USEFUL NUMBERS

If you have any queries about your pension benefit, please contactGroup Pensions Department

For Healthcare queries Income tax queries contact contact BUPA helpline Inland Revenue directon: 0845 606 6715 on: 0845 302 1462

Group Pensions Department, Pilkington Group Limited, Prescot Road, St Helens, Merseyside WA10 3TT

Telephone: (01744) 692596Fax: (01744) 737336 Email: pensions.administration@pilkington.com

The PSS is not, and cannotbe, immune from the effectsof this. Asset values have

fallen since December 2007 and,as a result, our funding levelcompared with our liabilitiescalculated on an actuarial basishas fallen below 100%.

The Trustee and the Companyare keeping the position underconstant review. The PSS is a long-term scheme, it has substantialassets and the payment of pensionsis not affected by this situation.

It is worth remembering that thePSS is now a ‘balance of cost’scheme, following the PensionsAct 2004, which means that theCompany stands fully behind theScheme.

The next formal triennialvaluation of the Scheme is due asat 31 December 2008. Followingthis valuation, if the funding levelremains below 100%, the Trusteeand the Company will agree on thesteps to be taken to restore it to100%.

It was disappointing for theTrustee to be told by the SchemeActuary for a second successiveyear that only the statutoryincreases to post 1997 pension in

payment could be granted in 2008.The Trustee was mindful of thedifficulty this would create formany of the PSS pensioners wheninflation is running at the levels itis – particularly in respect of powerand food. However the Trustee hasno discretion in this matter andmust follow the guidance from theScheme Actuary, whose advice hasbeen borne out by events.

The Trustee and the Companyhave each taken legal advice fromleading counsel during the courseof the last year to clarify one of theprovisions of the Trust Deed. It isthe clause which relates to thegranting of pension increases onpre 1997 pensions in payment. Ican now confirm that the agreedposition is that, in the event that anincrease at the full RPI rate cannotbe afforded by the Scheme, if theScheme Actuary is of the view thata lower percentage rise could begranted, then the Trustee mayaward such lower level of increase.Whilst this was not possible in2008 there may be times when itcould allow some increase to begranted where otherwise nonecould have applied.

The Trustee continues tomonitor the financial well-being of the sponsoring company,

Pilkington Group Limited, and itssubsidiaries through meetings withthe Finance Director and seniormanagement and the presentationof the Company’s results to theTrustee Board. The Trustee alsoinstructs PricewaterhouseCoopers(‘PwC’) to undertake anindependent review of the financialstrength of the Company on anannual basis. The Company hasdisclosed information to PwC inorder for full consideration of thestrength of its covenant to beundertaken by PwC. By ‘strengthof the Employer Covenant’ wemean the ability of the Company tofulfil its obligations to the Scheme.The PwC report highlighted areasof relative strength and weaknessto the Trustee but overall advisedthe Trustee that the Companyremains a good covenant on a firmfoundation.

The Trustee and in particular itsInvestment Committee, with theguidance of its advisers, willcontinue to monitor the Fund andthe economic markets and be readyto take appropriate action, if any,from time to time. I hope that bythe time I next write to youthe economic and financialenvironment will have settled downand some recovery will be in sight.

says Chairman Andrew Robb

MEMBERSHIP31 Dec 2006 31 Dec 2007

ACTIVE MEMBERS2593 2428

DEFERRED3333 3303

PENSIONERS/SPOUSES11860 11799

As you will all know this year’s turmoil in financial markets, particularly in the last three months, has beenunprecedented in recent times. As I write this in mid October world markets have suffered their largest falls for avery long time but Governments have announced a coordinated series of support measures designed to protect thebanking system and restore some stability.

UNPRECEDENTEDTURMOIL INFINANCIALMARKETS

WHERE ARE YOU?Please let us know if you change your address.Otherwise it is very difficult for us to contactyou and you risk missing information from uswhich could be important and potentially costlyto you.

We need written confirmation of change ofdetails but you can write to the address on thispage or forms are available to download onwww.superpilk.com

WHERE IS GROUPPENSIONS DEPARTMENT?You may have heard that some of the peoplewho currently work at the Head Office site onPrescot Road are due to relocate to Lathom atthe end of the year. Group PensionsDepartment, along with several otherdepartments, will remain at Prescot Road andin its current office on the 10th floor of theTower building. Our contact details remain the same.

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THE TRUSTEE BOARDThe Pilkington Superannuation Scheme is operated and managed by the Corporate Trustee –PILKINGTON BROTHERS SUPERANNUATION TRUSTEE LIMITED. This one Trustee is represented by itsBoard which can comprise up to 24 Directors. There are currently 22 Directors – one vacancy in theEmployer-nominated Directors and one in the Employee Member Nominated Directors.

As at 1 October 2008 the Directors of the Trustee were:-

Pilkington Brothers Superannuation Trustee Limited, Group Pensions Department, Prescot Road, St. Helens, Merseyside WA10 3TT Tel. (01744) 692980 Fax. (01744) 737336

Note: ‘E/ee’ denotes the Director is directly elected for a fixed term by the PSS members (where the abbreviationis ‘E/ee P’ by the pensioners)

* denotes the Director is in receipt of a PSS pension.

AdvisersThe Board of the Trustee has appointed the following advisers to support its work inadministering and managing the PSS:-

Scheme Actuary: Ian Watson (FIA) of Hewitt Associates Ltd.

Investment Consultant: Watson Wyatt Limited

Auditors: PricewaterhouseCoopers LLP

Lawyers: Lovells LLP

Bankers: National Westminster Bank plc

Investment Managers: State Street Global Advisers Ltd.UOB Global Strategies Fund plcRogge Global Partners plcPIMCO Europe LimitedGoldman Sachs Asset Management InternationalNomura Asset Management (UK) Ltd.

Custodian: JP Morgan Chase

DECLARATIONSIn addition to pension payable during a member’s retirement, it may be thecase that there are benefits payable on a member’s death. ‘Declaration ofWish’ forms are available from Group Pensions Department or on-line atwww.superpilk.com.

The Declaration does not bind the Trustee but it does enable the Trustee totake your wishes into account after your death when disposing of any deathbenefits.

If you are unsure about whether you have made a declaration or in whosefavour it is then simply send us another form and this will replace anyexisting one.

Circumstances change as life progresses and it is important that you keepyour declaration up to date so your wishes are clear if the occasion ariseswhen the Trustee has to have regard to the form.

2 REFLECTIONS The Pilkington Superannuation Scheme

Mr. A.M. Robb (Chairman)

Mr. R. Abbott, Greengate (E/ee)

Mr. S.J. Beesley* (E/ee P)

Mr. A. Cunliffe, Cowley Hill (E/ee)

Mr. D. Corf* (E/ee P)

Mr. P. Daley Head Office (E/ee)

Mr. P.R. Edholm Automotive, Lathom (E/ee)

Mr. S.M. Gange

Mr. D.P. Gilchrist, Automotive,

Lathom (E/ee)

Mr. J.K. Gillespie*

Mr. P.H. Grunwell*

Secretary: Miss J.P. Halligan

Mr. T. R.B. Hague Automotive, Lathom (E/ee)

Mr. R.P. Hemingway

Mr. T.R.J. Izzett

Mr. B.J. Kay

Miss A. M. Kelleher

The Law Debenture Pension TrustCorporation plc

Mrs. J. Mafi, PRSL (E/ee)

Mr. J. McKenna*

Mr. K. McKenna Automotive, KingsNorton (E/ee)

Mr. G. Nightingale*

Mrs. C. Wakefield Head Office (E/ee)

22001100Just another year – another year older certainly, and

wiser? Possibly! Certainly it is another year when

there will be a significant change in the world of

pensions. Currently an individual is allowed to draw

his/her pension at age 50 subject to the provisions

of the particular scheme allowing this. PSS does

allow an individual who has reached age 50 to

retire and draw the pension provided the Company

consents to the early retirement.

The law is changing this position after 5 April 2010. Regardless of scheme rules

an individual will not be able to draw an occupational pension until age 55.

The Company has written to all active and deferred members to explain the

position and it is only people born between April 1955 and April 1960 who

might be affected. That is to say, anybody who is 50 years old but who has not

reached age 55 by 5 April 2010 must either retire at 5 April 2010 or they will be

unable to draw their pension until age 55 which could be almost 5 years away.

Similarly a deferred pension could not be put into payment after 5 April 2010

until the recipient attains age 55.

Whilst there will not be too many people who have to exercise a choice, there

are quite a number of members who are simply looking at 5 years longer to

retirement because, not having reached age 50 at 5 April 2010, they cannot

apply for early retirement until they reach age 55.

FINANCIAL ADVICEAs you are aware, financial advisers haveto undergo specific training and they mustregister themselves with the FinancialServices Authority (FSA) in order to beauthorised to provide financial advice toindividuals. None of the Trustee Directorsnor anyone in Group Pensions Departmentis authorised in this way and so cannotprovide financial advice.

Should you wish to locate an independentfinancial adviser, the FSA website has alinked site at www.unbiased.com whichcan help you locate someone in your areawho is qualified to help you.

The life of a Trustee Director is not always ahappy one. Many people seem to think that it isa question of turning up for a free lunch a fewtimes a year. Nothing could be further from thetruth. There is, as it is said, no such thing as afree lunch. Nowhere is that more so than in thecase of the Trustee Director.

There are at least 5 Board meetings eachyear and most Directors serve on at least one ofthe Trustee’s Committees. The InvestmentCommittee as an example will have met 6times in 2008. Prior to the meetings – Board orCommittee – there are papers to consider. Theseusually run to about 100 pages for a Board or50ish for a Committee and much of this caninvolve technical issues.

For this reason, and because the PensionsRegulator requires Trustees/Trustee Directors toachieve a certain level of knowledge andunderstanding about pensions law, regulation,valuation, investments and other associated

issues, the Trustee Directors receive trainingfrom the Scheme’s advisers on a regular basisusually for a few hours before the BoardMeeting. This ensures that all the Directorsreceive the training in all the necessary areas –not just those with which they are directlyinvolved. This makes sure they are able to makethe decisions necessary, being informed aboutthe impact on all the classes of membershipand from a position of understanding theinformation being given to them. This soundsbasic but given the technical nature of actuarialvaluation procedure and reports, and theintricacies and jargon involved in investmentmanagement, there are areas where hours oftraining are given with continuous updating inorder to ensure the Directors are adequatelyprepared to look after all our interests.

The Directors expend a great deal of timeand energy on our behalf – we shouldappreciate them perhaps more than we do.

INCREASESThe issue of how increases to pensions in payment operate was covered in lastyear’s Reflections but the questions on the subject which continue to be askeddemonstrate that the subject is still perhaps not fully understood by members. Themain point is that pension accrued in respect of service before April 1997 does notautomatically receive an increase when it is in payment. Any increase to thisportion of pension depends on whether the Scheme Actuary believes the Fund canafford to award an increase and the consequential increase in liabilities.

Until 2003, an increase had always been awarded to this part of pension. Anincrease could not be afforded in 2003 or 2005 but these missed increases wereimplemented from July 2006. However, in each of 2007 and 2008 the Actuary hasdecided that the Fund was not sufficiently strong to grant an increase.

Pension accrued after April 1997 receives an increase each year whether or notpre ’97 pension rises. The increase is RPI up to 5% for pension accrued betweenApril 1997 and April 2005 and RPI up to 2.5% for pension accrual after April2005.

These statutory increases operate to ensure this later-accrued pension receivesan increase. These limits would not operate to reduce the level of increase awardedgenerally. The limit applies only when there is no general increase to pre-97pension.

TRUSTEE TRAINING

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The asset allocation and target returnsare set out in the Statement ofInvestment Principles (available onwww.superpilk.com). The actualreturns for 2007 at an overall Schemelevel are set out below. Certainmeasures have been taken since theend of 2007 to change the allocationof assets although the overall 50%return seeking:50% liability matchingsplit has been retained.

The overall return (i.e. net capitalappreciation plus income) for theScheme for 2007 was 6.2% againstthe benchmark return of 6.9%, asreported by WM PerformanceServices. During the year the RPI roseby 4.0% (per WM).

For the 5 years to December 2007 theannualised return on Schemeinvestments was 10.6% per annum(per WM) against a benchmark of10.8% per annum. Over the sameperiod retail price inflation was 3.4%per annum.

In 2007, the assets managed by SSgAin the passive index tracker bondfunds returned index performance asanticipated. The equity funds held bySSgA and managed on an enhancedindex basis performed slightly belowtarget so the overall return from SSgAwas 6.1% (per WM) against abenchmark of 6.6%.

Nomura’s performance was underclose scrutiny for the whole year andconsideration was given to alternativeoptions to gain exposure to equities inthe Asia Pacific region includingJapan. Ultimately, it was decided toretain Nomura to manage equities inthis region and the relativeperformance in the latter part of theyear showed an improvement. Theoverall performance, however,remains behind benchmark for theyear 2007 at 14.5% (per WM) againsta benchmark of 15%. Over the threeyears to December 2007, theperformance was 18.6% pa (per WM)versus a benchmark of 17.3% pa.Performance remains disappointinglybehind the target outperformanceobjective and continues to bereviewed regularly by the InvestmentCommittee.

It was agreed with PIMCO during2007 that the Sche me’s portfoliowould be used as the basis for apooled fund which, once established,would be available to third partiesseeking such a vehicle instead of asegregated investment. PIMCO’sperformance over the year 2007 wasbehind benchmark at 0.2% (per WM)against the 1.9% benchmark.Rogge, whose mandate began slightlyearlier than that of PIMCO and who

are still running a segregated mandatefor the Scheme, returned an annualperformance for 2007 of 2.9% (perWM) ahead of the 1.9% benchmark.

GSAM managed an active currencyoverlay for the Scheme. Throughout2007 this was a blended approachbeing half in the Fundamental Fundand half in the Strategic (iequantitative) Fund. Overall, theFundamental Fund performedreasonably well over the year but theaggregate return of the overlay wasvery disappointing due to the lossessustained by the Strategic Fund. Sincethe end of 2007, the InvestmentCommittee has reviewed theperformance and has decided toconsolidate the whole investment inthe Fundamental Fund. Hence themoney previously held in theStrategic Fund has been moved to the

Fundamental Fund. The portfolio in2007 returned -13.2% against abenchmark of 3.7%.

UOB returned significantly ahead ofits benchmark again in 2007 at 17.2%against a benchmark of 10%. Monieswere rebalanced back from UOB inlate 2007 as it had accumulatedbeyond the permitted deviation fromits allocation of 6% of the Scheme. Ineffect this locked in some £7m of gainon this investment since late 2005.

RebalancingDuring the year £17m wastransferred from SSgA to Nomuradue to a change in asset allocationfrom UK equities to overseasequities. £26m was transferred outof UOB to bring the Fund back tobenchmark. This money wastransferred to SSgA (£13m), Nomura(£7m) and the PIMCO Pooled Fund (£6m).

Relative Performance

The Scheme’s investment performance during the year was adversely affected bythe poor performance of the GSAM quantitative fund.

The Pilkington Superannuation Scheme REFLECTIONS 3

EXTRACT FROM INVESTMENT REPORT

The Pensions Regulator (‘TPR’) plays amajor role in the regulation of pensionschemes in the UK. He providessignificant protection for members byraising the standards of administration,governance and trustee knowledge andunderstanding as well as obliging Trusteesand Employers to ensure he is informed ofevents which could have an impact on ascheme.

There are many aspects of running a pensionscheme in which TPR is or may becomeinvolved. There is a duty on the Trustees, theAdministrator (which in the case of PSS isthe Company through Group PensionsDepartment), and the Advisers to theScheme – the actuary; lawyers; auditors – allto report to TPR a number of aspectsconnected with the scheme.

There is a duty on the Trustee to give TPRnotice of what are described as notifiableevents. These are not breaches of the law,which must in any event be reported to TPR,but are incidents or situations which maylead to concerns over the impact of the eventon the funding position of the scheme or theability of the employer to meet itsobligations to the scheme. Certain events arealways notifiable but others are so only ifthe scheme is underfunded.

The Trustee must notify TPR in all caseswhen it takes a decision to seek tocompromise a debt owed to the scheme or ifthe Trustee was to decide to grant an

augmentation or increase to any pensionseither without any additional fundingadvised by the Actuary or without consultingthe Actuary. Where a scheme is‘underfunded’ (where underfunded isdefined as being below 100% of the PPFfunding level or where there has been amaterial breach of the Schedule ofContributions) the Trustee must report thefollowing instances:-

(i) Two or more changes to the SchemeActuary or the scheme Auditor(including one change of each) in aperiod of 12 months.

(ii) A decision by the Trustee to make oraccept a transfer payment exceedingthe lower of 5% scheme assets or£1.5m.

(iii) A decision by the Trustee to grantbenefits (or a right to benefits) to amember at cost exceeding the lowerof 5% of scheme assets or £1.5m.

There are time limits in which the reportshould be made and very specificrequirements for what information must bedisclosed. Penalties apply where the duty toreport is not fulfilled. Consequently, thisduty, together with the duty to reportbreaches of the law provide additionalsafeguards to members that the Fund isbeing managed appropriately and correctlyin accordance with the Trust Deed and Rulesand legal requirements.

2003 2004 2005 2006 2007 3yrs 5yrs

% % % % % % %

Scheme Annual Return 13.5 9.5 17.5 6.9 6.2 10.1 10.6

Benchmark Annual Return 14.4 9.8 16.9 6.4 6.9 10.0 10.8

THE PENSIONS REGULATOR

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Equities Kinetics6.08%

Equities Nomura10.29%

Equities SSgA28.90%

Bonds Pimco6.19%

Bonds Rogge6.30%

Equities GSAM3.24%

Equities Other0.04%

Bonds SSga38.91%

Cash – internally managed0.05%

The Pilkington Superannuation Scheme REFLECTIONS 4

HOWTHE CASHFLOWS

THIS DIAGRAM, orsomething similar, appearsevery year in ‘Reflections’

to explain to you how the cashflows of the Scheme operate.What has become clear over theSummer of 2008 when pensionshas had a high profile within theCompany, is that even thoughthe diagram is there, it isperhaps not fully understood bythe members. Many peoplethought that the benefitpayments were met in full by thecontributions being made to theScheme by the active membersand the Company. Theillustration shows that this isclearly not so. Totalcontributions during the yearamounted to £20,396,000whereas the benefits paid out inthe form of pensions alone, sonot including the lump sumpayments made to people whocommuted pension atretirement, totalled £62,839,000.So how can this be? You can seethat by far the largest numberon the left-hand side of thediagram is £65,031,000 in respectof the change in the value of theinvestments. In addition to thisthere is a further £11,163,000 ofincome from these investments.So in short around £76 millionpounds worth of income for theScheme. And this is the principleupon which the defined benefitscheme works. Contributionrates for the future arecalculated by the Actuary havingregard to the likely investmentreturn and the length of timethe money will be in the Fundbefore the pension may bedrawn. That is why volatility inthe stock markets and lifeexpectancy are such importantfactors. If the membership livelonger than was assumed by theActuary then the pension has tobe paid for more time andtherefore costs the Scheme morethan was anticipated and morethan had been factored into

previous valuations. If thereturns from investments –either by increases in value orincome e.g. dividends on theinvestments – fall below whathad been expected then, again,this will impact the outcome ofthe valuation.

Contributions are an importantsource of income but as or moreimportant is the growth andincome from the investments ofthe Fund over time.

In practice in PSS the monthlycontributions are used to reducethe amount which has to bewithdrawn from the fund tomeet the monthly payroll. Thisminimises the amount which hasto be liquidated each month andthereby reduces the costs to thefund – buying/selling assetsalways incurs a trading cost.

The market falls since May 2008,and most particularly sinceSeptember 2008 after a positivemonth in August, have had anegative impact on the Fund.The Investment Committee ofthe Trustee with its investmentadvisers are monitoring theScheme constantly and discussingwhat if any actions are needed.The behaviour of the equitymarkets has confirmed the viewswhich have always beenexpressed that equities attract ahigher risk but over time ahigher reward. The markets hadrisen steadily for the last 5 or 6years so the dark days of thebeginning of the 21st Centuryfade from the memory. Recentevents bring this back sharplyinto focus. A pension fundhowever is a long-termarrangement and has to weatherthe economic downturn andposition itself to fare well in theupturns. The Trustee and theCompany are working togetherto achieve this in the current turbulent times.

BREAKDOWN BY MANAGERLIFETIME ALLOWANCE - PROTECTION

The new tax regime was introduced in 2006. It was called ‘Simplification’although it is not entirely clear why this was believed to be an appropriatedescription.

The Government allows an individual to hold benefits in tax-privilegedpensions up to an allowance – The Lifetime Allowance. Anyone who wasalready in receipt of a pension at 6 April 2006. will only be affected if (s)hehas other pension benefits not yet in payment and the combined value of thepension in payment and the undrawn benefit exceeds the Lifetime Allowance.

The Lifetime Allowance at 6.4.06 was £1.5m. This means anyone whosepension was in excess of £75000 pa in 2006 and who still has a pension orpensions which are not yet in payment, should seek advice about whether(s)he can protect the excess against the tax charge on pensions which exceedthe Lifetime Allowance. Anyone whose pension benefits do not reach thissort of figure, which means most people, do not need to worry. The time limitfor seeking protection from HMRC is April 2009.

*Figures are in ‘000’s

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