The FTSE 250 and their pension disclosures

Transcription

1 JLT EMPLOYEE BENEFITS The FTSE 250 and their pension disclosures A quarterly report from JLT EMPLOYEE BENEFITS as at 30 JUNE 2013 In association with

2 Executive Summary The total deficit in FTSE 250 pension schemes at 30 June 2013 is estimated to be 3 billion. This is an improvement of 5 billion from the position 12 months ago. Only 60 FTSE 250 companies are still providing more than a handful of current employees with DB benefits (i.e. ignoring companies who are incurring ongoing DB service costs of less than 1% of total payroll). Of these, only 12 companies (i.e. just 5% of the FTSE 250) are still providing DB benefits to a significant number of employees (defined as incurring ongoing DB service cost of more than 5% of total payroll). There continues to be significant funding of pension deficits and this at a time when most companies have precious little spare cash. Last year saw total deficit funding of 1.2 billion, down from 1.6 billion the previous year. Phoenix Group led the way with a deficit contribution of 57 million, but 37 other FTSE 250 companies also reported significant deficit funding contributions in their most recent annual report and accounts. The significant decline in ongoing DB pensions continues. We estimate that after allowing for the impact of changes in assumptions and market conditions, the underlying reduction in ongoing DB pension provision is almost 20% in the last 12 months alone. The average pension scheme asset allocation to bonds is 55%, an increase on last year s figure of 54%. This compares to 42% five years ago. But this disguises some significant changes. In 15 companies, pension scheme asset allocation to bonds has changed by more than 10%. There are a significant number of FTSE 250 companies where the pension scheme represents a material risk to the business. Fourteen FTSE 250 companies have total disclosed pension liabilities greater than their equity market value. For FirstGroup, total disclosed pension liabilities are almost ten times their equity market value. Only 24 companies disclosed a pension surplus in their most recent annual report and accounts; 115 companies disclosed pension deficits. However, we estimate that 41 companies would disclose a surplus if they had a year-end of 30 June In the last 12 months, the total disclosed pension liabilities of the FTSE 250 companies have increased from 63 billion to 65 billion. A total of 14 companies have disclosed pension liabilities of more than 1 billion, the largest of which is Invensys with disclosed pension liabilities of 6.1 billion. A total of 162 companies have disclosed pension liabilities of less than 100 million, of which 109 companies have no defined benefit pension liabilities. If pension liabilities were measured on a risk-free basis rather than using a AA bond discount rate, the total disclosed pension liabilities of the FTSE 250 would increase from 65 billion to around 85 billion, and the total deficit at 30 June 2013 would be over 20 billion. Published in association with J.P. Morgan Cazenove is a marketing name for the UK investment banking businesses [and EMEA cash equities and equity research businesses] of JPMorgan Chase & Co. and its subsidiaries. J.P. Morgan provides corporate and institutional clients with a wide range of services from sales and research to corporate broking and financial advice. In the UK, J.P. Morgan Cazenove is corporate broker to more companies in the FTSE 100 and FTSE 250 than any other bank. J.P. Morgan Cazenove equity research covers approximately 950 stocks across 40 sectors in Europe. Our stock coverage is complemented by a diverse set of strategy teams, including equity, derivatives, small and mid-caps, quant, accounting and valuation, investment companies, and pensions. J.P. Morgan Cazenove s European research team holds top-five positions across all industry sectors in Institutional Investor s 2013 surveys. Charles Cowling JLT Employee Benefits charles_cowling@jltgroup.com The appendix at the end of this report contains a full list of all the FTSE 250 companies analysed and their relevant pension disclosures. John Breedon JLT Employee Benefits john_breedon@jltgroup.com The FTSE 250 June

3 Position The overall funding position of pension schemes of FTSE 250 companies has improved over the year covered by their latest annual report and accounts. Including all pension arrangements, both UK and overseas, whether funded or unfunded, the FTSE 250 companies with the best-funded pension schemes overall were as follows: Name Rank Assets Liabilities (Deficit) Level Henderson % Tullett Prebon % Investec % 3i % WH Smith % Alliance Trust % Ladbrokes % Premier Oil % Inmarsat % Petra Diamonds % The FTSE 250 companies with the worst funded pension schemes overall were as follows: Name Rank Assets Liabilities (Deficit) Level Synthomer (120) 67% Ultra Electronics (83) 66% Kentz (11) 66% African Barrick Gold (75) 63% Alent (24) 63% Chemring (27) 62% Evraz (357) 48% Mondi (125) 43% AZ Electronic Materials (14) 12% Ferrexpo (31) 5% In 2007, IFRIC14* provided new guidance on irrecoverable surpluses. Within the FTSE 250, five companies have reported an irrecoverable surplus. The total reported irrecoverable surplus for FTSE 250 companies is now 60 million. The largest reported irrecoverable surpluses in the FTSE 250 were as follows: Name Rank Irrecoverable surplus FirstGroup 1 36 Dairy Crest 2 11 Genus 3 6 Laird 4 4 Stagecoach 5 3 * For more information on IFRIC14, see JLT EB publication IAS19: A Quarterly Guide for Finance Directors, at 30 June Commentary Adjusting these figures up to the quarter-end, we estimate that the total pension deficit in the FTSE 250 as at 30 June 2013 was 3 billion. This is an improvement of 5 billion from the position 12 months ago. The FTSE 250 June

4 Investment Mismatching Legislation over a number of years has clarified that pension liabilities are a form of corporate debt. Despite the fact that there is an increasing weight of opinion from academics and analysts that mismatched investment strategies in pension schemes reduce shareholder value, many companies are still running very large mismatched equity positions in their pension schemes. This has the impact of creating balance sheet volatility which some academic evidence might suggest flows through to share price volatility. Inevitably, analysis of mismatching is limited to the information disclosed in the annual report and accounts. Given the bond-like nature of pension liabilities, the allocation of pension assets to bonds gives an indication of the level of investment mismatching that exists. This report refers to investment mismatching in terms of the IAS19 accounting position, where liabilities are being valued using AA corporate bonds; therefore assets other than these bonds will lead to a mismatch. The FTSE 250 companies with the highest allocation to bonds were: Name Rank Assets % of Assets in Bonds AZ Electronic Materials % Dechra Pharmaceuticals % Hunting % Synergy Health % WH Smith % Regus % Petra Diamonds % Phoenix Group 8 3,479 85% BTG % Cable & Wireless Communications 10 1,308 80% The FTSE 250 companies with the lowest allocation to bonds were: Name Rank Assets % of Assets in Bonds Debenhams % Close Brothers % RIT Capital Partners % Stagecoach 244 1,974 17% Evraz % Tullett Prebon % Greene King % Renishaw % 888 Holdings % CSR % The FTSE 250 companies with the greatest change in bond allocation were: Name Rank Current Bond Allocation Previous Bond Allocation Switch to Bonds Homeserve 1 49% 13% 36% National Express 2 65% 39% 26% Aveva 3 62% 37% 26% Devro 4 78% 52% 26% Greene King 5 3% 22% -19% Alent 6 64% 82% -18% Mondi 7 64% 80% -16% Brewin Dolphin 8 52% 68% -15% Home Retail Group 9 55% 41% 15% Hays 10 63% 49% 14% Commentary Several companies and trustees are continuing to switch pension assets out of equities into bonds. Homeserve is the latest company to report a big switch, with bond allocations increasing by 36%. A total of 70 FTSE 250 companies have more than 50% of pension scheme assets in bonds. Moreover, company disclosures reveal little of the extensive activity there has been by a number of companies to use LDI (liability-driven investment) strategies, which frequently make use of derivatives and other financial instruments. Overall though, the average pension scheme asset allocation to bonds is now 55%, an increase on last year s figure of 54%. This compares to 42% five years ago. We can also expect IFRIC14 to impact on pension scheme investment strategies. If shareholders see none of the upside of pension scheme investment in equities and all of the downside, there will inevitably be further pressure on company management to encourage moves towards lower volatility investments in pension schemes. In addition, a further cause of movement towards bond-based assets could be the recent change to IAS19. In the P&L the expected return on assets will be replaced by the discount rate applied to the assets, so there will be no P&L benefit from holding outperforming assets. The FTSE 250 June

5 Size of Pension Scheme In recent years, pension schemes have grown significantly. Attempts by many companies to stem the growth of their pension liabilities by closing defined benefit pension schemes to new entrants have had little impact. Changes in economic conditions and increasing life expectancy have contributed to the spiralling growth in pension liabilities. Following the credit crunch, high spreads on corporate bonds prevailed over 2009, which countered the effects of rising inflation and increasing life expectancy, stifling the growth of pension liabilities. Over 2010, spreads on corporate bonds returned closer to historically normal levels and this significantly inflated pension liabilities reported in 2010 year-end accounts. Over 2011, the Euro crisis has depressed bond yields, but this has been countered to some extent by falling inflation expectations, so the net effect being that pension liabilities have risen. The FTSE 250 companies with the largest pension scheme liabilities (all those over 1 billion) are as follows: Name Rank Total Pension Liabilities Equity Market * Invensys 1 6,107 2,693 FirstGroup 2 4, Phoenix Group 3 3,344 1,428 Balfour Beatty 4 3,151 1,639 Carillion 5 2,353 1,189 Stagecoach 6 2,095 1,815 Taylor Wimpey 7 2,011 3,088 Mitchells & Butlers 8 1,698 1,519 The Go-Ahead Group 9 1, Atkins (WS) 10 1,494 1,010 Cable & Wireless Communications 11 1,382 1,035 Qinetiq 12 1,311 1,191 Rentokil Initial 13 1,226 1,622 Thomas Cook 14 1,142 1,243 * as at 30 June 2013 This table shows the number of FTSE 250 companies with pension scheme liabilities in each of the following bands: Pension Liabilities No. of Companies Over 1 billion million to 1 billion million to 500 million 49 Up to 100 million 53 Nil 109 Commentary In the last 12 months, the total disclosed pension liabilities of the FTSE 250 companies have increased from 63 billion to 65 billion. A total of 14 companies have disclosed pension liabilities of more than 1 billion, whilst 162 companies have disclosed pension liabilities of less than 100 million. The possibility of measuring pension liabilities on a risk-free basis (i.e. using gilt-based discount rates rather than AA bond discount rates) has been debated at length, including in a detailed discussion paper from the Accounting Standards Board. In the UK, a company can no longer default on its promises to pension scheme members unless it goes into liquidation; however, in 2010 the government changed the index linkage for many inflation-linked benefits which has had the effect of reducing the expected benefit outgo. If pension liabilities were to be measured on a risk-free basis, with no allowance for default or further reduction in benefits, we estimate that it would add around 30% to the total pension liabilities, increasing the total disclosed pension liabilities from 65 billion to around 85 billion. The total deficit at 30 June 2013 on a risk-free basis would be over 20 billion. The FTSE 250 June

6 Significance of the Pension Scheme in the Boardroom The impact of the pension liabilities on corporate decision-making and its importance in the boardroom depends on the relative size of the pension scheme. In the analysis below, the pension scheme deficit and liabilities are expressed as a percentage of the equity market value of the company. The FTSE 250 companies with the most significant pension scheme liabilities are as follows: Name Rank Equity Market * (Deficit) as a % of Equity Market Liabilities as a % of Equity Market FirstGroup % 947% The Go-Ahead Group % 254% Phoenix Group 3 1,428 9% 234% Invensys 4 2,693-18% 227% Kier % 207% Carillion 6 1,189-29% 198% Balfour Beatty 7 1,639-21% 192% Dairy Crest % 153% 106%** Atkins (WS) 9 1,010-28% 148% Cable & Wireless Communications 10 1,035-7% 133% 51%** Interserve % 121% Stagecoach 12 1,815-7% 115% Mitchells & Butlers 13 1,519-6% 112% Qinetiq 14 1,191-5% 110% De La Rue % 97% * as at 30 June 2013 ** These companies pension schemes have purchased contracts which insure part of their liabilities; the figures in italics represent the impact of the liabilities without these insured sections. A further sign of the significance of pensions in the boardroom is the extent of continuing DB provision to employees. This can be measured by looking at the ongoing spend on DB pensions (the service cost) before any allowance for deficit spending. The FTSE 250 companies with the highest ongoing spending is shown in the table below, together with the previous year s spend for comparison. Name Rank Current DB Service Cost Previous DB Service Cost FirstGroup Stagecoach The Go-Ahead Group Balfour Beatty Qinetiq Evraz Invensys Home Retail Group Pennon Kier Total current DB service cost of 546m compares with the total previous DB service cost of 604m. In total, 146 FTSE 350 companies showed zero (or negative) cost of current DB service costs, compared with 140 in the previous year. Commentary Fourteen FTSE 250 companies have total disclosed pension liabilities greater than their equity market value. For FirstGroup total disclosed pension liabilities are almost ten times their equity market value and their disclosed deficit is greater than their market valueand their disclosed deficit is greater than their market value. In addition Carillion and Atkins (WS) have pension deficits more than a quarter of their equity market value, and a further 13 companies have disclosed pension deficits bigger than 10% of their equity market value. Increasingly companies are reacting to the combination of difficult economic conditions, rising pension costs and increasingly aggressive pension regulations by closing pension schemes to future and even current employees. This decline in total DB pension provision is now apparent in the accounts of FTSE 250 companies, with several companies closing their scheme to future accrual or freezing pensionable salaries. We estimate that after allowing for the impact of changes in assumptions and market conditions, the underlying reduction in ongoing DB pension provision is almost 20% in the last 12 months alone. We believe that the majority of FTSE 250 companies will cease DB pension provision to all employees within two years. The FTSE 250 June

7 Impact of the Pension Scheme on the Company s Share Price As already mentioned, there is some evidence that balance sheet volatility caused by pension schemes flows through to share price volatility. Changes in the balance sheet position resulting from pensions can be separated into expected changes and unexpected changes. Expected balance sheet changes arise largely from the contributions paid by the company and the costs shown in the company s income statement. Unexpected balance sheet changes arise largely from actuarial gains and losses (due to stock market volatility) and changes to actuarial assumptions. In the analysis below, the unexpected change in balance sheet position (net of change in irrecoverable surplus) is expressed as a percentage of the equity market value of the company. We are not suggesting that the balance sheet impact will translate into a for impact on a company s share price (not least because of the impact of deferred tax), but this analysis gives a good indication of those companies most positively (and negatively) affected by their pension schemes in their last financial year. The FTSE 250 companies most positively affected by their pension schemes were: Name Rank Equity Market * Unanticipated Balance Sheet Gain Impact as a % of Equity Market The Go-Ahead Group % WH Smith % Britvic 3 1, % Ferrexpo % Home Retail Group 5 1, % Greggs % Smith (DS) 7 2, % 3i 8 3, % KCOM Group % Galliford Try % * as at 30 June 2013 The FTSE 250 companies most negatively affected by their pension schemes were: Name Rank Equity Market * Unanticipated Balance Sheet Gain Impact as a % of Equity Market Morgan Advanced Materials (44) -6% Henderson 242 1,622 (98) -6% Vesuvius 243 1,014 (61) -6% Mondi 244 3,004 (184) -6% Balfour Beatty 245 1,639 (113) -7% Debenhams 246 1,188 (82) -7% Kier (49) -11% Interserve (75) -11% Phoenix Group 249 1,428 (402) -28% FirstGroup (523) -113% * as at 30 June 2013 Commentary Over the year covered by their latest report and accounts, 30 companies felt the benefit of an unexpected gain to their balance sheet as a result of their pension schemes, whilst 111 companies suffered an unexpected loss to their balance sheet as a result of their pension schemes. The FTSE 250 June

8 Contributions paid into Pension Schemes This analysis compares the pension scheme contributions actually paid by companies with the cost of pension benefits accrued during the year. Surplus pension contributions paid in excess of the cost of benefits will reduce pension scheme deficits. However, where the contributions paid are less than the cost of benefits, this will increase pension scheme deficits (or reduce pension scheme surpluses). The large increases in the contributions seen in the last couple of years have ended, with the amount contributed in the most recent accounting year being the same as the amount contributed the previous year. Only contributions actually paid in the relevant accounting year are included in the analysis below. The FTSE 250 companies who have made the largest surplus contributions to their pension schemes were as follows: Name Rank Pension Contributions Cost of Benefits Surplus Contributions Mondi 1 2 (130) 131 Phoenix Group 2 57 (2) 59 Taylor Wimpey Vesuvius Balfour Beatty Invensys Howden Joinery Mitchells & Butlers i FirstGroup Carillion Interserve Smith (DS) Evraz Inchcape This table shows the number of FTSE 250 companies that paid pension contributions in each of the following bands: Pension Contributions No. of Companies Over 30 million million to 30 million 9 10 million to 20 million 23 Up to 10 million 89 Nil 114 Commentary In total, the amount contributed to FTSE 250 company pension schemes was 1.6 billion, 0.2 billion lower than in the previous accounting year. This is more than the 0.4 billion cost of benefits accrued during the year. It therefore represents 1.2 billion of funding towards reducing pension scheme deficits. This is an decrease on the previous year s deficit funding of 1.6 billion. Phoenix Group injected an additional 57 million into its pension schemes in the 12 months to 31 December 2012, on top of its regular contributions, which totalled 2 million. The huge cash contributions paid by Phoenix Group came at a time when most companies have precious little spare cash. Widening deficits, and perhaps weaker perceived sponsor covenants, will inevitably lead to trustees requesting larger deficit-correcting contributions from sponsoring employers. This year we expect to see a trend towards companies looking at alternative sources to fund their pension schemes, such as property partnership deals. Only 60 FTSE 250 companies are still providing more than a handful of current employees with DB benefits (i.e. ignoring companies who are incurring ongoing DB service costs of less than 1% of total payroll). Of these, only 12 companies (i.e. just 5% of the FTSE 250) are still providing DB benefits to a significant number of employees (defined as incurring ongoing DB service cost of more than 5% of total payroll). The FTSE 250 June

9 Appendix Name Year End Equity Market * () Pension Assets () Pension Liabilities () (Deficit) () Level % Bonds (Deficit) as Liabilities as Unanticipated Balance Sheet Impact 3i 31/03/2013 3, % 65% 4% 24% 20 1% Holdings 31/12/ (1) 91% 0% 0% 1% (0) 0% African Barrick Gold 31/12/ (75) 63% 48% -19% 52% 1 0% Alent 31/12/ (24) 63% 64% -3% 7% (1) 0% Alliance Trust 31/12/2012 2, % 48% 0% 1% (0) 0% Amlin 31/12/2012 1, (49) 90% 66% -2% 24% (23) -1% Ashtead 30/04/2012 3, % 33% 0% 2% (6) 0% Atkins (WS) 31/03/2013 1,010 1,209 1,494 (285) 81% 50% -28% 148% (48) -5% Aveva 31/03/2013 1, (13) 82% 62% -1% 5% (6) 0% AZ Electronic Materials 31/12/2012 1, (14) 12% 100% -1% 1% (2) 0% 1 0 (0) Balfour Beatty 31/12/2012 1,639 2,813 3,151 (338) 89% 58% -21% 192% (113) -7% Barr (A.G.) 26/01/ (3) 96% 35% -1% 15% (3) -1% 1 4 (0) Barratt Developments 30/06/2012 3, (21) 92% 51% -1% 9% (24) -1% BBA Aviation 31/12/2012 1, (41) 92% 75% -3% 39% (16) -1% Beazley 31/12/2012 1, (0) 98% 50% 0% 2% (1) 0% Bellway 31/07/2012 1, (12) 76% 42% -1% 3% (4) 0% 1-1 Berendsen 31/12/2012 1, (21) 93% 60% -2% 24% (1) 0% Berkeley 30/04/2012 2, % 55% 0% 0% (0) 0% Bodycote 31/12/2012 1, (19) 83% 61% -2% 11% (4) 0% Booker 29/03/2013 2, (7) 99% 46% 0% 29% (6) 0% Bovis Homes 31/12/2012 1, (3) 96% 42% 0% 9% (4) 0% Brewin Dolphin 30/09/ (10) 86% 52% -2% 11% (5) -1% Britvic 30/09/2012 1, (2) 100% 46% 0% 47% 32 3% Brown (N.) 02/03/2013 1, (3) 97% 52% 0% 8% (4) 0% BTG 31/03/2013 1, % 85% 0% 8% 0 0% Cable & Wireless Communications 31/03/2013 1,035 1,308 1,382 (74) 95% 80% -7% 133% (13) -1% Caledonia Investments 31/03/2013 1, (4) 95% 41% 0% 8% (3) 0% Capital & Counties Properties 31/12/2012 2, (0) 98% 28% 0% 1% (2) 0% Carillion 31/12/2012 1,189 2,012 2,353 (340) 86% 52% -29% 198% (62) -5% Carpetright 28/04/ (4) 81% 46% -1% 6% (1) 0% Chemring 31/10/ (27) 62% 30% -5% 13% (3) -1% Close Brothers 31/07/2012 1, % 20% 0% 2% 2 0% Cobham 31/12/2012 2, (73) 89% 55% -3% 23% (16) -1% Colt Group SA 31/12/ (4) 82% 61% 0% 3% 0 0% 2 2 (1) Countrywide Holdings Ltd 31/12/2012 1, (7) 85% 79% 0% 2% 0 0% Cranswick 31/03/ (3) 84% 47% -1% 4% 1 0% Crest Nicholson 31/10/ (30) 80% 42% -3% 17% (2) 0% CSR 28/12/2012 1, % 0% 0% 0% (0) 0% Dairy Crest 31/03/ (56) 94% 78% -9% 153% (14) -2% DCC 31/03/2013 2, (19) 84% 64% -1% 6% (10) 0% De La Rue 30/03/ (169) 82% 59% -18% 97% (40) -4% Debenhams 01/09/2012 1, (57) 91% 20% -5% 54% (82) -7% Dechra Pharmaceuticals 30/06/ (0) 87% 100% 0% 0% (0) 0% 0 - (0) Derwent London 31/12/2012 2, % 28% 0% 1% 1 0% Devro 31/12/ (59) 77% 78% -12% 54% (17) -3% Dialight 31/12/ (1) 95% 63% 0% 6% (2) -1% Dignity 31/12/ % 45% 0% 11% (1) 0% 1 1 (1) Diploma 30/09/ (5) 79% 22% -1% 4% (0) 0% Dixons Retail 28/04/2012 1, (262) 74% 29% -18% 67% (28) -2% Balance Sheet Impact as Current Previous (Deficit) The FTSE 250 June

10 Appendix (Continued) Name Year End Equity Market * () Pension Assets () Pension Liabilities () (Deficit) () Level % Bonds (Deficit) as Liabilities as Unanticipated Balance Sheet Impact Drax 31/12/2012 2, (42) 79% 40% -2% 9% (9) 0% Electrocomponents 31/03/2013 1, (19) 95% 30% -2% 38% (14) -1% Elementis 31/12/ (77) 88% 54% -8% 63% (42) -4% Enterprise Inns 30/09/ (1) 97% 40% 0% 4% (1) 0% Euromoney Institutional Investors 30/09/2012 1, (5) 85% 76% 0% 2% (3) 0% Evraz 31/12/2012 1, (357) 48% 15% -25% 49% (33) -2% F&C Asset Management 31/12/ (24) 91% 65% -5% 49% (9) -2% Fenner 31/08/ (48) 75% 37% -8% 33% (20) -3% Ferrexpo 31/12/ (31) 5% 43% -4% 4% 18 2% 0 0 (3) Filtrona 31/12/2012 2, (8) 96% 49% 0% 10% 7 0% FirstGroup 31/03/ ,777 4,400 (622) 86% 29% -134% 947% (523) -113% Galliford Try 30/06/ (0) 100% 76% 0% 23% 3 0% 7 7 (7) Genus 30/06/ (61) 70% 41% -7% 25% (47) -6% Grainger 30/09/ (6) 79% 67% -1% 5% (2) 0% Great Portland Estates 31/03/2013 1, (0) 99% 60% 0% 1% (0) 0% 1 1 (0) Greene King 29/04/2012 1, (67) 78% 3% -4% 18% (33) -2% Greggs 29/12/ (4) 96% 31% -1% 21% 4 1% Halma 30/03/2013 1, (47) 79% 35% -2% 12% (22) -1% Hays 30/06/2012 1, (15) 97% 63% -1% 40% (25) -2% Henderson 31/12/2012 1, % 79% 9% 31% (98) -6% Hiscox 31/12/2012 1, (17) 90% 33% -1% 10% (4) 0% Home Retail Group 02/03/2013 1, (85) 91% 55% -8% 84% 20 2% Homeserve 31/03/ % 49% 0% 2% (1) 0% Howden Joinery 29/12/2012 1, (155) 82% 41% -10% 54% (52) -3% Hunting 31/12/2012 1, % 100% 1% 23% (1) 0% Inchcape 31/12/2012 2, % 68% 3% 39% (10) 0% Informa 31/12/2012 2, (18) 82% 43% -1% 3% (9) 0% Inmarsat 31/12/2012 3, % 26% 0% 2% 3 0% International Personal Finance 31/12/2012 1, (3) 90% 46% 0% 3% 1 0% Interserve 31/12/ (101) 87% 46% -15% 121% (75) -11% Invensys 31/03/2013 2,693 5,634 6,107 (473) 92% 77% -18% 227% (113) -4% Investec 31/03/2013 2, % 80% 1% 5% (8) 0% James Fisher 31/12/ (27) 82% 75% -5% 30% (0) 0% Jardine Lloyd Thompson 31/12/2012 1, (131) 80% 50% -7% 32% (15) -1% KCOM Group 31/03/ (10) 95% 55% -2% 48% 2 0% Keller 31/12/ (7) 84% 36% -1% 6% (2) 0% Kentz 31/12/ (11) 66% 77% -3% 7% (5) -1% Kier 30/06/ (58) 94% 27% -13% 207% (49) -11% Ladbrokes 31/12/2012 1, % 62% 2% 14% (10) -1% Laird 31/12/ % 77% 0% 21% (2) 0% 0 0 (0) Law Debenture Corp 31/12/ (2) 94% 36% 0% 7% 0 0% Man Group 31/12/2012 1, (4) 99% 33% 0% 17% (10) -1% Marstons 29/09/ (25) 94% 51% -3% 52% (44) -5% Menzies 31/12/ (68) 79% 30% -16% 77% (12) -3% Millennium & Copthorne Hotels 31/12/2012 1, (17) 74% 42% -1% 4% (4) 0% Mitchells & Butlers 29/09/2012 1,519 1,610 1,698 (88) 95% 66% -6% 112% (81) -5% MITIE Group 31/03/ (30) 83% 24% -3% 19% (14) -2% Mondi 31/12/2012 3, (125) 43% 64% -4% 7% (184) -6% Morgan Advanced Materials 31/12/ (167) 74% 61% -22% 84% (44) -6% Balance Sheet Impact as Current Previous (Deficit) The FTSE 250 June

11 Appendix (Continued) Name Year End Equity Market * () Pension Assets () Pension Liabilities () (Deficit) () Level % Bonds (Deficit) as Liabilities as Unanticipated Balance Sheet Impact National Express 31/12/2012 1, (32) 95% 65% -3% 54% (10) -1% Oxford Instruments 31/03/ (48) 81% 55% -7% 36% (17) -3% Paragon 30/09/ (14) 83% 41% -2% 9% (1) 0% Pennon 31/03/2013 2, (110) 84% 33% -5% 29% (15) -1% Petra Diamonds 30/06/ % 86% 0% 2% (0) 0% Phoenix Group 31/12/2012 1,428 3,479 3, % 85% 9% 234% (402) -28% Premier Farnell 03/02/ (35) 84% 75% -5% 30% (8) -1% Premier Oil 31/12/2012 1, % 50% 0% 1% 1 0% Provident Financial 31/12/2012 2, % 56% 1% 27% 4 0% PZ Cussons 31/05/2012 1, % 40% 1% 18% (10) -1% Qinetiq 31/03/2013 1,191 1,257 1,311 (54) 96% 38% -5% 110% (43) -4% Rathbone Brothers 31/12/ (2) 98% 38% 0% 19% 1 0% Redrow 30/06/ (3) 97% 69% 0% 11% (8) -1% Regus 31/12/2012 1, (0) 93% 88% 0% 0% 0 0% 0 0 (0) Renishaw 30/06/2012 1, (42) 69% 1% -4% 12% (8) -1% Rentokil Initial 31/12/2012 1,622 1,298 1, % 73% 4% 76% (77) -5% RIT Capital Partners 31/12/2012 1, (2) 88% 19% 0% 1% (1) 0% Rotork 31/12/2012 2, (29) 81% 47% -1% 7% (10) 0% RPC Group 31/03/ (57) 68% 47% -8% 27% (8) -1% Savills 31/12/ (28) 84% 31% -4% 24% (0) 0% Scottish Investment Trust 31/10/ (3) 80% 61% 0% 2% (1) 0% Segro 31/12/2012 2, (11) 95% 63% -1% 10% (5) 0% Senior 31/12/2012 1, (37) 87% 76% -4% 27% (14) -1% SIG 31/12/2012 1, (34) 77% 51% -3% 15% 4 0% Smith (DS) 30/04/2012 2, (104) 88% 42% -5% 38% 18 1% Spectris 31/12/2012 2, (12) 91% 78% -1% 6% (0) 0% Spirax-Sarco Engineering 31/12/2012 2, (73) 79% 35% -4% 17% (11) -1% Spirent Communications 31/12/ (15) 91% 62% -2% 19% (10) -1% Sports Direct International 29/04/2012 3, (19) 67% 48% -1% 2% (5) 0% St. Modwen Properties 30/11/ % 38% 0% 4% (1) 0% Stagecoach 30/04/2012 1,815 1,974 2,095 (121) 94% 17% -7% 115% 8 0% - - (55) Synergy Health 31/03/ (16) 78% 100% -2% 11% 0 0% Synthomer 31/12/ (120) 67% 42% -18% 55% (18) -3% Taylor Wimpey 31/12/2012 3,088 1,771 2,011 (241) 88% 57% -8% 65% (77) -2% The Go-Ahead Group 30/06/ ,576 1,606 (31) 98% 25% -5% 254% 45 7% (3) Thomas Cook 30/09/2012 1, ,142 (331) 71% 33% -27% 92% (4) 0% Tullett Prebon 31/12/ % 8% 6% 23% 1 0% Ultra Electronics 31/12/2012 1, (83) 66% 23% -7% 21% (6) -1% United Business Media 31/12/2012 1, (48) 91% 44% -3% 33% (4) 0% United Drug 30/09/ (7) 88% 37% -1% 8% (2) 0% Vesuvius 31/12/2012 1, (69) 89% 80% -7% 62% (61) -6% Victrex 30/09/2012 1, (4) 91% 53% 0% 3% 1 0% WH Smith 31/08/ % 90% 12% 86% 29 3% Balance Sheet Impact as Current Previous (Deficit) * as at 30 June 2013 The FTSE 250 June

12 Notes All of the analysis contained in this report is based on the IAS19 numbers disclosed in a company s most recently published annual report and accounts. No adjustment is made for the fact that companies have applied different interpretations of IAS19 and have used different actuarial assumptions (for example, different mortality assumptions can make a significant difference to a company s pension liabilities). No adjustment is made in the individual analysis for the fact that companies have different year-ends. Inevitably, different market conditions applying at different year-ends will affect the comparisons. The assets and liabilities shown are the total global pension assets and liabilities, not just the UK figures. The figures shown in this report are before adjustment for IFRIC14 (and before adjustment for any other unrecognised pension surpluses), except for Unanticipated Balance Sheet Impact, which is shown net of the change in irrecoverable surplus. Whilst all reasonable care has been taken in the preparation of this publication, no liability is accepted under any circumstances by Jardine Lloyd Thompson for any loss or damage occurring as a result of reliance on any statement, opinion, or any error or omission contained herein. Any statement or opinion reflects our understanding of current or proposed legislation and regulation, which may change without notice. The content of this document should not be regarded as specific advice in relation to the matters addressed. J.P. Morgan Cazenove is a marketing name for the UK investment banking businesses [and EMEA cash equities and equity research businesses] of JPMorgan Chase & Co. and its subsidiaries (collectively JPMorgan). This publication has been prepared for information purposes only and is not a solicitation, or an offer, to buy or sell any security or to participate in any trading strategy, and should not be regarded as specific or investment advice in relation to the matters addressed. It has been prepared without regard to the individual financial objectives and circumstances of the recipients. It does not purport to be a complete description of the securities, markets or developments referred to in it. The information on which this publication is based has been obtained from sources which we believe to be reliable, but we have not independently verified such information and we do not warrant that it is accurate or complete. All expressions of opinion are subject to change without notice. Third party data providers make no warranty relating to the accuracy, completeness or timeliness of their data and shall have no liability whatsoever for losses that may arise from reliance upon such data. Jardine Lloyd Thompson and JPMorgan shall have no responsibility or liability whatsoever for loss or damage that may arise from reliance upon any statement or opinion in, or any error or omission from, this publication (including, without limitation, such third party data). Each of Jardine Lloyd Thompson, JPMorgan, and their respective connected companies, and the directors, officers and employees of each of them, may from time to time have a long or short position, or other interest, in the securities of the companies referred to and may sell or buy such securities and interests and may trade them in ways that may be inconsistent with any discussion in this publication. The FTSE 250 June

13 JLT Employee Benefits The St Botolph Building, 138 Houndsditch, London EC3A 7AW Tel +44 (0) Fax +44 (0) JLT Employee Benefits. A trading name of JLT Benefit Solutions Limited. Authorised and regulated by the Financial Conduct Authority. A member of the Jardine Lloyd Thompson Group. Registered Office: The St Botolph Building, 138 Houndsditch, London EC3A 7AW. Registered in England No VAT No /13