Directors’ report and additional disclosures

The Directors present their report on the affairs Powers of the Directors Share capital of the Group, together with the audited The Directors are responsible for the As at 31 March 2019, the Company’s issued financial statements and the report of the management of the business of the Company share capital was 1,213,878,659 ordinary auditor for the year ended 31 March 2019. and may exercise all powers of the Company shares of 5 pence, each credited as fully paid. Information required to be disclosed in the subject to applicable legislation and regulation The Company holds 157,229 ordinary shares Directors’ report may be found below and in and the Company’s Articles. in treasury, and the issued share capital of the the following sections of the Annual Report Directors’ indemnities Company which carries voting rights of one and Accounts, in accordance with the and liability insurance vote per share comprises 1,213,721,430 Companies Act 2006 (the ‘2006 Act’) and FirstGroup maintains liability insurance for its ordinary shares. Listing Rule 9.8.4R of the Financial Conduct Directors and Officers. The Company has also Further details of the Company’s issued share Authority (the ‘FCA’): granted indemnities to each of the Directors capital are shown in note 27 to the Company’s Information Section Page as well as the General Counsel & Company financial statements. Secretary, the Director of Finance, the Group Sustainability Corporate 59 Financial Controller, the Group Treasury & Tax The Company’s shares are listed on the governance Governance Director, the Chief Information Officer, the London Stock Exchange. report Greyhound President and an Officer of FGI Substantial shareholdings Greenhouse gas Key 41 Canada to the extent permitted by law. These As at 31 March 2019, the Company had been emissions performance indemnities are uncapped in amount, in relation notified under the FCA’s Disclosure, Guidance indicators to certain losses and liabilities which they may and Transparency Rule (‘DGTR’) 5 of the Likely future Chief 4 incur to third parties in the course of acting as a following interests in its total voting rights of developments in Executive’s Director (or Officer or Company Secretary as 3% or more: the business report the case may be) of the Company or any of its Number of % of total Risk factors and Principal 42 associated companies. In the case of the ordinary voting principal risks; risks and Director of Finance, the Group Financial Name of holder shares rights going concern and uncertainties Controller, the Group Treasury & Tax Director, viability statements Vidacos Nominees the Chief Information Officer, the Greyhound Ltd – HSBC Governance Our 30 President and an Officer of FGI Canada the Custody Nominees arrangements; stakeholders indemnities are limited to their actions as (Australia) Ltd 71,695,290 5.95 human rights and Directors of specific associated companies. Schroders plc 64,283,712 5.33 anti-corruption and Neither the indemnity nor insurance cover bribery matters provides cover in the event that a Director Jupiter Asset Long-term Directors’ 76 (or Officer or Company Secretary as the case Management Limited 60,603,024 5.03 incentive schemes remuneration may be) is proved to have acted fraudulently report or dishonestly. The indemnity is categorised West Face Capital, Financial Financial 103 as a ‘qualifying third-party indemnity’ for the Inc 60,455,000 4.99 instruments and statements purposes of the 2006 Act and will continue in Vidacos related market force for the benefit of Directors (or Officers or Nominees Ltd 59,397,756 4.93 transactions Company Secretary as the case may be) on an Coast Capital ongoing basis. Directors Management 49.934,190 4.12 The Directors of the Company who served Audit information Between 31 March 2019 and the date of this during the year, and those appointed after the The Directors who held office at 30 May 2019 report, Coast Capital Management notified the end of the financial year, and their biographical confirm that so far as they are aware, there is Company that they had increased their holding details are shown on pages 52 to 54. no relevant audit information (being information to 118,585,445 ordinary shares which Tim O’Toole stood down from the Board on needed by the auditor in connection with represent 9.77% of total voting rights. In 31 May 2018 and Drummond Hall will retire on preparing their audit report), of which the addition, Jupiter Asset Management Limited 31 May 2019. Steve Gunning and Julia Steyn Company’s auditor is unaware, and each of notified the Company that their holding had were appointed on 1 January and 2 May the Directors has taken all the steps that they been reduced to 60,568,279 ordinary shares respectively and Ryan Mangold was ought reasonably to have taken as a Director which represent below 5% of total voting appointed with effect from 31 May 2019. in order to make themselves aware of any rights. We understand that West Face Capital, relevant audit information and to establish Details of the Directors’ interests in shares can Inc has also reduced their holding from what that the Company’s auditor is aware of be found in the Directors’ remuneration report they held at year end but no formal notification that information. on pages 92 and 93. has been received. This confirmation is given and should be During the year, no Director had any interest in interpreted in accordance with the provisions any shares or debentures in the Company’s of section 418 of the 2006 Act. subsidiaries, or any material interest in any contract with the Company or a subsidiary being a contract of significance in relation to the Company’s business.

98 FirstGroup Annual Report and Accounts 2019 Articles of Association Employee involvement and policies Change of control – significant The description in this section summarises concerning disabled employees agreements certain provisions of the Company’s Articles For how we comply with Schedule 7 of The Financing agreements and applicable Scottish law concerning Large and Medium-sized Companies and The Group has a £800m multi-currency companies. This summary is qualified in its Groups (Accounts and Reports) Regulations revolving credit and guarantee facility between, Governance entirety by reference to this Company’s 2008 (No. 410) in this respect, please see amongst others, the Company and The Royal Articles and the 2006 Act. The Company’s Our people section on page 33. Bank of Scotland plc dated 7 November 2018. Articles may be amended by a special This refinanced the Group’s existing revolving Purchase of own shares resolution of the Company’s shareholders. credit and guarantee facility. Following any At the AGM of the Company in 2018 authority change of control of the Company, individual Shares was granted for the Company to purchase up lenders may negotiate with the Company with The rights attached to the ordinary shares of to 10% of its ordinary shares. During the year a view to resolving any concerns arising from the Company are defined in the Company’s no ordinary shares were purchased. Under the such change of control. If the matter has not Articles. No person has any special rights of existing authority the Company may purchase been resolved within 30 days, an individual control over the Company’s share capital and up to 121,140,782 ordinary shares. This bank may cancel its commitment and the all issued shares are fully paid. authority remains in place until the 2019 AGM, Company must repay the relevant proportion when the Company intends to seek a renewal. Voting rights of any drawdown. Shareholders are entitled to attend and vote at Political donations The US$100m 4.17% notes due 2025, any general meeting of the Company. It is the At the 2018 AGM, shareholders passed a US$175m 4.29% notes due 2028, the £350m Company’s practice to hold a poll on every resolution to authorise the Company and its 8.750% bonds due 2021, the £200m 6.875% resolution at general meetings. Every member subsidiaries to make political donations to bonds due 2024 and the £325m 5.250% present in person or by proxy has, upon a poll, political parties or independent election bonds due 2022 issued by the Company may one vote for every share held. In the case of candidates, to other political organisations, also be affected by a change of control of the joint holders of a share the vote of the senior or to incur political expenditure (as such terms Company. In respect of the £350m 8.750% who tenders a vote, whether in person or by are defined in sections 362 to 379 of the 2006 bonds due 2021, the £200m 6.875% bonds proxy, shall be accepted to the exclusion of the Act), in each case in amounts not exceeding due 2024 and the £325m 5.250% bonds due votes of the other joint holders and, for this £100,000 in aggregate. As the authority 2022, upon a change of control of the purpose, seniority shall be determined by the granted at the 2018 AGM will expire, renewal Company, provided that certain further order in which the names stand in the Register of this authority will be sought at this year’s thresholds in relation to the credit rating of the of Members in respect of the joint holding. AGM. Further details will be available in the bonds are met, the bondholders have the Notice of AGM. Dividend rights option to require the Company to redeem the Shareholders may by ordinary resolution As a result of the broad definition used in the bonds. In respect of the US$100m 4.17% declare dividends but the amount of the 2006 Act of matters constituting political notes due 2025, US$175m 4.29% notes due dividend may not exceed the amount donations, it is possible that normal business 2028, upon a change of control, the Company recommended by the Board. The Directors activities, which might not be thought to be must make an offer to noteholders to prepay are not recommending the payment of a final political expenditure in the usual sense, could the entire unpaid principal amount of the notes dividend this year. be covered. Accordingly, authority is being held by each bondholder (at par) together with sought as a precaution to ensure that the interest accrued thereon. Transfer of shares Company’s normal business activities do not There are no specific restrictions on the size First Rail infringe the 2006 Act, but it is not the policy of a holding nor on the transfer of shares which The Group’s franchised passenger rail of the Company to make donations to EU are both governed by the general provisions operators, First TransPennine Express Limited, political organisations nor to incur other of the Company’s Articles and prevailing First Greater Western Limited and First MTR political expenditure in the EU. legislation. The Directors are not aware of South Western Trains Limited (jointly owned any agreements between holders of the In the US it is far more common for businesses with MTR Corporation) are each party to a Company’s shares that may result in to participate in the political process through franchise agreement with the Secretary of restrictions on the transfer of securities or on a variety of methods. During the year the State for Transport. These franchise voting rights at any meeting of the Company. Group’s US businesses incurred political agreements are subject to termination clauses expenditure in the US of $14,000 (2018/19: which may apply on a change of control. Employee share plans $18,948) in the support of their business goals. First MTR South Western Trains Limited, The Company operates a number of The Group has fully complied with jurisdictional First TransPennine Express Limited and First employee share plans, details of which are set reporting of these contributions. Greater Western Limited and the Group’s out in note 35 to the consolidated financial non-franchised rail operator, Hull Trains statements and on the Annual report on Other than as explained above for our US Company Limited, each hold railway licences remuneration on page 81. businesses, no other political donations nor as required by the Railways Act 1993 (as expenditure was incurred by the Company All of the Company’s employee share plans amended); these licences may be revoked and its subsidiaries during 2018/19. contain provisions relating to change of control. on three months’ notice if a change of control On a change of control, options and awards occurs without the approval of the Office of granted to employees may vest and become Rail and Road. All of these operators also exercisable, subject to the satisfaction of any require and hold track access agreements applicable performance conditions at the time. with Network Rail Infrastructure Limited under

FirstGroup Annual Report and Accounts 2019 99 Directors’ report and additional disclosures continued

which they are permitted to access railway Post balance sheet events Management report infrastructure. Failure by any of the operators There have been no material post balance The Strategic and Directors’ reports together to maintain its railway licence is a potential sheet events as at the date of this report. are the management report for the purposes termination event under the terms of the of the FCA’s DGTR 4.1.5R. track access agreements. The Group’s railway Branch disclosure The Group has recently established a branch The Strategic report was approved on behalf operators also lease rolling stock from in France (First Travel Solutions Limited of the Board on 30 May 2019. specialist rolling stock leasing companies such registered on 28 March 2019). as , Rock Rail Limited, Beacon Rail Limited, Leasing Non-financial reporting statement Michael Hampson Company Limited and Limited. The EU Non-Financial Reporting Directive General Counsel & Company Secretary A material number of the individual leasing applies to the Group for the first time this year 30 May 2019 agreements include change of control and the tables shown overleaf summarise 395 King Street, Aberdeen AB24 5RP provisions. The Group is also involved from where you can find further information on time to time in bidding processes for UK rail each of the key areas of disclosure required. franchises and transport contracts further afield which customarily include change in Further disclosures, including our Group circumstance provisions which would be policies and non-financial targets and triggered on a change of control and could performance data, can be found on our result in termination or rejection from further website. A description of our Business participation in the relevant competitions. Model is set out on page 12. Significant shareholders’ agreements The Group, through First Rail Holdings Limited, has shareholders’ agreements governing its relationship with MTR Corporation in relation to the South Western rail franchise and with Trenitalia for the purposes of bidding for (and, if successful, operating) the West Coast Partnership franchise. As is customary, these agreements include provisions addressing change of control.

100 FirstGroup Annual Report and Accounts 2019 Non-financial reporting statement Reporting requirement Relevant section of this report 1. D escription of our business model ■■ Our strategy and business model – pages 12-13

2. T he main trends and factors likely to affect the future development, ■■ Our markets – pages 10-11 Governance performance and position of the Group’s business ■■ Business review – pages 14-24 3. D escription of the principal risks and any adverse impacts of ■■ Principal risks and uncertainties – pages 42-50 business activity 4. Non-financial key performance indicators ■■ Gender diversity – page 34 ■■ Punctuality – page 39 ■■ Safety – page 39 ■■ Customer and passenger satisfaction – page 40 ■■ Community investment – page 41 ■■ Greenhouse gas emissions – page 41

Policies, processes and standards Embedding, due diligence, and outcomes of our approach, Reporting requirement which govern our approach* Risk management and additional information 5. Environmental ■■ Environmental Policy ■■ Political and regulatory ■■ Responsible partnerships with our customers and matters ■■ Environmental Management risk – page 44 communities – Business review pages 15, 17, 19, Systems in every division, ■■ Competition and 21, 24 certified to ISO 14001 emerging technologies ■■ Performing sustainably – page 32 standard across UK risk – page 45 ■■ Greenhouse gas emissions data, trend analysis and businesses (with the exception ■■ Compliance, litigation, assurance – page 41 of Hull Trains) claims, health and safety ■■ Sustainable procurement – page 36 ■■ Certified ISO 50001 systems – page 47 ■■ Reducing the impacts of waste in First Rail – page 36 across First Rail ■■ Disruption to infrastructure/operations risk – page 48 6. Employees ■■ HR Policy framework across ■■ Labour costs, employee ■■ Employee engagement and representation – page 33 the Group relations, recruitment and ■■ Board level and divisional employee directors – ■■ Code of Ethics retention risk – page 48 page 33 ■■ Gifts and Hospitality Policy ■■ Compliance, litigation, ■■ Investing in our employees and tackling skill ■■ Whistleblowing Policy and claims, health and safety shortages – page 33 Procedure – page 47 ■■ Diversity and inclusion – page 34 ■■ Health and Safety Policy ■■ Health and wellbeing – page 34 ■■ Safety – page 37 7. Social and ■■ Community engagement and ■■ Compliance, litigation, ■■ Responsible partnerships with our customers and community community investment claims, health and safety communities – Business review pages 15, 17, 19, matters frameworks – page 47 21, 24 ■■ Code of Ethics ■■ Our community engagement strategies – page 35 ■■ Payroll Giving ■■ Working with charities – page 35 ■■ Matched Giving Guidelines ■■ Our Community Rail Partnerships and local and Exclusion Policy community investment – page 35 ■■ LBG impact measurement ■■ Safety – page 37 ■■ Health and Safety Policy ■■ Accessible journeys – page 31 ■■ Government engagement – page 32 ■■ Performing sustainably – page 41 8. Human rights ■■ Code of Ethics ■■ Compliance, litigation, ■■ Engaging ethically – page 30 ■■ Supplier Code of Conduct claims, health and safety ■■ Safety – page 37 ■■ Code of Conduct on – page 47 Anti-Slavery and Human Trafficking Prevention ■■ Modern Slavery and Human Trafficking Statement 2018 ■■ Health and Safety Policy 9. Anti-corruption ■■ Anti-Bribery Policy and ■■ Compliance, litigation, ■■ Engaging ethically – page 30 and anti- steering committee claims, health and safety bribery ■■ Conflicts of Interest Policy – page 47

* Some policies, processes and standards shown here are not published externally

FirstGroup Annual Report and Accounts 2019 101 Directors’ responsibility statement

Statement of Directors’ In preparing the Group financial statements, Responsibility statement responsibilities in respect International Accounting Standard 1 requires Each Director confirms to the best of their of the Annual Report and that Directors: knowledge that: the financial statements ■■ properly select and apply accounting policies ■■ the financial statements, prepared in The Directors are responsible for preparing the accordance with the relevant financial Annual Report and the Group and parent ■■ present information including accounting reporting framework, give a true and fair view company financial statements in accordance policies, in a manner that provides relevant, of the assets, liabilities, financial position and with applicable law and regulations. Company reliable, comparable and understandable profit or loss of the Company and the law requires the Directors to prepare financial information undertakings included in the consolidation statements for each financial year. Under that ■■ provide additional disclosures when taken as a whole law, the Directors are required to prepare the compliance with the specific requirements in Group financial statements in accordance with IFRSs are insufficient to enable users to ■■ the Strategic report and Governance section International Financial Reporting Standards understand the impact of particular include a fair review of the development and (IFRSs) as adopted by the European Union transactions, other events and conditions on performance of the business and the and Article 4 of the IAS Regulation and have the entity’s financial position and financial position of the Company and the chosen to prepare the parent company performance undertakings included in the consolidation financial statements in accordance with taken as a whole, together with a description ■■ make an assessment of the Company’s applicable UK Accounting Standards, of the principal risks and uncertainties that ability to continue as a going concern including Financial Reporting Standard 101 they face ‘Reduced Disclosure Framework’ (FRS 101) The Directors are responsible for keeping ■■ the Annual Report and Accounts, taken as a and applicable law. adequate accounting records that are whole, is fair, balanced and understandable sufficient to show and explain the Company’s Under company law, the Directors must not and provides the information necessary for transactions and disclose with reasonable approve the financial statements unless they shareholders to assess the Company’s and accuracy, at any time, the financial position are satisfied that they give a true and fair view the Group’s position and performance, of the Company and enable them to ensure of the state of affairs of the Company and of business model and strategy that the financial statements comply with the profit or loss of the Company for that The Strategic report comprising pages 3 to the 2006 Act. They are also responsible for period. In preparing the parent company 50, and the Governance section comprising safeguarding the assets of the Company and financial statements, the Directors are pages 51 to 102, and including the sections of hence for taking reasonable steps for the required to: the Annual Report and Accounts referred to prevention and detection of fraud and other in these pages, have been approved by the ■■ select suitable accounting policies and then irregularities, and have adopted a control Board and signed on its behalf by: apply them consistently framework across the Group. ■■ make judgements and accounting estimates The Directors are responsible for the that are reasonable and prudent maintenance and integrity of the corporate and Matthew Gregory ■■ state whether applicable UK Accounting financial information included on the Chief Executive Standards, including FRS 101, have been Company’s website. Legislation in the United 30 May 2019 followed, subject to any material departures Kingdom governing the preparation and 395 King Street, Aberdeen AB24 5RP disclosed and explained in the financial dissemination of financial statements may statements differ from legislation in other jurisdictions.

■■ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business

102 FirstGroup Annual Report and Accounts 2019