PENSIONWATCHMay 2018GATWICK AIRPORT PENSION PLAN (GAPP) NEWSLETTER

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Gatwick Airport Limited

Gatwick Airport Identity

Pension Plan_REVERSE

Steve R

24.09.10

Mark Tosey

Hamish Campbell

Simon Gore

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Welcome to PENSIONWATCH

Welcome to the latest edition of the Gatwick Airport Pension Plan newsletter.

Welcome to the latest edition of the Gatwick Airport Pension Plan newsletter.

I am pleased to introduce you to this update from the Plan Trustee. In the following pages you will find the latest information about the Plan and changes in the pensions world.

At the end of last year we completed the full valuation of the Plan, and agreed the level of contributions required to support the Plan.

Elsewhere in the UK, pensions continue to hit the news headlines, with the Carillion pension scheme likely to fall into the Pension Protection Fund as its sponsor, construction company Carillion, entered into liquidation. I want to remind you that the Plan continues to be backed by a strong employer,

providing comfort that your benefits earned in the Plan remain secure.

You can see an update on the Plan’s financial position and the results of the recent valuation on page 7.

From May 2018 new data protection regulation called the General Data Protection Regulations came into force. While many aspects of the GDPR are similar to the current rules, it strengthens the law and introduces a number of new protections. Further information on this and other topical issues for the Plan are set out on page 4.

Lastly, I am pleased to let you know that Clare Taylforth has taken on the role of the new Trustee Secretary for the Plan, and we look forward to working with her in the future.

As always, we hope you find this newsletter helpful and interesting. We are keen to get any feedback or any ideas for content in future issues.

We have recently launched an updated website for Plan members, which we recommend you visit. On the website, you can find a copy of this newsletter, and other information about the Plan: http://gapp.lcp.uk.com.

Please do let us have your comments and ideas on both the newsletter and the website using the contact details on the back page.

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Robert HergaChair of Trustee

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YOUR TRUSTEES AND ADVISERS

Current directors

Company-nominatedRobert HergaChair General Counsel

Paul InstoneHead of Finance Operations

Simon Baker Head of Finance

Member-nominatedChris KnowlesFire Service Station Manager

Andy GiannottiScheduler Integrator

Susan Blore Airport Security Officer

Current advisers

James Atherton FIA Scheme Actuary

Lane Clark & Peacock LLPActuarial and investment advisers

Travers Smith LLP Legal advisers

BDO LLPAuditor

Legal & General Investment Management Investment manager

BlackRock Investment Management (UK) Limited Investment manager

Capital InternationalInvestment manager

Insight Investment Management Investment manager

Ruffer LLP Investment manager

Alcentra Ltd Investment manager

GreenOak Real Estate Advisors LLP Investment manager

Lane Clark & Peacock LLP Administrators

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Trust Deed and RulesFollowing the benefit changes to the Plan made last year, the Trustee and the Company have been preparing an amended Trust Deed and Rules for the Plan, which reflect the changes to the benefit redesign.

Data protection changes – “GDPR”In order to administer the Plan, we as the Trustees, our advisers and administrators need access to personal details about you and your dependants.

You may have heard about some changes to the data protection regime. These changes were introduced by the General Data Protection Regulation (GDPR) in May 2018. The Trustee takes data protection seriously and is committed to protecting your personal information. To that end, the Trustee has been working with its advisers to prepare for the GDPR and have provided a copy of our updated privacy notice explaining the processes and measures in place to protect your personal data in accordance with the new laws.

New member websiteWe are pleased to announce the launch of our new website earlier this month. As you’ll be able to see the new website gives you much more insight into your Plan benefits and other useful information. The website is also able to quickly obtain illustrative transfer value quotations as well as early and late retirement illustrations.

We encourage you to log-on to the website at https://gapp.lcp.uk.com/ with the personal log-in details you recently received and test out the new features for yourself. We hope that this website will be of great benefit to you, and are keen to hear if you have any feedback, positive or negative, so we can make sure it continues to be useful to you. To do this, please get in touch with GatwickAdmin@lcp.uk.com with any feedback.

PLAN NEWS

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MembershipOver the past fourteen months the number of members being paid a pension from the Plan has continued to grow. Following the member consultation, many members chose to stop earning further benefits in the Plan as of 28 February 2017. As a result they became deferred pensioners, who are not building up any further benefits in the Plan, but will be entitled to a pension from the Plan when they retire. There are now only 44 members still earning benefits in the Plan, as shown in the chart below:

Members still accruing benefits

Deferred pensioners

Pensioners

Benefit statements will be sent earlier this year If you are still building up benefits in the Plan, we will shortly be issuing your annual benefits statement for 2018. This is a little earlier than in previous years, but the content of them is exactly the same. As with your previous annual statements, please read this, and check the information at the top is correct.

As a member of the Plan, it is important that you keep us up to date with any changes of contact details or changes in your beneficiaries. To do this, please visit the website or contact the Plan’s administrators, whose details are at the back of this newsletter.

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INVESTMENT UPDATE

Returns over the year across the “return seeking” asset classes were positive, with some measures of market volatility hitting all time lows. Strong returns on the Plan’s invested assets, alongside contributions from Gatwick Airport and Plan members, continued to increase the value of the Plan’s assets.

� Following the UK’s vote to leave the EU, the Bank of England responded by cutting interest rates to even lower levels in order to support the economy, compounding an already significant fall in the value of sterling. This meant that both sterling and the Bank of England base rate started 2017 at near record lows. This had the effect of boosting UK inflation levels, which, along with more robust than expected economic growth helped build expectations of a rate rise in late 2017. This rate rise materialised in November 2017.

� Global developed market equities reached all new highs over 2017. UK equities mostly shrugged off Brexit implications and performed strongly against a backdrop of rising commodity prices and strengthening global economic growth. US equities continued their positive performance of recent years, following President Trump’s envisaged tax cuts and fiscal policy changes.

� Emerging markets equities performed strongly over the year, with commodity-exporting economies benefiting from a strengthening oil price and weaker US dollar. The Eurozone’s economic recovery also appeared to gather pace as it managed to shrug off fears that it would struggle in a post-Brexit world.

LDI Portfolio (Insight)* 20%

UK equities (L&G) 12.5%

Overseas equities (L&G) 12.5%

DGF (BlackRock) 17.5%

DGF (Ruffer) 17.5%

Private credit (Alcentra) 5%

Private credit (GreenOak) 5%

EMMAF (Capital) 10%

20%

12.5%

12.5%17.5%

17.5%

5%5%

10%

Although global growth continued to gradually improve over the year to 30 September 2017, it was politics that took centre stage as a material driver of asset performance.

Investment StrategyThe current investment strategy is summarised in the pie-chart right. The Trustee keeps the Plan’s investment strategy under regular review to ensure that it continues to meet the desired balance between risk and expected returns. The strategy is unchanged over the last year.

*The LDI Portfolio consists of holdings in an LDI fund and a cash fund both held with Insight.

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How did the Plan perform over the year?The annual performance of each of the Plan’s investments after the deduction of fees, as at 30 September 2017, is shown in the table below. Mandate One year performance

to 30 September 2017 %LDI portfolio (Insight)*

LDI fund -17.7*Liquidity fund 0.7

UK equities (L&G) 12.3Overseas equities (L&G) 15.6DGF (BlackRock) 5.0DGF (Ruffer) 0.5Private credit (Alcentra) 3.9EMMAF (Capital) 9.3Total Plan 3.5Composite Plan Benchmark

3.2

Performance figures for GreenOak’s private credit fund are not shown as at 30 September 2017. This is because the Plan has been invested for less than one year.

The performance figures above illustrate positive performance for the Plan’s return seeking investments over the year to 30 September 2017. Overall, global equities saw strong returns over the year as rising US growth expectations helped to persuade investors to invest more heavily in riskier cyclical assets like equities. UK equities also performed strongly, albeit behind global equities due to some concerns remaining around the future of the UK post-Brexit.

The Plan’s emerging market multi-asset fund (‘EMMAF’) which allocates to emerging market bonds alongside emerging market equities to dampen volatility and diversify returns, performed well over the period.

The Diversified Growth Funds (“DGFs”) both produced positive returns over the period. BlackRock’s DGF, which returned 5%, was the better performer of the two, in contrast to last year when Ruffer was the better performer.

The Plan is invested in an asset class called Liability Driven Investment (“LDI”) which is designed to mirror the performance of the Plan’s target level of assets.

The reason we do this is to give the Plan protection when the target level of assets increases due to changes in financial conditions. As you will be able to see on the next page, over the year to 30 September 2017 the Plan experienced an improvement in the funding position. This was partly because the target level of assets reduced following a rise in interest rates. So as we would expect, the LDI portfolio reduced in a similar way over the year which detracted from the Plan’s performance.

SNAPSHOT OF PLAN PERFORMANCEOverall, the Plan’s assets produced positive returns of 3.5% over the year, outperforming the composite benchmark by 0.3%.

How is the Plan invested?The Plan’s assets are spread across the asset classes shown. The LDI portfolio forms the “low risk” part of the portfolio and aims to protect the portfolio if interest rates fall or remain at the same level. Within the LDI portfolio, the Trustee has increased the level of the Plan’s protection over the year, by moving funds from the liquidity fund to the LDI fund.

There is an allocation to equities to allow the Plan to benefit from the higher potential return expected from equities over the longer-term. However, equity markets tend to be relatively more volatile and higher-risk compared to most other assets. Therefore, the Plan also invests in diversified growth funds, private credit funds and the emerging market multi-asset fund.

Investing in diversified growth funds is one way for the Plan to reduce its reliance on the equity markets, whilst still seeking a higher investment return than liability driven investment. The diversified growth managers are allowed to invest in a wide range of assets (such as equities, bonds and commodities), and switch quickly between these asset classes to take advantage of market conditions as they change.

Private credit is the provision of loans to companies by institutions such as pension schemes. It aims to capitalise on the changed regulatory environment which has led to a gap between traditional lenders such as banks and companies (traditionally small and medium sized) that need to borrow money. The £30m committed by the Plan is gradually invested with the managers (Alcentra and GreenOak) over time as attractive investment opportunities become available. As at 30 September 2017, £9.7m and £2.2m of the Plan’s committed capital had been drawdown by Alcentra and GreenOak respectively.

INVESTMENT UPDATE (CONT’D)

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The Trustee of the Gatwick Airport Pension Plan regularly produces a Summary Funding Statement, like this one, to give you an update on the Plan’s funding position.

We use independent advisers to help us to monitor the Plan’s finances, and this statement summarises the results of the recently completed actuarial valuation of the Plan as at 30 September 2016, and provides you with a snapshot of the Plan on 30 September 2017.

The valuation as at 30 September 2016 showed a funding shortfall of £54m. However the position at 30 September 2017 had improved to a shortfall of £30m. This is largely due to rising interest rates over the year and better than expected asset returns.

The Plan’s financial position has therefore improved by £24m over the year since the valuation.

RESULTS OF THE ACTUARIAL VALUATIONAt 30 September 2016

Target level of assets: £468mActual assets were £54m lower than this

SUMMARY FUNDING STATEMENT

A SNAPSHOT OF THE PLANOn 30 September 2017

Target level of assets: £451mActual assets were £30m lower than this

414 421468 451

54 30

-£100m

£0m

£100m

£200m

£300m

£400m

£500m

30 September 2016 30 September 2017

£m

Actual assets Target level of assets Shortfall

We expect that the funding position of the Plan will fluctuate over time as financial and investment market conditions change. So long as Gatwick Airport pays the necessary contributions to make good any shortfall that may arise, this will not prevent benefits being paid in full. We monitor the funding position over time, and as you will be able to see from the chart up to 30 April 2018 the position has improved further.

-70

-60

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30 Sep 2016 31 Mar 2017 30 Sep 2017 31 Mar 2018

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Your questions answeredWhat if the Plan has to wind-up?The Company and the Trustee do not intend to wind up the Plan. However, we do monitor the expected position of the Plan in the event of a wind-up. In this case, responsibility for paying members’ pension benefits would be transferred to an insurance company.

The most recent estimate provided by our independent advisers looked at the position on 30 September 2016. This estimate showed that the Company would have had to make an additional contribution of about £650m to make sure all members’ pensions could be paid in full by an insurance company. This is larger than the shortfall shown above, as is common amongst similar UK pension schemes, and reflects the very cautious view taken by insurance companies, since, unlike the Trustee, an insurance company would not be able to request additional contributions from the Company if investment returns turned out not to be as high as expected.

This would only have an impact on members in the extreme event that the Company became insolvent and could not afford to pay the required contribution

Is my pension protected?The Government has set up the Pension Protection Fund which provides pension scheme members with added security should their employer become insolvent and unable to pay for the benefits to be secured with an insurance company. If the Plan were to enter the Pension Protection Fund, the amount members receive may be less than the pension benefits built up for them in the Plan. The Pension Protection Fund’s rules are complex. The amount it would 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 Pension Protection Fund is available at pensionprotectionfund.org.uk or by contacting the Pension Protection Fund, Renaissance, 12 Dingwall Road, Croydon, Surrey, CR0 2NA (tel 0845 600 2541, email: information@ppf.gsi.gov.uk).

When will I receive further updates?We will continue to monitor the position closely over the coming years and update you regularly as to progress against our funding target. In particular, we will send you Summary Funding Statements on a regular basis.

Is there anything else I need to know?Regulations require us to confirm to you that the employer has not taken any money out of the Plan in the last 12 months and that the Pensions Regulator has not intervened to modify the Plan Rules or impose a Schedule of Contributions. We can confirm that none of these events has occurred.

How much does the Company contribute to the Plan?Following the assessment of the funding position as at 30 September 2016, it was agreed that the Company would pay £15m per year until 2021 to repair the shortfall.

In addition the Company will contribute 16.5% pa of pensionable salaries each year. The expectation is that, based on prudent assumptions, this will provide enough money each year, when added to members’ contributions, to pay for all of the Plan’s benefits that are earned each year.

Whether any changes are needed to contributions will be considered following the next formal assessment of the funding position, due as at 30 September 2019.

AssumptionsThe Trustee employs an independent expert, the Scheme Actuary, to provide regular checks on the Plan’s finances. These regular check-ups involve calculating a target level of assets.

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

However, 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 Plan’s investments, amongst other factors. The Company stands behind the Plan and is obliged to ensure that ultimately the Plan can pay all members’ benefits.

Assets of the PlanThe assets of the Plan come from contributions paid by members and by the Company, together with investment growth. The assets of the Plan are held separately from the Company and the Plan’s Trustee is responsible for investing this money, after taking professional advice. The assets are held in a common fund – they are not held in separate pots for each member. Pensions are paid to retired members out of this common fund.

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How the Plan uses your personal dataIn order to administer the Plan, we as the Trustees, our advisers and administrators need access to personal details about you and your dependants.

Attached to this newsletter you will find a Privacy Notice letter which gives you more information about the personal data that the Plan holds to administer your benefits and how we use it.

We have set out below some key questions you might have on how we use your data.

What do you mean by personal data?This broad term encompasses information that is personal to you by which you could be identified, for example:

� Name

� Contact details

� Details about your dependants

� Pension details

Why do you need to have this data?We only need personal details to administer your benefits in the Plan in line with our legal and professional obligations. With this personal data we are able to calculate your pension accurately and deal with the necessary enquiries.

How do you obtain my personal data?There are a number of different ways we might obtain your personal data, for example it might be provided by:

� By you

� Gatwick Airport Limited, or any other relevant employers

� HM Revenue & Customs (HMRC)

� A tracing agency who may use a range of sources such as the electoral roll

Who do you share my data with?Your personal data is shared amongst the Trustee, the Scheme Actuary, and the Plan’s. administrators. It may also be necessary to share the information with other advisers such as legal advisers, investment advisers, auditors and accountants etc.

Where can I find out more?In the Privacy Notice letter you will be able to find more information on the type of information collected, how it is used and who it is shared with.

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CONTACT US

If you have any questions about your benefits in the Plan or for general information about the Plan then please contact the pensions team at LCP on:

Gatwick Airport PensionsLane Clark & Peacock LLP95 Wigmore StreetLondonW1U 1DQ

020 7432 0635

GatwickAdmin@lcp.uk.com

Or visit the Plan’s website:

http://gapp.lcp.uk.com/

For any queries relating to payroll deductions, please contact MyHR on:

0800 1114501

You can find information on choosing a financial adviser at:

https://www.moneyadviceservice.org.uk/en/articles/choosing-a-financial-adviser

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19112

Gatwick Airport Limited

Gatwick Airport Identity

Pension Plan_REVERSE

Steve R

24.09.10

Mark Tosey

Hamish Campbell

Simon Gore

Mac Illustrator CS3

—

—

Outlined

100%

INFO