THE FTSE 250 AND THEIR PENSION DISCLOSURES

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1 THE FTSE 250 AND THEIR PENSION DISCLOSURES March 2017 This half-yearly Report from JLT Employee Benefits covers all FTSE250 companies. It includes analysis of all annual reports for years ending on or before the 30 June 2016 and published by 31 October 2016.

2 EXECUTIVE SUMMARY Charles Cowling JLT Employee Benefits +44 (0) Murray Wright JLT Employee Benefits +44 (0) The total deficit in FTSE 250 pension schemes at 30 June 2016 is estimated to be 11 billion. This is broadly unchanged from the position 12 months ago. Only 44 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 13 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 1.21 billion, down from 1.53 billion the previous year. John Laing Group led the way with a deficit contribution of 126 million, but 35 other FTSE 250 companies also reported significant deficit funding contributions in their most recent annual report and accounts. 56 FTSE 250 companies could have settled their pension deficits in full with a payment of up to one year s dividend, 12 companies would need a payment of up to two years dividends to settle their pension deficits in full and 23 companies would need a payment of more than two years dividends in order to settle their pension deficits in full. The average pension scheme asset allocation to bonds is 54%, a decrease on last year s figure of 56%. This compares to 48% six years ago. In 12 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. 20 FTSE 250 companies have total disclosed pension liabilities greater than their equity market value. For The Go-Ahead Group, total disclosed pension liabilities are more than four times their equity market value. Only 41 companies disclosed a pension surplus in their most recent annual report and accounts; 91 companies disclosed pension deficits. However, we estimate that 24 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 remained around the same level of 81 billion. A total of 26 companies have disclosed pension liabilities of more than 1 billion, the largest of which is FirstGroup with disclosed pension liabilities of 4.05 billion. A total of 156 companies have disclosed pension liabilities of less than 100 million, of which 118 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 81 billion to around 100 billion, and the total deficit at 30 June 2016 would be around 30 billion. The appendix at the end of this report contains a full list of all the FTSE 250 companies analysed and their relevant pension disclosures.

3 FUNDING POSITION The overall funding position of pension schemes of FTSE 250 companies has worsened 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 m Liabilities m (Deficit) m Level Tullett Prebon % Cineworld Group % Investec % Henderson % Ladbrokes % WH Smith 6 1, % Alliance Trust % Rentokil Initial 8 1,445 1, % BTG % Inmarsat % The FTSE 250 companies with the worst funded pension schemes overall were as follows: Name Rank m Liabilities m (Deficit) m Level SSP Group (14) 71% Smurfit Kappa 242 1,388 1,991 (603) 70% Renishaw (68) 69% Synthomer (139) 67% Evraz (203) 64% Keller (23) 62% RPC Group (147) 59% Vedanta Resources (46) 40% Micro Focus International (22) 16% KAZ Minerals (10) 6% In 2007, IFRIC14* provided new guidance on the recognition of surpluses and the impact of minimum funding requirements. Within the FTSE 250, 18 companies have reported that the restrictions imposed by IFRIC14 have had an impact on their pension disclosures. The total reported impact for FTSE 250 companies is now 720 million. The largest reported adjustments for IFRIC14 in the FTSE 250 were as follows: Name Rank Irrecoverable surplus m Mitchells & Butlers WH Smith FirstGroup Stagecoach 4 38 Genus 5 22 Carillion 6 16 Dairy Crest 7 12 Weir Group 8 8 Ibstock 9 8 Laird 10 6 Adjusting these figures up to the six month-end, we estimate that the total pension deficit in the FTSE 250 as at 30 June 2016 was 11 billion. This is broadly unchanged from the position 12 months ago. * For more information on IFRIC14, see JLT publication IAS19: A Quarterly Guide for Finance Directors, at 30 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 m % of in Bonds Dechra Pharmaceuticals % Investec % Regus % Serco 4 1,309 97% Spectris % William Hill % Countrywide Holdings Ltd % Millennium & Copthorne Hotels % Vesuvius % Dairy Crest 10 1,044 85% The FTSE 250 companies with the lowest allocation to bonds were: Name Rank m % of in Bonds Grafton Group % Capital & Counties Properties % Debenhams % Close Brothers % Wood Group (John) % Evraz % The Go-Ahead Group 247 2,740 15% Stagecoach 248 3,009 13% Tullett Prebon % Renishaw % The FTSE 250 companies with the greatest change in bond allocation were: Name Rank Current Bond Allocation Previous Bond Allocation Switch to Bonds Bovis Homes 1 31% 58% -27% RIT Capital Partners 2 46% 22% +24% Crest Nicholson 3 28% 52% -24% Millennium & Copthorne Hotels 4 87% 66% +22% Ultra Electronics Holdings 5 32% 53% -21% Dignity 6 54% 36% +18% Marstons 7 71% 57% +15% Home Retail Group 8 52% 39% +13% Smith (DS) 9 30% 43% -13% Britvic 10 84% 72% 12% Several companies and trustees are continuing to switch pension assets out of equities into bonds but some are moving the other way. Bovis Homes is the latest company to report a big switch, with bond allocations decreasing by 27%. A total of 73 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. Recent changes to IAS19 require companies to disclose more detailed information on pension assets which will help investors to understand the risks which employers are exposed to. Overall though, the average pension scheme asset allocation to bonds is now 54%, a decrease on last year s figure of 56%. This compares to 48% six years ago. 4

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. The FTSE 250 companies with the largest pension scheme liabilities (all those over 1 billion) are as follows: Name Rank Total Liabilities m Equity Market * m FirstGroup 1 4,045 1,208 Phoenix Group 2 3,713 1,980 CYBG 3 3,513 2,040 Balfour Beatty 4 3,397 1,644 The Go-Ahead Group 5 3, Stagecoach 6 3,068 1,326 AMEC 7 2,717 1,913 Carillion 8 2,680 1,006 G4S 9 2,355 2,838 Mitchells & Butlers 10 2, AA 11 2,099 1,453 Smurfit Kappa 12 1,991 3,675 Atkins (WS) 13 1,822 1,327 Kier 14 1,648 1,002 Tate & Lyle 15 1,568 3,080 QinetiQ Group 16 1,448 1,321 Thomas Cook 17 1, IMI 18 1,342 2,782 Rentokil Initial 19 1,232 3,506 Serco 20 1,196 1,224 * as at 30 June 2016 This table shows the number of FTSE 250 companies with pension scheme liabilities in each of the following bands: Liabilities No. of Companies Over 1 billion million to 1 billion million to 500 million 47 Up to 100 million 38 Nil 118 In the last 12 months, the total disclosed pension liabilities of the FTSE 250 companies have remained around the same level of 81 billion. A total of 26 companies have disclosed pension liabilities of more than 1 billion, whilst 156 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 22% to the total pension liabilities, increasing the total disclosed pension liabilities from 81 billion to around 100 billion. The total deficit at 30 June 2016 on a risk-free basis would be around 30 billion. 5

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 * m (Deficit) as a % of Equity Market Liabilities as a % of Equity Market The Go-Ahead Group % 407% FirstGroup 2 1,208-36% 335% Carillion 3 1,006-38% 266% Stagecoach 4 1,326-4% 231% Thomas Cook % 229% 224%** Mitchells & Butlers % 222% Balfour Beatty 7 1,644-9% 207% Phoenix Group 8 1,980 26% 188% CYBG 9 2,040 3% 172% Kier 10 1,002-9% 164% Dairy Crest % 150% 110%** AA 12 1,453-17% 144% AMEC 13 1,913 3% 142% Atkins (WS) 14 1,327-20% 137% John Laing Group % 120% 94%** * as at 30 June 2016 ** 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 m Previous DB Service Cost m The Go-Ahead Group Stagecoach FirstGroup AA AMEC Smurfit Kappa CYBG Evraz Howden Joinery Croda International The total current DB service cost of 655m compares with the total previous DB service cost of 609m. In total, 162 FTSE 250 companies showed zero (or negative) cost of current DB service costs, compared with 157 in the previous year. 20 FTSE 250 companies have total disclosed pension liabilities greater than their equity market value. For The Go-Ahead Group total disclosed pension liabilities are more than four times their equity market value. For FirstGroup the total disclosed pension liabilities are more than three times their equity market value. In addition, Carillion, Stagecoach, Thomas Cook, Mitchell & Butlers, Balfour Beatty and Phoenix Group have disclosed pension liabilities that are almost double their equity market value. A total of 11 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. 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 10% in the last 12 months alone. 6

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 * m Unanticipated Balance Sheet Gain m Impact as a % of Equity Market Thomas Cook % FirstGroup 2 1, % AA 3 1, % Carillion 4 1, % AMEC 5 1, % Stagecoach 6 1, % Pendragon % Kier 8 1, % Tullett Prebon % Debenhams % *as at 30 June 2016 The FTSE 250 companies most negatively affected by their pension schemes were: Name Rank Equity Market * m Unanticipated Balance Sheet Gain m Impact as a % of Equity Market QinetiQ Group 241 1,321 (12) -1% Marstons (7) -1% Marshalls (5) -1% Renishaw 244 1,590 (21) -1% Galliford Try (12) -2% RPC Group 246 2,420 (43) -2% CYBG 247 2,040 (40) -2% Home Retail Group 248 1,244 (26) -2% Dairy Crest (21) -3% Balfour Beatty 250 1,644 (78) -5% *as at 30 June 2016 Over the year covered by their latest report and accounts, 90 companies felt the benefit of an unexpected gain to their balance sheet as a result of their pension schemes, whilst 41 companies suffered an unexpected loss to their balance sheet as a result of their pension schemes. 7

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 160 million lower than 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 Contributions m Cost of Benefits m Surplus Contributions m John Laing Group Mitchells & Butlers Balfour Beatty Phoenix Group Home Retail Group Carillion G4S Howden Joinery CYBG Smurfit Kappa Tate & Lyle Atkins (WS) Kier Meggitt FirstGroup This table shows the number of FTSE 250 companies that paid pension contributions in each of the following bands Contributions No. of Companies Over 30 million million to 30 million 7 10 million to 20 million 22 Up to 10 million 72 Nil 129 In total, the amount contributed to FTSE 250 company pension schemes was 1,840 million, 160 million lower than in the previous accounting year. This is more than the 630 million cost of benefits accrued during the year. It therefore represents 1,210 million of funding towards reducing pension scheme deficits. This is a decrease on the previous year s deficit funding of 1,530 million. Only 44 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 13 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). 8

9 CONFLICT OF INTEREST BETWEEN EMPLOYERS AND TRUSTEES There is an inherent conflict of interest involved in the running of a pension scheme. The following tables aim to capture employers reluctance towards contributing to their pension schemes against their relative enthusiasm for declaring dividends for their shareholders. The total disclosed pension deficit of the FTSE 250 companies was 4.7 billion and the total dividends paid by companies with a defined benefit pension scheme in the FTSE 250 was 7.2 billion. This compares to a deficit of 6.6 billion and dividends of 8.8 billion one year ago. In total, the amount contributed to FTSE 250 company pension schemes was 1.84 billion, down from 2.0 billion in the previous accounting year. 56 FTSE 250 companies could have settled their pension deficits in full with a payment of up to one year s dividend, 12 companies would need a payment of up to two years dividends to settle their pension deficits in full and 23 companies would need a payment of more than two years dividends in order to settle their pension deficits in full. The following companies had the highest excess of dividends paid over the latest disclosed pension scheme deficit. This might suggest that these companies could not only wipe off their deficit right away but also potentially contribute significantly towards de-risking opportunities. Name Rank (Deficit) ( m) Dividends paid ( m) Dividends over deficit ( m) Vedanta Resources 1 (46) Pennon Group 2 (41) United Business Media 3 (22) Victrex 4 (6) Bellway 5 (7) Aggreko 6 (2) Spirax-Sarco Engineering 7 (74) Millennium & Copthorne Hotels 8 (13) Cobham 9 (57) Galliford Try 10 (4) The following companies had the highest levels of pension scheme contributions relative to their dividends declared in a year. This may suggest that these companies are prioritising the financial health of their pension schemes over making returns to shareholders. Name Rank Contributions ( m) Dividends paid ( m) Contributions as a percentage of dividends John Laing Group % FirstGroup % Thomas Cook % AA % Home Retail Group % Stagecoach % Atkins (WS) % Howden Joinery % The Go-Ahead Group % Greencore Group % 9

10 Name Year End m Equity Market * Liabilities (Deficit) Level % Bonds (Deficit) as % of Market Liabilities as Unanticipated Balance Sheet Impact Balance Sheet Impact as Current Previous m m m m m m m m AA 31/01/2016 1,453 1,850 2,099 (249) 88% 45% -17% 144% % Aberdeen Asset 30/09/2015 3, % 63% 1% 5% 10 0% Management Aggreko 31/12/2015 3, (2) 98% 61% 0% 3% 4 0% Alliance Trust 31/12/2015 2, % 60% 0% 1% (0) 0% AMEC 31/12/2015 1,913 2,780 2, % 57% 3% 142% 147 8% Atkins (WS) 31/03/2016 1,327 1,557 1,822 (265) 85% 51% -20% 137% 9 1% Auto Trader Group 29/03/2016 3, % 40% 0% 0% (0) 0% Aveva 31/03/2016 1, (2) 97% 58% 0% 8% 8 1% B&M European Retail 26/03/2016 2,551-0 (0) 0% - 0% 0% 0 0% Balfour Beatty 31/12/2015 1,644 3,251 3,397 (146) 96% 64% -9% 207% (78) -5% Barr (A.G.) 30/01/ (13) 89% 61% -2% 21% 6 1% BBA Aviation 31/12/2015 2, (27) 95% 69% -1% 24% 3 0% Beazley 31/12/2015 1, (0) 98% 50% 0% 2% 0 0% Bellway 31/07/2015 2, (7) 86% 41% 0% 2% (3) 0% Berendsen 31/12/2015 2, % 77% 1% 15% 12 1% Bodycote 31/12/ (14) 89% 66% -1% 13% 3 0% Booker 25/03/2016 2, (30) 96% 53% -1% 24% (10) 0% Bovis Homes 31/12/ % 31% 1% 10% 0 0% Brewin Dolphin 30/09/ (3) 97% 60% 0% 13% 2 0% Britvic 27/09/2015 1, % 84% 1% 50% 4 0% Brown (N.) 27/02/ % 61% 2% 22% 13 3% BTG 31/03/2016 2, % 81% 1% 5% 3 0% Caledonia Investments 31/03/2016 1, % 36% 0% 3% 2 0% Capital & Counties Properties 31/12/2015 2, % 22% 0% 1% 1 0% Carillion 31/12/2015 1,006 2,302 2,680 (377) 86% 49% -38% 266% 87 9% Cineworld Group 31/12/2015 1, % 41% 1% 3% (0) 0% Clarkson 31/12/ (3) 98% 47% 0% 26% 4 1% Close Brothers 31/07/2015 1, % 21% 0% 2% (2) 0% Cobham 31/12/2015 2, (57) 92% 61% -2% 27% 40 1% Countrywide Holdings Ltd 31/12/ (0) 99% 89% 0% 9% 3 1% Cranswick 31/03/2016 1, (4) 83% 42% 0% 3% 0 0% Crest Nicholson 31/10/ (8) 95% 28% -1% 18% 8 1% Croda International 31/12/2015 4, ,032 (63) 94% 34% -1% 24% 32 1% CYBG 30/09/2015 2,040 3,565 3, % 72% 3% 172% (40) -2% Dairy Crest 31/03/ ,044 1,075 (30) 97% 85% -4% 150% (21) -3% Darty 30/04/ (55) 89% 0% -6% 56% 19 2% Debenhams 29/08/ % 21% 4% 114% 19 3% Dechra Pharmaceuticals 30/06/2016 1, (4) 79% 100% 0% 2% (2) 0% 1 1 (0) 15 Surplus / (Deficit) Dividends ( m) 10

11 Name Year End m Equity Market * Liabilities (Deficit) Level % Bonds (Deficit) as % of Market Liabilities as Unanticipated Balance Sheet Impact Balance Sheet Impact as Current Previous m m m m m m m m Derwent London 31/12/2015 2, % 26% 0% 0% 1 0% Dignity 25/12/2015 1, (13) 88% 54% -1% 8% (1) 0% 1 3 (0) 10 Diploma 30/09/ (6) 80% 24% -1% 3% (2) 0% Drax 31/12/2015 1, (30) 88% 57% -2% 19% 1 0% Electrocomponents 31/03/2016 1, (39) 92% 40% -3% 42% 16 1% Elementis 31/12/ (12) 98% 57% -1% 64% 8 1% Essentra 31/12/2015 1, % 62% 0% 18% (2) 0% Euromoney Institutional Investors 30/09/2015 1, (2) 94% 67% 0% 3% 2 0% Evraz 31/12/2015 2, (203) 64% 16% -10% 27% 34 2% FirstGroup 31/03/2016 1,208 3,612 4,045 (433) 89% 55% -36% 335% % G4S 31/12/2015 2,838 2,076 2,355 (279) 88% 59% -10% 83% 6 0% Galliford Try 30/06/ (4) 98% 73% -1% 32% (12) -2% Genus 30/06/ (23) 94% 53% -2% 38% 14 1% 7 6 (8) 13 Grafton Group 31/12/2015 1, (17) 92% 23% -1% 18% 14 1% Grainger 30/09/ (2) 94% 59% 0% 3% (1) 0% Great Portland Estates 31/03/2016 1, (3) 91% 61% 0% 2% 0 0% Greencore Group 25/09/2015 1, (113) 78% 45% -9% 40% 8 1% Greene King 01/05/2016 2, (52) 94% 48% -2% 36% (4) 0% Greggs 02/01/ (4) 96% 27% 0% 10% 5 1% Halma 02/04/2016 3, (52) 81% 42% -1% 7% 9 0% Hays 30/06/2016 1, (14) 98% 73% -1% 54% 34 2% Henderson 31/12/2015 2, % 78% 6% 20% (2) 0% Hill & Smith 31/12/ (15) 83% 61% -2% 13% 5 1% Hiscox 31/12/2015 3, (0) 100% 29% 0% 7% 33 1% Home Retail Group 27/02/2016 1,244 1,009 1,104 (95) 91% 52% -8% 89% (26) -2% Homeserve 31/03/2016 1, % 48% 0% 2% 0 0% Howden Joinery 31/12/2015 2, ,042 (49) 95% 45% -2% 44% 57 2% Ibstock 31/12/ % 53% 2% 104% (1) 0% IMI 31/12/2015 2,782 1,346 1, % 75% 0% 48% 40 1% 5 74 (1) 103 Inchcape 31/12/2015 2,897 1, % 75% 3% 32% (20) -1% 9 9 (3) 101 Inmarsat 31/12/2015 3, % 55% 0% 2% 2 0% 1 1 (1) 147 International Personal Finance 31/12/ (0) 99% 45% 0% 6% 1 0% Investec 31/03/2016 3, % 100% 2% 5% 5 0% Jardine Lloyd Thompson 31/12/2015 2, (130) 80% 39% -6% 31% 43 2% John Laing Group 31/12/ (36) 96% 65% -4% 120% 15 2% KAZ Minerals 31/12/ (10) 6% 50% -1% 2% 4 1% Keller 31/12/ (23) 62% 40% -4% 10% 2 0% Kier 30/06/2016 1,002 1,561 1,648 (88) 95% 30% -9% 164% 45 5% Ladbrokes 31/12/2015 1, % 35% 7% 27% 2 0% Laird 31/12/ % 79% 1% 11% 4 0% 1 1 (1) 35 Man Group 31/12/2015 2, % 73% 2% 14% (14) -1% 16 (4) Surplus / (Deficit) Dividends ( m) 11

12 Name Year End m Equity Market * Liabilities (Deficit) Level % Bonds (Deficit) as % of Market Liabilities as Unanticipated Balance Sheet Impact Balance Sheet Impact as Current Previous m m m m m m m m Marshalls 31/12/ % 72% 1% 64% (5) -1% Marstons 30/09/ % 71% 2% 61% (7) -1% Meggitt 31/12/2015 3, ,033 (239) 77% 64% -8% 33% 19 1% Micro Focus International 30/04/2016 3, (22) 16% 50% -1% 1% 0 0% - - (1) 70 Millennium & Copthorne Hotels 31/12/2015 1, (13) 83% 87% -1% 6% - 0% Mitchells & Butlers 26/09/ ,010 2,112 (102) 95% 72% -11% 222% (5) -1% MITIE Group 31/03/ (36) 82% 27% -4% 24% 3 0% 3 3 (1) 43 Morgan Advanced Materials 31/12/ (205) 72% 61% -30% 108% (1) 0% National Express 31/12/2015 1, (11) 98% 59% -1% 46% 2 0% Paragon 30/09/ (22) 81% 29% -3% 17% (5) -1% Pendragon 31/12/ (43) 90% 41% -11% 109% 22 6% Pennon Group 31/03/2016 3, (41) 95% 40% -1% 21% (1) 0% Phoenix Group 31/12/2015 1,980 4,219 3, % 42% 26% 188% 8 0% PZ Cussons 31/05/2016 1, % 76% 3% 21% 9 1% QinetiQ Group 31/03/2016 1,321 1,410 1,448 (38) 97% 62% -3% 110% (12) -1% Rathbone Brothers 31/12/ (5) 97% 38% -1% 22% 7 1% Redrow 30/06/2016 1, % 71% 1% 10% 8 1% Regus 31/12/2015 2, (1) 83% 100% 0% 0% (1) 0% Renishaw 30/06/2016 1, (68) 69% 2% -4% 14% (21) -1% Rentokil Initial 31/12/2015 3,506 1,445 1, % 78% 6% 35% 41 1% RIT Capital Partners 31/12/2015 2, % 46% 0% 1% 1 0% Rotork 31/12/2015 1, (23) 87% 46% -1% 10% 9 0% RPC Group 31/03/2016 2, (147) 59% 64% -6% 15% (43) -2% Saga 31/01/2016 2, (19) 92% 54% -1% 11% 23 1% Savills 31/12/ (16) 93% 34% -2% 27% (4) 0% Scottish Investment Trust 31/10/ (3) 85% 57% 0% 3% (0) 0% Segro 31/12/2015 3, % 71% 1% 8% 14 0% Senior 31/12/ (13) 96% 75% -1% 37% (2) 0% Serco 31/12/2015 1,224 1,309 1, % 97% 9% 98% 3 0% SIG 31/12/ (24) 86% 46% -4% 25% 4 1% Smith (DS) 30/04/2016 3, ,145 (188) 84% 30% -5% 32% 6 0% Smurfit Kappa 31/12/2015 3,675 1,388 1,991 (603) 70% 70% -16% 54% 72 2% Spectris 31/12/2015 2, (22) 86% 95% -1% 7% (8) 0% 1 1 (0) 57 Spirax-Sarco Engineering 31/12/2015 2, (74) 82% 50% -3% 15% 6 0% 7 11 (1) 140 Sports Direct International 24/04/2016 1, (13) 82% 54% -1% 4% (1) 0% SSP Group 30/09/2015 1, (14) 71% 52% -1% 3% 5 0% St. Modwen Properties 30/11/ % 59% 0% 5% (0) 0% Stagecoach 30/04/2016 1,326 3,009 3,068 (59) 98% 13% -4% 231% 82 6% (3) 62 Synthomer 31/12/2015 1, (139) 67% 46% -13% 39% 7 1% Tate & Lyle 31/03/2016 3,080 1,426 1,568 (142) 91% 72% -5% 51% (17) -1% Surplus / (Deficit) Dividends ( m) 12

13 Name Year End m Equity Market * Liabilities (Deficit) Level % Bonds (Deficit) as % of Market Liabilities as Unanticipated Balance Sheet Impact Balance Sheet Impact as Current Previous m m m m m m m m The Go-Ahead Group 02/07/ ,740 3,392 (652) 81% 15% -78% 407% 17 2% (37) 57 Thomas Cook 30/09/ ,104 1,383 (279) 80% 46% -46% 229% % Tullett Prebon 31/12/ % 3% 12% 27% 24 3% UDG Healthcare 30/09/2015 1, (6) 91% 45% 0% 5% (1) 0% Ultra Electronics Holdings 31/12/2015 1, (85) 74% 32% -7% 27% (3) 0% United Business Media 31/12/2015 2, (22) 96% 42% -1% 20% 27 1% Vedanta Resources 31/03/2016 1, (46) 40% 50% -4% 6% 10 1% Vesuvius 31/12/ (35) 95% 86% -5% 84% 16 2% Victrex 30/09/2015 1, (6) 90% 47% 0% 5% 1 0% Weir Group 01/01/2016 3, (82) 90% 70% -3% 26% 9 0% WH Smith 31/08/2015 1,815 1, % 69% 12% 52% 39 2% William Hill 29/12/2015 2, % 91% 1% 16% (16) -1% Wood Group (John) 31/12/2015 2, % 19% 0% 7% 19 1% Surplus / (Deficit) Dividends ( m) * as at 30 June

14 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. 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 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 and its 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. 14

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