Ferroglobe PLC
Ferroglobe PLC (Form: 6-K, Received: 06/02/2017 12:33:06)
 

 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934

For the Month of June, 2017

Commission File Number: 001-37668

FERROGLOBE PLC
(Name of Registrant)

2nd Floor West Wing, Lansdowne House
57 Berkeley Square
London, W1J 6ER
(Address of Principal Executive Office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F                                          Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes              No

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A


 

 
2017 Annual General Meeting of Ferroglobe PLC

On June 2, 2017, Ferroglobe PLC (“Ferroglobe” or the “Company”) released its Notice of 2017 Annual General Meeting (“2017 AGM”) and Annual Report and Accounts for the fiscal year ended December 31, 2016. The 2017 AGM will be held at 2:00 p.m. British Summer Time (BST) on Wednesday, June 28, 2017 at Brown’s Hotel, 19 Dover Street, London W1S 4LW, United Kingdom.

Exhibits

Reference is made to the Exhibit Index included hereto.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: June 2, 2017
 
  FERROGLOBE PLC  
       
 
By:
/s/ Nicholas Deeming  
    Name:  Nicholas Deeming  
    Title:    Corporate Secretary  
       
 
 
 
 
 
 



EXHIBIT INDEX

Exhibit No.
 
Description
     
99.1
 
Notice of Annual General Meeting dated June 2, 2017
     
99.2
 
Ferroglobe PLC Annual Report and Accounts for the fiscal year ended December 31, 2016
     
99.3
 
Extracts from the 2016 Form 20-F
     
99.4
 
Form of Proxy Card for 2017 Annual General Meeting

Exhibit 99.1
 
 

 

FERROGLOBE PLC

(a public limited company having its registered office at 5 Fleet Place, London, EC4M 7RD, United Kingdom and incorporated in England and Wales with company number 9425113)

2 June 2017

Dear Shareholder

2017 Annual General Meeting of Shareholders of Ferroglobe PLC (“Ferroglobe” or the “Company”)

I am pleased to invite you to attend Ferroglobe’s annual general meeting of its shareholders (the “ Annual General Meeting ”), to be held at 2:00 p.m. (British Summer Time) on Wednesday, 28 June 2017 at Brown’s Hotel, 19 Dover Street, London W1S 4LW, United Kingdom . The accompanying notice of Annual General Meeting describes the meeting, the resolutions you will be asked to consider and vote upon, and related matters.

Your vote is important, regardless of the number of shares you own. Whether or not you intend to attend the Annual General Meeting, please vote as soon as possible to make sure that your shares are represented. You may vote via the internet, by phone, or by mail by signing, dating and returning your proxy card in the envelope provided.

Recommendation

Except for Resolution 15, we consider all resolutions proposed to shareholders at the Annual General Meeting to be standard business. Resolution 15 relates to proposed changes to the Articles of Association of the Company to allow Pedro Larrea Paguaga, Ferroglobe’s Chief Executive Officer, to be appointed to the Company’s board of directors (the “ Board ”). You will find an explanation of each resolution within the Explanatory Notes on pages five to nine of this pack. The Board considers that all the resolutions to be put to the Annual General Meeting are in the best interests of the Company and its shareholders as a whole and are most likely to promote the success of the Company. The Board unanimously recommends that you vote “for” each of the proposed resolutions, as the members of the Board intend to do in respect of their beneficial holdings.

Thank you for your continued support of Ferroglobe.

Yours sincerely,
 
 
Javier López Madrid
Executive Chairman





FERROGLOBE PLC

(a public limited company having its registered office at 5 Fleet Place, London, EC4M 7RD, United Kingdom and incorporated in England and Wales with company number 9425113)

NOTICE OF 2017 ANNUAL GENERAL MEETING OF SHAREHOLDERS

To the holders of ordinary shares of Ferroglobe PLC (“ Ferroglobe ” or the Company ):

Notice is hereby given that Ferroglobe’s Annual General Meeting of shareholders will be held on Wednesday, 28 June 2017 at 2:00 p.m. (British Summer Time) at Brown’s Hotel, 19 Dover Street, London W1S 4LW, United Kingdom (“ U.K. ”).

The business of the Annual General Meeting will be to consider and, if thought fit, pass the resolutions below. Resolutions 1 to 14 will be proposed as ordinary resolutions, and Resolution 15 will be proposed as a special resolution. Explanations of the resolutions are given in the explanatory notes on pages 5 to 9 of this Annual General Meeting notice and additional information for those entitled to attend the Annual General Meeting can be found on pages 10 to 13. All resolutions will be put to vote on a poll, where each shareholder has one vote for each share held.

Certain of the resolutions that shareholders of the Company (“ Shareholders ”) will be asked to consider may not be familiar to them because, unlike many companies with shares traded on the NASDAQ markets, the Company is incorporated under the laws of England and Wales and is therefore subject to the U.K. Companies Act 2006 (the “ Companies Act ”). The Companies Act obliges the Company to propose certain matters to Shareholders for approval that would generally not be subject to periodic approval by shareholders of companies incorporated in the United States, but would be considered routine items for approval by shareholders of companies incorporated in England and Wales.

ORDINARY RESOLUTIONS:

U.K. annual report and accounts 2016

1.
THAT the directors’ and auditor’s reports and the accounts of the Company for the financial year ended 31 December 2016 (the “ U.K. Annual Report and Accounts” ) be received.

Directors’ 2016 remuneration report (the “Directors’ Remuneration Report”)

2.
THAT the Directors’ Remuneration Report (excluding that part containing the directors’ remuneration policy) for the year ended 31 December 2016 be received and approved.

Directors’ re‑election

3.
THAT Javier López Madrid be re‑elected as a director.

4.
THAT Donald J. Barger, Jr. be re‑elected as a director.

5.
THAT Bruce L. Crockett be re‑elected as a director.

6.
THAT Stuart E. Eizenstat be re‑elected as a director.

7.
THAT Greger Hamilton be re‑elected as a director.

8.
THAT Javier Monzón be re‑elected as a director.
 
 

 
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9.
THAT Juan Villar‑Mir de Fuentes be re‑elected as a director.

10.
THAT Manuel Garrido y Ruano, appointed as a director since the last Annual General Meeting, be re‑elected as a director.

Appointment of auditor

11.
THAT Deloitte LLP be appointed as auditor of the Company to hold office from the conclusion of the Annual General Meeting until the conclusion of the next general meeting at which accounts are laid before the Company.

Remuneration of auditor

12.
THAT the Audit Committee of the Board be authorised to determine the auditor’s remuneration.

Authority to purchase own shares

13.
THAT pursuant to section 693A of the Companies Act, the Company be and is hereby generally authorised to make one or more off‑market purchases (within the meaning of section 693(2) of the Companies Act) of any class of the Company’s ordinary shares of $0.01 each (“Ordinary Shares”, each an “Ordinary Share”), excluding, for the avoidance of doubt, the class A ordinary shares in the Company, for the purposes of and pursuant to the Incentive Plan (as described in the notice of Annual General Meeting dated 3 June 2016) approved by the Annual General Meeting of the Shareholders on 29 June 2016, and on such terms and in such manner as the directors may from time to time determine, provided that:

(a)
the minimum price which may be paid for each Ordinary Share (exclusive of expenses) shall be the nominal value of that Ordinary Share;

(b)
the maximum aggregate number of Ordinary Shares authorised to be purchased is 5,000,000;

(c)
the maximum price (exclusive of expenses) which may be paid for each Ordinary Share shall be the higher of: (i) an amount equal to 105% of the average of the closing middle market quotations for an Ordinary Share, as derived from the NASDAQ Global Select Market, for the five business days immediately preceding the day on which that Ordinary Share is contracted to be purchased; and (ii) the higher of the price of the last independent trade and the highest current independent purchase bid at the time on the trading venue where the purchase is carried out,

such authority to expire at close of business on the fifth anniversary of the passing of this resolution, but during this period the Company may enter into a contract to purchase Ordinary Shares, which would, or might, be completed or executed wholly or partly after the authority ends and the Company may purchase Ordinary Shares pursuant to such contract as if the authority had not ended.

Political donations

14.
THAT in accordance with sections 366 and 367 of the Companies Act, the Company and each company which is or becomes a subsidiary of the Company at any time during the period for which this resolution has effect, be and is hereby authorised:

(a)
to make political donations to political parties and/or independent election candidates;

(b)
to make political donations to political organisations other than political parties; and

(c)
to incur political expenditure,

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provided that:

(i)
the aggregate amount of political donations made or political expenditure incurred by the Company and its subsidiaries in such period shall not exceed £100,000 for the purposes of this resolution;

(ii)
‘political donations’, ‘political organisations’, ‘political parties’, ‘independent election candidates’ and ‘political expenditure’ have the meanings given in sections 363 to 365 of the Companies Act; and

(iii)
this authority shall expire on the date immediately preceding the fourth anniversary of the passing of this resolution.

SPECIAL RESOLUTION:

Amendment of the Company’s articles of association (the “Articles”)

15.
THAT the definition of “Director Nominees” in the Articles and articles 24, 25.4, 25.7, and 25.8 be amended as set out in the schedule to this Annual General Meeting notice, in order to increase the maximum number of directors of the Company so that the Chief Executive Officer of the Company may be appointed as a director.

 
 
 
Nicholas Deeming
Company Secretary

2 June 2017

Explanatory notes to the resolutions

Resolution 1 (U.K. Annual Report and Accounts 2016)

The Board is required to present at the Annual General Meeting the U.K. Annual Report and Accounts for the financial year ended 31 December 2016, including the Directors’ Report, the Auditor’s Report on the U.K. Annual Report and Accounts and those parts of the Directors’ Remuneration Report which have been audited.

Resolution 1 is an advisory vote and in accordance with its obligations under English law, the Company will provide Shareholders at the Annual General Meeting with the opportunity to receive the U.K. Annual Report and Accounts and ask any relevant and appropriate questions of the representative of Deloitte LLP in attendance at the Annual General Meeting.

Resolution 2 (Directors’ Remuneration Report)

Resolution 2 is an advisory vote to approve the Directors’ Remuneration Report as required by sections 439 and 440 of the Companies Act and the Large and Medium‑sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The Directors’ Remuneration Report is set out on pages 12 to 43 of the U.K. Annual Report and Accounts.

Resolutions 3 to 10 (directors seeking re‑election)

Resolutions 3 to 10 relate to the reappointment of the directors. Set forth below is a short biography of each of the Company’s directors.

Javier López Madrid has served as a director since our inception in February 2015 and served as Executive Vice‑Chairman from 23 December 2015 until 31 December 2016, when he was appointed Executive Chairman. He is Chief Executive Officer of Grupo Villar Mir, S.A.U. (“ Grupo VM ”). He is founder and largest shareholder of Siacapital and Tressis, Spain’s largest independent private bank. In addition to his professional activities, he is also a member of the World Economic Forum, Group of Fifty and a board member of Fundación Juan Miguel Villar Mir. Mr. López Madrid holds a Master in Law and Business from ICADE University.

Donald G. Barger, Jr.   has served as a director since 23 December 2015. He is a member of our Compensation Committee and serves as the chairman of the Nominating and Corporate Governance Committee. He served as a member of the board of directors of Globe Specialty Metals, Inc. (“ Globe ”) from December 2008 until the closing of Globe’s combination with Grupo FerroAtlántica to form Ferroglobe (the “ Business Combination ”) and was Chairman of Globe’s Audit Committee and
 
 
 
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Chairman of Globe’s Compensation Committee. Mr. Barger had a successful 36‑year business career in manufacturing and services companies. He retired in February 2008 from YRC Worldwide Inc. (formerly Yellow Roadway Corporation), one of the world’s largest transportation service providers, where he served as Vice President and Chief Financial Officer from December 2000 to August 2007 and from August 2007 until his retirement as advisor to the CEO. From March 1998 to December 2000, Mr. Barger was Vice President and Chief Financial Officer of Hillenbrand Industries, Inc., a provider of services and products for the health care and funeral services industries. From 1993 to 1998, Mr. Barger was Vice President of Finance and Chief Financial Officer of Worthington Industries, Inc., a diversified steel processor. Mr. Barger served on the Board of Directors of Gardner Denver, Inc. and was a member of the Audit Committee for his entire 19‑year tenure there until the sale of the company in July 2013. He served as Chair of the committee 17 of those years. Mr. Barger also served on the Board of Directors of Quanex Building Products Corporation for 16 years, retiring in February 2012. Additionally, he served on that company’s audit committee for 14 years and was its chairman for most of that time. On all the public company boards on which Mr. Barger has served, he was considered a “financial expert” for SEC purposes. Mr. Barger received a B.S. degree from the U.S. Naval Academy and an M.B.A. from the University of Pennsylvania.

Bruce L. Crockett has served as a director since 23 December 2015. He is a member of the Company’s Audit Committee and the BCA Special Committee. He served as a member of Globe’s board of directors since April 2014 until the closing of the Business Combination and was a member of Globe’s Audit Committee. Mr. Crockett is Chairman of the Invesco Mutual Funds Group Board of Directors, and is also a member of the audit, investment and governance committees. He serves as a director and audit committee chair of ALPS Property & Casualty Insurance Company. Mr. Crockett is the chairman of Crockett Technologies Associates and a private investor. He Crockett served as President and Chief Executive Officer of COMSAT Corporation from February 1992 until July 1996 and as President and Chief Operating Officer of COMSAT from April 1991 to February 1992. As an employee of COMSAT since 1980, Mr. Crockett held various other operational and financial positions, including Vice President and Chief Financial Officer. Mr. Crockett served as a director of Ace Limited from 1995 until 2012 and as a director of Captaris, Inc. from 2001 until its acquisition in 2008, and as Chairman from 2003 to 2008. Mr. Crockett is also a life trustee of the University of Rochester. Mr. Crockett received an A.B. degree from the University of Rochester, a B.S. degree from the University of Maryland, an M.B.A. from Columbia University, and holds an honorary Doctor of Law degree from the University of Maryland.

Stuart E. Eizenstat has served as a director since 23 December 2015. He is a member of the Company’s Nominating and Corporate Governance Committee and BCA Special Committee. He served as a director of Globe from February 2008 until the closing of the Business Combination and was the Chairman of Globe’s Nominating Committee. Mr. Eizenstat is Senior Counsel at Covington & Burling LLP in Washington, D.C. and heads the law firm’s international practice. He served as Deputy Secretary of the United States Department of the Treasury from July 1999 to January 2001. He was Under Secretary of State for Economic, Business and Agricultural Affairs from 1997 to 1999. Mr. Eizenstat served as Under Secretary of Commerce for International Trade from 1996 to 1997 and was the U.S. Ambassador to the European Union from 1993 to 1996. During the Clinton Administration he also served as Special Representative of the President and Secretary of State on Holocaust Issues. From 1977 to 1981 he was Chief Domestic Policy Advisor in the White House to President Carter. He is a trustee of BlackRock Funds and served as a member of the board of directors of Alcatel‑Lucent until 2016. He served as a member of the Board of Directors of United Parcel Service from 2005 to 2015. He serves on the Advisory Board of GML Ltd., and of the Office of Cherifien de Phosphates. He has received eight honorary doctorate degrees and awards from the United States, French, German, Austrian, Belgian and Israeli governments. He is the author of “Imperfect Justice: Looted Assets, Slave Labor, and the Unfinished Business of World War II” and “The Future of the Jews: How Global Forces are Impacting the Jewish People, Israel, and its Relationship with the United States.” He previously served as a Special Adviser to former Secretary of State Kerry on Holocaust‑Era Issues. Mr. Eizenstat holds a B.A. in Political Science, cum laude and Phi Beta Kappa, from the University of North Carolina at Chapel Hill, and a J.D. from Harvard Law School.

Greger Hamilton has served as a director since 23 December 2015. He is a member of the Company’s Compensation Committee and BCA Special Committee and serves as chairman of the Audit Committee. Mr. Hamilton is Managing Partner of Ovington Financial Partners, Ltd., a role he has held since 2009. From 2009 to 2014, he also served as a Partner at European Resolution Capital Partners, where he assisted in the restructuring of international banks in 16 countries. Prior to that, he was a Managing Director at Goldman Sachs International, where he worked from 1997 to 2008. He began his career at McKinsey and Company, where he worked from 1990 to 1997. Mr. Hamilton holds a B.A. in Business Economics and International Commerce from Brown University.

Javier Monzón has served as a director since 23 December 2015. He is a member of the Company’s Audit Committee and serves as chairman of the Compensation Committee. He has served as a director of ACS Servicios y Concesiones, S.A. of Spain since 2004 and as a member of the supervisory board of Lagardère SCA of France since 2008. Since June 2015, he also has served as a member of the advisory council of Chemo Group, as senior advisor to the group executive chairman at Banco Santander, and as a board member of Santander Spain. Prior to that, Mr. Monzón was Chairman and CEO of Indra

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Sistemas, S.A. from 1992 until 2015. He was a Partner at Arthur Andersen from 1989 to 1990, Chief Financial Officer of Telefonica, S.A. from 1984 to 1987, and Executive Vice President of Telefonica until 1989. Mr. Monzón began his career at Caja Madrid, where he was a Corporate Banking Director. Mr. Monzón served as vice chairman of the American Chamber of Commerce in Spain from March 2010 until January 2015 and has been member of the international advisory council of the Brookings Institute since 2014. He holds a Degree in Economics from Universidad Complutense de Madrid.

Juan Villar‑Mir de Fuentes has served as a director of the Company since 23 December 2015. He has acted as the Vice Chairman of Grupo VM since 1999. He is also Vice Chairman and CEO of Inmobiliaria Espacio, S.A. Mr. Villar‑Mir de Fuentes has served on the board of directors of Obrascón Huarte Lain, S.A. since 1996 and as its Chairman since 2016. He also serves as a director and on the audit committee of Inmobiliaria Colonial, S.A. He holds a Bachelor’s Degree in Business Administration and Economics and Business Management.

Manuel Garrido y Ruano was appointed to the Board on 30 May 2017. Mr. Garrido y Ruano has served as CFO of Grupo VM since 2003, and is either a member of the board or on the steering committee of a number of its subsidiaries in the energy, financial, construction and real estate sectors. He was on the steering committee of FerroAtlántica until 2015, having previously served as its CFO from 1996 to 2003. Mr. Garrido y Ruano is Professor of Communication and Leadership of the Graduate Management Program at CUNEF in Spain. He has a deep knowledge of strategic consulting, having worked at McKinsey & Company from 1991 to 1996, where he specialised in restructuring, business development and turnaround and cost efficiency projects globally. Mr Garrido y Ruano received a Masters of Civil Engineering with honours from the Universidad Politécnica de Madrid. He also holds a M.B.A. from INSEAD.

Resolution 11 (appointment of auditor)

At each general meeting at which accounts are laid before the Shareholders, the Company is required to appoint an auditor to serve until the next such meeting. Deloitte LLP has served as the Company’s U.K. statutory auditor since 3 February 2016.

If this resolution does not receive the affirmative vote of a majority of the shares entitled to vote and present in person or represented by proxy at the Annual General Meeting, the Board may appoint an auditor to fill the vacancy.

Resolution 12 (remuneration of auditor)

Under the Companies Act, the remuneration of the Company’s U.K. statutory auditor must be fixed in a general meeting or in such manner as may be determined in a general meeting. The Company is asking its Shareholders to authorise the Audit Committee to determine the remuneration of Deloitte LLP in its capacity as the Company’s U.K. statutory auditor under the Companies Act.

Resolution 13 (authority to purchase own shares)

Further to approval of the Incentive Plan by the Annual General Meeting of the Shareholders on 29 June 2016, a resolution will be proposed to authorise the Company to make purchases of its shares pursuant to the terms of the Incentive Plan and the Companies Act. Under the Companies Act, any purchases by a company of its own shares on an exchange which has neither its registered office nor its head office in the U.K. (including NASDAQ), are considered “off‑market” purchases. In order to aid implementation of the Incentive Plan, the directors consider it prudent for the Company to have the flexibility to effect off‑market purchases of its own shares in the future.

Under the terms of the resolution, the Company will be generally authorised to make market purchases of up to 5,000,000 shares with an aggregate nominal value of US$50,000, representing approximately 3% of the total issued share capital of the Company as at 26 May 2017, the latest practicable date prior to the date of this notice. The maximum price payable per share will be based on the market price of an Ordinary Share as set out in more detail in the resolution itself. The minimum price payable per share, exclusive of expenses, is its nominal value.

If approved, the authority will expire on the fifth anniversary of the date of approval.

Resolution 14 (political donations)

Under sections 366 and 367 of the Companies Act, the Company is required to seek Shareholders’ authority to make any political donations and/or incur political expenditure in the European Union.
 

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Although the Company does not make, and does not intend to make, donations to political parties and/or to independent election candidates within the normal meaning of that expression, the legislation is very broadly drafted and may encompass activities such as: funding seminars and other functions to which politicians are invited; supporting certain bodies involved in policy review and law reform; and matching employees’ donations to certain charities.

Therefore, in accordance with current best practice, the directors have decided to propose an ordinary resolution to authorise the Company and its subsidiaries to make certain types of political donations and/or expenditure, as more particularly described in the resolution, up to an aggregate amount of £100,000.

Resolution 15 (amendment of the Articles)

The Articles currently provide for a total of nine directors, of whom five are nominated by Grupo VM and the remainder are Independent Directors (defined in the Articles as Donald G. Barger, Jr., Stuart E. Eizenstat, Bruce L. Crockett and any other director appointed by the Independent Directors or the Board under Article 25.4 who qualifies as an independent director under NASDAQ rules). There are currently only eight directors (following the resignation of Alan Kestenbaum, who was an Independent Director), five of whom are Grupo VM nominees. There is therefore a vacancy for an Independent Director and the process of identifying a suitable additional Independent Director to join the Board is well advanced.

In addition to filling the current Board vacancy, the Board has unanimously decided that it would be in the interests of the Company to appoint Pedro Larrea Paguaga, the Chief Executive Officer of the Company, to the Board. It is common for a Chief Executive Officer to sit on the Board of an English company and this will enable the Board to benefit directly from Mr. Larrea Paguaga’s detailed knowledge of the business in its deliberations. His biography is set out below.

Pedro Larrea Paguaga has served as the Chief Executive Officer since 23 December 2015. He was Chairman and CEO of FerroAtlántica from December 2012, and served in that role until the closing of the Business Combination. He joined FerroAtlántica as CEO in 2011. Before joining FerroAtlántica, he worked for 13 years (1996 to 2009) at Endesa, the biggest power company in Spain and Latin America, where he reached the position of Chairman and CEO of Endesa Latinoamérica, with total revenues above €8 billion and EBITDA above €3 billion. He served on the Board of Directors of Enersis (2007 to 2009) and Endesa Chile (1999 to 2002 and 2006 to 2007), both public Chilean companies listed on the NYSE. Mr. Larrea Paguaga has also worked in management consulting firms PwC (2010 to 2011), where he led the energy sector practice in Spain, and McKinsey & Company in Spain, Latin America and the United States (1989 to 1995). Mr. Larrea Paguaga holds a Mining Engineer degree (MSc equivalent) from Universidad Politécnica de Madrid (graduating with honors). He also holds an M.B.A. from INSEAD, where he obtained the Henry Ford II award for academic excellence.

In order to appoint Mr. Larrea Paguaga as an additional director, it is necessary to amend the Articles to increase the maximum number of directors from nine to ten. The Board has resolved that if the proposed amendments to the Articles are approved, he will be appointed immediately on conclusion of the Annual General Meeting to fill the vacancy and would hold office until the next annual general meeting, whereupon he would come up for re‑election in the same manner as other Board members. For the purposes of the Articles, he would not be treated as a Grupo VM nominee or an Independent Director.

Further Notes:

1.
Some of the resolutions are items that are required to be approved by Shareholders periodically under the Companies Act and generally do not have an analogous requirement under United States laws and regulations. As such, while these resolutions may be familiar and routine to Shareholders accustomed to being shareholders of companies incorporated in England and Wales, other Shareholders may be less familiar with these routine resolutions and should review and consider each resolution carefully.

2.
In accordance with the Articles, all resolutions will be taken on a poll. Voting on a poll will mean that each Ordinary Share represented in person or by proxy will be counted in the vote.

3.
Resolutions 1 to 14 will be proposed as ordinary resolutions, which means that such resolutions must be passed by a simple majority of the total voting rights of Shareholders who vote on such resolutions, whether in person or by proxy. The results of the Shareholders’ vote on resolutions 1 and 2 regarding receipt of the U.K. Annual Report and Accounts and approval of the Directors’ Remuneration Report will not require the Board or any committee thereof to take (or refrain from taking) any action. The Board values the opinion of Shareholders as expressed through such resolutions and will carefully consider the outcome of the votes on resolutions 1 and 2.

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4.
Resolution 15 will be proposed as a special resolution, which means that such resolution must be passed by a majority of not less than 75% of the total voting rights of Shareholders who vote on such resolution, whether in person or by proxy.

5.
Shareholders of record ” are those persons registered in the register of members of the Company in respect of Ordinary Shares at 2.00 p.m. (British Summer Time) on 5 May 2017. If, however, Ordinary Shares are held for you in a stock brokerage account or by a broker, bank or other nominee, you are considered the “ beneficial owner ” of those Ordinary Shares.

6.
Beneficial owners of Ordinary Shares as at 2.00 p.m. (British Summer Time) on 5 May 2017 have the right to direct their broker or other agent on how to vote the Ordinary Shares in their account and are also invited to attend the Annual General Meeting. However, as beneficial owners are not Shareholders of record of the relevant Ordinary Shares, they may not vote their Ordinary Shares at the Annual General Meeting unless they request and obtain a legal proxy from their broker or agent.

7.
Any Shareholder of record attending the Annual General Meeting has the right to ask questions. The Company must cause to be answered any questions put by a Shareholder of record attending the meeting relating to the business being dealt with at the Annual General Meeting unless to do so would interfere unduly with the business of the meeting, be undesirable in the interests of the Company or the good order of the meeting, involve the disclosure of confidential information, or if the information has already been given on the Company’s website.

8.
In accordance with the provisions of the Companies Act, and in accordance with the Articles, a Shareholder of record who is entitled to attend and vote at the Annual General Meeting is entitled to appoint another person as his or her proxy to exercise all or any of his or her rights to attend and to speak and vote at the Annual General Meeting and to appoint more than one proxy in relation to the Annual General Meeting (provided that each proxy is appointed to exercise the rights attached to different Ordinary Shares). Such proxies need not be Shareholders of record, but must attend the Annual General Meeting and vote as the Shareholder of record instructs. Further details regarding the process to appoint a proxy, voting, and the deadlines therefor, are set out in the “Voting Process and Revocation of Proxies” section below.

9.
The results of the polls taken on the resolutions at the Annual General Meeting and any other information required by the Companies Act will be made available on the Company’s website as soon as reasonably practicable following the Annual General Meeting and for a period of two years thereafter.

10.
A copy of this Annual General Meeting notice can be found at the Company’s website, www.ferroglobe.com.

11.
Recipients of this notice and the accompanying materials may not use any electronic address provided in this notice or such materials to communicate with the Company for any purposes other than those expressly stated.

12.
To be admitted to the Annual General Meeting, please bring the Admission Ticket that you will have received through the post. You will need to be able to provide your photo identification at the registration desk.

13.
On arrival at the Annual General Meeting venue, all those entitled to vote will be required to register and collect a poll card. In order to facilitate these arrangements, please arrive at the Annual General Meeting venue in good time. You will be given instructions on how to complete your poll card at the Annual General Meeting.

VOTING PROCESS AND REVOCATION OF PROXIES

If you are a Shareholder of record, there are three ways to vote by proxy:

By Internet – You can vote over the Internet at www.envisionreports.com/FGLO by following the instructions at such web address. You will need to enter your control number, which is a 15‑digit number located in a box on your proxy card. We encourage you to vote by Internet even if you received this Annual General Meeting notice in the mail.

By Telephone – You may vote and submit your proxy by calling toll‑free 1‑800‑652‑8683 in the United States and providing your control number, which is a 15‑digit number located in a box on your proxy card.

By Mail – If you received this Annual General Meeting notice by mail or if you requested paper copies of the Annual General Meeting notice, you can vote by mail by marking, dating, signing and returning the proxy card in the postage‑paid envelope.

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Telephone and Internet voting facilities for Shareholders of record will be available 24 hours a day and will close at 2:01 p.m. (British Summer Time) on Monday, 26 June 2017. Submitting your proxy by any of these methods will not affect your ability to attend the Annual General Meeting in‑person and vote at the Annual General Meeting.

If your shares are held in “street name”, meaning you are a beneficial owner with your shares held through a bank or brokerage firm, you will receive instructions from your bank or brokerage firm, which is the Shareholder of record of your shares. You must follow the instructions of the Shareholder of record in order for your shares to be voted. Telephone and Internet voting may also be offered to Shareholders owning shares through certain banks and brokers, according to their individual policies.

The Company has retained Computershare to receive and tabulate the proxies.

If you submit proxy voting instructions and direct how your shares will be voted, the individuals named as proxies must vote your shares in the manner you indicate.

A Shareholder who has given a proxy may revoke it at any time before it is exercised at the Annual General Meeting by:

attending the Annual General Meeting and voting in person;

voting again by Internet or Telephone (only the last vote cast by each Shareholder of record will be counted), provided that the Shareholder does so before 2:01 p.m. (British Summer Time) on Monday, 26 June 2017.

delivering a written notice, at the address given below, bearing a date later than that indicated on the proxy card or the date you voted by Internet or Telephone, but prior to the date of the Annual General Meeting, stating that the proxy is revoked; or

signing and delivering a subsequently dated proxy card prior to the vote at the Annual General Meeting.

You should send any written notice or new proxy card to Proxy Services, c/o Computershare Investor Services, PO Box 30202, College Station, TX 77842‑9909, USA.

If you are a registered Shareholder you may request a new proxy card by calling Computershare at 1‑866‑490‑6057 if calling from the United States, or +1‑781‑575‑2780 from outside the United States, or you may also send a request via email to web.queries@computershare.com .

ANY SHAREHOLDER OWNING SHARES IN STREET NAME MAY CHANGE OR REVOKE PREVIOUSLY GIVEN VOTING INSTRUCTIONS BY CONTACTING THE BANK OR BROKERAGE FIRM HOLDING THE SHARES OR BY OBTAINING A LEGAL PROXY FROM SUCH BANK OR BROKERAGE FIRM AND VOTING IN PERSON AT THE ANNUAL GENERAL MEETING. YOUR LAST VOTE, PRIOR TO OR AT THE ANNUAL GENERAL MEETING, IS THE VOTE THAT WILL BE COUNTED.

DOCUMENTS AVAILABLE FOR INSPECTION

Forms of appointment of the non‑executive directors, as well as a memorandum setting out the terms of each executive director’s contract, will be available for inspection at the Company’s registered office during normal business hours and at the place of the Annual General Meeting from at least 15 minutes prior to the start of the meeting until the end of the meeting.

By order of the Board,
 
 
 
Nicholas Deeming
Company Secretary

2 June 2017

8



SCHEDULE
PROPOSED AMENDMENTS TO THE ARTICLES

Definitions
Director Nominees ” means any person nominated as a Director in accordance with Articles 24 and 25.3 through 25.6,

Article 24 NUMBER OF DIRECTORS AND CHIEF EXECUTIVE OFFICER

The Company must have a minimum of two Directors and a maximum of nine ten Directors. . Except as otherwise determined by a resolution of the Board, t T he entire Board shall consist of nine the maximum number of Directors excluding the ; provided, however, that prior to the Sunset Date, any such resolutions shall require the vote of two‑thirds of the entire Board; provided, further, that prior to the fifth anniversary of the date of adoption of these Articles any such resolutions shall also require the approval of a majority of the Directors who are independent of Grupo VMand otherwise unconflicted with respect to such matter. chief executive officer from time to time, whose vote shall not be counted in respect of any resolution of the Directors which requires the approval of a specified proportion of the entire Board. Subject to Article 25.8, T the chief executive officer shall be nominated or appointed as a Director by the Board and shall be neither a Grupo VM Director nor an Independent Director for the purposes of these Articles.

Article 25.4

Prior to the Decrease Date, subject to and in accordance with this Article 25.4 and subject to Article 24 , the Independent Directors (or, if there are no Independent Directors, the Directors who qualify as independent under the Exchange Rules and are not Grupo VM Directors) shall have the exclusive right to nominate persons on behalf of the Board for election at any meeting of members called for the purpose of electing Directors for to the Board , or to appoint persons to fill vacancies in , the Board, subject to the right of Grupo VM to designate and nominate Directors under these Articles or any contractual agreement between Grupo VM and the Company and subject to Articles 25.5, 25.6 and 25.7. On and after the Decrease Date, the Board shall have the right to nominate persons on behalf of the Board for election at any meeting of members called for the purpose of electing Directors for, to the Board or to fill vacancies in , the Board, subject to the exclusive right of Grupo VM to designate and nominate Directors under these Articles or any contractual agreement between Grupo VM and the Company and subject to Articles 25.5, 25.6 and 25.7. With respect to any meeting of members called for the purpose of electing Directors prior to the Decrease Date, the number of nominations by the Independent Directors (or, if there are no Independent Directors, the Directors who qualify as independent under the Exchange Rules and are not Grupo VM Directors) shall not exceed the number of the entire Board reduced by the number of Grupo VM Directors and by any person entitled to nomination under Articles 25.5, 25.6 and 25.7.

Article 25.7

On or after the third anniversary of the adoption of these Articles, if AK is not serving as the Executive Chairman, the Board may determine that the chief executive should serve as a member of the Board; provided that (A) if the chief executive is an Affiliate of Gupo VM, he or she shall be deemed to be a Grupo VM Nominee and a Grupo VM   Director, as the case may be, for all purposes under these Articles and (B) if the chief executive officer was a Grupo VM   Director prior to such Board determination, he or she shall be deemed to be a Grupo VM Nominee and a Grupo VM Director, as the case may be, for all purposes under these Articles.

[Intentionally Blank]

Article 25.8

(b)
Each of the Director Nominees nominated as an Independent Director or as a Grupo VM Director who is required to qualify as “independent” under the Nasdaq Exchange Rules and the chief executive officer (any such Director Nominee and the chief executive officer , a “ Qualified Director Nominee ”) shall at all times be qualified to serve as a Director under applicable rules and policies of the Company, the Exchange and applicable Law. Such qualification shall be determined with respect to each Qualified Director Nominee by the nominating and corporate governance committee of the Board, or other committee performing the functions of nominating Directors for election to the Board (the “ Nominating and Corporate Governance Committee” ), acting reasonably and in good faith and in a manner consistent with the fiduciary duties applicable to directors and the rules of the Exchange and applicable Law. In addition, in evaluating the Qualified Director Nominees for nomination, the Nominating and Corporate Governance Committee shall consider whether each Qualified Director Nominee (i) has demonstrated good judgement, character and integrity in his or her personal and professional dealings and (ii) has relevant financial, management and/or global

 
9


 

business experience, each as determined by the Nominating and Corporate Governance Committee, acting reasonably and in good faith and in a manner consistent with the fiduciary duties applicable to directors and the rules of the Exchange and applicable Law. In the event the Nominating and Corporate Governance Committee determines reasonably and in good faith and in a manner consistent with the fiduciary duties applicable to directors, that a Qualified Director Nominee is ineligible to serve under the applicable rules and policies of the Company, the Exchange and applicable Law, or otherwise does not satisfy the standards for service on the Board specified above, the Nominating and Corporate Governance Committee will inform Grupo VM, the Board and the Qualified Director Nominee of its determination and the basis therefor in writing and in reasonable detail and will allow a reasonable opportunity for Group VM, the Board and the Qualified Director Nominee to evaluate the determination, including through meetings and discussions with the Nominating and Corporate Governance Committee regarding the circumstances of his or her eligibility to serve. Following such discussions, if the Nominating and Corporate Governance Committee, acting reasonably and in good faith and in a manner consistent with the fiduciary duties applicable to directors, has not reversed its determination that the Qualified Director Nominee is ineligible to serve, then, in the case of a Qualified Director Nominee who has been submitted for nomination, Grupo VM, the Independent Directors or the Board, as applicable, shall submit in good faith a replacement Qualified Director Nominee for consideration by the Nominating and Corporate Governance Committee as promptly as possible but in all cases within thirty (30) days, in accordance with the requirements of this Article 25, or in the case of a Qualified Director Nominee who is an incumbent Director, such Qualified Director Nominee will, if requested by the Nominating and Corporate Governance Committee, promptly tender his or her resignation from the Board or committee of the Board, as applicable, and the resulting vacancy will be filled pursuant to this Article 25.

10

 
 
 
 
 
 
 
 
 
 
 
 

 
(This page has been left blank intentionally.)

 
 
 
Exhibit 99.2
 
 
 
Ferroglobe PLC
Annual Report and Accounts 2016
 
 

 
Company Registration No. 9425113
 
Ferroglobe PLC
 
Report and Financial Statements
 
Period ended 31 December 2016
 

 
Ferroglobe PLC

Report and financial statements 2016

Contents
 
      Page No.     
Glossary and definitions
1
Officers and professional advisers
3
Introduction
4
Strategic report
4
Directors’ report
6
Directors’ responsibilities statement
9
Directors’ Remuneration Report
10
Independent auditor’s report to the members of Ferroglobe PLC
36
Consolidated Financial Statements
38
Notes to the Consolidated Financial Statements
44
Company only Balance Sheet
106
Notes to the Company only Financial Statements
108


Ferroglobe PLC

GLOSSARY AND DEFINITIONS

The following definitions apply throughout this U.K. Annual Report unless the context requires otherwise:
 
“2016 Form 20‑F”
the Company’s Form 20‑F for the fiscal year ended 31 December 2016;
“AEP”
American Electric Power Co., Inc.;
“Amended Revolving Credit Facility”
 
the revolving credit facility available pursuant to the Amended Revolving Credit Facility Agreement;
“Amended Revolving Credit Facility Agreement”
 
the Existing Revolving Credit Facility Agreement as amended on or about 15 February 2017 by the Revolving Credit Facility Amendment;
“Annual General Meeting”
the Company’s annual general meeting to be held on 28 June 2017;
“Aon”
Aon Plc;
“Auditor”
Deloitte LLP, the Company’s independent U.K. statutory auditor;
“Aurinka”
Aurinka Photovoltaic Group, S.L.;
“Blue Power”
Blue Power Corporation, S.L.;
“Board”
the Company’s board of directors;
“Business Combination”
the business combination of Globe and FerroAtlántica as the Company’s wholly‑owned subsidiaries on 23 December 2015;
“Business Combination Agreement”
the definitive transaction agreement entered into on 23 February 2015 (as amended and restated on 5 May 2015) by, among others, the Company, Grupo VM, FerroAtlántica and Globe;
“Companies Act”
the United Kingdom Companies Act 2006;
“Company”
Ferroglobe PLC, a company incorporated in England and Wales with registered number 09425113 and whose registered office is at 5 Fleet Place, London EC4M 7RD, United Kingdom;
“Company Ordinary Shares”
the Ordinary Shares and Class A Ordinary Shares;
“Compensation Committee”
the compensation committee of the Company;
“EBITDA”
 
earnings before interest, tax, depreciation and amortisation;
“EU”
 
the European Union;
“Exchange Act”
the Securities Exchange Act of 1934 (as amended) of the United States;
“Executive Chairman”
 
the executive chairman of the Company;
“Executive Directors”
the executive directors of the Company;
“Executive Vice‑Chairman”
the executive vice‑chairman of the Company;
“Existing Revolving Credit Facility Agreement”
the credit agreement, dated as of 20 August 2013, among Globe, certain subsidiaries of Globe from time to time as co‑borrowers thereunder, the financial institutions from time to time party thereto as lenders, PNC Bank National Association and Wells Fargo Bank, National Association, as syndication agents for lenders, BBVA Compass Bank, as documentation agent, and Citizens Bank of Pennsylvania, as administrative agent for the lenders, as amended from time to time, other than pursuant to the Revolving Credit Facility Amendment;
“Existing Revolving Credit Facility”
the revolving credit facility available pursuant to the Existing Revolving Credit Facility Amendment;
 
1

 
“FerroAtlántica”
Grupo FerroAtlántica, S.A.U. a joint stock company organised under the laws of Spain, including (where the context so requires) its subsidiaries and subsidiary undertakings;
“Ferroglobe” or the “Parent Company”
the Company or, as the context requires, the Group;
“FerroVen”
FerroVen, S.A.;
“Globe”
Globe Specialty Metals, Inc., a Delaware corporation, including (where the context so requires) its subsidiaries and subsidiary undertakings;
“Group”
the Company and its subsidiaries;
“Grupo VM”
Grupo Villar Mir, S.A.U.;
“IASB”
International Accounting Standards Board;
“IFRS”
International Financial Reporting Standards;
“Indenture”
the indenture, dated as of 15 February 2017, among Ferroglobe and Globe as co‑issuers, certain subsidiaries of Ferroglobe as guarantors, and Wilmington Trust, National Association as trustee, registrar, transfer agent and paying agent;
“KPI”
key performance indicator;
“NASDAQ”
the NASDAQ Global Select Market;
“NASDAQ Rules”
the NASDAQ Stock Market Rules;
“Non‑Executive Directors”
the non‑executive directors of the Company;
“OFAC”
the U.S. Department of the Treasury’s Office of Foreign Assets Control;
“Ordinary Shares”
the ordinary shares of $0.01 each in the capital of the Company;
“Revolving Credit Facility Amendment”
 
the third amendment to the Existing Revolving Credit Facility Agreement, among, inter   alios , Ferroglobe and Globe as co‑borrowers, the subsidiary guarantors party thereto, the financial institutions party thereto as lenders and Citizens Bank of Pennsylvania as administrative agent;
“SEC”
the U.S. Securities and Exchange Commission;
“U.K.”
the United Kingdom of Great Britain and Northern Ireland;
“U.S.”
the United States of America;
“U.S. EPA”
the U.S. Environmental Protection Agency;
“WVA Manufacturing”
WVA Manufacturing, LLC; and
“$”
U.S. dollars.
 
2

Ferroglobe PLC

Report and financial statements 2016
Officers and professional advisers

Directors
 
J López Madrid
 
D Barger
 
B L Crockett
 
S Eizenstat
 
M Garrido y Ruano
(appointed 30 May 2017)
G Hamilton
 
J Monzón
 
J Villar‑Mir de Fuentes
 
T Garcia Madrid
(resigned 30 May 2017)
A Kestenbaum
(resigned 31 December 2016)
Company Secretary
 
N Deeming
(appointed 13 October 2016)
S Lebowitz
(resigned 13 October 2016)
Registered Address
 
5 Fleet Place
 
London
 
EC4M 7RD
 
Auditor
 
Deloitte LLP
 
Statutory Auditor
London
 
 

 
3

Ferroglobe PLC

Introduction

Ferroglobe PLC is a public limited company incorporated under the laws of England and Wales. Headquartered in London, United Kingdom, Ferroglobe (encompassing its subsidiaries Globe and FerroAtlántica) is a global leader in the growing silicon and specialty metals industry with an expanded geographical reach, building on Globe’s footprint in North America and FerroAtlántica’s footprint in Europe.

The Company was incorporated in 2015 and its Ordinary Shares are listed for trading on the NASDAQ in U.S. dollars under the symbol “GSM”.

The Company is subject to disclosure obligations in the U.S. and the U.K. While some of these disclosure requirements overlap or are otherwise similar, some differ and require distinct disclosures. Pursuant to the requirements of the Companies Act, this document includes our directors’ remuneration report, strategic report, directors’ report and required financial information (including our statutory accounts and statutory auditor’s report for the reporting period commencing 1 January 2016 and ending 31 December 2016), which, together, comprise our U.K. annual reports and accounts for the period ended 31 December 2016 (the “ U.K. Annual Report ”).

We are also subject to the information and reporting requirements of the Exchange Act, regulations and other guidance issued by the SEC and the NASDAQ listing standards applicable to foreign private issuers. In accordance with the Exchange Act, we are required to file annual and periodic reports and other information with the SEC, including, without limitation, our 2016 Form 20‑F. Certain other announcements made by the Company are furnished to the SEC on Form 6‑K. Our status as a foreign private issuer requires the Company to comply with various corporate governance practices under the Sarbanes‑Oxley Act of 2002, as well as related rules subsequently implemented by the SEC. In addition, NASDAQ Rules permit foreign private issuers to follow home country practice in lieu of the NASDAQ corporate governance standards, subject to certain exemptions and except to the extent that such exemptions would be contrary to U.S. federal securities law. We have provided as a separate attachment to the U.K. Annual Report extracts from the 2016 Form 20‑F to assist shareholders in assessing the Group’s strategies. This attachment does not form part of the financial statements. Investors may obtain the full 2016 Form 20‑F, without charge, from the SEC at the SEC’s website at www.sec.gov or from our website at www.ferroglobe.com. Unless expressly stated otherwise, the information on our website is not part of this U.K. Annual Report and is not incorporated by reference herein.

The capitalised terms used throughout the U.K. Annual Report are defined in the Glossary and Definitions section of this U.K. Annual Report unless otherwise indicated. In the following text, the terms “we,” “our,” “our company” and “us” may refer, as the context requires, to Ferroglobe or, collectively, to Ferroglobe and its subsidiaries.

Strategic Report

This Strategic Report has been prepared to provide additional information to shareholders to assess the Group’s strategies and the potential strategies to succeed.

The Strategic Report contains certain forward‑looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward‑looking information.

The directors, in preparing this Strategic Report, have complied with Section 414C of the Companies Act.

For a supplementary description of our business (including our model, strategy and competitive strengths), risks associated with our business and our results of operations, see the sections of the 2016 Form 20‑F: Part I, Item 3, Section D, Risk factors; Item 4, Information on the Company; Item 5, Operating and Financial Review and Prospects; and Item 11, Quantitative and Qualitative Disclosures about Market Risk, which sections are set out in a separate attachment to this U.K. Annual Report. The aforementioned sections do not form part of the financial statements.
 
4

Nature of the business

Ferroglobe was incorporated under the Companies Act as a private limited liability company in the United Kingdom on 5 February 2015, as a wholly‑owned subsidiary of Grupo VM.  As a result of the Business Combination, which was completed on 23 December 2015, FerroAtlántica and Globe merged through corporate transactions to create one of the largest producers worldwide of silicon metal and silicon and manganese based alloys, and Grupo VM ceased to be the sole shareholder, by incorporating the diversified shareholder base of Globe at the time of the merger and its listing in NASDAQ. This has resulted in an expansive geographical reach, established through Globe’s predominantly North American‑centred footprint and FerroAtlántica’s predominantly European‑centred footprint.

Business model and strategy

We believe our vertically integrated business model and ownership of raw materials provides us with a cost advantage over our competitors. We are not reliant on any single supplier for our raw materials and currently own sources of critical raw materials, which provides us with stable, long‑term access to critical raw materials for our production processes and, therefore, enhances our operational and financial stability.

As part of the strategy for delivering the objectives of the Company, the Group develops new products or new specifications on a continuous basis. As a consequence of these efforts, investments may be made in facilities that allow the production of new products, such as higher grade silicon metal, solar grade silicon metal or new foundry products.

The Group is continuously pursuing growth opportunities by the acquisition of industrial facilities or companies that operate in the same sector and produce similar products, and which are deemed to be potentially valuable for the Group.

Key Performance Indicators (“KPIs”)

The Board considered that the most important KPIs during 2016 were those set out below. These KPIs will also be a key factor for the Company during 2017.

At the corporate level, the principal KPIs that we use for measuring the overall performance of our business, and which also form part of our compensation structure for our key executives, are as follows:

Adjusted EBITDA: EBITDA, adjusted in accordance with Company’s adjustments announced as part of its earnings reports. We also consider Adjusted EBITDA margin (measured as adjusted EBITDA/revenues) as a significant indicator of our performance.

Free cash‑flow, which represents EBITDA plus or minus working capital changes, capital expenditure (other than required for safety or environmental matters), taxes and net interest.

Working capital (measured as inventories, plus trade and other receivables, minus trade and other payables) improvement. Working capital improvement has been measured taking into account at the end of each month of 2016 the LTM (last twelve months) improvement.

The following table sets out the Company’s performance against these financial KPI measures in 2016. As this is the Company’s first full year of operation as a combined Group, these measures of performance provide a base to review overall performance of our business going forward.

Adjusted
EBITDA
 
EBITDA
Margin
 
Working
Capital
Improvement
 
Free Cash
Flow
($m)
     
($m)
 
($m)
72.9
 
4.5%
 
172.1
 
72.7

In addition, during 2016 and into 2017, a special emphasis has been placed on achieving the announced synergies in connection with the Business Combination and on ensuring a successful integration of FerroAtlántica and Globe into a single well‑functioning organisation. As a consequence of this continuous emphasis on synergies, the original synergy target established at $65m was reviewed up to $85m. During 2016 a total of $57m synergies were captured, and by the end of the year the running rate was already close to the final target of $85 million.


5

Detail on how performance against the financial KPIs and Business Combination associated KPIs affected the bonus outcome of executive directors is contained in the Directors’ Remuneration Report on page 34.

Principal risks and uncertainties

The Company is exposed to a number of operational risks which are monitored on an ongoing basis and which are summarised within the supplementary attachment. The key financial risks related to credit risk and liquidity risk are highlighted in note 37.

Employees

As at 31 December 2016, the Group had:

nine directors, all of whom were male;

258 senior managers, of whom 211 were male and 47 were female; and

4,018 employees, of whom 3,624 were male and 394 were female.

Environment and other social matters

Ferroglobe is committed to conducting its business in compliance with all applicable laws and regulations in a manner that has the highest regard for the environment and the health, safety, and well‑being of employees and the general public.

The Strategic Report for the financial period ended 31 December 2016 was reviewed and approved by the Board on 30 May 2016.

 
 
Nick Deeming

Company Secretary

Directors’ report

Directors

The directors of the Company, who held office during the year ended 31 December 2016, were as follows:

Alan Kestenbaum                                                                                           
Director, Executive Chairman and Principal Executive Officer
Javier López Madrid                                                                                           
Director and Executive Vice‑Chairman
Donald G. Barger, Jr.                                                                                           
Non‑Executive Director
Bruce L. Crockett                                                                                           
Non‑Executive Director
Stuart E. Eizenstat                                                                                           
Non‑Executive Director
Tomás García Madrid                                                                                           
Non‑Executive Director
Greger Hamilton                                                                                           
Non‑Executive Director
Javier Monzón                                                                                           
Non‑Executive Director
Juan Villar‑Mir de Fuentes                                                                                           
Non‑Executive Director

Mr Kestenbaum resigned as Executive Chairman of the Ferroglobe Board of Directors, effective 31 December 2016. Javier López Madrid, the former Vice Chairman of the Ferroglobe Board of Directors, was unanimously appointed to succeed Mr Kestenbaum as Executive Chairman. Mr Kestenbaum serves as an independent consultant to the Company, advising on matters relating to international trade, contract negotiations, legacy customer relationships and business development opportunities.

Mr Kestenbaum was entitled to a lump sum severance payment, in addition to other payments and the accelerated vesting of equity awards, in connection with his resignation. Details in relation to this lump sum payment are set out in the Directors’ Remuneration Report on page 39.

On 30 May 2017, Mr García Madrid resigned from the Board of Directors and on the same date Mr Manuel Garrido y Ruano was appointed as a Non‑Executive Director in his place.


6

Directors’ indemnities

As permitted by the Company’s articles of association, each director is covered by appropriate directors’ and officers’ liability insurance and, as required by such articles, each director is indemnified in connection with his role as a director, to the extent permitted by law. Under his employment agreement with Globe, dated 27 January 2011, as amended on 22 February 2015 (the “ Amendment ”) (together, the “ Employment Agreement ”), Mr Kestenbaum had, until his resignation from the Board, the benefit of an indemnity in respect of all claims arising from or relating to his performance of his duties to the fullest extent permitted by law and/or Globe’s directors’ and officers’ liability insurance or articles of association or other applicable document in respect to any and all actions, suits, proceedings, claims, demands, judgments, losses, damages and reasonable out‑of‑pocket costs and expenses (including reasonable out‑of‑pocket attorney’s fees and expenses) resulting from his good faith performance of his duties and obligations with Globe or any of its affiliates or as the fiduciary of any benefit plan of Globe or its affiliates. In addition, Globe had agreed to cover Mr Kestenbaum under its directors’ and officers’ liability insurance during the six‑year period following his termination of employment in the same amount and to the same extent that Globe covers its other officers and directors during such period. The provisions of the indemnity were in force during the period under review.

Company details and branches outside the U.K.

The Company is a public limited company incorporated under the laws of England and Wales with registered number 9425113. The Company’s registered address is 5 Fleet Place, London, EC4M 7RD, United Kingdom. The Company has no overseas branches.

Share repurchases

The Company did not acquire any of its own shares during the year ended 31 December 2016 (2015: nil).

Capital reduction

On 22 June 2016, the Company completed a reduction of its share capital and as such the nominal value of each Ordinary Share was reduced from $7.50 to $0.01, with the amount of the capital reduction being credited to a distributable reserve.

Dividends

On 3 February 2016, the Board declared a quarterly dividend in the amount of $0.08 per Ordinary Share payable on 14 March 2016 (the “ March Dividend ”) to shareholders of record at the close of business on 26 February 2016 (together with their personal representatives or successors in title, the “ Recipients ”). The Company later identified that it had insufficient distributable reserves to pay the March Dividend, the effect of which is that the dividend was not paid in accordance with the Companies Act. A resolution was therefore passed at the Annual General Meeting on 29 June 2016 which authorised the appropriation of distributable profits of the Company to the March Dividend and waived any right of the Company to pursue directors or the Recipients for repayment of the March Dividend. The overall effect of the resolution being passed was to return all parties to the position they would have been in had the relevant dividends been made in full compliance with the Companies Act.

The Board of Directors of the Company agreed three further interim dividend payments during 2016, paid on 12 August 2016, 28 September 2016 and 29 December 2016 and each in the amount of $0.08 per Ordinary Share.

The future declaration and payment of dividends to shareholders and the amount of any such dividends will be at the discretion of the Board.

Political donations

The Company has not made any political donations, or incurred any political expenditure in the period under review.
 
7

Employee policies

Ferroglobe has a culture of continuous improvement through investment in people at all levels within Ferroglobe. Ferroglobe is committed to pursuing equality and diversity in all its employment activities, including recruitment, training, career development and promotion and ensuring there is no bias or discrimination in the treatment of people. Ferroglobe supports the principle of equal opportunities in employment and opposes all forms of unlawful or unfair discrimination on the grounds of race, age, nationality, religion, ethnic or national origin, sexual orientation, gender or gender reassignment, marital status or disability. Wherever possible, vacancies are filled from within Ferroglobe and efforts are made to create opportunities for internal promotion.

It is Ferroglobe’s policy to encourage applications for employment from disabled people and to assist with their training and development, particularly in light of their aptitudes and abilities. If an existing employee becomes disabled, it is Ferroglobe’s policy wherever practicable to provide continuing employment under normal terms and conditions and to provide training, career development, and promotion to the disabled employee to the fullest extent possible, unless such accommodation would cause the employer undue hardship.

Greenhouse gas emissions

The Company is in the process of preparing certain data on its emissions of greenhouse gasses across its wider group operations. The Company intends to release that data in respect of the year ended 31 December 2016, and details of its methodology in recording and assessing its emissions, on its Group website in due course.

Financial risk management objectives/policies and hedging arrangements

Please refer to Part I, Item 11 Quantitative and Qualitative Disclosures About Market Risk of the 2016 Form 20‑F (as set out in the separate attachment to this U.K. Annual Report) for information on Ferroglobe’s financial risk management objectives/policies and hedging arrangements.

Events since 31 December 2016

Amended Revolving Credit Facility

On 15 February 2017, Ferroglobe and its subsidiary Globe Specialty Metals, Inc., certain subsidiaries of Ferroglobe party thereto as guarantors, financial institutions party thereto as lenders and Citizens Bank of Pennsylvania, as administrative agent for the lenders, entered into a revolving credit facility amendment to amend the Existing Revolving Credit Facility Agreement. The amended revolving credit facility provides for borrowings up to an aggregate principal amount of $200 million.

Senior Notes due 2022

On 15 February 2017, Ferroglobe PLC and its Subsidiary Globe Specialty Metals, Inc. issued $350 million aggregate principal amount of 9.375% Senior Notes due 2022.

New development of the Spanish Solar Project

On 20 December 2016, Ferroglobe entered into an agreement with Aurinka and Blue Power providing for the formation and operation of a joint venture with the purpose of producing UMG solar silicon, subject to the satisfaction of certain conditions precedent. On 24 February 2017 the parties signed‑off the final JV agreement that launched the mentioned project.

Full details of the aforementioned events since the balance sheet date are set out in Note 38 to the financial statements.

Future developments

As part of its strategy to better serve customers, the Group develops new products or new specifications on a continuous basis. As a consequence of these efforts, investments may be made in facilities that allow the production of new products, such as higher grade silicon metal, solar grade silicon metal or new foundry products.


8

The Group is continuously pursuing growth opportunities by the acquisition of industrial facilities or companies that operate in the same sector and produce similar products, and which are deemed to be potentially valuable for the Group. No decision or formal commitment with respect to the pursuit of growth opportunities has been entered into as at the date of reporting, but at any given point in time several alternatives may be under analysis. It is possible that, in the short‑ to medium‑term, at least one of such projects could materialise.

Research and development

Please refer to Part I, Item 4, Information on the Company of the 2016 Form 20‑F (as set out in the separate attachment to this U.K. Annual Report) for information on Ferroglobe’s research and development.

Going concern

The Group meets its working capital needs through its cash reserves and banking facilities. Although the Group had a loss for the year of $338 million the Group has net assets of $2,019 million. This includes cash of $197 million and further facilities available of $547 million as at 31 December 2016. As noted above and as discussed in the “events after balance sheet date” note (note 38) the Group was refinanced and the existing debt structure at 31 December 2016 was replaced. The Group’s forecasts and projections take into account possible changes in trading performance and show that the Group should be able to operate within the current level of available facilities and cash flows from operations. As such, the directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

Statement of disclosure to the Company’s U.K. statutory auditor

In accordance with section 418 of the Companies Act, each director at the date of this Directors’ Report confirms that:

so far as he is aware, there is no relevant audit information of which the Auditor is unaware; and

he has taken all the steps he ought to have taken as a director to make himself aware of any relevant audit information and to establish that the Auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act. Deloitte LLP has indicated its willingness to continue in office, and a resolution that it be re‑appointed will be proposed at the Annual General Meeting.

By order of the Board on 30 May 2017,

 
 
Nicholas Deeming

Company Secretary

Directors’ responsibilities statement

The directors are responsible for preparing the annual reports and the financial statements in accordance with applicable law and regulations.

In accordance with the Companies Act, the directors are required to prepare financial statements for each financial period. Under that Act, the directors have elected to prepare the financial statements in accordance with IFRS as issued by the IASB. Under the Companies Act, the directors must not approve the financial statements unless they are satisfied that the financial statements give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors:

properly select and apply accounting policies;

present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;


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provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and

make an assessment of the company’s ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

To the best of each directors’ knowledge:

the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

this Directors’ Report and the Strategic Report include a fair review of the development or performance of the business and the position of the Company and its subsidiaries and subsidiary undertakings taken as a whole, together with a description of the principal risks and uncertainties that they face;

the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s position, performance, business model and strategy; and

the responsibility statement was approved by the Board on 30 May 2017 and signed on its behalf by Greger Hamilton.

By order of the Board on 30 May 2017,

 
 
Greger Hamilton

Director

Directors’ Remuneration Report

Introduction

Dear Shareholder

As Chairman of the Compensation Committee (the “Committee” ), and on behalf of the Board, I am pleased to present the Directors’ Remuneration Report for the period ended 31 December 2016.

This is our first Directors’ Remuneration Report covering a full financial year. The Company became the parent company of Globe and FerroAtlántica, as a result of the Business Combination, on 23 December 2015. This report sets out the Directors’ Remuneration Policy (the “ Policy ”), which was approved by a 92.09% majority at last year’s AGM, alongside the annual report on remuneration (the “Annual Report on Remuneration” ), which will be subject to an advisory vote at the Annual General Meeting on 28 June 2017.


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Board Changes

As explained in the Company’s Report and Financial Statements for the period ended 31 December 2015 (the “ 2015 annual report ”), the Company held a series of discussions with Mr Kestenbaum prior to expiration of his employment agreement to reach an agreement that would result in him entering into a service contract that would have been substantially on the terms of the Policy applicable to other Executive Directors. However, as announced on 2 January 2017, Mr Kestenbaum ceased employment with the Company on 31 December 2016 and resigned from the Company’s Board as Executive Chairman with effect on the same day. Following Mr Kestenbaum’s departure, the Board unanimously voted to appoint Javier López Madrid to succeed Mr Kestenbaum as Executive Chairman. As a result, Mr López Madrid is currently the only Executive Director.

The Committee spent a significant amount of time considering Mr Kestenbaum’s leaver terms in the context of the legacy arrangements which the Company inherited as a result of the Business Combination. In accordance with Mr Kestenbaum’s employment agreement, he was entitled to various payments and benefits and a lump sum severance payment. These payments and benefits are consistent with the Policy, which specifically adopted his employment agreement. In accordance with its powers under the Policy, the Committee approved minor amendments to the Policy, as described on page 28, to aid in the Company’s satisfaction of its obligations under Mr Kestenbaum’s employment agreement.

2016 Outcomes

During our first year as a combined entity, the Company has intensively worked to integrate the organisation, capture enhanced synergies, strengthen our commercial strategy and restructure our balance sheet, setting the Company up for an improvement of our financials in the wake of the market recovery. For 2016, Mr Kestenbaum was entitled to an annual bonus with a target level of 215% of his base salary, based on the achievement of demanding corporate financial measures (weighted at 70%) and integration of the business (weighted at 30%). The Committee determined achievement of 35% of the target level of performance for 2016 based on the best estimate, at the time Mr Kestenbaum ceased employment, of the Company’s financial results for 2016 and the assessment of progress on the integration process. Payment of this bonus was in accordance with Mr Kestenbaum’s employment agreement. Mr López Madrid, in his role as Executive Vice‑Chairman, was entitled to an annual bonus with a target level of 215% of his base salary. Payment of this bonus was subject to challenging financial, synergy and integration targets. As a result, the Committee determined achievement of 45.8% of target level of performance for 2016.

Looking forward

The Committee spent a considerable amount of time reviewing the implementation of the Policy for 2017 in light of feedback received last year. Within the Policy, the Committee has the ability to award non‑performance based long‑term incentive awards. Considering feedback and best practice, the Committee has decided all future awards for Executive Directors will be subject to performance conditions.

Implementation for 2017

Last year, the Committee decided to reflect the challenges of integrating the two businesses within the variable pay mix with greater weighting given to the short‑term than the long‑term. This was to ensure sufficient focus on the shorter‑term priorities of integrating the business. This was a one‑off arrangement. The Committee recognises the importance of aligning our executives’ interests with those of our investors and therefore, as highlighted in last year’s report, the long‑term opportunity for 2017 will be greater and the short‑term will be lower.

The annual bonus will once again be measured against challenging objectives, with 70% based on financial measures. The annual bonus targets are considered to be commercially sensitive at this time, however, the Committee is committed to disclosing these in next year’s report.

The proposed long‑term incentive measures remain unchanged from the 2016 awards. Vesting of 60% of the total award will be determined by Ferroglobe’s Total Shareholder Return (“ TSR ”) performance with 30% being determined relative to a bespoke group of peers and 30% being determined relative to the S&P Global 1200 Metals and Mining Index. The remaining 40% will be based on a “quality of performance assessment” which will relate to the Company’s return on invested capital (“ ROIC ”) over the three‑year period as compared with a bespoke comparator group of the Company’s peers using a quarterly average for the calculation of Invested Capital and the Company’s net operating profit after tax (“ NOPAT ”) growth as compared to the same bespoke comparator group of the Company’s peers.

The Committee has reviewed the base salary for Mr López Madrid, the Executive Chairman, and his salary remains unchanged for 2017.


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As highlighted last year, moving the corporate head office to London has involved the relocation of executives. The general policy is that an allowance is to be paid to those top‑level executives who relocate equal to 20% of salary which may be paid at up to twice this amount for the first three years. This avoids the need for the Company to incur significant property purchase tax payments or other one‑off costs that could easily exceed one times annual salary if grossed‑up for income tax. The Committee is committed to reviewing annually the level of the allowance to be paid and has determined that the allowances will continue at the existing level for 2017.

The Committee has worked hard on remuneration matters since the Business Combination. I hope I can rely on your support at our Annual General Meeting.

Signed on behalf of the Board.

 
 
Javier Monzón

Chairman of the Compensation Committee

30 May 2017

Remuneration Policy

Objectives

The Directors’ Remuneration Report has been prepared in accordance with the provisions of the Companies Act and The Large and Medium‑sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (the “ Regulations ”). The Policy was approved at the 2016 Annual General Meeting. The approved Policy can be found in the Directors’ Remuneration Report for the period ended 31 December 2015 and on the Company’s website. The Policy is set out below for information only; the chart showing remuneration scenarios for Mr López Madrid on page 20, has been updated to reflect proposed 2017 remuneration levels and minor changes to the text of the Policy have been made, in particular, to reflect the fact that the Policy has now been approved by the shareholders. In addition, certain wording has been updated below in respect of the legacy arrangements summary for Mr Kestenbaum to reflect his departure from the Company. The terms of the Policy remain unchanged, save that (as permitted by a power within the Policy) minor amendments have been made, as explained on page 28, in connection with Mr Kestenbaum’s legacy arrangements in order to aid the Company in satisfying its obligations under his employment agreement (which was adopted by the Company and incorporated into the Policy approved at the 2016 Annual General Meeting).

The overall aim of our remuneration strategy is to provide appropriate incentives that reflect the Company’s high performance culture and values to maximise returns for our shareholders. In summary, we aim to:

attract, retain and motivate high calibre, high performing employees;

encourage strong performance and engagement, both in the short‑ and the long‑term, to enable the Company to achieve its strategic objectives;

structure the total remuneration package so that a very significant proportion is linked to performance conditions measured over both the short‑term and longer‑term;

set fixed pay levels at or around market norms to allow for a greater proportion of total remuneration opportunity to be in variable pay; and

create strong alignment between the interests of shareholders and executives through both the use of equity in variable incentive plans and the setting of shareholding guidelines for Executive Directors.

There are no material differences in the Policy for our Executive Directors compared to our senior management other than in terms of quantum and levels of participation in incentive plans reflecting the higher weighting to variable pay and ability to influence performance outcomes. The foregoing did not apply to legacy arrangements that applied to Mr Kestenbaum and two members of senior management of Globe for the period to 31 December 2016. For our wider employee population, the Company aims to provide remuneration structures and levels that reflect market norms.


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Legacy Arrangements

The Company became the parent company of Globe and FerroAtlántica as a result of the Business Combination. Accordingly, a number of contractual commitments, including those entered into by Globe with Mr Kestenbaum, who was the executive chairman of Globe (and then Ferroglobe), remained in force. These commitments are described in this Directors’ Remuneration Report. It is a provision of the Policy that the Company would: (a) honour legacy arrangements with Mr Kestenbaum, including the implementation of incentive awards to ensure compliance with the contractual terms and (b) honour outstanding legacy share awards made to directors of the Company who were previously non‑executive directors of Globe as set out in the Annual Report on Remuneration.

As explained in the Company’s 2015 annual report, the Company held a series of discussions with Mr Kestenbaum prior to the expiration of his employment agreement on 31 December 2016 to reach an agreement that would result in him entering into a service contract that would have been substantially on the terms of the Policy applicable to other Executive Directors. However, Mr Kestenbaum ceased employment with the Company on 31 December 2016 and resigned from the Company’s Board as Executive Chairman with effect on the same day.

Components of remuneration for Executive Directors

Element
   
Purpose and
link to strategy
 
Operation and
maximum opportunity
 
Performance framework
and recovery
Salary
 
A fixed salary commensurate with the individual’s role, responsibilities and experience, having regard to broader market rates.
 
Reviewed annually, taking account of Group performance, individual performance, changes in responsibility and levels of increase for the broader employee population and market salary levels.
 
Not applicable.
Pension and retirement benefits
 
Attraction and retention of top talent; providing mechanism for the accumulation of retirement benefits.
 
Executive Directors may be paid a cash allowance in lieu of pension.

The maximum cash allowance is 20% of base salary. This includes contributions to the U.S. tax‑qualified defined contribution 401(k) plan.
 
Not applicable.
Benefits
 
Attraction and retention of top talent.
 
Benefits may include but are not limited to medical cover, life assurance and income protection insurance.
 
Not applicable.
       
Relocation allowances may take into account a housing allowance, school fees, adviser fees for assistance with tax affairs and an expatriate allowance to cover additional expenditure incurred as a result of the relocation. Payment of such relocation allowances will be
   
 
 
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Element
   
Purpose and
link to strategy
 
Operation and
maximum opportunity
 
Performance framework
and recovery
       
reviewed by the Committee on an annual basis.
   
       
Benefits will be provided as the Committee deems necessary including to take into account perquisites or benefits received from a prior employer or as is customary in the country in which an executive resides or is relocated from.
   
       
Benefits provided by the Company are subject to market rates and therefore there is no prescribed monetary maximum. The Company and the Committee will keep the cost of the benefits under review. The Company provides all Executive Directors with directors’ and officers’ liability insurance and will provide an indemnity to the fullest extent permitted by the Companies Act.
   
Annual bonus
 
Short‑term performance‑based incentive to reward achievement of annual performance objectives.
 
The Committee will determine an Executive Director’s actual bonus amount, subject to the achievement of quantitative and qualitative performance criteria.

At least two‑thirds of the bonus will be based on financial metrics with the balance based on non‑financial metrics.

The maximum bonus opportunity that may be awarded to an Executive Director is normally 200% of salary. In 2016, the maximum bonus was
 
The Committee will select the most appropriate performance measures for the annual bonus for each performance period and will set appropriately demanding targets.

Normally any bonus earned in excess of the target amount will be deferred for three years into shares in the Company. The Executive Director may be granted an additional long‑term incentive award, as described


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Element
   
Purpose and
link to strategy
 
Operation and
maximum opportunity
 
Performance framework
and recovery
       
greater than 200% as the Committee determined that more focus should be given to shorter‑term measures for business integration reasons with a broadly equivalent reduction in long‑term incentive. If the Committee provides higher annual bonus opportunities in any year, its rationale will be clearly explained in the Annual Report on Remuneration for the relevant year. In these, and other exceptional circumstances, the limit will be 500% of salary.

No more than 25% of the maximum bonus payable for each performance condition will be payable for threshold performance.
 
below, of equal value (at maximum) to the amount of annual bonus deferred.

Recovery and recoupment will apply to all bonus awards for misstatement, error or gross misconduct.
Long‑term incentive awards
 
Focus Executive Directors’ efforts on sustainable strong long‑term performance of the Company as a whole, and to aid retention with multi‑year vesting provision. Improves alignment of Executive Directors’ interests with those of the Company and shareholders.
 
Executive Directors are eligible for awards to be granted as decided by the Committee under the Company’s long‑term incentive plan. Awards would normally vest three years after the date of grant. The Committee may determine whether or not awards are subject to achievement of performance targets measured over a three‑year period. Awards where the vesting is subject to achievement of performance targets will form at least two‑thirds of the total long‑term incentive awards granted to an Executive Director in any financial year. The Committee has decided that all awards granted in 2017 and subsequent years to Executive
 
The Committee will select the most appropriate performance measures for long‑term incentive awards for each performance period and will set appropriately demanding targets.

Recovery and recoupment will apply to all long‑term incentive awards for misstatement, error or gross misconduct.


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Element
   
Purpose and
link to strategy
 
Operation and
maximum opportunity
 
Performance framework
and recovery
       
Directors under the Policy will be subject to performance targets. The annual target award limit will not normally be higher than 300% of salary (based on the face value of shares at date of grant).
   
       
Maximum vesting is normally 200% of target (based on the face value of shares at date of grant).
   
       
There is an exceptional annual target award limit in recruitment, appointment and retention situations of 500% of salary.
   
Share ownership guidelines
 
Increases alignment between the Executive Directors and shareholders.
 
Executive Directors, including the Executive Chairman, are recommended to hold a percentage of their salary in shares. This holding guideline could be achieved through the retention of shares on vesting/exercise of share awards and may also (but is not required to) be through the direct purchase of shares by the Executive Directors.
 
Not applicable.

Performance Criteria and Discretions

Selection of Criteria

The Committee assesses annually at the beginning of the relevant performance period which corporate performance measures, or combination and weighting of performance measures, are most appropriate for both annual bonus and long‑term incentive awards to reflect the Company’s strategic initiatives for the performance period. The Committee has the discretion to change the performance measures for awards granted in future years based upon the strategic plans of the Company. The Committee sets demanding targets for variable pay in the context of the Company’s trading environment and strategic objectives and taking into account the Company’s internal financial planning, and market forecasts. Any non‑financial goals will be well‑defined and measurable.

Discretions retained by the Committee in operating its incentive plans

The Committee operates the Group’s various plans according to their respective rules. In administering these plans, the Committee may apply certain operational discretions. These include the following:

determine the extent of vesting based on the assessment of performance;

determine “good leaver” status (as described below) and, where relevant, the extent of vesting;


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where relevant, determine the extent of vesting in the case of share‑based plans in the event of a change of control in accordance with the rules of the various plans; and

make the appropriate adjustments required in certain circumstances (e.g. rights issues, corporate restructuring events, variation of capital and special dividends).

The Committee, acting fairly and reasonably, and after consulting plan participants, may adjust the targets and/or set different measures and alter weightings for the variable pay awards already granted (in a way that the alterations are intended to create an equivalent outcome for plan participants) only if an unexpected event (corporate or outside event) occurs which causes the Committee to reasonably consider that the performance conditions would not, without alteration, achieve their original purpose and the varied conditions are materially no more or less difficult to satisfy than the original conditions. Any changes and the rationale for those changes will be set out clearly in the Annual Report on Remuneration in respect of the year in which they are made.

Remuneration scenarios for Mr López Madrid

Reflecting the Board changes, the chart below has been updated to show the level of remuneration potentially payable to Mr López Madrid as Executive Chairman under different performance scenarios for the 2017 financial year:


Assumptions — Mr López Madrid

Fixed pay comprises base salary for 2017, benefits at an estimated level of 4% of salary, a normal level of expatriate allowance of 20% of base salary with an exceptional additional expatriate allowance of 20% of base salary (for up to three years from appointment as an Executive Director because of the particular circumstances of the relocation of the Ferroglobe business to London) and a pension contribution of 20% of salary in accordance with the Directors’ Remuneration Policy.

On‑target performance comprises fixed pay plus annual bonus of 100% of salary and long‑term incentives of 230% of salary.


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Maximum performance comprises fixed pay plus annual bonus of 200% of target and long‑term incentives of 200% of target.

No share price growth or dividends have been assumed. As described below, an additional long‑term incentive award may be granted if part of the annual bonus is deferred, with the maximum value of such award equal to the amount of bonus deferred. For simplicity, this has been excluded.

Note that directors’ current base salary or fees here and elsewhere in the report is converted to U.S. Dollars using a three‑month average exchange rate to 31 March 2017 of 1 Pound Sterling = 1.2381 U.S. Dollars.

Approach to Recruitment Remuneration

The Committee expects any new Executive Directors to be engaged on terms that are consistent with the Policy (excluding the legacy arrangements) as set out in the policy table above.

The Committee recognises that it cannot always predict accurately the circumstances in which any new directors may be recruited. The Committee may determine that it is in the interests of the Company and shareholders to secure the services of a particular individual, which may require the Committee to take account of the terms of that individual’s existing employment and/or their personal circumstances. Examples of circumstances in which the Committee expects it might need to do this are:

where an existing employee is promoted to the Board, in which case the Company will honour all existing contractual commitments including any outstanding annual bonus or long‑term incentive awards or pension entitlements and will provide other benefits consistent with those provided to senior leaders in that employee’s home country;

where an individual is relocating in order to take up the role, in which case the Company may provide certain one‑off benefits in addition to benefits set out in the policy table, such as reasonable relocation expenses, assistance with visa applications or other immigration issues and ongoing arrangements, such as annual flights home and cost of education; and

where an individual would be forfeiting fixed or valuable variable remuneration in order to join the Company, in which case the Committee may award appropriate additional compensation in addition to the limit set out in the policy table. The Committee would look to replicate the arrangements being forfeited as closely as possible, taking into account the nature of the remuneration, performance conditions, attributed expected value and the time over which any variable pay would have vested or been paid.

In making any decision on any aspect of the remuneration package for a new recruit, the Committee would balance shareholder expectations, current best practice and the requirements of any new recruit and would strive not to pay more than is necessary to achieve the recruitment. The Committee would give full details of the terms of the package of any new recruit in the next remuneration report. Award levels under the Company’s variable incentive plans would not exceed those set out in the policy table, but their proportions can be altered for the first three years of employment.

Executive Directors’ Service Contracts and Policy on Cessation

In order to motivate and retain the Executive Directors and other senior executives, most of whose backgrounds are in the United States and Spain, the Committee took account of market practices in those countries in (a) determining the treatment of annual bonus and long‑term incentive awards in case of termination of their employment by the Company without cause, (b) referencing past annual bonuses in calculating the amount of payment in lieu of notice, (c) determining the extent of vesting of long‑term incentive awards in the event of a takeover and (d) determining that at least two‑thirds of the total long‑term incentive awards granted to an executive in any financial year will be subject to the achievement of performance targets.

Legacy service contract for Mr Kestenbaum

Mr Kestenbaum became a director and the Executive Chairman of the Company on the Business Combination, and continued to be engaged under an employment agreement with Globe, dated 27 January 2011, as amended on 22 February 2015 (the “ Amendment ”) (together, the “ Employment Agreement ”) until 31 December 2016. Pursuant to the Amendment, the Employment Agreement was scheduled to expire on 31 December 2016, and such expiry constituted a termination of employment without cause (with the consequences described below).


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A summary of the Employment Agreement can be found below:

Under the Employment Agreement, Mr Kestenbaum performed his duties on a non‑full time basis, but was expected to devote at least 70% of his full working time to the Company.

If his employment was terminated by reason of his death or disability, Mr Kestenbaum would be entitled to payment of all accrued but unpaid base salary, vested and unvested incentive awards, pro‑rata payment of incentive awards for the then current plan year, and full vesting of 108,578 restricted shares granted on 27 January 2011 that were otherwise scheduled to vest on 27 January 2021. If his employment was terminated without cause or if he resigned for good reason, Mr Kestenbaum was entitled to receive the foregoing items plus a lump sum severance payment comprised of two times his base pay, the value of his incentive awards granted or vested during the previous two calendar years, and the pre‑tax cost of two years’ Consolidated Omnibus Budget Reconciliation Act (“ COBRA ”) coverage for himself and his family under Globe’s health plans.

If Mr Kestenbaum’s employment was terminated before the second anniversary of the Business Combination (being 23 December 2017) without cause, or he resigned for good reason, or his employment was terminated for reasons other than disability or death, then he would have been entitled to the same payments as upon termination without cause or for resignation for good reason (as set out in the paragraph above), except that the lump sum severance payment would be an amount equal to $1 less than three times his Average Annual Compensation as defined in the Employment Agreement (in summary, the sum of his average base pay and his average incentive awards granted or vested for the past five years ending on the termination date).

If Mr Kestenbaum resigned without good reason or if he was terminated for cause, then he would have been entitled to any accrued but unpaid base pay and the vested portion of incentive awards. He would also forfeit his 108,578 restricted shares that were scheduled to vest in January 2021.

If the payments to Mr Kestenbaum upon termination of his employment were subject to the excise tax under Section 4999 of the U.S. Internal Revenue Code (the “ Code ”), a nationally recognised certified public accounting firm selected by Globe would determine whether to reduce the payments so that the value would not exceed the safe harbour amount specified in Section 280G(b)(3) of the Code. The payments would be reduced if the external accounting firm determines that Mr Kestenbaum would receive a greater net‑after tax amount if the aggregate payments were so reduced.

The Employment Agreement provided for non‑compete and non‑solicit restrictions for two years following a termination of employment under most circumstances. If Mr Kestenbaum’s employment was terminated without cause or if he resigned for good reason, he would not be bound by such restrictions. The restrictions would be applicable if the Employment Agreement expired on 31 December 2016.

The Employment Agreement was governed by the laws of the State of New York.

Under the Employment Agreement, “good reason” generally meant: (a) a material reduction of compensation, base pay, bonus plan award, other bonuses or benefits, (b) the assignment of duties substantially inconsistent with his responsibilities as then in effect, or his authorities, duties, or responsibilities are diminished in any material respect, including as a result of (x) his failure to be elected or appointed as a member of Company’s board of directors or (y) the Company ceasing to be a reporting company pursuant to the Exchange Act, (c) Globe, without Mr Kestenbaum’s consent, relocating its principal executive offices or his place of employment to an area other than New York, New York, (d) a requirement that Mr Kestenbaum report to a person or entity other than Globe’s board of directors or (e) a material breach by Globe of the terms of the Mr Kestenbaum’s Employment Agreement. “Cause” generally meant conviction of a crime causing material harm to Globe or any crime involving material fraud or embezzlement with respect to Globe’s property, or a breach of his Employment Agreement, including any restrictive covenants set forth therein, that causes material harm to Globe (after receiving written notice of a breach Mr Kestenbaum has 30 days to correct the breach).

Mr Kestenbaum’s base salary for 2016 was $995,000 per annum, which had remained unchanged for the past five years. Mr Kestenbaum was entitled to pension and benefits entitlements materially commensurate with the previous years. In addition, if another senior executive received incentive awards having terms materially more favourable than those granted to Mr Kestenbaum, then his incentive awards would be modified or he would receive additional awards to make them substantially as favourable.


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Legacy arrangements with Mr Kestenbaum also included an annual performance‑based bonus award and equity grants.

It is a provision of the Policy that the Company will: (a) honour legacy arrangements with Mr Kestenbaum, including the implementation of incentive awards to ensure compliance with the contractual terms and (b) honour outstanding legacy share awards made to him by Globe as set out in the Company’s 2015 annual report.

Service contracts

It is the Company’s policy (with the exception of the legacy arrangements of Mr Kestenbaum, see above , and subject to the Approach to Recruitment Remuneration above) that all Executive Directors have rolling service contracts for an indefinite term but a fixed period of notice of termination which would normally be 12 months. With respect to newly‑appointed directors, the Committee may, if it considers necessary, agree a notice period in excess of 12 months (but not exceeding 24 months), provided the notice period reduces to 12 months within a specified transition period not exceeding 36 months. The service contract for Mr López Madrid, who replaced Mr Kestenbaum as Executive Chairman on 1 January 2017 and was previously Executive Vice‑Chairman, is in accordance with this policy.

It is the Company’s policy that an Executive Director’s service contract (with the exception of the legacy arrangements of Mr Kestenbaum, ( see above ) may be terminated without notice and without further payment or compensation, except for sums accrued to the date of termination, for cause (as defined in the service contract). In other circumstances, the Company may terminate employment with immediate effect and make a payment in lieu of notice in the amount equivalent to the aggregate of (i) base salary, (ii) the average of annual bonuses in the last three years prior to termination, (iii) pension allowance plus (iv) cost of benefits, for the notice period (or if a notice has been served, for the unserved notice period). An Executive Director would be entitled to an equivalent payment in the event of his resignation for good reason (as defined in the service contract). Normally there would be no additional contractual entitlement in respect of a change‑in‑control. An Executive Director may also be entitled to certain amounts with respect to annual bonus and long‑term incentive awards, as described below. “Cause” and “good reason”, as defined in the service contract, also apply in relation to annual bonus awards and long‑term incentive awards as described below. Executive Directors’ service contracts (or a memorandum of the terms where the contract is unwritten) are available for inspection at the Group’s office at 2nd Floor West, Lansdowne House, 57 Berkeley Square, London, W1J 6ER during normal business hours and at the Annual General Meeting.

Generally

As circumstances may require, the Committee may approve compensation payments in consideration of statutory entitlements, for a release of claims, enhanced post‑termination restrictive covenants or transitional assistance, such as outplacement services and payment of legal fees in connection with termination, home relocation expenses including tax related expenses and other ancillary payments thereto.

Annual bonus awards

In the event that an Executive Director’s employment is terminated without cause, by resignation by the Executive Director for good reason, or by reason of death, injury, disability, his employing company or the business for which he works being sold out of the Group, the Company will pay an annual bonus amount in respect of the financial year in which termination occurs subject to performance conditions being met at the end of the period and with pro‑rating of the award determined on the basis of the period of time served in employment during the normal vesting period but with the Committee retaining the discretion in exceptional circumstances to increase the level of vesting within the maximum annual bonus amount as determined by the performance conditions. The Committee may, if it considers it appropriate in exceptional circumstances, measure performance to the date of cessation. In other circumstances, payment will be at the Committee’s discretion. The Committee will consider the period of the year worked and the performance of the executive during that period when considering how to exercise its discretion.

Long‑term incentive awards

As a general rule, any unvested long‑term incentive award (except deferred bonus awards, see below) will lapse upon an Executive Director ceasing to be an employee or director in the case of voluntary resignation or dismissal for cause. However, if the cessation is without cause, by resignation by the Executive Director for good reason, or because of his death, injury, disability, his employing company or the business for which he works being sold out of the Group or in other circumstances at the discretion of the Committee, then their award will vest in full on the date when it would have ordinarily vested subject to the performance conditions being met. Where an award vests at the discretion of the Committee that award may be pro‑rated taking into account the period of time served in employment during the normal vesting period of the award. The Committee can for any cessation measure performance up to the date of cessation and permit awards to vest early.


20

Deferred bonus awards vest in full upon cessation, other than in case of voluntary resignation by an Executive Director without good reason or dismissal for cause. Vested but unexercised awards held on cessation will remain capable of exercise for a limited period save in the case of dismissal for cause.

In the event of a takeover all awards will vest early to the extent that the performance conditions are determined as satisfied at that time on such basis as the Committee considers appropriate.

External appointments

Executive Directors may retain fees paid for external director appointments. These appointments are subject to approval by the Board and must be compatible with their duties as Executive Directors.

Matters taken into consideration in determining policy and differences in the remuneration policy of the Executive Directors and employees

It is not the Committee’s practice to consult with employees on matters relating to executive pay. However, the Committee will consider pay structures, practices and principles across the Group on a regular basis and take these into account in any review of the Executive Directors’ current policy or implementation thereof.

The Committee will consider feedback from shareholders and take into account the results of both advisory and binding votes concerning executive pay at the Annual General Meeting as well as ensuring it engages with shareholders on executive pay matters. The Company has taken account of its understanding of the guidelines of shareholders in formulating its Directors’ Remuneration Policy.

Directors’ Remuneration Policy for Non‑Executive Directors

Element
   
Purpose and link
to strategy
 
Operation and maximum
opportunity
 
Performance framework
and recovery
Non‑Executive Directors fees including non‑executive chairman
 
To appropriately remunerate the Non‑Executive Directors
 
The Non‑Executive Directors are paid a basic fee. Supplemental fees may be paid for additional responsibilities and activities, such as for the committee chairmen and other members of the main Board committees (e.g. audit, compensation, and nominating and corporate governance) and the Senior Independent Director, to reflect the additional responsibilities as well as travel fees to reflect additional time incurred in travelling to meetings.
 
Not applicable


21

 
Element
   
Purpose and link
to strategy
 
Operation and maximum
opportunity
 
Performance framework
and recovery
       
These fee levels are reviewed periodically, with reference to time commitment, knowledge, experience and responsibilities of the role as well as market levels in comparable companies both in terms of size and sector.
   
       
The Company does not currently have a non‑executive Chairman. If one were appointed, his fee would be set at a level with reference to time commitment, knowledge, experience and responsibilities of the role as well as market levels in comparable companies both in terms of size and sector.
   
       
There is no maximum fee level or prescribed annual increase.
   
Payment of expenses and benefits
 
To support the Non‑Executive Directors in the fulfilment of their duties
 
Reasonable expenses incurred by the Non‑Executive Directors in carrying out their duties may be reimbursed by the Company including any personal tax payable by the Non‑Executive Directors as a result of reimbursement of those expenses. The Company may also pay an allowance in lieu of expenses if it deems this appropriate.
 
Not applicable


22

 
Element
   
Purpose and link
to strategy
 
Operation and maximum
opportunity
 
Performance framework
and recovery
       
The Company provides Non‑Executive Directors with directors’ and officers’ liability insurance and an indemnity to the fullest extent permitted by the Companies Act.
   

Legacy Arrangements with Certain Non‑Executive Directors

Prior to the Business Combination, in keeping with many other NASDAQ listed companies, Globe granted restricted stock units and share appreciation rights to its non‑executive directors. Outstanding awards as at 31 December 2016 held by the Non‑Executive Directors, who were previously Globe’s non‑executive directors, are set forth on page 39.

It is noted that those Non‑Executive Directors with restricted stock units and share appreciation rights may be regarded as not being independent by U.K.‑based proxy voting agencies although the Board considers them to be fully independent. It is a provision of this Directors’ Remuneration Policy that the Company may accelerate the vesting or repurchase of these awards based on an independent valuation, if it deems such action appropriate.

Letters of Appointment with Non‑Executive Directors

The Company does not enter into service contracts with its Non‑Executive Directors, rather the Company enters into letters of appointment for a rolling period of 12 months with each annual renewal being subject to re‑election at each annual general meeting of the Company. No compensation for loss of office is payable in the event a Non‑Executive Director is not re‑elected. The Company may request that the Non‑Executive Directors resign with immediate effect in certain circumstances (including material breach of their obligations) in which case their appointment would terminate without compensation to the Non‑Executive Director for such termination but with accrued fees and expenses payable up to the date of termination.

Appointment of Non‑Executive Directors

For the appointment of a non‑executive chairman or other Non‑Executive Directors, the fee arrangement would be in accordance with the approved Directors’ Remuneration Policy in place at that time.

Minor amendments

The Committee may make minor changes to the Policy, which do not have a material advantage or disadvantage overall to directors, to aid in its operation or implementation (including to take account of any change in legislative or regulatory requirements applicable to the Company) without seeking shareholder approval for a revised version of the Policy. During 2016, the Committee exercised this power to make minor amendments to the Policy, as described on page 13, in connection with Mr Kestenbaum’s departure from the Company. This was done in order to aid the Company in satisfying its obligations under his employment agreement which has been adopted by the Company and incorporated into the Policy, which expressly honours legacy arrangements with Mr Kestenbaum, including the implementation of incentive awards. Such minor amendments form provisions of this Policy.


23

Annual Report on Remuneration

Implementation of the Directors’ Remuneration Policy for the year ending 31 December 2017

This section sets out how the Committee intends to implement the Policy for the year ending 31 December 2017.

Base salary

Mr López Madrid was appointed as Executive Chairman with effect from 1 January 2017. Mr López Madrid’s salary was reviewed on his appointment and remains unchanged at £555,000 ($687,146).

Pension and benefits

In accordance with the Policy, Mr López Madrid as Executive Chairman will continue to receive a pension contribution at the rate of 20% of base salary, payable as a cash allowance, benefits to the value of an estimate of 4% of salary and an expatriate benefits allowance. This expatriate benefits allowance will usually be equal to 20% of base salary. However, as described in the 2015 annual report, Mr López Madrid will continue to be entitled to an exceptional additional expatriate allowance of a further 20% of salary (in line with market practice, for up to three years from appointment as an Executive Director of the Company because of the particular circumstances of the relocation of the Ferroglobe business in this period of transition). This expatriate allowance will be reviewed by the Committee on an annual basis.

The Company provides directors’ and officers’ liability insurance and will provide an indemnity to the fullest extent permitted by the Companies Act.

Annual bonus

The target annual bonus opportunity for Mr López Madrid as Executive Chairman will be 100% of base salary with a maximum opportunity of twice the target level.

70% of the annual bonus will be based on achieving EBITDA, EBITDA margin and free cash flow targets (one third each) with the remainder based on strategic priority goals. The annual bonus targets are considered to be commercially sensitive at this time and are not disclosed. It is the Compensation Committee’s intention to disclose the threshold, target and stretch figures for each of these measures in next year’s report. Any bonus earned in excess of 100% of the target will be deferred for three years into shares in the Company.

As outlined in last year’s report, to further align the Executive Chairman’s interests with those of shareholders over the long‑term, and to link the annual bonus with the level of grant of long‑term incentives, the Company could have granted an additional long‑term incentive award in 2017, with a maximum value of such award equal to the amount of bonus deferred. This award would be subject to the performance targets and vesting schedule described under the heading Long‑term incentives below. As Mr López Madrid’s 2016 annual bonus outcome was below target, no annual bonus has been deferred and therefore no additional long‑term incentive award will be made in 2017. The same arrangement will apply to the 2017 annual bonus and, depending on the outcome, an additional long‑term incentive award may be made in 2018.

Long‑term incentives

The Executive Chairman will be granted a long‑term incentive award with a target level of vesting of 230% of base salary and maximum vesting of two times target.

Vesting of 60% of the total award will be determined by Ferroglobe’s Total Shareholder Return (“ TSR ”) performance. 50% of the TSR part of the award is calculated relative to a bespoke group of peers, and the other 50% is calculated relative to the S&P Global 1200 Metals and Mining Index in line with last year’s award. Performance will be measured over three years with vesting as set out below.

The bespoke peer group comprises the following companies:

Commercial Metals Company
Boliden
Allegheny Technologies
Morgan Advanced Material
Materion Corporation
Minerals Technologies
Steel Dynamics
Kaiser Aluminium
Antofagasta
Vallourec
Carpenter Technologies
Worthington Industries
Schnitzer Steel Industries
Salzgitter
Eramet
Vedanta Resources
Stillwater Mining Company
Norsk Hydro
Dow Chemical Company
AMG Advanced Metallurgical Group


24


 
Vesting schedule for TSR relative to the bespoke peer group

TSR Performance
 
Vesting scale
 
Less than median (50 th  percentile)                                                                                     
No vesting of awards
Between the 50 th  and 75 th  percentile                                                                                     
Proportionate vesting of between target (100%) and 150% of target
Between 75 th  percentile and 90 th  percentile
Proportionate vesting of between 150% and 200% of target
90 th  percentile                                                                                     
200% of target

Vesting schedule for TSR relative to the S&P Global 1200 Metals and Mining Index

TSR Performance
 
Vesting scale
 
Less than Index TSR                                                                                     
No vesting of awards
Equal to Index TSR                                                                                     
Proportionate vesting of between target (100%) and 150% of target
Equal to Index TSR + 15 percentage points
Proportionate vesting of between 150% and 200% of target
Equal to Index TSR + 25 percentage points
200% of target

Vesting of 40% of the award will be dependent upon the achievement of strategic measures with predetermined targets to be achieved creating a range between threshold, target and stretch that will determine the proportion of the award that will vest between 50% and 200% of the target amount. The measures will relate to the Company’s ROIC over the three‑year period as compared with the bespoke comparator group of the Company’s peers set out above using a quarterly average for the calculation of Invested Capital and the Company’s NOPAT growth as compared to the same bespoke comparator group of the Company’s peers. Performance will be measured over three years with vesting as set out below.

ROIC over the performance period
 
Vesting scale
Below the 25 th  percentile                                                                                                                             
0%
25 th  percentile                                                                                                                             
50%
Median (50 th  percentile)                                                                                                                             
100%
75 th  percentile and above                                                                                                                             
200%

NOPAT growth over the performance period
 
Vesting scale
Below the 25 th  percentile                                                                                                                             
0%
25 th  percentile                                                                                                                             
50%
Median (50 th  percentile)                                                                                                                             
100%
75 th  percentile and above                                                                                                                             
200%

No portion of the ROIC component shall vest unless the Company’s ROIC over the performance period is at least equal to the 25 th  percentile average ROIC for the members of the Comparator Group over the performance period. No portion of the NOPAT component shall vest unless the ratio between the Company’s NOPAT for the 12‑month period ending 31 December 2019 against the Company’s NOPAT for the 12‑month period ending 31 December 2016 is at least equal to the 25 th  percentile NOPAT growth ratio for the members of the Comparator Group over the same period. There is straight line vesting between each vesting point (25 th  percentile, median and 75 th  percentile).

Within the Policy, the Committee has the ability to award non‑performance based long‑term incentive awards. However, considering feedback and best practice, the Committee has decided all awards granted in 2017 and subsequent years for Executive Directors will be subject to performance conditions.

Share ownership guidelines

The Committee has recommended a minimum level of share ownership that it wishes the Executive Directors to build over time and hold of 200% of their base salary in shares in the Company. To achieve this, Executive Directors are expected to retain a proportion of the shares that vest (having sold sufficient shares to meet any taxation obligations) under the Company’s share based incentive plans until the share ownership guideline is met or to acquire shares in the market. The current levels of holdings are set out on page 38.


25

The Non‑Executive Directors had voluntarily agreed to apply at least a quarter of their annual gross fees (other than travel fees and additional fees payable for 2016) to acquire shares, retaining the shares worth a minimum of twice these gross fees.

However, as a result of a number of administrative challenges, appropriate arrangements were unable to be put in place by all of the Non‑Executive Directors in 2016 to facilitate the acquisition of shares on a regular basis. As a result, the Non‑Executive Directors have reviewed the position and agreed that the previous commitments should be amended.

The Non‑Executive Directors have now voluntarily agreed to apply on a cumulative basis at least a quarter of their normal annual gross fees to acquire shares under arrangements designed to ensure that shares can be purchased on a regular basis and where more or less shares are acquired in any one year, the value of shares to be acquired in the subsequent year may be reduced or increased respectively such that on a cumulative basis the 25% test is satisfied. In the absence of special circumstances, they will retain these shares whilst they remain a Non‑Executive Director.

Fees for the Non‑Executive Directors

The fee structure and 2016 fee levels were set following the Business Combination. Fees are reviewed, but not necessarily increased, annually, with increases normally effective from 1 January each year. A summary of fees applicable for 2017 (which remain at the same level as 2016) is shown below:

 
2017 fee
Non‑Executive Director base fee                                                                                                                                                     
£70,000 ($86,667)
Senior Independent Director (no current Senior Independent Director)                                                                                                                                                     
£35,000 ($43,334)
Member of Audit Committee                                                                                                                                                     
£17,500 ($21,667)
Member of Compensation Committee                                                                                                                                                     
£15,500 ($19,191)
Member of Nominating and Corporate Governance Committee                                                                                                                                                     
£12,000 ($14,857)
Committee Chairman                                                                                                                                                     
Two times membership fee
Travel fee (per meeting)
 
Intercontinental travel                                                                                                                                                     
£3,500 ($4,333)
Continental travel                                                                                                                                                     
£1,500 ($1,857)

The travel fee (payable for each meeting attended) is to compensate the Non‑Executive Directors for their time spent in travelling to meetings.

Because of the additional time commitment required of the Non‑Executive Directors as a result of the Business Combination, the Non‑Executive Directors were paid an additional fee for 2016 equal to 50% of the fees payable as set out above (other than the base and travel fees). This additional amount is not payable for 2017.

Remuneration paid in respect of the year to 31 December 2016

Single Figure of Remuneration for the period — Audited

The table below shows the aggregate emoluments earned by the directors of the Company for the year ended 31 December 2016 and for the period from 23 December 2015 (date of the Business Combination) to 31 December 2015. Note that emoluments in the table have been converted to U.S. Dollars using the average exchange rate for the year 2016 of 1 Pound Sterling = 1.3507 U.S. Dollars.

in U.S.$
 
Salary &
Fees (1)
   
Benefits (2)
   
Pension (3)
   
Annual
Bonus (4)
   
Long‑Term
Incentives (5)
   
Total
 
Executive
                                   
Alan Kestenbaum (2016)
   
995,000
     
122,407
     
3,975
     
748,738
     
     
1,870,120
 
Alan Kestenbaum (2015)
   
21,808
     
1,960
     
     
201,783
     
     
225,551
 
Javier López Madrid (2016)
   
749,639
     
308,108
     
149,928
     
738,886
     
     
1,946,562
 
Javier López Madrid (2015)
   
     
     
     
     
     
 
Non‑Executive
                                               
Donald G. Barger, Jr. (2016)
   
174,580
     
18,910
     
     
     
     
193,490
 
Donald G. Barger, Jr (2015)
   
     
     
     
     
     
 
Bruce L. Crockett (2016)
   
130,006
     
23,637
     
     
     
     
153,643
 
Bruce L. Crockett (2015)
   
     
     
     
     
     
 


26


 

in U.S.$
 
Salary &
Fees (1)
   
Benefits (2)
   
Pension (3)
   
Annual
Bonus (4)
   
Long‑Term
Incentives (5)
   
Total
 
Stuart E. Eizenstat (2016)
   
118,862
     
14,182
     
     
     
     
133,044
 
Stuart E. Eizenstat (2015)
   
     
     
     
     
     
 
Tomás García Madrid (2016)
   
118,862
     
8,104
     
     
     
     
126,966
 
Tomás García Madrid (2015)
   
     
     
     
     
     
 
Greger Hamilton (2016)
   
196,866
     
     
     
     
     
196,866
 
Greger Hamilton (2015)
   
     
     
     
     
     
 
Javier Monzón (2016)
   
192,814
     
10,130
     
     
     
     
202,944
 
Javier Monzón (2015)
   
     
     
     
     
     
 
Juan Villar‑Mir de Fuentes (2016)
   
94,549
     
8,104
     
     
     
     
102,653
 
Juan Villar‑Mir de Fuentes (2015)
   
     
     
     
     
     
 

(1)
Salary & Fees for 2015 is the pro‑rated amount payable for the full year.

(2)
For Mr López Madrid benefits includes an expatriate allowance of 40% of salary (£222,000 ($285,292) in 2016), and medical insurance and life assurance coverages. For Mr Kestenbaum benefits include automobile lease expenses, parking fees, housing expenses, certain relocation expenses, and advisory service fees. For 2015, this is a pro‑rated amount of the full year value of benefits. For the Non‑Executive Directors benefits comprise travel allowances.

(3)
For 2016 the pension for Mr López Madrid is 20% of base salary payable as a cash supplement. The 401(k) pension cap for Mr Kestenbaum had been reached before 23 December 2015 and no pension is payable for the period 23 December 2015 to 31 December 2015.

(4)
Details of the 2016 annual bonus amounts are set out below. The annual bonus for Mr Kestenbaum covering the period 23 December 2015 to 31 December 2015 is part of the Pre‑Closing Bonus as described on page 34.

(5)
There were no long‑term incentives with performance periods ending in the year to 31 December 2016 or during the period 23 December 2015 to 31 December 2015 and no awards granted with time‑based vesting only.

Annual bonus for the period 23 to 31 December 2015 — Audited

As indicated on page 26 of the 2015 annual report, prior to the Business Combination, Mr Kestenbaum was granted an annual performance‑based bonus award by Globe in respect of its financial year ending 30 June 2016 (the “ Globe Bonus ”), which, pursuant to the provisions of the Policy, the Company was required to honour. Under the terms of the award agreement, the Globe Bonus consisted of two portions, (i) the “ Pre‑Closing Bonus ” portion with respect to 1 July 2015 to 30 November 2015 (being the end of the last full month prior to the Business Combination), and (ii) the “ Post‑Closing Bonus ” portion with respect to 1 December 2015 to 30 June 2016.

Prior to the Business Combination, Globe’s compensation committee estimated the level of Pre‑Closing Bonus and paid the bonus out in accordance with that estimate. When calculating the balancing payment in April 2016, the Committee discovered that, prior to the Business Combination, the terms of the Globe Bonus had been amended so that the Pre‑Closing Bonus related to the 6‑month period from 1 July 2015 to 31 December 2015 (instead of the five‑month period to 30 November 2015), and the result for that period should be based on 50% of the full‑year results for the period from 1 January 2015 to 31 December 2015 (the “ Amended Globe Bonus ”).

Therefore, on such basis, the Committee has determined that the level of the Pre‑Closing Bonus is $4,641,000 and that the resulting cash element exceeds the 90% of the estimated level of the Pre‑Closing Bonus that was previously paid by $236,000. This “true‑up” amount was paid to Mr Kestenbaum on 14 November 2016. A pro‑rated amount of the Pre‑Closing Bonus (as determined under the terms of the Amended Globe Bonus) for the period 23 December 2015 to 31 December 2015 has been included in the remuneration table above.

The Post‑Closing Bonus (for the period from 1 January 2016 to 30 June 2016) plus the bonus arrangements corresponding to him for the period commencing on 1 July 2016 to 31 December 2016 were replaced by the annual bonus for the Company’s full financial year from 1 January 2016 to 31 December 2016, as described below on page 35.


27

Annual bonus for the financial year to 31 December 2016 for Mr López Madrid — Audited

The target annual bonus opportunity for the Executive Vice‑Chairman (now Executive Chairman) was 215% of salary, with a maximum opportunity of two times target. Details of payout against the performance targets set is included in the table below:

Measure
   
Weighting
(target %
of award)
   
Threshold
performance
(0% of target
paid)
   
Target
performance
(100% of target
paid)
   
Stretch
performance
(200% of target
paid)
   
Actual
Performance
   
Bonus outcome
(maximum 200%
of target)
 
Adjusted EBITDA                                       
   
23.3
%
 
$110 million
   
$160 million
   
$220 million
   
$72.9 million
     
0.0
%
EBITDA margin                                       
   
23.3
%
   
6%
 
   
9%
 
   
13%
 
   
4.5%
 
   
0.0
%
Free Cash Flow                                       
   
23.3
%
 
$50 million
   
$110 million
   
$170 million
   
$72.7 million
     
8.84
%
Synergies                                       
   
20.0
%
 
$30 million
   
$60 million
   
$80 million
   
$72.1 million
     
32.0
%
Integration Process
10.0
%
 
Assessment by the Board
     
50%
 
   
5.0
%
Total                                       
   
100
%
                                   
45.84
%

This resulted in a bonus outcome of 98.6% of salary for the Executive Vice‑Chairman (now Executive Chairman). As the bonus earned was not in excess of 100% of the target (215% of salary), none of it will be deferred for three years into shares in the Company.

Annual bonus for the financial year to 31 December 2016 for Mr Kestenbaum — Audited

As explained on page 26 of the Company’s 2015 annual report, the Committee considered appropriate bonus arrangements for Mr Kestenbaum for the period commencing on 1 July 2016 to 31 December 2016 as well as any modifications to the Post‑Closing Bonus, and concluded that, in lieu of the Post‑Closing Bonus, which would have covered the period from 23 December 2015 to 30 June 2016, Mr Kestenbaum would be eligible for an annual bonus arrangement under the Policy for the period commencing on 1 January 2016 to 31 December 2016. For 2016, the Committee approved an annual bonus arrangement under which Mr Kestenbaum was entitled to an annual bonus with a target level of 215% of his base salary, based on achievement of corporate financial measures (weighted at 70%) and integration of the business (weighted at 30%) in similar terms to the Executive Vice‑Chairman. Based on the best estimate at the time of Mr Kestenbaum’s departure of the Company’s financial results for 2016 and assessment of the integration process, the Committee has determined achievement of 35% of target level of performance for 2016, giving rise to a bonus payment of US$748,738.

Long‑term incentive awards for the financial year ended 31 December 2016 — Audited

There were no long‑term incentives with performance periods ending in the year to 31 December 2016 or awards granted in the year with time‑based vesting only.

Long‑term incentive awards granted in financial year 2016

While the Company engaged in discussions with Mr Kestenbaum over the course of 2016 with hopes to reach an agreement that would result in him entering into arrangements that would have been substantially on the terms of the Policy applicable to Executive Directors, no such agreement was reached. As a result, the Company did not grant any long‑term incentive award to Mr Kestenbaum in financial year 2016.

On 24 November 2016, Mr López Madrid was granted a long‑term incentive award as follows:
 
 
 
   
Type of
award
   
Basis of
award
(at target)
 
Share price
at date
of grant (3)
   
Number of
shares
at target
   
Face value
of shares
at target (4)
   
Face value
of shares at
maximum (5)
   
Vesting at
threshold
   
Performance
period
Javier López Madrid
 
 
Nil‑cost
option (2)
   
115% of salary of $749,639
 
$
11.57
     
68,541
   
$
793,025
   
$
1,586,050
     
40
%
 
Three years to 31 December 2018

Notes:

(1)
Details of the performance conditions are set out below.

(2)
No price is normally payable on the exercise of the nil‑cost option although the Company reserves the right to require the payment of the nominal cost of the shares as a condition of exercise if required to enable the issue or transfer of the shares.
 
 
28

 
(3)
This figure represents the average closing share price for the five days prior to the date of grant.

(4)
The value shown in this column has been calculated by multiplying the number of shares that would vest at target by the average closing share price for the five days prior to the date of grant.

(5)
The value shown in this column has been calculated by multiplying the number of shares that would vest at maximum (being 200% of target) by the average closing share price for the five days prior to the date of grant.

Vesting of 60% of the award will be determined by Ferroglobe’s TSR. Performance will be measured over three years commencing 1 January 2016 with vesting as set out below. 50% of the TSR part of the award will be determined by Ferroglobe’s TSR relative to the following bespoke group of peer companies:

Commercial Metals Company
Boliden
Allegheny Technologies
Morgan Advanced Material
Materion Corporation
Minerals Technologies
Steel Dynamics
Kaiser Aluminium
Antofagasta
Vallourec
Carpenter Technologies
Worthington Industries
Schnitzer Steel Industries
Salzgitter
Eramet
Vedanta Resources
Stillwater Mining Company
Norsk Hydro
Dow Chemical Company
AMG Advanced Metallurgical Group

TSR Performance
 
Vesting scale
 
Less than median (50 th  percentile)
No vesting of awards
Between the 50 th  and 75 th  percentile
Proportionate vesting of between target (100%) and 150% of target
Between 75 th  percentile and 90 th  percentile
Proportionate vesting of between 150% and 200% of target
90 th  percentile
200% of target

The other 50% of the TSR part of the award will be determined by Ferroglobe’s TSR relative to the S&P Global 1200 Metals and Mining Index.

TSR Performance
 
Vesting scale
 
Less than Index TSR
No vesting of awards
Equal to Index TSR
Proportionate vesting of between target (100%) and 150% of target
Equal to Index TSR + 15 percentage points
Proportionate vesting of between 150% and 200% of target
Equal to Index TSR + 25 percentage points
200% of target

In the 2015 annual report, the Committee expected that the vesting of the remaining 40% of the award would be dependent upon “quality of performance assessments” measured at the end of the performance period. Before granting 2016 awards, the Committee again considered the operation of this assessment and decided to measure Ferroglobe’s performance against certain peers with predetermined targets to be achieved creating a range between threshold, target and stretch that will determine the proportion of the award that will vest between 50% and 200% of the target amount, rather than a one‑off measurement at the end of the period. The Committee believes this is a more robust approach to assessing performance and in line with best practice. The measures relate to the Company’s ROIC over the three‑year period compared to the bespoke comparator group of the Company’s peers using a quarterly average for the calculation of Invested Capital and the Company’s NOPAT growth compared to the same bespoke comparator group of the Company’s peers set out above. Performance will be measured over three years with vesting as set out below.

ROIC over the performance period
 
Vesting scale
Below the 25 th  percentile
0%
25 th  percentile
50%
Median (50 th  percentile)
100%
75 th  percentile and above
200%
29


NOPAT growth over the performance period
 
Vesting scale
Below the 25 th  percentile
0%
25 th  percentile
50%
Median (50 th  percentile)
100%
75 th  percentile and above
200%

No portion of the ROIC component shall vest unless the Company’s ROIC over the performance period is at least equal to the 25 th percentile of the average ROIC for the members of the comparator group over the performance period. No portion of the NOPAT component shall vest unless the ratio between the Company’s NOPAT for the 12‑month period ending 31 December 2018 against the Company’s NOPAT (annualized) for the 6‑month period ending 30 June 2016 is at least equal to the 25 th percentile of the NOPAT growth ratio for the members of the comparator group over the same period. There is straight line vesting between each vesting point (25 th percentile, median and 75 th percentile).

Directors’ shareholding and share interests — Audited

The table below sets out the number of shares held or potentially held by directors (including their connected persons, where relevant) as at 31 December 2016.

Director
 
Beneficially
owned shares
   
Number of
awards held
under
long‑term
incentive
plans not
conditional on
performance (1)
   
Number of
awards held
under
long‑term
incentive
plans
conditional on
performance (2)
   
Target
shareholding
guideline
(as a % of
salary/gross
fees)
   
Percentage of
salary held in
shares as at
31 December
2016 (5)
 
Executive Directors
                             
Alan Kestenbaum (resigned on 31 December 2016)
   
6,502,363
     
     
     
n/a
(3)  
   
n/a
 
Javier López Madrid
   
20,000
     
     
68,541
(4)  
   
200
%
   
29
%
Non‑executive Directors
                                       
Donald G. Barger, Jr.
   
13,636
     
8,334
     
     
     
 
Bruce L. Crockett
   
     
16,666
     
     
     
 
Stuart E. Eizenstat
   
5,589
     
8,333
     
     
     
 
Tomás García Madrid
   
     
     
     
     
 
Greger Hamilton
   
     
     
     
     
 
Javier Monzón
   
19,400
     
     
     
     
 
Juan Villar‑Mir de Fuentes
   
     
     
     
     
 

Notes:

(1)
Mr Kestenbaum’s awards vested on 31 December 2016 in connection with his departure from the Company.

(2)
Details of the award are set out in the table on page 35.

(3)
Mr Kestenbaum resigned on 31 December 2016 and therefore the guideline does not apply.

(4)
This is the target number of shares that could vest. The maximum number of shares that could vest is 137,082.

(5)
Using the share price at 31 December 2016.

The following incentive awards are held by the Directors listed below and which the Company is authorised to honour following shareholder approval of the Policy.

Participant
 
Type
 
Grant
Date
 
Outstanding
   
Exercisable
as of
12/31/2016
   
Future
Vesting*
 
Final
Vest Date*
Barger                                                                       
 
NQ
 
Various
   
34,513
     
26,179
     
8,334
 
06/03/2017
Barger                                                                       
 
RSU/C
 
Various
   
23,741
     
22,627
     
1,114
 
31/12/2017
Barger                                                                       
 
SAR
 
Various
   
15,087
     
15,087
     
0
 
NA
Crockett                                                                       
 
NQ
 
Various
   
26,226
     
9,560
     
16,666
 
27/02/2018
Crockett                                                                       
 
RSU/C
 
Various
   
2,527
     
2,110
     
417
 
12/31/2017
Crockett                                                                       
 
SAR
 
Various
   
2,303
     
2,303
     
0
 
NA


30


Participant
 
Type
 
Grant
Date
 
Outstanding
   
Exercisable
as of
12/31/2016
   
Future
Vesting*
 
Final
Vest Date*
Eizenstat                                                                       
 
NQ
 
Various
   
34,513
     
26,180
     
8,333
 
19/03/2017
Eizenstat                                                                       
 
SAR
 
Various
   
15,087
     
15,087
     
0
 
NA
Kestenbaum                                                                       
 
RSU
 
01/27/2011
   
108,578
     
108,578
     
0
 
NA
Kestenbaum                                                                       
 
RSU/C
 
01/01/2014
   
22,543
     
22,543
     
0
 
NA
Kestenbaum                                                                       
 
RSU/C
 
04/24/2014
   
20,049
     
20,049
     
0
 
NA
Kestenbaum                                                                       
 
RSU/C
 
01/01/2015
   
78,239
     
78,239
     
0
 
NA
Kestenbaum                                                                       
 
RSU/C
 
03/15/2015
   
16,155
     
16,155
     
0
 
NA
Kestenbaum                                                                       
 
RSU/C
 
09/18/2015
   
127,856
     
127,856
     
0
 
NA
Kestenbaum                                                                       
 
RSU/C
 
12/22/2015
   
97,339
     
97,339
     
0
 
NA
Kestenbaum                                                                       
 
SAR
 
08/20/2013
   
424,006
     
424,006
     
0
 
NA
Kestenbaum                                                                       
 
SAR
 
03/20/2014
   
123,911
     
123,911
     
0
 
NA
Kestenbaum                                                                       
 
SAR
 
12/11/2015
   
340,000
     
340,000
     
0
 
NA

*
In accordance with the information contained on page 40, all of Mr Kestenbaum’s awards vested on 31 December 2016 in connection with his departure from the Company.

Total pension entitlements — Audited

Details of the value of pension contributions are provided in the “Pensions” column of the “Single Figure of Remuneration” table on page 33. Pension contributions are by way of a cash allowance or contribution to a 401(k) plan. There are therefore no specified retirement ages to disclose or consequences of early retirement.

Payments to past directors

None

Payments for loss of office

1.
Mr Kestenbaum ceased employment with the Company on 31 December 2016 and resigned from the Board as Executive Director with effect on the same day. Mr Kestenbaum was employed under an Employment Agreement dated 27 January 2011, as amended on 22 February 2015, as set out in detail on page 22. The Employment Agreement expired on 31 December 2016 and, in accordance with its terms, Mr Kestenbaum’s employment was treated as terminated without cause.

2.
For 2016, the Committee had previously approved an annual bonus arrangement under which Mr Kestenbaum was entitled to an annual bonus with a target level of 215% of his base salary. The Committee has determined achievement of 35% of target level of performance for 2016, giving rise to a bonus payment of US$748,738, as explained on page 13 above.

3.
Mr Kestenbaum was entitled to the following payments and benefits, and the lump sum severance payment summarised in paragraph 4, in accordance with provisions of the Employment Agreement:

(a)
Accrued obligations: Mr Kestenbaum was entitled to US$1,443,763 (reflecting the value of cash‑settled restricted stock units vested prior to 31 December 2016 but unpaid), plus US$2,602,104 (reflecting the value of cash‑settled restricted stock units vesting or subject to accelerated vesting on 31 December 2016 (based on the closing price of the Company’s shares on 27 December 2016 of US$11.45). Details of such cash‑settled restricted stock units are set out on page 39.

(b)
Annual bonus : It was affirmed that Mr Kestenbaum was entitled to a payment of US$748,738 as a 2016 annual bonus, based on the Committee’s determination as described in paragraph 2 above.

(c)
Full vesting of Long‑Term Award: On 27 January 2011, Mr Kestenbaum was awarded 108,578 restricted shares in the Company scheduled to vest on 27 January 2021 (the “ Long‑Term Award ”). In accordance with the Employment Agreement, on 31 December 2016, the Long‑Term Award vested fully, representing a value of US$1,243,218 based on the closing price of the Company’s shares on 27 December 2016 of US$11.45. Details of the Long‑Term Award are set out on page 22.


31

(d)
Dividends: Mr Kestenbaum is entitled to a cash payment of US$166,124 representing dividend equivalents on the Long‑Term Award accrued between 27 January 2011 and 31 December 2016.

(e)
Outstanding Equity Awards: In accordance with the Employment Agreement, Mr Kestenbaum’s outstanding equity awards (in addition to the cash‑settled restricted stock units described in paragraph (a) and the Long‑Term Award described in (c) above) vested in full on 31 December 2016. Details of these awards are set out on page 22. The stock option granted in August 2011, expired in August 2016.

4.
As explained in the Policy, on termination of Mr Kestenbaum’s employment without cause before 23 December 2017 (which includes the expiry of the Employment Agreement on 31 December 2016), Mr Kestenbaum would be entitled, under the Employment Agreement, to a lump sum severance payment of (i) an amount equal to $1 less than three times his Average Annual Compensation, as defined in the Employment Agreement (in summary, the sum of his average base pay and his average incentive awards granted or vested for the past five years ending on the termination date of 31 December 2016), plus (ii) the grossed‑up cost of two years’ COBRA coverage for Mr Kestenbaum and his dependants under the Company’s health plans. The total value of this lump sum severance payment is US$21,198,656, which is made up of the following elements:

   
Amount
 
Three times average annual base pay for the five years prior to 31 December 2016
 
 
US$2,985,000
 
Three times average annual value of incentive awards* granted or vested for the five years ending 31 December 2016
 
 
US$18,095,410
 
Subtotal (minus US$1)                                                                                                                     
 
 
US$21,080,409
 
Grossed‑up cost of two years’ COBRA coverage for Mr Kestenbaum and his dependants
 
 
US$118,247
 
Total lump sum severance                                                                                                                     
 
 
US$21,198,656
 
 
____________________   
The value of Mr Kestenbaum’s incentive awards for this purpose (which includes the aggregate of both annual bonus and equity awards) for the relevant five‑year period ranged from US$2,158,080 in 2016 (which includes the accelerated vesting of the Long‑Term Award described in paragraph 3(c) above) to US$9,882,359 in 2015.      
 
5.
In order to avoid arbitration proceedings with Mr Kestenbaum in relation to potential claims, including claims arising from the interpretation of the provisions of the Employment Agreement relating to the calculation of the Average Annual Compensation for the purpose of the lump sum severance payment, the Company agreed to pay US$725,497 in exchange for a release of such claims.

6.
Payment of the sums and provision of the benefits described above (other than accrued obligations and the annual bonus) were conditioned upon Mr Kestenbaum’s execution and non‑revocation of a release of claims in favour of the Company.

7.
In order for the Company to have flexibility on timing of the payment of the lump sum severance payment amount described in paragraph 4, it was agreed that the Company would be entitled to make all or part of this payment on a deferred basis (but no later than 30 June 2017). If it does so, the Company agreed to pay simple interest at a 5% annual rate. As the Company did defer part of this payment, a sum of $23,231 was paid by way of interest.

8.
All sums payable to Mr Kestenbaum will be subject to all deductions in respect of taxation and social security that the Company is required by law to make.

9.
If payments set out above would be subject to the excise tax under Section 4999 of the Code, the payments may be reduced so that the value will not exceed the safe harbour amount specified in Section 280G(b)(3) of the Code, if it is determined that Mr Kestenbaum would receive a greater net after tax amount if the aggregate payments were so reduced. It is not anticipated that such reduction would be made.

10.
Mr Kestenbaum reaffirmed that the post‑termination restrictive covenants in his Employment Agreement will remain in full force and effect.


32

11.
The payments set out above are consistent with the Policy, which specifically adopts the Employment Agreement. In accordance with its powers under the Policy, the Committee approved minor amendments to the Policy to aid the implementation of the Policy by authorising the Committee (a) to make the payments described in paragraph 5 and 7, and (b) the use of the 27 December 2016 share price (rather than that on 30 December 2016, the 31 December 2016 date referred to in the Employment Agreement being a non‑trading day) for calculating the termination payments.

Performance graph and Mr Kestenbaum remuneration table

The graph below illustrates the Company’s TSR performance relative to the constituents of the S&P 1200 Metals & Mining index from the start of the first day of listing of Ferroglobe’s shares on 24 December 2015 to 31 December 2016. The graph shows performance of a hypothetical $100 invested and its performance over that period. The index has been chosen for this table as the most appropriate comparator for the Company in this period as the Company is a constituent of this index and uses the constituents of this index for one of the TSR comparator groups for the long‑term incentive awards.


   
2015
   
2016
 
Mr Kestenbaum’s total remuneration                                                                                                           
 
$
225,551
   
$
1,870,120
 
Annual bonus (% of maximum)                                                                                                           
   
N/A
     
17.5
%
Share award vesting (% of maximum)                                                                                                           
   
N/A
     
N/A
 

Notes:

In respect of 2015, remuneration is shown for the period 23 December 2015 to 31 December 2015 only.

There was no long‑term incentive vesting (or with a performance period ending) in the period 23 December 2015 to 31 December 2015.

The period 23 December 2015 to 31 December 2015 is part of the Pre‑Closing Bonus as described on page 34. Under the legacy arrangements, a cap applied in respect of bonuses across 2015 and 2016 performance periods. Therefore, it is not possible to state a percentage of the maximum in respect of 2015.


33

The bonus in respect of 2016 reflects the percentage of maximum award. As stated elsewhere in this report, the bonus as a percentage of target was 35%.

The share award vesting percentage reflects the awards vesting in the ordinary course in the period 1 January 2016 to 31 December 2016, and not the awards vesting by reason of the termination of Mr Kestenbaum’s appointment.

Percentage increase in the remuneration of the Executive Chairman

Remuneration data for 2015 covers only the period 23 December 2015 to 31 December 2015. It is therefore not appropriate to set out the percentage change in remuneration between 2015 and 2016 as it would not compare remuneration for equal periods. Full disclosure in the percentage change in remuneration of the Executive Chairman and of the employees between 2016 and 2017 will be included in the 2017 directors’ remuneration report.

Relative importance of the spend on pay

The following table shows the Company’s actual spend on pay for all employees compared to distributions to shareholders in the financial year. Note the figures shown below are for the combined business of Globe and FerroAtlántica for a full financial year for 2016 and only nine days for 2015.

   
23 December
2015 to
31 December
2015
   
1 January
2016 to
31 December
2016
 
Employee costs                                                                                         
 
 
US$6,584,688
   
 
US$293,032,000
 
Average number of employees                                                                                         
   
4,151
     
4,085
 
Distributions to shareholders                                                                                         
   
   
 
US$54,988,000
 

External directorships during financial year 2016

Mr Kestenbaum

Principal, board member and investor of Bedrock Industries LP.

Mr Kestenbaum’s contract provided that he spend at least 70% of his working week as the Executive Chairman of Ferroglobe.

Mr López Madrid

Managing Director of Grupo VM.

Non‑Executive Chairman and investor of Siacapital and Tressis.

The Board was satisfied that under these arrangements the Executive Chairman and Executive Vice‑Chairman both had the necessary time to carry out their duties effectively during 2016.

Under the Policy, Executive Directors may retain fees paid for external director appointments. These appointments are subject to approval by the Board and must be compatible with their duties as Executive Directors.

Membership of the Committee

The Committee comprises Javier Monzón as chairman and members Donald G. Barger, Jr., and Greger Hamilton.

The Executive Chairman and other members of the management team as well as the other Non‑Executive Directors may be invited to attend meetings to assist the Committee in its deliberations, as appropriate. No executive, however, may be present during any decision making in relation to their own remuneration.


34

External advisors

Aon provides independent advice to the Committee and was appointed by the Committee in early 2016. The Committee seeks advice relating to executive remuneration and non‑executive director remuneration and the wider senior management population from Aon. Aon also provided advice to management, to enable their support of the Committee, primarily in relation to remuneration reporting and the operation of incentive plans, but does not provide any other services to the Company except for insurance broking services.

The Committee is satisfied that the advice received from Aon in relation to executive remuneration matters is objective and independent. Aon is a member of the U.K. Remuneration Consultants Group and abides by the Remuneration Consultants Group Code of Conduct, which requires its advice to be objective and impartial. The fees paid to Aon for advice provided directly to the Committee in 2016 were £142,544 ($183,183) (excluding VAT).

Statement of shareholder voting

The following table shows the results of:

the binding vote on the Policy commencing from the 29 June 2016 Annual General Meeting; and

the advisory vote on the 2015 Remuneration Report at the 29 June 2016 Annual General Meeting.

   
For
   
% of
votes cast
   
Against
   
% of
votes cast
   
Withheld
 
Directors’ Remuneration Policy                                                                               
   
146,616,626
     
92.09
     
12,580,971
     
7.90
     
9,119
 
Remuneration Report                                                                               
   
153,070,500
     
96.14
     
6,126,951
     
3.85
     
9,265
 

Approval

This Directors’ Remuneration Report, including both the Policy and Annual Report on Remuneration has been approved by the Board.

Signed on behalf of the Board.

 
 
Javier Monzón

Chairman of the Compensation Committee

30 May 2017


35

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FERROGLOBE PLC

We have audited the financial statements of Ferroglobe PLC for the year ended 31 December 2016 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement, the Company Balance Sheet, the Company Statement of Changes in Equity and the related notes 1 to 39 to the Consolidated financial statements and notes 1 to 7 to the Company financial statements. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (‘IASB’). The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom accounting standards (United Kingdom Generally Accepted Accounting Practice), including FRS 101 “Reduced Disclosure Framework”.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non‑financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion:

the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2016 and of the Group’s loss for the year then ended;

the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

the financial statements have been prepared in accordance with the requirements of the Companies Act; and, as regards the Group financial statements, Article 4 of the IAS Regulation.

Separate opinion in relation to IFRSs as issued by the IASB

As explained in Note 3 to the Group financial statements, the Group in addition to applying IFRSs as adopted by the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (IASB).

In our opinion the group financial statements comply with IFRSs as issued by the IASB.


36

Opinion on other matters prescribed by the Companies Act

In our opinion, based on the work undertaken in the course of the audit:

the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act;

the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

the Strategic Report and the Directors’ Report have been prepared in accordance with the Companies Act.

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report and the Directors’ Report.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act requires us to report to you if, in our opinion:

adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or

certain disclosures of directors’ remuneration specified by law are not made; or

we have not received all the information and explanations we require for our audit.

 
 
 
Makhan Chahal (Senior statutory auditor)
for and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
1 June 2017


37

Financial Statements Contents

 
Page
Consolidated statement of comprehensive income
40
Consolidated balance sheet
41
Consolidated statement of changes in equity
42
Consolidated cash flow statement
43
Notes to the consolidated financial statements
44
Company balance sheet
106
Company statement of changes in equity
107
Notes to the company financial statements
108


38

Ferroglobe PLC
Consolidated income statement
For the year ended 31 December 2016

   
Note
   
Year ended
31 December
2016
US$’000
   
Year ended
31 December
2015
US$’000
 
Sales
   
5
     
1,555,657
     
1,289,886
 
Cost of sales
           
(1,043,000
)
   
(817,875
)
Other operating income
           
25,712
     
15,500
 
Staff costs
   
8
     
(293,032
)
   
(202,585
)
Other operating expense
           
(234,326
)
   
(190,034
)
Depreciation and amortization charges, operating allowances and write‑downs
   
9
     
(121,346
)
   
(62,201
)
Operating (loss) profit before impairment losses, net gains/losses due to changes in the value of assets, gains/losses on disposals of non‑current assets and other loss
           
(110,335
)
   
32,691
 
Impairment losses
   
10
     
(267,449
)
   
(52,042
)
Other gains and losses
   
11
     
2,191
     
(3,467
)
Operating (loss) profit
           
(375,593
)
   
(22,818
)
Finance income
   
12
     
1,534
     
1,095
 
Finance costs
   
12
     
(24,585
)
   
(23,738
)
Exchange differences
           
(3,513
)
   
35,904
 
(Loss) profit before taxes
           
(402,157
)
   
(9,557
)
Income tax
   
13
     
46,609
     
(48,719
)
(Loss) profit from continuing operations
           
(355,548
)
   
(58,276
)
(Loss) Profit for discontinued operations
   
14
     
(3,065
)
   
(196
)
(Loss) profit for the year from continuing operations
           
(358,613
)
   
(58,472
)
Discontinued operations
                       
Loss attributable to non‑controlling interests
   
32
     
20,186
     
15,204
 
Loss for the year
           
(338,427
)
   
(43,268
)
(Loss) profit attributable to the parent company
           
(338,427
)
   
(43,268
)

         
2016
   
2015
 
Earnings per share
                 
From continued and discontinued operations
                 
(Loss) profit attributable to the Parent company
         
(338,427
)
   
(43,268
)
Average number of shares outstanding
         
171,838,153
     
99,699,262
 
Basic (loss) earnings per share
   
16
     
(1.97
)
   
(0.43
)
Effect of dilutive securities
           
     
 
Diluted (loss) earnings per share
   
16
     
(1.97
)
   
(0.43
)
From continued operations
                       
(Loss) profit attributable to the Parent company
           
(335,362
)
   
(43,072
)
Average number of shares outstanding
           
171,838,153
     
99,699,262
 
Basic (loss) earnings per share
   
16
     
(1.95
)
   
(0.43
)
Effect of dilutive securities
           
     
 
Diluted (loss) earnings per share
   
16
     
(1.95
)
   
(0.43
)
From discontinued operations
                       
(Loss) profit attributable to the Parent company
           
(3,065
)
   
(196
)
Average number of shares outstanding
           
171,838,153
     
99,699,262
 
Basic (loss) earnings per share
   
16
     
(0.02
)
   
 
Effect of dilutive securities
           
     
 
Diluted (loss) earnings per share
   
16
     
(0.02
)
   
 

Notes 1 to 39 are an integral part of the consolidated financial statements.

39

Ferroglobe PLC
Consolidated statement of comprehensive income
For the year ended 31 December 2016

   
 
2016
US$’000
   
 
2015
US$’000
 
Loss for the year
   
(358,613
)
   
(58,472
)
Items that will not be reclassified subsequently to income or loss:
               
Remeasurement of defined benefit obligation
   
4,297
     
756
 
Total
   
4,297
     
756
 
Items that may be reclassified subsequently to income or loss:
               
Arising from cash flow hedges
   
     
(990
)
Translation differences
   
(319
)
   
(18,435
)
Tax effect
   
     
(189
Total income and expense recognized directly in equity
   
(319
)
   
(19,614
)
Items that have been reclassified to income or loss in the period:
               
Arising from cash flow hedges
   
3,002
     
3,155
 
Tax effect
   
(751
)
   
(884
)
Total transfers to income or loss
   
2,251
     
2,271
 
Other comprehensive income/(loss) for the year, net of income tax
   
6,229
     
(16,587
)
Total comprehensive (loss) income for the year
   
(352,384
   
(75,059
)
Attributable to the Parent
   
(332,198
)
   
(59,855
)
Attributable to non‑controlling interests
   
(20,186
)
   
(15,204
)

Notes 1 to 39 are an integral part of the consolidated financial statements.

40

Ferroglobe PLC
Consolidated balance sheet
As at 31 December 2016

   
Note
   
 
2016
US$’000
   
 
2015
US$’000
 
ASSETS
                     
Non‑current assets
                     
Goodwill
   
17
     
230,210
     
426,851
 
Other intangible assets
   
18
     
62,839
     
71,619
 
Property, plant and equipment
   
19
     
781,606
     
971,573
 
Non‑current financial assets
   
20
     
5,823
     
9,672
 
Non‑current financial assets from related parties
   
39
     
9,845
     
 
Deferred tax assets
   
26
     
44,950
     
39,070
 
Non‑current receivables from related parties
   
39
     
2,108
     
 
Other non‑current assets
   
24
     
20,245
     
20,615
 
Total non‑current assets
           
1,157,626
     
1,539,400
 
Current assets
                       
Inventories
   
23
     
316,702
     
425,372
 
Trade and other receivables
   
21
     
209,406
     
275,254
 
Current receivables from related parties
   
39
     
11,971
     
10,950
 
Current income tax assets
           
19,869
     
9,273
 
Current financial assets
   
20
     
4,049
     
4,112
 
Other current assets
   
24
     
9,810
     
10,134
 
Cash and cash equivalents
           
196,931
     
116,666
 
Assets classified as held for sale
   
14
     
92,937
     
 
Total current assets
           
861,675
     
851,761
 
Total assets
           
2,019,301
     
2,391,161
 
EQUITY AND LIABILITIES
                       
Equity
                       
Share capital
           
1,795
     
1,288,787
 
Reserves
           
1,332,428
     
143,170
 
Translation differences
           
(217,423
)
   
(217,104
)
Revaluation reserves
           
(11,887
)
   
(18,435
)
Result attributable to the Parent
           
(338,427
)
   
(43,268
)
Non‑controlling interests
           
125,556
     
141,823
 
Total equity
   
31
     
892,042
     
1,294,973
 
Non‑current liabilities
                       
Deferred income
           
3,949
     
4,389
 
Provisions
   
30
     
81,957
     
81,853
 
Borrowings
   
25
     
179,473
     
223,676
 
Obligations under finance leases
   
27
     
3,385
     
89,768
 
Grants and other financial liabilities
   
28
     
86,467
     
7,549
 
Other non‑current liabilities
   
29
     
5,737
     
4,517
 
Deferred tax liabilities
   
26
     
139,535
     
191,748
 
Total non‑current liabilities
           
500,503
     
603,500
 
Current liabilities
                       
Provisions
   
30
     
19,627
     
9,010
 
Borrowings
   
25
     
241,818
     
182,554
 
Obligations under finance leases
   
27
     
1,852
     
13,429
 
Grants and other financial liabilities
   
28
     
1,592
     
 
Trade and other payables
   
29
     
254,185
     
287,695
 
Liabilities associated with assets classified as held for sale
   
14
     
107,682
     
 
Total current liabilities
           
626,756
     
492,688
 
Total equity and liabilities
           
2,019,301
     
2,391,161
 

Notes 1 to 39 are an integral part of the consolidated financial statements

The financial statements were approved by the board of directors and authorised for issue on 30 May 2017. They were signed on its behalf by:

 
 
Director
Greger Hamilton


41

Ferroglobe PLC
Consolidated statement of changes in equity
For the year ended 31 December 2016

   
Shares
   
Share
capital
US$’000
   
Reserves
US$’000
   
Translation
differences
US$’000
   
Valuation
adjustments
US$’000
   
Result for
the year
US$’000
   
Interim
dividend
US$’000
   
Non
controlling
interests
US$’000
   
Total
US$’000
 
Balance at December 31, 2014
   
200
     
285,760
     
393,356
     
(152,530
)
   
(20,283
)
   
38,437
     
(55,041
)
   
17,978
     
507,677
 
Comprehensive (loss) income for 2015
   
     
     
     
(18,435
)
   
1,848
     
(43,268
)
   
     
(15,204
)
   
(75,059
)
Business combination
   
171,638
     
553,200
     
244,838
             
     
     
     
144,533
     
942,571
 
FerroAtlantica share exchange
   
     
449,827
     
(449,827
)
   
     
     
     
     
     
 
Share issuance costs
   
     
     
(9,414
)
   
     
     
     
     
     
(9,414
)
Dividends paid (Note 15)
   
     
     
(76,520
)
   
     
     
     
55,041
     
     
(21,479
)
Distribution of 2014 profit
   
     
     
38,437
     
     
     
(38,437
)
   
     
     
 
Other changes
   
     
     
2,300
     
(46,139
)
   
     
     
     
(5,484
)
   
(49,323
)
Balance at 31 December 2015
   
171,838
     
1,288,787
     
143,170
     
(217,104
)
   
(18,435
)
   
(43,268
)
   
     
141,823
     
1,294,973
 
Comprehensive income (loss) for 2016
   
     
     
     
(319
)
   
6,548
     
(338,427
)
   
     
(20,186
)
   
(352,384
)
Share decrease (net effect)
   
     
(1,287,068
)
   
1,287,068
     
     
     
     
     
     
 
Share issuance costs
   
     
     
(275
)
   
     
     
     
     
     
(275
)
Dividends paid (note 15)
   
     
     
(54,988
)
   
     
     
     
     
     
(54,988
)