Reaching 58 Million Global Unique Users Every Month 01 Future Plc

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Future plc Annual Report and Accounts 2013

Reaching 58 million global unique users every month 01 Future plc

Group highlights Overview Future plc is an international media group and leading digital publisher, listed on the London Stock Exchange (symbol: FUTR). These highlights refer to the Group’s annual results for the year ended 30 September 2013.

Revenue Net Debt £112.3m £(6.9)m 2012: £123.5m (-9%t ) 2012: £(14.1)m +51%s

EBITDAE represents EBITDAE Pre-tax Profit earnings before interest, tax, depreciation, amortisation and exceptional items. £7.6m £5.8m 2012: £9.4m (-19%t ) 2012: £1.1m (+427%s)

EBITE represents earnings EBITE Dividend per Share before interest, tax and exceptional items. £4.7m 0.2p 2012: £6.8m (-31% t) 2012: -

A Year of Awards

Future has won more than 40 major industry awards in the last twelve months. Highlights include:

04.13 05.13 05.13

Future US’s integrated Hyundai/Walking Dead Future is named Media Company of the Year Future’s Consumer Insight unit wins at the digital and experiential campaign is named at the British Media Awards in May. Future International FIPP Research Forum Awards winner of the Excellence Award at the annual is the biggest winner on the night: Digital 2013 for its research into ‘Embracing the international Communicator Awards, recognising Camera also wins Print Product of the Year Opportunity of Apple’s Newsstand’. Judges big ideas in marketing and communication. and the Marketing team behind Mollie Makes said: “This is an outstanding piece of is named Media Marketing Team. research into ways of making the most of the potential for digital platforms.” Annual Report and Accounts 2013 02 Strategic Report

Strategic Report

01 Group highlights 03 Chairman’s statement 05 Chief Executive’s review 07 Business model 09 Where we operate 11 What we do 13 Business review 19 Risks and uncertainties 21 Corporate responsibility

Normalised Digital Revenues Normalised Digital Advertising Financial Review

Financial Review 23 Financial review +38% 59% year-on-year of total advertising revenues (2012: 48%)

Normalised Unique Users Normalised Digital Edition Revenues 57.7m +44% a month (+14% year-on-year) year-on-year

Corporate Governance Corporate Governance

Normalised results are presented to better reflect the current 29 Board of Directors size and structure of the business and give a better indication of the performance of the ongoing business. The normalised 31 Directors’ report results exclude revenues and costs relating to activities closed or divested between 1 October 2011 and 30 September 2013, but 35 Corporate Governance report include any new activities launched or acquired in that period. 41 Directors’ remuneration report 52 Independent auditors’ report

Financial Statements Financial Statements

55 Financial statements 88 Normalised results 89 Notice of Annual General Meeting 94 Investor information

06.13 09.13

Future secures the Association of Online Future picks up the Consumer Digital Publishers’ Award as Consumer Digital Publisher of the Year Award at the Professional Publisher of the Year for an unprecedented Publishers Association for the second year third year running. Judges praise Future’s running. Future is now unprecedented in “outstanding achievement in the digital winning all of the ‘big three’ industry awards in media environment”. a single year. 03 Future plc

Chairman’s statement Gathering momentum

We are pleased with the results, which show the business gathering momentum in the second half and ending the year with every sector performing well. We believe the advances in digital revenues mark an important turning point for the business, with advertising revenues now two thirds digital.

Peter Allen Chairman

“The improvement in The strategy agreed by the Board The improvement in performance over the past two years to diversify and the encouraging trends as we performance and the revenues and reduce dependence entered the 2013-14 financial year encouraging trends as we on print is clearly delivering the were seen by the Board as justifying entered the 2013-14 financial anticipated results. Digital and a resumption of dividend payments, year were seen by the Board Diversified revenues − including which were suspended in 2011. We revenues from digital circulation, will therefore pay a dividend of 0.2p as justifying a resumption of digital advertising, digital commerce, per share for all shareholders on the dividend payments.” FutureFolio, Future Plus and events register as at 14 February 2014. This − are now one third of the business decision reflects confidence in the and we are on a trajectory to maintain business and the prospects for the this momentum. period ahead.

It has been particularly encouraging to We are delighted to welcome Zillah see an effective focus on increasing Byng-Maddick as Chief Financial monetisation of our digital traffic and Officer. She brings with her invaluable to follow the development of our digital experience of managing the print- agency activity in the US and the UK to-digital transition at Trader Media, as a substantial new business. publisher of Auto Trader. We thank her predecessor, Graham Harding, We have placed great emphasis on for his contribution as CFO and many managing our operating margins, and years of distinguished service to continue to re-engineer our cost base Future and we wish him well. as part of that focus. We are pleased with progress in this area and the efforts undertaken to reduce costs in the UK and streamline the business organisation by removing some layers Peter Allen of management. Chairman Annual Report and Accounts 2013 04 Strategic Report The Future Mission

To reach and grow high-value global audiences with world-class content produced by talented experts; and to be tireless innovators in the way we engage with those consumers and generate value for Future and our commercial partners. Financial Review Corporate Governance Financial Statements 05 Future plc

Chief Executive’s Significant progress review Future has achieved further significant progress in the transition to a diversified digital business and delivered revenue growth, despite challenging trading conditions over much of the year. Digital revenues rose 38% − the highest rate of growth in recent years − and we passed a significant inflection point, with more than half of all advertising revenues (59% across the Group) now digital. This demonstrates how far the business has developed in its digital transformation.

Mark Wood Chief Executive

Our strategy Driving Future’s transformation into a The past 12 months have 01. global, digitally-led content business seen Future make good progress against its strategy as we maintain momentum Focussing on building brands across towards digital transition and channels – TechRadar is our no.1 priority diversified revenues. 02.

Innovating digitally to increase audience 03. engagement and diversify monetisation

Managing our print assets for 04. cash generation

Constantly controlling costs & targeting 05. investment to manage margin

Overview a loss in the prior year of £2.7m, with growth in digital revenues more than offsetting print Overall, Digital and Diversified revenues − declines. A cyclical decline in the Games market including revenues from digital circulation, was a significant drag on the business in the digital advertising, digital commerce, software first three quarters. But by the fourth quarter business FutureFolio, custom publishing Games had substantially recovered and trading business Future Plus and events − made up was stronger in Q4 across all other sectors. 32% of the business. During the second half a number of key As a result of disposals and restructuring we elements of the transition programme were have strengthened the balance sheet, net delivered: the US was operating profitably and debt has been halved to £6.9m (leverage 0.99 restructuring activity in the UK was completed times) and a new four year £25m maturing which will deliver margin benefits in 2014. credit facility agreed. Second half performance was significantly better than the first half and, after an encouraging fourth quarter, we Digital growth across all key brands entered the 2013-14 financial year with forward advertising bookings pacing ahead of last year. We increased our digital reach by 14% to 58 million unique users (UUs) a month. Future For the year as a whole, revenues grew by 3% now has 14 websites that each attract more than and profit before tax came in at £1.9m against one million UUs a month. We achieved greater Annual Report and Accounts 2013 06 Strategic Report No.1 No.1 No.1 PC Gamer is the world’s BikeRadar is the world’s MusicRadar is the world’s most popular PC most popular cycling most popular website gaming website reviews website for musicians Financial Review audience engagement across the portfolio, with Warehouse, Canon, Microsoft and Tesco. new titles into areas where we identify page views rising 19% to 328 million, increased In the fast-growing Photography market, Future opportunity for revenue and profit growth. dwell times and a 32% increase in average is the market-leading publisher in print and Recent new launches have included revenue per user across all sites. digital formats and our interactive Photography Love Patchwork & Quilting and Science Week tops the sector on Apple’s Newsstand. Uncovered, a mainstream science title We saw sustained digital growth across all We also secured the licence to stage The aimed at the 16-25 demographic. key sectors of the portfolio – Technology, Photography Show, set to be Europe’s biggest Games, Photography, Sport, Crafts, Music annual event of its kind, at the Birmingham We have significantly mitigated the impact and Digital Creative. NEC. The Photography Show will debut in of declines in mainstream title sales by March 2014. Our Events division, launched substantially expanding production of high- TechRadar, the news and reviews site which in 2012, also launched successful B2B value specials and bookazines. We print these is Future’s top brand, reached 20 million conferences and shows in Photography, in the UK, US and China and are targeting UUs a month and continued to grow a global Digital Creative and Music in the last year. markets in the US, Asia, UK and Europe. audience. TechRadar US more than doubled This demonstrates the success of our model its audience to 8.3 million UUs and was one of creating the best brands and content in a of the fastest growing US technology sites. sector and then leveraging this across other Summary & outlook In the UK we launched TechRadar Pro, engagement vehicles. focussed on the business technology sector, We have halved our debt during the year as and saw rapid growth in visitor traffic and In other areas, FutureFolio, our tablet edition a result of selling our portfolio of Rock titles, advertiser interest. software, extended its customer list. New closing loss-making titles and successfully clients include the Daily Telegraph and securing sub-letting deals in the US and UK, TechRadar is now unchallenged as the publishing group Redan, which has chosen reducing our property liabilities by £1.4m.

UK’s number one technology website and is FutureFolio to publish a highly interactive We maintain a rigorous focus on operating Corporate Governance increasingly competing with CNet in global version of the magazine based on the hugely margins. We have reshaped the business markets. Future’s CyclingNews and BikeRadar popular children’s character Peppa Pig. In to support our increasingly digital revenues, are global leaders in their sectors, while CVG, addition, we increased revenues from real-time reducing headcount in the UK to its lowest PC Gamer and GamesRadar all had market- programmatic data trading, which enables us level for more than 10 years. leading positions in the UK and US. Creative to monetise unsold advertising inventory. Bloq took the lead in the high-value UK Digital Future has developed an entrepreneurial and Design space within a year of launch and innovative culture and is well positioned to generated traffic of more than 2.2 million International growth seize opportunities as digital markets evolve. UUs a month. More than 40% of the Group’s revenues Future won all three top UK awards for Digital Revenues from Future’s digital editions on were generated outside the UK in the last Publisher of the Year in 2013, the first company tablets such as the iPad increased by 44% on year. In the US, revenues increased by 6% ever to take every top industry honour. This the prior year and Mac|Life, our US title, saw and in Australia by 23%, boosted by the is evidence that the Company is seen as subscriptions increase to 80,000. We now acquisition of two technology brands. These undisputed digital leader by the rest of the UK have more than 340,000 digital subscriptions have made Future a leader in the technology media industry. worldwide and renewal rates have been sector and will provide leverage to build running at close to 70%. TechRadar Australia. We will put that innovative flair to work as we continue to build Future’s digital business at We continue to see Future’s biggest speed in the year ahead. Innovation and diversified revenues opportunities internationally in the US and have an efficient model for repurposing Looking forward, we see the encouraging Q4 Content Marketing was an area of substantial UK-produced content for the American trends continuing with forward advertising

digital growth and is developing into a market. As well as significant growth in the US bookings up year-on-year, and revenue Financial Statements material new business area. Future has Technology and Games sectors, we see further momentum across all sectors. developed expertise in managing consumer potential in Photography, Crafts and Cycling. engagement and marketing campaigns for As we began the 2013-14 financial period, major brands in both the US and the UK. In Europe, we launched a French-language trading was in line with our expectations across Revenues from new business in this area version of MusicRadar and began producing all parts of the business. doubled and are now generating more than Sport and Technology content for print and 15% of total advertising revenues. digital products in German and Italian.

Future US created the blueprint, winning content production, audience engagement Agile management of our and experiential marketing campaigns for magazine portfolio major partners including Hyundai, Bethesda Mark Wood and DTS. The UK built on that experience We manage our print business for cash Chief Executive and secured content marketing campaigns generation and have continued to innovate for brands including Samsung, Carphone in creating new revenue streams. We launch 07 Future plc

Business model Creating value

Future is focussed on growing and engaging high-value global audiences. We create shareholder value by monetising these audiences and the meaningful engagement our reach delivers for our commercial partners.

The Future Advantage

We’re proud of the entrepreneurial 01. 02. and innovation-led culture at Future. We have world-class content creators and digital innovators whose passion is to connect, inspire and entertain the millions of engaged consumers who make up our global audience.

Our borderless communities of interest continue to enable our global expansion, Content Consumers and we’re trusted to help consumers make informed purchase decisions through content channels online, on mobile and in print. Creating high quality and Focussing on sectors in growth, Our audience reach and our high levels of unique branded content for and entertaining and informing engagement allow us to create innovative our engaged international our consumers. and successful consumer engagement for our commercial partners. communities of interest.

Our brands are our most important channels Across the globe, our consumers are united – and they are powered by our passionate, by one thing – they love and trust our content. world-class expert journalists, designers, Whether they’re following minute-by-minute developers and editors. In the last year our coverage of the Giro D’Italia on Cyclingnews.com people have won more than 40 industry or they were one of over four million people to awards and their talent, experience, creativity watch T3’s exclusive un-boxing video review of and innovation is recognised internationally. the PS4 in July 2013. Our people live our brands. Future creates trusted content, and in so doing Our focus on specialist sectors that ignite the we create loyal communities of interest. passions of consumers the world over allows Future to create branded content that travels in Increasingly our content is used in real the new borderless digital media landscape. time to influence and inform purchase decisions. TechRadar – which now reaches From T3 to Total Film, Digital Camera to over 20 million unique users a month globally – Computer Arts, Mollie Makes to Procycling, is a prime example of a Future brand selected we create brands our consumers keep coming by consumers already in the purchase funnel, back to again and again. actively looking for guidance they trust. Annual Report and Accounts 2013 08 Strategic Report

Future in numbers

58m Online

We have 58 million unique users from across the globe visiting our web properties monthly Financial Review

03. 04. 6.5m Social Media

Future has 6.5 million followers across all the main social networks

Engagement Partnership

Monetising consumers through Monetising our audiences via innovative engagement models. access to these communities for our commercial partners. £0.75m Corporate Governance Digital Editions

Over £0.75m gross revenue a month via all digital editions. Over five million sales across all channels in 2013

We deliver revenues from print and digital Our brands are hubs for our communities of product sales – we sold over 19 million interest. They provide a range of touchpoints magazines and over five million digital editions into their lives – online, on mobile, in print, in the last year. and beyond.

Future has focussed on developing multi- And they provide valuable opportunities for our channel engagement with its consumers. commercial partners to engage with passionate With 14 digital properties now attracting over enthusiasts and active purchasers alike. a million unique users a month, we have 132m extended page views and dwell times on our Future has rapidly developed a diversified Video own sites and utilised social networks to reach revenue stream in its content marketing new consumers. As we increase engagement offering: providing integrated creative solutions Last year our video content had we are evolving new ways to monetise and digital agency services to a growing roster over 132 million views – that’s our audiences, above all through affiliate of international brands, including Samsung, 706 years’ worth of content

partnerships with retailers. Hyundai, O2, and Carphone Warehouse. Financial Statements Future’s Content Marketing revenues have Our new Events business is a vital part of our doubled in the last 12 months – delivering consumer engagement across photography, tangible return on investment to clients as technology, design and music sectors. well as winning international awards. 19m Print

Over 19 million printed copies sold in 2013 – that’s 37 every minute of every day 09 Future plc

Where we operate A global business

Future’s focus is on creating high quality content that travels. Our innovation and agility has placed us at the centre of the digital media revolution and the last year has seen massive growth in our international audience. We now reach 58 million unique users globally each month and 75% of our digital edition sales are to non-UK consumers.

Future has become a global leader in publishing on the iPad through Apple’s Newsstand, with over £16m in gross revenue since its launch in October 2011. In 2013 Future sold over five million digital editions across all platforms and three quarters of our market is outside the UK.

And international partners are showing keen interest in licensing FutureFolio for their own brands. We are working with publishers in the US, Germany, Spain, Portugal, Brazil and Taiwan, and FutureFolio is now signed up to power 90 digital editions for partners.

We have strategic partnerships with 82 overseas media businesses, and 218 licences and licensed editions available in 92 countries worldwide – making us the largest UK-based publisher by licence. The enhancement of our product offerings makes it easier than ever for international partners to utilise our best-in- class content.

These initiatives include the development of our website technology solutions and the introduction of a dedicated translation unit to provide local language content to our digital and print content partners.

At a glance 58m 82 218 Global unique users Strategic partnerships Licensed editions a month with overseas partners available in 92 countries Annual Report and Accounts 2013 10 Strategic Report

Top 10 Countries for Top 10 International Top 10 Countries by Top 10 International Top Five Countries Digital Editions Digital Brands Licensed product Licensing Brands for Export

1 United States 1 Mac|Life 1 Germany 1 T3 1 United States 2 United Kingdom 2 T3 2 Brazil 2 Digital Camera 2 Australia 3 Australia 3 N-Photo 3 Spain 3 Procycling 3 Canada 4 Canada 4 Digital Camera World 4 Thailand 4 Computer Arts 4 New Zealand 5 Germany 5 Maximum PC 5 Sweden 5 Cycling Plus 5 South Africa 6 Norway 6 Photography Week 6 Malaysia 6 Total Film 7 The Netherlands 7 PC Gamer 7 Italy 7 PC Format 8 Denmark 8 Total Film 8 Indonesia 8 X box: The Official 9 South Africa 9 MacFormat 9 Lebanon Magazine 10 Singapore 10 Edge 10 South Africa 9 Mollie Makes 10 Mountain Biking UK

Digital edition sales

Primary markets

Secondary markets Financial Review Corporate Governance Financial Statements

No.1 3m 75% UK licensor of monthly Future magazines sold of digital edition sales magazines by value overseas each year outside the UK 11 Future plc What we do Our portfolios

Future plc is an international media group and leading digital business. We have operations in the UK, US and Australia, creating more than 200 publications, apps, websites and events across ten content portfolios.

• We hold market-leading positions in Technology, Photography, Games, Guitars, Creative & Design, Craft Technology Computing and Sport sectors. Future’s sector-leading Technology Mac|Life is the ultimate source portfolio is constantly innovating, of all things Apple in the US – it is • We attract 58 million monthly reflecting the fast-moving markets in our biggest-selling digital edition global unique users to our websites, which it operates. Today, we reach at over 80,000 copy sales monthly. which include TechRadar.com, more technology enthusiasts than ever Windows 7: Help & Advice magazine before through digital, print and events. continues to serve the world’s GamesRadar.com, BikeRadar.com More than 27 million unique users every largest installed operating system. and MusicRadar.com. month use our influential websites, Elsewhere, MacFormat, the number including TechRadar.com, T3.com one Apple title in the UK, celebrated and Gizmodo.co.uk. TechRadar alone its 20th anniversary in 2013. Its fully • Future sold more than 19 million reaches more than 20 million unique interactive iPad edition continues print magazines last year, that’s 37 users a month, and is the UK’s biggest to grow sales since the new format magazines sold every minute. Our technology reviews website. T3, our launched in July 2013. And Linux flagship technology and lifestyle brand, Format, the world’s number one most well-known brands include T3, is the world’s leading multiplatform technology magazine covering open Cycling Plus, Total Film, Mollie Makes technology media brand and is the source software and Linux operating and Xbox: The Official Magazine. market leader on iPad in the UK. systems, continues to thrive.

• Future has developed its own app-creation software, FutureFolio. Key brands: Key brands: We produce over 100 digital editions, TechRadar.com Mac|Life and have sold over 5 million digital T3 MacFormat issues in the last year. Gizmodo.co.uk Windows 7

• Future has 218 licensed properties available in 92 countries, making us the UK’s number one exporter and licensor of magazine content.

Games Film

Follow Future Our Games portfolio holds a unique Future is a leading film publisher, with position in the global games media a strong multiplatform portfolio across market, combining the strongest games print, tablet, online, video, mobile, apps industry partnerships with an innovative and events. Future’s movie websites multi-channel approach. We are the attract over 44 million page views each @futureplc only games media owner with audience month. Total Film, an exemplar of a reach across print, digital editions, modern multiplatform brand, is the online, social, video, mobile, on-console flagship title in a portfolio that includes and events. The consumer engagement SFX, SFX Presents and Comic of Future’s games brands – including Heroes. We have a unique position in www.linkedin.com/company/future-publishing GamesRadar.com, CVG.co.uk and the market, delivering cross-platform PC Gamer – is at a record high, campaigns to influential movie fans delivering a global monthly reach of throughout the full product lifecycle of a over 15 million, up 14% year-on-year. movie: from the early buzz to cinematic The Games portfolio records more than and DVD release. four million views of its video content across its YouTube sites every month.

Key brands: Key brands: GamesRadar.com Total Film CVG.co.uk SFX PC Gamer Comic Heroes Annual Report and Accounts 2013 12 Strategic Report

Photography Creative & Design Music

Future is the world’s market-leading Future’s Creative & Design group With long-established, market-leading Photography publisher, serving a wide serves professional creatives involved brands like Guitarist, Rhythm, variety of creative audiences through in design, web development and MusicRadar.com and Future Music, a best-in-class mix of digital content, animation. Our magazines such as Future has one of the most highly- Financial Review print products and events. Recent iPad Computer Arts, net, 3D World and respected music portfolios in the launch Photography Week is already ImagineFX have long been influential world. We continue to lead the market the international number one weekly titles in their sectors. But our new through print and digital innovation as on the iPad, while Digital Camera umbrella website, CreativeBloq.com, we look to target more musicians on a is the UK’s best-selling title in print has grown a much bigger international global scale. Guitarist is the magazine and digital editions. We also publish audience since its launch in 2012. With for guitar aficionados, offering the the leading newsstand magazines over two million unique users a month, world’s most authoritative guitar, for Nikon – N-Photo – and Canon – it has already become the UK’s most amplifier and effects reviews.Total PhotoPlus. In March 2014 Future will popular destination for digital creatives. Guitar is the definitive one-stop shop debut The Photography Show at And with its recently launched adaptive for all things guitar. MusicRadar.com, Birmingham’s NEC, which will instantly capabilities it is now reaching more our flagship music-making website, is become the biggest annual event of its international mobile users than ever. the world’s number one destination for kind in Europe. professional musicians.

Key brands: Key brands: Key brands: Digital Camera net Guitarist N-Photo Computer Arts Total Guitar Photography Week CreativeBloq.com MusicRadar.com Corporate Governance

Future Women Sport Auto

Future Women delivers award-winning Future’s depth and reach of content Future’s Automotive portfolio reaches a content to creative and active women makes us the world’s number one broad audience of passionate motoring internationally. Future’s craft brands, cycling publisher, and our portfolio enthusiasts, through its seven auto online, on mobile and in print reach continues to grow. Online, our cycling brands and six auto events. Through over one million women per month. websites now attract over 5 million our specialist motoring magazines, Mollie Makes is now the UK’s number global unique users every month. websites and interactive events, we one contemporary craft brand and Cyclingnews.com is the world’s engage with nearly 900,000 people has a strong and growing international biggest news and results service for whose lives are driven by a love of presence. The Simple Things, our professional cycling, with bulletins modified cars, classic cars, individual mindful consumer brand, has a monthly from around the globe accessible marques and motorbikes. The Future brand reach of over 80,000. And in online, on mobile and in app format. Auto Events Series saw over 73,000 the last 12 months we have launched BikeRadar.com is the go-to site for enthusiasts attend our series last year. two new craft titles into emerging new road cyclists and mountain bikers of Fast Bikes is the magazine for the

sectors – Simply Crochet and Love all levels, a source of product reviews, sports bike fan and is the UK’s top- Financial Statements Patchwork & Quilting – underlining information and a database of cycle selling sports bike title. our innovative approach to developing routes. A 24/7 global operation, it is the new opportunities. world’s biggest digital cycling brand.

Key brands: Key brands: Key brands: Mollie Makes Cycling Plus Fast Car The Simple Things BikeRadar.com Fast Bikes Simply Knitting Cyclingnews.com Classics Monthly 13 Future plc

Business review Driving digital transformation

Future is recognised as a leader in the transition from print to digital media, and 2013 saw good momentum in that progression. The period saw us develop new and diversified revenue streams as we seek to broaden the ways in which we engage with our growing international audiences.

Strategy in execution – examples of success.

Driving Future’s transformation into a 01. global, digitally-led content business

CVG’s adaptive design No.1 destination for UK No.1 photography wins mobile users design professionals weekly on iPad

Adaptive design opens the door to Creative Bloq: Delivering a must-visit Creating the world’s number one iPad optimised mobile opportunities destination for international creatives brand for photographers

CVG, Future’s flagship games news website Our flagship online property for global Future is the world’s leading photography is thriving in what is set to be one of the most design professionals, Creative Bloq has publisher and has been leading the way in exciting times in the UK games market in demonstrated rapid international growth digital innovation and international growth years. Following a major re-launch in May we since launching in 2012. The brand is now the over the last 12 months. Launched in October have seen record traffic, increased commercial UK’s most popular design site, and boasts 2012, Photography Week has rapidly become opportunities and successful brand extensions. over two million monthly unique users. The the international number one photography audience profile truly reflects the site’s global weekly on the iPad. The re-launched CVG was the first UK gaming nature, with the top 10 countries by page site to feature adaptive design, enabling our views including the UK, US, India, Canada, Innovative, packed with interactivity, and with users to access all of CVG’s functionality Australia, the Philippines and Brazil. community at its heart, Photography Week regardless of the device being used. Prior to gives readers a compelling, interactive, fun re-launch we knew over 30% of our traffic was In September the brand entered its second way of learning, regardless of their skill level. coming via mobile or tablet devices. Now CVG phase of development. To capitalise on its The most innovative title in its sector, is platform neutral, users are consuming content success, the extensive evolution responds Photography Week has already become the in greater numbers than ever before, resulting in to the changing ways international users world’s biggest consumer photography brand a 50% year-on-year increase in traffic. interact with the site to provide a richer, on Facebook, as well as establishing itself bespoke experience tailored to their needs. as one of Future’s most profitable digital CVG’s adaptive design also presents our Adaptive design enables users to access all editions. Recently launched as an optimised partners with new advertising formats and of Creative Bloq’s functionality regardless edition for the iPhone as well as the iPad, increased commercial opportunities. We now of the device being used. Whether on a Photography Week was named Digital provide games publishers with all the benefits phone, tablet or desktop – the content scales Innovation of the Year by the Professional of adaptive design but integrated within our perfectly to users’ devices. The new look site Publishers Association in June and named most popular content, meaning that the also offers truly global solutions to Creative one of the 60 best tablet apps in the world at commercial messaging sits perfectly within Bloq’s commercial partners. the international Tabby Awards in July. our engaging editorial. Annual Report and Accounts 2013 14 Strategic Report Building brands across channels

The strength of our brands is at the centre of the Future Advantage. The last year has seen brand reach grow internationally across all our core content sectors. And as our reach grows, so we continue to focus on new ways to generate a deeper level of engagement with consumers across a range of new touchpoints.

Strategy in execution – examples of success.

Focussing on building brands across Financial Review 02. channels – TechRadar is our no.1 priority

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TechRadar has 20 million global Mollie Makes extends brand Record voting at this year’s unique users a month into tablet weekly Golden Joystick Awards

TechRadar: Building a 24/7 global Multiplying the Mollie Makes Creating face-to-face experiences consumer technology brand brand power Future has identified events as a key platform TechRadar has grown to become a true 24/7 The Future Women portfolio of craft brands for strategic brand development and diversified global brand over the last 12 months, and now reaches over one million women per revenue growth, providing face-to-face we have identified it as a priority target for month. Mollie Makes is the UK’s number one opportunities for our communities of interest continued growth in 2014. Globally, TechRadar contemporary craft brand – with a range of to meet and interact with our brands and each is accessed by more than 20 million unique print and digital touchpoints developed in the other. Our Events division delivered a number of users a month and in the last year it launched last year. Its unique approach curates the best new conferences and events over the last year. operations with localised content in the US online craft content into a beautiful, collectable and Australia – allowing us to more effectively magazine at the heart of the brand. Generate, a brand extension from web design monetise those territories. The site has brand net, delivered a very successful debut become a go-to destination internationally for Mollie Makes also has a strong international conference for web design professionals in opinions, exclusives and authoritative reviews presence. It is the number one craft title in London. Meanwhile PhotoLive provided a of everything from mobile phones and tablets Barnes & Noble US – in a category with over brand new two-day learning experience for

to the latest cameras and televisions. 400 titles listed. over one thousand amateur photographers in Financial Statements October. And Future also secured the licence Over 16 million TechRadar unique users In October 2012 we launched Gathered by to produce The Photography Show – a live are from outside the UK. Over the last year Mollie Makes, a weekly tablet-only offering four-day event at Birmingham’s NEC. The TechRadar US more than doubled its audience for contemporary craft fans. Gathered by show will instantly become Europe’s largest to 8.3 million unique users a month, and was Mollie Makes showcases Mollie Makes’ annual event of its kind for consumers and one of the fastest-growing US technology sites. favourite things, and gives users three simple professionals when it debuts in March 2014. Already the US audience for TechRadar is twice weekly craft projects with easy step-by-step as big as the UK’s and continues to grow at guides. Meanwhile a series of Mollie Makes Our existing branded awards events – speed. In the UK, the brand is overwhelmingly bookazines introduced in the last year, including the T3 Gadget Awards and the the market leader. And with offices in San including Mollie Makes Homes and Mollie Golden Joystick Awards – continue to go from Francisco, London and Sydney, the brand Makes Handmade Wedding, have also proven strength-to-strength. The Joysticks delivered a became a truly 24/7 global operation this year. popular and driven revenues for the brand. record-breaking ten million votes this year. 15 Future plc

Business review Increasing engagement

Future has rapidly built a business delivering agency and content marketing solutions for partner brands as we create new and innovative ways to deepen the engagement between our loyal audiences and clients. These new diversified revenues are growing fast.

Strategy in execution – examples of success.

Innovating digitally to increase audience 03. engagement and diversify monetisation

Unique website takeover Delivering impact for the Carphone Warehouse partnership reaches partnership with Microsoft Saints Row IV launch consumers ahead of purchase decision

Future turns green to support Future brings Saints Row IV to life at Future is the ‘Smart Choice’ for Microsoft’s Xbox One San Diego Comic-Con Carphone Warehouse

As Microsoft unveiled its major new console Future US developed an innovative integrated Future’s technology brands – including launch, it partnered with Future for a multi- social, digital and experiential campaign for TechRadar, T3 and Gizmodo UK− deliver platform campaign to reach our 10 million the launch of one of the major ‘triple-A’ video more than five million tech enthusiasts in UK tech, games and film enthusiasts. games of 2013: Saints Row IV. the UK. Future’s access to this tech-savvy audience and its ability to co-create best- Microsoft chose Future UK’s Technology, In partnership with video game developer in-class digital and video content enabled Games, Film and Auto portfolios to develop Deep Silver, Future hit the streets of San Diego Carphone Warehouse to reach consumers a two-month-long campaign to promote the to promote the release of the fourth edition in in the crucial period of consideration prior launch of Microsoft’s next-gen console: Xbox the Saints Row franchise, cruising the crowded to upgrading their smartphone. One. The major partnership saw the creation San Diego streets in a custom Saints Row IV- of a unique multi-platform, multi-brand branded Presidential limousine. Carphone Warehouse required a media partner campaign across flagship brands including and multi-platform content which would let them T3, Total Film, CVG and Fast Car. Harnessing the buzz and awareness generated reach consumers early in this consideration from Comic-Con, Future secured major traffic phase and provide them with engaging and The unique partnership saw a complete with the launch of SaintsGov.com, a mock helpful information. The six month partnership homepage redesign of seven of Future’s government website for Saints Row IV fans involved the creation of a ‘Smart Choice’ flagship sites – T3, TechRadar, Gizmodo to vote on potential legislation, register their content destination within TechRadar offering UK, CVG, GamesRadar, OXM and Total super-charged weapons, create SRIV driver’s compelling and in-depth information, including Film – to replicate the Xbox One dashboard. licenses and get the latest from the Steelport rapid answers to questions from consumers Xbox One channels were created to provide Police Department scanner. researching their next handset. ‘Smart Choice’ authoritative insight on the specific areas also included integrated video content in of the Xbox One and were integrated with Promotional integration for this programme partnership with Carphone Warehouse video weekly video content taking a look at all included high-impact ad units, editorial agency Adjust Your Set. T3 and Gizmodo were aspects of the new system. The partnership coverage on Future’s MaximumPC, social also integrated into the partnership, with activity also saw the redesign of the Future brands’ promotion via GamesRadar, and print spreads driving digital reach among Future’s valuable logos to mirror the Xbox One logo. in PC Gamer and the Official Xbox Magazine. technology audience. Annual Report and Accounts 2013 16 Strategic Report Generating cash from print

We launch new regular titles where we identify market gaps in the sectors we serve. We have an established method of researching a market using social media tools and pre-launching new titles the same way, creating an audience, providing valuable real-time feedback and de-risking launch.

Strategy in execution – examples of success.

Managing our print assets for Financial Review 04. cash generation

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ISSUE 03 PRINTED IN THE UK • £4.99 etmag.com bathingLuxe ideas for towels, basketsbeauties and accessories Corporate Governance

Delivering into a growing Unlocking the world of Bookazine production crochet sector scientific discovery increased significantly

Consumer insight underpins craft Science Uncovered: A brand new Bookazines: Finding new revenue launch success international magazine opportunities for print launches

In January 2013, Simply Crochet hit the Future’s most recent regular frequency launch In the last 12 months Future has significantly newsstands. Crochet is a craft in growth, both is a new title in the mainstream science increased production of its regular series of in the UK and internationally. In fact, ‘How to sector. Science Uncovered – which launched premium-priced one-shot and brand extension Crochet’ was the fourth most searched ‘How in November 2013 – presents the world of bookazines. Printed in the UK, US and China, to’ term on Google in the UK in 2012, according scientific discovery in a highly impactful, Future’s bookazines have generated £6m in to the Google Zeitgeist survey. And Simply exciting and accessible way for an audience in revenue during the year. Crochet has been created specifically to the 16-25 demographic. deliver to this large and growing audience. We distribute in the UK and internationally, Interest in popular science has never been and work with many of the world’s best-known There are currently an estimated 1.8 million greater – from what happens when the sun’s retailers. Future bookazines and specials are quilters in the UK − an increase of 124% since magnetic poles flip, to the science of Doctor also licensed to more than 80 countries 2011, showing incredible growth in interest Who, and the dawn of holidaying in space with across the world.

and participation. According to the Quilting Virgin Galactic. Science Uncovered explains Financial Statements in America study, 14% of US households are and unlocks all this and more in every issue. A dedicated in-house team has been created in home to at least one quilter. the last year to accelerate our bookazine activity. The new print brand is 100% science and Love Patchwork & Quilting launched in October provides those interested in popular science- Future’s bookazine programme has been 2013 and is also available internationally as a related subjects with intelligent, topical and developed to increase our activity in new digital edition on Apple’s Newsstand, Google timely content delivered in an accessible format. and exisiting content areas, working with Newsstand, Amazon Kindle Fire, Barnes & In Science Uncovered, leading scientists from international retailers to research core Noble’s Nook and Zinio, as well as a print around the globe – and famous faces from consumer demand and respond quickly to edition. The new brand fills a clear gap for popular science shows in the UK and beyond – new consumer trends internationally. a more modern product in a very traditional explain how the world around us works. Designed to appeal both as a standalone quilting sector, delivering trend-led projects read and to complement the regular through contemporary design. It delivered It is packed with fascinating insights into magazines, they maximise profitability strong pre-launch subscriptions, has a space, nature, the human body, engineering and leverage the reach of some of our growing social media audience and is already and technology, all brought to life with stunning best known titles. established in the sector’s blogging community. photography and illustrations. 17 Future plc

Business review Focus on cost control

We halved our debt during the year as a result of selling our portfolio of UK Rock titles, closing loss-making titles and securing sub-letting deals in the US and UK.

Strategy in execution – examples of success.

Constantly controlling costs & targeting 05. investment to manage margin

We maintain a rigorous focus on operating margins, and have reshaped the business in the year, reducing headcount in the Group to its lowest level in five years.

Group Employee numbers US Employee numbers Actual numbers at 30 September Actual numbers at 30 September

1,400 350

1,200 300 1,199 1,189

1,000 1,172 250 1,013 235 800 980 200 222

600 150 198 149 400 100 144

200 50

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

An update on the key performance Key Performance Indicators indicators on a normalised basis is given here. The KPI trends noted demonstrate the further progress The key performance indicators are presented on a normalised basis. made during the year in digital and in the management of the overall 2013 2012 profitability of the Group. Corporate KPIs EBITDAE (£m): 6.4 6.4 Year-on-year movement in EBITDAE 0% +83% EBITE (£m): 3.5 4.0 Year-on-year movement in EBITE -13% +208% Digital KPIs Year-on-year movement in digital revenues +38% +25% Number of unique users logging onto our websites (monthly) 57.7m 51.2m Number of digital magazines sold per month (thousands) 433 239 Digital subscriber base (thousands) 342 235 Print KPIs Number of magazines sold per month 1.7m 1.7m Print subscriber base (thousands) 639 727 Copies sold as a percentage of copies printed 52% 54% (including subscriptions) Year-on-year movement in print revenues -3% -10% Strategic Report Financial review Corporate Governance Financial Statements 18

Revenues from Future’s digital digital Future’s from Revenues the on 44% by increased editions more have now We year. prior 340,000than digital subscribers have rates renewal and worldwide 70%. to close at running been

AnnualReport and Accounts 2013 Driving digital success digital Driving 19 Future plc

Risks and uncertainties Risks and uncertainties

Like all businesses, our business faces risks and uncertainties that could impact on the Group’s achievement of its objectives. Risk is accepted as being a part of operating any business and we have therefore established a continuous process of identifying, evaluating and managing risk.

Risk management

Risks Description Mitigation

Intellectual property Future uses, and grants licences to its licensees to use various types of third-party content Future produces guidance and in-house training to educate its staff on the importance of including music, audiovisual material, photos, images and text. As publisher, Future is obtaining appropriate rights or licences and has a dedicated in-house rights management team. responsible for any intellectual property or other infringement relating to the same and as Future’s legal team reviews all significant licences relating to third-party content and, where licensor, Future is responsible to its licensees. appropriate, seeks warranties and indemnities relating to the same. Future licenses content to third parties based on standard contracts which seek to limit Future’s liability. As the digital world emerges Future is developing its existing rights management system to be media neutral.

The Group is exposed to interest rate risk and foreign exchange risk. Future manages interest rate risk and foreign exchange risk through the use of hedging arrangements (see note 23 to the financial statements for more detail).

The significant issues considered in relation to the financial statements for the year ended Review by Audit Committee with external auditor. 30 September 2013 are set out in the Audit Committee section of the Corporate Governance report on page 39.

IT In the event of a total network or server failure or data loss there would be a major impact on the Future’s network has at least two diverse routes for all key offices and business-critical production of magazines, operation of websites and the operational effectiveness of the business. data is held on two highly resilient storage devices in different locations. In addition, all core switches are duplicated in different buildings so there are no single points of failure. Servers are distributed across several controlled server rooms in different buildings in Bath, London and San Francisco. Future can switch services from one server to another within a few hours. In addition, all mission-critical services have more than one server so there is no single point of failure. Further investment in the IT infrastructure has been made in 2013 and more is planned for 2014.

Staff The Group’s strong reputation in digital media makes its staff potentially attractive to Future employs people who are passionate about their subject and invests in the training of competitors. There is a risk that key staff will move elsewhere if offered significant increases those people. In addition, Future offers a number of other staff benefits and steps are taken to in remuneration with which Future is unable to compete. ensure that the Group is not excessively reliant upon any one employee

Personal data A loss of personal data triggers the need to notify users and the Information Commissioner’s During 2012 Future suffered one criminal attack of its TechRadar website which resulted in Office (ICO) and Future may suffer reputational risk, as well as a significant financial penalty, encrypted non-sensitive data being stolen. The ICO was notified and confirmed that Future had if it is responsible for the breach. taken considerable steps to ensure that such a breach does not occur in the future. We seek to ensure all of our systems comply with best practice as regards to security and we have in place a plan to mitigate the effects of any future hack. No attacks were suffered in 2013. Annual Report and Accounts 2013 20 Strategic Report

There are a number of general business risks to which Future is naturally exposed in the UK and US. In addition, the range of industry-specific risks faced by Future has increased since last year, due to the increasingly digital focus of the media landscape and the increasing number of evolving business models. Financial Review

Risk management Our internal controls seek to minimise the impact of risks, as explained in our Corporate Governance report on page 37, and during Risks Description Mitigation the year we have continued to develop those controls in response to the wider range of risks.

Operating environment The macro-economic environment continues to be difficult. Despite a more positive outlook, in The Company has proved more resilient than many of its competitors due to the nature of its both the UK and the US, general trading conditions remain tough. The economic environment, special-interest content, although more so in the UK where it has greater scale than in the US. as well as the general move to digital products, has resulted in printed magazine sales and It continues to innovate, making available its special-interest content to consumers in print, print-related advertising revenues falling. where we have had a number of successful launches in recent years and where we have 02 IFY . E significantly increased the production of bookazines, as well as in new digital media, including T VA N L on the various digital newsstands where we have led the way. E U D A I . T 1 E Intellectual property Future uses, and grants licences to its licensees to use various types of third-party content Future produces guidance and in-house training to educate its staff on the importance of 0 Future’s including music, audiovisual material, photos, images and text. As publisher, Future is obtaining appropriate rights or licences and has a dedicated in-house rights management team. assessment

responsible for any intellectual property or other infringement relating to the same and as Future’s legal team reviews all significant licences relating to third-party content and, where of risks

licensor, Future is responsible to its licensees. appropriate, seeks warranties and indemnities relating to the same. Future licenses content to 0 R 3

. O

third parties based on standard contracts which seek to limit Future’s liability. As the digital world P

emerges Future is developing its existing rights management system to be media neutral. 4 0

Financial Forecasting remains difficult in all consumer markets but this is particularly the case in relation Future’s forecasting in respect of innovative products will become easier as those products to sales through digital newsstands which are emerging. The long lag time for reporting on develop a more consistent customer base and stable business models. Corporate Governance sales of printed copies and associated retail promotional spend in the US and bookazines continued to be a challenge in the year. As we diversify our revenue streams, new activities On printed product a more conservative initial view on sales estimates continues, and the 01 Identification of risks are inherently more difficult to accurately forecast. exposure in the US has been reduced further. 02 Evaluation of level of risks and controls in place to The Group is exposed to interest rate risk and foreign exchange risk. Future manages interest rate risk and foreign exchange risk through the use of hedging manage those risks arrangements (see note 23 to the financial statements for more detail). 03 Action taken to manage risks

The significant issues considered in relation to the financial statements for the year ended Review by Audit Committee with external auditor. 04 Risks reported and monitored 30 September 2013 are set out in the Audit Committee section of the Corporate Governance report on page 39.

Corporate responsibility Responsible business

Corporate responsibility is integral to the way Future conducts its business. We focus our efforts around three key areas where we think we can make a difference.

1. The environment readers to recycle plastic film. Some plastic films are unsuited to recycling and in these A responsible approach to the environment is instances we use oxo-biodegradable film. essential to ensure the future sustainability of our business. Supplier audits We undertake environmental and ethical Our Head of Production and Procurement is audits on our main suppliers which include chairman of the PPA (Professional Publishers aspects such as the processing and disposal Association) Environment Committee. of effluents, emissions and waste materials, and the use of labour. Our environmental policy can be found on our website, www.futureplc.com. 2. Our people Sourcing paper Paper is the largest raw material we use as Future’s employees are our most important a Group. We work hard to make sure that assets; they are the driving force behind our whatever we consume, we do in a way that success as a business. is ethically responsible and environmentally The London Advertising Sales team have sustainable. In 2013, 100% of our paper across Developing our people continued their support of the Apples and the Group was sourced from either recycled In 2013 the training focus was on social media Pears playground in Hackney. fibre or sustainable forests where at least one and the digital space. Globally we continued tree is planted for every tree felled. In the UK our programme of excellence with core skill Future holds the FSC (Forestry Stewardship training across all disciplines. Council) Chain of Custody certification. This recognises Future’s commitment to sourcing We delivered cost effective, multi-platform paper supplies from sustainable forests. In training to our editorial, sales, central and 2013, over 90% of the paper we used in the UK technical teams with specific skills to reflect the was FSC certified. We actively encourage our evolving media landscape. Our sales teams suppliers to work towards FSC certification or were once again skills audited and specific one of the other internationally recognised and high-end suppliers were used to deliver targeted independently audited certification schemes skill-set training to assist in the growing portfolio for environmental care in forest management of products we offer to our clients. and conservation. Training needs are also identified as part of each Recycling and waste employee’s annual performance appraisal. The The Group is strongly incentivised to 2013 annual appraisal process began in July minimise the number of unsold magazines and is in progress. Future in the UK holds and we employ sophisticated techniques to FSC Chain of Custody certification. This help achieve this. In the UK Future’s unsold Health and safety recognises Future’s magazines are recycled. We also support The health and safety of all employees is a commitment to sourcing the PPA’s initiative encouraging readers to key priority for the Group. Future is largely paper supplies from well recycle their magazines after use and we an office-based environment. All companies managed forestry. incorporate the WRAP recycle logo in all our across the Group comply with relevant

magazines. We comply with our obligations legislation and we communicate our health and under the Producer Responsibility Obligations safety policy to all employees. In the UK, during (Packaging Waste) Regulations. The disposal the year to 30 September 2013, there were no of waste materials is also included in our print fatalities or reportable (RIDDOR) injuries and supplier audit. 13 minor injuries. There were no fatalities and two minor injuries in the US, and no fatalities or Plastic packaging injuries in Australia during this period. We have continued our partnership with Bath- We use plastic film to package magazines based charitable at retail and to wrap subscriptions copies for Policy on disability foundation, Quartet. mailing. Future is a member of the OPRL (On- The Group aims to ensure that when Pack Recycling Label) scheme to encourage considering recruitment, training, career

Employment data across the Group 2013 Split of female:male employees as at 30 September 2013 39%:61% Split of female:male Directors of the Company as at 30 September 2013 1:5

We are members of the Split of female:male members of the Group Management Board as at 30 September 2013 2:8 Professional Publishers Earnings meet at least legal minimum or minimum set by industry Yes Association (PPA) and support its initiative Cases of reported and proven discrimination or harassment None encouraging readers to Consultation and communication procedures in place for all areas of the business Yes recycle their magazines after use. We incorporate Code of conduct circulated to all existing and new employees Yes the recycle logo in all our UK magazines. Employment of young people under the age of 15 None Annual Report and Accounts 2013 22 Strategic Report

development, promotion or any other aspect Statement of Greenhouse Gas (GHG) Emissions for the Group of employment, no employee or job applicant is discriminated against, either directly or indirectly, on the grounds of disability. Global GHG emissions in tonnes of CO2 equivalent: If an employee became disabled while in employment and as a result was unable to Emissions from Current Year perform their duties, we would make every Financial Review effort to offer suitable alternative employment The combustion of fuel: gas for heating UK 470 tonnes and assistance with retraining. and fuel for vehicles USA 102 tonnes (Scope 1) Total 572 tonnes Internal communication Future has policies on employee The purchase of electricity, heat, steam UK 1,285 tonnes communication; acceptable use of IT; health or cooling by the Group for its own use USA 376 tonnes and safety and whistle-blowing, and we have (Scope 2) Australia 25 tonnes a commitment to diversity and opportunity. Total 1,686 tonnes Our employees also have access to free confidential employee well-being helplines. Total Emissions 2,258 tonnes CO2e In addition, we hold meetings for all employees at least annually, and extended leadership Intensity Ratio team meetings where we discuss the financial Tonnes per £1million revenue 20.1 tonnes/£1m performance of the Group and key strategic initiatives. In the UK we have an Employee Involvement Group, which allows employees We have reported on all of the emission sources required under the Companies Act 2006 to comment on and play a part in strategic- (Strategic Report and Directors’ Reports) Regulations 2013. level decision-making. Future’s lively culture is echoed in our company intranets which update The emissions sources fall within our financial statements. We do not have responsibility for employees on industry and business news and any emission sources that are not included in our financial statements. celebrate team successes. Methodology:

We have used the UK Government’s Environmental Reporting Guidance (2013 version). Corporate Governance

3. The community We have applied the 2013 DEFRA GHG Conversion Factor Repository to calculate the CO2e. As a Group with only office-based activities and no manufacturing activities, under the GHG We actively support the communities in which Protocol Corporate Standard, our emissions fall under Scope 1 (the combustion of fuel) and we operate through charitable donations and Scope 2 (the purchase of electricity). by encouraging our people to get involved in community initiatives. Notes: • Scope 1 – Time periods for combustion of gas for heating – figures for the US office are for Giving something back the financial year. Figures for UK offices are a mix of pro-rated calendar year consumption Future is fully engaged with the local (London) and financial year consumption (Bath). All figures are estimates based on % communities in all of its locations. In the UK share of office space within leased buildings except for UK Bath offices which are actual the Group has continued its partnership with consumption where whole buildings or floors within buildings have their own meters. Bath-based charitable foundation Quartet, who make donations to local charities on our • Scope 1 – Time periods for combustion of fuel in vehicles – only the UK operates leased behalf. Charities supported this year include vehicles and figures for the consumption of fuel are based on averaged annual mileage. Positive Action on Cancer, Bath Deaf Club and the Beechen Cliff Youth Project. The London • Scope 2 – Time periods for consumption of electricity – figures for the US office are for Advertising Sales team have continued their the financial year. Figures for the Australian office are pro-rated from typical (August support of the Apples and Pears playground in 2013) monthly consumption. Figures for UK offices are a mix of pro-rated calendar year Hackney for another year. This year’s Golden consumption (London) and financial year consumption (Bath). All figures are estimates Joystick Awards raised money for GamesAid, based on % share of office space within leased buildings except for UK Bath offices a UK charity which supports disabled and which are actual consumption where whole buildings or floors within buildings have disadvantaged children and young people in their own meters.

the UK. In the US, staff have supported the Financial Statements San Francisco Food Bank and also organised • Scope 2 – Electricity Sources – No electricity was purchased from owned or a goodwill clothing drive. controlled sources.

Future in the wider community • Fugitive Emissions – the Group benefits from air conditioning in some of its leasehold Future people are actively involved with a buildings. The scale of emissions from leaks is very small (estimated to be less than number of national organisations including the 0.5% of total emissions) and is deemed to be immaterial to overall reporting and trends. Professional Publishers Association, European Magazine Media Association, Association of • Base Year – Financial year 2013 will be our baseline year for future comparisons. Online Publishers, NABS, European & Leisure Software Publishers Association, the IPA, • Intensity Ratio – we are using ‘Tonnes per £1million revenue’ as the most appropriate the Marketing Society and the International measure in the context of our dual aims of growing revenues whilst restraining overheads. Federation of the Periodical Press. We are also represented on The Bath Initiative, a • We have maintained our focus on other environmental impacts, particularly initiatives to public/private collaboration. reduce waste and to continue sourcing all our magazine paper from sustainable forestry. 23 Future plc

Financial review Diversifying revenues

This financial review is based on a comparison of the Group’s results for the year ended 30 September 2013 with those for the year ended 30 September 2012. In running the business operationally, management use a number of Key Performance Indicators (KPIs) which are set out on page 17.

Zillah Byng-Maddick Chief Financial Officer and Company Secretary

Statutory results for the year ended 30 September 2013

“Digital and Diversified 2013 2012 revenues generated from our Statutory results for the year £m £m UK- and US-based businesses Revenue 112.3 123.5 continued to show strong EBITDAE 7.6 9.4 Depreciation charge (0.9) (1.1) growth and were up 20% Amortisation of intangible assets (2.0) (1.5) overall, driven by further EBITE 4.7 6.8 increases in digital circulation Exceptional items 2.5 (3.6) and increases in online EBIT (Operating profit) 7.2 3.2 advertising.” Net finance costs (1.4) (2.1) Pre-tax profit 5.8 1.1

Earnings per share (p) 1.3 0.1 Adjusted earnings per share (p) 0.6 1.1 Dividends relating to the period (pence per share) 0.2 -

Normalised results for the year ended 30 September 2013

The normalised results for the Group, and a reconciliation to the statutory results above, are set out on page 88.

Digital & Diversified Normalised results are presented to better reflect the current size and structure of the business Defined: and to give a better indication of the performance of the ongoing business. The normalised results exclude revenues and costs relating to activities closed or divested between 1 October 2011 and • Digital circulation 30 September 2013, but include any new activities launched in that period. • Digital advertising • Digital commerce 2013 2012 • FutureFolio Normalised results for the year £m £m • Future Plus Revenue 106.9 103.6 • Events EBITDAE 6.4 6.4 Depreciation charge (0.9) (1.1) Amortisation of intangible assets (2.0) (1.3) EBITE 3.5 4.0 Exceptional items (0.2) (4.6) EBIT (Operating profit/(loss)) 3.3 (0.6) Net finance costs (1.4) (2.1) Pre-tax profit/(loss) 1.9 (2.7)

Adjusted earnings per share (p) 0.3 0.4 Annual Report and Accounts 2013 24 Strategic Report Financial Review Normalised Review of operations Group revenues (£m)

The review of operations is based primarily on a comparison of normalised results for the year Digital & Diversified ended 30 September 2013 with those for the year ended 30 September 2012. Unless otherwise stated, change percentages relate to a comparison of these two periods.

2013 34.7 Analysis of revenue +20% 2012 29.0

2013 2012 Change 0 10 20 30 40 50 £m £m % Digital and Diversified 34.7 29.0 +20% Print 72.2 74.6 -3% Print Total revenue 106.9 103.6 +3%

Group revenue overall rose by 3% to £106.9m and encouragingly we saw increases in both the UK 2013 72.2 and the US. In particular Digital and Diversified revenues generated from our UK- and US-based businesses continued to show strong growth and were up 20% overall, driven by further increases -3% in digital circulation and increases in online advertising fuelled from the continuing growth in our Corporate Governance 2012 74.6 audience. Digital and Diversified revenues now represent 32% of the Group revenues with digital advertising now representing 59% of our total advertising revenues. 0 20 40 60 80 100 Overall print based revenues continued to decline in the UK and the US although the level of that decline has been mitigated with a significant increase in the number of bookazines that have been published in the year – we have increased the number from 92 in 2012 to 203 in 2013.

2013 2012 Change £m £m % 1 UK 87.6 85.4 +3% 2 US 20.1 18.9 +6% Intra-group (0.8) (0.7) Total revenue 106.9 103.6 +3%

Analysis of EBITDAE

Group revenue by country 2013 2012 Change Financial Statements £m £m % 1: UK 81% UK 7.5 8.3 -10% 2: US 19% US (1.1) (1.9) +42% Total EBITDAE 6.4 6.4 0%

Further analysis of the key drivers of the increase in EBITDAE is provided in the table overleaf which analyses the year-on-year variances across Digital and Diversified activities, print activities and overheads. 25 Future plc

Financial review

Analysis of EBITDAE (continued)

2013 2012 Change 1 £m £m % Digital and Diversified 7.4 4.8 +54% Print 18.2 21.4 -15% Overheads (19.2) (19.8) -3% EBITDAE 6.4 6.4 0% 2 3 The table above clearly illustrates the continuing progress being made in Digital and Diversified activities whilst at the same time demonstrating the relative impact of the print declines and overhead savings achieved during the year. The 3% reduction in overheads achieved during the year does not reflect the most recent restructuring activity. Group revenue 2013 Further commentary on those movements is provided in the following sections. 1: Digital and Diversified 32% 2: US Print 8% 3: UK Print 60% UK-based performance

2013 2012 Change £m £m % Circulation revenue 54.4 53.2 +2% Advertising revenue 23.6 23.4 +1% Customer publishing 3.8 4.0 -5% Licensing, events and other 5.8 4.8 +21% Total revenue 87.6 85.4 +3% EBITDAE 7.5 8.3 -10% EBITDAE margin 9% 10% Depreciation (0.7) (0.8) -13% Amortisation (1.2) (0.7) +71% 1 EBITE 5.6 6.8 -18% EBITE margin 6% 8%

UK-based activities saw revenue up by 3%. Within this we saw Digital and Diversified revenues 2 increase by 16%, offsetting the declines in print-related revenues.

Circulation revenues increased by 2%. Print copy sales were flat whilst digital copy sales increased from 6% of total circulation revenue to 8% of total circulation revenue in the year.

Advertising revenues overall were up 1%. Digital advertising revenues increased by 17%, more than UK revenue 2013 offsetting the print decline of 11%, and now represent 50% of total advertising revenue in the UK.

1: Digital & Diversified 26% Headcount in the UK at the end of September 2013 was 831, a reduction of 4% from the end of 2: Print 74% September 2012. Further restructuring was undertaken in Q4, the full-year effect of which will be seen in the current year. Following this restructuring activity there is an on-going focus on the margin, to ensure that any further declines in revenue are offset by appropriate structuring of the cost base. Annual Report and Accounts 2013 26 Strategic Report Financial Review

US-based performance

2013 2012 Change $m $m % 1 Circulation revenue 10.5 10.9 -4% Advertising revenue 15.0 13.0 +15% Customer publishing 5.1 5.1 0% Licensing, events and other 0.9 0.8 +13% Total revenue 31.5 29.8 +6% 2 EBITDAE (1.7) (2.9) +41% EBITDAE margin -5% -10% Depreciation (0.3) (0.5) -40% Amortisation (1.3) (1.0) +30% US revenue 2013 EBITE (3.3) (4.4) +25% 1: Digital & Diversified 60% EBITE margin -10% -15% 2: Print 40%

The US-based activities have shown revenue growth of 6% from 2012. Within this we saw Digital and Corporate Governance Diversified revenues increase by 28%, offsetting the ongoing declines in print-related revenues.

Circulation revenue overall fell by 4% with the largest impact arising from print subscriptions which were down 20%. Advertising revenues were up 15%, with digital advertising up 49% and print advertising down 42%. Digital advertising in the US now represents 81% of total advertising revenues.

The improvement of $1.2m in EBITDAE is driven by the digital revenue increases and the full year impact of the restructuring action undertaken through 2012 which has resulted in a $0.8m saving year-on-year in overheads. In the second half the US business produced a positive EBITDAE of $0.4m.

Exceptional items

Exceptional items on a statutory basis can be split into three elements as follows:

£m Profit on the sale of UK assets 2.7 Vacant property provision movements 1.2 Restructuring (1.4) Financial Statements Total exceptional items 2.5

The UK Rock titles were sold in April 2013 for gross consideration of £10.2m.

The restructuring cost relates to further action taken in the UK through the year, the benefits of which will be seen in 2014.

As a result of the restructuring activities in the US in 2012 we vacated one floor of the offices in San Francisco. During the year we have sublet that floor and therefore released an element of the vacant property provision established in 2012. 27 Future plc

Financial review

Net finance costs

Net finance costs were £1.4m (2012: £2.1m) reflecting a decrease in the average net debt position over the year following the sale of the UK Rock titles in April 2013.

Taxation

The tax charge for the year amounted to £1.5m (2012: £0.9m), comprising a current tax charge of £1.2m (2012: £1.2m) and a deferred tax charge of £0.3m (2012: deferred tax credit of £0.3m). The current year charge arises in the UK where the standard rate of corporation tax is 23.5%. In the US the impact of the current year and brought forward tax losses means that there is no tax charge relating to the US.

Overall the effective rate for the Group when applied to the profit before tax was 26%. The Group continues to focus on compliance with tax authorities in all territories in which it operates. During the year the Group reached agreement with HMRC relating to the tax treatment of certain one-off transactions which took place in 2003. Part of that agreement will result in the Group paying tax of £6.2m plus interest (comprising instalments of £85,000 per month over five years from July 2013 and a final instalment of £2m). The tax payable was fully provided for in prior year accounts.

Earnings per share

2013 2012

Net debt Statutory Normalised Statutory Normalised Basic earnings/(loss) per share (p) 1.3 0.4 0.1 (0.9) Adjusted earnings per share (p) 0.6 0.3 1.1 0.4

2013 £(6.9)m Adjusted earnings per share are based on the profit/(loss) after taxation which is then adjusted +51% to exclude exceptional items and related tax effects. The normalised adjusted profit after tax amounted to £1.0m (2012: £1.3m) and the weighted average number of shares in issue was £(14.1)m 2012 332m (2012: 329m).

0 3 6 9 12 15 18

Dividend

The Board’s policy is that dividends should be covered at least twice by adjusted earnings per share. As noted above for the year ended 30 September 2013 statutory adjusted earnings per share were 0.6p and on this basis the Board has recommended a final total dividend of 0.2p per share for the year.

If approved at the Annual General Meeting to be held on 3 February 2014, a final dividend of 0.2p per share will be paid on 14 March 2014 to all shareholders on the register on 14 February 2014. The ex dividend date will be 12 February 2014.

Cash flow and net debt

Net debt at 30 September 2012 was £14.1m. During the period there was a cash inflow from operations before cash exceptional items of £6.7m (2012: cash inflow of £6.5m). Cash inflow from the sale of non-core titles amounted to £9.2m (2012: £2.1m). Annual Report and Accounts 2013 28 Strategic Report Financial Review

During the year cash outflows totalled £8.9m (2012: £11.4m) in respect of the following items:

• £2.4m (2012: £4.4m) in exceptional costs • £2.9m (2012: £2.5m) in respect of capital expenditure • £1.2m (2012: £1.4m) in net interest payments • £1.8m (2012: £1.0m) in net taxation payments • £0.6m (2012: £0.5m) in respect of bank arrangement fees • £nil (2012: £1.6m) in respect of dividends

Foreign exchange and other movements accounted for the balance of cash flows.

As a result of the above, net debt at 30 September 2013 was £6.9m, a decrease of 51% from September 2012.

Credit facility and covenants

The Group signed a new four year Credit Facility in February 2013. Interest payable under the facility is calculated as the cost of three month LIBOR plus an interest margin of between 2.0% and 3.25%, dependent on covenant ratio performance. The key covenants are set out in the following table where net debt is exclusive of non-current tax and other payables and Bank EBITDA is not materially different to statutory EBITDA. Corporate Governance

Bank Covenant

Net debt/Bank EBITDA Less than 2.25 times for December 2013 and thereafter less than 2.0 times Bank EBITDA/Interest More than 4.0 times Capital expenditure 125% of agreed annual budget

The Group was in compliance with all its covenants at 30 September 2013 as set out in the following table:

Covenant 30 September 2013 Limit Net debt: Bank EBITDA 0.99 Less than 2.25 times Bank EBITDA: Net interest 7.74 More than 4.0 times

The Group also met its covenant for capital expenditure at 30 September 2013.

Based on the calculation of 2013 EBITDA for bank purposes the Group had headroom of £9.4m

over and above the level of bank debt at 30 September 2013. Financial Statements

Trading updates during the financial year Approved by the Board of Directors and signed on its behalf by: During the financial year the Group issued trading updates or made Interim Management Statements (IMSs) on 4 February 2013 (IMS), 22 May 2013 (Interim results), 18 July 2013 (IMS and trading update) and 15 October 2013 (trading update). The IMS and trading update on 18 July 2013 stated that the Board expected EBITDA to be £9.5m and EBITDAE to be £8.0m. The actual EBITDA result was £10.1m (ahead of the £9.5m forecast as a result of lower than anticipated restructuring costs effected through redeployment) and the actual EBITDAE result was £7.6m, broadly in line with the Zillah Byng-Maddick forecast £8.0m. Chief Financial Officer and Company Secretary 13 December 2013 29 Future plc

Board of Directors Strong leadership

Peter Allen Mark Wood Independent non-executive Chief Executive Chairman

Zillah Byng-Maddick Manjit Wolstenholme Chief Financial Officer and Senior independent Company Secretary non-executive

Seb Bishop Mark Whiteling Independent non-executive Independent non-executive Annual Report and Accounts 2013 30 Strategic Report s Member of the Nomination Committee l Member of the Remuneration Committee n Member of the Audit Committee

Peter Allen Mark Wood Chairman Chief Executive sln Mark was named Chief Executive of Future Peter was named Chairman in August 2011. plc in October 2011. He joined Future in He was Chief Financial Officer of Celltech April 2009 as an independent non-executive Group plc between 1992 and 2004. In 2003 he Director and was appointed as Chief Executive Financial Review was also appointed Deputy Chief Executive of Future UK in September 2010. Mark has Officer of Celltech until the company was sold been accelerating the growth of Future’s digital in 2004. He was Chief Financial Officer of the businesses. In the UK, Future has been named electronics company Abacus Group plc from Consumer Digital Publisher of the Year in 2013 2005 until the company was sold to Avnet Inc by the Professional Publishers Association, in January 2009. Peter is currently Chairman of the Association of Online Publishers and the Clinigen plc, Chroma Therapeutics Limited and British Media Awards. Before joining Future, ProStrakan plc and a non-executive director Mark was Chief Executive of ITN, the television of Oxford Nanopore Technologies Limited, news organisation, where he developed a Mecom Group plc, Scancell Holdings plc and range of digital ventures, including a world- Advanced Medical Solutions Group plc. leading digital image business. Prior to ITN, Mark was Editor-in-Chief and Head of Media at Reuters. He began his career as a foreign correspondent for Reuters and was based in Berlin, Moscow, Bonn and Vienna.

Zillah Byng-Maddick Manjit Wolstenholme Chief Financial Officer Senior independent non-executive and Company Secretary sln Corporate Governance Zillah joined the Board on 1 November 2013 Manjit joined Future as the senior non- and was appointed as Chief Financial Officer executive Director in February 2011. She is a and Company Secretary of Future plc with non-executive director of Provident Financial effect from 18 November 2013. Zillah was plc, Unite Group plc and Aviva Investors. After CFO of Fitness First Group from 2006 to 2009 qualifying as a chartered accountant in 1988 and, prior to her appointment to the Future plc with PricewaterhouseCoopers, Manjit spent Board, she was CFO of Trader Media Group 13 years with Dresdner Kleinwort, latterly as – owner of Auto Trader – from 2009 to 2012, co-head of investment banking including more and interim CEO of Trader Media from 2012 than a decade specialising in the media sector. to 2013. Zillah is currently a non-executive She was a partner at Gleacher Shacklock from director of Mecom Group plc and Betfair plc. 2004 to 2006. Zillah is a chartered management accountant and qualified treasurer.

Seb Bishop Mark Whiteling Independent non-executive Independent non-executive sl sln

Seb joined Future as an independent non- Mark joined Future as an independent non- executive Director in June 2007 and became executive Director in October 2010. Mark has a a member of the Remuneration Committee Master of Commerce degree and qualifications

in November 2008. He is the CEO of goop, a as both a New Zealand ACA and an American Financial Statements digital media and e-commerce company. Prior CPA. He is currently Chief Financial Officer to goop, Seb was the International CEO of of FTSE 250 company Premier Farnell plc, a PRODUCT (RED), the business set up by Bono leading multi-channel electronics distributor of and Bobby Shriver to fight AIDS in Africa. In products and services to design and purchasing 2000, he founded Espotting, the company that professionals globally. His experience includes pioneered pay-per-click advertising and search Group Finance Director of Communisis plc, the marketing in the UK. He expanded Espotting pan-European print management/direct mail before selling the company to MIVA, a US group and Tibbett & Britten plc, a FTSE 250 Nasdaq-quoted company in 2004, and taking logistics company, as well as roles at SmithKline up the Presidency of MIVA until 2007. Seb is Beecham plc in both the USA and Europe. Chairman of Steak, a digital marketing agency, a Governor of the School of Communication Arts, a member of the World Economic Forum’s Young Global Leaders and an investor in digital start-ups such as Summly (sold to Yahoo), Adjug (sold to IgnitionOne) and Orlebar Brown. 31 Future plc

Directors’ report Directors’ report

For the year ended The information presented in this Directors’ report relates to 30 September 2013 Future plc and its subsidiaries. The Chairman’s statement, Chief Executive’s review, Financial review and Corporate responsibility statement are each incorporated by reference into, and form part of, this Directors’ report.

Principal activity Result of 2013 Annual General Meeting Rules of the Financial Conduct Authority), there are no restrictions on the voting rights attaching The principal activity of the Company and All resolutions put to the Annual General to the Ordinary shares or on the transfer of the its subsidiaries (the ‘Group’) as a whole is Meeting held on 4 February 2013 were passed Ordinary shares. The Articles of Association the publishing of special-interest consumer unanimously on a show of hands. Shareholders may be amended only by a special resolution of magazines, apps and websites, notably in the holding more than 85% of all issued shares the Company’s shareholders. areas of Technology, Film, Games, Future submitted proxy votes and of these, more than Women, Sport, Auto and Music. 89% were cast in favour of all resolutions. Details of all movements in share capital are given in note 24 on page 83. As at The Company is incorporated and domiciled in 30 September 2013, the number of shares in the UK and has subsidiaries operating in the Reported financial results issue was 333.4 million. This represents a small UK, the US and Australia. increase of 0.1% compared with the number of The audited financial statements for the shares in issue as at 30 September 2012. All of year ended 30 September 2013 are set out the new shares were issued in satisfaction of Business review on pages 55 to 87. Details of the Group’s employee share option exercises or share results are set out in the consolidated income awards vesting during the year. The purpose of the Annual Report is to provide statement on page 56 and in the notes to the information to the shareholders of the Company. financial statements on pages 66 to 87. The Company was granted authority, at the Annual General Meeting held on 4 February Reviews of the Group’s activities during 2013, to purchase up to 33,300,000 of its own the year, the position at the year-end and Dividends shares, representing just under 10% of the developments since then are set out in the Company’s issued share capital at a maximum Chairman’s statement, Chief Executive’s The Board’s policy on dividends and its price per share of 5% above average of the review, the Corporate Governance report and recommendation for a final dividend are set market values for an Ordinary share as derived the Financial review. The Financial review and out on page 27 in the Financial review. from the London Stock Exchange’s Daily Strategic report explain financial performance, The Company’s Employee Benefit Trust (EBT) Official List for the five business days prior to KPIs, the position at the year-end, any post waives its entitlement to any dividends. the relevant purchase as at 14 December 2012, balance sheet events, any likely future being the date the notice for the Annual General developments and a description of the principal Meeting in 2013 was prepared. The Company risks and uncertainties facing the Group and Share capital has never purchased any of its shares and this how these are managed. authority will expire following the end of the The Company has a single class of share Company’s Annual General Meeting to be held The Annual Report contains certain capital which is divided into Ordinary shares on 3 February 2014, at which a resolution to forward-looking statements with respect to of one penny each. The rights and obligations renew such authority is proposed. the operations, performance and financial attaching to the Company’s Ordinary shares condition of the Group. By their nature, these and provisions governing the appointment and statements involve uncertainty since future replacement of, as well as the powers of, the Directors events and circumstances can cause results Directors, are set out in the Company’s Articles to differ from those anticipated. The forward- of Association, copies of which can be obtained Biographical details of the Directors holding looking statements reflect knowledge and from Companies House in the UK or by writing office as at 13 December 2013 are set out on information available at the date of preparation to the Company Secretary. Save for restrictions page 30. of this Annual Report and the Company that may from time to time be set out in the undertakes no obligation to update those Company’s Articles of Association or imposed Directors’ shareholdings in the Company’s forward-looking statements. by laws and regulations (including the Listing share capital are set out opposite. No Director

Significant shareholdings

At 13 December 2013, the Company had been notified of the following significant interests in its Ordinary shares:

Percentage of Shareholder Number of shares issued share capital Aberforth Partners LLP 77,101,394 23.12% Schroders Plc 72,790,854 21.83% FIL Ltd 36,368,960 10.90% Investec Asset Management Ltd 28,710,000 8.61% Herald Investment 18,265,000 5.48% Franklin Templeton Investments Corp 16,663,407 5.00% Gartmore Investments Limited 16,446,486 4.93% Artemis Investment Management Ltd 10,627,757 3.19% 276,973,858 83.06% Directors’ holdings (see opposite) 1,637,999 0.49% Total of significant holdings 278,611,857 83.55% Total number of shares in issue 333,476,541 100% Annual Report and Accounts 2013 32 Strategic Report

Directors’ shareholdings (audited)

Balance as at Purchases Balance as at Directors in office at 30 September 2013 30 September 2012 during the year 30 September 2013 Executive Mark Wood - - - Financial Review Graham Harding4 333,110 - 333,110 Non-executive Peter Allen 800,000 - 800,000 Seb Bishop 17,000 - 17,000 Mark Whiteling 400,000 - 400,000 Manjit Wolstenholme 34,000 53,889 87,889 Total 1,584,110 53,889 1,637,999

Notes: 1. All holdings are beneficial. 2. Between 30 September 2013 and 13 December 2013 (being the latest practicable date prior to publication of this document) there were no changes to the holdings of serving Directors. 3. Details of the share options and awards for executive Directors are set out on page 45. There are no such options or awards for non-executive Directors. 4. Graham Harding left the Company on 30 November 2013. There were no changes to his holdings. Zillah Byng-Maddick was appointed to the Board on 1 November 2013. As at 13 December 2013, she holds no shares in the Company.

has any interest in any other share capital of Conflicts of interest model and strategy. In preparing these financial the Company or any other Group company, nor statements, the Directors are required to: does any Director have a material interest in The Board has a set of procedures to ensure any contract of significance to the Group. that: (i) conflicts of interest are raised by :: select suitable accounting policies and then Directors (and any potential Directors prior apply them consistently; to appointment); (ii) appropriate guidelines :: make judgements and accounting

Significant agreements are followed before any conflict is authorised estimates that are reasonable and prudent. Corporate Governance (including ensuring that only Directors who The provisions of the European Directive on have no interest in the matter being considered The Directors are responsible for keeping Takeover Bids (as implemented in the UK in will be able to take the relevant decision and adequate accounting records that are sufficient the Companies Act 2006) require the Company in taking the decision the Directors act in a to show and explain the Company’s transactions to disclose any significant agreements which way they consider, in good faith, will be most and disclose with reasonable accuracy at any take effect, alter or terminate upon a change likely to promote the Company’s success); time the financial position of the Company of control of the Company. In common with and (iii) records are kept of conflicts of interest and the Group and enable them to ensure that many other companies, the Group’s bank and authorisations. The Directors are satisfied the financial statements and the Directors’ facility (details of which are set out in note 19 on that the Board’s powers of authorisation remuneration report comply with the Companies pages 77 and 78) is terminable upon change of of conflicts are operating effectively and Act 2006 and, as regards the Group financial control of the Company. In common with market that the procedures have been followed. statements, Article 4 of the IAS Regulation. They practice, awards under certain of the Group’s The procedures and any authorisations will are also responsible for safeguarding the assets long-term incentive plans (details of which are continue to be reviewed annually. of the Company and the Group and hence for set out in the Directors’ remuneration report on taking reasonable steps for the prevention and page 43 and note 25 on page 84) will vest or detection of fraud and other irregularities. potentially be exchangeable into awards over Directors’ responsibility for accounts a purchaser’s share capital upon change of The Directors are responsible for the control of the Company. There is also a change The Directors are responsible for preparing maintenance and integrity of the Company’s of control provision in the service agreements the Annual Report, the Directors’ remuneration website. Legislation in the United Kingdom of the two executive Directors, exercisable report and the financial statements in governing the preparation and dissemination within three months of a change of control by accordance with applicable law and regulations. of financial statements may differ from the Company or on one month’s notice by the legislation in other jurisdictions.

executive to expire no later than three months Company law requires the Directors to Financial Statements from the date of the change of control. prepare financial statements for each financial year. Under that law the Directors have Corporate responsibility prepared the Group and parent company Financial instruments financial statements in accordance with The Board considers that issues of corporate International Financial Reporting Standards responsibility are important. The Board’s Information in relation to the Group’s use of (IFRSs) as adopted by the European Union. report, including a statement on Greenhouse financial instruments is set out in note 23 on The Directors must not approve the financial Gas Emissions for the Group, is set out on pages 80 to 83. statements unless they are satisfied that they pages 21 and 22. give a true and fair view of the state of affairs of the Group and the Company and of the profit Corporate governance or loss of the Group for that period and that Annual General Meeting 2014 the Annual Report, taken as a whole, is fair, The Board supports best practice in corporate balanced and understandable and provides At the Company’s fifteenth Annual General governance. The Board’s report on this subject the information necessary for shareholders Meeting, which will be held on Monday is set out on pages 35 to 40. to assess the Group’s performance, business 3 February 2014 at 12 noon at Future’s 33 Future plc

Directors’ report

For the year ended 30 September 2013

Headquarters at 2 Balcombe Street, London Biographical details of all Directors are If granted, this authority would replace all NW1 6NW, a number of resolutions will be set out on page 30. previous authorities granted in this connection. proposed. The resolutions are set out in the The authority granted by this resolution will Notice of Annual General Meeting on pages Following a rigorous evaluation and taking into expire on 31 March 2015 or, if earlier, following 89 to 90 and an explanation of all proposed account the need for progressive refreshing the conclusion of the next AGM of the Company. resolutions is provided below. of the Board, the Board confirms that the If the Directors exercise the authority granted performance of each executive and non- under paragraph 13.1 of the Notice of AGM, they executive Director of the Company continues will all stand for re-election at the following AGM. Ordinary resolution 1 – Financial to be effective and demonstrates commitment statements to the role. The Nomination Committee has The Directors do not have any present intention carefully considered the time commitments of exercising this authority other than in Shareholders will be asked to approve the required from and the contribution made connection with any exercises under share financial statements of the Company for the by each Director and both the Nomination option and other share incentive schemes, financial year ended 30 September 2013, Committee and the Board unanimously but intend to seek this authority each year. together with the reports of the Directors and recommends that Zillah Byng-Maddick be In addition, there may be circumstances auditors. The audited financial statements elected as a Director and each Director where it would be appropriate for the Company appear on pages 55 to 87. standing for re-election be re-elected. to issue new Ordinary shares, such as an acquisition where it might be appropriate for the consideration to be settled in whole, or in Ordinary resolution 2 – Directors’ Ordinary resolutions 11 and 12 – part, by the issue of new Ordinary shares. The remuneration implementation report Auditors Company does not hold any shares in treasury.

Shareholders will be asked to approve the A resolution proposing the reappointment of Directors’ remuneration implementation report PricewaterhouseCoopers LLP as auditors of Ordinary resolution 14 – Approval of for the financial year ended 30 September the Company and authorising the Directors to political donations 2013, which is set out on pages 42 to 47. determine their remuneration will be proposed at the Annual General Meeting. An explanation It remains the policy of the Company not to regarding the Board’s proposal to reappoint make political donations or to incur political Ordinary resolution 3 – Directors’ PricewaterhouseCoopers LLP as auditors expenditure, as those expressions are remuneration policy can be found on page 40 in the Corporate normally understood. However, following Governance report. broader definitions introduced by the 2006 Act, Shareholders will be asked to approve the the Directors continue to propose a resolution Directors’ remuneration policy for the three designed to avoid inadvertent infringement of year period commencing on 1 October 2013 Ordinary resolution 13 – To authorise these definitions. which is set out on pages 48 to 51. the Directors to issue and allot new Ordinary shares The 2006 Act requires companies to obtain shareholders’ authority for donations to Ordinary resolution 4 – Payment of Under the provisions of section 551 of the registered political parties and other political final dividend Companies Act 2006 (the 2006 Act), the organisations totalling more than £5,000 in Directors may allot and issue Ordinary any 12-month period, and for any political The Directors propose a final dividend of shares only if authorised to do so by the expenditure, subject to limited exceptions. 0.2 pence per Ordinary share to be paid on Company’s Articles of Association or by The definition of donation in this context is 14 March 2014 to those Ordinary shareholders shareholders at a shareholders’ meeting. very wide and extends to bodies such as those on the register at the close of business on Consistent with guidance issued by the concerned with policy review, law reform and 14 February 2014. Since no interim dividend Association of British Insurers (ABI) this the representation of the business community. was paid in respect of the period to 31 March resolution will, if passed, authorise the It could also include special interest groups, 2013 the total dividend payable in respect of the Directors to allot shares up to a maximum such as those involved with the environment, year ended 30 September 2013 amounts to 0.2 nominal value of £2,222,000 as follows: which the Company and its subsidiaries might pence per Ordinary share. The Board’s policy wish to support, even though these activities on dividends and its recommendation for a final (a) in relation to a pre-emptive rights issue are not designed to support or to influence dividend are set out in the Chairman’s statement only, equity securities (as defined by support for any particular political party. and on page 27 of the Financial review. section 560 of the 2006 Act) up to a maximum nominal amount of £2,222,000 which represents approximately two Special resolution 15 – Disapplication Ordinary resolutions 5 to 10 – Election thirds of the Company’s issued Ordinary of statutory pre-emption rights of Zillah Byng-Maddick and annual shares (excluding treasury shares) as at 13 re-election of other Directors December 2013. This maximum is reduced Resolution 15 will be proposed to renew by the nominal amount of any Relevant the Directors’ existing authority to allot new Following Zillah Byng-Maddick’s appointment to Securities allotted under paragraph 13.2 of Ordinary shares for cash other than pro rata the Board on 1 November 2013, she stands for the Notice of AGM; and to existing shareholdings. Section 561 of the election to confirm her appointment. Under the 2006 Act requires that equity securities issued terms of her appointment Zillah is committed to (b) in any other case, Relevant Securities for cash must first be offered to the Company’s perform her services for the equivalent of seven up to a maximum nominal amount of existing holders of securities in proportion to days in every ten, notwithstanding the fact £1,111,000 which represents just under one their existing rights. that as a Director she will work such hours as third of the Company’s issued Ordinary may be reasonably necessary to enable her to shares as at 13 December 2013. This Consistent with the previous practice of the properly discharge her duties. maximum is reduced by the nominal Company, the authority now sought would amount of any equity securities allotted permit the allotment of Ordinary shares up to the Consistent with our policy since 2004, all under paragraph 13.1 of the Notice of amount covered by resolution 13 in connection Directors are proposed for re-election. AGM in excess of £1,111,000. with a rights issue (or other pro rata Ordinary Annual Report and Accounts 2013 34 Strategic Report

share issue) and otherwise up to an aggregate The 2006 Act permits certain listed companies as they intend to do in respect of their own nominal amount not exceeding £166,700, to hold shares in treasury as an alternative to beneficial holdings. equivalent to just under 5% of the Company’s cancelling them following a purchase of own issued Ordinary share capital as at 13 December shares by the Company. Shares held in treasury Annual General Meeting procedures 2013, such authority to expire on 31 March may subsequently be cancelled or sold for cash, and result 2015 or, if earlier, following the conclusion of the or used to satisfy employee share option or Company’s next Annual General Meeting save other awards under the Company’s share option As in previous years, the Company will: (a) Financial Review that the Company would, before the expiry of or long-term incentive schemes. Once held in indicate the level of proxies lodged on each the power conferred, be able to make an offer or treasury, a company is not entitled to exercise resolution together with the balance for and agreement which would or might require equity any rights, including the right to attend and vote against each resolution and the number of securities to be allotted after its expiry and the at Company meetings in respect of the shares abstentions; (b) announce the results of voting Directors would be able to allot equity securities and no dividend or distribution of the Company’s to the London Stock Exchange; and (c) post pursuant to such an offer or agreement as assets may be made to the Company in respect the results of voting on our corporate website, if the power, if conferred, had not expired. If of shares held in treasury. If the Directors www.futureplc.com. granted, this authority would replace all previous exercise the authority conferred by resolution 16, authorities existing in this connection. The Board they will consider holding any shares purchased intends to renew this authority each year. in treasury rather than cancelling them. Disclosure of information to the auditors The Board does not currently intend to issue The total number of options to subscribe for more than 7.5% of the Ordinary issued share or awards granted in respect of Ordinary The Directors confirm that they have complied capital of the Company in any rolling three- shares that were outstanding at 13 December with the relevant provisions of the 2006 Act in year period without prior consultation with the 2013 (being the latest practicable date prior to preparing the financial statements. Investment Committees of the Association of publication of this document) was 12,911,750. British Insurers and the National Association The proportion of issued share capital that they In addition, each of the Directors confirms that, of Pension Funds. represented at that time was 3.87% and the so far as they are aware, there is no relevant proportion of issued share capital that they will audit information of which the auditors are represent if the full authority to purchase shares unaware. Each Director has taken all reasonable Special resolution 16 – Purchase of (existing and being sought) is used is 4.30%. steps to ensure that they are aware of any own shares relevant audit information and that the auditors are aware of any relevant audit information.

Resolution 16 is proposed to renew the Special resolution 17 – General Corporate Governance Company’s authority to make market meetings on 14 days’ notice purchases of its own Ordinary shares. Responsibility statement The maximum number of Ordinary shares Notice periods for AGMs must give at least that may be purchased will be 33,340,000 21 days’ clear notice. For other general meetings, Each of the Directors, whose names and representing just under 10% of the issued the old minimum notice period of 14 days functions are listed in the Board of Directors Ordinary share capital of the Company as was increased to 21 days by the Companies section on pages 29 and 30, confirm that to the at 13 December 2013. (Shareholders’ Rights) Regulations 2009, unless best of their knowledge: shareholders approve a shorter period of at The minimum price payable for shares will be least 14 clear days. In the interests of greater (a) the Group financial statements, which have the nominal value of one penny per Ordinary efficiency, resolution 17 seeks to renew approval been prepared in accordance with IFRSs share and the maximum price will not be more for notice periods of at least 14 clear days. as adopted by the EU, give a true and than the higher of 5% above the average of fair view of the assets, liabilities, financial the middle-market quotation of the Company’s position and profit of the Group; and Ordinary shares as derived from the London Action to be taken Stock Exchange Daily Official List for the five (b) the Strategic report and Financial review business days immediately preceding the day A form of proxy is included with this Annual include a fair review of the development on which the Ordinary shares are purchased Report for use in connection with the Annual and performance of the business and and that stipulated by Article 5(1) of the Buy- General Meeting. Please complete and return the position of the Group, together with back and Stabilisation Regulation 2003. This the form in accordance with the instructions a description of the principal risks and authority, if granted, would expire on 31 March printed on it to Computershare Investor uncertainties that it faces; and 2015 or, if earlier, following the conclusion of Services PLC, The Pavilions, Bridgwater Road, the Company’s next Annual General Meeting Bristol BS99 6ZY as soon as possible and, in (c) the Annual Report, taken as a whole, is fair,

save that the Company would, before expiry any event, no later than 12 noon on Thursday balanced and understandable and provides Financial Statements of the power conferred, be able to make a 30 January 2014. The return of the form of proxy the information necessary for shareholders contract to purchase shares which may be will not prevent you from attending the Annual to assess the Group’s performance, executed wholly or partly after its expiry, as if General Meeting and voting in person if you business model and strategy. the power, if conferred, had not expired. The wish to do so. Further information about the Board intends to seek this authority each year. AGM, including about electronic appointment Approved by the Board of Directors and signed If approved, the power would be used only of proxies, is provided on pages 91 to 92. on its behalf by: where it was demonstrably in shareholders’ interests, such as by improving adjusted EPS. Recommendations While the Board has no current intention to use the power proposed, it considers that it The Board believes that each of the resolutions is desirable to have this authority each year, to be proposed at the Annual General Meeting as there could be circumstances in which the is in the best interests of the Company and Zillah Byng-Maddick purchase by the Company of its own shares its shareholders as a whole. Accordingly, the Chief Financial Officer would be in the best interests of the Company Directors unanimously recommend that you and Company Secretary and its shareholders generally. vote in favour of all of the resolutions proposed, 13 December 2013 35 Future plc

Corporate Governance Good Practice report Effective corporate governance requires not just compliance with legislative and regulatory requirements, but also applying the principle of good governance in the boardroom and throughout the business. At Future, we are committed to ensuring that good corporate governance is enshrined at the heart of our business structure and processes.

Zillah Byng-Maddick Chief Financial Officer and Company Secretary

Our approach to corporate Manjit Wolstenholme is the Senior independent governance non-executive Director. There is a genuine mix of views and insights, as well as experience. “ The non-executives play In this report, we provide detail on the role Each non-executive Director is expected to a critical role on the of the Board of Directors, followed by a more commit 20 days a year to their role to allow for Board in overseeing and detailed focus on the work of each of the three preparation for and attendance at Board and key committees: the Audit Committee, the Committee meetings and keeping in touch with scrutinising the running Nomination Committee and the Remuneration the senior management team, shareholders Committee. Together, these give a clear insight and other stakeholders. of the business and in into how we manage corporate governance ensuring that corporate principles and processes within the Group. Roles of the Chairman and Chief Executive The duties and responsibilities of the Board governance remains at For the financial year ended 30 September are effectively divided so that the Chairman 2013, we have complied in full with the leads the Board and the Chief Executive leads the top of the agenda.” requirements of the UK Corporate Governance the business. Code (2012) which is available on the Financial Reporting Council website www.frc.org.uk/ Board meetings corporate/ukcgcode.cfm. The disclosures on The Board had six scheduled meetings share ownership, appointing and replacing during the financial year and attendance Directors and other similar disclosures required is summarised below. The Board had four by rule 7.2.6 of the Disclosure and Transparency unscheduled telephone meetings to deal with Rules are set out in the Directors’ report on matters that arose during the year during which pages 31 to 34. all members were present.

All Directors are aware of the need to be 1. Board of Directors available and there is a clear contact process. Board meetings are sometimes preceded by Membership of the Board an informal dinner where senior management The Board consists of two executive and can update the Board on business issues four non-executive Directors. Biographies and challenges. Quick find contents of Directors and details of their other time commitments are set out on pages 29 and 30. There is a regular and comprehensive exchange of information between meetings to Mark Millar resigned as Company Secretary ensure Board members are well informed to Board of Directors and was replaced by Graham Harding, Chief participate effectively in meetings. Directors Page 35 Financial Officer, on 25 January 2013. There receive a Board pack a week before the were no other changes during the year to meeting with minutes of the previous meeting, Audit Committee 30 September 2013. On 1 November 2013, Zillah all papers for agenda items, a report from the Page 38 Byng-Maddick was appointed to the Board to Company Secretary summarising any key legal replace Graham Harding who left the Company issues and providing any regulatory/legislative Nomination Committee on 30 November 2013. Zillah Byng-Maddick updates, and a summary of share ownership Page 40 took on the role of Chief Financial Officer and and recent share dealing. Similar packs are Company Secretary on 18 November 2013. provided for all Committee meetings. Between Remuneration Committee meetings, the Board receives a monthly Board Page 40 Role of the non-executive Directors report written by the executive Directors The non-executives play a critical role on the which summarises financial and operational Board in overseeing and scrutinising the running performance and provides updates on key of the business and in ensuring that corporate programmes within the business. governance remains at the top of the agenda.

The non-executive Directors all serve three- Attendance year terms, terminable by either party on three Director (6 scheduled meetings) months’ notice at any time and subject to their election and annual re-election or removal by Peter Allen 6 of 6 shareholders. Although annual re-election is Seb Bishop 6 of 6 not a requirement for Future, we believe it is the Mark Whiteling 6 of 6 best way to ensure non-executives are directly accountable to shareholders. Manjit Wolstenholme 6 of 6 Mark Wood 6 of 6 All of the non-executive Directors are Graham Harding 6 of 6 considered to be independent by the Board. Annual Report and Accounts 2013 36 Strategic Report Financial Review

There is a written schedule of matters reserved The appointment and removal of the Company for the Board which sets out those matters that Secretary is a Board decision. The Directors require Board approval including setting strategy, may also take independent professional advice approving budgets and financial statements and at the Company’s expense provided that they i setting up policies. This schedule was reviewed give notice to the Chairman. No such advice was in July 2013 and it was noted that 36 matters had sought during 2013. The Company maintains Non-executive Directors been considered by the Board during the year. appropriate insurance for its Directors. The schedule is available on the Company’s As a smaller company we are only website at www.futureplc.com. The Board Terms of reference for the Audit, required to have two independent delegates day-to-day operational matters to Remuneration and Nomination Committees non-executive Directors, however the Group management board. The terms of reference for all Committees we have chosen voluntarily to are available on the Company’s website, comply with the full requirement Board decisions are made unanimously www.futureplc.com. and have at least half the Board whenever possible but can be made by majority. as non-executive Directors. This If Directors have concerns that cannot be Effective Development brings broader experience with resolved about the running of the Company or a the diversity of our business and proposed action, their concerns are recorded in Training and induction our desire to ensure that our the minutes. No such concerns arose in the year. The Board’s training and development policy non-executives have the time to requires that all new Directors should receive devote to corporate governance The Board regularly appoints a sub-committee appropriate induction on joining the Board, both as well as monitoring and consisting of at least two Directors in order to in respect of the Group’s activities as a whole challenging the executive team on finalise and approve those matters that have and of each operating company individually. operational and strategic matters. been approved in principle by the Board, Corporate Governance subject to final amendments only. A permanent Ongoing training for Directors is available as sub-committee consisting of at least two appropriate whether by presentations to the Directors exists to approve the issue and Board by senior management or more formally allotment of new shares in satisfaction of where individual Directors request training on employee share schemes. specific issues. The training and development needs of each individual Director are assessed The Board has a number of nominated advisers and discussed during individual performance (as listed on page 94). During the last financial evaluation meetings with the Chairman and year meetings were regularly held with key Company Secretary as part of the annual advisers to keep them aware of issues, and Board performance evaluation. The Board PricewaterhouseCoopers LLP attended Audit encourages appropriate training and regular Committee meetings and briefings with members updates and refresher sessions are provided of the executive and senior finance teams. by the Company Secretary and the Company’s legal advisers and auditors, to inform the Board Advice and support or relevant Committees of important changes in All Directors have access to the Company legislation, regulation and best practice. Secretary who can advise them on issues of governance, best practice and any other legislative or regulatory matters.

Summary of performance evaluation Financial Statements

Objectives for 2013 Steps taken during 2013

Financing of the business through Signed new four-year credit facility agreement digital transition in February 2013

Improve balance sheet The sale of the UK Rock titles and the signing of the new credit facility agreement has significantly strengthened the balance sheet

Consolidation and development Good progress has been made in the year in of US business significantly reducing the level of EBITDAE losses in the US business. Management believe the business is on track for EBITDAE profitability in 2014. 37 Future plc

Corporate Governance report

Performance evaluation Credit facility The Directors completed a detailed Board The Company signed a new four year £31m performance evaluation questionnaire as credit facility with Barclays and Santander i part of the annual performance evaluation on 22 February 2013. This was made up of a process. Each questionnaire was analysed term loan of £6m and a revolving credit facility Re-election of Directors and the results were presented to the Board for of £25m. Following the disposal of the UK discussion. The Chairman discussed the Board’s Rock titles in April 2013, the term loan was We are not required to offer performance during the year and any specific repaid in full. all our Directors up for annual requirements for training and development with election, however, all our each Director. During the process the Board also Financial covenant compliance Directors take individual and compared its performance with the results and Key covenants are tested quarterly, and are collective responsibility for recommendations from prior year’s performance set out in the table at the bottom of this page. the decisions that the Board evaluations and noted that the Board had made makes and are happy to let significant progress in dealing with the risks and At 30 September 2013 following a further shareholders judge their challenges identified for the year. The Board year of tight working capital management and performance by standing for considers this exercise to be of significant value based on the calculation of EBITDA for bank annual re-election. We have in ensuring a functional and effective Board purposes the Group had headroom of £9.4m followed this practice since the and Committees. over and above the level of net bank debt at AGM in 2005. 30 September 2013. The Chairman also met with non-executive Directors during the year without the presence Risk management and internal controls of executive Directors, in order to assess the Details of the principal risks and the Group’s performance of the executive Directors. approach to managing them are set out on pages 19 and 20. The Board conducted an Accountability and going concern annual review of financial, operational, legal The Directors are required to make an and compliance risks with the assistance assessment of the Group’s ability to continue of members of the Group legal and finance to trade as a going concern. teams to ensure that there is a sound system of internal controls in place and that these The Directors have given this matter due are sufficient to manage (rather than consideration and have concluded that it is eliminate) those risks effectively. appropriate to prepare the Group financial No significant failings or weaknesses statements on a going concern basis. were identified as part of this review. The two main considerations were as follows: The internal controls that are in place to ensure a) Strength of the Group’s cash flow effective risk management are structured The Group has continued to generate operating to ensure a timely flow of information within cash flows during the year. It has also generated the Group and a clear structure of delegated additional cash flows from the disposal of authority and responsibility. The main features certain assets (predominantly print based) in the of the Group’s internal control and risk UK. Most of the Group’s operating expenditure management systems are explained is cash expenditure, and the majority of the further in the following paragraphs. Group’s revenue is collected from distributors (print and digital), subscribers (print and digital) The Board approves a set of control and advertising agencies and clients. documents which specify:

b) Continued support of the Group’s banks (i) v arious financial and treasury policies to The Board maintains a regular and constructive be followed across the Group; and dialogue with the banking syndicate to keep them informed of the Group’s performance on a (ii) the powers of delegated authority across monthly basis. the Group.

Bank Covenants

Net debt/Bank EBITDA Less than 2.5 times at 31 March 2013 and 30 June 2013, less than 2.25 times at 30 September 2013 and 31 December 2013 and less than 2.0 times thereafter Bank EBITDA/Interest More than 4.0 times Capital expenditure 125% of agreed annual budget Annual Report and Accounts 2013 38 Strategic Report Financial Review

The Group finance team manages the financial All Directors are available to meet reporting processes ensuring that there is shareholders at the AGM or on request appropriate control and review of the financial by contacting the Chairman or Company information including the production of the Secretary. Because more than 80% of consolidated financial statements. Group the Company’s shares are held by major finance is supported by operational finance institutions, the executive Directors hold a managers throughout the Group who have the series of meetings presenting the interim and responsibility and accountability to provide annual results to these institutions in order to information in accordance with our policies update them on the progress of the business and procedures. and gauge their views following the analyst presentations of the results. The UK and US operating companies each have a Board (whose members include the In order that all Directors are aware of the views two executive Directors) responsible, inter of shareholders, Board packs include a note alia, for ensuring that the control documents of views as expressed by shareholders during are applied in practice. The Board of the UK meetings held with Directors or as reported operating company also takes responsibility to Directors through the Company’s brokers, “Good corporate for the Australian business. together with copies of analysts’ notes, press articles and other relevant information. governance is The executive Directors hold monthly essential for the management board meetings by video conference with senior UK and US 2. Audit Committee long-term success management in order to provide a proper Corporate Governance opportunity for financial results and other Attendance of the Company.” business and operational issues to be Member (3 scheduled meetings) explored and addressed. Mark Whiteling1 Peter Allen 3 of 3 (Chairman) Chairman Internal audit The Audit Committee and the Board have Peter Allen 3 of 3 again during 2013 reconsidered whether there Manjit Wolstenholme 3 of 3 is a need for an internal audit function. It was concluded that while an independent internal 1. T he Chairman of the Committee, Mark Whiteling, has recent audit department with the necessary technical and relevant financial experience. skills is not currently justified, the Committee should continue to review this subject each year. The Audit Committee’s primary objective is to provide effective financial governance and Whistle-blowing policy monitor the integrity of the Group’s financial As part of its internal controls, the Group has statements and internal controls. a whistle-blowing policy which is updated regularly and published on the Group’s intranet The Audit Committee meets before the interim to encourage employees to report, in good and annual results announcements and faith, any genuine suspicions of fraud, bribery reviews the relevant financial results with the or malpractice in order to identify any problems executive management team and the external within the Group at an early stage. The policy auditors. The Audit Committee also meets is also designed to ensure that any employee separately for the purposes of planning the

who raises a genuine concern is protected. audit process, monitoring its effectiveness, Financial Statements reviewing the Group’s relationship with the Relations with shareholders/ external auditors and undertaking a detailed communication review of the Group’s internal controls and risk We aim to have an open relationship with management systems. It considered whether our shareholders and shareholders can find the 2013 Annual Report was fair, balanced up-to-date information on Group activities on and understandable and advised the Board the Company’s website, www.futureplc.com. accordingly. The Audit Committee carries There is a specific Investor Relations section out the functions required by rule 7.1.3 of the on that site which includes copies of all of Disclosure and Transparency Rules. the Group’s public announcements made via the Regulatory News Service of the London Stock Exchange, as well as full copies of the Company’s annual and interim results and presentations provided to analysts. 39 Future plc

Corporate Governance report

Significant financial reporting judgements newstrade estimates due to the increased The Audit Committee discussed the key risks volume of products which went on sale in and judgements with management and the the second half of the year (in particular auditors as part of the audit planning process relating to bookazines) management believe in July. At the same time they discussed and the estimates made were appropriate. agreed upon appropriate levels of materiality in the context of the anticipated results for the 3. Risk of management override of year. As a result of those discussions an audit internal controls plan was agreed and subsequently executed. The Audit Committee have discussed this with the auditors and noted the one-off The significant issues considered in relation testing carried out by the auditors on a to the financial statements for the year ended sample basis. Based on those discussions, 30 September 2013, which were originally the fact that the one-off testing did not reveal identified and discussed as part of the planning any issues and the levels of review of the process referred to above, are set out below financial results of the business the Audit and were addressed as follows: Committee are satisfied that this risk has “ The Audit Committee been managed effectively and mitigated 1. Impairment where possible. is responsible for IAS 36 requires an impairment test to providing effective be performed for goodwill on an annual 4. Going concern basis. Management prepared a detailed The Audit Committee have considered the financial governance impairment assessment of the UK business going concern assumption as set out on and the US business as separate cash page 37. and monitoring the generating units. integrity of the Group’s 5. Tax position The key assumptions made in that The Audit Committee have reviewed the tax financial statements assessment were as follows: position of the Group with management and the auditors. During the year the Committee and internal controls.” Growth rate to perpetuity 2.0% approved the settlement agreement with EBITAE growth rate in years 1-5 5.2% HMRC noted in the Financial review and Mark Whiteling Discount rate (post-tax) 9.5% have been actively involved in considering Chairman of Audit Committee any areas of judgement relating to tax Management discussed the impairment positions in the UK, US and Australia. assessment and responded to the challenges put forward by the auditors Audit fees and the Audit Committee. Management The Audit Committee has reviewed concluded that as a result of this the remuneration received by assessment no impairment is required at PricewaterhouseCoopers LLP for non-audit 30 September 2013. The Audit Committee work conducted during the financial year. agree with this conclusion. The fees for non-audit work were at a level equivalent to the audit fee, and related mainly 2. Revenue recognition to advising in relation to taxation. For further The areas of revenue which carry the most details regarding fees paid, see note 4 to the judgement are newstrade revenue (both financial statements on page 68. domestic and export) and revenue relating to the increasing number of larger advertising Auditor independence contracts. Management have carefully The Audit Committee monitors the Company’s considered the estimates made in respect of safeguards against compromising the newstrade revenues and have ensured that objectivity and independence of the external the recognition of revenues on the larger auditors by performing an annual review of advertising contracts is appropriate. In all non-audit services provided to the Group and cases the estimates and judgements made their cost, reviewing whether the auditors have been discussed with the auditors and believe there are any relationships that may the Audit Committee. Particular attention affect their independence and obtaining has been given to bookazines in the context written confirmation from the auditors that of the fact that returns information relating they are independent. to export newstrade can take up to nine months from the on sale date to be finalised. For the financial year ended 30 September Whilst it is recognised that there is an 2013, the Audit Committee has conducted increased level of uncertainty in the area of its review of the auditors’ independence and Annual Report and Accounts 2013 40 Strategic Report Financial Review concluded that no conflict of interest exists appointment was confirmed and attended a between PricewaterhouseCoopers LLP audit Board meeting as an observer prior to the and non-audit work and that their involvement in date on which her appointment started. non-audit matters, which was mainly tax-related i and performed by a separate team, was the Following discussion of the skills and most effective way of conducting the Group’s contribution of each Director, the Nomination Investor Relations business during the year. Committee supports the proposed re-election of all Directors standing for re-election at For copies of all of the Group’s Auditor appointment policy the 2014 AGM and the election of Zillah public announcements made The Audit Committee has reviewed its Byng-Maddick to confirm her appointment via the RNS and copies of policy for appointing auditors and awarding to the Board. In line with best practice, each the Committees’ terms of non-audit work. Committee member seeking re-election was reference, visit excluded from approving the proposal for The Group has recently had little their re-election. www.futureplc.com/investors non-audit work outside of tax work but has an open mind about instructing firms other than PricewaterhouseCoopers LLP 4. Remuneration Committee where appropriate. Attendance On the recommendation of the Audit Committee, Member (3 scheduled meetings) the Board has decided that it is in the best Manjit Wolstenholme interests of the Company to put a resolution to 3 of 3 (Chairman) shareholders that PricewaterhouseCoopers LLP, Corporate Governance who have been the Company’s external auditor Peter Allen 3 of 3 for 14 years, be reappointed as auditors for the Mark Whiteling 3 of 3 forthcoming year. The resolution to appoint Seb Bishop 3 of 3 PricewaterhouseCoopers LLP will propose that they hold office until the conclusion of the next Annual General Meeting at which accounts are In addition to the three scheduled meetings there laid before the Company, at a level of were two unscheduled conference calls during remuneration to be determined by the Directors. which all Committee members were present.

The Remuneration Committee determines 3. Nomination Committee the remuneration packages of executive Directors, including performance-related Attendance awards and share-based incentives, Member (1 scheduled meeting) remuneration policy, which includes the Peter Allen (Chairman) 1 of 1 individual bonus targets for executive Directors and performance criteria attached to share- Manjit Wolstenholme 1 of 1 based incentives, the remuneration of the Seb Bishop 1 of 1 Chairman, recommendations of remuneration Mark Whiteling 1 of 1 levels for non-executive Directors and senior management in line with industry remuneration packages and the implementation of any new In addition to the scheduled meeting, there share-based incentive scheme proposed to

was one conference call during which all be implemented. The Directors’ remuneration Financial Statements Committee members were present to discuss report is set out on pages 41 to 51. the departure of Graham Harding and the recruitment of his replacement. Approved by the Board of Directors and signed on its behalf by: The Committee agreed that the search for a new Chief Financial Officer should focus on finding a candidate with experience of the transition from a print to digital business and that a recruitment consultancy would be appointed to lead the search. Zillah Byng- Maddick was subsequently identified, outside Zillah Byng-Maddick of that process, as being an ideal candidate Chief Financial Officer fulfilling key criteria. Zillah was interviewed and Company Secretary by each non-executive Director before her 13 December 2013 41 Future plc

Directors’ remuneration Annual statement report The remuneration philosophy is based on the need to For the year ended 30 September 2013 motivate and incentivise the executive Directors, whilst aligning their interests with those of the shareholders.

Dear shareholders,

I am pleased to present the Directors’ remuneration report for the financial year ended 30 September 2013. This report has been prepared on behalf of the Future plc Board by the Remuneration Committee, and has been approved by the Future plc Board.

As required under the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (Sl 2013/1981) Directors’ Remuneration Regulations, this report is split into two sections: an Implementation report, setting out details of Directors’ remuneration for the financial year ended 30 September 2013, and a Remuneration policy report, setting out the Group’s forward-looking remuneration policy (“Policy”) for executive and non-executive Directors for the three year period from 1 October 2013.

The key challenge faced by the Remuneration Committee during the year related to the change in the Chief Financial Officer. Graham Harding has served the business over a number of years and has been instrumental in the past two years in the actions taken to stabilise the balance sheet and funding position of the business. The Remuneration Committee therefore felt it was appropriate to exercise a reasonable degree of discretion in arriving at a commercial position regarding compensation for loss of office.

The Policy will be subject to a binding shareholder vote at the Company’s AGM on 3 February 2014 and will take effect immediately thereafter.

During the year to 30 September 2013, the Committee has considered the level and make-up of the executive Directors’ remuneration packages, including the grant of share- based incentive awards and the basis of performance-related bonuses, details of which are set out in the Implementation report and the Policy. There has been no significant change in the Committee’s approach to Directors’ remuneration during the year.

The remuneration philosophy is based on the need to motivate and incentivise the executive Directors, whilst aligning their interests with those of the shareholders. As a result, remuneration levels are designed to reflect the relative performance of the business for the relevant period. Overall the results of the business for the year ended 30 September 2013 were satisfactory in the context of a difficult market environment and the need for the business to focus on stabilisation of the balance sheet in the form of a new Credit Agreement and the sale of certain assets – both of which were executed successfully. Trading results, however, were below the expectations set at the beginning of the year and as a result no performance-related bonuses were payable in respect of the year ended 30 September 2013. Quick find contents We believe that the Policy will incentivise the executive team to deliver growth in the short, medium and long term, and hope to receive your continued support at the Implementation report Company’s 2014 AGM. Page 42

Remuneration policy report Page 48 Manjit Wolstenholme 13 December 2013 Annual Report and Accounts 2013 42 Strategic Report Implementation report

The following report provides details of Directors’ remuneration for the year ended 30 September 2013. In setting remuneration for the year, the Committee applied the principles set out in the Remuneration policy report.

Remuneration Committee excessive risk-taking. The Committee is The potential maximum performance-related also responsible for fixing the Chairman’s bonus payable to the executive Directors Four independent non-executive Directors remuneration and approving the terms of any under the Annual Bonus Scheme during served on the Remuneration Committee during new share-based incentive scheme for any 2013 was 100% of basic annual salary for the year to 30 September 2013: Manjit employees of the Group, subject, where the Chief Executive and 65% for the Chief Wolstenholme chairs the Committee and Peter appropriate, to shareholder approval. Financial Officer. Allen, Seb Bishop and Mark Whiteling served Financial Review throughout the period. Graham Harding, Chief It is the Board that is responsible for Payment of any performance-related bonus Financial Officer and Company Secretary, determining the remuneration of non-executive under the Annual Bonus Scheme is made in has been Secretary to the Committee since Directors following the recommendation of the December, following announcement of the 25 January 2013 following the resignation of Committee as set out on page 43. preliminary results and conclusion of the audit Mark Millar, who was Company Secretary and in respect of the preceding financial year. Secretary to the Committee from September No Director is involved in deciding his or her Payment of any performance-related bonus 2002. On 1 October 2013, it was announced that own remuneration. As explained on page 36, is also subject to the executive Director being Graham Harding would be leaving the Company the terms of reference of the Remuneration in the Company’s employment at the time of on 30 November 2013 and would be replaced by Committee, reviewed annually, are available payment of such performance-related bonus Zillah Byng-Maddick, who would become the on the Company’s website. and not having given or received notice of new Chief Financial Officer as well as Secretary termination of employment and certain other to the Committee. events not having occurred. Performance-related bonus The Committee is responsible for determining (Annual Bonus Scheme) Performance targets the basic annual salaries, incentive arrangements and terms of employment Operation of the scheme The profit criteria for payment of the of executive Directors, for making performance-related bonus for 2013 was recommendations regarding non-executive The performance-related bonus is subject to in a range from 90% to 115% target EBITE, Directors’ fees, the level and make-up of the both profit related and subjective individual as follows: remuneration packages of senior managers, performance criteria, with 20% of the potential including bonus schemes and share-based maximum performance-related bonus payable :: If EBITE is 10% below target EBITE, incentives, and ensuring that remuneration being subject to individual performance criteria no discretionary bonus will be payable. policies and practices do not encourage determined by the Committee. Corporate Governance

Single Total Figure of Remuneration (audited)

The remuneration of the Directors is set out below:

Salary/fees Benefits1 Annual bonus3 PSP3, 4, 5 Pension2 Total

2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Mark Wood 285 258 10 10 - 130 - - 36 32 331 430 Graham Harding 185 169 7 6 - 55 - - 23 19 215 249

Total for executive Directors 470 427 17 16 - 185 - - 59 51 546 679

Peter Allen 120 112 ------120 112 Manjit Wolstenholme 45 44 ------45 44

Mark Whiteling 45 44 ------45 44 Financial Statements Seb Bishop 40 39 ------40 39

Total for non-executive Directors 250 239 ------250 239

Total 720 666 17 16 - 185 - - 59 51 796 918

Notes: 1. Benefits for executive Directors comprise principally car allowance, private health insurance and life assurance. There were no taxable expenses paid to any Director in the year. 2. Mark Wood received a cash supplement in lieu of pension contribution. This additional cash payment is not included in determining his entitlement to any bonus, share-based incentive or pension entitlement. 3. Details relating to the Annual Bonus Scheme and the Performance Share Plan (“PSP”) are set out on pages 42 and 43. 4. T he PSP award granted to Graham Harding in November 2009, when he occupied the role of Group Financial Controller, lapsed in November 2012 as a result of both EPS and TSR performance criteria not being satisfied. For more information, see explanation relating to PSP scheme on page 43. 5. The PSP award granted to Graham Harding in December 2010, when he occupied the role of Group Financial Controller, will lapse in December 2013 since performance criteria have not been satisfied. For more information, see explanation relating to PSP scheme on page 43. 6. Zillah Byng-Maddick was appointed to the Board on 1 November 2013 and consequently no remuneration is included in the table above. 43 Future plc

Directors’ remuneration report

For the year ended 30 September 2013

:: If EBITE is between EBITE target and 10% of basic annual salary. However, in exceptional Trinity Mirror below EBITE target, such amount as the circumstances, where it is felt necessary Wilmington Group Committee determines in its discretion to provide further incentive to the executive WPP Group will be payable. The Committee retained Directors, awards of up to 200% of basic annual discretion to ensure that the level of bonus salary may be approved. Prior to January 2012 The list of comparator companies in relation was merited by the individual. awards were granted to executive Directors and to all PSP awards granted from 21 December key senior executive management, including 2010 onwards is as follows: :: If EBITE target is achieved, 40% of basic Graham Harding in his role as Group Financial annual salary will be payable to the Chief Controller. Since this date, awards have been Bloomsbury Publishing Executive and 26% of basic annual salary made only to the two executive Directors. Centaur Media will be payable to the Chief Financial Officer. Chime Communications Performance targets Ebiquity :: If EBITE target is exceeded by up to Haynes Publishing 15%, such amount as the Remuneration Subject to the executive Directors remaining HIBU Committee determines in its discretion in in employment at the vesting date, awards Huntsworth excess of 40% and 26% of basic annual shall vest subject to the following criteria Johnston Press salary respectively will be payable. having been met. M&C Saatchi Mecom Group :: If EBITE target is exceeded by 15% or :: Earnings Per Share (50% of award) Motivcom more, the maximum profit related element Progressive Digital Media of the bonus equal to 80% of basic annual Growth in EPS over the three years of at Quarto Group salary for the Chief Executive and 52% of least annual Retail Price Index (RPI) + 3% STV Group basic annual salary for the Chief Financial for this part of the award to vest (at this level Ten Alps Officer will be payable. the vested amount is zero), with full vesting at Trinity Mirror annual RPI + 8% and on a straight-line basis Wilmington Group The EBITE target is not disclosed as this between these levels. YouGov is believed to be a commercially sensitive number but it is set by the Committee to be :: Total Shareholder Return (50% of award) Performance against targets in respect of challenging and is set by reference to the the 27 November 2009 award budget for the relevant financial year. In 2013, The Company’s TSR performance is it was adjusted to take into account the impact compared against a basket of comparator The movement in EPS for the relevant on EBITE in the year of the sale of the UK Rock companies comprising at all times a minimum measurement period was -39%, and TSR titles in April 2013. of 15 companies. performance placed the Company 15th within the group of 18 comparator companies. The individual performance criteria set by If the Company’s TSR performance places Consequently, the PSP award granted to the Committee were designed to reward the it below median ranking, none of the part of Graham Harding in November 2009 lapsed in successful implementation of specific elements the award dependent on TSR performance its entirety on 27 November 2012. of the Group’s financial and operational strategy. will vest. If the TSR performance places it in median ranking, 25% of this part of the award Performance against targets in respect of Payment of any part of the individual will vest through to 100% if the Company is the 21 December 2010 award performance-related bonus was subject to ranked in the upper quintile, i.e. top 20%. the 90% EBITE floor being achieved. Between median and upper quintile, this part The Committee exercised its discretion to of the award will vest on a pro rata straight- waive the requirement for Graham Harding Actual performance against targets for line basis. to remain employed within the Group at the year the vesting date and to allow the award In respect of the TSR performance for to vest in December 2013, subject to the Since the actual EBITE achieved of £4.7m was awards granted up to 20 December 2010, relevant performance criteria having been below the 90% floor, no performance-related the Company’s TSR performance was met. The movement in EPS for the relevant bonus is payable to either of the executive measured against the following basket measurement period was -67% and TSR Directors in respect of the financial year to of comparator companies: performance placed the Company 16th within 30 September 2013. the group of 19 comparator companies. Bloomsbury Publishing Consequently, the PSP award granted to Centaur Media Graham Harding in December 2010 shall 2005 Performance Share Plan (PSP) Chime Communications lapse in its entirety on 21 December 2013. Euromoney Institutional Investor Operation of the scheme Haynes Publishing HIBU Non-executive Directors’ remuneration The PSP has been in operation since 2005 Informa and is designed to reward performance over a ITE Group Non-executive Directors do not participate three-year period in the context of performance ITV in any of the Company’s share incentive targets which are designed to align the interests Johnston Press arrangements, nor do they receive any of the executive Directors with those of the Mecom Group benefits. Their fees are reviewed every three shareholders. Those targets are set out in the Pearson Group years. The Chairman’s fees are set by the next two columns. The maximum amount of an Reed Elsevier Committee, and those for the non-executive award in any financial year is normally 100% STV Group Directors are set by the Board as a whole. Annual Report and Accounts 2013 44 Strategic Report

Share incentives awarded during the year (audited)

PSP Grant: 17 December 2012

% vesting at No. shares Performance % salary Value (£) min performance awarded period

Mark Wood 100% £285,000 12.5% 1,583,333 1 Oct 2012 – Financial Review 30 Sept 2015 Graham Harding 100% £185,000 12.5% 1,027,778 1 Oct 2012 – 30 Sept 2015

Notes: 1. The value of the PSP award is calculated using the share price at the date of grant, which was 18p per share. 2. The PSP awards are exercisable at nil value. 3. The performance conditions attached to the grant of the above awards are the same as set out on page 43. 4. The percentage vesting at minimum performance represents the 25% vesting of the TSR element of the award.

Pension entitlements (audited) Company shall pay a pension contribution in the amount of £15,417 into the Company’s The only element of remuneration that is group personal pension plan on his behalf in pensionable is basic annual salary, excluding December 2013, and a further contribution of performance related bonuses and benefits in £3,854 on 31 July 2014, save that such kind. Employer’s pension contributions are amount will be reduced by any amount due to payable for the executive Directors at a rate be paid into any future employer’s pension of 12.5%. Mark Wood receives his entitlement plan during August and September 2014. In to employer’s pension contributions in cash addition to the above, he will receive a further as a salary supplement. This additional cash ex gratia amount of £34,838 in December payment is not included in determining his 2013 as compensation for employment claims entitlement to any performance-related bonus, arising on termination and certain benefits Corporate Governance share based incentive or pension. including private health insurance up until 30 September 2014. The liability of the Company in respect of the executive Directors’ pensions amounts to £1,927 as at 30 September 2013. Normal retirement age Statement of Directors’ shareholding under the scheme rules is 75. and share interests (audited)

The Company has a policy on share ownership Payments to past Directors (audited) by executive Directors which requires that any such Director should accumulate a holding in No payments were made to any past shares over a five year period from appointment Directors during the financial year ended where the acquisition cost of those shares 30 September 2013. represents at least one times salary. In respect of Mark Wood and Graham Harding, no shares were purchased between 27 October 2011 and Payments for loss of office (audited) 30 September 2013, however Graham Harding has a holding of 330,110 shares which was During the financial year to 30 September 2013, accumulated prior to his appointment. The no payments were made to any Director who relevant five year period ends on 26 November served during the year ended 30 September 2016. In respect of Zillah Byng-Maddick, the 2013 or any previous financial year in respect period commenced on 1 November 2013 and of loss of office. will end on 31 October 2018. Financial Statements Graham Harding left the Company on Details of Directors’ shareholdings are set 30 November 2013 having served two months out on page 32 of the Directors’ report. of his contractual notice period. In lieu of the remaining ten months’ notice, he will receive a lump sum payment of £123,933 in December 2013 and a further £30,983 on 31 July 2014 save that, where he has found alternative employment by 31 July 2014, any amount that he is due to earn in August and September 2014 shall be deducted from the amount payable on 31 July 2014. In addition, the 45 Future plc

Directors’ remuneration report

For the year ended 30 September 2013

Directors’ interests in share schemes (audited)

Details of options and other share incentives held by executive Directors and movements during the year are set out below, including details of the awards made during the year.

Price Exercise Lapsed paid price per Balance at Granted unexercised Balance at Directors in office at for Earliest Expiry share 1 Oct during the during 30 Sept 30 September 2013 Date of grant grant exercise date date (p) 2012 year4 the year 2013 PSP1 Mark Wood 18 Jan 2012 Nil 18 Jan 2015 N/A Nil 3,500,000 - - 3,500,000 17 Dec 20124 Nil 17 Dec 2015 N/A Nil - 1,583,333 - 1,583,333 Graham Harding5 27 Nov 2009 Nil 27 Nov 2012 N/A Nil 269,065 - (269,065) - 21 Dec 2010 Nil 21 Dec 2013 N/A Nil 224,221 - - 224,221 18 Jan 2012 Nil 18 Jan 2015 N/A Nil 2,000,000 - (555,556) 1,444,444 17 Dec 20124 Nil 17 Dec 2015 N/A Nil - 1,027,778 (1,027,778) - Sharesave2 Mark Wood 20 Dec 2010 Nil 1 Feb 2014 1 Aug 2014 16.5 54,545 - - 54,545 Graham Harding 20 Dec 2012 Nil 1 Feb 2016 1 Aug 2016 14.0 - 64,285 - 64,285 DABS3 Graham Harding5 21 Dec 2010 Nil 21 Dec 2013 N/A Nil 62,500 - - 62,500

As noted on page 32, Graham Harding’s beneficial interests in the shares of the Company were 333,110 at 30 September 2013 (333,110 at 30 September 2012). Mark Wood held no beneficial interest in the shares of the Company on these dates.

Notes: 1. The performance criteria which apply to awards under the PSP scheme are set out on page 43. 2. Details of the Sharesave scheme, which has no performance conditions, are set out in note 25 on page 85. 3. Graham Harding is not eligible to receive awards under the DABS as an executive Director of the Company, but retains the benefit of awards made prior to his appointment as an executive Director on 27 October 2011. The DABS has been in operation since January 2005 and applies to Group senior managers below executive Director level. The maximum value of any award granted under the DABS to any participant is an amount which is equal to a fixed percentage of the participant’s annual cash bonus received or receivable in respect of the previous financial year. The number of shares awarded is calculated by reference to the market value of a share in the Company on the date of the award. Shares awarded will vest three years from the date of grant of the award, subject only to the participant remaining employed within the Group at the vesting date. 4. The market price at the time of grant of the PSP awards on 17 December 2012 was 18p. 5. Graham Harding left the Company on 30 November 2013. The PSP Award granted on 17 December 2012 over 1,027,778 shares lapsed in full on 30 September 2013. The Committee exercised its discretion to waive the requirement for Graham Harding to be in employment on the vesting date of the DABS Award, and allow the DABS Award granted over 62,500 shares to vest as normal on 21 December 2013. The Committee further exercised its discretion to allow a portion of the PSP Award granted on 18 January 2012 to vest as normal on 18 January 2015 on a pro rata basis (subject to the relevant performance criteria being met), therefore 555,556 options lapsed on 30 September 2013 and 1,444,444 options will vest as normal on 18 January 2015 subject to performance criteria having been met.

Company performance

The performance graph opposite shows the TSR on a holding of shares in the Company compared with the FTSE All Share Media Index (UK companies).

The following is a list of the companies currently included in the FTSE All Share Media Index (UK companies):

British Sky BCast Group Centaur Media Chime Comms Entertainment One (DI) Euromoney Instl. Investor Huntsworth Informa ITE Group ITV Johnston Press Moneysupermarket.com GP Pearson Perform Group Reed Elsevier Rightmove Tarsus Group Trinity Mirror UBM UTV Media Wilmington Group WPP 4Imprint Group Annual Report and Accounts 2013 46 Strategic Report

Graph: Past five financial years ended 30 September 2013

Total Shareholder Return: Rebased to Future plc as of 1 October 2008

300 Financial Review

250

200

150

100

2008 2009 2010 2011 2012 2013 Corporate Governance

Future (rebased to 100) FTSE All-Share Media Index (UK companies) (rebased to 100)

Chief Executive pay during last five years

Chief Executive single figure Bonus paid as % Share based incentives Year £’000 of maximum vesting as % of maximum 2009 (Stevie Spring) £423 0% 100%1 2010 (Stevie Spring) £746 40% 48%2 2011 (Stevie Spring) £546 0% 100%3 2012 (Mark Wood) £430 50% 0%4 2013 (Mark Wood) £331 0% 0%4

Notes: 1. This represents shares which were granted as part of an exceptional one-off award intended to aid recruitment and retention. The award was not subject to performance criteria.

2. This represents the first tranche of a deferred bonus share award which was not subject to performance criteria and the PSP award granted in December 2006 which partially vested in December 2009 Financial Statements following the partial satisfaction of TSR performance criteria. 3. This represents the second tranche of a deferred bonus share award which was not subject to performance criteria. The PSP award granted in December 2007 lapsed in December 2010. 4. The first awards granted to Mark Wood under the PSP were granted in January 2012 and will not vest until January 2015, subject to performance criteria being met.

Percentage change in remuneration of Chief Executive

Salary Benefits (inc pension) Bonus

2013 2012 % change 2013 2012 % change 2013 2012 % change Mark Wood £285,000 £260,000 +9.6% £46,000 £42,000 +9.5% £0 £130,000 -100.0% All employees £35,418 £34,896 +1.5% £3,454 £3,501 -1.3% £144 £545 -73.6% 47 Future plc

Directors’ remuneration report

For the year ended 30 September 2013

Relative importance of spend on pay

The relative importance of the spend on pay for the business is shown in the table below.

2013 2012 £m £m Group pay 45.5 47.4 Group operating costs excluding Group pay & exceptional costs 62.1 69.3 Capital expenditure 2.9 2.5 Dividends 0.0 1.6

The table shows the actual expenditure of the Group, and change between the current and previous years, on remuneration paid to all employees compared to the total operating costs for the Group excluding exceptional costs and remuneration, and investment in capital expenditure and dividends.

Shareholder voting

At the last Annual General Meeting, votes on the Directors’ remuneration report for the year ended 30 September 2012 were cast as follows:

For % Discretionary % Against % Abstain % Approval of Directors’ remuneration 277,694,590 99.89 273,367 0.10 21,018 0.01 500 0.00 report for 2012

Implementation of remuneration policy in the year to 30 September 2014

The Remuneration Committee proposes the following changes to the remuneration policy for 2014, as outlined in the Remuneration policy report on pages 48 to 51, subject to shareholder approval at the Company’s AGM on 3 February 2014.

Performance, Element Operation of element Max. potential value weighting & time Base salary No change No change1,2 No change Benefits No change No change No change Annual Bonus No change No change3 The Committee approved an increase in the stretch of the range of profit- related targets, from 90% to 115% of EBITE to a range of 85% to 115% of EBITE. The weighting of profit-related targets to individual subjective performance targets remains unchanged. PSP No change No change No change Pension No change No change No change

Notes: 1. P ay reviews take place annually and any increase takes effect from 1 October. The Company has postponed pay reviews across the Group, including for executive Directors. To the extent that the Company implements a pay rise during the year for all employees, the executive Directors’ salaries shall be increased with effect from the same date as any increase for all employees and such increase shall be limited to the average percentage increase awarded to all employees. 2. A new Chief Financial Officer has been appointed with effect from 18 November 2013. While the basic annual salary and potential maximum bonus of Zillah Byng-Maddick on a full-time equivalent basis are higher than that of Graham Harding, they remain in line with the remuneration policy. 3. Performance targets for the Annual Bonus for 2014 are not disclosed due to their commercial sensitivity. In the event that there is an increase in the executive Directors’ base salaries during the year, the potential maximum value of the Annual Bonus and pension shall increase accordingly.

Advisers to the Remuneration Committee

New Bridge Street Consultants have been independent advisers to the Committee since the Committee appointed it in 2002. They provide no other services to the Company or its Directors. No formal advice was sought during the year.

Compliance with the UK Corporate Governance Code

The Board has complied fully with the provisions of Section D of the UK Corporate Governance Code in relation to Directors’ remuneration policy and practice, and has followed Schedule A to the Code in relation to performance-related remuneration policy. Further information regarding the Company’s compliance with the provisions of the Code is set out in the Corporate Governance report on pages 35 to 40. Annual Report and Accounts 2013 48 Strategic Report Remuneration policy report

The policy set out below is intended to apply for all financial years beginning on or after 1 October 2013 to 30 September 2016, subject to shareholder approval at the Company’s Annual General Meeting to be held on 3 February 2014 and shall take effect following conclusion of the 2014 AGM.

To aid understanding of this policy, we Element of remuneration Maximum % of salary levels, whilst at the same time ensuring that have included detailed explanations of how recruitment and remuneration expenditure Not higher than our forward-looking policy differs from the Salary is not excessive and does not encourage market value policy in operation in the financial year to excessive risk-taking. 30 September 2013. Dependent on Benefits circumstances (b) The interests of executive Directors The policy, if adopted, will be displayed should be aligned with those of 12.5% of basic Financial Review on the Company’s website, in the area Pension shareholders by ensuring that a significant reserved for investors, immediately after annual salary proportion of remuneration is linked to the 2014 AGM. Group performance. Performance- 100% related bonus2 The Committee considers the remuneration (c) Remuneration packages and employment policy annually to ensure that it remains Share incentive conditions of executive Directors are 100% aligned with the Group’s business needs schemes1 considered in conjunction with both those of and is appropriately positioned relative to key senior managers (keeping succession

the market. However, there is no intention Notes: planning in mind) and all employees in to put the policy forward to shareholders for 1. P SP scheme rules provide for awards of up to 100% of the Group in order to achieve a consistent approval more frequently than every three basic annual salary, save in exceptional circumstances remuneration policy across the Group. where the Committee is allowed discretion to award up to years unless an amendment is proposed. 200% of basic annual salary. 2. The Committee retains discretion to make one-off sign (d) Bonus potential and share scheme awards on payments or to grant awards under the share-based that are capped at a percentage of salary incentive scheme of up to 200% of basic annual salary to the Approach to recruitment extent that it is necessary to recruit a high calibre individual, are restricted if salaries are low. remuneration for executive and or to compensate the individual for loss of bonus or other incentive awards granted by the previous employer. (e) Subjective criteria are applied to an non-executive Directors 3. In the event of an internal promotion, any commitments made by the Company to an internal candidate shall be honoured element of the performance-related bonus The Committee’s objective at the time of even if it would otherwise be inconsistent with the policy. of the Chief Executive and Chief Financial an appointment to a new role is to weight Officer (with a financial underpin) in order executive Directors’ remuneration packages In determining the level and make-up of executive to ensure that the Committee retains towards performance-related pay, with Directors’ remuneration, the Committee carefully discretion and to ensure no performance- performance-related targets linked to financial considers the following issues: related bonus is unjustly received.

performance of the Group against budget and Corporate Governance the Group’s performance against business (a) Remuneration packages offered to executive When determining the level of non-executive objectives and its stated strategy. Directors should be competitive with those Directors’ fees, the Board considers that the available for comparable roles in companies fees offered should be competitive with those Any new executive Director’s remuneration operating in similar markets and on a similar available for non-executive Directors operating package would include the same elements as scale. They should be sufficiently desirable in similar markets on a similar scale, and those of the existing executive Directors, as so as to attract, retain and motivate high should be sufficiently desirable to attract and shown in next column. calibre Directors to perform at the highest retain high calibre individuals.

Service contracts and payments for loss of office

Executive Directors

Contract provision Policy Details Notice periods Director or Company shall be entitled to serve A Director may be required to work during their 6 months’ notice (in Zillah Byng-Maddick’s case) notice period or be put on garden leave. or 12 months’ notice (in Mark Wood’s case).

Compensation for loss of office Director shall be entitled to receive 6 months’ While service agreements allow for monthly (in Zillah Byng-Maddick’s case) or 12 months’ payments during notice period which are subject (in Mark Wood’s case) salary and benefits during to mitigation, the Committee retains discretion to any unexpired notice period. make payments in such manner as is deemed

appropriate particularly by reference to the Financial Statements circumstances of the loss of office. Treatment of share incentives Incentives will lapse or vest at the Committee’s The Committee has discretion to allow awards on termination discretion, subject to performance criteria being to vest partially or in full on termination, or to met and the rules of the scheme . preserve awards until normal vesting date.

Change of control In the event of a change of control, a Director In the event of termination by either the may terminate their appointment on serving no Director or the Company, the Director will be less than 1 month’s notice. entitled to receive 6 or 12 months’ salary, in line with the contractual notice period. Non-executive Directors Notice periods 3 months’ notice from either Company Appointed for a 3 year term, subject to annual or Director. re-election by shareholders at AGM.

Copies of Directors’ service agreements and letters of appointment are available for inspection on request at the Company’s registered office. 49 Future plc

Directors’ remuneration report

For the year ended 30 September 2013

Remuneration table

Executive Directors

Element Operation Objective & link to strategy Max. potential value Performance measures Changes for 2014

Basic annual salary Basic annual salary is paid in 12 equal monthly instalments during the year and is reviewed annually, To recruit, retain and motivate individuals of high calibre, Current basic annual salary of Chief Executive is £285,000 and Not applicable. On 1 November 2013, Zillah Byng-Maddick with any change taking effect from 1 October. When assessing the level of basic annual salary, the and reflect the skills, experience and contribution of the Chief Financial Officer is £160,000 (£228,600 on a full-time equivalent was appointed to the Board of Future plc and Committee takes into account performance, market conditions, remuneration of equivalent roles within relevant Director. basis). Salary increases shall generally reflect market conditions, took over the role of Chief Financial Officer on comparable companies, the size and scale of the business and pay in the Group as a whole. performance of the individual, new challenges or a new strategic 18 November 2013. Her basic annual salary of direction for the business. Similarly, the Committee may approve a £160,000 and maximum bonus potential are higher basic annual salary for a newly appointed Director than the higher than that of the previous Chief Financial outgoing Director received where it considers it necessary in order Officer on a full-time equivalent basis. to recruit an individual of sufficient calibre for the role. The annual pay review due to take place on 1 October 2013 was postponed. In the event that a pay increase is awarded during the year, the maximum increase will be in line with the average staff increase and will take effect at the same time as any such staff salary increase.

Benefits Current benefits available to executive Directors are car allowance, permanent health insurance, To ensure broad competitiveness with market practice. The Company shall continue to provide benefits to executive Not applicable. No change. healthcare and life assurance. Additional benefits may be offered if applicable and subject to the Directors at similar levels; where insurance cover is provided by the maximum value of all benefits not exceeding the maximum potential value set by the Committee. Company, that cover shall be maintained at a similar level and the Company shall pay the then current market rates for such cover.

Pension The Company shall make a contribution up to a maximum percentage of basic annual To ensure broad competitiveness with market practice. Total cost annually shall not exceed 15% of basic annual salary. Not applicable. No change. salary (currently 12.5%).

Performance- Targets are set annually by the Committee, based on (i) financial performance against budget and Designed to reward delivery of shareholder value and Chief Executive: 100% of basic annual salary (of which Profit element: The stretch of the range of the profit-related related bonus1 (ii) individual subjective performance targets which are determined for each executive Director. implementation of the Group’s strategy. 80% is linked to profit targets and 20% is linked to individual If EBITE is more than 15% below target EBITE, no profit-related bonus will be payable. targets has been changed from 90% to 115% The Committee retains discretion to set the financial targets based on the performance during the subjective criteria). If EBITE is 15% below target EBITE, 10% of the potential maximum of the profit-related of target EBITE to 85% to 115% of target previous financial year and the budget for the forthcoming year, and performance of the individual Chief Financial Officer: 80% of basic annual salary (of which bonus will be payable in the event that the Committee determines, in its absolute EBITE and the levels at which a certain fixed against their specific subjective performance targets. 80% is linked to profit targets and 20% is linked to individual discretion, that such payment is merited by the individual. percentage of the potential maximum of the subjective criteria). If EBITE is 10% below target EBITE, 20% of the potential maximum of the profit-related profit-related bonus may be payable at the The Committee retains discretion to vary the potential total bonus will be payable in the event that the Committee determines, in its absolute discretion of the Committee have been maximum bonus, the weighting of the variable elements and the discretion, that such payment is merited by the individual. clearly defined. stretch of the targets in order to incentivise or recruit executive If EBITE is 5% below target EBITE, 30% of the potential maximum of the profit-related Directors, provided that the total maximum potential bonus for any bonus will be payable in the event that the Committee determines, in its absolute one year shall not exceed 150% of basic annual salary and that discretion, that such payment is merited by the individual. maximum bonus shall only be payable for over performance. If EBITE target is achieved, 50% of the potential maximum of the profit-related bonus will be payable. If EBITE target is exceeded by 5%, 65% of the potential maximum of the profit-related bonus will be payable in the event that the Committee determines, in its absolute discretion, that such payment is merited by the individual. If EBITE target is exceeded by 10%, 85% of the potential maximum of the profit-related bonus will be payable in the event that the Committee determines, in its absolute discretion, that such payment is merited by the individual. If EBITE target is exceeded by 15% or more, 100% of the potential maximum of the profit-related bonus will be payable. If EBITE falls in between any of the above levels, a percentage of the potential maximum profit-related bonus will be payable, on a pro rata basis to the levels expressed above, in the event that the Committee determines, in its absolute discretion, that such payment is merited by the individual. Subjective element: Chief Executive: bonus of up to 20% of basic annual salary (i.e. 20% of maximum potential bonus) is determined by subjective criteria. Chief Financial Officer: bonus of up to 16% of basic annual salary (i.e. 20% of maximum potential bonus) is determined by subjective criteria.

Long term Annual awards to executive Directors of up to a maximum of 1x basic annual salary, with discretion Designed to reward delivery of shareholder value in the Value of grant as a maximum percentage of salary is 100% of basic Awards vest at the end of three-year performance period. 50% of award vests based on No change. share-based to award up to a maximum of 2x basic annual salary in exceptional circumstances, e.g. recruitment medium-to-long term. annual salary, however in exceptional circumstances the Committee EPS performance and 50% vests based on TSR performance. incentive of a Director to “buy out” awards granted by prior employer. The scheme rules allow the Committee retains discretion to grant awards of a value up to 200% of basic EPS: Growth in EPS over three years must exceed annual RPI + 3% for the award to discretion to change the performance targets and the Committee shall be entitled to exercise its annual salary. vest, with full vesting at RPI + 8% and on a straight-line basis between these levels. discretion to change performance criteria to the extent that it reflects market practice and/or the TSR: Against comparator group comprising a minimum of 15 companies at all times, Committee considers alternative performance targets to be more appropriate to the business. if TSR performance places it above median ranking 25% will vest through to 100% if placed in the upper quintile. Between median and upper quintile, the award vests on a pro rata straight-line basis. The Committee retains the discretion to set such performance criteria as are deemed appropriate to the Company at the time an award is made.

Notes to the table 1. P erformance-related bonus targets: The performance targets are determined annually by the Committee and are designed to align executive Directors’ interests with those of the Company’s shareholders and to reward good performance by the Company. Financial targets are set by reference to the Company’s budget for the relevant financial year, and individual performance targets are set by reference to the Company’s strategy and goals for the relevant financial year. The targets for the financial year to 30 September 2014 are not disclosed here due to their commercial sensitivity. 2. PSP performance targets: additional details of the performance criteria attaching to PSP grants are set out on page 43.

Non-executive Directors

Element Operation Objective & link to strategy Max. potential value Performance measures Changes for 2014

Fees1 Non-executive Directors’ fees are reviewed every three years and paid in 12 monthly instalments. Current Reflects the time commitment and responsibilities Chairman: £120,000 Not applicable No change to fees fees were set in 2011. of the roles. Other non-executive Directors: £40,000 for 2014 compared Additional fees payable: to 2013 Chairman of Committee: £5,000 Senior independent Director: £5,000 Member of Committee: Nil

Notes to the table 1. F ees are paid at a standard annual rate to reflect the time, commitment and responsibilities of the roles, with additional fees paid to those who chair Board Committees to reflect their additional responsibilities. Separately, the Board sets the fee payable to the Chairman of the Board. Additional fees apply only once, regardless of the number of Committees of which a non-executive Director is a member or a Chairman. Non-executive Directors are not included in any performance-related bonus, share incentive schemes or pension arrangements. Annual Report and Accounts 2013 50 Strategic Report

Remuneration table

Executive Directors

Element Operation Objective & link to strategy Max. potential value Performance measures Changes for 2014

that a pay increase is awarded during the Financial Review year, the maximum increase will be in line with the average staff increase and will take effect at the same time as any such staff salary increase.

If EBITE target is exceeded by 10%, 85% of the potential maximum of the profit-related Corporate Governance bonus will be payable in the event that the Committee determines, in its absolute discretion, that such payment is merited by the individual. If EBITE target is exceeded by 15% or more, 100% of the potential maximum of the profit-related bonus will be payable. If EBITE falls in between any of the above levels, a percentage of the potential maximum profit-related bonus will be payable, on a pro rata basis to the levels expressed above, in the event that the Committee determines, in its absolute discretion, that such payment is merited by the individual. Subjective element: Chief Executive: bonus of up to 20% of basic annual salary (i.e. 20% of maximum potential bonus) is determined by subjective criteria. Chief Financial Officer: bonus of up to 16% of basic annual salary (i.e. 20% of maximum potential bonus) is determined by subjective criteria.

3. All employees of the Group receive a basic annual salary, benefits, pension and annual bonus (subject to financial performance). The maximum value of remuneration packages is based on the seniority and responsibilities of the relevant role. Discretionary share incentives are not awarded to employees other than executive Directors (PSP) and senior managers (DABS), however an

approved Sharesave scheme operates for all permanent UK employees. Financial Statements

Non-executive Directors

Element Operation Objective & link to strategy Max. potential value Performance measures Changes for 2014

Notes to the table 1. Fees are paid at a standard annual rate to reflect the time, commitment and responsibilities of the roles, with additional fees paid to those who chair Board Committees to reflect their additional responsibilities. Separately, the Board sets the fee payable to the Chairman of the Board. Additional fees apply only once, regardless of the number of Committees of which a non-executive Director is a member or a Chairman. Non-executive Directors are not included in any performance-related bonus, share incentive schemes or pension arrangements. 51 Future plc

Directors’ remuneration report

For the year ended 30 September 2013

Total remuneration scenarios

Mark Wood Zillah Byng-Maddick

Bonus 700 £616,000 700

600 £502,000 600 Salary, pension & benefits

500 46% 500 34% 400 £331,000 400 £314,000 £263,000 300 300

£186,000 41% 29% 200 200 66% 54% 100% 71% 59%

100 100 100%

Minimum Target Maximum Minimum Target Maximum

Notes: 1. Zillah Byng-Maddick was appointed with effect from 1 November 2013. 2. Annual salary is based on basic salary for the financial year ending 30 September 2014. Salary increases take effect from 1 October each year, however, for the financial year to 30 September 2014, the pay review has been postponed. To the extent that pay rises are implemented during the year for all staff, the salaries of executive Directors will be increased by the same percentage of basic annual salary. 3. The value of pension is determined as a percentage of salary, based on salary for 2014. The value of benefits in kind is calculated on the basis of the value for 2013. 4. On-target performance would deliver 60% of the maximum annual bonus for the Chief Executive and the Chief Financial Officer, assuming that individual performance targets are met and the maximum individual performance-related element of the bonus is awarded by the Committee. Maximum performance would result in the maximum annual bonus payment of 100% of basic annual salary for the Chief Executive and 80% of basic annual salary for the Chief Financial Officer. 5. No share options or other share incentives are due to vest in the financial year ending 30 September 2014.

Consideration of employee conditions The 2005 Performance Share Plan (“2005 within the Group PSP”) which was adopted in January 2005, following extensive consultation with major The Committee takes into consideration the shareholders relating to the scheme itself and pay and conditions of employees across the the performance criteria, will expire in January Group when determining remuneration for 2015. The Remuneration Committee considered executive Directors. during the year whether to replace the PSP with an alternative long term incentive scheme, but All employees receive a basic annual salary, intends to renew the current scheme when it benefits and an entitlement to receive a bonus, expires in January 2015. It is the Committee’s subject to financial performance, under the intention to review the performance criteria Group’s profit improvement scheme. attaching to the 2005 PSP during the year as they have been unchanged since the 2005 PSP Discretionary share incentive awards are was adopted. In the event that the Committee granted to senior managers in all territories wishes to exercise its discretion to make any under the DABS scheme, the details of significant changes to the performance criteria, which are set out at note 25 on page 86. the Board will consult with major institutional And all permanent UK employees are shareholders prior to proposing a resolution entitled to participate in the Company’s to shareholders at the Company’s AGM in Sharesave scheme. February 2015 to adopt a new PSP scheme with effect from the same date.

Consideration of shareholder views The 2005 Deferred Annual Bonus Scheme (“2005 DABS”) which applies to Group senior The remuneration policy remains largely managers below executive Director level and unchanged from previous years and the local country senior managers, was adopted in Company has therefore not needed to January 2005 and will also expire in January consult with shareholders with regard to 2015. The Committee considered during the the remuneration policy. In the event of any year whether to replace the 2005 DABS with significant change to remuneration policy, an alternative incentive scheme, but intends in particular the performance related bonus to renew the current scheme when it expires scheme and any long term incentive schemes, in January 2015. The Board therefore expects the Board will consult with major institutional to propose a resolution to shareholders at the shareholders in advance, and any changes Company’s AGM in February 2015 to adopt a to the remuneration policy will require new DABS scheme, the provisions of which will shareholder approval. remain unchanged from the 2005 DABS. Annual Report and Accounts 2013 52 Strategic Report Independent auditors’ report to the members of Future plc

Report on the financial statements

Our opinion What an audit of financial statements Overview of the scope of our audit involves In our opinion: The Group reports its results for its two We conducted our audit in accordance geographical segments, being the UK • The financial statements, defined below, give with International Standards on Auditing (incorporating the Australian results) and the a true and fair view of the state of the Group’s (UK & Ireland) (ISAs (UK & Ireland)). An US. The Group financial statements are a and of the Parent Company’s affairs as at audit involves obtaining evidence about the consolidation of these three business operations Financial Review 30 September 2013 and of the Group’s profit amounts and disclosures in the financial and the Group’s centralised functions. and of the Group’s and Parent Company’s statements sufficient to give reasonable cash flows for the year then ended; assurance that the financial statements are In establishing the overall approach to the • The Group financial statements have been free from material misstatement, whether Group audit, we determined the amount and properly prepared in accordance with caused by fraud or error. This includes an type of work that needed to be performed at International Financial Reporting Standards assessment of: each of the individual reporting units to be able (IFRSs) as adopted by the European Union; to conclude whether sufficient appropriate • The Parent Company financial statements • whether the accounting policies are audit evidence had been obtained as a have been properly prepared in accordance appropriate to the Group’s and Parent basis for our opinion on the Group financial with IFRSs as adopted by the European Company’s circumstances and have statements as a whole. Union and as applied in accordance with the been consistently applied and provisions of the Companies Act 2006; and adequately disclosed; Accordingly, of the Group’s three business • The financial statements have been • the reasonableness of significant accounting operations, we identified two that, in our view, prepared in accordance with the estimates made by the Directors; and required an audit of their complete financial requirements of the Companies Act • the overall presentation of the financial information due to their size, together with the 2006 and, as regards the Group financial statements. Group centralised functions. This, together statements, Article 4 of the IAS Regulation. with additional procedures performed at In addition, we read all the financial and the Group level, gave us the evidence we This opinion is to be read in the context of what non-financial information in the Annual Report needed for our opinion on the Group financial we say below. to identify material inconsistencies with the statements as a whole. audited financial statements and to identify any information that is apparently materially What we have audited incorrect based on, or materially inconsistent Areas of particular audit focus

with, the knowledge acquired by us in the Corporate Governance The Group financial statements and parent course of performing the audit. If we become In preparing the financial statements, the company financial statements (the “financial aware of any apparent material misstatements Directors made a number of subjective statements”), which are prepared by Future or inconsistencies we consider the implications judgements, for example in respect of plc, comprise: for our report. significant accounting estimates that involved making assumptions and considering future • the Consolidated and Company balance events that are inherently uncertain. We sheets as at 30 September 2013; Overview of our audit approach primarily focussed our work in these areas • the Consolidated income statement and by assessing the Directors’ judgements statement of comprehensive income for the Materiality against available evidence, forming our own year then ended; judgements, and evaluating the disclosures • the Consolidated and Company statements We set certain thresholds for materiality. in the financial statements. of changes in equity and statements of cash These helped us to determine the nature, flows for the year then ended; and timing and extent of our audit procedures In our audit, we tested and examined • the notes to the financial statements, which and to evaluate the effect of misstatements, information, using sampling and other auditing include a summary of significant accounting both individually and on the financial techniques, to the extent we considered policies and other explanatory information. statements as a whole. necessary to provide a reasonable basis for us to draw conclusions. We obtained audit The financial reporting framework that has Based on our professional judgement, we evidence through testing the effectiveness been applied in their preparation comprises determined materiality for the Group financial of controls, substantive procedures or a applicable law and IFRSs as adopted by the statements as a whole to be £0.6m. combination of both. European Union and, as regards the Parent Company, as applied in accordance with the Materiality is based on 0.5% of revenue, We considered the areas on page 53 to be

provisions of the Companies Act 2006. because, in our view, this is the most relevant those that required particular focus in the Financial Statements measure of underlying performance given the current year. This is not a complete list of all Certain disclosures required by the financial nature of the Group’s operations and its results. risks or areas of focus identified by our audit. reporting framework have been presented We discussed these areas of focus with the elsewhere in the Annual Report and Accounts We agreed with the Audit Committee that we Audit Committee. Their report on those matters (the “Annual Report”), rather than in the notes would report to them misstatements identified that they considered to be significant issues to the financial statements. These are cross- during our audit above £28,000 as well as in relation to the financial statements is set referenced from the financial statements misstatements below that amount that, in our out on page 39. and are identified as audited. view, warranted reporting for qualitative reasons. 53 Future plc

Independent auditors’ report

Area of focus How the scope of our audit addressed the area of focus

Goodwill impairment assessment We evaluated the Directors’ future cash flow forecasts, including comparing them to the latest Board approved budgets, testing the underlying calculations and testing the We focussed on this area because the determination of whether or not an impairment accuracy of historic forecasts. charge for goodwill was necessary involved significant judgements by the directors about the future results of the UK business. We challenged:

We needed to obtain evidence for the goodwill of £82.8m in this part of the business. • The Directors’ key assumptions for long-term growth rates by comparing them (Refer also to note 12 to the financial statements.) to historical results and checking that they do not exceed the current IMF inflation forecast.

• The discount rate used by assessing the cost of capital for the Company and comparable organisations.

We also performed sensitivity analysis around both the growth forecasts and discount rates. Having ascertained the extent of change in the growth and discount rates that would be required for the goodwill to be impaired, we considered the likelihood of such movement in those key assumptions arising.

Revenue recognition We tested revenue transactions by tracing to contract, sales orders and cash receipts (where applicable). ISAs (UK & Ireland) presume there is a risk of fraud in revenue recognition. In addition, we focussed on this area because, as noted in the critical accounting We identified and challenged the key assumptions and judgements made by judgements section on page 65, of the significant level of management judgement management in their calculation of returns provisions on newsstand sales by in the calculation of the returns provision, which directly affects the recognition of considering initial sales returns from distributors and stores. We also compared the newsstand sales. equivalent judgements made by management when preparing the prior year financial statements to actual post year-end outcomes to test the historic effectiveness of the process of making judgements.

For significant contracts, we tested the timing of revenue recognition, taking into account contractual obligations and the Group’s accounting policies.

Risk of management override of internal controls We assessed the overall control environment of the Group, including the arrangements for staff to “whistle-blow” inappropriate actions. ISAs (UK & Ireland) require that we consider this. We tested the significant accounting estimates and judgements relevant to the financial statements for evidence of bias by the Directors that may represent a risk of material misstatement due to fraud. In addition, we carried out unpredictable audit procedures in areas that may be susceptible to fraud including contributors’ payments, free adverts and barter transactions. We also tested key year-end reconciliations and journal entries.

Going concern We obtained the Directors’ forecast of the Group’s funding requirements for the next 12 months from the date the financial statements were signed and: We considered the Directors’ decision to apply the going concern basis of accounting in preparing the financial statements in the context of the covenants attached to the • T ested whether appropriate account had been taken of the seasonal cash flows Group’s financing facility. inherent in the Group’s business.

• Challenged the expected rate of adoption of digital versus print distribution.

• Challenged the assumptions underlying the Directors’ forecasts prepared to demonstrate compliance with covenant requirements, in particular the sales and cash collection forecasts.

• Challenged the mitigating actions that management can take to reduce unnecessary cash spend in the event that forecast cash flows are lower than expected.

Our conclusion on going concern is shown opposite.

Provision for tax liabilities We requested and read the latest correspondence between the Group and the relevant tax authorities. As noted in the critical accounting judgements section on page 65, estimates are made with respect to the tax position for prior fiscal years not yet agreed with tax authorities. We discussed the potential tax exposure with senior Group management, including the Group’s in-house tax specialists. We focussed on this area because there are historical open tax positions that are both material to the financial statements and require judgement in assessing the appropriate We utilised our experience of similar challenges elsewhere to independently assess accounting treatment for this year. the evidence described above. Annual Report and Accounts 2013 54 Strategic Report

Going Concern • the parent company financial statements Other information in the Annual Report and the part of the Directors’ remuneration Under the Listing Rules we are required to report to be audited are not in agreement Under ISAs (UK & Ireland), we are required to review the Directors’ statement, set out on with the accounting records and returns. report to you if, in our opinion, information in page 37, in relation to going concern. We have the Annual Report is: nothing to report having performed our review. We have no exceptions to report arising from this responsibility. • materially inconsistent with the information Financial Review As noted in the Directors’ statement, the in the audited financial statements; or Directors have concluded that it is appropriate • apparently materially incorrect based on, or to prepare the Group’s and Parent Company’s Directors’ remuneration materially inconsistent with, our knowledge financial statements using the going concern of the Group and Parent Company acquired basis of accounting. The going concern Under the Companies Act 2006 we are in the course of performing our audit; or basis presumes that the Group and Parent required to report if, in our opinion, certain • is otherwise misleading. Company have adequate resources to remain disclosures of Directors’ remuneration in operation, and that the Directors intend them specified by law have not been made, and We have no exceptions to report arising from to do so, for at least one year from the date the under the Listing Rules we are required this responsibility. financial statements were signed. As part of our to review certain elements of the report to audit we have concluded that the Directors’ use shareholders by the Board on Directors’ of the going concern basis is appropriate. remuneration. We have no exceptions to Responsibilities for the financial report arising from these responsibilities. statements and the audit However, because not all future events or conditions can be predicted, these statements Our responsibilities and those of the are not a guarantee as to the Group’s and the Corporate Governance Statement Directors Parent Company’s ability to continue as a going concern. Under the Companies Act 2006, we are As explained more fully in the Directors’ required to report to you if, in our opinion, responsibilities statements set out on pages a corporate governance statement has not 32 and 34, the Directors are responsible for the Opinions on matters prescribed by the been prepared by the parent company. preparation of the Group and Parent Company Companies Act 2006 We have no exceptions to report arising financial statements and for being satisfied that from this responsibility. they give a true and fair view.

In our opinion: Corporate Governance Under the Listing Rules we are required to Our responsibility is to audit and express an • the information given in the Strategic review the part of the Corporate Governance opinion on the Group and Parent Company Report and the Directors’ report for the statement relating to the Company’s compliance financial statements in accordance with financial year for which the financial with nine provisions of the UK Corporate applicable law and ISAs (UK & Ireland). statements are prepared is consistent with Governance Code (“the Code”). We have Those standards require us to comply with the the financial statements; nothing to report having performed our review. Auditing Practices Board’s Ethical Standards • the part of the Directors’ remuneration for Auditors. report to be audited has been properly On page 34 of the Annual Report, as required prepared in accordance with the by the Code Provision C.1.1, the Directors This report, including the opinions, has been Companies Act 2006; and state that they consider the Annual Report prepared for and only for the Company’s • the information given in the Corporate taken as a whole to be fair, balanced and members as a body in accordance with Chapter Governance report set out on pages 35 understandable and provides the information 3 of Part 16 of the Companies Act 2006 and for to 40 in the Annual Report with respect necessary for members to assess the no other purpose. We do not, in giving these to internal control and risk management Group’s performance, business model and opinions, accept or assume responsibility for systems and about share capital structures strategy. On page 39, as required by C3.8 any other purpose or to any other person to is consistent with the financial statements. of the Code, the Audit Committee has set whom this report is shown or into whose hands out the significant issues that it considered it may come save where expressly agreed by in relation to the financial statements, and our prior consent in writing. Other matters on which we are required how they were addressed. Under ISAs (UK & to report by exception Ireland) we are required to report to you if, in Colin Bates our opinion: (Senior Statutory Auditor) Adequacy of accounting records and

information and explanations received • the statement given by the Directors is for and on behalf of Financial Statements materially inconsistent with our knowledge Under the Companies Act 2006 we are of the Group acquired in the course of PricewaterhouseCoopers LLP required to report to you if, in our opinion: performing our audit; or Chartered Accountants and Statutory Auditors • t he section of the Annual Report describing Bristol • we have not received all the information and the work of the Audit Committee does not 13 December 2013 explanations we require for our audit; or appropriately address matters communicated • adequate accounting records have not been by us to the Audit Committee. kept by the Parent Company, or returns adequate for our audit have not been We have no exceptions to report arising from received from branches not visited by us; or this responsibility. 55 Future plc Financial statements

Contents

Consolidated income statement 56

Consolidated statement of 56 comprehensive income

Consolidated statement of 57 changes in equity

Company statement of 57 changes in equity

Consolidated balance sheet 58

Company balance sheet 59

Consolidated and Company cash flow statements 60

Notes to the Consolidated and Company cash flow statements 61

Accounting policies 62

Notes to the financial statements 66 Annual Report and Accounts 2013 56 Strategic Report

Consolidated income statement for the year ended 30 September 2013

2013 2012 Note £m £m Revenue 1,2 112.3 123.5

Operating profit before exceptional items 1 4.7 6.8 Exceptional items 5 2.5 (3.6)

Operating profit 3 7.2 3.2 Financial Review Finance income 7 0.8 0.2 Finance costs 7 (2.2) (2.3) Net finance costs 7 (1.4) (2.1) Profit before tax 1 5.8 1.1 Tax on profit 8 (1.5) (0.9) Profit for the year attributable to owners of the parent 4.3 0.2

Earnings per 1p Ordinary share

2013 2012 Note pence pence Basic earnings per share 10 1.3 0.1 Diluted earnings per share 10 1.3 0.1

As permitted by the exemption under Section 408 of the Companies Act 2006 no Company income statement or statement of comprehensive income is presented. Corporate Governance

Consolidated statement of comprehensive income for the year ended 30 September 2013

2013 2012 Note £m £m Profit for the year 4.3 0.2 Items that may be reclassified to the consolidated income statement Currency translation differences - 0.1 Cash flow hedges 26 0.2 0.1 Other comprehensive income for the year 0.2 0.2 Total comprehensive income for the year attributable to owners of the parent 4.5 0.4

Items in the statement above are disclosed net of tax. Financial Statements 57 Future plc

Financial statements

Consolidated statement of changes in equity for the year ended 30 September 2013

Issued Share Cash flow share premium Merger Treasury hedge Accumulated Total capital account reserve reserve reserve losses equity Group Note £m £m £m £m £m £m £m Balance at 1 October 2011 3.3 24.5 109.0 (0.3) (0.1) (73.1) 63.3 Profit for the year - - - - - 0.2 0.2 Currency translation differences - - - - - 0.1 0.1 Cash flow hedges 26 - - - - 0.1 - 0.1 Other comprehensive income for the year - - - - 0.1 0.1 0.2 Total comprehensive income for the year - - - - 0.1 0.3 0.4 Interim dividend relating to 2011 9 - - - - - (1.6) (1.6) Share schemes - Value of employees’ services 6 - - - - - 0.2 0.2 New share capital subscribed 24 - 0.3 - - - - 0.3 Balance at 30 September 2012 3.3 24.8 109.0 (0.3) - (74.2) 62.6 Profit for the year - - - - - 4.3 4.3 Cash flow hedges 26 - - - - 0.2 - 0.2 Other comprehensive income for the year - - - - 0.2 - 0.2 Total comprehensive income for the year - - - - 0.2 4.3 4.5 Share schemes - Value of employees’ services 6 - - - - - 0.3 0.3 Balance at 30 September 2013 3.3 24.8 109.0 (0.3) 0.2 (69.6) 67.4

Company statement of changes in equity for the year ended 30 September 2013

Issued Share share premium Retained Total capital account earnings equity Company Note £m £m £m £m Balance at 1 October 2011 3.3 24.5 43.8 71.6 Loss for the year - - (2.5) (2.5) Other comprehensive income for the year - - - - Total comprehensive loss for the year - - (2.5) (2.5) Interim dividend relating to 2011 9 - - (1.6) (1.6) Share schemes - Value of employees’ services - - 0.2 0.2 New share capital subscribed 24 - 0.3 - 0.3 Balance at 30 September 2012 3.3 24.8 39.9 68.0 Profit for the year - - - - Other comprehensive income for the year - - - - Total comprehensive income for the year - - - - Share schemes - Value of employees’ services - - 0.3 0.3 Balance at 30 September 2013 3.3 24.8 40.2 68.3 Strategic Report Financial Review Corporate Governance Financial Statements - - - 58 £m 2.8 3.0 0.8 1.9 8.5 1.7 1.3 4.1 1.3 0.2 8.6 0.2 6.3 (0.3) 2012 24.8 92.3 98.9 20.3 30.7 62.6 20.9 31.0 58.4 67.0 (74.2) 129.6 129.6 3.3 3.3 109.0 109.0 - - £m 3.3 2.5 3.5 0.4 1.9 0.4 4.6 1.2 1.5 1.5 0.2 9.4 0.2 0.9 5.2 (0.3) 2013 11.5 24.8 92.7 86.3 28.3 21.4 67.4 44.2 53.6 31.6 (69.6) 121.0 109.0 121.0 8 8 11 26 24 12 26 26 16 12 14 15 20 17 19 20 14 21 22 19 20 18 Note hief Financial Officer illah Byng-Maddick Z C

Merger reserve Total equity and liabilities equity Total Share premium account Equity Issued share capital Equity and liabilities Property, plant and equipment Property, Assets Non-current assets Intangible assets - goodwill Treasury reserve Treasury Cash flow hedge reserve Trade and other receivables Trade Intangible assets - other Deferred tax non-current assets Total Current assets Inventories Financial assets - derivatives Cash and cash equivalents current assets Total assets Total Accumulated losses Non-current liabilities borrowings Financial liabilities - interest-bearing loans and Total equity Total Financial liabilities - derivatives Deferred tax Provisions Other non-current liabilities liabilities non-current Total Corporation tax payable Current liabilities Financial liabilities - interest-bearing loans and borrowings Financial liabilities - derivatives and other payables Trade Corporation tax payable liabilities current Total liabilities Total Chairman Peter Allen The financial statements on pages 55 to 87 were approved by the Board of Directors13 December on and 2013 signed on its behalf by: Consolidated balance sheet Consolidated as at 30 September 2013 AnnualReport and Accounts 2013 59 Future plc

Financial statements

Company balance sheet as at 30 September 2013

2013 2012 Note £m £m Assets Non-current assets Investment in Group undertakings 13 159.1 159.1 Deferred tax 14 0.1 0.1 Total non-current assets 159.2 159.2 Current assets Trade and other receivables 16 43.3 35.7 Cash and cash equivalents 17 - - Total current assets 43.3 35.7 Total assets 202.5 194.9 Equity and liabilities Equity Issued share capital 24 3.3 3.3 Share premium account 24.8 24.8 Retained earnings 40.2 39.9 Total equity 68.3 68.0 Non-current liabilities Financial liabilities - interest-bearing loans and borrowings 19 - 1.7 Financial liabilities - derivatives 20 - 0.2 Corporation tax payable 8 5.2 - Provisions 21 - 0.3 Total non-current liabilities 5.2 2.2 Current liabilities Financial liabilities - interest-bearing loans and borrowings 19 6.6 18.9 Financial liabilities - non-interest-bearing overdraft 19 7.5 11.9 Financial liabilities - derivatives 20 0.2 0.2 Trade and other payables 18 113.8 93.7 Corporation tax payable 8 0.9 - Total current liabilities 129.0 124.7 Total liabilities 134.2 126.9 Total equity and liabilities 202.5 194.9

The financial statements on pages 55 to 87 were approved by the Board of Directors on 13 December 2013 and signed on its behalf by:

Peter Allen Zillah Byng-Maddick Chairman Chief Financial Officer

Future plc Company registration number: 3757874 Annual Report and Accounts 2013 60 Strategic Report

Consolidated and Company cash flow statements for the year ended 30 September 2013

Group Company Group Company 2013 2013 2012 2012 Note £m £m £m £m Cash flows from operating activities Cash generated from/(used in) operations A 4.3 (1.7) 2.1 (3.1) Interest paid (1.2) (1.0) (1.4) (1.1) Tax paid (1.8) (0.1) (1.0) -

Net cash generated from/(used in) operating activities 1.3 (2.8) (0.3) (4.2) Financial Review Cash flows from investing activities Purchase of property, plant and equipment (0.6) - (0.5) - Purchase of magazine titles, websites and trademarks - - (0.1) - Purchase of computer software and website development (2.3) - (1.9) - Disposal of magazine titles and trademarks 10.3 - 2.7 - Costs of business disposals (1.1) - (0.6) - Net movement in amounts owed to/by subsidiaries - 21.7 - (8.7) Net cash generated from/(used in) investing activities 6.3 21.7 (0.4) (8.7) Cash flows from financing activities Proceeds from issue of Ordinary share capital - - 0.3 0.3 Draw down of bank loans 26.0 19.0 17.9 16.0 Repayment of bank loans (36.7) (32.9) (19.3) (7.2) Bank arrangement fees (0.6) (0.6) (0.5) (0.5) Repayment of finance leases (0.1) - (0.1) - Equity dividends paid - - (1.6) (1.6) Net cash (used in)/generated from financing activities (11.4) (14.5) (3.3) 7.0 Net (decrease)/increase in cash and cash equivalents (3.8) 4.4 (4.0) (5.9) Corporate Governance Cash and cash equivalents at beginning of year 8.5 (11.9) 12.5 (6.0) Exchange adjustments (0.1) - - - Cash and cash equivalents at end of year 4.6 (7.5) 8.5 (11.9) Financial Statements 61 Future plc

Financial statements

Notes to the Consolidated and Company cash flow statements for the year ended 30 September 2013

A. Cash generated from/(used in) operations The reconciliation of profit/(loss) for the year to cash flows generated from/(used in) operations is set out below:

Group Company Group Company 2013 2013 2012 2012 £m £m £m £m Profit/(loss) for the year 4.3 - 0.2 (2.5) Adjustments for: Depreciation charge 0.9 - 1.1 - Amortisation of intangible assets 2.0 - 1.5 - Profit on disposal of magazine titles and trademarks (2.7) - (1.2) - Share schemes - Value of employees’ services 0.3 - 0.2 - Impairment of investment in Group undertakings - 0.3 - 0.2 Dividend receivable from Group undertakings - (1.5) - - Net finance costs 1.4 1.1 2.1 0.9 Tax charge/(credit) 1.5 (1.3) 0.9 (1.5) Profit/(loss) before changes in working capital and provisions 7.7 (1.4) 4.8 (2.9) Movement in provisions (2.7) (0.3) 1.8 (0.3) Decrease in inventories 0.1 - 1.6 - (Increase)/decrease in trade and other receivables (1.6) - 2.3 - Increase/(decrease) in trade and other payables 0.8 - (8.4) 0.1 Cash generated from/(used in) operations 4.3 (1.7) 2.1 (3.1)

B. Analysis of net debt

1 October Other Exchange 30 September 2012 Cash flows non-cash changes movements 2013 Group £m £m £m £m £m Cash and cash equivalents 8.5 (3.8) - (0.1) 4.6 Debt due within one year (20.9) 9.1 0.1 0.2 (11.5) Debt due after more than one year (1.7) 1.7 - - - Net debt (14.1) 7.0 0.1 0.1 (6.9)

1 October Other 30 September 2012 Cash flows non-cash changes 2013 Company £m £m £m £m Cash and cash equivalents (11.9) 4.4 - (7.5) Debt due within one year (18.9) 12.2 0.1 (6.6) Debt due after more than one year (1.7) 1.7 - - Net debt (32.5) 18.3 0.1 (14.1)

C. Reconciliation of movement in net debt

Group Company Group Company 2013 2013 2012 2012 £m £m £m £m Net debt at start of year (14.1) (32.5) (11.8) (17.8) (Decrease)/increase in cash and cash equivalents (3.8) 4.4 (4.0) (5.9) Movement in borrowings 10.8 13.9 1.5 (8.8) Other non-cash changes 0.1 0.1 - - Exchange movements 0.1 - 0.2 - Net debt at end of year (6.9) (14.1) (14.1) (32.5) Annual Report and Accounts 2013 62 Strategic Report Accounting policies

Basis of preparation

The financial statements have been prepared under the historical cost convention, except for derivative financial instruments and share awards which are stated at fair value.

The principal accounting policies applied in the preparation of the consolidated financial statements published in this 2013 Annual Report are set out on pages 62 to 65. These policies have been applied consistently to all years presented, unless otherwise stated.

The financial statements of the Group have been prepared in accordance with Financial Review International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee’s (IFRIC) interpretations as adopted by the European Union, applicable as at 30 September 2013, and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The going concern basis has been adopted in preparing these financial statements as stated by the Directors on page 37.

Basis of consolidation Segment reporting

Subsidiaries are all entities over which The Group is organised and arranged primarily the Group has the power to govern the by geographical segment. Operating segments financial and operating policies, generally are reported in a manner consistent with accompanying a shareholding of more than the internal reporting provided to the Chief one half of the voting rights. The existence Operating Decision Makers who are considered and effect of potential voting rights that are to be the executive Directors of Future plc. currently exercisable or convertible are

considered when assessing whether the Corporate Governance Group controls another entity. Subsidiaries Revenue recognition are fully consolidated from the date on which control is transferred to the Group. They are Revenue from the sale of goods is recognised in deconsolidated from the date that control the income statement when the significant risks ceases. The purchase method of accounting and rewards of ownership have been transferred is used to account for the acquisition of to the buyer. Revenue from services rendered subsidiaries by the Group. is recognised in the income statement once the service has been completed. The cost of an acquisition is measured as the fair value of the assets given, equity Revenue comprises the fair value of the instruments issued and liabilities incurred consideration received or receivable for the or assumed at the date of exchange, and sale of goods and services in the ordinary includes the fair value of any asset or liability course of the Group’s activities. Revenue resulting from a contingent consideration is shown net of value-added tax, estimated arrangement. Acquisition-related costs are returns, rebates and discounts and after expensed as incurred. Identifiable assets eliminating sales within the Group. The acquired and liabilities and contingent following recognition criteria also apply: liabilities assumed in a business combination are measured initially at their fair values at • Magazine newsstand circulation and the acquisition date. The excess of the cost of advertising revenue is recognised according acquisition over the fair value of the Group’s to the date that the related publication goes share of the identifiable net assets acquired is on sale.

recorded as goodwill. Financial Statements • Revenue from the sale of digital magazine Inter-company transactions, balances subscriptions is recognised uniformly over and unrealised gains on transactions the term of the subscription. between Group companies are eliminated. Unrealised losses are also eliminated but • Event income is recognised when the event are considered an impairment indicator of has taken place. the asset transferred. Accounting policies of subsidiaries have been changed where • Licensing revenue is recognised on the necessary to ensure consistency with the supply of the licensed content. policies adopted by the Group. • Other revenue is recognised at the time of sale or provision of service. 63 Future plc

Financial statements

Foreign currency translation privately administered pension plan on a minimum lease payments and are depreciated contractual or voluntary basis. The Group over their estimated economic lives or the (a) Functional and presentation currency has no further payment obligations once the finance lease period, whichever is the shorter. Items included in the financial statements of contributions have been paid. Contributions The corresponding liability is recorded within each of the Group’s entities are measured are charged to the income statement as they borrowings. The interest element of the rental using the currency of the primary economic are incurred. costs is charged against profits over the period environment in which the entity operates of the lease using the actuarial method. (‘the functional currency’). The consolidated (b) Share-based compensation financial statements are presented in sterling, The Group operates a number of equity-settled, Payments made under operating leases (net which is the Group’s presentation currency. share-based compensation plans. The fair of any incentives received from the lessor) are value of the employee services received charged to the income statement on a straight- (b) Transactions and balances in exchange for the grant of the awards is line basis over the period of the lease. Foreign currency transactions are translated recognised as an expense. The total amount into the functional currency using the exchange to be expensed over the appropriate service rate prevailing at the date of the transaction. period is determined by reference to the fair Tax Foreign exchange gains and losses resulting value of the awards. The calculation of fair value from the settlement of such transactions includes assumptions regarding the number of Tax on the profit or loss for the year comprises and from the translation at balance sheet cancellations and excludes the impact of any current tax and deferred tax. Tax is recognised exchange rates of monetary assets and non-market vesting conditions (for example, in the income statement except to the extent liabilities denominated in foreign currencies earnings per share). Non-market vesting that it relates to items recognised directly in are recognised in the income statement, conditions are included in assumptions about equity in which case it is recognised in equity. with exchange differences arising on trading the number of awards that are expected to vest. transactions being reported in operating At each balance sheet date, the Group revises Current tax is payable based on taxable profit and with those arising on financing its estimates of the number of awards that profits for the year, using tax rates that have transactions reported in net finance costs are expected to vest. It recognises the impact been enacted or substantively enacted unless as a result of cash flow hedging they of the revision of original estimates, if any, in at the balance sheet date, along with any are reported in other comprehensive income. the income statement, with a corresponding adjustment relating to tax payable in previous adjustment to equity. years. Management periodically evaluates (c) Group companies items detailed in tax returns where the tax The results and financial position of all the Group The grant by the Company of share awards treatment is subject to interpretation. Taxable entities that have a functional currency different to the employees of subsidiary undertakings profit differs from net profit in the income from the presentation currency are translated is treated as a capital contribution. The statement in that income or expense items that into the presentation currency as follows: fair value of employee services received, are taxable or deductible in other years are measured by reference to the grant date fair excluded – as are items that are never taxable (i) Assets and liabilities for each balance value, is recognised over the vesting period or deductible. Current tax assets relate to sheet are translated at the closing rate at as an increase to investment in subsidiary payments on account not offset against the date of that balance sheet. undertakings, with a corresponding credit to current tax liabilities. equity in the Company’s financial statements. (ii) Income and expenses for each income Deferred tax is provided in full, using the statement are translated at average Shares in the Company are held in trust to liability method, on temporary differences exchange rates. satisfy the exercise of awards under certain arising between the tax bases of assets and of the Group’s share-based compensation liabilities and their carrying amounts in the (iii) All resulting exchange differences are plans and exceptional awards. The trust is consolidated financial statements. However, recognised as a separate component consolidated within the Group financial deferred tax is not accounted for if it arises of equity. statements. These shares are presented from initial recognition of an asset or liability in the consolidated balance sheet as a in a transaction other than a business On consolidation, exchange differences arising deduction from equity at the market value combination that at the time of the transaction from the translation of the net investment in on the date of acquisition. affects neither accounting nor taxable profit foreign operations, and of borrowings and or loss. Deferred tax is determined using other currency instruments designated as (c) Bonus plans tax rates (and laws) that have been enacted hedges of such investments, are taken to The Group recognises a liability and or substantively enacted by the balance shareholders’ equity. When a foreign an expense for bonuses taking into sheet date and are expected to apply when operation is sold, exchange differences that consideration the profit attributable to the the related deferred tax asset is realised were recorded in equity are recognised in Company’s shareholders after certain or the deferred tax liability is settled in the the income statement as part of the gain adjustments. The Group recognises a appropriate territory. or loss on sale. provision where contractually obliged or where there is a past practice that has Deferred tax assets are recognised to the Goodwill and fair value adjustments existing created a constructive obligation. extent that it is probable that future taxable at the transition date have been treated as profits will be available against which the assets and liabilities of the acquiring company. temporary differences can be utilised. Goodwill and fair value adjustments arising on Leases Deferred tax is provided on temporary the acquisition of a foreign entity post transition differences arising on investments in are treated as assets and liabilities of the Leases in which the Group assumes subsidiaries, except where the timing of foreign entity and translated at the closing rate. substantially all the risks and rewards of the reversal of the temporary difference is ownership of the leased assets are classified controlled by the Group and it is probable that as finance leases. All other leases are classed the temporary difference will not reverse in the Employee benefits as operating leases. foreseeable future.

(a) Pension obligations Assets held under finance leases are included Deferred tax assets and liabilities are offset The Group has a number of defined either as property, plant and equipment or against each other where they relate to contribution plans. For defined contribution intangible assets at the lower of their fair the same jurisdiction and there is a legally plans the Group pays contributions into a value at inception or the present value of the enforceable right to offset. Annual Report and Accounts 2013 64 Strategic Report

Dividends appropriate cash generating units (those Recoverable amount expected to benefit from the business Interim dividend distributions to the combination) and it is not subject to amortisation To determine whether an impairment loss Company’s shareholders are recognised as but is tested annually for impairment. should be recognised, the carrying value of the a liability in the financial statements in the assets and liabilities of the CGUs or groups of period in which they are paid. Final dividend (b) Titles, trademarks, customer lists, CGUs is compared to their recoverable amount. distributions are recognised in the period in advertising relationships and other which they are approved. ‘magazine and website related’ intangibles Carrying values of CGUs and groups of CGUs Magazine-related intangible assets have a tested include goodwill and assets with finite finite useful life and are stated at cost less useful lives (property, plant and equipment, Property, plant and equipment accumulated amortisation. Assets acquired intangible assets and net working capital). as part of a business combination are initially Property, plant and equipment is stated at cost stated at fair value. Amortisation is calculated The recoverable amount of a CGU is the higher Financial Review (or deemed cost) less accumulated depreciation using the straight-line method to allocate the of its fair value less costs to sell and its value and impairment losses. Certain items of cost of these intangibles over their estimated in use. Fair value less costs to sell is the best property, plant and equipment that had been useful lives (between one and five years). estimate of the amount obtainable from the revalued to fair value prior to 1 October 2004, sale of an asset in an arm’s length transaction the date of transition to IFRS, are measured on Expenditure incurred on the launch of new between knowledgeable, willing parties, less the the basis of deemed cost, being the revalued magazine titles is recognised as an expense in costs of disposal. This estimate is determined, amount at the date of that valuation. Cost the income statement as incurred. on 30 September, on the basis of the discounted includes expenditure that is directly attributable present value of expected future cash flows plus to the acquisition of the items. (c) Computer software and website a terminal value and reflects general market development sentiment and conditions. Non-integral computer software purchases are Depreciation stated at cost less accumulated amortisation. Value in use is the present value of the future Costs incurred in the development of new cash flows expected to be derived from the Depreciation is calculated using the straight- websites are capitalised only where the cost CGUs or group of CGUs. Cash flow projections line method to allocate the cost of property, can be directly attributed to developing the are based on economic assumptions and plant and equipment less residual value over website to operate in the manner intended by forecast trading conditions drawn up by the estimated useful lives, as follows: management and only to the extent of the future Group’s management, as follows: economic benefits expected from its use. These • Land and buildings – 50 years or period of costs are amortised on a straight-line basis over • cash flow projections are based on five-year the lease if shorter. their estimated useful lives (between one and business plans; three years). Costs associated with maintaining • Plant and machinery – between one and computer software or websites are recognised • cash flow projections beyond that time frame five years. as an expense as incurred. are extrapolated by applying a 2.0% growth

rate to perpetuity; and Corporate Governance • Equipment, fixtures and fittings – between one and five years. Impairment tests and Cash-Generating • the cash flows obtained are discounted Units (CGUs) using appropriate rates for the business and The assets’ residual values and useful lives the territories concerned. are reviewed, and adjusted if appropriate, A CGU is defined as the smallest identifiable at each balance sheet date. An asset’s group of assets that generates cash inflows If goodwill has been allocated to a CGU and carrying amount is written down immediately that are largely independent of the cash inflows an operation within that CGU is disposed, to its recoverable amount if the asset’s from other assets or groups of assets. the goodwill associated with that operation carrying amount is greater than its estimated is included in the carrying amount of the recoverable amount. Goodwill is not amortised but tested for operation in determining the profit or loss on impairment at least once a year or more disposal. The goodwill allocated to the Gains and losses on disposals are determined frequently when there is an indication that it disposal is measured on the basis of the by comparing proceeds with carrying amounts. may be impaired. Therefore, the evolution of relative profitability of the operation disposed These are included in the income statement. general economic and financial trends as well and the operations retained. as actual economic performance compared to market expectations represent external Intangible assets indicators that are analysed by the Group, Inventories together with internal performance indicators, (a) Goodwill in order to assess whether an impairment test Inventories are stated at the lower of cost and In respect of business combinations that have should be performed more than once a year. net realisable value. For raw materials, cost is occurred since 1 October 2004, goodwill taken to be the purchase price on a first in, first represents the difference between the cost IAS 36 ‘Impairment of Assets’ requires these out basis. For work in progress and finished

of the acquisition and the fair value of net tests to be performed at the level of each goods, cost is calculated as the direct cost Financial Statements identifiable assets acquired. In respect of CGU or group of CGUs likely to benefit from of production. It excludes borrowing costs. business combinations prior to this date, acquisition-related synergies, within an Net realisable value is the estimated selling goodwill is included on the basis of its deemed operating segment. price in the ordinary course of business, less cost, which represents the amount recorded applicable variable selling expenses. under previous GAAP. The classification and Any impairment of goodwill is recorded in the accounting treatment of business combinations income statement as a deduction from operating that occurred prior to 1 October 2004 has not profit and is never reversed subsequently. Trade and other receivables been reconsidered in preparing the Group’s opening IFRS balance sheet. Other intangible assets with a finite life are Trade and other receivables are initially amortised and are tested for impairment only recognised at fair value and subsequently Goodwill is stated at cost less any accumulated where there is an indication that an impairment measured at amortised cost using the effective impairment losses. Goodwill is allocated to may have occurred. interest method, less a provision for impairment. 65 Future plc

Financial statements

A provision for impairment of trade will be reviewed on a ‘case by case’ basis at is calculated by looking at the forecast sales receivables is made when there is objective inception to determine whether they should projections for the following month of the titles evidence that the Group will not be able to qualify as hedges and be accounted for that were on sale at the year-end and providing collect all amounts due in accordance with the accordingly under IAS 39. In accordance with for any shortfall. The US estimate is made original terms of the receivables. its treasury policy, the Group does not hold or based on a study of the historic levels of returns. issue any derivative financial instruments for trading purposes. Cash and cash equivalents New or revised accounting standards and interpretations Cash and cash equivalents include cash in Investments hand, deposits held at call with banks and There has been no material impact from bank overdrafts for the purpose of the cash The Company’s investments in subsidiary the adoption of the following new or revised flow statement. Bank overdrafts are shown undertakings are stated at the fair value of standards or interpretations which are relevant within borrowings in current liabilities on the consideration payable, including related to the Group: balance sheet. acquisition costs, less any provisions for impairment. • Amendment to IAS 1 Presentation of Financial Statements on Other Trade and other payables Comprehensive Income. Exceptional items Trade and other payables are initially Certain new standards, amendments and recognised at fair value and subsequently The Group classifies transactions as interpretations to existing standards have measured at amortised cost using the effective exceptional where they relate to an event been published that are mandatory for interest method. that falls outside the ordinary activities of accounting periods beginning on or after the business and where individually or in 1 October 2013 or later periods but which aggregate they have a material impact on the Group has chosen not to adopt early. Borrowings the financial statements. This classification These include the following standards excludes impairment charges made on the which are relevant to the Group: Borrowings are recognised initially at fair value, carrying value of CGUs or groups of CGUs. net of transaction costs incurred. Borrowings • IFRS 10 Consolidated Financial Statements. are subsequently stated at amortised cost with • IFRS 12 Disclosure of Interests in other any difference between the proceeds (net of Critical accounting assumptions and entities. transaction costs) and the redemption value judgements • IFRS 13 Fair Value Measurement. recognised in the income statement over the • IAS 27 (revised) Separate financial period of the borrowings using the effective The preparation of the financial statements statements. interest method. under IFRS requires the use of certain • IAS 28 (revised) Associates and joint critical accounting assumptions and requires ventures. Borrowings are classified as current liabilities management to exercise its judgement and unless the Group has an unconditional right to to make estimates in the process of applying The Group does not expect that these defer settlement of the liability for at least 12 the Group’s accounting policies. The areas standards and interpretations issued but not months after the balance sheet date. requiring a higher degree of judgement or yet effective will have a material impact on areas where assumptions and estimates are results or net assets. significant to the financial statements are Provisions discussed below:

Provisions are recognised when the Group has (a) Intangible assets a present legal or constructive obligation as a The Group uses forecast cash flow information result of past events, and it is more likely than and estimates of future growth to assess not that an outflow of resources will be required whether goodwill and other intangible assets to settle the obligation. are impaired. If the results of an operation in future years are adverse to the estimates used Provisions are measured at the Directors’ best for impairment testing, an impairment may be estimate of the expenditure required to settle triggered at that point, or a reduction in useful the obligation at the balance sheet date, and economic life may be required. are discounted to present value where the effect is material. (b) Taxation The Group is subject to tax in all territories, and judgement and estimates of future Derivative financial instruments and profitability are required to determine the hedging activities Group’s deferred tax position. If the final tax outcome is different to that assumed, resulting The Group uses derivative financial changes will be reflected in the income instruments to reduce exposure to foreign statement or statement of changes in equity exchange and interest rate risks and as appropriate. The Group corporation tax recognises these at fair value in its balance provision reflects management’s estimation of sheet. The Group applies cash flow hedge the amount of tax payable for fiscal years with accounting under IAS 39 in respect of certain open tax computations where liabilities remain instruments held. For instruments for which to be agreed with Her Majesty’s Revenue and hedge accounting is applied, gains and losses Customs and other tax authorities. are taken to equity. Any changes to the fair value of derivatives not hedge accounted for (c) Returns provision are recognised in the income statement. Any The Group makes a provision for sales returns new instruments entered into by the Group at the end of each month. The UK estimate Annual Report and Accounts 2013 66 Strategic Report Notes to the financial statements

1. Segmental reporting

The Group is organised and arranged primarily by reportable segment. The executive Directors consider the performance of the business from a geographical perspective, namely the UK and the US. The Australian business is considered to be part of the UK segment and is not separately reported due to its size.

(a) Reportable segment (i) Segment revenue

2013 2012 £m £m UK 92.2 99.1 Financial Review US 20.9 25.1 Revenue between segments (0.8) (0.7) Total 112.3 123.5

Transactions between segments are carried out at arm’s length.

(ii) Segment EBITE

2013 2012 £m £m UK 6.5 9.7 US (1.8) (2.9) Total segment EBITE 4.7 6.8

EBITE is used by the executive Directors to assess the performance of each segment.

A reconciliation of total segment EBITE to profit before tax is provided as follows:

2013 2012 £m £m Corporate Governance Total segment EBITE 4.7 6.8 Exceptional items 2.5 (3.6) Net finance costs (1.4) (2.1) Profit before tax 5.8 1.1

(iii) Segment assets and liabilities

Segment net Segment assets Segment liabilities assets/(liabilities)

2013 2012 2013 2012 2013 2012 £m £m £m £m £m £m UK 110.7 119.7 (42.3) (56.2) 68.4 63.5 US 10.3 9.9 (11.3) (10.8) (1.0) (0.9) Total 121.0 129.6 (53.6) (67.0) 67.4 62.6

(iv) Other segment information

Depreciation Capital expenditure and amortisation Exceptional items Financial Statements 2013 2012 2013 2012 2013 2012 £m £m £m £m £m £m UK 2.6 1.8 1.9 1.5 (1.3) 0.6 US 0.9 0.7 1.0 1.1 (1.2) 3.0 Total 3.5 2.5 2.9 2.6 (2.5) 3.6

Other than the items disclosed above and a share-based payments charge of £0.3m (2012: £0.2m) there were no other significant non-cash expenses during the year. 67 Future plc

Financial statements

1. Segmental reporting (continued)

(b) Business segment After geographical location, the Group is managed into five key business segments. Each business segment comprises groups of individual magazines, websites and events, combined according to the market sector in which they operate. The Group considers that the assets within each segment are exposed to the same risks.

(i) Revenue by business segment

2013 2012 £m £m Entertainment 29.6 36.5 Technology 27.4 26.8 Music 13.0 20.3 Creative 23.4 21.0 Sport & Auto 19.7 19.6 Revenue between segments (0.8) (0.7) Total 112.3 123.5

(ii) Gross profit by business segment

2013 2012 £m £m Entertainment 6.3 8.2 Technology 6.7 6.4 Music 2.7 4.1 Creative 5.9 5.5 Sport & Auto 5.2 5.2 Add back: distribution expenses 7.7 9.6 Total 34.5 39.0

2. Revenue

An additional analysis of the Group’s revenue is shown below:

2013 2012 £m £m Circulation 64.8 72.5 Advertising 34.4 37.1 Customer publishing 7.3 8.6 Licensing, events and other 5.8 5.3 Total 112.3 123.5

3. Operating profit

2013 2012 £m £m Revenue 112.3 123.5 Cost of sales (77.8) (84.5) Gross profit 34.5 39.0 Distribution expenses (7.7) (9.6) Administration expenses (22.1) (22.6) Exceptional items 2.5 (3.6) Operating profit 7.2 3.2 Annual Report and Accounts 2013 68 Strategic Report

4. Fees paid to auditors

2013 2012 £m £m Audit fees in respect of the audit of the financial statements of the Company and consolidated financial statements 0.1 0.1 Fees payable for other services: - The audit of the financial statements of the Company’s subsidiaries 0.1 0.1 - Tax compliance services 0.1 0.1 - Tax advisory services 0.1 0.1 Total fees 0.4 0.4 Financial Review

5. Exceptional items

2013 2012 £m £m Vacant property provision movements (1.2) 2.7 Restructuring and redundancy costs 1.4 2.1 Profit on disposal of magazine titles and trademarks (2.7) (1.2) Total (2.5) 3.6

In 2013, the vacant property provision movement relates to the release of a provision following the sublease of a vacant floor of a property in the US. The vacant property provisions made in 2012 related to surplus office space in the UK and US.

The restructuring and redundancy costs relate mainly to staff termination payments following the restructuring of the UK and US businesses in line with the Group’s strategy.

The profit on disposal in 2013 relates to the sale of the UK Rock titles and in 2012 it relates to the sale of the New York Music titles and the sale of two UK based titles, Trucking and Truckstop News.

6. Employees Corporate Governance 2013 2012 £m £m Wages and salaries 39.2 41.1 Social security costs 5.1 5.4 Other pension costs 1.2 0.9 Share schemes - Value of employees’ services 0.3 0.2 Total staff costs 45.8 47.6

2013 2012 Average monthly number of people (including Directors) No. No. Production 822 834 Administration 214 202 Total 1,036 1,036

At 30 September 2013, the actual number of people employed by the Group was 980 (2012: 1,013). In respect of our reportable segments 831 (2012: 869) were employed in the UK and 149 (2012: 144) were employed in the US. Financial Statements 69 Future plc

Financial statements

6. Employees (continued)

Key management personnel compensation

Group Company Group Company 2013 2013 2012 2012 £m £m £m £m Salaries and other short-term employee benefits 0.8 0.3 1.0 0.3 Termination benefits - - 0.8 0.8 Share schemes - Value of employees’ services 0.2 - 0.1 - Total 1.0 0.3 1.9 1.1

Key management personnel are deemed to be the members of the Board of Future plc. It is this Board which has responsibility for planning, directing and controlling the activities of the Group.

Mark Wood and Graham Harding are paid by Future Publishing Limited, a subsidiary company, for their services. In 2013 £0.2m (2012: £0.2m) was recharged to Future plc by Future Publishing Limited in respect of Mark Wood and £0.1m (2012: £0.1m) was recharged in respect of Graham Harding.

Further details on the Directors’ remuneration and interests are given in the Directors’ remuneration report on pages 41 to 51. The highest paid Director during the year was Mark Wood (2012: Stevie Spring) and details of his remuneration are shown on page 42.

7. Finance income and costs

2013 2012 £m £m Interest receivable 0.6 - Fair value gain on interest rate derivative not in a hedge relationship 0.2 0.2 Total finance income 0.8 0.2 Interest payable on interest-bearing loans and borrowings (1.0) (1.5) Amortisation of bank loan arrangement fees (0.4) (0.5) Other finance costs (0.7) (0.3) Exchange losses (0.1) - Total finance costs (2.2) (2.3) Net finance costs (1.4) (2.1)

8. Tax on profit

The tax charged in the consolidated income statement is analysed below:

2013 2012 £m £m UK corporation tax Current tax at 23.5% (2012: 25%) on the profit for the year 1.4 1.6 Adjustments in respect of previous years (0.2) (0.4) Current tax 1.2 1.2 Deferred tax origination and reversal of temporary differences Current year charge - 0.2 Adjustments in respect of previous years 0.3 (0.5) Deferred tax 0.3 (0.3) Total tax charge 1.5 0.9 Annual Report and Accounts 2013 70 Strategic Report

8. Tax on profit (continued)

The tax assessed in each year differs from the standard rate of corporation tax in the UK for the relevant year. The differences are explained below:

2013 2012 £m £m Profit before tax 5.8 1.1 Profit before tax at the standard UK tax rate of 23.5% (2012: 25%) 1.4 0.3 Different tax rates applicable overseas (0.1) (0.7) Effect of change in deferred tax rate (0.1) -

Losses and other temporary differences not recognised in respect of tax in the US 0.3 1.9 Financial Review Profits relieved against brought forward losses (1.7) (0.3) Other net disallowable items 1.6 0.6 Adjustments in respect of prior years 0.1 (0.9) Total tax charge 1.5 0.9

During the year the Group reached agreement with HMRC relating to the tax treatment of certain one-off transactions which took place in 2003. Part of that agreement will result in the Group paying tax of £6.2m plus interest (comprising instalments of £85,000 per month over five years from July 2013 and a final instalment of £2.0m). The tax payable was fully provided for in prior year accounts.

The liability in the balance sheet has been split based on this agreement between current liabilities and non-current liabilities.

9. Dividends

Equity dividends 2013 2012 Number of shares in issue at end of year (million) 333.4 333.0 Dividends paid in year (pence per share) - 0.5 Dividends paid in year (£m) - 1.6

A final dividend in respect of the year ended 30 September 2013 of 0.2 pence per share, amounting to a total dividend of £0.7m, is to be proposed at the Annual General Meeting on 3 February 2014. The financial statements do not reflect this dividend. Corporate Governance

The dividends totalling £1.6m paid during the year ended 30 September 2012 relate to the interim dividend for the six-month period to 31 March 2011 of 0.5 pence per share.

10. Earnings per share

Basic earnings per share are calculated using the weighted average number of Ordinary shares in issue during the year. Diluted earnings per share have been calculated by taking into account the dilutive effect of shares that would be issued on conversion into Ordinary shares of awards held under employee share schemes.

Adjusted earnings per share removes the effect of exceptional items and any related tax effects from the calculation as follows:

Adjustments to profit after tax

2013 2012 £m £m Profit after tax 4.3 0.2 Exceptional items (2.5) 3.6 Tax effect of the above adjustment 0.2 (0.3) Adjusted profit after tax 2.0 3.5 Financial Statements

2013 2012 Weighted average number of shares in issue during the year: - Basic 331,812,054 329,101,739 - Dilutive effect of share options 6,298,779 3,751,837 - Diluted 338,110,833 332,853,576 Basic earnings per share (in pence) 1.3 0.1 Adjusted basic earnings per share (in pence) 0.6 1.1 Diluted earnings per share (in pence) 1.3 0.1 Adjusted diluted earnings per share (in pence) 0.6 1.1 71 Future plc

Financial statements

10. Earnings per share (continued)

The adjustments to profit have the following effect:

2013 2012 pence pence Basic earnings per share 1.3 0.1 Exceptional items (0.8) 1.1 Tax effect of the above adjustment 0.1 (0.1) Adjusted basic earnings per share 0.6 1.1

Diluted earnings per share 1.3 0.1 Exceptional items (0.8) 1.1 Tax effect of the above adjustment 0.1 (0.1) Adjusted diluted earnings per share 0.6 1.1

11. Property, plant and equipment

Equipment, Land and Plant and fixtures and buildings machinery fittings Total Group £m £m £m £m Cost At 1 October 2011 4.4 5.7 2.8 12.9 Transfer (0.1) 0.1 - - Additions 0.2 0.2 0.1 0.5 Disposals (0.4) (0.2) (0.5) (1.1) Exchange adjustments - (0.1) - (0.1) At 30 September 2012 4.1 5.7 2.4 12.2 Additions - 0.5 0.1 0.6 Disposals - (0.2) - (0.2) At 30 September 2013 4.1 6.0 2.5 12.6

Accumulated depreciation At 1 October 2011 (2.5) (4.6) (2.4) (9.5) Charge for the year (0.4) (0.6) (0.1) (1.1) Disposals 0.4 0.2 0.5 1.1 Exchange adjustments - 0.1 - 0.1 At 30 September 2012 (2.5) (4.9) (2.0) (9.4) Charge for the year (0.2) (0.6) (0.1) (0.9) Disposals - 0.2 - 0.2 At 30 September 2013 (2.7) (5.3) (2.1) (10.1)

Net book value at 30 September 2013 1.4 0.7 0.4 2.5 Net book value at 30 September 2012 1.6 0.8 0.4 2.8 Net book value at 1 October 2011 1.9 1.1 0.4 3.4

Depreciation is included within administration expenses in the consolidated income statement. Annual Report and Accounts 2013 72 Strategic Report

12. Intangible assets

Magazine and Goodwill website Other Total Group £m £m £m £m Cost At 1 October 2011 313.7 15.3 10.6 339.6 Additions - 0.1 1.9 2.0 Disposals (1.7) - (0.2) (1.9) Exchange adjustments (0.9) (0.2) (0.2) (1.3)

At 30 September 2012 311.1 15.2 12.1 338.4 Financial Review Additions 0.2 0.5 2.2 2.9 Disposals (6.2) - (0.1) (6.3) Exchange adjustments - (0.1) - (0.1) At 30 September 2013 305.1 15.6 14.2 334.9

Accumulated amortisation At 1 October 2011 (219.6) (15.2) (8.1) (242.9) Charge for the year - (0.1) (1.4) (1.5) Disposals - - 0.1 0.1 Exchange adjustments 0.8 0.2 0.2 1.2 At 30 September 2012 (218.8) (15.1) (9.2) (243.1) Charge for the year - (0.1) (1.9) (2.0) At 30 September 2013 (218.8) (15.2) (11.1) (245.1)

Net book value at 30 September 2013 86.3 0.4 3.1 89.8 Net book value at 30 September 2012 92.3 0.1 2.9 95.3 Net book value at 1 October 2011 94.1 0.1 2.5 96.7 Corporate Governance

Magazine and website related assets relate mainly to trademarks, advertising relationships and customer lists. These assets are amortised over their estimated economic lives, typically ranging between one and five years.

Any residual amount arising as a result of the purchase consideration being in excess of the value of identified magazine related assets is recorded as goodwill. Goodwill is not amortised under IFRS, but is subject to impairment testing either annually or on the occurrence of some triggering event. Goodwill is recorded and tested for impairment on a territory by territory basis.

Other intangibles relate to capitalised software costs and website development costs.

Amortisation is included within administration expenses in the consolidated income statement.

Impairment tests for goodwill and other intangibles The breakdown of the goodwill balance at 30 September 2013 comprises:

2013 2012 £m £m UK 82.8 88.9 US 3.5 3.4 Total 86.3 92.3

The basis for calculating recoverable amounts is described in the accounting policies. Financial Statements

Trends in the economic and financial environment, competition and regulatory authorities’ decisions, or changes in competitor behaviour in response to the economic environment may affect the estimate of recoverable amounts, as will unforeseen changes in the political, economic or legal systems of some countries. 73 Future plc

Financial statements

12. Intangible assets (continued)

Other assumptions that influence estimated recoverable amounts are set out below:

At 30 September 2013

UK US Basis of recoverable amount Value in use Value in use Source used Five year plans Five year plans Discounted cash flow Discounted cash flow

Growth rate to perpetuity 2.0% 2.0% EBITDA margins assumed 12.1% to 13.7% 1.0% to 7.5% Post-tax discount rate 9.5% 9.5% Pre-tax discount rate 13.3% 12.5%

At 30 September 2012

UK US Basis of recoverable amount Value in use Value in use Source used Five year plans Five year plans Discounted cash flow Discounted cash flow

Growth rate to perpetuity Nil Nil EBITDA margins assumed 11.7% to 14.0% 0.1% to 7.4% Post-tax discount rate 8.5% 8.5% Pre-tax discount rate 11.5% 11.5%

Sensitivity of recoverable amounts At 30 September 2013 the analysis of the recoverable amounts gave rise to the following assessments of sensitivity:

(i)K U The value in use of the UK business exceeded the carrying value by £6.1m. An impairment would be required if the discount rate was more than 1.0% higher or if forecast cash flows were more than 7.8% lower.

(ii)S U The value in use of the US business exceeded the carrying value by £1.6m. An impairment would be required if the discount rate was more than 3.1% higher or if forecast cash flows were more than 41.1% lower.

Goodwill is not considered to be impaired at 30 September 2013 however a reasonably possible change in the discount rate or forecast cash flows could give rise to an impairment.

13. Investments in Group undertakings

2013 2012 Company £m £m Shares in Group undertakings At beginning and end of year 159.1 159.1

The recoverability of this investment has been considered by taking into account the amounts owed by the Company to Group undertakings (see note 18). Annual Report and Accounts 2013 74 Strategic Report

14. Deferred tax assets and liabilities

The following are the major deferred tax assets and liabilities recognised by the Group, and the movements thereon, during the current and prior years.

Intangible Share-based Depreciation vs assets payments tax allowances Tax losses Total £m £m £m £m £m At 1 October 2011 (1.8) 0.1 0.4 0.5 (0.8) Credited/(charged) to income statement 0.5 - - (0.2) 0.3 At 30 September 2012 (1.3) 0.1 0.4 0.3 (0.5) Credited/(charged) to income statement 0.1 - (0.1) (0.3) (0.3) At 30 September 2013 (1.2) 0.1 0.3 - (0.8) Financial Review

The changes to the main rate of corporation tax for the UK announced in the March 2013 Budget were substantively enacted on 2 July 2013. The changes reduced the main rate of corporation tax from 23% to 21% from 1 April 2014 and to 20% from 1 April 2015. As these changes had been substantively enacted before the year-end, any impact has been included in these financial statements. As a result, the Group has booked a credit of £0.1m in respect of this.

Certain deferred tax assets and liabilities have been offset against each other where they relate to the same jurisdiction. The following is the analysis of deferred tax balances after offset for balance sheet purposes:

2013 2012 £m £m Deferred tax assets 0.4 0.8 Deferred tax liabilities (1.2) (1.3) Net deferred tax liability (0.8) (0.5)

The deferred tax asset of £0.4m (2012: £0.8m) is disclosed as a non-current asset of which the assets due within one year total £0.1m (2012: £0.3m). The deferred tax liability of £1.2m (2012: £1.3m) is disclosed as a non-current liability of which the liabilities due within one year total £nil (2012: £nil).

As at 30 September 2013 the Group has: • unprovided deferred tax assets on tax losses totalling £11.0m (2012: £7.6m) of which £10.8m (2012: £7.3m) arises in the US; and • unprovided deferred tax assets on other temporary differences totalling £2.2m (2012: £3.3m) of which £2.2m (2012: £3.3m) arises in the US. Corporate Governance

Deferred tax assets have been recognised in respect of tax losses and other temporary differences where it is probable that these assets will be recovered.

No deferred tax is recognised on the unremitted earnings of overseas subsidiaries as any remitted earnings would not give rise to a tax liability in the foreseeable future.

The deferred tax asset of £0.1m (2012: £0.1m) recognised on the Company’s balance sheet is in respect of share-based payments. The Company has no unprovided deferred tax assets or liabilities at 30 September 2013 (2012: £nil).

15. Inventories

2013 2012 £m £m Raw materials 0.4 0.3 Work in progress 1.2 1.2 Finished goods 0.3 0.4 Total 1.9 1.9

The cost of raw material inventories recognised as an expense and included within cost of sales amounted to £8.2m (2012: £10.8m). Financial Statements 75 Future plc

Financial statements

16. Trade and other receivables

Group Company Group Company 2013 2013 2012 2012 £m £m £m £m Current assets: Trade receivables 15.1 - 14.8 - Provisions for impairment of trade receivables (0.2) - (0.4) - Trade receivables net 14.9 - 14.4 - Amounts owed by Group undertakings - 43.3 - 35.7 Other receivables 0.6 - 0.3 - Prepayments and accrued income 5.7 - 5.4 - 21.2 43.3 20.1 35.7 Non-current assets: Other receivables 0.2 - 0.2 - Total 21.4 43.3 20.3 35.7

The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

Receivable balances from the two main magazine distributors, one in the UK segment and one in the US segment, represented 14% (2012: 18%) of the Group’s trade receivables balance at 30 September 2013.

The Group has provided for estimated irrecoverable amounts in accordance with its accounting policy described on page 64 of these financial statements.

Credit checks are obtained and, if applicable, guarantees put in place before a new customer is accepted and terms and credit limits are agreed. Bookings are not taken before these factors have been fulfilled. In addition, annual credit checks are carried out and fully documented. Final decisions on credit terms are made by an appropriate senior manager within advertising or finance. In the event of a request to increase a customer’s credit limit the following factors will be considered: trading history to date, review of credit status and review of the reason for the increase.

Included within the Group’s trade receivables balance are receivables with a carrying amount of £3.0m (2012: £2.3m) which are past due at the reporting date but for which the Group has not provided as there has not been a significant change in credit quality and the Group believes that the amounts are still recoverable. These relate to advertising and licensing debtors in the UK and US. The Group does not hold any security over these balances. A breakdown of the ageing is set out below:

Group Group 2013 2012 Past due £m £m 0-30 days 1.6 1.0 31-60 days 0.5 0.9 61-90 days 0.7 0.4 91+ days 0.2 - Total 3.0 2.3

As at 30 September 2013, trade receivables of £0.2m (2012: £0.4m) were impaired and provided for. The individually impaired receivables mainly relate to advertising and licensing customers. It is assessed that a portion of the receivables is expected to be recovered. These receivables are all more than 60 days old. Annual Report and Accounts 2013 76 Strategic Report

16. Trade and other receivables (continued)

The movement in the Group provision for trade receivables during the year is as follows:

Group Group 2013 2012 £m £m At 1 October 0.4 0.6 Provision for receivables impaired 0.1 0.1 Receivables written off during the year (0.3) (0.3) At 30 September 0.2 0.4 Financial Review

The creation and release of provision for impaired receivables have been included in administration expenses in the income statement. Amounts charged to the provision are written off when there is no realistic expectation of recovering additional cash.

The other asset classes within trade and other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security for trade receivables.

All the Company’s receivables are with Group undertakings and no additional disclosure in relation to credit risk is required. Interest on £0.3m of the amounts owed by Group undertakings has been charged at three-month LIBOR + 3.1%. The balance of amounts owed by Group undertakings is interest-free without any terms for repayment.

17. Cash and cash equivalents

Group Company Group Company 2013 2013 2012 2012 £m £m £m £m Cash at bank and in hand 4.6 - 8.5 - Cash and cash equivalents (excluding bank overdraft) 4.6 - 8.5 -

Cash and cash equivalents include the following for the purposes of the cash flow statements: Corporate Governance

Group Company Group Company 2013 2013 2012 2012 £m £m £m £m Cash at bank and in hand 4.6 - 8.5 - Bank overdraft (note 19) - (7.5) - (11.9) Cash and cash equivalents 4.6 (7.5) 8.5 (11.9)

The Group has a number of authorised counterparties with whom cash balances are held in the countries in which the Group operates. Credit risk is minimised by considering the credit standing of all potential bankers before selecting them by the use of external credit ratings. 80% of the Group’s cash is held at counterparties with an S&P credit rating of A.

18. Trade and other payables

Group Company Group Company 2013 2013 2012 2012 £m £m £m £m Trade payables 11.1 - 10.6 - Amounts owed to Group undertakings - 113.7 - 93.5 Other taxation and social security 1.2 - 1.1 - Other payables 1.6 - 0.5 - Financial Statements Accruals and deferred income 17.7 0.1 18.8 0.2 Total 31.6 113.8 31.0 93.7

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The Group has financial risk management policies in place to ensure all payables are paid within the agreed credit terms.

The Directors consider that the carrying amount of trade payables approximates to their fair value.

Amounts owed to Group undertakings are unsecured and interest-free without any terms for repayment. 77 Future plc

Financial statements

19. Financial liabilities – loans, borrowings and overdrafts

Non-current liabilities

Interest rate at Interest rate at Group Company Group Company 30 September 30 September 2013 2013 2012 2012 2013 2012 £m £m £m £m Sterling term loan - 5.1% - - 1.7 1.7 Total - - 1.7 1.7

Current liabilities

Interest rate at Interest rate at Group Company Group Company 30 September 30 September 2013 2013 2012 2012 2013 2012 £m £m £m £m Sterling term loan - 5.1% - - 3.2 3.2 Sterling revolving loan 2.9% 4.1% 6.6 6.6 15.7 15.7 US Dollar revolving loan 2.6% 3.8% 4.9 - 1.9 - 11.5 6.6 20.8 18.9 Obligations under finance leases - 3.0% - 15.0% - - 0.1 - Total 11.5 6.6 20.9 18.9

The interest-bearing loans and borrowings are repayable as follows:

Group Company Group Company 2013 2013 2012 2012 £m £m £m £m Within one year 11.5 6.6 20.9 18.9 Between one and two years - - 1.7 1.7 Total 11.5 6.6 22.6 20.6

In February 2013, the Group negotiated a new bank facility with a syndicate of banks (comprising Barclays and Santander) to replace its existing facility which was due to expire in December 2013. The total facility available to the Group at 30 September 2013 amounts to £25m and this can be drawn in sterling, US Dollars or Euros. The Group has granted security to the banks and the availability of the facility, which expires in February 2017, is subject to certain covenants.

Fees relating to the new facility amounted to £0.6m and these are being amortised over the term of the facility. The bank borrowings and interest are guaranteed by Future plc, Future Holdings 2002 Limited, Future Publishing Limited and Future US, Inc.

Interest payable under the current credit facility is calculated as the cost of three-month LIBOR (currently approximately 0.5%) plus an interest margin of between 2.0% and 3.25%, dependent on the net debt/Bank EBITDA covenant ratio.

The key covenants are set out in the following table where net debt is exclusive of non-current tax and other payables and Bank EBITDA is not materially different to statutory EBITDA.

Bank covenant

Net debt/Bank EBITDA Periods from 31 March 2013 to 30 June 2013 – less than 2.50 times Periods from 30 September 2013 to 31 December 2013 – less than 2.25 times Periods from 31 March 2014 onwards – less than 2.00 times Bank EBITDA/Interest More than 4.0 times Capital expenditure 125% of agreed annual budget Annual Report and Accounts 2013 78 Strategic Report

19. Financial liabilities – loans, borrowings and overdrafts (continued)

The covenants are tested quarterly on the basis of rolling figures for the preceding 12 months and the covenant position at the year-end is set out in the following table:

30 September 2013 Covenant Net debt/Bank EBITDA 0.99 < 2.25 times Bank EBITDA/Interest 7.74 > 4.0 times

The Group met its covenant for capital expenditure at 30 September 2013.

Based on the above calculations the Group had headroom of £9.4m over and above the level of bank debt at 30 September 2013. Financial Review

The minimum lease payments due under finance leases are set out below:

2013 2012 Group £m £m Within one year - 0.1 Total - 0.1

The present value of minimum lease payments due under finance leases is set out below:

2013 2012 Group £m £m Within one year - 0.1 Total - 0.1

The Company has a non-interest-bearing overdraft of £7.5m (2012: £11.9m) which forms part of the Group cash pooling account and can be offset against cash balances in other Group companies.

20. Financial assets and liabilities – derivatives Corporate Governance The fair value of hedging derivatives is split between current and non-current assets or liabilities based on the maturity of the cash flows.

Group Company Group Company 2013 2013 2012 2012 Current assets £m £m £m £m Forward foreign exchange contracts 0.4 - - - Total 0.4 - - -

Group Company Group Company 2013 2013 2012 2012 Non-current liabilities £m £m £m £m Interest rate derivatives - - (0.2) (0.2) Total - - (0.2) (0.2)

Group Company Group Company 2013 2013 2012 2012 Current liabilities £m £m £m £m Interest rate derivatives (0.2) (0.2) (0.2) (0.2) Financial Statements Total (0.2) (0.2) (0.2) (0.2)

In line with the Board’s policy of hedging interest rate risk as disclosed in note 23, the Group has entered into interest rate derivatives to reduce its exposure on a proportion of the outstanding debt under its committed facility.

In October 2007, the Group entered into a UK interest rate collar over £5.0m which has a seven-year period. The collar has a cap at 6.00% and a floor of 4.65%.

A fair value gain for the year of £0.2m (2012: £0.2m) on interest rate derivatives has been included within finance income in the income statement as hedge accounting is not applied to these contracts.

The Group hedges its exposure to transactional foreign currency risk and enters into forward foreign exchange contracts to sell US Dollars and Australian Dollars. These contracts have monthly maturity dates and the outstanding contracts at 30 September 2013 end in August 2014. 79 Future plc

Financial statements

20. Financial assets and liabilities – derivatives (continued)

A fair value gain for the year of £0.2m (2012: £0.1m) on forward foreign exchange contracts has been recognised directly in equity as hedge accounting is applied to these contracts.

The amounts in the tables on page 78 are the fair value of financial assets and liabilities using Level 2 – inputs that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

The maturity analysis of the Group’s derivative financial assets and liabilities is set out below:

2013 2012

Forward foreign Forward foreign Interest rate exchange Interest rate exchange derivatives contracts derivatives contracts Group £m £m £m £m Within one year (0.2) 0.4 (0.2) - Between one and two years - - (0.2) - Total (liabilities)/assets (0.2) 0.4 (0.4) -

The maturity analysis of the Company’s derivative financial liabilities is set out below:

2013 2012 Interest rate Interest rate derivatives derivatives Company £m £m Within one year (0.2) (0.2) Between one and two years - (0.2) Total liabilities (0.2) (0.4)

21. Provisions

Property Other Total Group £m £m £m At 1 October 2012 3.8 0.3 4.1 Charged in the year 0.1 - 0.1 Released in the year (1.4) - (1.4) Utilised in the year (1.1) (0.3) (1.4) Exchange adjustments 0.1 - 0.1 At 30 September 2013 1.5 - 1.5

The provision for property relates to dilapidations and obligations under short leasehold agreements on vacant property. The release in the provision during the year relates to an element of surplus office space in the US which was sublet during the year. The vacant property provision is expected to be utilised over the next five years. The dilapidations provision is expected to be utilised on the expiry of property leases.

Provisions for the Company were £nil (2012: £0.3m). These are shown as ‘other’ provisions in the table above and relate to disposals made during 2007 and ongoing commercial dispute resolution.

22. Other non-current liabilities

2013 2012 Group £m £m Other payables 1.5 1.3

Other payables consist mainly of deferred subscription revenue and a deferred property lease liability. Annual Report and Accounts 2013 80 Strategic Report

23. Financial instruments

Financial instruments by category

The Group’s financial assets and financial liabilities are set out below:

Fair value Amortised cost 2013

Loans and Other Total carrying Total fair Derivatives receivables liabilities value value Group Note £m £m £m £m £m Trade receivables net 16 - 14.9 - 14.9 14.9

Other receivables - 2.9 - 2.9 2.9 Financial Review Derivatives 20 0.4 - - 0.4 0.4 Cash and cash equivalents 17 - 4.6 - 4.6 4.6 Total financial assets 0.4 22.4 - 22.8 22.8 Trade payables 18 - - (11.1) (11.1) (11.1) Other liabilities - - (9.6) (9.6) (9.6) Current borrowings 19 - - (11.5) (11.5) (11.5) Non-current borrowings 19 - - - - - Derivatives 20 (0.2) - - (0.2) (0.2) Total financial liabilities (0.2) - (32.2) (32.4) (32.4)

Fair value Amortised cost 2012

Loans and Other Total carrying Total fair Derivatives receivables liabilities value value Group Note £m £m £m £m £m Trade receivables net 16 - 14.4 - 14.4 14.4 Other receivables - 1.6 - 1.6 1.6

Cash and cash equivalents 17 - 8.5 - 8.5 8.5 Corporate Governance Total financial assets - 24.5 - 24.5 24.5 Trade payables 18 - - (10.6) (10.6) (10.6) Other liabilities - - (10.8) (10.8) (10.8) Current borrowings 19 - - (20.9) (20.9) (20.9) Non-current borrowings 19 - - (1.7) (1.7) (1.7) Derivatives 20 (0.4) - - (0.4) (0.4) Total financial liabilities (0.4) - (44.0) (44.4) (44.4)

Total financial liabilities are shown net of unamortised costs which amounted to £0.4m (2012: £0.3m).

The Company’s financial assets and liabilities are set out below:

Fair value Amortised cost 2013

Loans and Other Total carrying Total fair Derivatives receivables liabilities value value Company Note £m £m £m £m £m Other receivables 16 - 43.3 - 43.3 43.3 Total financial assets - 43.3 - 43.3 43.3

Other liabilities 18 - - (113.8) (113.8) (113.8) Financial Statements Overdrafts 19 - - (7.5) (7.5) (7.5) Current borrowings 19 - - (6.6) (6.6) (6.6) Non-current borrowings 19 - - - - - Derivatives 20 (0.2) - - (0.2) (0.2) Total financial liabilities (0.2) - (127.9) (128.1) (128.1) 81 Future plc

Financial statements

23. Financial instruments (continued)

Fair value Amortised cost 2012

Loans and Other Total carrying Total fair Derivatives receivables liabilities value value Company Note £m £m £m £m £m Other receivables 16 - 35.7 - 35.7 35.7 Total financial assets - 35.7 - 35.7 35.7 Other liabilities 18 - - (93.7) (93.7) (93.7) Overdrafts 19 - - (11.9) (11.9) (11.9) Current borrowings 19 - - (18.9) (18.9) (18.9) Non-current borrowings 19 - - (1.7) (1.7) (1.7) Derivatives 20 (0.4) - - (0.4) (0.4) Total financial liabilities (0.4) - (126.2) (126.6) (126.6)

Total financial liabilities are shown net of unamortised costs which amounted to £0.4m (2012: £0.3m).

The fair value is the amount for which a financial instrument could be exchanged between knowledgeable, willing parties. If an active market exists, the market price is applied. If an active market does not exist a discounted cash flow or generally accepted estimation and valuation technique based on market conditions at the balance sheet date is used to calculate an estimated value.

The market value of financial instruments is determined by the use of valuation techniques including estimated discounted cash flows.

Treasury overview The Group uses financial instruments to raise funding for its operations and to manage the financial risks arising from those operations. The agreements governing the principal instruments entered into were approved by the Board.

The principal financing and treasury exposures faced by the Group arise from foreign currencies, working capital management, the financing of capital expenditure and acquisitions, the management of interest rates on the Group’s debt, the investment of surplus cash and the management of the Group’s debt facilities. The Group manages all of these exposures with an objective of remaining within covenant ratios agreed with the Group’s banks and the Group has been in compliance with its covenants during the year. These ratios are disclosed in note 19.

The capital structure of the Group is reviewed regularly by the Board to ensure that the debt/equity ratio of funding remains appropriate for the Group.

In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or sell assets to reduce debt.

Currency and interest rate profile The currency and interest rate profile of the Group’s financial assets and liabilities is shown below:

Financial assets Financial liabilities

Non- Non- Net financial Floating interest Floating Fixed interest (liabilities)/ rate bearing Total rate rate bearing Total assets £m £m £m £m £m £m £m £m At 30 September 2013 Currency: Sterling - 13.6 13.6 (1.6) (5.0) (15.8) (22.4) (8.8) US Dollar 0.1 6.2 6.3 (4.9) - (4.6) (9.5) (3.2) Euro - 0.5 0.5 - - (0.2) (0.2) 0.3 Other - 2.4 2.4 - - (0.3) (0.3) 2.1 Total 0.1 22.7 22.8 (6.5) (5.0) (20.9) (32.4) (9.6)

At 30 September 2012 Currency: Sterling - 15.8 15.8 (15.7) (5.0) (15.4) (36.1) (20.3) US Dollar 0.2 5.2 5.4 (1.9) - (5.9) (7.8) (2.4) Euro - 0.6 0.6 - - (0.4) (0.4) 0.2 Other 0.1 2.6 2.7 - - (0.1) (0.1) 2.6 Total 0.3 24.2 24.5 (17.6) (5.0) (21.8) (44.4) (19.9) Annual Report and Accounts 2013 82 Strategic Report

23. Financial instruments (continued)

Interest rate risk Details of the interest rates on borrowings as at 30 September 2013 are set out in note 19.

The Group’s overall policy on hedging interest rate risk is as follows:

• To the extent that net debt is below £10m there is no requirement to hedge against interest rate fluctuations on the balance of the gross debt.

• To the extent that net debt is above £10m a minimum of 25% of the balance of the gross debt greater than £10m should be hedged.

In applying the above policy, management takes full consideration of cash flow projections to fix the period for which any hedging arrangements are entered into. Financial Review

Details of the Group’s interest rate derivatives at 30 September 2013 are set out in note 20.

For 2013, if interest rates on net borrowings had been on average 0.5% higher/lower with all other variables held constant, the post-tax profit for the year would have decreased/increased by £nil (2012: £0.1m).

There would be no impact on equity excluding retained earnings.

Foreign exchange risk Some of the Group’s activities are carried out in countries outside the United Kingdom where transactions are carried out in that country’s own functional currency. Movements in exchange rates can therefore have a significant impact on the Group’s total cash flows, whilst the translation of the results, assets and liabilities of foreign operations into sterling can have a significant effect on the Group’s reported profits and balance sheet. The main exposures are to movements in the US Dollar and Australian Dollar against sterling, and Canadian Dollar against US Dollar.

The Group’s policy for managing exchange rate risk is summarised as follows:

• Transaction exposure – the Group manages this by ensuring that transactions are denominated in the local functional currency of the operating units wherever possible. Where this is not possible the use of forward contracts to hedge exposure is considered. The use of forward contracts (or any other derivative financial instrument) is subject to authorisation by the Chief Financial Officer. Details of the Group’s forward foreign exchange contracts at 30 September 2013 are set out in note 20.

• Translation exposure – the Group matches currency assets with currency liabilities wherever possible as evidenced by the fact that £4.9m of gross debt is denominated in US dollars. Corporate Governance The following table summarises the Group’s sensitivity to translational currency exposures at 30 September:

2013 currency risks expressed in Currency 1/Currency 2 £m GBP/USD GBP/AUD USD/CAD Reasonable shift 10% 10% 10% Impact on profit after tax if Currency 1 strengthens against Currency 2 (0.3) (0.1) - Impact on profit after tax if Currency 1 weakens against Currency 2 0.3 0.1 - Impact on equity excluding retained earnings if Currency 1 strengthens against Currency 2 0.3 0.1 - Impact on equity excluding retained earnings if Currency 1 weakens against Currency 2 (0.3) (0.1) -

2012 currency risks expressed in Currency 1/Currency 2 £m GBP/USD GBP/AUD USD/CAD Reasonable shift 10% 10% 10% Impact on loss after tax if Currency 1 strengthens against Currency 2 (0.2) (0.1) - Financial Statements Impact on loss after tax if Currency 1 weakens against Currency 2 0.2 0.1 - Impact on equity excluding retained earnings if Currency 1 strengthens against Currency 2 0.2 0.1 - Impact on equity excluding retained earnings if Currency 1 weakens against Currency 2 (0.2) (0.1) - 83 Future plc

Financial statements

23. Financial instruments (continued)

Liquidity risk For the past three years the Group has funded the business largely from cash flows generated from operations and long-term debt. Details of the Group’s borrowings are disclosed in note 19.

The Group monitors and manages the cash for the Group and has maintained committed banking facilities as noted above to mitigate any liquidity risk it may face. If necessary, inter-company loans within the Group meet short-term cash needs. The following table shows the Group’s remaining contractual maturity for financial liabilities and derivative financial instruments. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group is obliged to pay:

Less than Between one Between two Over five one year and two years and five years years Total 30 September 2013 £m £m £m £m £m Trade payables (11.1) - - - (11.1) Other liabilities (8.4) (0.4) (0.6) (0.1) (9.5) Borrowings (12.0) - - - (12.0) Derivatives 0.2 - - - 0.2 Total financial liabilities (31.3) (0.4) (0.6) (0.1) (32.4)

Less than Between one Between two Over five one year and two years and five years years Total 30 September 2012 £m £m £m £m £m Trade payables (10.6) - - - (10.6) Other liabilities (8.3) (0.7) (1.7) (0.1) (10.8) Borrowings (21.2) (1.7) - - (22.9) Derivatives (0.2) (0.2) - - (0.4) Total financial liabilities (40.3) (2.6) (1.7) (0.1) (44.7)

24. Issued share capital

2013 2012 £m £m

Authorised share capital 600,000,000 Ordinary shares of 1p each 6.0 6.0

2013 2012

Number of Number of shares £m shares £m Allotted, issued and fully paid Ordinary shares of 1p each At beginning of year 332,982,172 3.3 328,804,760 3.3 Share scheme exercises 416,655 - 4,177,412 - At end of year 333,398,827 3.3 332,982,172 3.3

During the year 416,655 Ordinary shares with a nominal value of £4,167 were issued by the Company for a total cash commitment of £30,170 pursuant to share scheme exercises as detailed in note 25.

In 2012 4,177,412 Ordinary shares with a nominal value of £41,774 were issued by the Company for a total cash commitment of £298,368 pursuant to share scheme exercises as detailed in note 25. Annual Report and Accounts 2013 84 Strategic Report

25. Share-based payments

The income statement charge for the year for share-based payments was £0.3m (2012: £0.2m). This charge has been included within administration expenses.

These charges arise when employees are granted awards under the Group’s share option schemes, performance share plan (PSP), or deferred annual bonus scheme (DABS), and when employees are granted awards by the trustees of The Future Network plc 1999 Employee Benefit Trust (EBT). The charge equates to the fair value of the award and has been calculated using the Monte Carlo and Black-Scholes models, using the most appropriate model for each scheme. Assumptions have been made in these models for expected volatility, risk-free rates and dividend yields.

The Company has not applied IFRS 2, ‘Share-based Payment’, retrospectively and therefore it has only been applied to options granted after 7 November 2002 which had not vested before 1 January 2005. Financial Review A reconciliation of movements in share options and other share incentive schemes is shown below:

2013 2013 2012 2012 Number of Weighted average Number of Weighted average options/awards exercise price options/awards exercise price Outstanding at the beginning of the year 10,185,502 £0.025 22,313,657 £0.058 Granted 7,538,279 £0.080 7,096,009 £0.000 Share awards exercised – new share issues (282,255) £0.059 (4,177,412) £0.071 Share awards exercised – shares awaiting issue - - (134,400) £0.100 Lapsed (3,660,572) £0.023 (14,912,352) £0.049 Outstanding at 30 September 13,780,954 £0.055 10,185,502 £0.025 Exercisable at 30 September 482,297 £0.155 34,560 £0.100

The weighted average share price at the date of exercise of share options and other share incentive awards during the year was £0.157 (2012: £0.114).

For options and other share incentive schemes outstanding at 30 September the weighted average exercise prices and remaining contractual lives are as follows:

Weighted average remaining Number of options/awards Weighted average exercise price contractual life in years Corporate Governance 2013 2012 2013 2012 2013 2012 Sharesave Plan December 2008 - 34,560 - £0.100 - - April 2010 481,254 675,628 £0.155 £0.155 - 1 December 2010 834,530 898,892 £0.165 £0.165 1 2 December 2012 3,906,197 - £0.140 - 3 - PSP November 2009 - 522,815 - - - - December 2010 224,221 435,679 - - - 1 January 2012 4,944,444 6,100,000 - - 1 2 December 2012 1,583,333 - - - 2 - DABS November 2009 1,043 180,448 - - - - December 2010 326,462 420,650 - - - 1 January 2012 876,726 916,830 - - 1 2 December 2012 602,744 - - - 2 - Total outstanding at 30 September 13,780,954 10,185,502 £0.055 £0.025 2 2 Financial Statements 85 Future plc

Financial statements

25. Share-based payments (continued)

The fair value per share for grants made during the year and the assumptions used in the calculation are as follows:

2013 2012

DABS PSP Sharesave DABS PSP Grant date 17/12/12 17/12/12 20/12/12 18/01/12 18/01/12 Share price at grant date £0.180 £0.180 £0.183 £0.088 £0.088 Exercise price - - £0.140 - - Vesting period (years) 3 3 3 3 3 Expected volatility 55% 55% 55% 57% 57% Option life (years) 3 3 3 3 3 Expected life (years) 3 3 3 3 3 Risk-free rate 0% 0% 1% 1% 1% Dividend yield 0% 0% 0% 13% 13% TSR correlation - 6% - - 5% Fair value £0.180 £0.159 £0.083 £0.060 £0.048 Fair value – EPS element - £0.180 - - £0.060 Fair value – TSR element - £0.138 - - £0.037

Notes: 1. The expected volatility is based on Future’s historical volatility, averaged over a period equal to the expected life, where possible. 2. The Group has used the Black-Scholes model to value instruments with non-market-based performance criteria such as earnings per share. For instruments with market-based performance criteria, notably total shareholder return, the Group has used a Monte Carlo model to determine the fair value. The Black-Scholes model has been used to value all options with the exception of 50% of the PSP grants which have market-based performance criteria; the Monte Carlo model has been used to value these awards.

Future plc operates two share option schemes being:

- The Future Network plc UK Inland Revenue Approved Sharesave Plan 2000 (2000 Sharesave Plan)

- The Future plc 2010 Approved Sharesave Plan (2010 Sharesave Plan)

As at 30 September 2013, options or awards had been granted under both of the above schemes but were only outstanding under the 2010 Sharesave Plan.

The 2000 Sharesave Plan and the 2010 Sharesave Plan (the Sharesave Plans) Under the Sharesave Plans the option entitlement granted to participating employees is linked to the monthly contributions which such employees have agreed to pay into the Sharesave Plans (up to a maximum amount of £250 per month). The options granted under the Sharesave Plans vest on the third anniversary of the grant of such options. Where legal and regulatory constraints permit, the Company uses its discretion to offer options granted under the Sharesave Plans at a discount to the market price in force at the date of the invitation being made.

The Board exercised its discretion in November 2012 to issue invitations to participate in the Company’s 2010 Sharesave Plan to eligible employees in the UK. The option price represented a 20% discount to the market price at the time of the invitation.

Other share-based payments No further share options are to be granted. Instead, the Group has put into place a number of alternative share incentive schemes.

Performance Share Plan (PSP) The PSP is a share-based incentive scheme open to the executive Directors, based on a percentage of the participant’s salary. Awards under this scheme are subject to stretching performance criteria measured against both earnings per share (EPS) and total shareholder return (TSR). Subject to the participant’s continued employment within the Group, awards will vest three years after the date of grant assuming that the following performance criteria are achieved:

• A maximum of 50% of an award will vest if the Group’s growth in adjusted EPS is equal to RPI plus 8%, 0% will vest if the Group’s growth in adjusted EPS is equal to RPI plus 3%, and vesting will be on a pro rata straight-line basis between the two. If growth in the Group’s adjusted EPS is less than RPI plus 3%, none of that 50% of the award will vest.

• The remaining 50% of the award will vest if the Company’s TSR performance, compared to a group of similar companies, places it in the top quintile as against the comparator companies. If the Company’s TSR performance is median, 12.5% of the award will vest, and vesting will be on a pro rata straight-line basis between the two points. If the Company’s performance is below median, none of that 50% of the award will vest. The comparator groups of companies are as disclosed on page 43 of this Annual Report.

Grants were made under the PSP in January 2012 and December 2012.

Annual Report and Accounts 2013 86 Strategic Report

25. Share-based payments (continued)

Deferred Annual Bonus Scheme (DABS) The DABS is a share-based incentive scheme, open to senior management across the Group. The maximum value of any shares granted under the DABS to any one participant will be an additional amount which is equal to a fixed percentage of that eligible participant’s annual cash bonus actually received or payable for the previous financial year. The number of shares over which an award is to be granted to each participant will be calculated by reference to the market value of an Ordinary share in the Company on the date of the award. The shares awarded under the DABS will be issued or transferred to the participant three years after the date of the award, subject only to the employee remaining in the employment of the Group throughout the three-year period.

Grants were made under the DABS in January 2012 and December 2012.

26. Other reserves Financial Review

Treasury reserve The treasury reserve represents the cost of shares in Future plc purchased in the market and held by the EBT to satisfy awards made by the trustees.

Group Group 2013 2012 £m £m At beginning and end of year (0.3) (0.3)

The 1,426,848 (2012: 1,426,848) shares held by the EBT represent 0.4% (2012: 0.4%) of the Company’s issued share capital. The treasury reserve is non-distributable.

Cash flow hedge reserve The cash flow hedge reserve represents the net gains or losses on effective cash flow hedging instruments.

Group Company Group Company 2013 2013 2012 2012 £m £m £m £m At 1 October - - (0.1) - Net fair value gains 0.2 - 0.1 - At 30 September 0.2 - - - Corporate Governance

Merger reserve The merger reserve of £109.0m (2012: £109.0m) arose following the 1999 Group reorganisation and is non-distributable.

27. Pensions

The Group operates a defined contribution scheme for employees resident in the United Kingdom.

In the US, the Group operates a section 401(K) profit sharing defined contribution plan in respect of pensions, which covers substantially all Future US employees. The section 401(K) plan allows employees to invest in 29 funds run by T. Rowe Price, but the employees, not the employer, have complete control over which funds they invest in, although they have no control over the stocks owned by the funds.

During the year, £1.2m (2012: £0.9m) contributions were made to these plans.

Financial Statements 87 Future plc

Financial statements

28. Commitments and contingent liabilities

(a) Operating lease commitments At 30 September 2013, the Group had the following total future lease payments under non-cancellable operating leases:

Land and Total Land and Total buildings Other 2013 buildings Other 2012 £m £m £m £m £m £m Within one year 4.3 0.2 4.5 4.0 0.2 4.2 Between one and five years 9.9 0.1 10.0 12.0 0.2 12.2 After five years 8.1 - 8.1 9.3 - 9.3 Total 22.3 0.3 22.6 25.3 0.4 25.7

Future minimum sub-lease receipts expected under non-cancellable subleases at 30 September 2013 total £3.9m (2012: £3.0m).

During the year, £3.2m (2012: £4.1m) was recognised in the income statement in respect of operating lease rental payments and £0.7m (2012: £0.6m) was recognised in respect of sub-lease receipts.

The Group leases various offices under non-cancellable operating lease agreements. The leases have various terms, escalation clauses and renewal rights. The Group also leases other equipment under non-cancellable operating lease agreements.

(b) Contingent liabilities There are no contingent liabilities expected to result in a material loss for the Group.

29. Related party transactions

The Group had no material transactions with related parties in 2013 or 2012 which might reasonably be expected to influence decisions made by users of these financial statements.

During the year, the Company had management charges receivable of £0.1m (2012: £nil) from subsidiary undertakings. The outstanding balance at 30 September 2013 was £0.1m (2012: £nil).

30. Principal subsidiary undertakings

The principal subsidiary undertakings at 30 September 2013 are shown below. A full list of subsidiaries is available at the Company’s registered office. All subsidiaries are included in the consolidation. Shares of those companies marked with an * are indirectly owned by Future plc through an intermediate holding company.

Country of Nature of Company name incorporation business Holding % Class of shares Subsidiaries Future Publishing Limited* England and Wales Publishing 100 £1 Ordinary shares Future US, Inc* USA (State of California) Publishing 100 Not applicable Annual Report and Accounts 2013 88 Strategic Report

Normalised results (unaudited)

2013 2012 Note £m £m Revenue 1,2 106.9 103.6

Operating profit before exceptional items (EBITE) 1,2 3.5 4.0

Adjusted earnings per 1p Ordinary share (normalised) Financial Review

2013 2012 Note pence pence Adjusted basic earnings per share 2 0.3 0.4

Normalised results are presented to better reflect the current size and structure of the business, and give a better indication of the performance of the ongoing business. The normalised results exclude revenues and costs of activities closed or divested between 1 October 2011 and 30 September 2013, but include any new activities launched or acquired in that period.

Adjusted earnings per share are based on normalised results but exclude exceptional items and related tax effects.

Notes to the normalised results

1. Normalised segmental reporting 2. Reconciliation of statutory results to normalised results a) Revenue by segment a) Reconciliation of statutory revenue to normalised revenue

2013 2012 2013 2012 £m £m £m £m

UK 87.6 85.4 Statutory revenue 112.3 123.5 Corporate Governance US 20.1 18.9 Adjustment: UK closed and divested activities (4.6) (13.7) Revenue between segments (0.8) (0.7) Adjustment: US closed and divested activities (0.8) (6.2) Total normalised revenue 106.9 103.6 Normalised revenue 106.9 103.6

b) EBITE by segment b) Reconciliation of statutory operating profit before exceptional items (EBITE) to normalised EBITE

2013 2012 £m £m 2013 2012 £m £m UK 5.6 6.8 US (2.1) (2.8) EBITE 4.7 6.8 Total normalised EBITE 3.5 4.0 Adjustment: UK closed and divested activities (0.9) (2.9) Adjustment: US closed and divested activities (0.3) 0.1 Normalised EBITE 3.5 4.0 Additional analysis of the Group’s normalised revenue by type is set out below: c) Revenue by type c) Reconciliation of statutory basic earnings per share to normalised adjusted basic earnings per share

2013 2012 Financial Statements £m £m 2013 2012 pence pence Circulation 61.1 60.1 Advertising 33.2 31.6 Basic earnings per share 1.3 0.1 Customer publishing 7.0 7.2 UK closed and divested activities (0.8) (1.0) Licensing, events and other 5.6 4.7 US closed and divested activities (0.1) - Total normalised revenue 106.9 103.6 Exceptional items - 1.4 Tax effect of the above adjustments (0.1) (0.1) Normalised adjusted basic earnings per share 0.3 0.4 89 Future plc

Notice of Annual General Notice of Annual General Meeting Meeting

This Notice of Meeting is important and requires your immediate attention.

If you are in any doubt as to what action you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other independent adviser authorised under the Financial Services and Markets Act 2000.

If you have sold or otherwise transferred all your shares in Future plc, please forward this notice, together with the accompanying documents, as soon as possible either to the purchaser or transferee or to the person who arranged the sale or transfer so that they can pass these documents to the purchaser or transferee.

Notice of Annual General Meeting

Notice is hereby given that the fifteenth Annual General Meeting of Future plc will be held on Monday 3 February 2014 at Future’s Headquarters, 2 Balcombe Street, London NW1 6NW at 12 noon at which the following resolutions numbered 1 to 14 will be proposed as ordinary resolutions, and resolutions numbered 15 to 17 will be proposed as special resolutions.

Ordinary resolutions

1. To receive and adopt the audited financial 12. To authorise the Directors to determine statements of the Company for the financial the remuneration of the auditors of year ended 30 September 2013 and the the Company. reports of the Directors and the auditors. 13. T hat, in substitution for any existing 2. To approve the Remuneration authority, the Directors be and are hereby implementation report as set out in pages generally and unconditionally authorised 42 to 47 of the Annual Report of the in accordance with section 551 of the Company for the financial year ended Companies Act 2006 (the ‘Act’) to exercise 30 September 2013. all the powers of the Company to allot shares in the Company and to grant rights 3. To approve the Remuneration policy report to subscribe for, or to convert any security as set out in pages 48 to 51 of the Annual into, shares in the Company: Report of the Company for the three year period commencing on 1 October 2013. 13.1 in connection with an offer by way of a rights issue (comprising equity securities as 4. To declare a final dividend of 0.2 pence defined by section 560 of the Act), up to an per Ordinary share. aggregate nominal amount of £2,222,000 (such amount to be reduced by the nominal 5. To elect as a Director Zillah amount of any relevant securities allotted Byng-Maddick. under paragraph 13.2 below):

6. To re-elect as a Director Peter Allen. (a) to holders of Ordinary shares in proportion (as nearly as may be practicable) to their 7. To re-elect as a Director Mark Wood. respective holdings; and

8. To re-elect as a Director Seb Bishop. (b) to holders of any other equity securities as required by the rights of those securities 9. To re-elect as a Director Mark Whiteling. or as the Directors otherwise consider necessary, but subject to such exclusions 10. To re-elect as a Director Manjit or other arrangements as the Board may Wolstenholme. deem necessary or expedient in relation to treasury shares, fractional entitlements, 11. To reappoint PricewaterhouseCoopers LLP, record dates, legal or practical problems Chartered Accountants and Registered in or under the laws of any territory or the Auditors, as auditors of the Company to requirements of any regulatory body or hold office until the conclusion of the next stock exchange; and General Meeting at which accounts are laid before the Company. Strategic Report Financial Review Corporate Governance Financial Statements 90

p T t a t u t purchase shares under the authority conferred by this resolution prior to expiry of such authority, which may be executed wholly or partly after expiry of this and authority; shares any Ordinary shares purchased 16. resolution this under Annual General Meeting, may be called on not less clear than 14 days’ notice. expenses) which may be paid for such Ordinary shares shall not be more than the higher of: of the middle market quotations for such Ordinary shares as derived from the London Stock Exchange’s Daily Official List for the five business days immediately preceding the date on which the Ordinary shares are purchased; and revoked, this authority shall expire at the conclusion of the next Annual General Meeting following the date of this resolution if earlier, or, March on 31 2015; of the Buy-back and Stabilisation 2003; Regulation

(f) ursuant to the Articles to hold as treasury 17. hat ageneral meeting, other than an (c) he maximum price (exclusive of (i) n amount equal to above 5% the average (ii) he amount stipulated by Article 5(1) (d) nless previously renewed, varied or (e) he Company may make acontract to and Company Secretary Company and 2013 December 13 On behalf of the Board Zillah Byng-Maddick Chief Financial Officer

t t T t a t Ordinary shares which may be purchased be limited to 33,340,000 (representing just under of the 10% issued share capital of the Company December as at 13 2013); payable per Ordinary share be one penny; unconditionally permitted to make market purchases (within the meaning of section of the693(4) Act) of Ordinary shares of one penny each in the capital of the Company on such terms and in such manner as the Directors may think fit that: provided territory; and to sub-paragraph above) of equity (a) securities up to an aggregate nominal amount of (representing £166,700 just under of 5% the issued share capital of conclusion of the Company’s next Annual General Meeting if earlier, or, March on 31 that (save the2015 Company may before the expiry of such authoritymake an offer or agreement which would or might require equity securities to be allotted after its expiry and the Directors may allot equity securities pursuant to such an offer or agreement as if the power hereby expired). not conferred had connection with an offer by of way a rights issue, open offer or pre-emptive offer to holders of Ordinary shares on the register of members of the Company on a date fixed by the Directors where the equity securities to be allotted to existing shareholders shall be in proportion (as nearly as to may their be) respective holdings and, if the rights attaching to any other equity securities so provide, in favour of the holders of those equity securities in accordance with such rights, but subject to such exclusions or other arrangements as the Directors consider necessary or expedient in connection with Ordinary representing shares fractional entitlements or on account of either legal or practical problems arising in connection with the laws of any territory, or of the requirements of any generally recognised regulatory body or stock exchange in any the Company December as at 13 2013)

(a) he maximum aggregate number of (b) he minimum price (exclusive of expenses) 16. hat the Company be generally and (b) he allotment (otherwise than pursuant nd such authority shall expire at the (a) (a) he allotment of equity securities in

T m m T i 13, the13, Directors be and are hereby authorised pursuant to Article 3.2 and section 570 of the Act to allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authority conferred upon it for the purposes of section of the 551 Act by resolution provided 13 that such authority shall be limited to: £50,000 in total, during the period beginning with the date of the passing organisations other than political parties not exceeding £50,000 in total; and following ending and resolution this of the conclusion of the Company’s next Annual General Meeting if earlier, or, on March31 2015. and/or independent election candidates not exceeding £50,000 in total; introduced by sections 363 to 365 of the Act of the terms used in (ii) (i), and (iii) below (which for the purposes of this resolution have the meanings given by the theAct), Company and its subsidiaries at any time during the period for which the resolution is effective be authorised together to: nominal amount of £1,111,000 (such nominal amount of £1,111,000 amount to be reduced by the nominal amount of any equity securities allotted under paragraph above in excess 13.1 of at any time or times during £1,111,000), the period beginning on the date of the passing of this resolution and ending following the conclusion of the Company’s next earlier, if Annual Meeting or, General Marchon 31 (unless 2015 previously revoked or varied by the Company in General Meeting) save that the Company may before expiry of this authority make an offer or agreement which would or might securities allotted be to relevant require after its expiry and the Directors may such to pursuant securities relevant allot an offer or agreement as if the authority expired. not conferred had hereby in

Special resolutions 15. hat, subject to the passing of resolution (iii) exceeding political not cur expenditure (ii) ake political donations to political (i) ake political donations to political parties 14. hat, following the broader definitions 13.2 n any other case, up to an aggregate AnnualReport and Accounts 2013 91 Future plc

Notice of Annual General Notes Meeting

Further information about the AGM Electronic appointment of proxies Eligible shareholders

1. Information regarding the meeting, 4. As an alternative to completing the 7. The Company, pursuant to Regulation including the information required by printed proxy form, you may appoint a 41 of The Uncertificated Securities section 311A of the Act, is available from: proxy electronically by visiting the Regulations 2001, specifies that only those www.futureplc.com/investors. following website: members on the register of the Company www.investorcentre.co.uk/eproxy as at 6pm on Thursday 30 January 2014 or, if this meeting is adjourned, in the Attendance at the AGM You will be asked to enter the Control register of members 48 hours before the Number, the Shareholder Reference time of any adjourned meeting, shall be 2. If you wish to attend the meeting in Number (SRN) and PIN as printed on your entitled to attend and vote at the meeting person, please bring the attendance card proxy form and to agree to certain terms in respect of the number of shares attached to your form of proxy and arrive at and conditions. To be effective, electronic registered in their name at that time. Future’s Headquarters in sufficient time for appointments must have been received by Changes to entries on the Register after registration. Directions will be provided at the Company’s Registrars not later than 6pm on Thursday 30 January 2014, or, if reception and the venue is accessible for 12 noon on Thursday 30 January 2014. this meeting is adjourned, in the register of the disabled. Appointment of a proxy does members 48 hours before the time of any not preclude a member from attending the adjourned meeting, shall be disregarded meeting and voting in person. If a member Number of shares in issue in determining the rights of any person to has appointed a proxy and attends the attend or vote at the meeting. meeting in person, the proxy appointment 5. As at the close of business on will automatically be terminated. 13 December 2013 (being the last business day prior to the publication of Indirect investors this notice) the Company’s issued share Appointment of proxies capital consisted of 333,476,541 8. Any person to whom this notice is sent who Ordinary shares of one penny each. is a person that has been nominated under 3. Any member entitled to attend and vote Each Ordinary share carries one vote. section 146 of the Act to enjoy information at the meeting may appoint one or more There are no shares held in treasury. rights (a ‘Nominated Person’) does not proxies to attend, speak and vote in their The total number of voting rights in the have a right to appoint a proxy. However, place. A member may appoint more than Company is therefore 333,476,541. a Nominated Person may, under an one proxy provided that each proxy is agreement with the registered shareholder appointed to exercise the rights attached by whom they were nominated (a ‘Relevant to a different share or shares held by Documents available for inspection Member’), have a right to be appointed (or to that shareholder. If you appoint multiple have someone else appointed) as a proxy proxies for a number of shares in excess 6. Printed copies of the service contracts of for the meeting. Alternatively, if a Nominated of your holding, the proxy appointments the Company’s Directors and the letters Person does not have such a right, or does may be treated as invalid. A proxy need of appointment for the non-executive not wish to exercise it, they may have a not be a member of the Company. A Directors will be available for inspection right under any such agreement to give proxy card is enclosed. To be effective, during usual business hours on any instructions to the Relevant Member as to proxy cards should be completed in weekday (Saturdays, Sundays and public the exercise of voting rights. A Nominated accordance with these notes and the holidays excluded) at the headquarters of Person’s main point of contact in terms of notes to the proxy form, signed and the Company at their investment in the Company remains returned so as to be received by the the Relevant Member (or, perhaps, the Company’s Registrars: 2 Balcombe Street, Nominated Person’s custodian or broker) London NW1 6NW, and the Nominated Person should continue Computershare Investor Services plc, to contact them (and not the Company) The Pavilions, Bridgwater Road, and at the Company’s registered office at regarding any changes or queries relating Bristol BS99 6ZY to the Nominated Person’s personal details 30 Monmouth Street, and their interest in the Company (including not later than 12 noon on Thursday Bath BA1 2BW, any administrative matters). The only 30 January 2014 being two business exception to this is where the Company days before the time appointed for the including on the day of the meeting from expressly requests a response from the holding of the meeting. If you submit 11.45am until its completion. Nominated Person. more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence. Strategic Report Financial Review Corporate Governance Financial Statements 92 U a t i U W Company must answer any question you ask relating to the business being dealt with at the meeting unless: unduly with the preparation for the meeting or involve the disclosure of confidential information; a website in the form of an answer to a question; or Company or the good order of the meeting that the question be answered. or members meeting the qualification criteria set out at below, note may, 18 subject to conditions set out at note 19, require the Company to give to members notice of a resolution which may properly be moved and is intended to be moved at meeting. that company, any proxy form, amendment or revocation must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the documents are signed a duly (or certified copy of such power of authority) must be included. A corporate member can appoint one or corporatemore may representatives who exercise, on its behalf, all its powers as a member provided that no more than one powerscorporate representative exercises over the same share. purports to appoint a proxy, only the appointment submitted by the member whose name appears first on the register will be accepted. I

Questions at the AGM Questions at the 14. nder section of the Act, 319A the (a) interfere question the would nswering (b) he answer has already been given on (c) t is undesirable in the interests of the right to require circulation of Members’ AGM a resolution to be proposed at the 15. nder section 338 of the Act, amember Corporate members 12. n the case of member a which is a Joint holders 13. here more than one of the joint holders

C T B N I I T T proxy appointments (see above) also apply in relation to revocations; any revocation received after the relevant disregarded. be will deadline is submitted, the appointment received received appointment the submitted, is last before the deadline for the receipt of precedence. take will proxies signed letter clearly stating a member’s intention to revoke a proxy appointment must be sent by post or by hand to the Company’s Registrars: needs to submit a new proxy appointment using the methods set out above. Note that the deadlines for receipt of proxy appointments (see above) also apply in relation to amended instructions; appointment proxy amended any received after the relevant deadline will be disregarded. Where a member has appointed a proxy using the paper proxy form and would like to change the form, such another instructions using appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) such take(s)) action as shall be necessary toensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. a CREST Proxy Instruction in the circumstances set out in Regulation of the Uncertificated35(5)(a) Securities 2001. Regulations that member should contact the Registrars on +44 707 1443. (0)870

omputershare Investor Services plc, he Pavilions, Bridgwater Road, ristol BS99 6ZY. ote that the deadlines for receipt of f more than one valid proxy appointment Revoking a proxy 11. n order to revoke aproxy instruction, a Amending a proxy 10. o change aproxy instruction, amember he Company may treat as invalid

C I C their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system apply therefore limitations will and timings in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned if to take (or, the CREST member is a CREST personal member or sponsored member or has instruction made using the CREST service to be valid, the appropriate CREST message ‘CREST Proxy (a Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of appointment the constitutes it whether of a proxy or to an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID 3RA50) noon by 12 on Thursday 30 January if or, 2014, the meeting is adjourned, not less than 48 hours before the time fixed for the adjourned meeting. For this purpose, the time of receipt will be taken to be the time applied timestamp the by determined (as to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by AfterCREST. this time any change of instructions to proxies appointed through CREST should be communicated to the means. other appointee through a proxy or proxies throughthe CREST electronic proxy appointment service may do so forthe meeting and any adjournment(s) thereof by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.

REST members and, where applicable, n order for aproxy appointment or through CREST 9. 9. REST members who wish to appoint Appointment of proxies Appointment of proxies AnnualReport and Accounts 2013 93 Future plc

Notice of Annual General Meeting

Members’ right to have a matter of Members’ qualification criteria (ii) sent either: by post to business dealt with at the AGM 18. In order to be able to exercise the Company Secretary, 16. Under section 338A of the Act, a member members’ rights set out in notes 15 to Future plc, or members meeting the qualification 17 above the relevant request must Beauford Court, criteria set out at note 18 below, may, be made by: 30 Monmouth Street, subject to the conditions set out at note Bath BA1 2BW; 19, require the Company to include in the (a) a member or members having a right to business to be dealt with at the AGM a vote at the AGM and holding at least 5% or by fax to +44(0)1225 732266 matter (other than a proposed resolution) of total voting rights of the Company; or marked for the attention of the which may properly be included in the Company Secretary; and business (a matter of business). (b) at least 100 members having a right to vote at the AGM and holding, on average, at (e) in the case of a request made in electronic least £100 of paid up share capital. form, such request must: Website publication of any audit concerns (i) state your full name and address; and Conditions 17. Pursuant to Chapter 5 of Part 16 of the (ii) be sent to [email protected]. Act, where requested by a member or 19. The conditions are that: Please state ‘AGM’ in the subject line of members meeting the qualification criteria the email. You may not use this electronic set out at note 18 below, the Company (a) any resolution must not, if passed, address to communicate with the must publish on its website a statement be ineffective (whether by reason of Company for any other purpose. setting out any matter that such members inconsistency with any enactment or the propose to raise at the AGM relating to Company’s constitution or otherwise); the audit of the Company’s accounts (including the auditors’ report and the (b) the resolution or matter of business must conduct of the audit) that are to be laid not be defamatory of any person, frivolous before the AGM. or vexatious;

Where the Company is required to publish (c) the request: such a statement on its website: (i) may be in hard copy form or in (a) it may not require the members making electronic form; the request to pay any expenses incurred by the Company in complying (ii) must identify the resolution or the matter of with the request; business of which notice is to be given by either setting it out in full or, if supporting (b) i t must forward the statement to the a resolution/matter of business sent by Company’s auditors no later than the time another member, clearly identifying the the statement is made available on the resolution/matter of business which is Company’s website; and being supported;

(c) the statement may be dealt with as part of (iii) in the case of a resolution, must be the business of the AGM. accompanied by a statement setting out the grounds for the request; The request: (iv) must be authenticated by the person or (d) may be in hard copy form or in electronic persons making it; and form and must be authenticated by the person or persons making it (see note (v) must be received by the Company not 19(d) and (e) below); later than six weeks before the date of the AGM; (e) should either set out the statement in full or, if supporting a statement sent (d) in the case of a request made in hard copy by another member, clearly identify the form, such request must be: statement which is being supported; and (i) signed by you and state your full name and (f) must be received by the Company at least address; and one week before the AGM. Strategic Report Financial Review Corporate Governance Financial Statements 94

E E S

Bristol Financial calendar 8AE S13 Announcement annual results of 22 November 2013 General MeetingAnnual 3 February 2014 end Half-year March31 2014 Announcement interim results of May 2014 year-endFinancial 30 September 2014 Advisers Independent auditors LLP PricewaterhouseCoopers auditors and accountants Chartered Great31 George Street Bristol 5QD BS1 Broker Numis Securities Ltd Paternoster Square10 London Principal bankers Barclays Bank plc C4M 7LT Place Churchill 1 London Solicitors Norton Rose Fulbright LLP 5HP 14 3 More London Riverside London Registrars Computershare Investor Services plc 2AQ E1 Pavilions The Bridgwater Road

or by completing the

0800 111 6768 N

C www.fca.org.uk/register R www.fca.org.uk/consumers/scams/ I the before FCA getting involved by visiting calling fraud reporting form on the website FCA at: investment-scams/share-fraud-and- boiler-room-scams/reporting-form

Headquarters Balcombe Street 2 London +44Tel (0)20 7042 4000 www.futureplc.com 6NWW1 Registered office Future plc Beauford Court Monmouth Street 30 Bath 442244 +44Tel (0)1225 2BW A1 Company registration number 3757874 Wales and England Registeredin Offices Directors Peter Allen Chairman Mark Wood Chief Executive Zillah Byng-Maddick Chief Financial Officer Secretary Company and Wolstenholme Manjit independentSenior Director non-executive Seb Bishop Director Non-executive Mark Whiteling Director Non-executive • heck that they are properly authorised by • eport the matter to the either FCA by • f the calls persist, hang up. If you deal with an unauthorised firm, you will not be eligible toreceive payment under the Financial Services Compensation Scheme. Details of any share dealing facilities that the Company endorses will be included in mailings.company More detailed information on this or similar activity can be found at www.moneyadviceservice.org.uk.

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• ake sure you get the correct name of the ‘boiler room’ scams ‘boiler room’ In recent years, many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas-based ‘brokers’ who target UK shareholders, offering to sell them what often turn out to be worthless or high- risk shares in US or UK investments. These operations are commonly known as ‘boiler rooms’. These ‘brokers’ can be very persistent and extremely persuasive, and a 2006 survey by the Financial Services Authority (FSA) reported that the average amount lost by investors is around £20,000. It is not just the novice investor that has been duped in this many way; of the victims had been successfully investing for several years. Shareholders are advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports. If you receive any unsolicited investment advice: Warning to shareholders – Warning The share register is by law a publicdocument. limit theTo receipt of mail from other Mailing the with register please organisations, Preference Service, by visiting www.mpsonline.org.uk/mpsr/. Unsolicited mail To registerTo for the service, go to www.investorcentre.co.uk. Our Registrar, Computershare, has a service to provide shareholders with online internet access to details of their shareholdings. The service is free, secure and easy to use. Online information – www.investorcentre.co.uk Bristol +44 1443 707 (0)870 Tel: Shareholders should contact the Registrar, 8AE S13 connection changes in with Computershare, of address, lost share certificates, transfers of shares and bank mandate forms to enable dividends. of payment automated The Company’s share register is maintained by: Computershare Investor Services plc Pavilions The Bridgwater Road Registrar and transfer office Registrar and transfer For enquiries of a general nature regarding the Company and and Company the regarding nature a general of enquiries For Byng- Zillah contact please enquiries relations investor for visit or Headquarters, Company’s the at Maddick www.futureplc.com and select the investor relations section. relations investor the select and www.futureplc.com

AnnualReport and Accounts 2013 Investor information Investor Contacts Future plc Future US, Inc. Headquarters 4000 Shoreline Court 2 Balcombe Street Suite 400 London South San Francisco NW1 6NW CA 94080 United Kingdom USA Tel +44 (0)20 7042 4000 Tel +1 650 872 1642

Registered office Future Publishing Beauford Court (Overseas) Ltd 30 Monmouth Street Suite 3, Level 10 Bath 100 Walker Street BA1 2BW North Sydney United Kingdom NSW 2060 Tel +44 (0)1225 442244 Australia Tel +61 2 9955 2677 www.futureplc.com

Future Publishing Ltd Headquarters 2 Balcombe Street London NW1 6NW United Kingdom Tel +44 (0)20 7042 4000

Registered office Beauford Court 30 Monmouth Street Bath BA1 2BW United Kingdom Tel +44 (0)1225 442244