefing on 5G network technology by the European Parliamentary Research Service. The Directors believe that leading market share positions in base stations with industry leaders in Europe, North America and Asia give Laird the diversification required to take advantage of this projected global growth. Within the areas of heat protection and temperature, the Performance Materials division will continue to target markets that value system uptime and integration of complex cooling solutions. These markets are Connected Industry, Connected Medical and Telecom/Computing which are significantly larger than other markets due to the high concentration of liquid cooling systems sold into these markets. Laird s diverse product range may also enable secondary sources of growth in adjacent markets such as the automotive and consumer markets. Market drivers and customer needs in these markets include higher heat loads which require a thermal technology level shift across applications, form factor improvements (reduced size and weight), sustainable solutions, lower noise emissions and real time system status monitoring with a focus on higher system uptime and an increasing interest from customers to acquire the same design in different regions. Within the areas of prototyping and mock up design, one of the main markets in which Laird operates is IT with an active customer base in excess of 400 customers. Other markets served by this business include: automotive, mobile devices, medical/healthcare, computer/gaming and industrial/production. The Model Solution business has experienced growth predominantly through its handset design mockup business, partnering with a global electronics component manufacturer and Silicon Valley customers. As a result of these relationships, Model Solution has been able to increase its client base and expand the portfolio and geographic reach of prototyping tools. Competitive landscape Within certain businesses in the Performance Materials division, the competitive landscape has become more challenging over the last twelve months. The Directors believe that Laird continues to be an innovative and differentiated provider of precision metals and electronic materials, but competitors are becoming more sophisticated and the markets in which Laird operates are becoming more mature. Competitors, especially those based in China, are investing in vertical integration and supplying more complex sub-assemblies and modules. Given the trend towards combination solutions, it will become increasingly difficult to supply only components or simple combination products. In addition, competitors have become more aggressive on price in order to gain or retain market share in this low growth environment. Competitors fall into two main categories: large multinational companies with multiple divisions together with companies who are listed on the local stock exchanges, allowing easy access to capital; and multi-product, multi-technology companies serving multiple markets. Both categories of competitor have a strong presence in Asia due to their multinational status or their geographical presence in Asia. 97

98 Competitors of Laird s Performance Materials division tend to have a focus on either material development or metal forming capabilities. Relative to the competition, Laird believes it is in a competitive position because its core competencies span across this spectrum. The Directors believe the Performance Materials business is in an advantageous position to provide integrated combination solutions when the market requires leading differentiated EMI and thermal management materials technologies combined with core metal stamping. By product line, precision metals competitors vary by market segments and in automotive, they are particularly fragmented and regional. Meanwhile, thermal competitors tend to be a tight group of multinationals and in EMI materials, the competitors vary by market segments. Regional influences also play a role, particularly in the case of large global electronics component manufacturers and the IT/Computing market segments. The EMI product lines can leverage the well-established precision metals position in these market segments through development of combination solutions. The MCP market is dominated by a few big ceramics players. Laird s product line has maintained a niche position in select market segments and also as a second source. This niche will be further expanded into the high growth wireless charging applications by leveraging Laird s capabilities in metals and thermal bringing value added integration solutions to market. The thermal market is highly fragmented with niche suppliers serving specific industries with select global players. No one company dominates any product group and opportunities exist for consolidation. In the mock-up appearance market, there is increased competition as companies develop new materials and finishes and use local technical support. Model Solution s on-site 3D printing and machining capability and access to product development services within the Wireless Systems division of the business, particularly LS Research, contribute to Model Solution s competitive edge. Route to market Laird s focus continues to be on driving higher levels of customer engagement with strategic and focused accounts in the division s key vertical markets associated with the IoT, handset and tablets, wearables and connected devices, automotive electronics and mobile and data infrastructure. Through the development of innovative new products and capabilities in precision metals, EMI and a combination of both, Laird believes it is in a unique position to offer differentiated designs. This in turn may result in partnering with leaders in the market to develop innovative new solutions. Within precision metals and BLS, Laird continues to drive innovation by enabling smaller form factors with tighter tolerances and smaller features. Laird believes that the continued growth in handset Tier 1 and automotive markets will require this innovation along with the development of combination solutions. The route to market in this instance will be to extend coverage down to the module level and offer integrated thermal solutions which enable full processor performance. In relation to thermal materials, penetration into handset/tablets, automotive electronics and consumer electronics requires a continued focus on product development that expands the portfolio into dispensables, adhesives and heat spreader for these markets. By utilising the core capabilities of plating, coatings and flexible substrates, the division can expand into the wearables and 3D, flexible electronics space. Within ETS, the go to market strategy is based on three categories of customers: intrinsic, extrinsic and strategic value customers. Intrinsic customers are defined as accounts that mainly focus on convenience, cost and availability. These customers are addressed through a transactional channel model and price management techniques. For extrinsic customers (focus accounts), who focus on problem solving and customised solutions, a consultative sales model and value pricing technique is used, whilst for strategic customers, those who are willing to leverage Laird s enterprise capabilities beyond the differentiated products, a full strategic account management approach is adopted which includes a multi-functional core team tied to the account. Additionally, there will be a continued market for standardised components and systems which are sold, mainly through indirect sales channels and potentially through other Laird businesses for certain components and markets (notably in the automotive, consumer and rail markets). 98

99 Supply chain Laird s supply chain encompasses strategic and tactical operations as well as oversight activities. The supply chain strategic procurement processes relate to supporting the definition of the requirement, sourcing and negotiating options. Tactical activities include supplier monitoring, quality, compliance and delivery performance, purchasing from established suppliers and process administration, In relation to sourcing raw materials, the process catalyst for a sourcing event is usually due to a new product requirement, new capability need, cost reduction/value engineering effort or potentially a perceived risk with a current supplier. Supplier sources are typically chosen based upon the category or segment of material or service which is required and are typically selected from a small group of approved suppliers. Category teams, led by a Category Manager maintain category strategies which include actions around building the preferred supplier list for a particular material spend. This provides options within the supplier portfolio which enables a competitive environment vs. a reliance on a single supplier. Laird s strategic procurement and tactical materials management teams have trusted relationships with category A supplier partners. Many of these suppliers are long-term partners and the procurement team within Laird meets at least once annually with senior executives of the highest valued suppliers to review the business and further enhance the partnership. Reorganisation of the Group s divisions As from 1 January 2017, the Company is operating in three divisions: CVS, WTS and PM. The changes from the old structure can be summarised as follows: The Telematics business of Laird, together with Novero, have separated from the original Wireless Systems division to create the new CVS division; ETS which used to form part of the Performance Materials division and which provides heat protection and temperature control to maintain peak performance of larger electronic and mechanical sub systems and components, has combined with the rest of the original Wireless Systems division to create the new WTS division; and The remainder of the original Performance Materials division remains as the new PM division. The table below shows the revenue and segment profit before amortisation and impairment of acquired intangible assets and exceptional items for each of the years ended 31 December 2014, 2015 and 2016 for each of the original divisions, as well as the revenue and segment profit before amortisation and impairment of acquired intangible assets and exceptional items for such years based on the new divisional structure. The figures for the original divisions are extracted without material adjustment from Note 3 to the Laird Final Results for the year ended 31 December 2016 and from the Laird Annual Report and Accounts for each of the years ended 31 December 2014 and The figures for the new divisional structure are derived from unaudited Company data. For a reconciliation of the revenue and segment profit before amortisation and impairment of intangible assets and exceptional items to the original divisional structure, see Important Information Non-IFRS Information Reorganisation of the Group s divisions. 99

100 Old division structure New division structure 2014 Wireless Systems Performance Materials Total CVS WTS PM Total ( millions) (Unaudited) Revenue Segment profit before amortisation and impairment of acquired intangible assets and exceptional items Revenue Segment profit before amortisation and impairment of acquired intangible assets and exceptional items Revenue Segment profit before amortisation and impairment of acquired intangible assets and exceptional items Connected Vehicle Solutions The new CVS division comprises the combination of the Telematics business and Novero. The Directors believe this combination will mean that the division will be well placed to take advantage of the significant growth potential in the connected automotive market. With the telematics control technology from Novero, combined with the vehicle antenna systems from the Telematics business, CVS will create smart antenna systems that differentiate the Group as one of the leaders in this technology. As a result, the potential content per vehicle has expanded and sales opportunities have also increased. The focus of the division is on automotive antennas and telematics control units for cars, trucks and fleets with a broad product offering of automotive antennas, telematics control unit ( TCUs ), signal enhancement systems, wireless charging, fleet tracking and automotive USB hubs. The Directors believe that CVS is a growing business which has taken a step change through recent investment and that separating Novero and Telematics into a standalone division will enable CVS to take advantage of fast growing end markets and high sales visibility, which the Group is already seeing in its order book and pipeline for The Directors expect to see superior growth and margin progression in this division and are targeting revenue in excess of 405 million (US$500 million) by 2020, with improving profitability, according to the Company s unaudited estimates. (i) (i) 12.1 (i) 12.2 The CVS division designs, manufactures and sells a range of products into the vehicle connectivity market, including: Automotive antennas; Telematics control units; Automotive grade connectivity devices; and Smart device integration. According to unaudited Company data, in 2016, the CVS division s revenue would have been million (2015: million; 2014: million) and its segment profit before amortisation and impairment of acquired intangible assets and exceptional items would have been 13.0 million (2015: 13.6 million; 2014: 10.8 million). 100

101 Wireless and Thermal Systems The new WTS division represents several discrete businesses with related technologies across a range of end markets: Industrial and commercial antennas; Commercial wireless connectivity, including Bluetooth and Wi-Fi radios; Industrial control systems; and Active engineered thermal management systems. The four businesses have largely been driven independently and can generally be characterised as offering low volume, high value add products and systems, with modest growth and limited examples of valuable collaboration between the areas. The WTS division comprises engineered solutions businesses serving specific wireless markets. These businesses aim to be commercially focused to drive growth, deep market and competitive insights and new product execution into target markets. The Directors believe that combining these businesses will allow the Group to leverage a multitude of complementary capabilities and technologies, improve the cross-fertilisation of ideas, become smarter about customer integration and reduce costs. In the medium to long term, the Directors believe the WTS division is well placed to benefit from global trends, including the development of the EIoT and the 5G roll-out. According to unaudited Company data, in 2016, the WTS division s revenue would have been million (2015: million; 2014: million) and its segment profit before amortisation and impairment of acquired intangible assets and exceptional items would have been 14.3 million (2015: 18.2 million; 2014: 14.4 million). Performance Materials The new PM division represents a cluster of material technologies and end markets: Precision Metals (c.55% of revenue); EMI Materials Performance Coatings and RF Polymers; Thermal materials, including dispensables, adhesives and heat spreader products; and Magnetic and Ceramic Products. In recent years, Performance Materials has been a key growth driver of Group profitability, delivering healthy margins and good cash generation by leveraging innovation and reliable fulfilment. However, much of Performance Materials is a short cycle business with a natural volatility linked to certain end markets, most notably consumer devices. The relative scale of Performance Materials coupled with this volatility and short sales visibility can create uncertainty and the intention is to deliver a more sustainable business model and profit performance. In order to achieve this, as a first step, a new President of the division has been recruited and joined the Group with effect from 6 February Additionally, the Group is taking action to improve commercial and operational performance within precision metals to stabilise the financial performance of the Performance Materials division as a whole, whilst also reviewing growth and value creation options. Model Solution remains part of this division, as this prototype model business remains adjacent to Performance Materials. By moving the ETS business from this division into the new WTS division, Laird has created a more focused material technologies business which the Directors believe is better able to address the higher value-add opportunities within existing markets. According to unaudited Company data, in 2016, the new PM division s revenue would have been million (2015: million; 2014: million) and its segment profit before amortisation and impairment of acquired intangible assets and exceptional items would have been 42.2 million (2015: 56.1 million; 2014: 53.4 million). Operating Model In 2012, the Group began a cultural transformation of the business to embed One Laird values throughout the organisation and in October 2015, the Group announced a re-design of its operating model to simplify its manufacturing capabilities in Europe and North America in order to reduce the Group s footprint and consolidate its regional design, engineering, sales and distribution activities. (i) (i)

102 Four years on from the introduction of One Laird the ethos is firmly embedded within the culture of the organisation. One Laird not only fosters the exchange of ideas and innovation that can lead to new product development and customer wins, but it also fosters collaboration across functions and teams. The benefits of One Laird means shared resources. From an inter-divisional view point, common shared corporate resources include treasury, planning, corporate development and legal. Within cross-functional transaction management common activities are carried out in shared services centres, focusing on financial transaction management, HR transactions and IT. There is a third shared resource relating to market knowledge and customer management and channels: Laird s main markets are common to both the Performance Materials and Wireless Systems divisions and have a shared understanding of market needs and requirements. Performance Materials is also very active in automotive (radar materials, heat absorbing materials for lighting and wireless charging). Performance Materials work closely with the Wireless Systems businesses to share market knowledge and uses the relationships with automotive OEMs as a channel to market. The aim of the re-design announced in October 2015 was to simplify the organisation and improve profitability to generate greater investment income in order to continue developing new products and capabilities. The re-design has improved time-to-market and driven innovation on more complex, higher-value solutions resulting in the creation and capture of value for more customers in a broader range of markets. This was an investment programme designed to ensure Laird remained competitive and generated maximum income to invest in developing new products and capabilities. Sites are no longer purely product or system focused, but operate as campuses leveraging skills and capabilities in those locations as well as maximising collaboration opportunities. By focusing activities across fewer, but more strategically located sites, Laird has been able to leverage the investment already spent in the capabilities of those sites in recent years and improve its ability to recruit top talent. Once the operating model re-design is complete Laird will operate globally from 28 principal sites. The simplification of Laird s manufacturing capabilities in Europe and North America into the largest and most strategically located facilities in Liberec, Czech Republic and Reynosa, Mexico reinforces the Group s ability to deliver reliable fulfilment and speed, while leveraging the cost base. Taking Liberec as an example, factory space will increase from 12,500 metres squared to 21,000 metres squared and should be completed by the end of the first quarter of The project is progressing to plan and is on-track to deliver annual cash benefits of at least 15 million (US$20 million) from 2018, with 12 million (US$15 million) expected in 2017, according to unaudited Company estimates. The total cash cost of the project remains at 44 million (US$60 million), much of which was provided for in 2015, with approximately 22 million (US$30 million) paid in 2016 and the balance of 22 million (US$30 million) to be spent in 2017, according to unaudited Company estimates. Almost all of the operational transfers were complete by the end of 2016, with final activities scheduled in 2017 in line with Laird s original timetable. Research and development The Directors believe that the Group s ability to maintain its competitiveness depends in part on its ability to enhance existing product offerings and develop and acquire new products and technologies. The Group s R&D teams have extensive expertise and work closely with the Group s customers to identify their current and future needs. Laird s R&D function comprised approximately 713 employees as at 31 December 2016 located in 38 offices across 12 countries. (i) (i) (i) 6.2 (i) 11 (i) 6.4 Intellectual property Laird protects its systems, products and solutions through a combination of patent, trademark, copyright and trade secret laws and confidentiality procedures and contractual provisions wherever possible. The Directors believe that the enforcement and maintenance of its patents and other intellectual property rights is important for the successful development of its business. The Group maintains patents and registered designs and files patent and registered design applications in the principal jurisdictions in which it operates, including the United States, China and the European Union. At 31 December 2016 Laird had a portfolio of approximately 766 registered patents and designs and 402 patent and registered design applications. The Group s patents have expiration dates between 2017 and Laird does not have any material licence arrangements either as licensor or licensee, with third parties. 102

103 Environment, Health and Safety All of the Group s manufacturing sites are deemed to have some form of environmental impact and are required to implement certified Integrated Environment, Health and Safety risk management systems to ISO and OHSAS standards. Fifteen of the Group s facilities currently hold active Integrated Management Systems certification standards to ISO and to OHSAS standards and four facilities hold active ISO14001 certification. Laird manages required environmental regulatory requirements (and associated licences, permits and authorisations) at the site level and regularly evaluates and audits compliance to those regulations through the sites respective EHS Management systems. (i) 8.2 Properties The Group s principal office is located in London, United Kingdom. In addition, the Group has 28 principal operational facilities in nine countries, including corporate offices, engineering and manufacturing sites. The Group s premises are located in owned and leased premises. Individual office leases vary as to their terms, rental provisions and expiration dates. The Group s leases have expiration dates ranging between 2017 and 2032 and rent on the majority of the Group s leased premises is paid monthly in advance. Employees As at 31 December 2016, the total number of Group employees was 9,836, including 8,426 permanent employees and 1,410 temporary employees. The table below sets out the average number of employees employed by the Group for the years ended 31 December 2014, 2015 and 2016 divided by key geography: North America... 1,280 1,252 1,179 Europe... 1, Asia... 7,073 6,628 7,150 Total... 9,664 8,593 8,939 (i) 17.1 The table below sets out the average number of employees employed by the Group for the years ended 31 December 2014, 2015 and 2016 divided by segment: Performance Materials... 6,942 6,406 6,813 Wireless Systems... 2,772 2,187 2,126 Total... 9,664 8,593 8,939 The Group s employees are members of works councils in Belgium and Germany and of trade unions with limited collective bargaining rights in the Czech Republic and Sweden. The Directors believe Laird has proactive and productive relationships with the works councils and trade union representatives. With the exception of a half-day strike on 4 February 2015 at the Group s Krefeld site in Germany, the Group has not experienced a labour-related work stoppage to date. As of 31 December 2016, approximately 450 employees are members of six different defined benefit schemes in the UK, Belgium, Germany, Sweden and South Korea, which have approximately 1,500 deferred and current pensioners. The total assessed value of the schemes assets at 31 December 2016, at their market value, is estimated at million and the liabilities are estimated at million. See note 34 to the Laird Final Results for the year ended 31 December 2016, which is incorporated by reference in this document as described in Part X Documentation Incorporated by Reference. Regulatory environment and licences The Group is subject to the laws and regulations of a number of countries covering a wide variety of areas affecting international operations, including data protection and privacy, export controls, anti corruption legislation and labour laws. 103

104 PART V OPERATING AND FINANCIAL REVIEW The financial information below for the year ended 31 December 2016 is extracted without material adjustment from the Laird Final Results for the year ended 31 December 2016 and the consolidated summary financial information for the years ended 31 December 2014 and 2015 is extracted without material adjustment from the Laird Annual Report and Accounts for each of the years ended 31 December 2014 and ESMA (i) 3.1 (i) The Laird Final Results for the year ended 31 December 2016 and each of the Laird Annual Report and Accounts for the years ended 31 December 2014 and 2015, including the independent auditors reports in respect of each of these, are incorporated by reference in this document as described in Part X Documentation Incorporated by Reference. You should read the information below in conjunction with the Group s audited historical financial information and the independent auditors reports contained in the Laird Final Results for the year ended 31 December 2016 and the Laird Annual Report and Accounts for each of the years ended 31 December 2014 and 2015 alongside the detailed information included in this document in Part IV Business Overview of the Group and the other information incorporated by reference into this document and you should not rely solely on key and summarised information. Deloitte LLP has issued an unqualified audit opinion in respect of the financial statements for the Company for the year ended 31 December 2016 and Ernst & Young LLP has issued unqualified audit opinions in respect of the financial statements for the Company for each of the years ended 31 December 2014 and Some of the information in the review set forth below and elsewhere in this document and in the information incorporated by reference into this document includes forwardlooking statements that involve risks and uncertainties. The Group s actual results may differ materially from those discussed in these forwardlooking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this document, including under Risk Factors and Cautionary Note Regarding Forward-Looking Statements. (i) (i) (i) 6.2 (i) 7.1 (i) 12.1 (i) 12.2 Overview Laird PLC is a global technology company focused on providing systems, components and solutions that enable connectivity in mission-critical wireless applications and antenna systems and that protect electronics from EMI and heat. Laird s aim is to be a trusted partner to its customers by creating innovative customer solutions, providing high quality engineering and manufacturing processes and enabling accelerated new product launches for its customers by providing speed and access throughout the design process in which there are high levels of customer engagement. As at 31 December 2016, Laird had 9,836 employees in 53 locations covering 4 continents and 17 countries. The Group has 24 engineering and manufacturing sites in different locations around the world and 21 design centres. (i) 6.3 (i) 9.1 (i) (i) (i) 10.1 (i) 10.2 (i) 10.3 (i) 10.4 (i) 10.5 Laird designs, manufactures and supplies products which are used in a wide range of applications, from smartphones, automotive and medical applications, to large scale installations for railways, ports, mines and military uses. The end markets which the Group currently targets are Connected Transport (representing 38% of revenue in 2016), Telecom/Computing (representing 22% of revenue in 2016), Mobile Devices (representing 15% of revenue in 2016), Connected Industry (representing 10% of revenue in 2016) and Connected Medical (representing 4% of revenue in 2016), with recent entry into the Connected Car end market. The Group s customers primarily include large North American and European OEMs across these end markets. Key factors affecting the Group s Results of Operations The results of the Group s operations have been, and will continue to be, affected by many factors, some of which are beyond the Group s control. This section sets out certain key factors the Directors believe have affected the Group s results of operations in the period under review and could affect its results of operations in the future. Customer relationships in Performance Materials The customer base of the Group s Performance Materials division has historically been highly concentrated, although the Group has been actively diversifying so as to manage this concentration. The top five customers in the Performance Materials division accounted for 23%, 26% and 27% of the (i) 6.3 (i) (i) (i)

105 Group s total revenue in 2016, 2015 and 2014, respectively and its largest customer accounted for 13%, 13% and 15% of the Group s total revenue in 2016, 2015 and 2014, respectively. The Group s customers in its Performance Materials division typically do not commit to firm order schedules in advance. As a result, the Performance Materials business does not have a significant long-term order book and regularly experiences short lead times on certain customer orders. The Group manages the risks associated with these short lead times by utilising field application engineers to increase customer engagement, as well as maintaining close relationships with contract manufacturers and diversifying across segments, customers and product portfolio. Nevertheless, during periods of rapid growth or decline in demand for the Group s products, the Group faces challenges in effectively estimating demand and managing supply chain infrastructure in a timely basis. The Group is able to partially mitigate pricing pressures by developing innovative and differentiated products, managing its own cost base and through increased diversification of its customer base and product offerings throughout the Group s business divisions. Customer demand The Group s business depends on the demand of consumers in the end markets in which the Group s customers operate. The Directors believe that demand is influenced by overall macroeconomic conditions as well as certain market factors and trends. Changes in economic conditions, particularly when widespread and pronounced, can put pressure on the Group s customers margins and can therefore have an effect on the Group s results of operations. Key macroeconomic events which have affected the Group s results of operations include the decline in oil prices in 2016, which had an impact on the customers in the Group s WACS business unit and reduced demand for the Group s products. If adverse economic conditions are widespread, pronounced and/or long-lasting, such as the global financial crisis, such conditions could have a significant impact on overall demand for the Group s products and the Group s results of operations. Customer demand is also impacted by the growth and maturity of the end markets in which the Group operates. For example, the growth of the smartphone market led to increased demand for the Group s products and had a positive impact on the Group s results, however this market has since become highly saturated and intensely competitive, which the Directors believe contributed to a customer s later than expected ramp-up on smartphones in 2016, which negatively impacted the Group s results. The Directors believe that the Group s diversification across products, geographies and industries reduces, in part, its sensitivity to demand cycles in certain geographies and markets. For example, while the smartphone market growth has slowed as the market has matured, market growth in the connected car market has an estimated CAGR of 29% between 2015 to 2018, according to PWC s In the fast lane: The bright future of connected cars (2014), with shipments of embedded OEM telematics systems projected to reach 56 million units by 2020, compared to 11 million units shipped in 2014 according to Berginsight data. Additionally, the Directors believe the emergence of 4G/ LTE and the evolution to 5G is driving automotive OEMs to upgrade their antennas to include MIMO. The Directors believe that these technology trends will lead to increased demand for products from its new CVS division. Cost base The Group s margins are impacted by changes in the Group s cost base, which in turn are impacted by factors outside the Group s control such as the price of raw materials and components used in the Group s products, costs associated with logistics, including export and import licensing fees and costs of labour. The Group s cost of sales in the years ended 31 December 2016, 2015 and 2014 were million, million and million, respectively. In addition, certain business in the Performance Materials division must plan manufacturing in advance of receiving firm purchase orders, which may involve investing in technologies or specialised manufacturing equipment required for production of a component or product as well as hiring additional employees in anticipation of production requirements. The Group bases its planning on analyses of the customers end product market forecasts and indicative production share allocations through framework agreements, past orders and some advance orders, as well as contractual commitments to maintain capacity levels. However, because purchase commitments are not binding, the loss of a major customer or significant reductions in order volume from a major customer could result in a loss of the value of the investments made, as well as result in costs being incurred in relation to decommissioning 105

106 premises, plant or equipment and inventory losses. There can be no assurance that the Group will be able to completely offset an unexpected reduction in orders through operational cost-reduction and cost-savings initiatives. The Group proactively manages its cost base by diversifying suppliers of raw materials and components where possible, locating production facilities near customers to reduce transportation costs and managing headcount by, for example, hiring temporary workers in some of its facilities during periods of heavy demand. Innovation and product development The Group s business strategy relies on continuing to develop innovative products which take advantage of structural technological trends, address customer needs and differentiate the Group and its product offerings from its competitors. More mature products or mature markets can become commoditised, which increases pressure on the Group s margins, whereas innovative and differentiated products can increase the profitability of the Group s operating segments. Investments in research and development carry risks associated with any new product or service development effort, including cost overruns, delays in delivery or a failure to achieve market acceptance, and it may take longer to generate revenue, or the Group may generate less revenue than anticipated from newly developed or enhanced products or services. Expenditure on research and development in the years ended 31 December 2016, 2015 and 2014 was 69.8 million, 45.8 million and 41.6 million, respectively, or 8.7%, 7.3% and 7.4% as a percentage of revenue, respectively. The Group has also acquired new technologies, in particular through the acquisition of Novero in January 2016 for 50.1 million. The Directors believe that the Group s investment in developing and acquiring innovative products and technologies may lead to further growth through accessing expanded addressable markets, and allowing it to take advantage of technological trends in the industries in which the Group operates. For example, the combination of Laird s existing technologies for connectivity into the vehicle and Novero s technology of telematics control within the vehicle has enabled Laird to offer full end-to-end vehicle connectivity solutions, with a highly capable software platform for value added services. The Directors believe this has positioned the Group to capitalise on projected growth in the connected car market, and are targeting expected revenue in excess of 405 million (US$500 million) by 2020 in the new CVS division, with improving profitability according to unaudited company estimates. Operational improvement programme Beginning in late 2015, the Group undertook an operational improvement programme which involved a number of measures designed to streamline the Group s operating model in order to reduce costs and increase profitability by simplifying Laird s manufacturing capabilities in Europe and North America into the largest and most strategically located facilities. The operational improvement programme is described further in Part IV Business Overview of the Group. The project is progressing to plan and is on-track to deliver annual cash benefits of at least 15 million (US$20 million) from 2018, with 12 million (US$15 million) expected in 2017, according to unaudited Company estimates. The total cash cost of the project remains at 44 million (US$60 million), much of which was provided for in 2015, with approximately 22 million (US$30 million) paid in 2016 and the balance of 22 million (US$30 million) to be spent in 2017, according to unaudited Company estimates. Foreign exchange fluctuations The Group s results of operations are affected by exchange rate fluctuations and the Group is exposed to both translational and transactional risk due to fluctuations in foreign currency exchange rates. The Group s reporting currency is pounds sterling, although it generates the majority of its revenue in US dollars and incurs the majority of its costs in either US dollars or RMB, with 68% of revenues negotiated in US dollars and 34% of costs incurred in US dollars in In 2016, 11% of revenues were negotiated and 33% of costs were incurred in RMB and 18% of revenues were negotiated in Euros and 17% of costs. In most currencies (other than US dollars and Euros), costs exceed revenues. Further, as of 31 December 2016, the Group s sterling-denominated external borrowings were 13 million, representing 3% of the Group s total external borrowings, (excluding finance leases) its US dollar-denominated external borrowings were US$383 million, representing 77% of the Group s total external borrowings, and its Euro-denominated external borrowings were 91 million, representing 19% of the Group s total 106

107 external borrowings. In 2016, the impact of the translation of external borrowings into sterling was approximately 51.0 million. Transactions are typically measured in the currency in which they occur and the accounts of subsidiaries are then translated into pounds sterling for presentation of the Group s consolidated operating results. In 2016, 99.9% of the Group s total revenue was generated in currencies other than pounds sterling and 95% of the Group s operating costs were incurred in currencies other than pounds sterling. As currency exchange rates fluctuate, translation of operating results affects the Group s reported results of operations. In 2016, the impact of movements in foreign exchange rates on underlying profit before tax was a benefit of approximately 7.6 million, of which approximately 5.8 million was due to translation of profits into sterling. The Group is exposed to transactional foreign exchange rate fluctuation when a Group subsidiary enters into a sale or purchase transaction in a currency other than that subsidiary s functional currency. Whilst the Group partially naturally hedges certain transactional exposures by matching the currency of revenue to the relevant cost, where possible, the Group s sales from certain jurisdictions, such as China, are often denominated in dollars as a feature of that jurisdiction s export market. The Group aims to forward cover at least 75% of the unmatched cash flows on a quarterly basis. In addition, the Group s foreign currency borrowings are used to partially hedge the currencies of the Group s principal assets and cash flows. Seasonality The Group s revenue is concentrated in the second half of the year, and in particular in the fourth quarter, largely driven by peak sales periods during the end of year holidays and fourth quarter launches of products by the Group s significant customers. (i) (i) Impairment of goodwill The Group reviews goodwill annually for assessment of impairment and any impairment identified is charged against the Group s operating (loss)/profit. Any significant impairment to goodwill will thus affect the Group s results in that period. In 2016, the decline in sales in the US rail freight market, which impacted demand in the Group s WACS business, together with the higher level of cost required in Novero, resulted in a million write-off due to impairment of goodwill in the Wireless Systems division. While there was no cash impact and no further write-downs are anticipated in the near term, the Group s operating (loss)/profit was negatively impacted relative to prior periods. Acquisitions The Group has undertaken acquisitions which have affected its results of operations during the periods under review and which the Directors believe will affect its results of operations in future periods. The Group s most recent acquisitions were the acquisition of a 51% stake in Model Solution in 2014 for 20.5 million, the acquisition of LS Research in 2015 for 36.5 million and the acquisition of Novero in January 2016 for 50.1 million. The acquisition of Model Solution, a South Korean rapid prototyping and design company, was undertaken in order to diversify the Group s geographic reach and customer base as well as to support its expansion into the South Korean market. The acquisition of LS Research was undertaken in order to expand the capabilities, products and services of the Wireless Systems division while providing new routes to market for existing products. The acquisition of Novero was undertaken primarily in order to bring telematics control technology to the Group s CVS business unit and enable the Group to produce smart antenna in house rather than competing in consortia. While acquisitions which are integrated successfully and perform well will have a positive effect on the Group s results of operations, difficulties in integrating newly-acquired businesses or in developing familiarity with new geographical or product markets may lead to anticipated benefits of such acquisitions not being realised fully, or at all, which could have an adverse impact on the Group s results of operations. Whilst the Group did not incur material integration costs as a result of the acquisition of LS Research, which was integrated successfully into the existing M2M business within three months of acquisition, challenges were identified relating to the Novero business, with turnaround actions and associated costs at the high end of the Group s pre-acquisition expectations, creating a loss for the business in 2016 and contributing to the impairment of goodwill in the wireless systems division. Novero is now fully integrated into the Group s business and its performance is now in line with the Board s plan for it to deliver modest profitability in 2017 with industry standard margins from

108 Description of Key Line Items in the Income Statement Revenue The Group generates revenue from the sale of goods and services. (i) (i) (i) (i) 12.1 (i) 12.2 Impairment of goodwill The Group reviews goodwill annually for assessment of impairment in accordance with IAS 36. If an impairment to goodwill is identified, it is charged against the Group s operating (loss)/profit. Amortisation of acquired intangible assets Intangible assets acquired by the Group, which include brand names, trade secrets, trademarks and trade names, patents, licences, customer relationships and software, are amortised on a straight line basis over their estimated useful lives and all amortisation charges for the year are charged against operating profits. Exceptional items The Group s exceptional items are items of income or expense incurred outside the normal course of business and are considered by management to be material and non-recurring in nature. In the years ended 31 December 2016, 2015 and 2014, exceptional items related to write-downs for property, plant and equipment, software, capitalised development and inventory, as well as restructuring costs, provisions for patents litigation, acquisition costs and other non-recurring items. Operating (loss)/profit The Group s operating (loss)/profit consists of revenue, less cost of sales, selling, administration and other expenses (including amortisation of acquired intangible assets and exceptional items) and research and development expenditure (net). Finance income The Group s finance income comprises interest income that is generated through use of short-term cash surpluses. Finance costs The Group s finance costs largely reflect expenses incurred in managing the Group s debt structure. Taxation Taxation comprises the amount payable on taxable profits for the year as well as deferred taxation. Segmental Reporting The Group s business comprised two reporting segments: (i) Performance Materials and (ii) Wireless Systems for the periods under review. Performance Materials designs and supplies a range of EMI shielding materials, thermal management solutions and signal integrity products to a wide variety of electronic devices and prototypes. Wireless Systems designs and supplies a range of high specification wireless antennae and M2M wireless modules for a number of markets, including the infrastructure and automotive markets. As from 1 January 2017, the Group reports in three segments: (i) CVS, (ii) WTS and (iii) PM. The changes from the old structure are summarised in Part I Letter from the Chairman of Laird PLC. 108

109 Results of Operations (i) The table below presents the Group s results of operations for the periods indicated, which has been extracted without material adjustment from the Group s Financial Statements for the years ended 31 December 2016, 2015 and ( millions, unless otherwise indicated) Revenue Performance Materials Wireless Systems Operating profit before impairment of goodwill, amortisation of acquired intangible assets and exceptional items Impairment of goodwill... (155.5) Amortisation of acquired intangible assets... (17.2) (13.2) (13.3) Exceptional items (45.0) 0.7 Operating (loss)/profit... (109.6) Finance income Finance costs... (11.1) (8.4) (8.5) Financial instruments fair value adjustments... (1.9) 0.5 (2.5) Other net finance income pension (Loss)/profit before tax... (122.3) Taxation (23.0) 2.1 (Loss)/profit for the year... (110.8) (7.6) 50.2 Attributable to: Equity shareholders of the parent company... (111.7) (8.3) 50.1 Non-controlling interests (110.8) (7.6) 50.2 Basic earnings per share on (loss) for the year... (41.3)p (3.1)p 18.8p Diluted earnings per share on (loss) for the year... (41.3)p (3.1)p 18.6p Underlying profit before tax (1) Underlying basic earnings per share (2) p 19.1p (1) The Group defines underlying profit before tax as (loss)/profit before tax, adding back financial instruments fair value of adjustments, impairment of goodwill, amortisation of acquired intangible assets and exceptional items. (2) Underlying basic earnings per share is calculated as underlying earnings attributable to shareholders of the parent divided by the weighted average number of shares. Underlying earnings attributable to the parent is defined (loss)/profit for the year attributable to equity shareholders of the parent company, adding back financial instruments fair value of adjustments, impairment of goodwill, amortisation of acquired intangible assets less amortisation of acquired intangible assets attributable to non-controlling interests, exceptional items, tax on exceptional items, deferred tax on goodwill, acquired intangible assets and US capitalised development costs, exceptional US tax loss movement/(recognition) and exceptional tax attributable to non-controlling interests. Comparison of Results of Operations Results of operations for the year ended 31 December 2016 compared to the year ended 31 December 2015 Revenue Revenue from the Performance Materials segment increased by 33.6 million, or 8.5%, to million in 2016 from million in 2015, primarily due to foreign currency movements, in particular the decrease in value of pounds sterling compared to the US dollar. On an organic constant currency basis, revenue from the Performance Materials division was 3.0% lower in 2016 than in 2015, primarily due to pricing pressures from a key customer and reduced volumes due to a customer s later than expected ramp-up cycle on smartphones within the precision metals business within Performance Materials. Revenue from the Wireless Systems segment increased by million, or 58.4%, to million in 2016, from million in 2015 primarily due to foreign currency fluctuations referenced above, 109

110 contributions from the acquisitions of LS Research and Novero and strong performance in most of the business units within Wireless Systems, in particular the automotive sector. On an organic constant currency basis, revenue from the Wireless Systems division was 3.9% higher in 2016 than in This increase was partially offset by the unexpected and substantial downturn in sales in the US rail freight markets in 2016, due in part to the global collapse of oil prices, which adversely affected demand in the Group s WACS business unit within Wireless Systems. For the reasons described above, total revenue increased by million, or 27.2%, to million in 2016, from million in On an organic constant currency basis, revenue decreased by 0.4% in 2016 compared to Impairment of goodwill The Group identified an impairment to goodwill of million in 2016, related to impairments in the Wireless Systems division as a result of the downturn in sales in the US rail freight market, which adversely affected demand in the WACS business as well as the higher level of costs associated with the Novero turnaround. No impairment to goodwill was identified in Amortisation of acquired intangible assets Amortisation of acquired intangible assets increased by 4.0 million, or 30.3%, to 17.2 million in 2016 from 13.2 million in 2015, primarily due to the acquisitions of LS Research and Novero. Exceptional items Exceptional items were a credit of 1.2 million in 2016, compared to a charge of 45.0 million in Exceptional items in 2016 primarily included a credit of 0.4 million related to restructuring costs, a 3.0 million charge related to fees in connection with the rights issue and amendments to the financial covenants and a credit of 3.8 million in relation to changes in valuation to the put and call options in respect of Model Solution. Exceptional items in 2015 primarily included 8.2 million related to write downs, 30.9 million related to restructuring costs and 3.5 million related to acquisition costs. Operating (loss)/profit The following table breaks down the components of the Group s operating profit for the years ended 31 December 2016 and 2015: ( millions) Revenue Cost of sales (1)... (522.3) (375.0) Gross profit Selling, administration and other expenses (2) (187.1) Research and development expenditure (net) (3) (45.8) Operating (loss)/profit... (109.6) 22.5 (1) Cost of sales includes cost of inventories, amounting to million and million in 2016 and 2015, respectively. (2) Selling, administration and other expenses includes an exceptional credit of 1.2 million and charge of 45.0 million in 2016 and 2015, respectively, as well as million and 13.2 million of goodwill impairment and amortisation of acquired intangible assets in 2016 and 2015, respectively. (3) Research and development expenditure includes 13.1 million and 6.0 million of amortisation and impairment in respect of capitalised development costs for 2016 and 2015, respectively. Operating (loss)/profit decreased by million, to a loss of million in 2016 from a profit of 22.5 million in 2015, primarily due to the impairment to goodwill of million in 2016 as well as pricing and margin pressures from a key customer, reduced volumes due to a customer s later than expected ramp-up on smartphones and a downturn in sales in the US rail freight markets as well as losses and increased costs associated with the turnaround of the Novero business in the initial operational and financial turnaround period. This was offset in part by the exceptional credit of 1.2 million in 2016 compared to an exceptional charge of 45.0 million in 2015, which were related to the Group s operational improvement programme, as well as and benefits from movements in foreign exchange rates. 110

111 Finance income Finance income was 0.1 million in 2016, compared to 0.6 million in 2015, consisting of interest income generated through use of short term cash surpluses. Finance costs Finance costs increased by 2.7 million, or 32.1%, to 11.1 million in 2016 from 8.4 million in 2015, primarily due to higher outstanding borrowings, which in turn was driven by investments made across the Group, including in relation to the acquisition and turnaround of the Novero business. Taxation Taxation decreased by 34.5 million, to a credit of 11.5 million in 2016, compared to a charge of 23.0 million in 2015, primarily due to lower taxable profits in 2016 and the exceptional tax charge in (Loss)/profit for the year As a result of the foregoing, loss for the year increased by million, to a loss of million in 2016 from a loss of 7.6 million in (Loss)/profit before tax and Underlying profit before tax As a result of the foregoing, profit before tax decreased by million, to a loss of million in 2016 from a profit of 15.4 million in Underlying profit before tax decreased by 22.0 million, to 51.1 million in 2016 from 73.1 million in In 2016, there was a tailwind on underlying profit before tax of approximately 7.6 million related to movements in foreign exchange rates. Basic earnings per share and Underlying basic earnings per share As a result of the foregoing, basic earnings per share decreased by 38.2p, to a loss per share of 41.3p, from a loss per share of 3.1p in Underlying basic earnings per share decreased by 8.2p, to underlying basic earnings per share of 13.6p in 2016 from 21.8p in Results of operations for the year ended 31 December 2015 compared to the year ended 31 December 2014 Revenue Revenue from the Performance Materials segment increased by 28.7 million, or 7.8%, to million in 2015 from million in 2014, primarily due to the impact of foreign exchange movements, which were partially offset by ongoing weakness in the telecoms and smartphone markets. Revenue from the Wireless Systems segment increased by 36.8 million, or 18.5%, to million in 2015, from million in 2015, primarily due to strong performance in the automotive segment, which was driven by increased content and volume demands from new and existing customers in Europe, China and the Americas as well as a contribution of approximately 1.4 million in revenue from the acquisition of LS Research. Total revenue increased by 65.5 million, or 11.6%, to million in 2015 from million in 2014 for the reasons described above. Impairment of goodwill No impairment of goodwill was identified in either 2015 or Amortisation of acquired intangible assets Amortisation of acquired intangible assets remained broadly flat at 13.2 million in 2015, as compared to 13.3 million in Exceptional items Exceptional items were a 45.0 million in expenses in 2015, compared to a net exceptional credit of 0.7 million in Exceptional items in 2015 primarily included 8.2 million related to asset write downs, 30.9 million related to restructuring costs and 3.5 million related to acquisition costs, whereas 111

112 exceptional items in 2014 primarily included 1.2 million related to write downs and 0.5 million related to restructuring costs, offset by an exceptional credit 5.2 million in respect of development of the Group s Nextreme thermal technology. Operating profit The following table shows the Group s operating profit for the years ended 31 December 2015 and 2014: ( millions) Revenue Cost of sales (1)... (375.0) (337.4) Gross profit Selling, administration and other expenses (2)... (187.1) (127.3) Research and development expenditure (net) (3)... (45.8) (41.6) Operating profit (1) Cost of sales includes cost of inventories, amounting to million and million in 2015 and 2014, respectively. (2) Selling, administration and other expenses includes an exceptional charge of 45.0 million in 2015 and an exceptional credit of 0.7 million in 2014, as well as 13.2 million and 13.3 million of amortisation related to acquired intangible assets in 2015 and 2014, respectively. (3) Research and development expenditure includes 6.0 million and 4.8 million of amortisation in respect of capitalised development costs for 2015 and 2014, respectively. Operating profit decreased by 36.1 million, or 61.5%, to 22.5 million in 2015, from 58.6 million in 2014, primarily due to the increased costs associated with the Group s operational restructuring. Finance income Finance income was 0.6 million in 2015, compared to 0.5 million in 2014, consisting of interest income generated through use of short term cash surpluses. Finance costs Finance costs were 8.4 million in 2015, compared to 8.5 million in 2014, primarily reflecting an increase in interest payable on bank loans and overdrafts, which was offset by a decrease in interest payable on other loans and on finance leases, with other finance charges broadly in line with Taxation Taxation was a charge of 23 million in 2015, compared to a credit of 2.1 million in 2014, primarily reflecting an exceptional deferred tax credit of 20.1 million in 2014 as a result of recognition of US tax losses as well as an exceptional tax charge of 8.3 million in (Loss)/profit for the year As a result of the foregoing, (loss)/profit for the period decreased by 57.8 million, to a loss of 7.6 million in 2015 from a profit of 50.2 million in Profit before tax and Underlying profit before tax As a result of the foregoing, profit before tax decreased by 32.7 million, to 15.4 million in 2015 from 48.1 million in Underlying profit before tax increased by 9.9 million, to 73.1 million in 2015 from 63.2 million in Basic earnings per share and Underlying basic earnings per share As a result of the foregoing, basic earnings per share decreased by 21.9p, to a loss of 3.1p per share in 2015 from earnings of 18.8p per share in Underlying basic earnings per share increased by 2.7p, to underlying basic earnings per share of 21.8p in 2015 from 19.1p in

113 Liquidity and capital resources ESMA The Group s primary sources of liquidity for its operations are the cash flows generated from its operations, along with drawdowns under the Group s third party debt. Cash flows The table below presents a summary of the Group s cash flows for the years ended 31 December 2016, 2015 and 2014, which have been extracted without material adjustment from the Group s 2016, 2015 and 2014 Financial Statements. (i) 9.1 (i) (i) 10.1 (i) 10.2 (i) 10.3 (i) 10.4 (i) ( millions) Net cash flows from operating activities Net cash flows from investing activities... (104.2) (66.0) (52.5) Net cash flows from financing activities (15.5) 2.9 Effects of movements in foreign exchange rates (Decrease)/increase in cash and cash equivalents for the year... (4.3) Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December Net cash flows from operating activities Net cash flows from operating activities decreased by 24.5 million, or 28.5%, to 61.5 million in 2016 from 86.0 million in Net cash flows in 2016 consisted of 75.9 million in cash generated from continuing operations, less 14.4 million in tax paid. The decrease in net cash flows from operating activities was primarily driven by pricing and margin pressures from a key customer, reduced volumes due to a customer s later than expected ramp-up on smartphones and a downturn in sales in the US rail freight markets as well as increased costs associated with the turnaround of the Novero business. Net cash flows from operating activities increased by 25.7 million, or 42.6%, to 86.0 million in 2015, from 60.3 million in Net cash flows from operating activities in 2015 consisted of million in cash generated from continuing operations, less 15.3 million in tax paid, as compared to 73.3 million in cash generated from continuing operations, less 13.0 million in tax paid in This increase was due to the increase in revenue in Net cash flows from investing activities Net cash flows from investing activities decreased by 38.2 million, or 57.9%, to an outflow of million in 2016 from an outflow of 66.0 million in 2015, primarily due to the investments made across the Group, including in relation to the acquisition to Novero. Net cash flows from investing activities increased by 13.5 million, or 25.7%, to an outflow of 66.0 million in 2015, from an outflow of 52.5 million in 2014, primarily reflecting the 33.9 million cash consideration (net of cash acquired) paid in respect of the acquisition of LS Research in November 2015, as compared to 19.0 million cash consideration (net of cash acquired) paid for the acquisition of 51% of Model Solution in April Purchase of property, plant and equipment decreased by 6.6 million, from 22.5 million in 2014 to 15.9 million in 2015, but was offset by increases in the purchase of software and of intangible assets (internally developed). Net cash flow from financing activities Net cash flows from financing activities increased by 44.0 million, to an inflow of 28.5 million in 2016 from an outflow of 15.5 million in 2015, primarily due to the higher outstanding borrowings, as well as a repayment of borrowings of 35.0 million, primarily relating to US private placement notes repaid in Net cash flows from financing activities increased by 18.4 million, to an outflow of 15.5 million in 2015, from an inflow of 2.9 million in 2014, primarily due to a change in increase of borrowings from 44.2 million in 2014 to 32.8 million in 2015 reflecting operational activities and investment in the Group. 113

114 Borrowings Existing Finance Arrangements The Group s existing financing arrangements consist of revolving credit facilities, Schuldschein Facilities and US private placement notes (together, Existing Finance Agreements ), each of which are described below. The Existing Finance Arrangements include two key financial covenants, which are tested semiannually on 30 June and 31 December of each year. These covenants relate to the leverage ratio, being the ratio between Covenant EBITDA and net debt, and the interest cover ratio between Covenant EBITA and cash interest expense. The permitted limits of these financial covenants are a maximum net debt to Covenant EBITDA of 3.5x and an interest cover of at least 3.0x. As at 31 December 2016, the Group s ratio of net debt to Covenant EBITDA was 3.2x. As described in paragraph 2.2 of Part I Letter from the Chairman of Laird PLC, whilst Laird did not believe that it would breach any of the covenants under its financing arrangements at 31 December 2016 (and in fact has not breached them), it successfully obtained amendments to the Existing Financing Arrangements to ensure that was the case. The leverage covenants will be tested again at 30 June 2017 and thereafter at their original levels. As at 31 December 2016, million was drawn and 40.5 million was undrawn under the Bilateral Facility Agreements, an aggregate of 87.7 million was outstanding under the SSD Agreements and an aggregate of 97.8 million was outstanding under the US PP Notes. Upon receipt of the net proceeds of the Rights Issue, the Group will use the proceeds to reduce borrowings under its revolving credit facilities. The Group is targeting a net debt to Covenant EBITDA ratio of between 1.0x and 2.0x in the medium term. Revolving credit facilities As at 27 February 2017, Laird PLC had committed bilateral revolving credit facilities aggregating 255 million, being the following (each, an Existing Bilateral Facility Agreement and together, the Existing Bilateral Facility Agreements ): (a) (b) (c) (d) (e) (f) a 30 million facility agreement originally dated 24 November 2011 between, amongst others, Laird PLC and Bank of America, N.A. Frankfurt Branch as amended and/or amended and restated from time to time (including by way of amendment to accede Bank of America Merrill Lynch International Limited as a new lender); a 25 million facility agreement originally dated 11 April 2011 between, amongst others, Laird PLC and Bank of China (UK) Limited as amended and/or amended and restated from time to time; a 60 million facility agreement originally dated 11 April 2011 between, amongst others, Laird PLC and Commerzbank Aktiengesellschaft, London Branch as amended and/or amended and restated from time to time; a 60 million facility agreement originally dated 11 April 2011 between, amongst others, Laird PLC and HSBC Bank plc as amended and/or amended and restated from time to time; a 30 million facility agreement originally dated 11 April 2011 between, amongst others, Laird PLC and ICBC (London) plc as amended and/or amended and restated from time to time; and a 50 million facility agreement originally dated 11 April 2011 between, amongst others, Laird PLC and The Royal Bank of Scotland plc as amended and/or amended and restated from time to time. The Existing Bilateral Facility Agreements are each documented on substantially the same terms, which are customary for a company with a public listing and an investment grade credit rating. In December 2016, the Group agreed amendments to the financial covenants of each of the Existing Bilateral Facility Agreements with each of the lenders under the Existing Bilateral Facility Agreements (the Existing Bilateral Facility Lenders ). These amendments provided additional near-term headroom through short-term adjustments to the covenant test for the period ending 31 December 2016 only (the Amended Financial Covenant ). On 25 January 2017, Laird PLC and JPMorgan Chase Bank, N.A., London Branch, among others, entered into a 20,000,000 bilateral facility agreement (the JPM Bilateral Facility Agreement and together with the Existing Bilateral Facility Agreements, the Bilateral Facility Agreements ). The Directors intend to use part of the proceeds of the Rights Issue to repay in full the available commitment 114

115 under the JPM Bilateral Facility Agreement. Except as noted below, the JPM Bilateral Facility Agreement is documented on substantially the same terms as the Existing Bilateral Facility Agreements, including the Amended Financial Covenant. The interest rate payable on the facilities made available under the Existing Bilateral Facility Agreements for each interest period is LIBOR (or EURIBOR in relation to any loan in Euros) plus a margin. The margin is subject to a margin ratchet calculated by reference to the ratio of consolidated net debt to consolidated EBITDA. Default interest is chargeable on unpaid amounts as is customary. Interest periods will be one, two, three or six months, unless a different period is agreed by the relevant borrower and the relevant Bilateral Facility Lender. Interest will be payable in arrears at the end of each interest period or at the end of each six month period, where the agreed interest period is greater than six months. A commitment fee is payable quarterly in arrears on all undrawn, uncancelled amounts and is calculated as a fixed percentage of the applicable margin. The relevant borrower must repay loans drawn under each Bilateral Facility Agreement at the end of each interest period. All facilities outstanding under each of the Bilateral Facility Agreements must be repaid on 28 March 2019, with the exception of the JPM Bilateral Facility Agreement which must be repaid on 25 June Standard mandatory prepayment provisions are applicable to the relevant Bilateral Facility Agreement (including a mandatory prepayment event on a change of control of Laird PLC only). In the case of the JPM Bilateral Facility Agreement, a mandatory prepayment provision is applicable within five Business Days of the receipt by any member of the Group from any person that is not a member of the Group of proceeds from an equity issuance. Voluntary prepayments and cancellations may be made upon five Business Days notice, in minimum amounts of 1.0 million, subject to break costs if the prepayment does not take place on the last day of an interest period. Laird PLC, Laird America Inc., Laird Asia Limited and Laird Holdings Limited (together the Bilateral Facility Guarantors ) provide a continuing guarantee of punctual performance of each of the borrowers obligations under each Bilateral Facility Agreement. Each Bilateral Facility Guarantor also undertakes to indemnify the relevant Bilateral Facility Lender immediately on demand against any cost, loss or liability it incurs as a result of any borrower s non-performance under the relevant Bilateral Facility Agreement. The facilities are unsecured. A number of standard representations and warranties have been given in each Bilateral Facility Agreement, most of which are repeated on the date of each utilisation request and on the first day of each interest period. Customary materiality tests, carve outs and grace periods also apply. The Bilateral Facility Agreements each require the borrowers and the Bilateral Facility Guarantors to comply, and to ensure the compliance of the Group, with a number of customary undertakings (including financial covenants). The events of default are usual for facilities of this type. Upon the occurrence of an event of default which is not remedied or waived, the Bilateral Facility Lenders will not be obliged to fund further utilisations, the Bilateral Facility Lenders may cancel the available facilities and may declare all outstanding payments to be immediately due and payable. Schuldschein Facilities As at 27 February 2017, Laird PLC had in place the following loan agreements (each, an SSD Agreement and together, the SSD Agreements ): (a) (b) a 70,000,000 loan agreement relating to a certificate of indebtedness (Schuldscheindarlehen) dated 27 April 2016 between, amongst others, Laird PLC as borrower, Laird America, Inc., Laird Asia Limited and Laird Holdings Limited as guarantor and Commerzbank Aktiengesellschaft as arranger, paying agent, calculation agent and lender (the EUR SSD ); and a US$35,000,000 loan agreement relating to a certificate of indebtedness (Schuldscheindarlehen) dated 27 April 2016 between, amongst others, Laird PLC as borrower, Laird America, Inc., Laird Asia Limited and Laird Holdings Limited as guarantor and Commerzbank Aktiengesellschaft as arranger, paying agent, calculation agent and lender (the USD SSD ). The current lenders under the EUR SSD are Banco de Sabadell SA London Branch, Ceska Sporitelna AS, ICBC London PLC, ING Bank N.V., KBC Bank N.V., Raiffeisen Bank International AG and Raiffeisenlandesbank Oberoesterreich AG. 115

116 The current lenders under the USD SSD are Agricultural Bank of China UK Limited and China Construction Bank London Ltd. The SSD Agreements are each documented on substantially the same terms. In December 2016, the Group agreed amendments to the financial covenants of the SSD Agreements with each of the lenders under the SSD Agreements (the SSD Lenders ). These amendments provided additional headroom through short-term adjustments to the covenant test for the December 2016 accounts, which, after such test date, reverted to the previously agreed financial covenants. The interest rate payable on the facilities made available under the SSD Agreements for each interest period is LIBOR for the USD SSD and EURIBOR for the EUR SSD, in each case, plus a margin. Default interest is chargeable as is customary. Interest periods are three months. Interest will be payable in arrears at the end of each interest period. All facilities outstanding under each of the SSD Agreements must be repaid on 6 May Standard mandatory prepayment provisions are applicable to each SSD Agreement (including a mandatory prepayment event on a change of control of Laird PLC only). Laird PLC, Laird America Inc., Laird Asia Limited and Laird Holdings Limited (together the SSD Guarantors ) provide a continuing guarantee of punctual performance of each of the borrowers obligations under each SSD Agreement. Each SSD Guarantor also undertakes to indemnify the relevant SSD Lender immediately on demand against any cost, loss or liability it incurs as a result of any borrower s non-performance under the relevant SSD Agreement. The facilities provided under each SSD Agreement are guaranteed in this way but otherwise unsecured. A number of standard representations and warranties have been given in each SSD Agreement, most of which are repeated on the date of each utilisation request and on the first day of each interest period. Customary materiality tests, carve outs and grace periods also apply. The SSD Agreements each require the borrowers and the SSD Guarantors to comply, and to ensure the compliance of the Group, with a number of customary undertakings. The events of default are usual for facilities and transactions of this type. Upon the occurrence of an event of default which is not remedied or waived each SSD Lender separately may declare any amount outstanding under the loan under the relevant SSD Agreement immediately due and payable and demand immediate payment of principal and accrued interest as well as any other amounts payable under the relevant SSD Agreement. US Private Placement Notes A note purchase agreement was entered into on 30 July 2014 between Laird and a number of third party investors (the US Noteholders ), pursuant to which Laird issued US$13 million of 3.69% Senior Notes, Series A, due 25 September 2020, US$92 million of 4.02% Senior Notes, Series B, due 25 September 2021 and 15 million of 2.59% Senior Notes, Series C, due 25 September 2021, as amended by an amendment agreement dated as of 23 December 2016 (as so amended, the US PP Notes ). The proceeds from the issue of the US PP Notes were used to refinance indebtedness and for the general corporate purposes of Laird. Interest is payable on the US PP Notes on a half-yearly basis and for any series may be increased by 0.75% per annum if the majority in aggregate principal amount of US Noteholders request that Laird obtain a credit rating for that series of US PP Notes and the credit rating for such series is not investment grade. Default interest is chargeable as is customary. As described in paragraph 2.2 of Part I Letter from the Chairman of Laird PLC, the Group and the US Noteholders agreed an amendment to the net debt to EBITDA covenant for the 31 December 2016 testing date. The US PP Notes must be repaid on their maturity dates. Standard mandatory prepayment provisions are applicable to the US PP Notes (including a mandatory prepayment event on a change of control of Laird and if a holder of a Note would be in violation of sanctions laws due to a change in sanctions laws). Voluntary prepayments may be made, subject to the payment of a make-whole amount. Those subsidiaries of Laird which are borrowers under or have provided guarantees under Laird s banking and Schuldschein Facilities are also required to provide similar guarantees of the punctual performance of Laird s obligations under the US PP Notes. Each such guarantor undertakes to indemnify the US Noteholders immediately on demand against any cost, loss or liability they incur as a result of 116

117 Laird s non-performance under the US PP Notes. The US PP Notes are unsecured, and rank pari passu to the facilities under the banking and Schuldschein Facilities. A number of standard representations and warranties have been given in the US PP Notes. Customary materiality tests, carve outs and grace periods also apply. The US PP Notes require the Group to comply with a number of customary undertakings and to maintain specified EBITDA to interest and net debt to EBITDA ratios. The events of default are usual for notes and transactions of this type. Upon the occurrence of an event of default which is not remedied or waived, the US Noteholders may require all outstanding US PP Notes to be repaid immediately, together with a make whole amount. Commitments and contingent liabilities Commitments The Company has various contractual obligations and commercial commitments to make future payments, including bank loans, long-term debt instruments, overdrafts, operating lease and international off-set obligations. The following table summarises the Company s future obligations (including interest up until 31 December 2016) under these contracts due by the periods indicated as of 31 December 2016: ESMA 127 (i) 10.3 (i) 10.4 (i) 10.5 (i) 6.4 Less than a year Between one and five years More than five years Total (unaudited) ( million) Contractual obligations Borrowings Operating Leases Total Contingent liabilities As at 31 December 2016, the Group had no contingent liabilities. Capital expenditure The Group s capital expenditure primarily relates to investments in capacity growth, automation and manufacturing equipment required to meet the requirements of the Group s customers. In addition, 2016 saw significant spend in relation to the Group s operational improvement programme. Capital expenditure, consisting of additions to property, plant and equipment and software, amounted to 46.9 million, 18.2 million and 23.5 million in the years ended 31 December 2016, 2015 and 2014, respectively. (i) (i) (i) (i) 10.4 Capitalisation and indebtedness As at 31 December 2016, the total shareholders funds (consisting of total ordinary share capital, retained earnings and losses and other reserves) of the Group in accordance with IFRS as adopted by the EU was million. The following tables show the capitalisation and the indebtedness and cash of the Group as at 31 December The figures for the capitalisation and the indebtedness and cash of the Group have been extracted without material adjustment from the Laird Final Results for the year ended 31 December ESMA 127 (i) (i) (i) (i) 10.1 (i) 10.2 (i) 10.3 (i) 10.4 (i) 10.5 (iii)

118 As at 31 December 2016 (unaudited) ( million) Shareholders equity Equity share capital Share premium Retained earnings... (161.8) Translation reserve Treasury shares... (2.7) Other reserve... (33.3) Total Non-controlling interests Total There has been no material change in the capitalisation of the Group, as set out in the table above, since 31 December As at 31 December 2016 Total current debt (unaudited) ( million) Guaranteed... Secured Total current indebtedness Total non-current debt Guaranteed Secured Total non-current indebtedness Total indebtedness Net financial indebtedness analysis As at 31 December 2016 (unaudited) ( million) Cash and cash equivalents... (64.5) Current debt... Non-current debt Finance leases Total Dividend policy In light of the proposed Rights Issue, the Board intends that no final dividend will be paid in respect of the year to 31 December The total dividend in respect of the 2016 financial year will therefore be the interim dividend of 4.53p (2015: 13.0p). (i) 20.7 (i)

119 The Board understands the importance of optimising value for shareholders and believes in balancing returns to shareholders with investment in the business to support future growth. To this end, the Board intends to resume dividends in 2017 based on a dividend per share that is covered three times by underlying basic earnings per share, with the interim dividend equal to approximately one third of the full year dividend. Thereafter, consistent with the anticipated improvement in earnings and of cash generation in 2018 and beyond, and subject to prevailing market conditions, the Board expects to reduce dividend cover towards two times underlying basic earnings per share over the medium term. Qualitative and quantitative disclosures about market risk Descriptions of the Group s qualitative and quantitative disclosures about market risk are incorporated by reference from the Laird Final Results for the year ended 31 December 2016, which is incorporated by reference in this document as described in Part X Documentation Incorporated by Reference. Critical accounting policies Critical accounting policies are those policies that require the application of the Group s management s most challenging, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Critical accounting policies involve judgements and uncertainties that are sufficiently sensitive to result in materially different results under different assumptions and conditions. A detailed description of certain of the main accounting policies used in preparing the Company s historical financial information is set forth in note 2 to the Laird Final Results for the year ended 31 December 2016, which is incorporated by reference in this document as described in Part X Documentation Incorporated by Reference. 119

120 PART VI FINANCIAL INFORMATION OF THE GROUP PART A HISTORICAL FINANCIAL INFORMATION Consolidated financial information relating to Laird as at and for each of the years ended 31 December 2014, 2015 and 2016 is incorporated into this document by reference to the Laird Annual Report and Accounts for each of the years ended 31 December 2014 and 2015, and to the Laird Final Results for the year ended 31 December 2016 as described in Part X Documentation Incorporated by Reference of this document. (i) 3.1 (i) 9.1 (i) 20.1 (i) 20.3 (i) (i) (i)

121 PART VII UNAUDITED PRO FORMA FINANCIAL INFORMATION SECTION A PRO FORMA FINANCIAL INFORMATION The unaudited pro forma statement of net assets and accompanying notes (the Pro forma financial information ) set out in Section A of this Part VII Unaudited Pro Forma Financial Information has been prepared to show the effect on the Group s consolidated net assets of the Rights Issue, as if it had occurred on 31 December The Pro forma financial information has been prepared in accordance with Annex II of the PD Regulation, and in a manner consistent with the accounting policies adopted by the Group in preparing its consolidated financial statements for the year ended 31 December It has been prepared on a voluntary basis and for illustrative purposes only and, due to its nature, the Pro forma financial information addresses a hypothetical situation and, therefore, does not represent the Group s actual financial position. The Pro forma financial information does not constitute financial statements within the meaning of section 434 of the Companies Act Shareholders should read the whole of this document and not rely solely on the summarised financial information contained in this Part VII Unaudited Pro Forma Financial Information. Deloitte LLP s report on the Pro forma financial information is set out in Section B of this Part VII Unaudited Pro Forma Financial Information. The Pro forma financial information does not reflect any changes in the trading position of the Group other than those outlined in the notes to the statement below, since 31 December (i) 20.2 (i) (ii) 1 6 Unaudited pro forma statement of net assets As at 31 December 2016 (Note 1) Proceeds of Rights Issue (Note 2) Adjustments Use of proceeds (Note 3) Unaudited pro forma as at 31 December 2016 ( millions) Non-current assets Property, plant and equipment Intangible assets Deferred tax assets Derivative financial instruments Retirement benefit assets Other non-current assets Current assets Inventories Trade and other receivables Income tax receivable Cash and cash equivalents (175.0) (175.0) Total assets... 1, (175.0) 1,

122 As at 31 December 2016 (Note 1) Proceeds of Rights Issue (Note 2) Adjustments Use of proceeds (Note 3) Unaudited pro forma as at 31 December 2016 ( millions) Current liabilities Borrowings... (0.3) (0.3) Derivative financial instruments... (2.1) (2.1) Trade and other payables... (192.0) (192.0) Current tax liabilities... (33.9) (33.9) Provisions... (26.8) (26.8) (255.1) (255.1) Non-current liabilities Borrowings... (408.8) (233.8) Derivative financial instruments... (31.0) (31.0) Deferred tax liabilities Retirement benefit obligations... (13.7) (13.7) Other non-current liabilities... (0.8) (0.8) Provisions... (14.1) (14.1) Total liabilities (625.3) Net assets Notes: 1. The net assets of the Group as at 31 December 2016 have been extracted, without material adjustment, from the Group s audited consolidated financial statements incorporated by reference from the Laird Final Results as described in Part X Documentation Incorporated by Reference of this document. 2. This adjustment reflects the net proceeds of the Rights Issue receivable by the Company of 175 million (being gross proceeds of approximately 185 million less estimated fees relating to the Rights Issue of approximately 10 million), as detailed in the section headed Rights Issue Statistics of this document. 3. This adjustment reflects the use of net proceeds of the Rights Issue: to reduce borrowings under its revolving credit facilities, as detailed in Part I Letter from the Chairman of Laird PLC of this document. 4. No adjustment to the balance sheet has been made to reflect the trading results of the Group since 31 December

123 SECTION B ACCOUNTANTS REPORT ON THE PRO FORMA FINANCIAL INFORMATION (ii) 7 Deloitte LLP Athene Place 66 Shoe Lane London EC4A 3BQ The Board of Directors on behalf of Laird PLC 100 Pall Mall London SW1Y 5NQ J.P. Morgan Securities plc 25 Bank Street Canary Wharf London E14 5JP N M Rothschild & Sons Limited New Court St Swithin s Lane London EC4N 8AL 28 February 2017 Dear Sirs, Laird PLC (the Company ) We report on the pro forma statement of net assets (the Pro forma financial information ) set out in Section A of Part VII Unaudited Pro Forma Financial Information of the prospectus dated 28 February 2017 (the Prospectus ), which has been prepared on the basis described in the notes, for illustrative purposes only, to provide information about how the Rights Issue (the Transaction ) might have affected the financial information presented on the basis of the accounting policies adopted by the Company in preparing the financial statements for the period ended 31 December This report is required by the Commission Regulation (EC No 809/2004) (the Prospectus Directive Regulation ) and is given for the purpose of complying with that requirement and for no other purpose. Responsibilities It is the responsibility of the directors of the Company (the Directors ) to prepare the Pro forma financial information in accordance with Annex II items 1 to 6 of the Prospectus Directive Regulation. It is our responsibility to form an opinion as to the proper compilation of the Pro forma financial information and to report that opinion to you in accordance with Annex II item 7 of the Prospectus Directive Regulation. Save for any responsibility arising under Prospectus Rule 5.5.3R(2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Annex I item 23.1 of the Prospectus Directive Regulation, consenting to its inclusion in the Prospectus. In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro forma financial information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue. 123