RAIL JOURNEYS 2013 OF THE WORLD

Annual Report and Audited Financial Statements 2013 RAIL JOURNEYS 2013 OF THE WORLD

The theme for this year’s annual report and accounts is rail journeys of the world. Find out more about each journey at the back of this booklet. Contents

Trustee Company’s responsibilities in respect of Statement of contributions Trustee Company The Railways and summary responsibilities Pension of contributions in relation to The Trustee’s Scheme Audited payable in the year audited financial Investment Financial statements Report Appendices Statements

04 07 10 11 20 21 22 23 24 35 38 39

Actuary’s Key Statistics Report Chairman’s Independent The Trustee introduction Auditor’s Company report Independent Annual Report Auditor’s Statement about contributions to the Trustee of the RPS On behalf of your Trustee Board I introduce the Annual Report and Audited Financial Statements of the Railways Pension Scheme (‘the Scheme’) for the year ended 31 December 2013.

Investment returns in 2013 were reasonably strong. The Growth (Pooled) Fund, in which well over half the Scheme’s assets are now invested, performed well both in absolute terms (8.6%) and against benchmark (3.5%), propelled by another “double digit” year for the equities in which more than 40% of that fund is invested. The Growth Fund will not, however, match the performance of equities; rather, it is designed to balance out the risks and volatile returns associated with single-asset strategies by investing in a wide range of assets, targeting a long-term return of 5% per annum above UK RPI inflation. On an annualised basis, however, the Growth Fund is only 3.2% ahead of UK RPI inflation since its establishment in July 2010.

Property and hedge funds also had good years, returning 11.5% and 10.6% respectively, both ahead of benchmark. Of the return- seeking assets, only commodities had a disappointing year. The Chairman’s asset class is extremely volatile, and the negative return of minus 8.4% (0.6% below benchmark) was reflective of falls in commodity markets generally. Since its establishment, however, the return of the Commodities (Pooled) Fund remains ahead of benchmark.

In contrast to the favourable returns from most pooled funds,

Introduction defensive assets did not have a positive year. Index linked bonds returned 2.4%, while government bonds were almost flat at only

0.1%. The return on corporate bonds was minus 1%, reflecting

generally rising yields over the year, and was also slightly below benchmark, though performance remains above benchmark since

inception. , , In May, new pooled funds were launched for the BRASS additional voluntary contribution arrangements within the Scheme, into which most legacy BRASS assets were transferred. As well as offering choice for members, the new BRASS funds are combined with the option of two so-called “lifestyle strategies” which aim to match members’ age and time to retirement with an appropriate Late in 2012, your Trustee level of risk. Under a lifestyle strategy, savings are automatically reallocated within the available funds in order to reduce risk as announced that it intended members approach their target retirement age. to perform a wide-ranging Late in 2012, your Trustee announced that it intended to perform review of investment decision- a wide-ranging review of investment decision-making. After some making. After some preliminary preliminary investigations, work commenced in earnest in May 2013, with the assistance of external advisors. The first phase, investigations, work commenced lasting until August 2013, included a re-examination of the Trustee’s investment beliefs and an appraisal of the governance in earnest in May 2013 structure at both Trustee Company and operating executive levels. The second phase, ending in December 2013, consisted of a ,, more substantive review of the workings of the investment process through pooled funds. Chairman’s Introduction

The actions agreed during the first two phases will be implemented can result in increased contributions or changes to the sections’ John has more than 20 years’ experience in pensions. He will be in a third and final phase, which commenced in January 2014. benefit structures, the Trustee Company will only agree to these taking over as Trustee Chairman from 1 June and, together with the Key to this phase will be engagement and consultation with changes if they are in the interests of all of the affected sections’ other members of your Trustee Board, will continue to safeguard pensions committees, employers, and other stakeholders, while stakeholders. Members of the 1994 Pensioners Section and the the interests of the railways pension schemes and provide support the Trustee Company develops proposals concerning investment BR Section of the Scheme should take comfort in the protection to all members, past and present. strategy and the range of pooled funds. The results of the 2013 offered to them under the Crown Guarantee provided to their actuarial valuation of the Scheme will also form an important part sections. I wish John the very best of luck and know he will enjoy the full of these deliberations. support of your Board in meeting the various challenges to be Following on from our successes in previous years, I am pleased faced. The latest triennial valuation of the Scheme is now underway, to report that your Scheme was presented with the ‘Defined measuring the funding position of each section of the Scheme as Benefits Communications (Private Sector)’ award at the at 31 December 2013. Whilst indicative results for most sections Professional Pensions Scheme of the Year awards during 2013 were provided to sponsoring employers in early 2014, the first and I would like to use this section of the annual report to thank set of draft results will not be available until shortly after these the staff of RPMI who have again provided an excellent service in audited accounts are published. When the Actuary calculates supporting the Scheme throughout the year. Derek Scott the valuation results he will take into consideration a number of Chairman of the Trustee Company variables, including expected future investment returns, benefit Finally, on a personal note, after 17 years as Trustee Director – payments, contribution payments and demographic factors. Due and the last seven as Chairman – I’ll be stepping down from Annual Report and Audited Financial Statements to a combination of these factors, many sections are expected to my current role at the start of the summer. I’m past halfway in my have a funding deficit at the current valuation which will require the final six-year term of office, which ends in 2016, so this is sponsoring employers of those sections to agree a suitable recovery an appropriate time to pass the baton over to John Chilman. plan with your Trustee Company. Whilst these recovery plans

2013 2013 Following on from our successes in previous years, I am pleased to report that your Scheme was presented with the ‘Defined Benefits Communications (Private Sector)’ award at the Professional Pensions Scheme of the Year awards during 2013’. 4-5 Moscow RUSSIA

Ekaterinburg

Irkutsk Novosibirsk Vladivostok

Ulaanbaatar

2013 MONGOLIA

Beijing TRANS-SIBERIAN RAILWAY CHINA The Railways thus avoidingsome oftheexternalinvestmenttransaction costs. where possible,buy pooledfundunitsfromsections wishingtosell, Sections wishing to investinpooledfundsthefirst instance, management costsandaccessto a widerangeofinvestments. allows allsectionstobenefitfrom economiesofscaleininvestment individual investmentmanagers.The sizeofthepooledfundsalso considered separatelyfromtheappointment andmonitoringof For example, theassetallocationneedsofsectionscanbe resulting inseveraladvantagesfor the schemesandsections. would bepossibleweresectionstoinvesttheirassetsseparately, ‘pooled funds’.Theseinvestmentfundsaresignificantlylargerthan The industry-wide structureallowstheassets tobecombinedinto Advantages ofanindustry-widescheme section oftheSharedCostArrangement. participate inmorethanonearrangementand the Industry-Wide DefinedContributionSection.Employersmay the DefinedBenefitArrangement,OmnibusSectionand Shared CostArrangement,theDefinedContribution The RPScomprisessixparts:the1994Pensioners Section,the within theprivatisedrailwayindustry. and providespensionsfor156(2012–162)companiesoperating the Trustee Company. ItisoneofthelargestschemesinUK The RPSisthelargestoffourpensionschemesmanagedby Pension SchemeweretransferredintotheRPS on thatdate. Active members,preservedpensionersand oftheBR multi-employer railwayindustry.Itwascreated on 1October1994. scheme createdtoprovidefundedpensionarrangements intheprivatised The RailwaysPensionScheme(‘RPS’)isanindustry-wide pension Pension Scheme Appendix G. A summaryofthemainprovisionsSchemeisshownin in termsofqualitystandardsagainstotherproviders. pensions policy, communicationsandfinanceteams,benchmarked through itsexperiencedadministration,investment,secretariat, The Trustee Companyprovideshigh-qualitypensionsservices employers whileremaininginthesamepensionscheme. of employeesbetweenrailwaycompanies,allowingthemtochange The industry-wide natureoftheSchemecansimplifymovement pensions inpayment ofthe1994Pensioners Sectionat1August The SecretaryofState guaranteesallpastserviceliabilities and Transport. agreement betweentheTrustee CompanyandtheDepartmentfor also transferredtothe1994Pensioners Sectionin2007, after and liabilitiesofanothersixclosed railwaypensionschemeswere were alsotransferredtothe1994 Pensioners Section. Theassets 2000, pensionersandpreserved oftheBRSection of theRPS–1994Pensioners Section.Later, on30December on 30September1994weretransferredintoaseparatesection Pensioners andpreservedpensioners intheBRPension Scheme The 1994PensionersSection members. 2007, plusanyfutureannualpensionincreasesawardedtoSection employers isgiven inNote10totheAuditedFinancial Statements. who haveprotected rights.Afulllistofsectionsand participating Act 1993,however, sotheirpensionrights maydifferfromthose Scheme. Newmembersarenotprotected undertheRailways employer whoareemployedinthe railwayindustrymayjointhe new members.For opensections,employeesoftheparticipating had activemembersand45ofthese sectionsremainopento As at31December2013,93ofthe 105sharedcostsections result inthecreationormergersofsections. Subsequent salesandtransfersofpartsbusinessescannow RPS assetswastransferredtothenewsectionofScheme. BR businesswasfranchisedorsold,aproportionateshareof be createdforeachdesignatedemployer. Originally, aseach A separatesectionwithintheSharedCostArrangementmay the RPSwhiletheycontinuetobeemployedinrailwayindustry. members withprotectedrightshaveastatutoryrighttoremainin into theSharedCostArrangementon1October1994.Transferred All activemembersoftheBRPension Schemeweretransferred The SharedCostArrangement

6-7 Annual Report and Audited Financial Statements The Railways Pension Scheme

The Omnibus Section Contribution Section was established on 1 November 2001. The Pensions Committees Employers with fewer than 50 members are eligible to combine in section aims to provide employers with a flexible defined contribution The designated employer of each shared cost section may establish a multi-employer Omnibus section. Employers may remain in the scheme. At the end of 2013, 20 employers were part of this section a pensions committee to which the Trustee Company will delegate arrangement if their membership increases above 50. At the end of (2012 – 14 employers). certain of its powers and duties under Appendix 5 of the Pension Trust, 2013, 40 employers (2012 – 42 employers) were part of the Omnibus which includes responsibilities such as the determination of incapacity section. A full list of participating employers is given in Note 10 to the At 31 December 2013, there were three defined contribution sections and discretionary benefits. Setting investment strategy can also be Audited Financial Statements. (2012 – three sections) but no other defined benefit arrangements vested in the committees under Clause 5G of the Pension Trust, (2012 – none). subject to the Trustee Company’s approval. All pensions committees have an equal number of employer and member nominees. The

Defined Contribution Sections, other Defined Benefit Reporting chairmanship alternates annually between the employer and member Arrangements and Industry-Wide Defined Contribution There are separate records for each section and each section receives nominees. The Trustee Company, however, retains responsibility for Section quarterly reports including accounts, investment and administration supervising how the committees exercise their powers and monitors

Employers may set up a different defined benefit section and/or performance. Each section is independently valued by the Scheme necessary training undertaken by committee members. defined contribution section or they can choose to join the Industry- Actuary. Wide Defined Contribution Section. The Industry-Wide Defined

, , The Trustee Company provides high-quality pensions services through its experienced administration, investment, secretariat, pensions policy, communications and finance teams, benchmarked in terms of quality standards against other providers. ,, The Railways

employers sections members Arrangement 209,079 • Adjustingforthose employersthatparticipateinmore thanonesectionorarrangement, thenumberofemployersacross theRPSreducesfrom197above to156. Shared Shared Cost 105 133

Arrangement Pension Scheme Defined Defined Benefit Benefit 0 0 0

Arrangement Contribution Contribution Defined Defined 75 3 3

Industry-Wide Contribution Contribution Defined Defined 2,807 Section 20 1

123,833 Pensioners Section 1994 1 1

Omnibus 1,646 Section 40 1

8-9 Annual Report and Audited Financial Statements Key Statistics

Five-year summary of RPS participation Five-year summary of financial statements of RPS Five-year summary of net assets of RPS

2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 Total assets of the Scheme Sections 111 112 111 109 107 £m £m £m £m £m Employers 197 199 208 212 217 Scheme benefits Active Pensions 725 710 684 664 648 25 membership 87,528 85,321 84,411 84,304 86,747 Lump sums 132 133 129 170 165 Death benefits 22 21 21 19 22 Preserved 20 membership 108,440 109,219 109,088 109,138 108,252 Total benefits 879 864 834 853 835 Pensioners 141,472 143,668 145,278 145,118 144,340 Contributions income 15 Total membership 337,440 338,208 338,777 338,560 339,339 Employees 270 263 255 255 248 £bn Employers 366 364 423 374 361 10 Government 23 25 25 26 28 Total contributions 659 652 703 655 637 5 Comparison of membership of sections Net transfer values1 (220) 19 32 37 10 Admin expenses (including PPF) (50) (47) (43) (56) (33) 0 50 400,000 Change in market 45 values & interest2 1,697 1,430 (3) 1,702 2,313

350,000 2009 2010 2011 2012 2013 337,440 40 300,000 Net increase/ 35 (decrease) in the 1,207 1,190 (145) 1,485 2,092 30 250,000 Scheme Key statistics for 2013 25 200,000 Net assets of 20 Scheme 20,105 18,898 17,708 17,853 16,368 137,887 150,000 15 Total 80,948 100,000 Membership 10 47,239 1 337,440 64,181 Net transfer values out includes £229m of RPS assets transferred to the 5 33,467 50,000 19,093 1,709 PPF in 2013. 0 0 Net increase 2 in the Scheme 0-99 Change in market values & interest includes £320m of investment income £1,207m in 2013 (2012 - £265m). 100-999 >10,000 1,000-1,999 2,000-2,999 3,000-3,999 4,000-4,999 5,000-9,999 Net assets of Scheme £20,105m Number of sections Cumulative membership The notesnumbered1to10form anintegralpartoftheseAuditedFinancialStatements. Audited Net assetsattheendofyear Net assetsatthestartofyear Net increaseintheSchemeduringyear Net returnsoninvestments Change inmarketvalues Returns oninvestments Net withdrawalsfromdealingswithmembers Total withdrawals PPF levies Administrative expenses Individual transfersout Death benefits Lump-sum retirementbenefits Group transfersout Pensions Individual transfersin Contributions Contributions andbenefits Fund accountfortheyearended31December2013 Financial Statements Notes 6 5 4 3

(1,168) (919) (1,118) (872) 20,105 18,898 18,898 17,708 1,207 1,190 1,697 1,430 1,697 1,430 (490) (240) (132) (133) (229) - (725) (710) 2013 2012 (30) (29) (20) (18) (10) (8) (22) (21) 678 679 659 £m 19 652 27 Chairman,Trustee Board DerekScott Approved bytheDirectorsofTrustee Companyon7May2014. BR SectionarebackedbyCrownGuarantees. conjunction withthesefinancialstatements.Benefitspayableforthe1994 PensionersSectionandthe pensions isaddressedintheActuary’sReport,whichsummarisedonpage38andshouldberead take accountoftheobligationstopaypensionsandotherbenefitsinfuture.Theabilityfuture The auditedfinancialstatementssummarisethetransactionsandnetassetsofScheme.Theydonot

Net assetsattheendofyear Net current(liabilities)/assets Investments Net assetsstatementasat31December2013 Audit Committee Director andChairman, John Mayfield Notes 10 7 6 20,105 18,898 20,122 2013 2012 (17) £m 18,891 7 10-11 Annual Report and Audited Financial Statements Audited Financial Statements

to receive at least £1 per unit upon retirement or on earlier death. Pension protection fund (‘PPF’) levies Notes to the audited financial statements Members leaving before age 55 may receive a discounted value PPF levies are accounted for in the year in which they fall due. for the year ended 31 December 2013 depending on their age. Transfer values 1. Basis of preparation c. Substitution orders refer to deferred payments due under the Transfer values, including PPF transfers, are determined on the The audited financial statements have been prepared in accordance Transport Act 1980, and are valued as certified by the Scheme advice of the Scheme Actuary and, where applicable, the PPF. with applicable United Kingdom law, the Occupational Pension Actuary. The Scheme Actuary is James Wintle, of Towers Watson Individual transfers in or out are accounted for when received or paid, Schemes (Requirement to obtain Audited Accounts and a Statement Limited. The Government Actuary, Trevor Llanwarne (who will be which is normally when member liability is accepted or discharged. from the Auditor) Regulations 1996, and with the guidelines set out succeeded by Martin Clarke during 2014), is joint Actuary for the Group transfers are accounted for in accordance with the terms in the Statement of Recommended Practice, ‘Financial Reports of 1994 Pensioners Section and the BR Section. of the transfer agreement. Transfer of undertakings (protection of Pension Schemes (revised May 2007)’. employment) (‘TUPE’) and other intra-RPS transfers are settled by a d. Loans and deposits and net current assets/(liabilities) are mixture of pooled fund units and cash pro rata to the asset mix of the 2. Accounting policies included at book cost, which the Trustee Company considers to be a transferring section. The financial statements have been prepared on an accruals basis. reasonable estimate of accounting fair value. The principal accounting policies of the Scheme are as follows: 3. Contributions receivable Change in market values Investments Change in market values mainly comprise gains and/or losses on 2013 2012 Investments are included in the financial statements at the year-end investments arising in the year and reinvested investment income. £m £m using the following valuation bases: Investment income arising from the underlying investments of pooled Members’ contributions a. The majority of the assets of the Scheme are invested in a investment vehicles is reinvested within the pooled funds, reflected in Normal 196 201 portfolio of pooled funds, which operate as internal unit trusts for the unit prices and reported within change in market values. Additional voluntary (including BRASS AVCs) 52 48 those railway pension schemes under the control of the Trustee. Deficit funding 22 14 Pooled fund unit holdings are valued on the basis of the unit prices Realised and unrealised gains and losses on investments, including Employers’ contributions of the units held by the Scheme in each pooled fund at the year-end. income receivable, are dealt with in the pooled fund accounts in the Normal 298 306 Unit prices reflect the market valuations of the underlying assets held year in which they arise and are reflected in the pooled fund unit Deficit funding 51 39 by the pooled funds and include income receivable on investments prices. Government support 23 25 held. Further details of the pooled fund investment accounting BRASS matching 15 16 policies are set out in the extracts from the pooled fund accounts in Contributions and benefits Augmentation 2 3 Appendix I. Contributions, including AVCs, and benefits are accounted for in the year in which they fall due. Payments under the Transport Act 1980 659 652 b. The Trustee Company holds assets invested separately from the are accounted for as they become payable. Amounts receivable main Scheme to secure additional benefits on a defined contribution to extinguish future liabilities under the Transport Act 1980 are (‘DC’) basis. Members participating in these arrangements each accounted for when the future liability is discharged. Deficit funding contributions are being paid into the Scheme by receive an annual statement confirming the amounts held to their both employees and employers until January 2028, or earlier, in account and the movements in the year. The assets are held in a Benefits payable are accounted for from the period in which the accordance with recovery plans to improve the funding position of portfolio of pooled funds valued at their bid price or last traded price members notify the Trustee of their decision on the type or amount of sections of the Scheme. at the year-end date, as advised by the investment manager. benefit to be taken or, if there is no member choice, from the date of retirement or leaving. Further information on contribution rates can be found in the Additional Voluntary Contribution (‘AVC’) investments (BRASS) in Actuary’s Report on page 38. Information on late payments pooled investment vehicles are stated at market value at the year-end Administrative expenses during the year can be found on page 41. Further information on date as advised by the manager. The Pension Assured Fund (‘PAF’) Administrative expenses are accounted for in the year in which they government support can be found on page 37. is valued as a whole by reference to the market value of assets fall due. within the fund as advised by the provider, Aviva. Members holding units in the PAF aged 55 or more are, however, guaranteed by Aviva in thepooledfundaccountsAppendixI. the unitpricesofpooledfundinvestmentsanddisclosedseparately investment managementfeesandcosts,whicharedeductedfrom Administration andtrusteegovernanceexpensesdonotinclude and areallocatedaccordingtothemembershipofeachsection. reports. TheseactivitiesarecarriedoutbyRPMILimited(‘RPMI’) transactions andpreparationoffinancialstatementsother Pensions administrationchargescover theprocessingofmember 5. Administrativeexpenses Limited. Holdings Limited,CatalisLimitedandWestern Track Engineering with OmnibussectionmemberspreviouslyemployedbyBridgen members oftheRelayfastandFastline sectionsoftheRPSalong RPS assetstothePension ProtectionFund inrelationto (‘PPF’) Group transfersoutof£229min2013relateto 4. Grouptransfersout Audited

Communications Legal fees Other overheads Trustee governance Actuarial fees Pensions administration Financial Statements

2013 2012 £m 20 18 12 1 1 1 2 3 2 10 1 1 2 2 6. Investments BRASS investments include716,363,318unitsinthe PAF.BRASS Further informationonthePAF canbefoundonpage37. Other cashandinstruments Substitution orders (AVC)BRASS andDC by schemes Securities directlyheld Cashflow matching Commodities LDI Passive Equity Hedge Funds Index Linked Property Cash Fund Non-Government Bond Government Bond Defensive Infrastructure Equities Private Equity Growth Pooled Funds

1,335 4120 62

102662 606192 605157 810 680139

1,805 18,891 8,6471,534 Market values at 31/12/12 18,751 3,535 16,860 2,781 2,424 140 556 13 275 - 112 115 127 449 £m

Purchases at cost 741 £m 47 (92) 23 (18) 7 - (61)(10) - - (229) - - (1,596) Proceeds (3,990) 1,697 19,993 (3,236) 1,603 (754) (275) - (499) (170) Sales (31) (10) 16 (73) (21) (95) 152 (10) (56) £m - 27596 market values Change in 385 249 790 (3) £m (1) (8) (8) 67 28 9 3 1 Market values at 31/12/13 18,008 10,915 20,122 1,389 1,213 1,891

135 248 266 724 733 801 867 129 £m 27 41 68 79

12-13 Annual Report and Audited Financial Statements Audited Financial Statements

6. Investments (cont.) 7. Net current (liabilities)/assets Certain directors of the Trustee Company and its subsidiaries receive Income from pooled fund investments is capitalised within the price of remuneration, which is disclosed in the financial statements of those the pooled fund units and, therefore, reflected within the market values 2013 2012 companies. The Scheme bears its share of this remuneration through of investments (see page 13). Although income is not distributed, the £m £m recharges. pooled fund regulations allow the Scheme to extract its share of pooled fund income at no cost, by selling units at zero spread. The income Contributions due from employers 22 21 9. Employer-related investments withdrawn from the pooled funds in this way can then be used to pay PPF levies 1 3 As at 31 December 2013, investments in employers amounted to benefits. Administration expenses (3) (3) no greater than 5% of the assets of the Scheme, and, for any single Benefits payable (4) (8) section, the investment in its sponsoring company was not greater Taxation and social security (7) (6) than 5% of the assets of the section. Investment administration includes the cost of selecting and monitoring Assets payable to the PPF (26) - the investment managers and custodians and the preparation of pooled fund accounts. These activities are carried out by RPMI. (17) 7 Investment securities issued by HM Government are excluded from the definition of employer-related investments for the purposes of these Further analysis of investments, charges and fees for each pooled fund audited financial statements. is provided in the pooled fund accounts in Appendix I. The percentages £26m of assets payable to the PPF shown in the table above relate of the pooled funds’ assets that relate to RPS investments are shown to illiquid assets that remain invested in the pooled funds but whose in the table below. ownership has transferred to the PPF. These assets relate to the and Relayfast sections as well as the Catalis Ltd, Western Track Engineering Ltd and Bridgen Holdings Ltd employers within the % of pooled % of pooled fund owned fund owned Omnibus section. 31/12/13 31/12/12 £241,000 of unpaid contributions at the year-end that are on the Pooled Funds schedules of contributions were not paid by their due date. Of these, Growth 93.2 91.8 £184,000 has since been paid and £57,000 remains outstanding. Private Equity 96.0 95.9 The £57,000 of outstanding contributions relate to contributions due Equities* 96.6 98.3 from Railcare Limited who went into administration during 2013. An Infrastructure 95.2 95.3 application has been made to the insolvency practitioner to pay these Defensive 94.8 100.0 contributions on the employer’s behalf. Government Bond* 91.9 90.7 Non-Government Bond* 96.9 95.7 Cash Fund* 90.8 92.1 Property* 96.0 97.7 8. Related party transactions Index Linked 83.7 78.9 The Trustee Company and its subsidiaries, RPMI and Railpen Hedge Funds* 75.9 83.5 Investments, provide services to the Scheme (explained on page 24). Passive Equity 100.0 100.0 The charges payable, and those of external service providers, are LDI 100.0 100.0 detailed in note 5. At 31 December 2013, net current assets included Commodities* 100.0 100.0 a liability of £2.7m in respect of these charges (2012 – a liability of Cashflow matching 89.8 90.7 £2.7m).

* The total value of the pooled funds used in the percentage At 31 December 2013, eight directors of the Trustee Company calculations only include scheme investments in the pooled funds and were members of the Scheme and two of these directors were also so exclude cross-held investments owned by the Growth, Defensive and Non-Executive Directors of RPMI. All Executive Directors of RPMI and BRASS pooled funds. Railpen Investments are also members of the Scheme. All directors receive benefits on the same basis as other members of the Scheme. The netassetsofeachsectiontheSchemeat31December2013areshownbelow: 10. Netassetsattheendofyear Audited

Bombardier Transportation UK Bombardier Transportation Bombardier Transportation ATOS Worldline UKLtd Arriva TrainsWales *1994 Pensioners Babcock RailLtd Alstom Railways Balfour Beatty Angel Alpha Trains BAM Nuttall (Signal) UK Atkins Ltd Amey Rail ATOC Ltd Section Abellio AMCO Atos c2c

Financial Statements Employer UK Ltd Bombardier Transportation UK Ltd Bombardier Transportation BAM NuttallLtd Balfour BeattyRailLtd Balfour BeattyGroupLtd First ProjectsLtd First EngineeringHoldingsLtd Babcock RailLtd ATOS ITServicesUKLtd ATOC Ltd Atkins Ltd Arriva CymruLtd /Trenau Abellio GreaterAngliaLtd Angel Trains Ltd Amey RailLtd Amalgamated ConstructionLtd Alstom Ltd Alpha Trains (UK)Ltd Abellio Transport HoldingsLtd for Transport The SecretaryofState ATOS Worldline UKLtd (Rolling Stock)UK Ltd Bombardier Transportation UK Ltd Bombardier Transportation

membership as at 31/12/13 123,833 3,213 2,367 1,271 3,420 2,509 2,089 1,220 Total 167 372 357 877 904 237 166 11 17 27 38

at 31/12/13 Net assets 3,641 227 192 165 148 272 214 228 105 £m 41 76 42 37 1 1 7 4 6 1

Carlisle Cleaning Services Ltd CleaningServices BUPA OccupationalHealth CSC ComputerSciences CSC Chiltern RailwayCo.Ltd British TransportPolice Carillion Rail(Centrac) Carillion Rail(GTRM) DB Schenker Rail (Maintenance) Clientlogic COMATEC c2c Rail Section Employer *BR BT

Railway InternationalLtd English, Welsh &Scottish Railway HoldingsLtd English, Welsh &Scottish Engineering SupportGroupLtd Axiom Rail(Cambridge)Ltd DB Schenker Rail(UK)Ltd CSC ComputerSciencesLtd CSC Colas RailLtd Clientlogic (UK)Ltd Carillion ConstructionLtd c2c RailLtd British Telecommunications plc *** COMATEC UKLtd Company Ltd The ChilternRailway Carlisle CleaningServicesLtd Carillion ConstructionLtd Occupational HealthCareLtd Authority British Transport Police Scottish Ministers UndergroundLtd Railways Ltd London &Continental RailLinkLtd BRB (Residuary)Ltd for Transport ofState The Secretary membership as at 31/12/13 10,369 2,203 4,006 1,560 3,302 Total 325 238 372 875 10 65 32 67 98

at 31/12/13 Net assets 1,010 147 227 116 £m 80 13 32 86 15 1 3 9 1 2 14-15 Annual Report and Audited Financial Statements Audited Financial Statements

Section Employer Total Net assets Section Employer Total Net assets membership as at 31/12/13 membership as at 31/12/13 at 31/12/13 £m at 31/12/13 £m

DeltaRail Group (Link) DeltaRail Group Ltd 206 31 Interfleet Technology Interfleet Technology Ltd 339 46

DeltaRail Group (Rail) DeltaRail Group Ltd 274 65 Island Line Stagecoach South Western 89 5 Trains Ltd DeltaRail Group (TCI) DeltaRail Group Ltd 127 25 ISS Transport Services ISS Facility Services Ltd 209 6 East Coast Main Line 7,436 379 ISS Support Services Ltd Company Ltd ISS Transport Services Ltd East Midlands East Midlands Trains Ltd 4,100 260 ** Jarvis Facilities Jarvis Rail Ltd 1,821 197 Fastline Ltd Environmental Scientifics Environmental Scientifics 299 24 Jarvis plc Group Group Ltd ESG Asbestos Ltd Lionverge Lionverge Civils Ltd 109 5 Eurostar Eurostar International Ltd 4,055 302 London & South Eastern London & South Eastern 8,795 521 Railway Ltd Railway Ltd Eversholt Rail (UK) Ltd Eversholt Rail (UK) Ltd 115 35 London and North Western London and North Western 67 7 First Capital Connect First Capital Connect Ltd 5,338 284 Railway Railway Company Ltd First Great Western First Greater Western Ltd 11,045 613 London Eastern Railway Abellio Greater Anglia Ltd 1,190 90 (West Anglia) First ScotRail First ScotRail Ltd 7,887 501 London Midland London & 5,463 333 Freightliner Freightliner Ltd 3,162 287 Railway Ltd Freightliner Heavy Haul Ltd Freightliner Maintenance Ltd London Overground London Overground Rail 1,384 75 Management Consortium Operations Ltd Bid Ltd London Underground London Underground Ltd 42 1 GB Railways GB Ltd 313 35 Merseyrail Merseyrail Electrics 2002 Ltd 2,292 134 Global Crossing Level 3 Communications UK Ltd 234 38 MITIE Facilities Services MITIE Facilities Services Ltd 45 1 Great Eastern Railway Abellio Greater Anglia Ltd 2,312 178 Mouchel Parkman Rail Ltd *** Mouchel Rail Ltd 7 1 Halcrow Rail Halcrow Group Ltd 244 41 National Express Services Ltd ***National Express 144 2 HS1 HS1 Ltd 35 7 Services Ltd Hull Trains Hull Trains Company Ltd 61 6 Audited

New Cross Country Trains New CrossCountry Northern (ex NorthWest) Northern (ex NorthEast) Omnibus Section Employer

Financial Statements Ltd Rail ManagementServices *** Puccino’sLtd Phoenix ITServicesLtd Orient ExpressServicesLtd O2 UnifyLimited Ltd NG BaileyFacilities Services *** MouchelRailLtd Management Ltd MITIE Technician Facilities Manpower UKLtd Lorne Stewartplc Keolis (UK)Ltd (Facilities Management)Ltd Interserve Harsco RailLtd Forth andObanLtd EB CentralServicesLtd DHL ServicesLtd ComputerSciencesLtd CSC Crossrail Ltd Colas RailLtd Cats SolutionsLtd CapGemini UKplc UK Ltd Bombardier Transportation Amec GroupLtd Aggregate IndustriesUKLtd Northern RailLtd Northern RailLtd XC Trains Ltd Infrastructure Ltd Network Rail membership as at 31/12/13 £m 43,414 1,646 4,606 5,060 3,845 Total at 31/12/13 Net assets 4,641 111 281 343 257

Owen WilliamsRailways Omnibus (continued) Rail GourmetUKLtd **Railcare (2007) Section Employer Qjump

Qjump Ltd Wetton CleaningServicesLtd Ltd West CoastRailwayCompany Weedfree Ltd Services Ltd Weatheralls Management Vossloh CogiferUKLtd Businesses Ltd VolkerRail Specialist Voestalpine VAE UKLtd **Vital RailLtd TeleTech UKLtd Ltd Telent Technology Services Staveley Industriesplc Maintenance Ltd Stagecoach Supertram Sodexho Ltd Signet SolutionsLtd Services (UK)Ltd Rentokil InitialFacilities Ltd Railways Vehicle Engineering Railcare Ltd International Ltd Rail GourmetWaterloo Rail GourmetUKLtd Porterbrook MaintenanceLtd Company Ltd Porterbrook Leasing Amey OWRLtd membership as at 31/12/13 £m Total 125 340 451 166 332 at 31/12/13 Net assets 39 28 33 56 3 16-17 Annual Report and Audited Financial Statements Audited Financial Statements

Section Employer Total Net assets Section Employer Total Net assets membership as at 31/12/13 membership as at 31/12/13 at 31/12/13 £m at 31/12/13 £m

RPMI RPMI Ltd 647 56 The Chiltern Railway Company The Chiltern Railway 1,236 88 Company Ltd RSSB Rail Safety and Standards 425 66 Board Ltd The QSS Group Ltd The QSS Group Ltd 75 8 RIQC Ltd Scott Wilson URS Infrastructure and 212 42 Environment UK Ltd Torrent Trackside Ltd Torrent Trackside Ltd 8 1

Serco Serco Ltd 568 53 TransPennine Express (Former First/Keolis Transpennine Ltd 854 66 Arriva Trains Northern) Serco (UK) Services Ltd Serco (UK) Services Ltd 6 0.1 TransPennine Express (Former First/Keolis Transpennine Ltd 640 42 Siemens Siemens plc 91 6 North Western Trains)

Siemens Enterprise Unify Enterprise 5 1 Unipart Rail - NRS Unipart Rail Ltd 617 54 Communications Ltd Communications Ltd Unipart Rail - Railpart Unipart Rail Ltd 356 44 Signalling Solutions Ltd Signalling Solutions Ltd 53 7 Unisys Unisys Ltd 30 2 South West Trains Stagecoach South Western 10,892 597 Trains Ltd UPS UPS Ltd 357 33

Southern Southern Railway Ltd 9,808 439 Voith Voith Industrial Services Ltd 21 1

Specialist Computer Centres Specialist Computer Centres plc 33 3 Voyages- UK Ltd Voyages-sncf UK Ltd 40 7

Swirl Service Group ISS Facility Services Ltd 9 0.1 Wabtec Rail Ltd Wabtec Rail Ltd 10 1 ISS Support Services Ltd ISS Transport Services Ltd West Coast Traincare Alstom Ltd 1,048 100 Tata Steel UK Ltd Tata Steel UK Ltd 553 38 West Coast Trains Ltd West Coast Trains Ltd 7,152 444 Tata Steel UK Rail Consultancy Ltd Westinghouse Rail Systems Siemens Rail Automation 912 140 Holdings Ltd Thales Information Systems Thales Information 29 4 Systems Ltd Wrexham, Shropshire & *** Wrexham, Shropshire 32 1 Marylebone Railway & Marylebone Railway Thales Transport and Security Thales Transport and 1,998 247 Company Company Ltd Security Ltd Thales Corporate Services Ltd 334,558 20,068 Thales UK Ltd ***Denotes employersthatwerein administrationornolongertradingat31December2013 ** Denotessections/employersthat wereinaPPFassessmentperiodat31December2013 * DenotessectionswithaCrownGuarantee bold. For thosesectionsthathavemorethan oneparticipatingemployer, thedesignatedemployerisshownin Audited

West AngliaGreatNorthern Wales andWest Passenger Defined contribution arrangement c2c RailLtd Trains Ltd Section Employer Railway

Financial Statements Railway Ltd West AngliaGreatNorthern Trains Ltd Wales andWest Passenger c2c RailLtd membership as at 31/12/13 £m Total 55 18 2 at 31/12/13 Net assets 0.004 0.02 0.2

Industry-Wide Defined Contribution Section Section Employer

Unipart RailLtd Company Ltd The ChilternRailway Tata SteelUKLtd Trains Ltd Stagecoach SouthWestern Company Ltd Swietelsky Construction Southern RailwayLtd RPMI Ltd International Ltd Rail GourmetWaterloo Rail GourmetUKLtd Company Ltd Porterbrook Leasing Northern RailLtd London EasternRailwayLtd Hull Trains CompanyLtd GB RailfreightLtd Freightliner Ltd First/Keolis Transpennine Ltd Eversholt Rail(UK)Ltd East MidlandsTrains Ltd Babcock RailLtd Abellio GreaterAngliaLtd membership as at 31/12/13 £m 337,440 2,807 Total at 31/12/13 Net assets 20,105 37 18-19 Annual Report and Audited Financial Statements Independent Auditor’s report

Independent Auditor’s report to the Trustee of the RPS ■ contain the information specified in Regulation 3 of, and the We have audited the financial statements of the RPS for the year Schedule to, the Occupational Pension Schemes (Requirement ended 31 December 2013 set out on pages 11 to 19. The financial to obtain Audited Accounts and a Statement from the Auditor) INDIAN PACIFIC reporting framework that has been applied in their preparation Regulations 1996, made under the Pensions Act 1995. is applicable law and UK Accounting Standards (UK Generally

Accepted Accounting Practice). This report is made solely to the Trustee, as a body, in accordance 2013 with the Pensions Act 1995 and Regulations made thereunder. Our audit work has been undertaken so that we might state to the Trustee those matters we are required to state to it in an Auditor’s Gareth Horner report and for no other purpose. To the fullest extent permitted by for and on behalf of KPMG LLP, Statutory Auditor law, we do not accept or assume responsibility to anyone other than Chartered Accountants the Scheme Trustee, as a body, for our audit work, for this report, or 15 Canada Square for the opinions we have formed. Canary Wharf London, E14 5GL Respective responsibilities of Trustee and Auditor 7 May 2014 As explained more fully in the Statement of Trustee’s responsibilities set out on page 23, the Trustee is responsible for the preparation of financial statements which give a true and fair view in accordance with UK Generally Accepted Accounting Practice.

Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). These standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statements A description of the scope of an audit of financial statements is AUSTRALIA provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate

Opinion on financial statements In our opinion, the financial statements: Longest straight stretch of track in the world

■ show a true and fair view of the financial transactions of the Scheme during the Scheme year ended 31 December 2013, Indian Sydney and of the amount and disposition at that date of its assets Ocean Perth and liabilities, other than liabilities to pay pensions and benefits after the end of the Scheme year; Adelaide ■ have been properly prepared in accordance with UK Generally Pacific Accepted Accounting Practice; and Ocean Ocean Pacific Chairman DerekScott Signed forandonbehalfoftheTrustee on7May2014. Trustee Company’sresponsibilities... schedules intheAuditors’StatementaboutContributions. year ended31December2013.TheSchemeAuditorreportsoncontributions payableunderthe contributions certifiedbytheSchemeActuaryandpaymentschedules inrespectoftheScheme It setsouttheemployerandmembercontributionspayableto Schemeundertheschedulesof Trustee. This summaryofcontributionshasbeenpreparedonbehalfof, andistheresponsibilityof, the Scheme yearended31December2013 Trustee’s summary ofcontributionspayableundertheschedulesinrespect 2004 toconsidermakingreportsThePensions Regulatorandthemembers. Where breachesoftheschedulesoccur, theTrustees isrequiredbythePensions Acts1995and is inplace,accordancewiththeSchemerulesandrecommendationofActuary. Scheme bytheemployerinaccordancewithschedulesofcontributions,orwherenoschedule of anyactivemembertheschemeandformonitoringwhethercontributionsaremadeto The Trustee isalsoresponsibleforkeepingrecordsinrespectofcontributionsreceived 1995 respectively, relevanttoeach ofthesectionsScheme. of contributionsandpaymentschedulesdrawupinaccordancewiththePensions Acts2004and impracticality ofagreeingoneschedulemeansthattheTrustee hasdecidedtomaintainschedules to bepaid.TheSchemehasover100sectionsandapproaching200participatingemployers. and theactivemembersofschemedatesonorbeforewhichsuchcontributionsare showing theratesofcontributionspayabletowardsSchemebyoronbehalfemployers maintained andfromtimetorevisedschedulesofcontributionspayment The Trustee isresponsibleunderpensionslegislationforensuringthatthereareprepared, Statement ofTrustee’s responsibilitiesinrespectofcontributions summary ofcontributionspayableintheyear ...in respectofthecontributionsand Contributions payableundertheschedulesinrespectofSchemeyear statements inrespectoftheSchemeyear: Reconciliation ofcontributionspayableundertheschedulestoreportedinfinancial Reconciliation ofcontributions 196 15 23 52 51 634 2 22 298 financial statements Total contributionsreportedinthe Augmentation Actuary: rules andrecommendationsoftheScheme Contributions payableunderthesection qqqq the schedules Contributions payableunder Member: Employer: Government support (as above) Contributions payableundertheschedules Deficit contributions Additional voluntarycontributions Normal contributions matchingcontributions BRASS Deficit contributions Normal contributions £m £m 659 634 634 196 298 23 52 15 22 51 2 20-21 Annual Report and Audited Financial Statements Independent Auditor’s statement...

...about contributions to the Trustee of the RPS

We have examined the summary of contributions to the RPS for The Trustee has a general responsibility for procuring that Statement about contributions payable under the the Scheme year ended 31 December 2013 which is set out in contributions are made to the Scheme in accordance with schedules the Trustee’s Report on page 21. those schedules of contributions and payment schedules as if In our opinion contributions for the Scheme year ended 31 the Pensions Acts 1995 and 2004 applied to those individual December 2013 as reported in the summary of contributions and This statement is made solely to the Trustee, as a body, in sections and employers, or, where there is no applicable schedule, payable under the schedules have in all material respects been accordance with the Pensions Act 1995 and Regulations made in accordance with the Scheme rules and the recommendations paid at least in accordance with the schedules of contributions thereunder. Our work has been undertaken so that we might state of the Actuary. certified by the Actuary, the payment schedules or the Scheme to the Trustee those matters we are required to state to it in an rules and the recommendations of the Actuary. Auditor’s statement about contributions and for no other purpose. The Trustee is also responsible for keeping records in respect To the fullest extent permitted by law, we do not accept or assume of contributions received in respect of active members of the responsibility to anyone other than the Trustee, as a body, for our Scheme and for monitoring whether contributions are made to work, for this statement, or for the opinions we have formed. the Scheme by the employer in accordance with the schedule of contributions and payment schedules. It is our responsibility to Respective responsibilities of Trustee and Auditor provide a statement about contributions paid under the schedule As explained more fully in the Statement of Trustee’s of contributions and payment schedules and to report our opinion responsibilities, the Trustee is responsible for ensuring that there to you. Gareth Horner are prepared, maintained, and from time to time revised, schedule for and on behalf of KPMG LLP, Statutory Auditor of contributions and payment schedules showing the rates and Scope of work on statement about contributions Chartered Accountants due dates of certain contributions payable towards the Scheme Our examination involves obtaining evidence sufficient to give KPMG by or on behalf of the employers and the active members of the reasonable assurance that contributions reported in the summary 15 Canada Square Scheme. of contributions have in all material respects been paid at least Canary Wharf

in accordance with the schedule of contributions and payment London, E14 5GL In view of the complexity of the arrangements and the number of schedules. This includes an examination, on a test basis, of 7 May 2014 employers participating in the Scheme, the Trustee has decided evidence relevant to the amounts of contributions payable to the

to maintain schedules of contributions and payment schedules Scheme and the timing of those payments under the schedule of

relevant to each of the participating employers and sections of the contributions and payment schedules.

Scheme. , , It is our responsibility to provide a statement about contributions paid under the schedule of contributions and payment schedules and to report our opinion to you. ,, Statement of Trustee Company responsibilities...

...in relation to Audited Financial Statements

2013 The audited financial statements, which are prepared in accordance with UK Generally Accepted Accounting Practice (‘UK GAAP’), are the responsibility of the Trustee. Pension scheme regulations require the Trustee to make available to Scheme members, beneficiaries and certain other parties, audited financial statements for each Scheme year which: ROCKY ■ show a true and fair view in accordance with UK GAAP of the financial transactions of the Scheme during the Scheme year, and of the MOUNTAINEER amount and disposition at the end of the Scheme year of the assets and liabilities, other than liabilities to pay pensions and benefits after the end of the Scheme year; and ■ contain the information specified in the Schedule to the Occupational CANADA

Pension Schemes (Requirement to obtain Audited Accounts and a Annual Report and Audited Financial Statements Statement from the Auditor) Regulations 1996, including a statement whether the accounts have been prepared in accordance with the Statement of Recommended Practice, ‘Financial Reports of Pension Schemes’.

The Trustee has supervised the preparation of the financial statements and has agreed suitable accounting policies, to be applied consistently, making estimates and judgements on a reasonable and prudent basis. Jasper The Trustee is also responsible for making available each year, commonly in the form of a Trustee’s annual report, information about the Scheme prescribed by pensions legislation, which it should ensure is consistent with the financial statements it accompanies. Lake Louise

The Trustee also has certain responsibilities in respect of contributions Banff which are set out in the statement of Trustee’s responsibilities accompanying the Trustee’s summary of contributions. Calgary The Trustee has a general responsibility for ensuring that adequate accounting records are kept and for taking such steps as are reasonably Vancouver open to safeguard the assets of the Scheme and to prevent and detect fraud and other irregularities, including the maintenance of appropriate internal controls.

Approval of the accounts The financial statements have been prepared and audited in accordance with regulations made under sections 41 (1) and (6) of the Pensions Act 1995. The directors of the Trustee Company approved this report on 7 May 2014. 22-23 The Trustee Company Annual Report

Railways Pension Trustee Company Limited Railtrust Holdings Limited The operating subsidiaries The Railways Pension Trustee Company Limited (‘Trustee The Trustee Company is owned by Railtrust Holdings Limited RPMI provides services to the railways pension schemes. RPMI Company’) is the trustee to four railway industry pension schemes. (‘RHL’), a company limited by guarantee. Designated Employers is based in Darlington, Coventry and London, and is responsible Two of these schemes are open to new members: the RPS and the of sections in the RPS, Omnibus Employers in the RPS and the for a wide range of services including: pensions administration; British Transport Police Force Superannuation Fund. All the pension principal employers of the other schemes of which the Trustee communication with members and stakeholders; strategic schemes participate in the pooled fund structure. Company is a trustee are all encouraged to become a member of investment advice; contribution collection; treasury management; RHL. The company is owned equally by its guarantor members, investment, company and scheme accounting; employer covenant Trust law, the Pensions Acts and the Companies Acts govern irrespective of size. Each member of RHL is committed to assessment; and business assurance, company secretarial, the activities of the Trustee Company as a corporate trustee. contribute a maximum of £1 to its liabilities if it is wound up. governance, legal, responsible investment, technical, pensions The Trustee Company has overall fiduciary responsibility for the policy and compliance services. RPMI is also authorised by effective operation of the schemes, including administration of The primary purpose of RHL is to provide governance controls the Financial Conduct Authority (‘FCA’) to carry out third-party benefits, collection of contributions, payment of pensions and the and appoint the directors of the Trustee Company. The Articles of administration services for insurance companies and others. investment and safe custody of assets. It must act fairly in the Association set out the procedure for the appointment of directors. interests of active members, deferred pensioners, pensioners and The aim is to achieve a balanced representation of the different RPMI’s wholly owned subsidiary, Railway Pension Investments employers. employers and the members (or their representatives) of the Limited (‘Railpen Investments’), carries out investment schemes. The directors of RHL and the Trustee Company are the management for the Trustee of the Railways Pension Scheme. same. Railpen Investments is an FCA authorised body which permits it to 3,531 carry out regulated investment business for the Trustee. There are 16 directors in total, eight elected by the members of 6,031 RHL (‘employer directors’) and eight on behalf of the members 2,536 of the railways pension schemes (‘employee directors’). Six of The structure of the Trustee group as at 31 December 2013 the employee directors are nominated on behalf of the employee members and two on behalf of the pensioner members (including deferred pensioners). Roughly a third of the directors retire by Railtrust Holdings Limited (‘RHL’) rotation every two years. The term of office is six years.

Trustee directors are non-executive and are entitled to emoluments Railways Pension Trustee Company Limited (‘RPTCL’) which are disclosed in the financial statements of RHL. Total membership at 31/12/13 RPMI Limited (‘RPMI’) 349,538 £m Total membership at 31/12/13 Railway Pension Electricity Pensions Railways Pension Scheme 337,440 Investments Limited Administration Limited (‘Railpen Investments’) (‘RPMI EPAL’) British Transport Police Force 6,031 Superannuation Fund 337,440 British Railways Superannuation Fund 3,531 On 27 February 2014 ownership of Railpen Investments was BR (1974) Fund 2,536 transferred to RPTCL.

and deemednominatingconstituency. at theendofDecember2013,theirdateretirementbyrotation, The chart,right,showsthecurrentemployerTrustee directorsas employer, onevote. deferred pensioner. The‘All Employers’groupcontinuestobeone for eachactivememberandhalfavotepensioner and pensionersassociatedwiththeemployer. Thereisonevote basis ofthenumberemployeemembers,deferredpensioners than vacancies,votingwithintheconstituencygroupsison most emphasistoactivemembers.Iftherearemorenominations The votingarrangementsrecogniseallmemberswhilegivingthe constituency aresetoutinthetablebelow: groups andthenumberofdirectorstobeappointedbyeach on industrysub-sectorconstituencies.Thenominatingconstituency The currentprocedure,whichwasintroducedin2010,isbased Employer directorappointmentprocedure The Trustee Company

All employers(includingabove) support services Freight trainoperatingcompaniesand Network Rail Passenger trainoperatingcompanies Nominating constituency Number ofDirectors 1 2 2 3 those withthemostvotes. in therailwayspensionschemes.The successfulnomineeswillbe ballot isheldofallactivemembers orpensioners,asappropriate, In allcases,iftherearemorenominations thanvacancies,asecret Police Federation. Officers’ Society, therailwaytradeunionsandBritish Transport British Transport Pensioners’ Federation, theRetired Railway members (includingdeferredpensioners)aresoughtfromthe Nominations forthetwodirectorsrepresentingpensioner Committees. Transport Police Federation, andPensions andManagement members aresoughtfromtherailwaytradeunions,British Nominations forthesixdirectorsrepresentingemployee Employee directorappointmentprocedure

Name John Wilson David Simpson Russell Mears Chris Hannon John Hamilton Richard Goldson John Chilman (Chairman) Derek Scott Annual Report companies andsupport companies andsupport Freight trainoperating Freight trainoperating operating companies operating companies operating companies Passenger Passenger train Passenger train constituency All employers Network Rail Network Rail Nominating services services

Retirement by Rotation Date of 2014 2016 2018 2014 2014 2016 2018 2016

and deemednominatingconstituency. at theendofDecember2013,theirdateretirementbyrotation, The chart,below, showsthecurrentemployeeTrustee directorsas Name Dave Tyson TowseGary Stephen Richards John Mayfield Charles Harding Dave Gott Tony Cotgreave Mick Cash Superannuation Fund Management Committee oftheBritishRailways Maritime andTransport Workers (‘RMT’) andtheManagement Shipbuilding andEngineering Staffs’ Association(‘TSSA’) Officers’ Society(‘RROS’) (Pensioners’ Federation) Locomotive Engineers& Maritime andTransport Pensioners’ Federation National UnionofRail, National UnionofRail, Superannuation Fund Associated Societyof Committee (‘BRSF’) Transport Salaried Firemen (‘ASLEF’) Confederation of 2014 British Transport 2014 Unions (‘CSEU’) Workers (‘RMT’) British Railways Retired Railway constituency Nominating

by Rotation Retirement Date of 2016 2018 2014 2018 2016 2016

24-25 Annual Report and Audited Financial Statements The Trustee Company Annual Report

Governance Pension Protection Fund (‘PPF’) The Trustee Company’s Directors as at 31 December 2013 The Trustee places great emphasis on maintaining high standards of The PPF became operational on 6 April 2005 and impacts upon fiduciary governance. Governance means having the people, structure most defined benefit schemes in the UK which have to pay levies 1. Derek Scott (Chairman of the Trustee) and processes in place to provide the foundation for the efficient to the PPF. The PPF will pay compensation to members of eligible Derek is a Scottish chartered accountant specialising in professional operation and effective decision-making of the Trustee Board. defined benefit schemes when there is a qualifying insolvency event trusteeships and has also held a number of non-executive in relation to the employer, and where there are insufficient assets in directorships. His other industry-wide, multi-employer scheme The experience and skills of Trustee Directors are the cornerstones the pension scheme to cover PPF levels of compensation. Schemes experience includes chairing the Stagecoach Group Pension Scheme of the Board’s effective ways of working. Directors attended between or sections with a Crown Guarantee are ineligible to join the PPF and since 1987, and he is also a former Government-appointed trustee 10 and 20 Board and Committee meetings in 2013. Attendance is therefore do not pay the PPF levy. of the Mineworkers’ Pension Scheme (2004-2008). Derek was a reported to the Board and published in this Report and Accounts. member of the NAPF Investment Council from 1998 to 2006 and Insolvent employers vice chairman for 2005 and 2006. He was first elected as a Trustee Directors have a comprehensive training programme on appointment During November 2010, the PPF confirmed that the Fastline, Jarvis Company director in 1997. and throughout their tenure. They complete Training Skills Analyses Facilities Limited and Relayfast Group Sections of the RPS entered and have individual, tailor-made training programmes. Our objective is a PPF assessment period as a result of the insolvency of the Jarvis 2. Mick Cash (Chairman of the Executive Committee) that all Trustee Directors complete a minimum standard which meets Group in March 2010. In addition, three employers in the Omnibus the Pensions Regulator’s and the Trustee Company’s requirements Section also entered a PPF assessment period during 2010, due Mick is Senior Assistant General Secretary of the RMT. He joined within six months of appointment. A wide range of training is offered to the companies entering administration. These three employers in October 1978 and left railway employment to become by external providers and RPMI, including Trustee Knowledge and are: Catalis Limited; Bridgen Holdings Limited; and Western Track a full-time Union official in April 2002. Mick sits on the Network Rail Understanding (‘TKU’) Training. Equally as important is training on Engineering Limited. Pensions Committee and was previously a member of the Carillion the unique characteristics and complexity of the railways pension Rail (GTRM) Pensions Committee. He is also a Trustee of the Network schemes. To further support Trustee Directors, there is a dedicated All the members associated with the above employers transferred Rail Defined Contribution and CARE Schemes. Mick was appointed as area of the RPMI website which provides one easily accessible to the PPF in early 2013, with the exception of the members of the a Trustee Company director in 2004. location for information relevant to their role. Jarvis Facilities Limited Section, who are expected to transfer to the PPF in 2014. 3. John Chilman Exposure of investments (Chairman of the Investment Committee) RPS assets are invested in a number of pooled investment vehicles During 2013 the Railcare Limited (2007) section and Vital Rail Ltd John is Director of Reward & Pensions at FirstGroup plc. A chartered that operate as internal unit trusts. These offer the RPS the ability which participates in the Omnibus Section have also entered a PPF accountant by qualification, he has worked for a number of large to invest in a wide range of investments including UK and foreign assessment period. The Trustee is assisting the members and the companies, including PricewaterhouseCoopers, South Western equity, bonds, hedge funds, private equity, property, commodities PPF in this process and it is expected that the members associated Electricity, Shell and HBOS in pensions, financial and commercial and infrastructure. Each of these types of investments has its own with these employers will enter the PPF in due course. roles. John has pensions experience dating back 20 years and is a risks associated with it. Therefore the asset classes that the RPS trustee of FirstGroup pension arrangements in the USA and Canada. is invested in are closely monitored to ensure that assets are not In addition to the above companies, there are some other John was appointed as a director of the Trustee Company in 2007 exposed to unnecessary risk as a result of investment choices. participating employers within the RPS that are no longer trading or and a Non-Executive Director of RPMI in 2009. Further details of pooled fund investment exposures can be found who are in administration. Further details are given in Note 10 of the within the consolidated pooled fund accounts in Appendix I. Audited Financial Statements. 4. Tony Cotgreave Tony was employed in the railway industry for 39 years until retiring in 1990. He has been a member of the 1994 Pensioners Section Pensions Committee since 1997, nominated by the British Transport Pensioners’ Federation and the Retired Railway Officers’ Society. Tony was appointed as a Trustee Company director in June 2005. appointed adirector oftheTrustee Companyin2005. Safeway Supermarkets plcandThomasCookGroup. Chriswas supporting roleswithseveralprivate sectoremployers,including joining NetworkRailin2004,has held managementandtrustee over 30yearsofcompanypensions experienceand,priorto and servesontheNetworkRailPensions Committee. Hehas supports thetrusteeboardofin-house pensionarrangements defined contributionpensionschemes. Inthatrolehealso for themanagementandoperation ofitsdefinedbenefitand Chris isHeadofPensions at NetworkRailwhereheisresponsible Committee) 8. ChrisHannon(ChairmanoftheBenefits&Funding Company in2008. pension scheme.JohnwasappointedadirectoroftheTrustee Group plc,whereheisalsoanexperiencedtrusteeofthegroup’s and theDirectorofPensions andEmployeeBenefitsatStagecoach John isacharteredaccountantandtheGroupTaxation Director 7. JohnHamilton the Trustee Companyin2007andre-elected2012. Pensions Committeein2005.Davewasappointedasadirectorof Management Committeein2001andelectedtotheNetworkRail grades intheLincoln/Retfordareas.HewaselectedtoBRSF Dave joinedBritishRailin1980andworksthesignalling 6. DaveGott transport Better Transport, thecharitywhichcampaignsforsustainable Richard hasalsobeenaTrustee Directorof theCampaignfor Director ofRPMIandChairmanitsBoard.SinceJanuary2014, charities. In2009,RichardwasappointedasaNon-Executive Trustee oftheRailwayBenefit Fund, oneoftheindustry’sleading and re-electedforfurthertermsin20042010.Heisalsoa elected asanemployerdirectoroftheTrustee Companyin1998 BR Pensions Committeefromitsinceptionuntil1997andwas Group plcasRailDevelopmentDirector. Hewasamemberofthe industry, including,forthefinal nine years,withNationalExpress In hisearliercareer, hespent36yearsworkingintherailway Specialist AdvisertotheHouseofCommonsTransport Committee. the OfficeofRailRegulation.Since1April2011,hehasbeena Richard was,until31March2011,aNon-ExecutiveDirectorof 5. RichardGoldsonOBE(ChairmanoftheRPMIBoard) The Trustee Company 9. CharlesHarding 2010 andresignedasaTrustee Directoron20January2014. Director. HewasappointedadirectoroftheTrustee Companyin he movedtoScotlandwhereis NetworkRail’sRouteManaging across theUK,includinginEastAngliaandMidlands.In2005, Trainee andsincethenhasworkedinavarietyofoperationalroles David joinedtherailindustryin1986asaBRManagement 13. DavidSimpson Stephen isalsoamemberoftheAtosOriginPensions Committee. Trustee CompanyanditspredecessorsinceFebruary 1993. Transport SalariedStaffs’AssociationnominatedDirectorofthe Stephen joinedtherailindustryin1972.Hehasbeen 12. StephenRichards(ChairmanoftheCaseCommittee) appointed asadirectoroftheTrustee CompanyinJuly2010. stepped uptotheroleofCEOinOctober2013.Russellwas becoming ChiefFinancialOfficerinJanuary2005.Hesubsequently a varietyofseniorfinancialpostswithinthe a charteredaccountantwithKingstonSmith.Hehassinceheld Russell joinedRailfreightDistributionin1993afterqualifyingas 11. RussellMears the Trustee Companyin1996. Committee from1994to1997andwasappointedasadirectorof He wasamemberofthe1994Pensioners SectionPensions Railway Officers’SocietyandaformerdirectorofRailnewsLimited. until heretiredin1993.HeisapastpresidentoftheRetired and thenasFinanceDirectorattheBritishRailPropertyBoard John workedastheBritishRailwaysBoard’sChiefInternalAuditor 10. JohnMayfield(ChairmanoftheAuditCommittee) director oftheTrustee Companyin2007. Railway OrganiserforUnitetheUnion.Charleswasappointedasa Representativesince1998andisaLead been aSeniorCSEU and currentlyworksforamajorrailfreightoperator. Charleshas Charles joinedBritishRailatCreweETDasanEngineerin1989 Annual Report appointed adirectoroftheTrustee Companyin2008. the Pensions Committeesof severalsectionsoftheRPS.Hewas about theirpensionarrangements.Johnhasbeenamemberof Scheme. Hehasnearly40years’experienceadvisingcompanies where heworkedwithothersinestablishingtheRailwaysPension John isanActuaryandwasformerlyemployedbyBritishRail 16. JohnWilson Executive uponwhichheservedbetween1994and2004. Pensions Committees.HeistheformerpresidentofASLEF’s in 1980.HehasservedontheBR,Angliaand1994Pensioners train driverbasedatNorwich,wherehejoinedtherailwayindustry 2001 andaNon-ExecutiveDirectorofRPMIin2009.Heis Dave wasappointedasaTrustee CompanydirectorinFebruary 15. DaveTyson Director ofRPMIin2009. director oftheTrustee Companyin2004andaNon-Executive Federation between1996and2006.Garywasappointedasa He waselectedastheTreasurer oftheBritishTransport Police Transport Police Force SuperannuationFund from1992to2006. the SouthEastArea.HewasaCommitteememberofBritish Gary joinedtheBritishTransport Police in1974andserved 14. GaryTowse 26-27 Annual Report and Audited Financial Statements The Trustee Company Annual Report

The Trustee Company’s Directors

Trustee board and committee meetings attended:

Number of meetings attended Number of meetings eligible to attend

11 10 13 13 11 18 10 13 18 13 13 15 18 10 13 20

Derek Scott Mick Cash John Chilman Tony Cotgreave Richard Dave Gott John Hamilton Chris Hannon Chairman of the Chairman of the Chairman of the Nominated by: Goldson OBE Nominated by: Appointed by: Chairman of the Trustee Executive Committee Investment British Transport Chairman of the National Union of Passenger Train Benefits & Funding Appointed by: Nominated by: Committee Pensioners’ RPMI Board Rail, Maritime & Operating Companies Committee Federation Transport Workers All employers National Union of Rail, Appointed by: Appointed by: Term of office Appointed by: Term of office (RMT) Term of office Maritime & Transport Passenger Train Passenger Train ending: Network Rail ending: ending: Workers (RMT) Operating Companies Operating Companies Term of office 2014 Term of office ending: 2014 2016 Term of office ending: Term of office ending: ending: 2018 Term of office ending: 2018 2016 2018 2016 The Trustee Company Annual Report

10 16 18 12 12 16 13 17 20 20 16 12 12 16 21 15

Charles Harding John Mayfield Russell Mears Stephen Richards David Simpson Gary Towse Dave Tyson John Wilson Nominated by: Chairman of the Nominated by: Chairman of the Nominated by: Nominated by: Nominated by: Appointed by: Confederation of Audit Committee Freight Train Case Committee Network Rail British Railways Associated Society of Freight Train Shipbuilding & Operating Superannuation Fund Locomotive Engineers Operating Nominated by: Nominated by: Term of office ending: Engineering Unions Companies & Management and Firemen (‘ASLEF’) Companies & Retired Railway Transport Salaried 2014 (CSEU) Support Services Committee Support Services Officers’ Society Staffs’ Association Term of office Term of office Term of office Term of office (‘TSSA’) Term of office ending: ending: Term of office ending: ending: ending: 2016 2016 ending: Term of office ending: 2014 2014 2016 2014 2018 The Trustee Company Annual Report

Membership and activities of board and principal list all meetings which Committee and Board members were eligible ■ reviewing the scope and plans of external audit and Business committees as at 31 December 2013 to attend, except for the Trustee Investment Monitoring Meetings of Assurance; and The Trustee Board maintains oversight of the RPS and has delegated which there were two during the year. All Trustee Directors may, and ■ overseeing the control and risk management systems of the certain functions to five principal committees. some often do, attend meetings of the Trustee Board’s Committees Trustee Company and operating companies. in addition to those of which they are formally members. Attendance at the Trustee Board is shown in the table below. The Committee meets at least twice a year to discuss, consider and Audit Committee review the audit work of the external auditors, financial reporting The purpose of the Audit Committee is to decide, consider and report arrangements, the work of the RPMI Business Assurance team Number of Number of on matters relating to the appointment of external auditors, financial and general internal control issues. The Committee also reviews Member meetings meetings eligible reporting arrangements, the work of external audit and Business attended to attend the Annual Report and Audited Financial Statements prior to Board Assurance and internal control systems. approval.

Derek Scott (Chairman)1 5 5 The Audit Committee comprises six directors of the Trustee Board, During 2013, the Committee met on two occasions. It considered Mick Cash 3 5 and includes members with appropriate accounting qualifications the Annual Report of Business Assurance covering its internal John Chilman 5 5 and experience. External auditors and the Business Assurance team audit and assurance activities during 2012, received reports on attend meetings at the invitation of the Committee, and relevant the progress of the 2013 internal audit plans, and considered Tony Cotgreave 5 5 directors and officers of RPMI and Railpen Investments also attend and approved the internal audit plan for 2014. In addition, the Richard Goldson 5 5 as appropriate. Membership and attendance during 2013 are shown Committee received and approved the Business Assurance Strategy in the following table: Dave Gott 5 5 and Audit Charter and considered reports from Business Assurance summarising the activities of the Risk Management Committee and John Hamilton 4 5 Number of Number of its work in facilitating the Trustee’s risk management process. Chris Hannon 4 5 Member meetings meetings eligible The Audit Committee co-ordinates and monitors the risk Charles Harding 5 5 attended to attend management process, ensuring that it is effective in identifying, John Mayfield 5 5 John Mayfield (Chairman) 2 2 evaluating and managing the key risks faced by the Trustee. On a day-to-day basis, this is delegated to members of the Risk Russell Mears 5 5 Tony Cotgreave 2 2 Management Committee, which meets three times a year and is Stephen Richards 5 5 John Hamilton 2 2 attended by representatives of the Audit Committee. 2 David Simpson 4 5 Russell Mears 2 2 Financial reporting matters considered by the Committee in 2012 Gary Towse 5 5 David Simpson 1 2 included the Annual Report and Financial Statements of Railtrust Dave Tyson 5 5 Gary Towse 1 2 Holdings and the Trustee Company, the operating companies John Wilson 5 5 (RPMI and Railpen Investments), railways pension schemes and pooled funds. The Committee also received and considered the In addition to the above scheduled Audit Committee meetings, there Report by the External Auditor on the 2012 Report and Financial 1Derek Scott is retiring as Trustee Chairman in June 2014. He will were also three Risk Management Committee meetings during the Statements and the External Audit Strategy for 2013. In addition, the remain as a Trustee Director but will be replaced as Chairman by year that all Audit Committee members were eligible to attend. Committee considered the requirements of the current Statement John Chilman. Derek has been a Trustee Director since 1997 and of Recommended Practice (SORP) disclosure requirements and Chairman since 2007. The key responsibilities of the Audit Committee are outlined in a reviewed current guidance relating to Audit Committee reporting. formal Terms of Reference which is regularly reviewed and updated 2David Simpson resigned from the Trustee Board in January 2014. and includes:

A short report has been prepared on each of the Trustee Board’s ■ appointment of the external auditor; principal committees of 2013 which provides an overview of the ■ reviewing the adoption of accounting principles and policies; main activities of those committees during the year. The reports also ■ reviewing aspects of the annual accounts; table: tendance oftheCommittee duringtheyearisshown inthefollowing in therailwayindustry pensionschemes.Themembership andat- and decideoncontributions,benefits andotherchangestosections aretomanagetheactuarial valuationprocessfortheRPS (‘B&F’) The mainresponsibilitiesoftheBenefits and Funding Committee Benefits andFundingCommittee management systemsareoperating effectively. able andtimelyinformationtosatisfyitselfthatthecontrolrisk The AuditCommitteeissatisfiedthatithasreceivedsufficient,reli- auditors andtheBusinessAssurancemanager. private discussionsareheldinaclosedsessionwiththeexternal Reporting ofConcernsPolicy. Ateachmeetingofthe Committee, of Concerns.TherewerenoreportsreceivedundertheConfidential external orinternalreportsviathePolicy forConfidentialReporting dents orfraudsandwillconsideranygovernanceissuesarisingfrom The Committeealsoreceivesreportsofanysignificantsecurityinci- money initsprovisionofadministrationservices. DC CodeofPracticeChecklistandhowRPMIachievesvaluefor hospitality andgifts,authorisedsignatories,thePension Regulator’s 1 January2012to31December2012,Trustee expenses,Trustee the pensionsadministrationbusinessofRPMIforperiodfrom Control AssuranceReport(ISAE3402andAAF01/06)preparedfor Other mattersconsideredbytheCommitteewereInternal out onpage12. category ofinvestmentscanbefoundintheaccountingpoliciesset More detailonthespecificvaluationprinciplesadoptedforeach that thesearrangementsarerobust. crepancies totheAuditCommittee.TheCommitteeissatisfied this totheTrustee Company’svaluation,reportinganymaterialdis- their ownindependentvaluationofschemeassetsandcompare of theyear-end financialstatements,theexternalauditorsperform ly ofthefundmanagers’valuations.Inaddition,aspartaudit majority oftheScheme’sassetsarepricedcompletelyindependent- er possible,onindependentsourcesofdata,ensuringthatthevast property valuerforUKproperties.BNYMelloninturnrelies,wherev- to providethevaluationofquotedsecurities,andanindependent of theScheme’sassets.TheTrustee Company retainsBNYMellon sidered theprocessesthatenablereliableandrelevantvaluations As partofthesereviews,theAuditCommitteehasspecificallycon- The Trustee Company in theannualreport butareavailableonrequestfrom RPMI. latest completed valuation foreachsectionhavenot beenincluded as at31December 2010.Theindividualactuarialcertificates ofthe Funding PrinciplesandSchedulesofContributionsforeachsection refers totherequirementproduce individualStatementsof A reportfromtheSchemeActuary is includedonpage38which November 2013. reinforced withconsultationforums whichtookplaceinOctoberand Pensions Committeesseekingviews ontheproposals.Thiswas document attheendofSeptember2013toemployersand The Trustee andSchemeActuaryissuedajointconsultation valuation resultsisneededfromeachsponsoringemployer. under thePensions Act2004, andmeansthatagreementonthe a separateentitywithitsownvaluationresults.Thisfalls 105 sectionsoftheRPSasat31December2013istreated major undertakingwhichisrequiredeverythreeyears.Eachofthe forthcoming actuarialvaluationat31December2013.Thisisa developed theapproachwhichisproposedtobeadoptedfor During 2013,theB&F, inconjunctionwiththeSchemeActuary, completed forallexceptthreesections. agreed proposalswiththeTrustee andformaldocumentationis had notcompletedtheirvaluationbytheendof2012havenow December 2010issubstantiallycomplete.Thefewsectionswhich The actuarialvaluationoftheRailwaysPension Schemeasat31 Valuation Member John Wilson Dave Tyson Stephen Richards Russell Mears Charles Harding John Hamilton Mick Cash Chris Hannon(Chairman) Annual Report Number of meetings attended 5 3 5 5 3 5 4 5 meetings eligible Number of to attend 5 5 5 5 5 5 5 5 operating companies. of sponsoringemployersorchanges tofranchisesaffectingtrain sections resultingfromcorporatereorganisations withingroups The B&Falsoprogressedthechanges toarrangementsforspecific This hasresultedinpaymentsbeingmadeintothesection. Omnibus employersnolongerhaveactivemembersinthesection. funding purposes.TheB&Fhasconsideredthedebtsarisingwhen where theassetsandliabilitiesarepooledforinvestment The OmnibusSectionisasectionfornon-associatedemployers addressed. ChangesarethenreflectedintheRulesofsection. is consideredindetailandtheimpactonfundingcontributions employer, afterreviewbyPensions Committees whereapplicable, changes forindividualsectionsoftheRPS.Eachproposalfroman During theyear, theB&Fagreedarangeofbenefitandcontribution Rule changes similar arrangements ments forspecificsectionsoftheSchemeincludingguaranteesand with theemployerswhichresultedinadditionalcovenantenhance- many cases,theB&Fpursuedandagreedmitigationarrangements B&F alsoconsideredtheimpactofvariouscorporatetransactions.In As wellasassessingemployerstrengthforvaluationpurposes,the with apotentialvalueofinexcess£600m. tion agreements,andsecurityoverassetsotherarrangements assessments. Theseincludearangeofguarantees,loansubordina- enhancement proposalswithemployerstoimprovetheircovenant For the2010valuation,B&Fhasagreedarangeofcovenant by anexperiencedin-houseteamwithinRPMI. the RPS.Inundertakingthiswork,B&Fcontinuestobeadvised challenging taskofassessingthisforallthesponsoringemployersin sponsoring statutoryemployer, andtheB&Fcontinuestohave A keyfactorwhenconsideringeachvaluationisthestrengthof Employer covenant the changeinfundingpositionsince2010valuation. cember 2012.Theseresultshavebeensenttoemployersandshow The B&Fagreedtheresultsofannualfundingupdateat31De- 30-31 Annual Report and Audited Financial Statements The Trustee Company Annual Report

During 2013, our relationship with the Pensions Regulator has ■ 17 appeals under stage 2 of the internal disputes resolution During the year, the DCC has overseen the transition of members’ continued to develop. The Regulator’s representatives have a better procedure funds (other than the BRASS Pension Assured Fund) into a new understanding of the complexity and the atypical shared cost nature ■ 13 applications to re-join the Railways Pension Scheme range of investment funds. It is anticipated that the majority of the of the RPS. This has helped the Regulator’s funding team when it ■ 12 applications for early payment of preserved benefits assets in the Pension Assured Fund will be transferred early in 2014. becomes involved with the Scheme in considering whether individual ■ 5 reviews of eligible dependant’s pension after being in payment We have also seen the automatic enrolment of many new members sections remain appropriately funded. We have kept them aware of 10 years into the IWDC Section following a change in pensions legislation. The the approach we have taken to the valuation of the Scheme, and DCC has received briefings on changes to the law and participated ■ 13 Clause 7E - forfeiture of benefits cases sought their views on the proposed approach for the 2013 actuarial in several government consultations, as well as receiving training on valuation. Defined Contribution Committee the governance of DC pension arrangements; the Rules governing the Trustee’s DC arrangements; ways in which members can be The purpose of the Defined Contribution Committee (‘DCC’) is to Case Committee supported as they approach retirement; alternative approaches ensure appropriate management and governance of the additional The Case Committee meets to consider decisions on case work to investment in the early stages of retirement; and the Pensions voluntary contribution (‘AVC’) and defined contribution (‘DC’) applications from individual members, where the decision-making Regulator’s new DC Code of Practice and Guidance. arrangements of the railways pension schemes. These include powers have not been delegated to a Pensions Committee or to BRASS, AVC Extra, the RPS Industry-Wide Defined Contribution RPMI. The membership and attendance of the Committee during the The DCC is very pleased to report that in March 2013 the RPS IWDC (‘IWDC’) Section and the RPS Defined Contribution Arrangement, all year is shown in the table, below: Section was awarded Pension Quality Mark READY status. of which are overseen by the DCC and now offer the same suite of The Pension Quality Mark (PQM) was set up in 2009 by the National investment funds to members. The membership and attendance of Association of Pension Funds and is a standard that recognises high Number of Number of the Committee during 2013 is shown in the following table: Member quality DC schemes through an assessment of their governance, meetings meetings eligible communications and contribution levels. As a PQM READY scheme, attended to attend Number of Number of the Trustee and RPMI have demonstrated excellence in the IWDC Member meetings meetings eligible Section’s governance standards (including trustee training), the Stephen Richards (Chairman) 6 6 attended to attend range of investment options and its charges. The Section has also Tony Cotgreave 6 6 been recognised for its clear and comprehensive suite of member John Wilson (Chairman) 5 5 Dave Gott 6 6 communications in both print and digital media. This means that any Chris Hannon 5 5 employer that wishes to obtain the PQM or PQM PLUS standard in Derek Scott 6 6 respect of its own participation in the Section only has to meet the Charles Harding 3 5 David Simpson 5 6 contribution standards. Russell Mears 4 5 John Wilson 5 6 The DCC continues to monitor the best practices in DC scheme Gary Towse 4 5 governance, administration and investment to help members aim for In 2013, the Case Committee held six scheduled meetings and one Dave Tyson 4 5 the best outcomes for them at retirement. special meeting. Executive Committee The DCC was established at the beginning of 2013 as the Trustee As at 31 December 2013, the Case Committee had responsibility for The main responsibility of the Executive Committee is to provide recognised that it was important to spend more time dedicated to 85 sections of the Railways Pension Scheme. oversight of the operations and management of RPMI on behalf of its the schemes’ AVC and DC arrangements. The DCC receives regular shareholder and parent, the Trustee Company. It also serves as the reports on the administration and investment performance of these During 2013, the Case Committee considered and made decisions remuneration/nomination committee for Executive Directors of RPMI. arrangements and considers the best ways to support members to on 182 cases which can be categorised as follows: achieve good outcomes at retirement. To do this, it oversees the This work includes: approving the appointment and terms and types of investments offered, the options available to turn DC funds conditions of employment of the directors of RPMI (other than ■ 45 applications and reviews of incapacity benefits into retirement income, and how the scheme is communicated to the Chief Executive which is reserved for the Trustee Company); ■ 59 applications for payment of lump sum death benefit members. The Committee monitors how members choose to invest overseeing the financial performance of RPMI and reviewing the ■ 18 applications for spouse’s, children’s and dependant’s their funds and how they engage with their pension savings to service provided to railways pension schemes; and ensuring that pensions encourage them to make the best decisions for their circumstances stakeholders’ views are taken into account and acted upon. and to plan for their future. 2 1 *External nomination are showninthetablebelow: Membership andattendanceduring2013byCommitteemembers The Trustee Company 2015, withtheexpectation thiswouldcontinuealso into2016. increase inRPMI administration chargesforthetwo years2014- three years.The Trustee Company agreedthatthereshouldbeno charges fromRPMItotheRPS.Charges arereviewedeverytwoor The maintaskfortheCommitteein 2013wasareviewofthe RPMI), JohnChilman,GaryTowse andDavidTyson. 2013 areRichardGoldson(Non-Executive ChairmanoftheBoard Trustee Directorswhowere Non-ExecutiveDirectorsofRPMIduring Executive CommitteecannotbeaNon-ExecutiveDirectorofRPMI. Non-Executive DirectorsofRPMI.Inaddition,theChairman more thantwomembersoftheExecutiveCommitteearealso terms ofreferencetheExecutiveCommitteeensurethatno four Trustee DirectorsasNon-ExecutiveofRPMI.The Company isensuredthroughagovernancestructurethatinvolves Transparency andaccountabilitybetweenRPMItheTrustee meetings heldin2013. attend meetingsoftheExecutiveCommittee.Heattendedall3 Richard Goldson,asChairmanoftheRPMIBoard,isinvitedto

Member Charles HardingretiredfromtheCommitteeon20March2013 Dave GottwasappointedtotheCommitteeon20March2013 Gary Towse Chris Tingle* Rob Holden* Charles Harding John Hamilton Dave Gott John Chilman Mick Cash(Chairman) 1 2 Number of meetings attended 3 3 1 1 2 2 3 3 meetings eligible Number of to attend 3 3 3 1 3 2 3 3

of investmentdecision-making withintherailschemes, basedin late 2012,anoutline proposalforundertakingadetailed review Overall investment governance–theCommittee considered,in * ExternalAppointees table below: The membershipandattendanceoftheCommitteeisshownin the governancereview. meetings, aTrustee workshopwasheldintheautumnfocusingon arising fromthisgovernancereview. Inadditiontotheabove pattern andtwowereaddedspecificallytoexamineproposals on furtherbelow. Fiveofthemeetingsfollowedan established and decision-makingwithintherailschemeswhichiscommented notably inrespectofadetailedreviewinvestmentgovernance was anincreaseon2012,reflectingtheincreasedvolumeofwork, The InvestmentCommitteemetonsevenoccasionsin2013.This custodian. pooled fundsandtheunderlyinginvestmentmanagers for theRPSandtoreviewmonitorperformanceof consider theinvestmentstrategy, risk-budgetingandassetallocation The mainresponsibilitiesoftheInvestmentCommitteeareto Investment Committee The nextchargingreviewwillbein2016. Member Gary Towse Peter Stanyer* John Mayfield Virginia Holmes* Chris Hitchen* Chris Hannon Richard Goldson Tony Cotgreave John Chilman(Chairman) Annual Report Number of meetings attended 5 5 5 5 5 4 5 5 5 meetings eligible Number of to attend 5 5 5 5 5 5 5 5 5 valuation. considered keyfinancial assumptionslookingahead tothe2013 encompassed withinthegovernance review. TheCommitteealso liquidity ofitsinvestments,thefurther developmentofwhichisnow examining eachsection’sliabilitycash flowpatternsagainstthe Work also commencedonthedevelopmentof‘liquiditybudgets’ adopted in2012,ordertoensure consistencyacrosssections. to applyanumberofpoliciesinthesettingstrategies,originally employer covenantandsectionmaturity. TheCommitteecontinued budgeting’) informedbymatterssuchasthevaluationresults, and returnexpectationsrelativetoliabilities(referredas‘risk- In formingitsview, theCommitteeexaminesrisk(volatility) to the2010actuarialvaluation,tookplacein2011and2012. quiet yearasmuchoftheworkconsideringstrategies,inresponse review section-specificinvestmentstrategy. 2013wasarelatively Investment Strategy–oneoftheCommittee’smaintasksisto exercise carriedoutinthesummerof2013. Executive, theoutputsofwhichformedbackbonebeliefs Further workwascarriedoutbyboththe CommitteeandtheRPMI built onthework,includingatrusteeworkshop,carriedoutin2012. review wastore-examinetheTrustee’s investment beliefswhich Investment Beliefs–anearlystrandofworkinthegovernance half of2013. governance reviewandwhichmetfrequentlythroughthesecond established specificallytooverseePhases1and2ofthe The Committeeisindebtedtoasub-committeewhichwas proposals aredevelopedinrelationtothepooledfundrange. other stakeholdersand,induecourse,formalconsultationas informal engagementwithemployers,Pensions Committeesand agreed outcomesfromtheearliertwophases.Thiswillinclude focus ofPhase3(commencedJanuary2014)istoimplementthe processes andoperationsemployedintheinvestmentprocess.The December 2013)comprisedamorefundamentalevaluationofthe the trusteeandoperatingcompanylevel.Phase2(September– (see below)andanexaminationofthegovernancestructureatboth 2013) includedare-evaluationoftheTrustee’s investmentbeliefs 2013. Thereviewissplitintothreephases.Phase1(May–August first meetingin2013andtheresultingreviewcommencedMay A moredetailedproposalwasapprovedbytheCommitteeatits part onahighlevelstudycarriedoutbyindependentconsultants. 32-33 Annual Report and Audited Financial Statements The Trustee Company Annual Report

Pooled Funds – the Committee continued to receive periodic economic and market updates which allowed it to consider its overall strategy in light of recent events and emerging trends. ENGLAND These updates provided the general context against which decisions VENICE SIMPLON- were made, such as modifications to the characteristics of pooled funds and strategic asset allocation considerations for the Growth ORIENT-EXPRESS and Defensive Pooled Funds. 2013 RPMI Railpen manages the Growth Pool and decides its asset London allocation, in light of the economic and market updates referred to above, within delegated authority limits set by the Committee. The Committee also sets the range of permissible assets for the Fund and proposed ranges when considering risk and asset allocation within the fund.

The Committee also considered a report summarising the results of an annual review of the services provided by the Trustee’s global custodian, Bank of New Mellon.

Investment Managers – manager appointments are determined by RPMI Railpen under an investment management agreement with Paris the Trustee, but with the Committee commenting on significant manager appointments and terminations. In addition, there was one ‘Trustee Monitoring Meeting’ at which Trustee Directors met a AUSTRIA selection of the Scheme’s external fund managers and two further meetings where Pensions Committee representatives were given the FRANCE Innsbruck opportunity to meet the RPMI Railpen senior team and a selection of managers. train or map graphics to go in here

Corporate Governance – the Investment Committee oversees the extensive governance activities undertaken by the Scheme globally. In this regard, the Committee sets the policies to be pursued and Verona Venice received regular reports on key issues arising from AGM activity in the main global markets in which the Scheme has investments. The Committee also undertook an annual review of its Stewardship Compliance Statement and its UK Corporate Governance Policy. ITALY Investment Report

Introduction returns are deemed to outweigh the additional costs; that is, the Investment strategy The Trustee is responsible for ensuring that investment strategies fund management companies try to add value in addition to the The Trustee’s Investment Committee sets investment strategy for all are agreed for all sections of the RPS. It does this with advice from benchmark returns. Where active management is considered less sections without a Pensions Committee; the Benefits and Funding its executive arm, RPMI, and using its Investment Committee (or a likely to be successful, passive management, that is index-tracking, Committee reviews and approves strategies determined by Pensions Pensions Committee where established with delegated investment is utilised to ensure the most cost-effective approach. In order to Committees or the Investment Committee. In setting strategies responsibilities) and the Benefits and Funding Committee. The align more closely the interests of the managers with those of the for sections, the profile of the liabilities, along with the covenant policies that control how the assets of each section of the Railways Scheme, a significant proportion of active managers’ fees vary strength and views of the sponsoring employer, are taken into Pension Scheme are invested are set out in Statements of according to their performance against their benchmark. account. Investment Principles and Funding Principles; copies are available on request. An overview of the provisions of the Statements of During 2013, the specifications of a number of the pooled funds The majority of sections’ strategy is set as a risk budget, where Investment Principles is shown in Appendix F. were refined and their management arrangements revised, to risk is taken to be the expected volatility of returns relative to ensure they remain fit for purpose in meeting sections’ needs. long-dated index-linked gilts (a proxy for the pension liabilities). The Trustee’s Investment Committee also has delegated authority The most significant activities were: The risk budgeting approach facilitates a more flexible approach for most of the Trustee’s investment responsibilities; it decides on to asset allocation, which means that prevailing market conditions appropriate investment policies and management arrangements. ■ the introduction of a new tranche of the Private Equity Pooled can be taken into account when managing the level of volatility It has appointed Railpen Investments as its provider of investment Fund; risk. Each section’s strategy is implemented through investment in management services. In this capacity, Railpen is regulated by the ■ the implementation of a change in the investment management the appropriate mix of the pooled funds operated by RPMI for the

Financial Conduct Authority as an Occupational Pension Scheme approach of the Hedge Fund Pooled Fund away from funds of Trustee. For those adopting risk budgeting or wanting to introduce a Annual Report and Audited Financial Statements firm. It acts both as a manager of managers, whilst also taking funds towards a mixed model including some direct hedge fund degree of dynamic asset allocation into their strategy, investment is some significant investment decisions directly. exposure. This resulted in the termination of Rock Creek Group, usually made in the Growth Pooled Fund, which invests in a range of a reduction in the mandate size of Grosvenor and the increase return-seeking assets. Those sections which do not set a risk budget Investment management arrangements in the mandate size of Blackstone; adopt a fixed asset allocation approach. The assets of the Scheme are invested through a number of pooled ■ the continued implementation of additional specific Growth AUSTRIA investment funds, each with a different risk and return profile. These Pool manager mandates and direct positions, including the Following the 2010 valuation the Trustee agreed a consistent funds are managed as if they are internal unit trusts and each appointment of Dimensional, Epoch and Invesco and the approach to setting strategy across sections according to the pooled fund is approved by HM Revenue and Customs. Only railways increase in mandate size of Legal and General and Blackrock covenant rating and maturity. Strategies were agreed for the pension schemes may invest in these pooled funds. Each section Advisors; majority of Sections by the end of 2012 and the Trustee’s principles holds units in some or all of the pooled funds. The use of these ■ the management of a significant reduction in the size of the were applied to the few remaining sections which finalised their pools enables sections to hold a broader range of investments more Global Equity Pooled Fund, as sections sold equities prior to funding plans over 2013. The Trustee continued to adopt a policy efficiently than may have been possible through direct ownership. moving into the Growth Pool, Edinburgh Partners and River and of de-risking where there is the scope and the desire to do so and, Mercantile were termnated as part of this process; accordingly, a number of sections were de-risked somewhat during In most cases, each pooled fund covers a single asset class. ■ a number of changes in the roster of managers. the year. In some cases a policy of dynamic de-risking was adopted However there are also a number of multi-asset pooled funds where in order to reduce risk in response to funding level improvements. the mix of asset classes is variable depending on market conditions Exposure to overseas currency risk is controlled by the use of and opportunities, which these funds seek to exploit in order to currency hedging. This process removes some of the volatility of Liquidity of investments capture returns more efficiently and effectively than the single asset sterling returns inherent in investing in overseas markets. There Investments described in the financial statements as ‘quoted’ or pools. They enable RPS sections to hold a managed portfolio of is full hedging of foreign exchange exposure in the Hedge Fund, ‘exchange traded’ are either listed on a recognised investment assets rather than a fixed allocation, which consequently should Government Bond and Non-Government Bond Pooled Funds and a exchange, or traded in a secondary market where prices are usually have a less volatile return profile. 50% hedge of the overseas currency exposure of the Global Equity readily available from a broker, dealer, industry group or other Pooled Fund, excluding emerging markets. The Growth Pool may pricing service, and where those prices are representative of actual Each pooled fund has a performance benchmark and risk actively vary the extent of its currency hedging over time. All other market transactions on an arm’s length basis. These investments parameters within which additional returns may be targeted. pooled funds are unhedged. are assumed to be realisable at accounting fair value although, on Single asset pooled funds are managed largely by external fund occasion, markets may experience reduced liquidity, in which case management companies selected by Railpen Investments and it may not always be possible to realise such assets at short notice are actively managed where the opportunities for additional at prices at least equal or close to accounting fair value. 34-35 Investment Report

Investments described as ‘unquoted’ in the financial statements Investment performance The Infrastructure Pooled Fund delivered a positive return of 21.3% – mainly property, private equity (including infrastructure), over- The global economy gathered momentum throughout 2013, led by for the year, significantly ahead of the RPI benchmark. This Fund is the-counter (‘OTC’) derivatives and hedge funds – are unlisted and improvements in the economic data from the US. Central Banks in its divestment period and during 2013 the Fund returned £100m there is no organised public market for such instruments. These around the world continued to take a highly accommodative stance back to investors as underlying investments were realised. investments are carried at estimated fair values in accordance to monetary policy, which supported the performance of riskier with the Trustee Company’s accounting policies, as set out in the assets like equities. Bond markets in countries perceived as a The Property Pooled Fund also achieved a positive result in absolute notes to the financial statements. These asset classes are generally safe haven (e.g. the USA and UK) saw a modest rise in yields for and relative terms, with an overall return of 11.5%. less liquid than quoted or exchange traded investments, either government and investment grade debt. Meanwhile bond yields fell because of the lack of an organised public market, the nature of in some European countries viewed as riskier credits (e.g. Italy and The Hedge Funds Pooled Fund had a positive return of 10.6% in the instruments or contractual arrangements. For these reasons, it Spain), as worries about the Eurozone receded. 2013, which was also ahead of the benchmark return. Commodity is not usually possible to realise part or all of such assets at short returns were volatile over the period. The Commodities Pooled notice. The Growth Pooled Fund invests in a wide range of return-seeking Fund generated a negative return of 3.5% in 2013 and was slightly assets with flexible allocations based on a risk budget range and behind the benchmark return for this Fund. Economic commentary provided by RPMI a target level of long-term return. Global equities continue to 2013 produced growing evidence that an inflection point in the be the largest asset class holding in the Fund. The allocation The Defensive Pooled Fund was set up in 2012 as a transitional global economy may have passed. The economic data during the increased over the 12 months from 34% to around 43% as the vehicle to facilitate risk reduction for Sections. The Fund has second half of the year improved markedly even if the recovery economic outlook improved. Other significant asset segments in flexible allocations based on a risk budget range and a target level remains a shallow one and policymakers continue to tread very the Fund include non-government bonds, property, commodities, of longer-term return. It invests in assets which are defensive in carefully. fund-of-hedge-funds, absolute return, emerging market debt and nature and as at the end of 2013 holdings consisted of the Non- reinsurance. Government Bond Pooled Fund, Government Bond Pooled Fund, a The nascent recovery has been led by the US, which has portfolio of secrutised debt and cash. The Fund’s 12-month return consistently outperformed the rest of the OECD. Fears of a The Growth Pooled Fund targets a long-term real return of 5% above of negative 1.1% was below the long-term target and benchmark. meltdown in Europe have largely subsided, despite continued UK RPI inflation over a market cycle. The return in 2013 was 8.6%, difficulties in the periphery, while fears about a ‘hard landing’ in which was ahead of its target return. The key driver of returns The return of negative 1.0% for the Government Bond Pooled Fund China have also receded somewhat. Meanwhile, some of the early during this period was the allocation to equity markets. reflected the aggregate rise in yields of government debt over the optimism engendered in Japan by ‘Abenomics’ appears to have worn year and was slightly below the benchmark. The Non-Government off. The Global Equity Pooled Fund provides diversified exposure to Bond Pooled Fund produced a return of 0.1%, while the strongest global equities and uses a blend of active and passive management. return within the defensive assets in 2013 came from the Index Central banks remain highly accommodative although have recently The Global Equity Pooled Fund produced a return of 23.5% in 2013, Linked Pooled Fund at 2.4%. taken their first steps to normalising policy e.g. Fed tapering. The which was comfortably ahead of the benchmark and target for this timeline for rate rises is somewhat unclear with central banks Fund. Section returns stepping back from initial forward guidance thresholds. There is a range of investment strategies amongst RPS sections, The Private Equity Pooled Fund provides exposure to a highly reflecting the diversity in terms of liability profiles and employer Return-seeking assets and equity markets posted strong gains in diversified range of private equity investments. It is made up of a covenants. In 2013, the investment return produced by section 2013, rising even in advance of the improvement in data. The MSCI series of sub-funds, each representing a different vintage of private assets ranged between 0% and 14%, although most section returns World Index – a measure of equity prices in developed markets – equity investment. were in a narrower range of 6% to 9%. This reflected the diversity of returned 26% in local currency price terms, led by US stocks which returns seen in the major asset classes over the year. returned 30% (S&P 500). Emerging Market stocks, however, were The Private Equity Pooled Fund produced a return of 11.4% in left behind, finishing broadly flat. As would be expected, credit 2013, behind its quoted equity benchmark return. Because of the Over a three-year period, the investment returns of RPS sections spreads also benefitted in this environment, tightening significantly. unquoted nature of these investments, there is often a significant ranged from 3% to 7% per annum, while over a five-year time The impact on overall yield levels was offset by higher interest rates time lag for revised information on underlying investments to flow horizon, the range of returns was 7% to 10% per annum. Over a which increased last year as investors digested better economic through to the Fund valuation. Therefore, due to this lag, the return ten-year time horizon, however, the range of returns was 5% to 9%. data and the onset of Fed tapering. for 2013 has not fully captured the rally in equity markets. business fail. and partoftheirpensionsatthesametime,shouldemployer’s restricted toavoidtheprospectofemployeeslosingtheirjobs benefits asawhole.Investmentsinemployers’businessesarealso so thatthefailureofonedoesnotaffectsecuritymembers’ (Investment) Regulations2005requireinvestmentstobediversified The Pensions Act1995and theOccupationalPension Schemes Self-investment Government. partly incashandbymeansofsubstitutionordersfromthe Railways Board’shistoricalobligations.Theseobligationsaremet The Transport Act1980providesfinancialsupportfortheBritish Government support to recallsecuritiesifanimportantvoteisscheduled. rights temporarily. TheTrustee Companyretainstheright,however, lent securities,forexamplebyreceivingdividends,butlosesvoting defaulting borrowers.TheSchemeretainseconomicexposuretothe indemnification programmeswhichprotecttheSchemeagainst the Schemereceivesrevenues.Thecustodiansalsooperate a resultofoperatingthesesecuritieslendingarrangements, that meetstandardssetonbehalfoftheTrustee Company. As Scheme receivescollateralintheformofcashorothersecurities managers’ investmentactivities.Inplaceofthelentsecurities, short-term requirements.Thelendingdoesnotimpactonthefund securities theyholdavailableforlendingtohouseswith certain portfolios,custodiansareabletomakeaproportionof and subjecttotheagreementsinplaceconstraintson theapprovalofInvestmentCommittee, securities market.With the regulatoryauthoritiestomaintainanorderlyandmoreliquid Securities lendingformspartofthearrangementssanctionedby Securities lending Investment Report to monitoringbyRPMI. allocation, pricingandadministrationofdealingintheunits,subject management ofthePAF, includingtheissueofbonusunits,asset Aviva isresponsibleforprovisionoftheguaranteeandoverall age 55mayreceiveadiscountedvaluedependingontheirage. holders atage55oronearlierdeath.Membersretiringbefore are guaranteedbyAvivatobeworthatleast£1eachtheunit managed byAvivaInvestorsandLegal&General.UnitsinthePAF in thePension AssuredFund (‘PAF’) withunderlyinginvestments At 31December2013,thegreaterpartoffundwasinvested the rangeofavailablefundsin2013. advisers, Towers Watson, theTrustee madeanumberof changes to vehicles. Actingonadvicefromtheirprofessionalinvestment administered byRPMIandinvestedinseveraldifferentinvestment The mainAVC is arrangementfortheRPS,knownas‘BRASS’, Total valueoffundat31/12/13= £1,358m Railways Pension Schemeholdingat31/12/13=£1,351m arrangement) BRASS (AVC) investments (excludesIWDCandDC statutory limitsonself-investment arenotbreached. RPMI regularlymonitorsinvestmentmanageractivitytoensurethat within discretionsgiventothembytheTrustee Company. investments aretakenbyexternalinvestmentmanagersacting Investment decisionsonthepurchaseandsaleofemployer-related basis. The rulesforself-investment thereforeapplyonasection-by-section non-associated employers,withactuariallyindependentsections. The RPSisinaspecialposition.Itmulti-employerschemefor the PAF areshowninthetablebelow: fundsotherthan The investmentbenchmarksfortheBRASS time changetherangeoffundsmadeavailabletomembers. Global BondFund andDepositFund. TheTrustee mayfromtimeto Aggregate BondFund, LongTerm GrowthFund, Index-Linkedand and GlobalEquity)fiveself-select funds:GlobalEquity Fund, 2013 andconsistsoftwolifestylestrategies(LongTerm Growth investmentfundrangewaslaunchedinMay The newBRASS and wasbasedonadvicefromTowers Watson. quarter of2014.Thistransferwasdoneforthebenefitmembers a plannedtransferofpartthefundwascompletedinfirst been closedtocontributionssince2007andimplementationof balance inanactivelymanagedglobalequityfund.Thefundhas long-term bondfundandacashportfolio,withthemajorityof Approximately 80%oftheunderlyingassetsareinvestedina Deposit Fund Global BondFund Index-Linked and TermLong GrowthFund Aggregate BondFund indices Global EquityFund Fund Benchmark Rate (LIBID) 7 DaySterlingLondonInterbankBid Gilt andcorporatebondindices Composite comprisingIndex-Linked out-performance ofUKRPI+5%p.a.) UK RPI(withalongtermtarget and corporatebondindices Composite comprisinggovernment Composite comprisingregionalequity

36-37 Annual Report and Audited Financial Statements Actuary’s Report

The 31 December 2010 valuation and with the Statement of Funding Principles. For each section a Overall I expect that the funding levels disclosed by the draft results During the year work has continued to progress on seeking to short report is issued which sets out how the funding position may will be close to or only slightly lower than the corresponding funding finalise the actuarial valuation of the Railways Pension Scheme as have changed since the last assessment. level from the 2010 valuation for many sections, especially for at 31 December 2010. This is the sixth valuation of the Scheme, larger sections with stronger covenant ratings. However, other the previous valuation having been carried out as at 31 December At the time of writing, the annual updates as at 31 December 2011 sections may see a more significant reduction in funding level and 2007. As for the 2007 valuation, the 2010 valuation has been and 31 December 2012 have been completed for all but one of the it is expected that most sections will remain less than fully funded carried out to satisfy the scheme funding regulations in addition to sections for which the 2010 valuation has been completed. These (i.e. with assets less than liabilities). In addition, the Government’s the requirements of the Scheme’s Trust Deed and Rules. updates showed that for most sections funding levels have reduced decision to remove the option for schemes to contract out of the by between 5% and 15% since 31 December 2010. This is mainly a State Second Pension from 2016 may lead to further changes to The main purpose of the valuation is to set the future contributions result of returns on most asset classes being lower than anticipated benefits for future service for many sections. Both aspects will need to be paid into each section. The Trustee and I consulted widely on in the valuation. In addition, changes in the outlook for future to be reflected in the final contribution arrangements agreed as part the methodology and the large number of assumptions needed to do investment returns and contribution payments had an impact on the of the valuation process in due course. this. Ultimately it is necessary to reach agreement on these matters results. with the Designated Employer of each section. Defined Contribution arrangements No formal action is required to be taken by the Trustee or The RPS encompasses the Defined Contribution Arrangement and The formal documentation required to complete the valuation for Designated Employers following these annual updates; in particular, the Industry Wide Defined Contribution Section. These arrangements each section includes a Statement of Funding Principles (which sets the Schedule of Contributions agreed for each section following the are excluded from the valuation and annual updates. out the Statutory Funding Objective for the Section), a valuation 31 December 2010 valuation remains in force and does not need to report, a Recovery Plan (for those Sections with an overall valuation be reviewed until the next full actuarial valuation of the RPS as at 31 shortfall) and a Schedule of Contributions. At the time of writing, December 2013. the 2010 valuation, including the formal documentation, has been completed for 99 Shared Cost sections and for the 1994 Pensioners In addition, initial actuarial valuations have been completed for four section. Furthermore, agreement has been reached between the new sections of the RPS: as at 31 December 2011 for the Hull Trustee and Designated Employer for the three remaining sections Trains section and the London and North Western Railway section, James C Wintle and the formal documentation for these is expected to be completed and as at 31 December 2012 for the Voith section and the Amco Actuary to the Railways Pension Scheme shortly. This will formally conclude the 2010 valuation process. section. Towers Watson Limited Watson House For the sections for which the 2010 valuation has been finalised, The 31 December 2013 valuation London Road the assets cover their funding target by 97% on average. Of these At the same time, work for the formal actuarial valuation as at 31 Reigate sections, 35 hold assets of more than 100% of their funding target December 2013 has begun and the process of consulting with Surrey and 17 sections have made changes to the benefits to be accrued relevant parties is well progressed. Indicative results for most RH2 9PQ for future service. sections were issued at the end of February and the formal draft results will follow at the end of May. While the final position will not 10 April 2014 The 2011 and 2012 annual updates be known for all sections until relevant discussions are concluded, In order to satisfy the requirements of the Pensions Act 2004, an some preliminary observations are possible. interim funding update needs to be completed for each shared cost section for each year in which a full actuarial valuation is not Various changes to the assumptions are expected as detailed completed. The assumptions and methodology for the annual during the consultation process. The expected impact of these update do not need to be formally agreed between the Trustee changes on funding levels since the last actuarial valuation is likely and Designated Employers. The assumptions used are set using a to vary between sections depending on their covenant category and consistent approach with that used at the most recent full valuation membership profile. Appendices

Appendix G Appendix I Appendix B Summary of the Pooled fund main provisions of accounts Payment of Appendix D contributions the Scheme Responsible investment Annual Report and Audited Financial Statements 40 41 42 43 45 46 48 50 51

Appendix H Appendix A Appendix C Appendix E Where to go for Principal advisers to Custody Risk statement Appendix F help the Trustee Company arrangements Statement of Investment Principles

38-39 Appendix A: Principal advisers to the Trustee Company

Scheme and investment administrator RPMI, Stooperdale Offices, Brinkburn Road, Darlington, DL3 6EH

Manager of investment managers Railpen Investments, 2nd Floor, Camomile Court, 23 Camomile Street, London, EC3A 7LL

Actuaries James Wintle, Towers Watson Limited Trevor Llanwarne, the Government Actuary (joint actuary for the 1994 Pensioners Section and BR Section)

External auditors KPMG LLP

Solicitors Herbert Smith Freehills, Linklaters, DWF, Eversheds, Maclay Murray & Spens, Simmons & Simmons

Principal custodians The Bank of New York Mellon

Clearing Bankers The Royal Bank of Scotland Group plc Appendix B: the Industry-Wide Defined ContributionSection.Collection of contributing tothe DefinedContributionArrangement and As at31December2013,therewere 23employersactively Section Arrangement andtheIndustry-Wide DefinedContribution Sections intheDefinedContribution (moneypurchase) Designated EmployerandtheTrustee Company. date. Theschedulesofcontributions mustbesignedbyboththe contributions mustbesignedoffwithin15monthsofthevaluation the Schemeeverythreeyears.Thevaluationandschedulesof following monthunderlegislation).TheSchemeActuaryrevalues the relevantmembersarepaid(comparedto19thdayof due datesetoutintheRules,whichissevenworkingdaysafter prepared fortheSchemerequirepaymenttobemadeby The schedulesofcontributionsthattheTrustee Companyhas or willbemetbytheendofrecoveryperiod. the fundingobjectivewillcontinuetobemetfornextfiveyears, certified bytheSchemeActuaryasbeingsufficienttoensurethat dates onwhichthecontributionsaredue.Eachschedulemustbe the Schemebyemployersandmembers,alsoshows out asapercentageofpay, therateofcontributionspayableto contributions foreverysectionoftheScheme.Thisschedulesets The Trustee Companyisrequiredtomaintainascheduleof Sections intheSharedCostArrangement application ofthePensions Act1995. be received.Thesedatesthenbecomethelegalduefor schedules settingoutthedatesbywhichcontributionsshould Trustee Companyisrequiredtoprepare,maintainandmonitor responsibility ofeachemployertopaycontributionsontime.The Under theprovisionsofPensions Act1995,itisthe Due datesforpaymentofcontributions payroll combinations. based atapproximately170differentaddressesand200distinct employees. Asaresult,theTrustee Company dealswithemployers of weekly, fortnightly, four-weekly andcalendar-monthly paid locations, eachwithitsownpayrolldepartmentandcombination participating employers.Eachonemayoperatefromseveraldistinct participating intheScheme.Asatyear-end, therewere156 The Trustee Companycollectscontributionsfrommostemployers Participating employers Payment ofcontributions

day aftertheduedate. The largestindividualamountwas£190,000whichpaidone of contributionspayableundertheschedulescontributions. contributions withatotalvalueof£1.6m,whichrepresents0.3% During 2013,therewere163instancesoflatepayment reduces theriskofanemployerfailingtopaycontributionsontime. direct debitarrangementsforallinvoicedamounts,whichgreatly Employers areencouragedtoparticipateintheTrustee Company’s Regulator’s recommendations. reported inaccordancewithbothapplicablelawandthePensions of theregulationsdeemedsignificantby Trustee Companyare Regulator fromwhomitseeksadviceonbestpractice.Breaches seriously, andalsomaintainsadialogue withthePensions The Trustee Companytakesthecollectionofcontributionsvery significance. Regulator latepaymentsofcontributionswhicharematerial The Trustee CompanyisrequiredbylawtoreportthePensions Late paymentofcontributions by thedateshowninschedule. require. Onceputinplace,theemployermustpaycontributions Trustee Companyandrevisedfromtimetoascircumstances to becertifiedbytheSchemeActuary, butmustbepreparedbythe which thecontributionsaredue.Payment schedulesdonothave to theSchemebyemployersandmembers,dateson sets outasapercentageofpay, therateofcontributionspayable schedule. Thisissimilartoascheduleofcontributions,andagain contributions fromtheseemployersisgovernedbyapayment

EXPRESS EXPRESS EASTERN & ORIENTAL ORIENTAL & EASTERN THAILAND Hua Hin

River Kwai 2013 Bangkok Butterworth Kuala Lumpur Singapore 40-41 Annual Report and Audited Financial Statements Appendix C: Custody arrangements

The law of trust imposes a fiduciary duty on trustees to safeguard ■ reporting; assets and this has been reinforced by the Pensions Act 1995 and ■ cash management; the Occupational Pension Schemes (Investment) Regulations 2005. ■ foreign exchange; and The Trustee Company has appointed custodians to hold the assets, ■ appointing and operating through sub-custodians in overseas including cash, that make up the various quoted securities portfolios markets. managed by the investment fund managers. This is in accordance with the Pensions Act 1995 which requires trustees, rather than As part of the services provided to the Trustee Company, RPMI the employer or the fund manager or some other party, to make the reviews the effectiveness of custody arrangements on a regular appointment. basis. This includes monitoring the efficiency of transaction settlement, income collection, tax recovery, foreign exchange The custodians are responsible for the administration and performance and the appointment and management of overseas safekeeping of the assets. Safekeeping can be defined as the sub-custodians. The verification of assets is also conducted by preservation of assets under a system of control that ensures that reference to independent records held by the custodians. Great assets are only released with proper authorisation, and that the emphasis is placed on asset safety. custodian’s clients’ investments are legally segregated from those of the custodian. In addition, all custodians appointed by the Trustee Company are required to publish an AAF 01/06, ISAE 3402 or similar Other arrangements which seek to ensure asset safety, and to document in other jurisdictions. This is a report on the custodian’s protect evidence of title, are in place for certain asset classes such internal controls, which is made available to third parties, and is as hedge funds and property. In the case of property, freehold and reviewed by the custodian’s reporting accountant, in accordance leasehold property is normally registered at HM Land Registry, with guidance issued by the Audit and Assurance facility of the where appropriate, and copies of all title documents are held by the Institute of Chartered Accountants in England and Wales in its Trustee Company’s property lawyers or the Network Rail property technical release AAF 01/06 ‘Assurance reports on internal controls

deeds depository. of service organisations made available to third parties’, or ISAE 3402 (formerly SAS70, as amended following the introduction of In the case of investments managed by US fund of hedge fund the Sarbanes-Oxley Act of 2002, the US equivalent issued by the , managers, the Trustee Company has appointed The Bank of New Auditing Standards Board of the American Institute of Certified , York Mellon as the independent fund administrator to ensure that Public Accountants (‘AICPA’) as a Statement on Auditing Standards). underlying hedge fund entitlements are properly monitored and accounted for, through effective and rigorous reporting and controls. Although not a regulatory requirement, this constitutes best practice Core administrative functions performed by the custodians include and the Trustee Company will not appoint a custodian that does not As part of the the following: produce a report of this type. These reports are reviewed by RPMI’s services provided to the Business Assurance team and external audit as part of the ongoing ■ settlement of transactions; monitoring of custodians. Trustee Company, RPMI ■ registration and safekeeping; ■ collection of income (dividends and interest) arising from reviews the effectiveness investments; of custody arrangements ■ tax recovery; ■ processing corporate actions, including proxy voting where on a regular basis. applicable; ,, explain. general meetingsandstronglysupports theprincipleofcomplyor disagreement withthecompanies in whichitinvestspriortoannual its externalfundmanagersordirectly, toresolveareas of Wherever possible,theTrustee Companyendeavours,through ■ ■ ■ ■ ■ ■ investment, votingandengagementby: The Trustee Companyseekstopromotebestpracticeinresponsible General principles decision making. this includestakingESGissuesintoconsiderationininvestment recognise thatinvestorshaveresponsibilitiesaswellrightsand superior long-termfinancialperformancethanthosewithout. We interested andinvolvedshareholdersaremorelikelytoachieve that companieswithrobustcorporategovernancestructuresand rights) attachedtoinvestments.TheTrustee Companybelieves their policy(ifany)directingtheexerciseofrights(includingvoting in theselection,retentionandrealisationofinvestments extent (ifatall)towhichSEEconsiderationsaretakenintoaccount the in theirschemes’StatementsofInvestmentPrinciples(‘SIP’) UK occupationalpensionschemesarerequiredbylawtoaddress environmental, socialandgovernance(‘ESG’)issues.Trustees of (‘SEE’) considerations,nowmoregenericallydescribedas shareholder engagementandsocial,environmentalethical Responsible investmentencompassescorporategovernance, Appendix D: working withotherinstitutionalinvestors toachievetheseends. investor; and encouraging bestpracticeinstewardshipasaresponsible reporting; supporting improvementsinthequalityandclarityofcompany recognised bestpracticeinothermarkets; Code andtheUKStewardshipCode,otherstatementsof promoting compliancewiththeUKCorporateGovernance policy developmentactivities; market levelbyrespondingtorelevantconsultationsandother company strategyandshareholdervaluecontributingata widening thescopeofcorporategovernancedebateto on corporategovernancepolicy; investors inthosecompanies,andshapingthedebate maintaining communicationswithinvesteecompanies,other Responsible investment available tomembersonrequest.Itwillrepeatthisperiodically. Stewardship Codecomplianceasat30September2012whichis has obtainedanindependentauditopiniononaspectsofitsown Code. TheTrustee Companywishestoleadbyexampleonthisand recommended intheguidancetoPrinciple7ofStewardship independent auditopinionwhichcanbedisclosedtoclientsas 01/06 reportonStewardshipCodecomplianceandtoobtainan We encourageourexternalfundmanagerstomakeanAAF found onourwebsiteatwww.rpmi.co.uk together withourapproachtoresponsibleinvestment,canbe statement onhowweapplytheCodeanditssevenprinciples, in ourownSIPs, andtopublishacompliancestatement.Ourfull with theCodeanditsprinciples,whichhavealsobeenincorporated We expectourexternalfundmanagers,whererelevant,tocomply exercise ofgovernanceresponsibilities. to helpimprovelong-termreturnsshareholdersandtheefficient can enhancethequalityofengagementwithinvesteecompanies 2012, whichsetsoutsevenprinciplesonhowinstitutionalinvestors Reporting Council’sUKStewardshipCode,updatedinSeptember support, andencourageourfundmanagerstoadopt,theFinancial are runinamannerconsistentwithclients’bestinterests.We intermediaries haveamajorroletoplayinensuringthatcompanies The Trustee Companyconsidersthatitsfundmanagersandother UK StewardshipCode interests ofbeneficiariestodoso. independently orwithotherparties, whereitconsidersinthebest engagement activitiesinrelationto individualcompanies,whether Company, throughRPMIRailpenInvestments,willundertakefurther performed byfundmanagersandotherintermediaries,theTrustee Trustee Company. Inaddition tothemonitoringofactivities Stewardship Code,fullvotingauthorityultimatelyrestswiththe issues, andtoengageproactivelywithcompaniesinlinethe managers areexpectedtoadviseandreportongovernance Although theTrustee Company’sexternalUK-based fund Voting andengagement ■ ■ ■ companies toadopt: between theinterestsofdirectorsandshareholdersurge and engagementwork.We expect toseesignificantalignment Executive remunerationcontinuestobeamajorfocusofourvoting Executive remuneration companies. transparency withoutunderminingourongoingdialoguewith the monthinwhichmeetingisheld,sothatwecanbalance 2010, subjecttoawaitingperiodofthreemonthsfromtheend record inrespectofallUKcompanymeetingsheldafter1January We publiclydiscloseonourwebsitewww.rpmi.co.uk ourvoting UK votingdisclosure understand ourviewsontheseissues. should helpinvestmentmanagersandcompanydirectorsto left openforshareholderstoresolvewithcompanyboards.This covered bytheCode,requiregreateremphasisorarespecifically Our policydocumentaimstodealwithissuesthatareeithernot companies tocomplywiththeCodeorexplainanydepartures. draws heavilyontheUKCorporateGovernanceCodeandweexpect participate asemployersinrailwayindustrypensionschemes.It The policyappliestoallUKlistedcompaniesincludingthosethat at www.rpmi.co.uk of majorgovernancedevelopments.Itcanbefoundonourwebsite December 2013andwillcontinuetoberegularlyrefreshedinlight corporate governanceandvotingpolicywhichwaslastupdatedin establish avotingandengagementalliancethroughjointUK fund withastrongcommitmenttoresponsibleinvestment, Universities SuperannuationScheme,anothermajorUKpension Since 2010,RPMIRailpenInvestmentshasworkedwiththe UK votingandengagementalliance provide forclawback. its sector, whichdonotencourageexcessiverisktaking and and longer-term incentives,appropriate tothecompanyand the useofrigorousperformancetargets forannualbonuses a deferredelementoftheremuneration package;and salary atmarketlevels; a simpleandtransparentstructurewhichprovidesforbasic 42-43 Annual Report and Audited Financial Statements Appendix D: Responsible investment

The regulatory authorities in the UK and elsewhere are imposing As well as taking part in UNPRI activities, we also encourage our their own requirements for the deferral of annual bonuses as external fund managers to become asset manager signatories. part of their perceived need for more prudent regulation. The UK Government consulted extensively on executive pay reform and Pooled fund equity holdings will be introducing a binding shareholder vote on forward looking The largest ten equity holdings within the pooled fund investments future remuneration policy (“future policy report”) from October as at 31 December 2013 were as follows: 2013 in addition to the existing advisory vote on the retrospective implementation of the policy (“implementation report”). £m Overseas markets In addition to our activities in the UK, active voting and engagement Nestle 34.40 has been extended selectively to overseas markets since 2006 British American Tobacco 28.67 26.64 and currently extends to the USA, Continental Europe, Japan, Sanofi SAP 25.33 Singapore, Australia and Hong Kong. Self-standing policies for Unilever 24.04 several of our overseas markets can be found on our website at Accenture 23.01 www.rpmi.co.uk Reckitt Benckiser Group 22.40 Bank of New York Mellon 20.64 Collaborative Engagement Imperial Tobacco Group 20.54 We work informally with other investors and pension funds around Mondelez International 19.30 the world, and benefit from the local market expertise that they bring to our own thinking on ESG matters. RPMI Railpen Investments is an active and lead participant in several national, regional and global investor networks, alliances and trade bodies in line with the active share-ownership principles outlined in the Stewardship Code. , These include, but are not limited to, the NAPF, the International , Corporate Governance Network, the UK Corporate Governance Forum, the UK Social Investment Forum, the Global Investors Governance Network, the Working Group of the International The Trustee Integrated Reporting Council and various other investor corporate Company considers that its governance bodies, including the Council of Institutional Investors in the USA, Eumedion in the Netherlands, the Australian Council of fund managers and other Super Investors and the Asian Corporate Governance Association in the Far East. We are also members of Institutional Investors Group intermediaries have a major on Climate Change. role to play in ensuring that In addition, we are asset owner signatories to the following major companies are run in a responsible investor initiatives: manner consistent with ■ UN Principles for Responsible Investment (‘UNPRI’) clients’ best interests ■ Extractive Industries Transparency Initiative ■ Carbon Disclosure Project ■ Forest Footprint Disclosure Project ,, Appendix E: each operatingcompany, RPMIandRailpen Investments.Actions completion), are recorded intheriskregisterof Trustee and management (includingresponsibilities andtargetdatesfor The risksidentified,togetherwith action plansfortheir occur. the significanceofconsequent impactonthebusinessifthey are evaluatedbyconsideringthelikelihood ofoccurrenceand team, whichisseparatefromoperationalmanagement.Risks directors inaformalprocessfacilitatedbytheBusinessAssurance Risks areidentifiedandregularlyreviewedbymanagement Risk identificationandmanagement investment managersretainedbytheTrustee Company. programme toreviewtheinternalcontrolenvironmentofall obligation todoso.Theinternalauditplanincludesarolling controls, althoughinvestmentmanagersareundernoregulatory 3402 orequivalentstylereports),ontheeffectivenessofinternal to publishinternalcontrolassurancereports,(AAF01/06,ISAE The Trustee Companystronglyencouragesitsinvestmentmanagers operations andincludestheuseofthird-partyserviceproviders. The riskpolicycoversallaspectsoftheTrustee Company’s provides aframeworkformanagingriskonday-to-day basis. regularly bymanagementandannuallytheTrustee Company and boards oftheoperatingcompanies.Theriskpolicyisreviewed other risks.Implementationoftheriskpolicyisdelegatedto safeguarding, tobusiness,financial,operational,complianceand exposure oftheScheme,andassetsthatitisresponsiblefor The objectiveoftheTrustee Company’sriskpolicyistolimitthe Controls. within thePension Regulator’sCodeofPracticeonInternal Governance CodeissuedinSeptember2012andtheguidance taking noteoftheguidanceandprinciplesUKCorporate procedures toreducesignificantrisksanacceptablelevel, and managingrisk,toimplementingmaintainingcontrol and riskmanagement.Itiscommittedtoidentifying,evaluating The Trustee Companyhasoverallresponsibilityforinternalcontrol Risk policy year-ended 31December2013. The followingriskmanagementprocessoperatedthroughoutthe Risk statement operating companies. Theinternalauditplanisapproved bythe registers andcovers allmajoractivitiesoftheTrustee Companyand internal auditplan,whichfocuses on thesignificantrisksinrisk The effectivenessoftheinternalcontrols isexaminedbythe assurance, forexampleinternalcontrol reporting. Audit, ExternalAuditand/oranyother independentsourceof This describestheindependentassurance providedbyInternal Third lineofdefence: the RMCandComplianceteam. enforced bythemonitoringfunctionsofriskmanagementthrough Executive ManagementGroupandtheBoard.Thesecondlineisre- information concerningkeybusinessactivities,forexample,the and willincludecommitteesreceivingreportsmanagement of theeffectiveoperationinternalcontrolenvironment This describesthecommitteesandfunctionsthatprovideoversight Second lineofdefence: projects. by documentedpoliciesandproceduresorinsomecasesspecific other unexpectedeventsorerrors.Theseprocessesaresupported supervision thatensurescomplianceandidentifiesbreakdownsor systems andprocessesthedaytolinemanagement This referstothedaycontrolsthathavebeendesignedinto First lineofdefence: outlined below. The approachisbaseduponthe“threelinesofdefence”modelas unnecessary duplicationwillbecomeapparent. comfort thatrisksarebeingmanagedandreportedon.Inaddition, address anygapsintheriskmanagementprocessandprovides by eachcontrol.Theprocessprovidesthemeanstoidentifyand particular riskandthesourcequalityofassuranceprovided The assurancemapidentifiesallthecontrolssupportinga risk. controls assurancemaphasbeendevelopedforeachidentified In supportoftheriskregistersandasanaidetomanagingrisk,a by theBusinessAssuranceteam. risk sharingandcontingencyplanning.Theseactionsaremonitored include implementingoradaptinginternalcontrols,risktransfer, or loss. reasonable, notabsolute,assuranceagainstmaterialmisstatement to achievebusinessobjectives,andthereforecanonlyprovide is designedtomanage,ratherthaneliminate,theriskoffailure internal control,theTrustee Company’sriskmanagementprocess Because ofthelimitationsthatareinherentinanysystem controls associatedwiththesesignificantrisks. evaluated andmanaged,aswelltheeffectivenessofinternal significant risksandassesshowtheyhavebeenidentified, team withtheexternalauditorsinattendance,toconsider Trustee Directors.ItmeetsregularlywiththeBusinessAssurance includes representativesofexecutivemanagementandisopento Management CommitteeischairedbytheFinanceDirectorand which isreviewedperiodicallybytheAuditCommittee.TheRisk need arise.InternalauditactivityisgovernedbytheAuditCharter, of theAuditCommitteeandTrustee Board Chairmanshouldthe the AuditCommittee,andhasunrestrictedaccesstoChairman Manager reportstotheChiefExecutiveofTrustee Companyand the in-houseBusinessAssuranceteam.The Internal auditservicesareprovidedtotheTrustee Companyby to thirdparties(AAF01/06)’. reports oninternalcontrolsofserviceorganisationsmadeavailable Accountants inEngland&Wales Technical Release,‘Assurance Engagements 3402(ISAE3402)andtheInstituteofChartered under theguidelinesofInternationalStandardonAssurance during theperiod.Thesehavebeenindependentlyevaluated of therelevantcontrolobjectivesandprocedureswhichoperated year ended31December2012.Thereportsetsoutadescription an internalcontrolsassurancereporthasbeenpreparedforthe In respectofthepensionsadministrationserviceprovidedbyRPMI, them, arereportedtotheAuditCommittee. findings orrisksidentified,togetherwithplannedactionstomitigate Audit Committee.Internalauditoutput,intermsofanysignificant 44-45 Annual Report and Audited Financial Statements Appendix F: Statement of Investment Principles

Under the Pensions Act 1995 (as amended) and the Occupational When setting the target and risk range for each section, the Trustee Where the Trustee Company or Railpen believes that the returns Pension Schemes (Investment) Regulations 2005 the Trustee Company takes into account maturity, liability profile and strength achieved through active management over the medium term will Company is required, following consultation with the employers, of the employer’s covenant (and that of the Secretary of State at exceed those from passive management then active management to maintain a Statement of Investment Principles (‘SIP’) for the the Department for Transport in the case of the 1994 Pensioners may be adopted. Scheme. Each section of the Scheme has a unique combination of Section). For a section which has adopted this so-called ‘risk assets, liabilities and strength of employer covenant. In addition, budgeting’ approach, details of targets and risk budgets are set out The fund managers have discretion in the timing of realisation some sections have established Pensions Committees, which in in the relevant section’s SIP. of investments and in considerations relating to the liquidity of most cases have the power to set investment strategy – although those investments within parameters stipulated in the relevant the Trustee Company retains legal responsibility for implementation Where a Pensions Committee has decided not to adopt a risk appointment documentation and pooled fund prospectuses. This of investment policy and for ensuring the policy complies with budgeting approach, the asset allocation for the relevant section is includes the power to rebalance funds from available cash or make statutory requirements. still driven by the maturity, liability profile and strength of covenant transfers in order to keep within stipulated asset allocations or of the sponsoring employer(s), and the strategic asset allocation is restrictions. Where relevant, the fund managers are responsible for In order to deal with the large diversity of sections, the Trustee recorded in the relevant SIP for the section. implementing short-term tactical shifts in asset allocation around Company has developed an overarching SIP, supplemented by an their agreed investment benchmarks. individual statement of investment principles for every section. Pooled funds These are reviewed following each triennial actuarial valuation and The sections invest in a number of pooled funds which are Performance measurement following any significant change in the investment policy of the operated by RPMI on behalf of the Trustee Company. These funds During the year under review the Trustee Company retained WM Scheme or of a section. The Trustee Company will consult with the offer diversification by risk and return characteristics and by asset Performance Services to independently calculate the performance relevant employers about any changes, but where changes are only class and are reviewed regularly by the Trustee. The investment of each section and each pooled fund. WM Performance Services in relation to a section-specific SIP, the employers have agreed that performance of each pooled fund is measured against an agreed also calculates the performance of the portfolios of each fund the Trustee Company will only consult with employers participating benchmark. manager appointed by Railpen. in that particular section. Implementation of a section’s investment policy may be achieved Investment performance and compliance with operating parameters An overview of the provisions in the Scheme and section SIPs is set by means of either the risk budgeting or strategic asset allocation are monitored by Railpen. Quarterly and cumulative reports on out below. approaches described above. Where a risk budgeting approach is investment performance and activity are produced and distributed followed, the proportion of the section assets held in a particular to the Trustee Company, the Pensions Committees (where Investment objectives pooled fund may be changed from time to time by the Trustee appropriate) and the relevant employer. The Trustee Company’s primary objective is to ensure that the Company (or RPMI under delegated authority) in order to comply assets of each section are sufficient to pay the benefits promised with the risk budget in the manner the Trustee Company considers Risk management when they fall due, and to endeavour to achieve this at affordable appropriate. In other words, the proportion is inherently flexible The Trustee Company recognises that there are various investment cost to the employers and members. Due to the diverse maturities and the actual proportion invested in each pooled fund may change related risks to which any pension Scheme is exposed, and has of the sections and the differing strength of covenant of each as a result of changes to risk, or for other reasons. taken the following steps to manage those risks. sponsoring employer, investment strategies will vary widely. Investment objectives therefore have to be set separately for each Details of the pooled funds operating during the year, including An Audit Committee has been established, which has specific section. their benchmarks and performance information, is included in an responsibilities including review of financial control and risk appendix to the overarching Scheme SIP and is also set out in the management systems. Further information on the Audit Committee In setting the investment strategy, the Trustee recognises pooled fund accounts in Appendix I. can be found in the Trustee Company’s Annual Report on pages that the use of a range of asset classes may offer diversifying 30-31. characteristics. This makes it possible to increase portfolio Asset management efficiency, achieving potentially higher returns without a The investment of the assets within each pooled fund is delegated RPMI advises the Trustee Company and Pensions Committees on proportionate increase in overall risk for the portfolio. to fund managers appointed by Railway Pension Investments asset allocation and risk-budgeting strategies. In doing so, RPMI Limited (‘Railpen’). There are a number of managers within considers the risk of the Scheme or Section failing to meet its own The Trustee’s preferred approach is to define the asset allocation most pooled funds, in order to attempt to diversify the risk of objectives. according to expected volatility of returns compared to liabilities. underperformance attached to any individual fund manager. under regularreview andrenegotiatedfromtimeto time. prior toawarding mandates, butthereafterfeelevels arekept has apolicyofconcluding feenegotiationsasfar possible some combination),dependingon mandatespecifics.Railpen managers areeitheradvaloremor performance-related(or resources whereverappropriate.Fees toexternalfund strategy inthemostefficientmanner possible,usinginternal The Trustee Companyaims toimplementSchemeandsection Costs range offundsoffersdiversificationbybothregionandassetclass. reviewed regularlyandmaybechangedfromtimetotime.The out inappendicestotheoverarchingSIP, althoughtheofferingis contribution arrangement.Therangeoffundsavailableisset contributions inrespectofmemberstheindustry-wide defined includes members’additionalvoluntarycontributions(‘AVCs’) and choices fortheinvestmentofdefinedcontributionassets.This The Trustee Companyisresponsibleforprovidingappropriatefund Defined contributionassets investment policy. levels inordertolimittheimpactofcashflowrequirementson RPMI estimatescashflowrequirementsandcomparesitwith to complywiththispolicyunderthetermsoftheirmandates. the useoftheseinstruments.Investmentmanagersarerequired has aderivativespolicywhichspecifiesacceptableparametersfor Railpen authorisestheuseofderivativesbyitsfundmanagersand the organisationstoperformtheirfunctions. banks andbysettingserviceobjectivesthatrelatetotheabilityof is measuredbyassessingthecredit-worthinessofcustodian custodians’ andotheradministrators’activities.Custodianrisk risk ofmisuse.RPMImanagescustodianbymonitoringthe the managementandcustodyofassets,inordertoreduce It istheTrustee Company’spolicytoseparate,asfarpracticable, risk managementtools. returns andbymodellingthebehaviourofmanagerportfoliosusing managed byRailpenthroughmonitoringtheactualdeviationof ‘tracking error’)relativetothemanager’sbenchmark.Thisriskis is theexpecteddeviationinmanagerperformance(theso-called in decidingthesizeofmandate.Onemeasuremanagerrisk Due considerationisgiventotheriskprofileofindividualmanagers Risks withinthePooled Funds arealsomonitoredbyRailpen. Appendix F: Statement ofInvestmentPrinciples 1992. Ithasnowextendedvoting selectivelytooverseasmarkets. of UKcompaniesinwhichithasholdings andhasdonesosince on allresolutionsatAnnualand ExtraordinaryGeneralMeetings beneficiaries todoso.The Trustee Companyendeavourstovote with otherparties,whereitconsiders itinthebestinterestsof in relationtoindividualcompanies, whetherindependentlyor Through RPMI,theTrustee Companywilltakefurtheraction post-hoc quarterlyreportsonvotingandothersignificantmatters. regularly ontheircompliancewiththesepoliciesandtoprovide overseas fundmanagers.Railpenrequiresmanagerstoreport Council andexpectssimilarstandardstobefollowedbyUK in theUKStewardshipCodepublishedbyFinancialReporting Company supportstheprinciples,asrevisedfromtimetotime, to membersonrequest.Aspartofthesepolicies,theTrustee with therelevantpolicy. Acopyofthesepoliciesisavailable markets andexpectsitsfundmanagersinthosetocomply The Trustee Companyhascorporategovernancepoliciesforvarious companies andwidercorporategovernanceinitiatives. improved throughconstructiveconsultationandengagementwith of theirbeneficiariesandassertsthatshareholdervaluecanbe to ensurethatinvestmentsaremanagedinthelongterminterest that institutionalinvestorshaveageneralfiduciaryresponsibility companies inwhichitinvests.TheTrustee Companybelieves maintenance ofgoodstandardscorporategovernanceby The Trustee Companyattachesparticularimportancetothe Policy oncorporategovernanceandvoting the performanceofportfolio. are likely, inthefundmanager’sview, tohaveamaterialimpacton selecting, retainingandrealisinginvestments,wherethesefactors into accountsocial,environmentalandethicalconsiderationsin The Trustee CompanyexpectsRailpen’sfundmanagerstotake Socially responsibleinvestment demonstrate similarstandardsofdisclosure. Fund DisclosureCode(2007)anditsoverseasfundmanagersto comply withtheInvestmentManagementAssociation’sPension of RPMI.Inaddition,RPMIrequiresitsUKfundmanagersto monitored byanindependentthirdpartyorpartiesonbehalf Transaction costsincurredbytheinvestmentmanagersare in which itinvests governance bycompanies standards ofcorporate to themaintenance ofgood attaches particularimportance TheTrustee Company , , , ,

46-47 Annual Report and Audited Financial Statements Appendix G: Summary of the main provisions of the Scheme

Introduction Contributions The RPS is a registered Scheme under the Finance Act 2004. All railway employees are eligible to join the Scheme if allowed by their contract of employment. Contributions are based on section pay which is generally pensionable pay, plus any pensionable restructuring premiums The members of each of the sections of the Shared Cost and the Defined Contribution Arrangements of (‘PRPs’) less 1½ times the basic State Pension for a single the RPS are contracted-out of the State Second Pension (‘S2P’). Members of the Industry-Wide Defined person. Pensionable pay is basic pay plus, where appropriate, Contribution Section are not contracted-out of S2P. pensionable allowances, excluding PRPs.

Rules specific to sections PRPs are earnings which, as part of an agreement with the A broad outline of the main provisions of sections that have adopted the Shared Cost Arrangement is employer to restructure pay, become pensionable for future given below. However, some employers have introduced rules specific to their section only which override service only from the date that pay was restructured. Pensionable the summary given below. Each section’s rules are available from RPMI to members of that section upon pay and PRPs are re-assessed on the first Monday in July each request. year, based on the member’s section pay on the previous 1 April. Contribution rates are subject to review at each actuarial The outline of the main provisions of sections covers the standard situation whereby a section remains valuation. ongoing with a solvent employer backing the section. In the rare event of the employers in a section suffering a qualifying insolvency event, the benefits available from that section will depend on the assets Additional voluntary contributions in the section. If there are insufficient assets available to secure a minimum level of benefits, the Pension Active Current members can pay extra contributions through BRASS Protection Fund (‘PPF’) will pay compensation to members at this minimum level. In these situations, and AVC Extra to secure additional benefits. the PPF will take over the pension scheme’s assets and provide the compensation to the scheme’s members members. The compensation provided by the PPF would in almost all cases be lower than the pensions BRASS is the AVC arrangement for the Shared Cost sections. that members could have received from the scheme that has been taken over. There are limits to the maximum amount that can be paid into BRASS. If members want to pay more than the maximum BRASS Defined contribution sections limit they can do so by paying the excess into AVC Extra. AVC Industry-Wide Defined Contribution Section participating employers can choose their contribution Extra contributions are invested in the same way as contributions rates, normal retirement date and amount of lump sum on death in service. Contributions range from to the Defined Contribution sections. upwards of 5% of pensionable pay, and retirement ages range from 60 to 65. Lump sums are four times pensionable pay on death in service. At retirement, members use their accumulated funds to provide an Death in service annuity purchased from an insurance company under an open market option. They can also take tax-free cash up to the HM Revenue & Customs limit. The remaining members within the Defined Contribution Nominated dependants or personal representatives will receive: Arrangement are all preserved pensioners. A lump-sum death benefit of four times final average pensionable pay plus any PRPs. Pension increases Pensions increased by 2.2% with effect from 8 April 2013. This is based on the Consumer Price Index Plus (CPI) inflation figure as at September 2012. The increase from April 2014 was 2.7%. Pensions in A dependant’s pension of one half of the pension the member payment and deferment in the Fund are increased in line with Orders laid by the Government under the would have received had he/she retired due to incapacity at Pensions (Increase) Act 1971. the date of death. Pensions for up to two children may also be payable.

Full details of the provisions of the Scheme can be found in the Pension Trust and Rules. 7 April1991. A 25%bonuslumpsumonmembershipbefore introduced. of thePRPforeachyearsincewas For memberswithPRPs alumpsumof1/40th pay foreachyearofpensionableservice. A tax-freelumpsumof1/40thfinalaverage Appendix G: also bepayable. lump sum).Pensions foruptotwochildrenmay member’s pension(beforeconversion ofany A dependant’spensionofonehalf ofthe 7 April1991. Plus a5%bonuspensiononmembershipbefore introduced. of thePRPforeachyearsincewas Plus, formemberswithPRPs apensionof1/60th service. a singlepersonforeachyearofpensionable pay less1/40thofthebasicStatePension for A pensionof1/60thfinalaveragepensionable And ondeath Plus When amember retires He/She will receive at orafterage60

Summary ofthemainprovisionsScheme payment. retirement atage60butreducedforearly A pensionandlumpsumcalculatedasfor payable. Pensions foruptotwochildrenmayalsobe pension (beforeconversionofanylumpsum). A dependant’spensionofonehalfthemember’s And ondeath When amember retiresbetween He/She will receive age 50and60 Leaving theScheme

also bepayable. lump sum).Pensions foruptotwochildrenmay member’s pension(beforeconversionofany A dependant’spensionofonehalfthe up totenyears. calculate thepensionmayalsobeenhancedby early payment.Thelengthofserviceusedto retirement atPension Agewithnoreductionfor A pensionandlumpsumcalculatedasfor And ondeath When amember retires because ofincapacity He/She will receive

be takenintoaccount. early. Therearenootherdiscretionarybenefitsto assumed futureexperienceofmembersretiring payable uponearlyretirementonthebasisof of transfervaluesfordiscretionarybenefits 1996. Allowanceismadeinthecalculation Pension Schemes(Transfer Values) Regulations calculated inaccordancewiththeOccupational All transfervaluesoutoftheschemeare approved pensionarrangement. A transfervaluepaymentpayabletoanother Pension Age. A preservedpensionandlumpsumpayablefrom When animmediatepension Or He/She will receive is notpayable

48-49 Annual Report and Audited Financial Statements Appendix H: Where to go for help

Trustee Company and Railpen Investments The Pensions Advisory Service (‘TPAS’) The Pensions Regulator Company Secretary TPAS is an independent voluntary organisation with local advisers The Pensions Regulator can be contacted at the following address: Railways Pension Trustee Company Limited who are experts in pension matters. TPAS can be contacted either 2nd Floor through any local Citizens Advice Bureau or at the following address: The Pensions Regulator Camomile Court Napier House 23 Camomile Street TPAS Headquarters Trafalgar Place London 11 Belgrave Road Brighton EC3A 7LL London BN1 4DW SW1V 1RB T: 020 7220 5000 T: 0870 606 0707 E: [email protected] T: 0845 601 2923 E: [email protected] W: www.rpmi.co.uk Online enquiry: www.pensionsadvisoryservice.org.uk/online-enquiry W: www.thepensionsregulator.gov.uk W: www.pensionsadvisoryservice.org.uk

RPMI Pensions Ombudsman Pension Tracing Service Further information about the fund and individual entitlements can If TPAS cannot resolve a complaint or dispute, then the Pensions Information about UK schemes (including a contact address) is be obtained from: Ombudsman could be contacted at the following address: provided to the Department for Work and Pensions (‘DWP’) Pension Tracing Service. This enables members to trace benefits Paul Faulkner The Office of the Pensions Ombudsman from previous employers’ schemes. Head of Rail Administration 11 Belgrave Road RPMI London The DWP’s Pension Tracing Service can be contacted at the Stooperdale Offices SW1V 1RB following address: Brinkburn Road Darlington T: 020 7630 2200 Pension Tracing Service DL3 6EH E: [email protected] The Pension Service W: www.pensions-ombudsman.org.uk Main Handling Site A T: 0800 2 343434 (Customer Services Team) Wolverhampton E: [email protected] WV98 1LU W: www.railwayspensions.co.uk T: 08456 002 537 W: www.gov.uk/find-lost-pension

RPS Registration number: 100541628 pages 62to63,andtheunitpricesonpage61. pooled fundattheendofcurrentandprioryearsissetouton the categoriesrequiredbySORP. The netassetvalueofeach 60 to85analysethetotalpooledassetsof£19,871.97minto these pooledfundsasat31December2013.Thenotesonpages The tableonpage54summarisestheinvestmentsofeach the Pension AssuredFund. Fund. 2fundnowremainingis TheonlyexternallymanagedBRASS brought in-housetobeinvestedintheDefinedContribution Pooled 2assetsalsobeing new segmentswithexternallymanagedBRASS were transitionedfromtheGrowthandCautioussegmentsinto Fund, wereclosedandfivenewsegmentsopened.Assets Fund, theBrassGrowthPooled Fund andtheBrassCautiousPooled In May2013twosegmentsoftheDefinedContribution Pooled wide rangeofassetclasses. provide therailwayspensionschemeswithameanstoinvestin in placefortheinvestmentofschemes’andsections’assets key elementofthearrangementsthatTrustee Companyhasput The pooledfundsoperateasinternalunittrusts.Theycomprisea (2012 -£20,036.51m). arrangements, bringingtotalassetsto£21,303.51m the railwayspensionschemesnotincludedinpooledfund £1,431.54m (2012-£1,957.93m)ofassetshelddirectlyby was £19,871.97m(2012-£18,078.58m).Thereareinaddition The totalvaluationofthepooledassetsasat31December2013 2013. the railwayspensionschemesforyearended31December Report andnon-statutoryauditedAccountsofthepooledfunds This appendixrepresentsaconsolidatedsummaryoftheAnnual Introduction tothepooledfundaccounts Appendix I: Pooled FundAccounts economic exposureofCDSs,asdisclosed inthetableonpage52. the accountingfairvalueof£0.22misbestmeasure additional return,andinviewofthistheTrustee considersthat allowed toenterintoCDSsinorderreducecostsorgenerate the efficientmanagementofbondportfolios,fundmanagersare future crediteventoccurringonthereferencesecurity. Aspartof reflects themarket’sbestestimateoflikelihoodrelevant The marketvalueofaCDSisthefaircontract,which credit riskinexchangeforanannualfee. to insurancearrangements,sincetheyallowthebuyerreduce subject ofthecontract.InthisrespectCDSsaresomewhatsimilar credit event)oftheissuer‘referencesecurity’thatis another intheeventofinsolvency(orothersuitablydefined for astreamofincome,onepartyagreestomakepayments Credit defaultswaps(“CDSs”)arecontractswhereby, inexchange been shownagainstcash. designed tohedge;thenetassetvalueofotherFXcontractshas the yearendhasbeenshownagainstassetcategorytheyare asset valueofthosecontractsusedtohedgeinvestmentsheldat settle investmenttransactions.Inthetableonpage52,net decision designedtogenerateinvestmentreturninsterlingor overseas investmentsinthepooledfunds,asanactiveinvestment Foreign exchange(“FX”)contractsareusedeithertohedge underlying economicexposureofthepooledfunds. analysis givenintheaccounts,andgiveanunderstandingof of thepooledfundassets,whichisintendedtocomplement Group, thetableonpage52presentsanalternativeclassification Based onguidancepreparedbythePensions ResearchAccountants schemes’ investmentportfoliosandtherelatedrisksrewards. accounts togainaninsightintotheeconomicexposuresof schemes canmakeitdifficultforareaderofpensionscheme The useofderivativesandpooledinvestmentvehiclesbypension The economicexposureofpooledfundassets £1,431.54m pooled fund pension schemesnotinthe Assets heldbytherailways £19,871.97m Total assetsinpooledfunds Total assetsheldbythe railways pensionschemes £21,303.51m Key pooledfundstatistics as at31December2013

50-51 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

The economic exposure of pooled fund assets as at 31 December 2013

Segregated Futures Swaps Options Forwards CDS Pooled FX Total investments investment vehicles

£m £m £m £m £m £m £m £m £m UK equities 347.03 - - - - - 505.68 - 852.71 Overseas equities 2,181.51 261.65 - - - - 3,005.05 61.04 5,509.25 Property 1,516.68 - - - - - 29.17 - 1,545.85 Private equity 0.65 - - - - - 1,918.90 - 1,919.55 Commodities - 252.55 ------252.55 Hedge funds ------2,511.22 43.86 2,555.08 Infrastructure ------890.57 - 890.57 UK index linked securities 10.99 - - - - - 173.07 - 184.06 Overseas index linked securities 23.63 ------0.04 23.67 Liability driven investments ------40.34 - 40.34 UK public sector bonds 68.56 9.28 - - 57.27 - - - 135.11 UK non-public sector bonds 153.20 ------153.20 Overseas public sector bonds 1,778.02 (290.50) - - - - - 14.48 1,502.00 Overseas non-public sector bonds 1,480.44 - - - - 0.22 293.06 27.90 1,801.62 Cash 2,718.75 (221.41) (0.24) 0.05 (57.24) - - (0.05) 2,439.86 Other assets and liabilities 66.55 ------66.55

Total 10,346.01 11.57 (0.24) 0.05 0.03 0.22 9,367.06 147.27 19,871.97 (ix) (viii) (vii) (vi) (v) (iv) (iii) (ii) (i) funds fortheinvestmentswithinthemaresetoutbelow: The principalbasesofinvestmentvaluationadoptedbythepooled Investments Accounting policies Appendix I: rates rulingatthefundstatement date. equivalents havebeentranslatedinto sterlingattheexchange Foreign investments,debtors,creditors,cashand the year. reported withinchangeinmarketvalue ofinvestmentsduring All gainsandlossesarisingonderivative contractsare rate attheyearenddate. Forward foreignexchangecontractsare valuedattheforward data attheyearenddate. the fundmanagers,usingpricingmodelsandrelevantmarket BNY Mellon,whoprovideavaluationserviceindependentof external valuersretainedbytheTrustee Companythrough estimate ofaccountingfairvaluebasedonadvicefromMarkit, derivativesarestatedattheTrustee(“OTC”) Company’s determined usingmarketquotedprices.Overthecounter Exchange tradedderivativesarestatedatmarketvalues of CharteredSurveyors. are CharteredSurveyorsandmembersoftheRoyalInstitution have beenvaluedbyindependentexternalvaluers,DTZ.DTZ and thePracticeStatementcontainedtherein.Theproperties of CharteredSurveyors’AppraisalandValuation Standards end datedeterminedinaccordancewiththeRoyalInstitution Properties areincludedatopenmarketvalueastheyear offer spreads,asprovidedbytheinvestmentmanagers. with bid/offerspreads,orsingleprice,wheretherearenobid/ Pooled investmentvehiclesarestatedatbidpriceforfunds fair valuebasedonadvicefromtheinvestmentmanagers. are includedattheTrustee Company’sestimateofaccounting equity andinfrastructure(bothdirectviamanagedfunds), Unquoted securities,includingmostinvestmentsinprivate accrued incomeaccountedforwithininvestmentincome. Fixed interestsecuritiesarestatedattheir‘clean’prices,with statement. on whichtheyarequoted,atthedateofnetassets price, dependingontheconventionofstockexchange Listed investmentsarestatedatthebidpriceorlasttraded Pooled FundAccounts on afullconsolidation basis. with theSORP, theyhave beenincludedinthepooledfundaccounts fall tobesubsidiaryundertakingsof thepooledfund.Inaccordance Trustee Companyonbehalf ofthePropertyPooled Fund, andhence of thePropertyPooled Fund. All theentitiesarecontrolledby are heldeitherdirectlyorindirectly forthebeneficialentitlement In allcases,thesharecapitalorunits inalltheentitiesquestion Jersey unittrustsandanumberofcompanies. of anexemptunauthorisedunittrust,Englishlimitedpartnerships, Several propertiesinthePropertyPooled Fund areownedbymeans Subsidiaries andconsolidation (vii) (vi) (v) (iv) (iii) (ii) (i) following bases: Dividend andinterestincomeisincludedintheaccountson Investment income of investmentsduringtheyear. balance translationareaccountedforinthechangemarketvalue at thedateoftransaction.Differencesarisingoninvestment denominated inforeigncurrenciesaretranslatedattherateruling the raterulingatnetassetsstatementdate.Transactions Balances denominatedinforeigncurrenciesaretranslatedat Foreign currencies the participatingschemes. pooled fundsandnoincomedistributionshavebeenmadeto Income hasbeenaccumulatedwithintheunitpricesof within thechangeinmarketvalue. investment vehicles,reflectedintheunitpriceandreported of pooledinvestmentvehiclesisreinvestedwithinthe Investment incomearisingfromtheunderlyinginvestments taxes arereportedseparatelyasataxcharge. the associatedinvestmentincome.Irrecoverablewithholding but grossofwithholdingtaxeswhichareaccruedinlinewith Investment incomeisreportednetofattributabletaxcredits commission areaccountedforonareceivablebasis. Sub-underwriting, commissionrecaptureandstocklending in accordancewiththetermsoflease. Property rentalincomeisaccountedforonanaccrualsbasis Interest isaccruedonadailybasis. security isdeclaredex-div. Dividends fromquotedequitiesareaccountedforwhenthe funds. basis andincludein-specietransfersbetweensectionspooled Units issuedandredeemedduringtheyearareshownonagross Unit transactions additional capitalorincome). management (includingthereductionofcostorgeneration they contributetoareductionofrisk,orfacilitateefficientportfolio Investment inderivativeinstrumentsmaybemadeonlysofaras Company’s approvedderivativespolicy. agreement, andeachmanagermustcomplywiththeTrustee they arespecificallypermittedintheinvestmentmanagement Derivatives mayonlybeusedbyinvestmentmanagerswhere by investmentmanagersaspartofthestrategy. The Trustee Companyhasauthorisedtheuseofderivatives Derivative contracts:objectivesandpolicies 52-53 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

Fund statement as at 31 December 2013

Equities Fixed Index UK Pooled Derivative Derivative Cash deposits Other Other Cross Net assets interest linked property investment assets liabilities & cash assets liabilities Holdings attributable securities securities vehicles instruments to unit holders

Pooled Fund £m £m £m £m £m £m £m £m £m £m £m £m Growth 883.76 608.82 18.67 - 2,943.45 37.95 (0.47) 197.86 32.61 (4.98) 6,996.62 11,714.29 Global Equity 1,644.78 16.96 - - 1,777.60 59.79 (10.75) 334.22 4.57 (3.27) - 3,823.90 Private Equity 0.65 - - - 1,918.90 0.01 (0.06) 50.85 0.18 (1.01) - 1,969.52 Non Government Bond - 1,698.43 - - - 43.41 (16.82) 82.06 69.49 (24.90) - 1,851.67 Property - - - 1,516.68 20.23 - - 215.75 15.07 (30.81) - 1,736.92 Hedge Funds - - - - 1,148.71 33.98 - 182.05 20.13 (3.34) - 1,381.53 Cash ------1,210.58 0.47 (0.16) - 1,210.89 Government Bond - 943.10 15.95 - - 18.47 (10.46) 25.52 25.11 (31.82) - 985.87 Infrastructure - - - - 890.57 - - 19.10 0.04 (0.15) - 909.56 Defensive - - - - 94.56 3.19 - 94.45 0.02 (0.05) 652.28 844.45 Defined Contribution - - - - 3.93 - - 218.80 0.40 (0.51) 456.20 678.82 Commodities - 212.91 - - 214.93 4.75 (4.75) 41.59 0.24 (0.54) - 469.13 Liquid Growth - - - - 76.57 0.66 - 45.41 0.10 (0.03) 184.29 307.00 Index Linked - - - - 169.14 - - 0.14 - (0.04) - 169.24 LDI - - - - 40.34 - - 0.11 - (0.06) - 40.39 Passive Equity - - - - 68.13 - - 0.05 - (0.02) - 68.16 Cashflow Matching ------0.32 0.01 (0.31) - 0.02 Cross Holdings ------(8,289.39) (8,289.39)

Total 2,529.19 3,480.22 34.62 1,516.68 9,367.06 202.21 (43.31) 2,718.86 168.44 (102.00) - 19,871.97

% 12.73 17.51 0.17 7.63 47.14 1.02 (0.22) 13.68 0.85 (0.51) - 100.00

The accounting policies on pages 53 and the notes on pages 60 to 85 form part of these accounts. Analysis ofCrossHoldings Fund statementasat31December2013 Appendix I: The accountingpoliciesonpages53andthenotes60to85formpartoftheseaccounts Total Liquid Growth Defined Contribution Defensive Growth Pooled Fund 307.00 307.00 Growth Liquid £m - - - 2,567.15 2,367.92 130.81 Global Equity 68.42 £m Pooled FundAccounts - Linked Index 7.16 7.16 £m - - - 1,277.54 1,231.26 Hedge Funds 46.28 £m - - 1,477.84 1,440.42 Property 37.42 £m - - Private Equity 0.06 0.06 £m - - - Government 187.97 187.97 Bond £m - - - Government 1,103.47 280.40 790.72 21.12 11.23 Non £m

Commodities 441.74 430.69 11.05 £m - - 919.46 183.91 735.55 Cash £m - - Total Cross 8,289.39 6,996.62 Holdings 184.29 456.20 652.28 £m 54-55 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

Fund statement as at 31 December 2013

Movement in unit holders’ funds

In issue at Issued Redeemed Change in market Reinvested Change in Total unit start of year during year during year value of investments income Cross Holdings holders’ funds

Pooled Fund £m £m £m £m £m £m £m Growth 9,420.31 1,714.56 (275.26) 805.54 49.14 - 11,714.29 Global Equity 4,716.66 561.98 (2,363.65) 869.47 39.44 - 3,823.90 Private Equity 1,882.15 118.53 (290.58) 263.68 (4.26) - 1,969.52 Non Government Bonds 1,590.77 791.66 (533.08) (54.24) 56.56 - 1,851.67 Property 1,598.67 215.04 (241.56) 82.89 81.88 - 1,736.92 Hedge Funds 1,231.73 359.79 (331.85) 129.04 (7.18) - 1,381.53 Cash 984.62 1,711.55 (1,489.32) - 4.04 - 1,210.89 Government Bonds 828.09 219.10 (50.24) (34.29) 23.21 - 985.87 Infrastructure 849.84 - (100.00) 160.07 (0.35) - 909.56 Defensive 680.09 187.06 (14.39) (8.23) (0.08) - 844.45 Defined Contribution 92.86 714.96 (143.51) 14.05 0.46 - 678.82 Commodities 455.08 137.64 (76.30) (45.86) (1.43) - 469.13 Liquid Growth - 301.53 (0.31) 5.47 0.31 - 307.00 Index Linked 165.72 31.02 (31.08) 3.81 (0.23) - 169.24 LDI 111.87 - (61.35) (23.53) 13.40 - 40.39 Passive Equity 62.08 - (10.05) 16.23 (0.10) - 68.16 Cashflow Matching 302.81 1.00 (304.07) (4.43) 4.71 - 0.02 Cross Holdings (6,894.77) - - - - (1,394.62) (8,289.39)

Total 18,078.58 7,065.42 (6,316.60) 2,179.67 259.52 (1,394.62) 19,871.97

The accounting policies on page 53 and the notes on pages 60 to 85 form part of these accounts. Approved on behalf of the Trustee Company on 7 May 2014.

Derek Scott Chairman John Mayfield Director and Chairman, Audit Committee The accountingpolicies onpage53andthenotes pages60to85formpartofthese accounts. Fund statementasat31December2012 Appendix I: % Total Cross Holdings Passive Equity Defined Contribution LDI Index Linked Cashflow Matching Commodities Defensive Government Bond Infrastructure Cash Hedge Funds Non GovernmentBond Property Private Equity Global Equity Growth Pooled Fund Equities 2,804.76 2,470.07 310.22 15.51 19.73 4.74 £m ------securities 3,239.47 1,393.04 interest 199.15 283.83 795.59 557.58 17.92 10.28 Fixed £m ------

Pooled FundAccounts securities 29.83 linked 29.83 Index 0.17 £m ------

1,552.68 1,552.68 property 8.59 £m UK ------

investment 7,591.86 1,805.80 1,893.81 1,536.10 1,067.82 vehicles 111.48 165.62 123.84 806.84 Pooled 62.08 18.47 41.99 £m ------Derivative 126.55 assets 33.90 29.00 13.51 18.88 25.31 0.02 0.70 5.43 0.50 £m ------Derivative liabilities (33.89) (10.70) (0.19) (5.67) (6.71) (0.28) (0.32) (7.60) (0.01) (2.60) £m ------Cash deposits instruments 2,715.16 and cash 101.52 984.18 111.18 163.51 324.20 763.45 20.61 47.38 20.16 18.87 22.98 64.35 72.18 15.02 0.01 0.45 0.13 £m -

186.10 assets 39.08 18.44 18.58 11.04 86.56 Other 2.56 0.72 0.06 8.25 0.20 0.51 0.08 1.03 0.02 £m - - - -

liabilities (133.94) (55.41) (15.94) (52.35) (0.74) (0.01) (0.14) (0.06) (0.03) (0.42) (0.45) (0.01) (1.42) (0.13) (0.07) (4.91) (1.93) (0.66) Other £m - (6,894.77) 6,162.52 Holdings 659.88 72.37 Cross £m ------attributable Net assets 18,078.58 (6,894.77) 1,231.73 1,590.77 1,598.67 1,882.15 4,716.66 9,420.31 holders 100.00 111.87 165.72 302.81 455.08 680.09 828.09 849.84 984.62 to unit 62.08 92.86 £m 56-57 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

Fund statement as at 31 December 2012

Analysis of Cross Holdings

Global Hedge Property Non Cash Commodities Government Index Total Cross Equity Funds Government Bond Linked Holdings Bond

Pooled Fund £m £m £m £m £m £m £m £m £m Growth 2,226.16 1,085.01 1,128.44 600.70 711.44 410.77 - - 6,162.52 Defensive - - - 345.14 162.61 - 152.13 - 659.88 Defined Contribution 24.80 9.19 10.54 12.26 - 2.90 8.45 4.23 72.37

Total 2,250.96 1,094.20 1,138.98 958.10 874.05 413.67 160.58 4.23 6,894.77

The accounting policies on pages 53 and the notes on pages 60 to 85 form part of these accounts. Movement inunitholders’funds Fund statementasat31December2012 Appendix I: The accountingpoliciesonpage53 andthenotesonpages60to85formpartoftheseaccounts. Total Cross Holdings Passive Equity Defined Contribution LDI Index Linked Cashflow Matching Commodities Defensive Government Bond Infrastructure Cash Hedge Funds Non GovernmentBond Property Private Equity Global Equity Growth Pooled Fund Pooled FundAccounts start ofyear In issueat 16,966.04 (5,293.30) 1,129.40 1,071.55 1,555.21 1,840.08 6,456.55 7,035.15 149.64 187.99 510.26 394.16 907.02 765.63 189.09 67.61 £m - - 2,086.09 during year 5,543.35 1,047.57 177.00 691.99 135.76 407.24 125.12 639.42 Issued 60.75 29.37 81.85 59.93 1.17 0.09 £m - - -

during year Redeemed (4,679.89) (3,061.06) (386.15) (192.01) (255.18) (116.56) (178.03) (358.59) (44.52) (20.44) (24.20) (11.34) (20.57) (9.73) (1.51) £m - - - value ofinvestments Change inmarket 619.41 1,559.98 (37.67) (12.82) (18.25) (11.19) 621.88 (2.79) 12.30 28.84 84.08 91.91 77.71 99.65 1.34 5.58 £m - - Reinvested income 290.57 (0.01) (0.21) (1.17) (8.78) (4.67) 44.42 14.52 24.31 45.61 75.13 59.87 38.25 0.03 0.13 3.14 £m - - Cross Holdings (1,601.47) (1,601.47) Change in £m ------holders’ funds 18,078.58 (6,894.77) Total unit 1,231.73 1,590.77 1,598.67 1,882.15 4,716.66 9,420.31 111.87 165.72 302.81 455.08 680.09 828.09 849.84 984.62 62.08 92.86 £m 58-59 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

Consolidated notes to the fund statement

1.1 Fund statement as at 31 December 2013

Assets Note 2013 2012 Assets Note 2013 2012 Liabilities Note 2013 2012 £m £m £m £m £m £m

Equities Overseas unquoted 2,445.62 2,351.14 Derivative contracts UK quoted 346.90 390.13 – partnerships Forwards – OTC 1.5 - (0.21) UK unquoted 0.13 0.13 Overseas unquoted 1,653.20 1,360.34 Futures – exchange traded 1.5 (9.26) (7.39) Overseas quoted 2,175.40 2,406.47 – hedge funds TBA contracts – OTC - (0.16) Overseas unquoted 6.76 8.03 Overseas unquoted 94.56 - Swaps – OTC 1.5 (1.53) (1.98) – unit trusts Options – OTC 1.5 - (0.06) 2,529.19 2,804.76 Overseas unquoted 626.83 576.14 FX contracts – OTC 1.5 (32.52) (24.09) – other managed funds Fixed interest securities (43.31) (33.89) UK quoted – public sector 68.56 273.51 9,367.06 7,591.86 UK quoted – non public sector 126.59 122.13 Other liabilities UK unquoted – non public sector 26.61 - Derivative contracts Other investment liabilities 1.8 (57.16) (61.54) Overseas quoted – public sector 1,778.02 1,349.56 Forwards – OTC 1.5 0.03 0.27 Current liabilities 1.10 (44.84) (51.65) Overseas quoted – non public sector 1,458.33 1,494.27 Futures – exchange traded 1.5 20.83 9.19 Overseas quoted – non public sector 22.11 - TBA contracts – OTC - 1.33 (102.00) (113.19) Swaps – OTC 1.5 1.51 2.43 3,480.22 3,239.47 Swaps – exchange traded - 0.77 Total liabilities (145.31) (147.08) Options – OTC 1.5 0.05 0.28 Indexed linked securities Options – exchange traded - 0.01 Net assets attributable to UK quoted – public sector 10.99 - FX contracts – OTC 1.5 179.79 112.27 unit holders 19,871.97 18,078.58 UK quoted – non public sector - 1.04 Overseas quoted – public sector 23.42 28.52 202.21 126.55 Overseas quoted – non-public sector 0.21 0.27 Cash deposits and 1.6 2,718.86 2,715.16 34.62 29.83 cash instruments

UK Property 1,516.68 1,552.68 Other assets Other investment assets 1.7 161.66 156.42 Pooled investment vehicles Current assets 1.9 6.78 8.93 UK unquoted – property partnerships 20.23 18.47 168.44 165.35 UK unquoted – unitised insurance policies 2,713.98 2,110.35 Total assets 20,017.28 18,225.66 UK unquoted – other partnerships 651.80 591.87 UK unquoted – other managed funds 92.28 85.85 Overseas quoted – hedge funds 78.64 0.21 Overseas quoted – other managed funds 989.92 497.48 1.2 Pooled fundunitpricesasat31December Appendix I: Private EquityPooled Fund 2011 Private EquityPooled Fund 2009 Private EquityPooled Fund 2007 Private EquityPooled Fund 2005 Private EquityPooled Fund 2004 Private EquityPooled Fund 2001 Direct InvestmentPooled Fund 2000 Direct InvestmentPooled Fund 1999 Direct InvestmentPooled Fund 1998 Direct InvestmentPooled Fund 1997 Direct InvestmentPooled Fund 1995 Private EquityPooled Fund Cashflow Matching2013 Pooled Fund Cashflow Matching2012 Pooled Fund (UntilMarch2013) Cashflow Matching Pooled Fund Liquid GrowthPooled Fund (From May 2013) Passive EquityPooled Fund Defensive Pooled Fund Property Pooled Fund Non GovernmentBondPooled Fund Infrastructure Pooled Fund Index LinkedPooled Fund Hedge Funds Pooled Fund Growth Pooled Fund Government BondPooled Fund Global EquityPooled Fund Commodities Pooled Fund Cash Pooled Fund Pooled FundAccounts 5,221.57 292.42 193.22 156.01 51.38 13.73 14.30 12.65 23.98 20.74 27.01 23.53 28.89 22.99 17.16 16.20 26.47 11.73 13.05 12.97 10.36 - 12.83 10.14 10.10 10.21 65.98 59.76 11.97 12.00 54.31 53.19 15.01 13.63 12.61 11.62 11.29 11.43 65.04 52.90 13.46 14.76 10.16 10.13 £/unit 2013 9.88 9.62 7.31 10.40 9.58 8.02 - 10.21

2012 DC AggregateBondFund (From May2013) DC IndexLinkedandGlobalBondFund (From May2013) DC DepositFund (From May2013) DC LongTerm GrowthFund (From May2013) DC GlobalEquityFund (From May2013) Brass Pooled Fund (Growth)(UntilMay2013) Brass Pooled Fund (Cautious)(UntilMay2013) Defined Contribution Pooled Fund LDI RPI2060Pooled Fund LDI RPI2055Pooled Fund LDI RPI2050Pooled Fund LDI RPI2045Pooled Fund LDI RPI2040Pooled Fund LDI RPI2035Pooled Fund LDI RPI2030Pooled Fund LDI RPI2025Pooled Fund LDI RPI2020Pooled Fund LDI RPI2015Pooled Fund LDI Nominal2060Pooled Fund LDI Nominal2055Pooled Fund LDI Nominal2050Pooled Fund LDI Nominal2045Pooled Fund LDI Nominal2040Pooled Fund LDI Nominal2035Pooled Fund LDI Nominal2030Pooled Fund LDI Nominal2025Pooled Fund Liability DrivenInvestmentPooled Fund

10.02 - 10.35 - 11.04 - 18.89 15.46 18.57 15.74 18.23 16.14 18.19 16.64 18.40 17.46 17.85 18.45 16.04 18.99 15.27 19.02 14.51 15.74 10.95 11.19 16.72 17.21 16.34 17.33 16.18 17.98 15.89 18.89 15.80 20.00 14.52 20.43 13.73 20.98 13.13 21.04 £/unit 2013 9.71 - 9.77 - - 12.37 - 12.37

2012 60-61 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

1.3 Value of the Pooled Funds

2013 2012 2013 2012 £m £m £m £m

Growth Pooled Fund 11,714.29 9,420.31 Cashflow Matching Pooled Fund Global Equity Pooled Fund 3,823.90 4,716.66 Cashflow Matching 2012 Pooled Fund (Until March 2013) - 98.99 Private Equity Pooled Fund* 1,969.52 1,882.15 Cashflow Matching 2013 Pooled Fund 0.02 203.82 Non Government Bond Pooled Fund 1,851.67 1,590.77 Property Pooled Fund 1,736.92 1,598.67 0.02 302.81 Hedge Funds Pooled Fund 1,381.53 1,231.73 Cash Pooled Fund 1,210.89 984.62 Private Equity Pooled Fund Government Bond Pooled Fund 985.87 828.09 Direct Investment Pooled Fund 1995 0.15 0.01 Infrastructure Pooled Fund 909.56 849.84 Direct Investment Pooled Fund 1997 0.22 0.18 Defensive Pooled Fund 844.45 680.09 Direct Investment Pooled Fund 1998 0.14 8.13 Defined Contribution Pooled Fund 678.82 92.86 Direct Investment Pooled Fund 1999 0.15 0.64 Commodities Pooled Fund 469.13 455.08 Direct Investment Pooled Fund 2000 28.52 36.78 Liquid Growth Pooled Fund 307.00 - Private Equity Pooled Fund 2001 181.33 218.09 Index Linked Pooled Fund 169.24 165.72 Private Equity Pooled Fund 2004 94.91 101.55 Liability Driven Investment Pooled Fund* 40.39 111.87 Private Equity Pooled Fund 2005 328.24 335.05 Passive Equity Pooled Fund 68.16 62.08 Private Equity Pooled Fund 2007 1,008.20 987.13 Cashflow Matching Pooled Fund* 0.02 302.81 Private Equity Pooled Fund 2009 171.57 132.55 Private Equity Pooled Fund 2011 156.09 62.04 28,161.36 24,973.35 1,969.52 1,882.15 Cross holdings Global Equity Pooled Fund (2,567.15) (2,250.96) Property Pooled Fund (1,477.84) (1,138.98) Hedge Funds Pooled Fund (1,277.54) (1,094.20) Non Government Bond Pooled Fund (1,103.47) (958.10) Cash Pooled Fund (919.46) (874.05) Commodities Pooled Fund (441.74) (413.67) Liquid Growth Pooled Fund (307.00) - Government Bond Pooled Fund (187.97) (160.58) Index Linked Pooled Fund (7.16) (4.23) Private Equity Pooled Fund (0.06) -

Net assets attributable to unit holders 19,871.97 18,078.58

* See breakdown into pooled fund segments right and on next page. Appendix I: LDI RPI2060Pooled Fund LDI RPI2055Pooled Fund LDI RPI2050Pooled Fund LDI RPI2045Pooled Fund LDI RPI2040Pooled Fund LDI RPI2035Pooled Fund LDI RPI2030Pooled Fund LDI RPI2025Pooled Fund LDI RPI2020Pooled Fund LDI RPI2015Pooled Fund LDI Nominal2060Pooled Fund LDI Nominal2055Pooled Fund LDI Nominal2050Pooled Fund LDI Nominal2045Pooled Fund LDI Nominal2040Pooled Fund LDI Nominal2035Pooled Fund LDI Nominal2030Pooled Fund LDI Nominal2025Pooled Fund Liability DrivenInvestmentPooled Fund Pooled FundAccounts 40.39 111.87 2013 0.63 1.38 0.33 0.78 0.37 0.97 0.42 1.17 0.62 1.86 2.62 7.60 2.74 9.44 2.78 9.69 2.07 6.41 0.46 1.83 6.39 13.91 3.53 8.10 4.37 10.63 4.35 11.31 5.28 14.31 2.00 7.01 1.28 4.68 0.15 0.79 £m 2012 1.4 Investmentincome Reinvested income(accruedinunitprice) Minority interest Tax RPMI fees Investment managementfees–performance Investment managementfees–base Administration, custodyandotherexpenses Total income Irrecoverable withholdingtax Other income Income frompooledinvestmentvehicles Interest fromcashdeposits Income fromUKproperty Income fromindexlinkedsecurities Income fromfixedinterestsecurities Dividends fromequities (71.27) (77.73) 259.52 290.57 330.97 366.02 334.83 368.92 (15.70) (13.49) (33.08) (35.51) (19.37) (17.07) 126.37 116.62 (0.18) 2.28 (0.01) (3.11) (11.65) (3.86) (2.90) 29.69 45.22 10.21 11.27 94.09 87.14 68.07 104.86 2013 4.69 3.14 1.71 0.67 £m 2012 62-63 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

1.5 Derivative contracts Included within net assets is £162.10m cash, £165.72m US Treasury bills, £3.63m US Treasury bonds and £47.18m US Treasury notes in respect of initial and variation margins arising on open futures Futures: Future contracts are standardised, transferable, exchange traded contracts that require delivery contracts at the year end. The duration of futures is between one and 18 months. of a commodity, bond, currency or stock index, at a specified price, on a specified future date. The details of open futures contracts at the year end are as follows: Collateral deposited by counterparties with the Trustee Company is respect of futures contracts at the year end date amounted to £110.02m cash. Contingent collateral received in this way is not reported within the pooled fund’s net assets. Type of future Economic exposure Asset value at Liability value at year end £m year end £m at year end £m Swaps: Swap contracts are arrangements in which the parties agree to exchange one stream of MSCI EM index 75.98 1.99 - cashflows for another. The details of swap contracts in place at the year end date are as follows: US S&P index 48.66 1.92 - Commodities 252.55 4.75 (4.75) Type of swap Duration Nominal Asset value at Liability value Eurostoxx index 29.67 1.61 - (years) amount £m year end £m at year end £m Swiss market index (“SMI”) 8.85 0.34 - Japanese Topix 89.93 3.37 - OTC Euribor (9.69) 0.22 - Credit default swaps 0 to 5 73.82 0.81 (0.77) Australian government bonds (16.57) 0.05 - Credit default swaps 5 to 10 26.57 0.25 - UK government bonds 9.28 0.43 (0.06) Credit default swaps 35 to 40 0.58 0.04 - Canadian government bonds (277.40) 0.17 (1.04) Credit default swaps 45 to 50 4.43 - (0.11) Japanese government bonds 41.82 0.24 - Interest rate swaps 0 to 5 199.60 0.22 (0.21) German government bonds 6.51 1.10 (0.45) Interest rate swaps 5 to 10 23.17 0.11 (0.44) US government bonds (30.08) 4.29 (2.93) Interest rate swaps 10 to 15 2.52 0.07 - Italian government bonds (3.33) 0.02 - Interest rate swaps 25 to 30 1.38 0.01 - French government bonds (1.76) - (0.01) Other equity indices 8.56 0.33 (0.02) 1.51 (1.53)

232.98 20.83 (9.26) Under the terms of swaps, each party may be required to place collateral with the other according to whether the outstanding position is a profit or a loss. Under the terms of the above swap contracts, the Trustee Company had deposited £0.52m of US Treasury bills and £1.38m of cash collateral at the year end. These amounts are included in the net assets of the pooled funds at the year end.

Collateral deposited by counterparties with the Trustee Company is respect of swap contracts at the year end date amounted to £7.76m cash, £1.51m US Treasury bonds, £0.12m US Treasury bills and £0.44m US Treasury notes. Contingent collateral received in this way is not reported within the pooled funds’ net assets. The aboveoptionsexpirebetweenninemonthsoftheyearenddate. option contractsinplaceattheyearenddateareasfollows: or ‘sold’,meaningtheycarrytheobligationtobuysellifexercisedbycounterparty. Thedetailsof traded andmaybe‘bought’,whichmeanstheycarrytherighttobuyorsellifexercisedbyholder future dateatthepricespecifiedincontract.Optionsmaybeeitherovercounterorexchange (“call” options)orsell(“put”asecurity, currency, commodityorderivativecontractonaspecified Options: Optionsarecontractswhichconfertothepurchaserright,butnotobligation,buy contracts, theTrustee Companyhadneitherdepositednorreceivedcollateralattheyearend. according towhethertheoutstandingpositionisaprofitorloss.Undertermsofaboveforward Under thetermsofforwardcontracts,eachpartymayberequiredtoplacecollateralwithother The detailsofopenforwardcontractsattheyear-end dateareasfollows: commodity, bond,currencyorstock index,ataspecifiedprice,onfuturedate. ForwardForwards: contractsarenon-standardisedOTC contractsthatrequiredelivery ofa Appendix I: Interest rateswaps OTC Type ofoption UK governmentbonds Type offorward or Sold Bought Bought Economic exposure at yearend£m

Pooled FundAccounts value £m Notional 57.27 0.03 87.34 57.27

Asset valueat Asset valueat year end£m year end£m 0.05 0.05 0.03 at yearend£m at yearend£m Liability value Liability value - - - - time andprice. a contractinwhich thesellerofsecurities,suchas Treasury Bills,agreesto buy thembackataspecified Included withincash balancesis£52.17minrespect ofrepotransactions(2012-£103.72m). Arepois 1.6 Cashdepositsandcash instruments Most FXcontractswillsettlebyApril 2014. respect ofcollateralarisingonopenFXcontractsattheyearend. Included withinnetassetsis£1.56mUKTreasury bondsand£1.15mGermanGovernmentin not reportedwithinthepooledfund’snetassets. French Treasury notesinrespectofcollateralattheyearend.Contingentreceivedthisway is contracts, theTrustee Companyhadreceived£0.38mcash,£0.25mFrench Treasury bondsand£0.14m according towhethertheoutstandingpositionisaprofitorloss.Under thetermsofaboveFX Under thetermsofFXcontracts,eachpartymayberequiredtoplace collateralwiththeother as follows: foreignexchangeForward contracts:ThepooledfundshadopenFXcontractsattheyearend (‘FX’) Sterling /Australiandollar Sterling /Yen Assets Sterling /HongKong dollar Sterling /Canadiandollar Type ofcontract Sterling /Euro Sterling /Singaporedollar Sterling /USdollar Other Australian dollar/Sterling US dollar/Euro Sterling /Euro Indian rupee/USdollar US dollar/Sterling Yen /Sterling US dollar/SouthKorean won Liabilities Other Currency bought 103,136.37 30,027.77 5,228.59 1,304.03 105.72 628.20 283.21 594.28 196.92 141.38 million 56.38 35.12 31.11 54.30

(4.72) 8.33 Currency sold 102,586.80 152,650.00 8,466.16 181.76 694.95 336.05 438.55 162.79 795.06 176.13 million 58.93 61.74 30.18 8.63

Value atyear

end £m (32.52) 179.79 (12.30) 115.98 (0.96) (1.08) (7.67) (3.60) (2.09) (0.10) 38.63 7.81 1.66 2.25 1.57 3.59 64-65 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

1.7 Other investment assets 1.10 Current liabilities

2013 2012 2013 2012 £m £m £m £m

Asset in respect of investment transactions 104.85 102.38 Accrued management fees and expenses (13.93) (16.30) Investment income accrued 46.98 41.46 Property income received in advance (17.82) (20.72) Recoverable tax 0.92 2.20 Trade creditors (6.99) (8.13) Rent receivable 8.91 10.38 Liability in respect of unit trades (0.39) (0.22) Tax (4.29) (4.30) 161.66 156.42 Other (1.42) (1.98)

(44.84) (51.65) 1.8 Other investment liabilities

2013 2012 1.11 Stocklending £m £m The Trustee Company has given limited approval to custodians to lend stock in the market. A principal Liability in respect of investment transactions (56.81) (61.33) condition of this approval is that borrowers must meet the Trustee Company’s collateral specifications. Tax payable (0.35) (0.21)

(57.16) (61.54) At 31 December 2013, the market valuation of stock that had been lent in the market was £208.60m (2012 - £450.38m).

1.9 Current assets Collateral held in respect of the stock on loan at 31 December 2013 had a total value of £213.99m (2012 – £462.55m). 2013 2012 £m £m

Asset in respect of unit trades 0.42 0.27 Trade debtors 3.67 5.70 Tax 2.23 2.47 Other 0.46 0.49

6.78 8.93 1.12 Reconciliation ofinvestmentsheldatbeginningandend of year Appendix I: Swaps Equities Directly heldassets Net Assets Cross holdings Cash andcurrentassets Other Cross holdings FX contracts Options TBAs Futures Forwards Derivatives UK property Pooled investmentvehicles Index linkedsecurities Fixed interestsecurities

Pooled FundAccounts Value at31 18,078.58 24,973.35 15,218.60 (6,894.77) December 2,767.32 6,894.77 1,552.68 7,591.86 3,239.47 2,804.76 92.66 88.18 29.83 2012 1.22 0.23 1.17 1.80 0.06 £m

Units issued/ (redeemed) 748.82 259.52 748.82 £m ------

Income 259.52 £m ------

Purchases atcost and derivative (21,579.95) 11,311.53 (10,829.91) payments 7,554.44 (7,690.77) 2,713.98 (2,045.95) 4,160.38 4,879.11 2,206.92 (2,976.57) 7,453.54 12.11 19.24 78.86 45.88 3.99 1.36 4.58 £m -

Sales proceeds and derivative (3,251.25) (4,434.09) (7,550.60) 20,566.63 (133.44) (111.97) 42.88 receipts (12.51) (0.84) (34.56) (2.27) (1.90) (9.30) 6.77 (4.12) (0.49) £m -

market value Change in 1,227.55 2,179.67 (204.27) 202.57 726.59 866.07 494.08 156.15 (6.53) 78.20 22.96 £m

Value at31 16,927.77 28,161.36 19,871.97 (8,289.39) December 1,516.68 8,289.39 9,367.06 3,480.22 2,529.19 2,785.30 158.90 147.27 (0.02) 11.57 34.62 2013 0.05 0.03 £m - 66-67 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

1.13 Investment managers during the year

The investment managers used by the pooled funds during the year together with their net assets under management at the year end were as follows:

2013 2012 2013 2012 £m £m £m £m

Blackrock Investment Management 3,198.16 3,573.28 Brought forward 18,585.88 16,328.00 Legal & General Investment Management 2,206.53 997.48 Orchard Street 1,694.43 1,577.47 CoreCommodity Management, LLC (from February 2013) 105.24 - Wellington Management Int 1,630.92 1,433.75 Newton Investment Management 79.68 75.10 Blackstone Alternative Asset Management 1,248.30 617.76 Innisfree 78.60 61.85 Lazard Asset Management 958.33 644.67 Ardevora 77.34 55.16 Railpen Investments 790.95 827.60 Bain Capital 61.11 49.48 Rogge Global Partners 610.72 337.55 Warburg Pincus 55.33 59.83 Unigestion 367.26 272.83 EQT Funds Management 55.00 48.46 Pacific Investment Management Co 351.52 436.77 Henderson Equity Partners 54.57 38.60 Credit Suisse 343.97 320.48 Intermediate Capital Group (from December 2013) 54.48 - Horsley Bridge Partners 288.78 256.57 Aspect Capital 52.06 39.27 Morgan Stanley Investment Management 278.04 267.47 Insight Investment 49.28 120.38 William Blair & Company 277.30 273.38 Indicus Advisors 48.07 50.74 Longview Partners 265.96 312.18 Edgbaston Investment Partners 32.94 30.73 Goldman Sachs Asset Management 249.01 216.98 Columbia Capital 30.25 17.70 Grosvenor Capital Management 248.42 451.31 Headland Capital Partners 29.81 33.55 HarbourVest Partners 241.95 243.15 Oaktree Capital Management 29.16 41.50 Cinven 239.70 250.85 Scale Ventures Partners 22.70 20.90 J P Morgan Asset Management 238.48 507.98 Balderton Capital 22.68 17.70 Bridgewater 235.99 222.81 Sequoia Capital 21.92 12.18 Neuberger Berman Europe 227.43 331.09 Khosla Ventures 21.74 15.33 Alinda Capital Partners 219.29 225.18 Great Hill Partners 21.68 12.57 Standard Life Investments 205.19 193.17 Archer Capital 20.40 38.63 Southeastern Asset Management 174.11 217.50 Sankaty Advisors 16.49 23.27 Arcus Infrastructure Partners 167.85 127.52 Hony Capital 16.40 17.21 Aberforth Partners 151.84 194.40 Ares Management 16.06 8.63 New Finance Capital 136.44 123.84 Westbridge Capital Partners 16.00 9.87 Invesco Asset Management 134.15 52.66 Institutional Venture Partners 15.87 9.27 Taiyo 134.12 166.62 Anacap Financial Partners 15.43 11.77 Dimensional Fund Advisors Ltd (from August 2013) 132.76 - Accel Partners 15.15 8.48 Apax Partners 132.75 140.24 KPS Capital Partners 13.35 10.99 Blakeney General Partners 128.30 110.29 Morningside Ventures 12.98 5.45 Marathon Asset Management 122.06 96.25 Innova 12.43 7.19 Pantheon Ventures 116.61 130.47 Highland Capital Partners 12.12 9.18 Epoch Investment Partners (from August 2013) 111.08 - Domain Partners 10.99 8.71 AQR Capital Management (from December 2013) 110.43 - Charlesbank Capital Partners 10.12 6.51 Adams Street Partners 108.59 107.31 Navis Capital Partners 9.45 7.60 Graham Capital 108.16 69.14

Carried forward 18,585.88 16,328.00 Carried forward 19,802.76 17,311.79 Appendix I: Relational Investors(untilJuly2013) River andMercantileAssetManagement(untilJune2013) Rock CreekGroup(untilJanuary2013) Edinburgh Partners (untilJuly 2013) Governance For OwnersGroup Bridges CommunityVentures Peak RockCapital Triton Partners (fromJuly2013) CP2 Innovation Works (fromJanuary 2013) Scale Venture Partners (fromJuly2013) ClearVue Partners (fromDecember2013) General Atlantic(fromMay2013) Berkshire Partners Abry Partners Capital Dynamics Andreessen Horowitz Index Ventures Bessemer Venture Partners H.I.G. Capital(fromJanuary2013) Thoma Bravo(fromAugust2013) Clearsight Investments Southern CrossGroup CI CapitalInvestors Brought forward Pooled FundAccounts 19,871.97 19,802.76 17,311.79 2013 0.14 0.27 0.59 1.14 1.31 48.33 1.63 1.66 2.94 3.02 3.25 3.55 3.58 4.00 4.69 4.76 5.05 5.66 6.43 7.28 8.26 £m - - - - 18,078.58 183.66 197.40 292.46 16.54 2012 1.05 0.37 0.12 1.79 2.13 4.77 1.42 1.86 2.38 2.03 4.50 5.98 ------benchmark. The performanceoftheDCGlobalEquityFund ismeasuredagainsttheGlobalEquityPooled Fund in thepooledfund. The performanceoftheLDIPooled Fund ismeasuredagainsttheliabilityprofileofsectionsinvesting a customisedbenchmarkdesignedtoreflectthespecificmaturityprofiles ofthatsegment. The performanceofeachannualsegmenttheCashflowMatching Pooled Fund ismeasuredagainst The targetfortheGlobalEquityPooled Fund istobeatthisbenchmarkby0.5%overthelongterm. exposure inthepooledfundishedgedbacktoSterling. A passivehedgingstrategyisemployedwhereby50%oftheoverseasdevelopedmarketscurrency the yearendcomprised: The performanceoftheGlobalEquityPooled Fund ismeasuredagainstacompositebenchmarkwhichat 1.14 Benchmarksandtargets MSCI EmergingMarketsFree (netdividendsreinvested)Index AllWorldFTSE DevelopedAsiaPacific (exJapan)Index AllWorldFTSE DevelopedEurope(exUK)Index AllShareIndex FTSE AllWorldFTSE NorthAmericaIndex 100.0 2013 15.0 20.0 20.0 20.0 25.0 % 2012 68-69 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

The benchmarks and targets of all other pooled funds as at 31 December 2013 are shown in the table 1.15 Performance below: The return of each pooled fund as measured by WM Performance Services and RPMI is shown in the Pooled fund Benchmark Long-term target table below: Growth Retail Price Index Benchmark + 5% pa Pooled Fund Actual Target Bench Actual last Target last Bench last Private Equity MSCI All Countries World Index Benchmark + 1% pa 2013 2013 2013 5 years1 5 years1 5 years1

Non Government Bond Barclays Capital Global Aggregate Benchmark + 0.75% pa (%) (%) (%) (%) (%) (%) Corporate Index (hedged) Growth2 8.6 7.7 2.7 6.9 8.6 3.6 Property Investment Property Databank All Benchmark + 1% pa Properties Index Global Equity 23.5 20.5 20.0 13.8 13.0 12.5 Hedge Funds SONIA 3 month swap rate. The 3 month Benchmark + 3.5% pa Private Equity 11.4 22.2 21.2 10.8 13.9 12.9 SONIA swap rate represents a sterling Non Government Bond 0.1 1.0 0.2 5.3 5.4 4.6 overnight index average rate for brokered unsecured overnight trades between banks. Property 11.5 11.9 10.9 9.4 8.5 7.5 Cash 7 Day Sterling London Inter-Bank Intra Day Benchmark Hedge Funds 10.6 3.9 0.4 8.2 4.2 0.7 Interest Rate Cash 0.4 0.4 0.4 0.5 0.4 0.4 Government Bond Citigroup World Government Bond Index – Benchmark + 0.5% pa Government Bond (1.0) 0.0 (0.5) 3.7 4.0 3.5 ex Japan (hedged) Infrastructure 15.8 6.7 2.7 (0.5) 7.5 3.5 Infrastructure Retail Price Index Benchmark + 4% pa Defensive (1.1) 3.2 2.7 0.7 3.7 3.2 Defensive Retail Price Index Benchmark + 4.0% pa Commodities (8.4) (7.8) (7.8) 6.9 5.3 5.3

Commodities Composite benchmark comprising: Benchmark 3 75% DJ AIG Commodities Index Liquid Growth 1.6 4.9 1.6 1.6 4.9 1.6 25% S&P GSCI Petroleum Index Index Linked 2.4 2.2 2.2 9.3 9.1 9.1 Liquid Growth Retail Price Index Benchmark + 5.0% pa LDI (8.9) n/a n/a 12.6 n/a n/a Index Linked FTSE UK gilts – Index Linked > 15 years Index Benchmark Passive Equity 26.7 26.8 26.8 23.5 23.5 23.5 Passive Equity FTSE All world Index developed Markets (hedged) Benchmark DC Long Term Growth3 1.9 1.6 1.6 1.9 1.6 1.6 DC Long Term Growth Retail Price Index Benchmark DC Deposit3 0.2 0.1 0.1 0.2 0.1 0.1 DC Deposit 7 Day Sterling London Inter-Bank Intra Day DC Global Equity3 7.7 6.3 6.3 7.7 6.3 6.3 Interest Rate Benchmark DC Aggregate Bond3 (4.6) (4.9) (4.9) (4.6) (4.9) (4.9) DC Index Linked and Composite benchmark comprising: Benchmark DC Index Linked and Global Bond3 (5.5) (5.4) (5.4) (5.5) (5.4) (5.4) Global Bond 50% FTSE UK gilts index Linked > 15 years Index 50% Barclays Global Aggregate Corporation (hedged) Index 1 For pooled funds that have been existence for less than five years, the figures given in the table are DC Aggregate Bond Composite benchmark comprising: Benchmark since the inception of the pooled fund. 50% Citigroup World Government Bond Index – ex Japan (hedged) 50% Barclays Global 2 The allocation of the Growth Pooled Fund throughout the year to 31 December 2013 between asset Aggregate Corporation (hedged) Index classes is shown in the table on next page.

3 Since inception in May 2013. Allocation ofGrowthPooledFundbyassetclassthroughout2013 Appendix I: Other Commodities Property Cash Bond Hedge Funds Equities Highest proportion Pooled Fund (%) of theGrowth 12.4 15.0 13.9 17.7 42.5 3.3 4.5 Pooled FundAccounts

Lowest proportion Lowest Pooled Fund (%) of theGrowth 11.5 11.9 11.3 12.6 17.1 35.1 39.5

7.9 11.6 2.9 3.0 3.7 4.1 SCOTSMAN

BELMOND ROYAL BELMOND Average proportion Pooled Fund (%) of theGrowth 100.0 17.3

Achnasheen

2013 Lochalsh Kyle of SCOTLAND Pitlochry Inverness Perth Montrose Edinburgh Aberdeen Keith 70-71 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

The graphs below illustrate the movement in the unit price and annualised performance of each pooled fund over the last five years, or since inception where the fund has been in existence for less than five years.

Growth Pooled Fund Unit Price Growth Pooled Fund Performance

13 12

10

12 8

6 £/unit % return

11 4

2

10 2 2010 2011 2012 2013 2010 2011 2012 2013

SI fund SI target SI benchmark Global EquityPooledFundUnitPrice £/unit 30 35 40 45 50 55 60 65 25 2009 2010 2011 2012 2013

% return Global EquityPooledFundPerformance 10 12 14 -2 0 2 4 8 6 5 yearfund 2009 2010 5yeartarget 2011 2012 5yearbenchmark 2013 72-73 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

Private Equity Pooled Fund Performance

14

12

10

8

6 % return 4

2

0

-2 2009 2010 2011 2012 2013

5 year fund 5 year target 5 year benchmark Non GovernmentBondPooledFundUnitPrice £/unit 11 12 13 10 9 2010 2011 2012 2013

% return Non GovernmentBondPooledFundPerformance 0 1 2 3 4 5 6 7 8 9 2010 5 yearfund 2011 5yeartarget 2012 5yearbenchmark 2013 74-75 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

Property Pooled Fund Unit Price Property Pooled Fund Performance

70 10

65 8

60 6

£/unit 55 4 % return

50 2

45 0

-2 40 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

SI fund SI target SI benchmark Hedge FundsPooledFundUnitPrice £/unit 10 11 12 14 15 16 13 2009 2010 2011 2012 2013

% return Hedge FundsPooledFundPerformance 0 1 2 3 5 6 4 7 8 9 SI fund 2009

2010 SItarget 2011 SIbenchmark 2012 2013 76-77 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

Cash Pooled Fund Unit Price Cash Pooled Fund Performance

10.2 0.8

0.7

0.6

0.5

£/unit 10.0 % return 0.4

0.3

0.2

0.1

9.8 0 2010 2011 2012 2013 2010 2011 2012 2013

SI fund SI target Government BondPooledFundUnitPrice £/unit 10 11 12 9 2010 2011 2012 2013 Government BondPooledFundPerformance % return -1 0 1 2 3 4 5 6 2010 SI fund

2011 SItarget 2012 SIbenchmark 2013 78-79 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

Infrastructure Pooled Fund Unit Price Infrastructure Pooled Fund Performance

10 10

5 9

0 £/unit

8 % return -5

7 -10

6 -15 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

SI fund SI target SI benchmark Defensive PooledFundUnitPrice £/unit 10.0 10.5 9.5 2012 2013 Defensive PooledFundPerformance % return -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 2012 SI fund

SIbenchmark 2013 80-81 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

Index Linked Pooled Fund Unit Price Index Linked Pooled Fund Performance

60 25

55 20

50 15 £/unit 45 % return 10 40

5 35

30 0 2009 2010 2011 2012 2013 2010 2011 2012 2013

SI fund SI target £/unit Commodities PooledFundUnitPrice 17 18 10 11 12 13 14 15 16 2009 2010 2011 2012 2013 Commodities PooledFundPerformance % return 10 15 20 25 35 40 30 0 5 2009 2010 SI fund

2011 SItarget 2012

2013 82-83 Annual Report and Audited Financial Statements Appendix I: Pooled Fund Accounts

Liquid Growth Pooled Fund Unit Price

10.5

£/unit 10.0

9.5 2013 Passive EquityPooledFundUnitPrice £/unit 10 11 12 13 9 2012 2013 Passive EquityPooledFundPerformance % return 10 15 20 25 30 0 5 2012 SI fundandbenchmark 2013

84-85 Annual Report and Audited Financial Statements Rail journeys of the world

page 6 page 34 THE TRANS- 2013 VENICE SIMPLON- 2013 The longest railway line in the world stretches nearly The Venice Simplon-Orient-Express train is a private SIBERIAN RAILWAY 9500 km from Moscow to Vladivostok in the Russian ORIENT-EXPRESS venture running original carriages from the 1920s and Far East. Construction started on the Tsar’s orders 30s between London and Venice. Once a year, it also back in 1891, and the line is still being extended retraces the route of the original iconic Express from today, connecting Europe at one end with China, Paris to Istanbul. Japan and Korea at the other.

page 20 page 41 INDIAN PACIFIC 2013 EASTERN & 2013 This epic journey spans the Australian continent The sister train to Europe’s legendary Venice Simplon- between the Indian and Pacific oceans, and has ORIENTAL EXPRESS Orient-Express offers exotic travel through South East been running for over 40 years. It has carried over Asia, from Singapore, Thailand and Malaysia, through three million passengers so far, and follows a to Laos. It was built in Japan in 1972 and operated spectacular route from Sydney to Adelaide and on as the Silver Star in New Zealand before being sold to to Perth, taking in ancient plains, the wild Outback Orient-Express Hotels. and the Blue Mountains.

page 23 page 71 ROCKY 2013 BELMOND ROYAL 2013 The Canadian tour operator has carried over one Also run by Orient-Express Hotels, this world-famous MOUNTAINEER million passengers since 1990, and its Rocky SCOTSMAN train runs exclusive luxury tours through Scotland Mountain trip between Vancouver and Calgary is and the Highlands. Carrying just 36 passengers, the considered the most scenic train tour in the country, Scotsman aims to recreate the atmosphere of a five- taking in spectacular mountains, lakes and wilderness. star country house hotel – there’s even the option Its first international route – the Coastal Passage to buy your own family tartan Highland Dress as a - launched in 2013 and connects Seattle in America, memento of your trip. to Jasper and Banff.

RAIL JOURNEYS 2013 OF THE WORLD