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Every year the Trustee of the Research Machines PLC 1988 Pension Scheme produce a Summary Funding Statement, to give you an update on the Scheme’s funding position. The statement gives you a snapshot of the Scheme on 31 May 2017, and an update of the Scheme’s progress since 31 May 2015.

We can report that as of 31 May 2017, there was a funding shortfall of £71m which when taken together with the asset value of the Escrow Account (at £7m) implies an overall shortfall of £64m. (The Escrow Account holds additional assets to support the Scheme).

The position has worsened compared to 31 May 2016. On page 4, we have included an update on some investment changes we are making to help increase returns and manage the Scheme’s risks.

Yours sincerely

RM Pension Scheme Trustee Limited

Topics included in this update:

• Update on the Scheme’s funding position as at 31 May 2017

• Investment strategy update

• Advisor changes

• Warning on pension scams

SUMMARY FUNDING STATEMENTResearch Machines PLC 1988 Pension Scheme AUTUMN 2017

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A SNAPSHOT OF THE SCHEME ON 31 MAY 2017

At 31 May 2017 the target level of assets was £276m, but the actual assets excluding the Escrow Account were £71m less than this (74% funded). When the Escrow Account asset is included, the shortfall was £64m (77% funded).

The chart shows that the shortfall on 31 May 2017 was £71m (74% funded). This £71m shortfall does not affect the pensions currently being paid out of the Scheme – we have always paid members their pensions in full.

The position has worsened compared to 31 May 2016, when the funding shortfall was £51m (78% funded). The deterioration has arisen mainly as a result of a decline in interest rates during the course of the year, partially offset by positive asset returns and contributions made by the Company.

As at 31 May 2015, there was a £42m shortfall (excluding the Escrow Account). In order to fill this gap, the Company paid a one-off contribution of £4m in December 2015 and will continue to pay contributions of £3.6m per annum until 30 September 2024. In addition to these contributions the Company pays £32,000 per month towards the Scheme’s administrative expenses.

The assets in the Escrow Account were around £7m as of 31 May 2017. This account is jointly managed by the Company and the Trustee and has been set up to fund risk reduction exercises within the Scheme. Any funds remaining in the Escrow account as at 1 May 2021 will be transferred to the Scheme.

Please note that we expect the snapshot to change from year to year because the Scheme’s finances depend on changes in global financial markets.

The next actuarial valuation of the Scheme is due as at 31 May 2018. One of the outputs of this valuation will be an assessment of how much needs to be paid in by the company to meet the shortfall, and whether contributions need to rise.

Target level of assets £276 million

£205 million

£71 million

Actual assets

Shortfall

Assessing the SchemeThe Trustees employ an independent expert to provide regular checks on the Scheme’s finances. These regular check-ups involve calculating a target level of assets.

The target level of assets is the amount that is expected to be enough to continue to pay out all the pensions that members have already built up in the Scheme.

Nobody knows exactly how much money will be needed to pay everybody’s pensions. This will depend on how long members live, the level of inflation, and the returns earned on the Scheme’s investments, amongst other factors.

Assets of the SchemeThe assets of the Scheme come from contributions paid by the Company, together with investment growth.

The assets of the Scheme are held separately from the Company and the Scheme’s Trustees are responsible for investing this money, after taking professional advice.

The assets are held in a common Scheme – they are not held in separate pots for each member.

Pensions are paid to retired members out of this common Scheme.

£212 million

£64 million

Actual assetswith Escrow

Shortfall withEscrow

£212 million

£64 million

Actual assetswith Escrow

Shortfall withEscrow

£212 million

£64 million

Actual assetswith Escrow

Shortfall withEscrow

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Q: Has the Company taken any money out of the Scheme?Regulations require us to let you know whether the Company has taken any money out of the Scheme in the last 12 months. We can confirm that it has not.

Q: What if the Scheme has to wind-up?The Company and the Trustee do not intend to wind up the Scheme. We do however monitor the impact on the Scheme should the Company no longer be able to support it.

In this event, a wind-up of the Scheme is likely to be triggered and the responsibility for paying members’ pension benefits would be transferred to an insurance company. The Trustee monitors the cost of securing all members’ benefits with an insurance company.

The most recent estimate provided by our independent advisers looked at the position on 31 May 2015. This estimate showed that the Company would have to make an additional final contribution of about £213m to make sure all members’ pensions could be paid in full by an insurance company.

If the Company became insolvent and could not afford to pay this, you might not get your full pension benefits.

This is larger than the shortfall shown on page 2, but this is fairly common amongst similar UK pension schemes.

Q: Is my pension protected?The Government has set up the Pension Protection Fund which provides pension scheme members with added security should the Company become insolvent and unable to pay the final contribution. If a scheme enters the Pension Protection Fund, the amount members receive may be less than the pension benefits built up for them in the scheme.

The Pension Protection Fund rules are complex. The amount they will pay depends on the rules of the scheme, whether a pension is already being paid, a member’s age and the type of pension benefit.

More information and guidance about the Pensions Protection Fund is available at pensionprotectionfund.org.uk or by contacting the Pension Protection Fund, 12 Dingwall Road, Croydon, Surrey, CR0 2NA (tel: 0845 600 2541).

Q: Who is the Trustee of the Scheme?The Trustee is a limited company and has its own legal identity. The Trustee Directors make the decisions and carry out the duties for which the Trustee is legally responsible, including looking after the Scheme on behalf of its members. The Trustee holds the assets of the Scheme in trust and acts separately from the Company who sponsors the Scheme. Two of the Trustee Directors are nominated by the Company (Mike Greig and Michelle Rawnsley) and two are nominated by Scheme members (Rob Sirs and Keith Spence).

Q: Can I transfer my benefits out of the Scheme before I am due to retire?You can opt to transfer your Scheme benefits to another pension arrangement before retirement. If you are considering this you should take financial advice before acting, you will also need to be able to demonstrate you have taken this advice from an appropriately qualified advisor if your benefits are worth more than £30,000. The Trustee is not able to provide you with financial advice.

Q: What about my Additional Voluntary Contributions (AVCs)?The Scheme also holds AVCs for those who chose to pay them, these are separately invested.

YOUR QUESTIONS ANSWERED

Need more information?If you have any questions or would like to see a copy of a Scheme’s financial accounts, investment or funding policy documents relating to the contributions payable, please visit the Scheme’s website https://rmpensions.lcp.uk.comAlternatively, if you would like a copy of any of these documents, the rules of the Scheme or the Actuarial Valuation Report

as at 31 May 2015, please contact the Scheme’s administrators Lane Clark & Peacock:

RMAdmin@lcp.uk.comLane Clark & Peacock, St Paul’s House, St Paul’s Hill, Winchester, Hampshire

SO22 5AB01962 870 060

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UPDATE TO THE INVESTMENT STRATEGYFollowing a detailed investment strategy review in August 2016, which included taking professional advice from PSolve and consulting with the Company, the Trustee has decided to make various changes to the Scheme’s investments. The aim is to increase the returns of the investments whilst also managing the risk.

The changes made are as follows, see the Investment terms box for further explanation:

� Introducing a liability hedging strategy within the gilt portfolio

� Switching part of the growth portfolio to a structured equity policy

The chart shows how the investment strategy has changed over the last 12 months.

Reminder to be wary of pension scamsThere has been a dramatic rise in pension scams in recent years. If you are considering taking a transfer or a lump sum from your pension to invest somewhere else, please be aware that scammers may operate in these markets.

Never be pressured into making a decision – a lifetime’s savings can be lost very quickly and you may also incur substantial tax charges. For more information on pension scams, visit the Pensions Regulator website (http://thepensionsregulator.gov.uk/individuals/dangers-of-pension-scams.aspx) where there are tips on how to recognise and protect yourself from scams.

Investment TermsEquity: Equity funds invest in company shares. The fund shares in the profits and bears the losses incurred by the company.

Corporate bonds: Corporate bond funds loan money to companies in return for interest income.

Gilts: Gilts are bonds that are issued by the government. Interest income may be fixed or linked to inflation. Gilts can be purchased through pooled funds or direct in a bespoke arrangement.

Liability hedging strategy: A liability hedging strategy aims to create an asset portfolio which behaves in a similar way to the Scheme’s liabilities to reduce volatility in the Scheme’s funding position. For example as interest rates and inflation change the assets match the liability movement so the funding position stays stable.

Structured equity policy: A structured equity policy uses financial instruments called derivatives to provide some protection against falls in equity markets. The protection is paid for by giving up the potential to benefit from “extreme” upside, should equity markets deliver very strong returns (above 10% a year).

Equity 48%

Pooled Gilts 20%

Corporate Bonds 15%

Insurance Policy 17%

Equity 41%

Insurance Policy 17%

Structured Equity 21%

Bespoke Gilts 21%

Liability Hedge

Initial asset strategy New asset strategy

Change in advisor and administrators

During the year the Trustee has appointed Lane Clark & Peacock LLP (LCP) as trustee secretary, actuarial advisors and administrators to the Scheme. The pensions administration will transition from Mercer to LCP with effect from 1 September 2017. LCP will be taking over pensioner payroll responsibilities with effect from October 2017.

As part of the change we expect to be able to provide increased access to information. There will be a website that provides information about the Scheme and will enable you to access your personal data and benefit illustrations online. Further details of this will be provided later in the year.