depth AgustaWestland UK Pension Scheme

November 2014

REPORT & ACCOUNTS

FOR THE PERIOD ENDED 5 APRIL 2014

UK Pension Scheme

Report and Accounts For the year ended 5 April 2014

Trustee's report Investment report

1-9 10 - 14

Statement of Trustee's responsibilities

15

Independent Auditor's report to the Trustee

16

Fund account

17

Net assets statement

18

Notes to the financial statements

19 - 32

Compliance statement

33 - 35

Summary of contributions

36

Statement about contributions

37

Actuarial statements

38 - 39

Report and Accounts For the year ended 5 April 2014

CHAIRMAN'S REVIEW Chairman's Review

I am pleased to present the Report and Accounts for the AgustaWestland UK Pension Scheme (the “Scheme”) for the year ended 5 April 2014. The Trustee board monitors funding of the Scheme on a quarterly basis. The actuary’s 2013 annual report showed the Scheme funding ratio was 82%, which was an improvement on the previous year. We have seen a further improvement since this date and continue to monitor the funding position in preparation for the triennial valuation on 5 April 2014. The Scheme’s investment performance during this period has been good contributing to the improvement in the funding position. The return seeking assets in the portfolio produced a 4.9% return. However, the liability matching portfolio reduced in value, and this has resulted in a negative total portfolio return. However, the liability matching portfolio moves broadly in line with Scheme liabilities, so liabilities fell by a similar amount. Overall, we have seen an improved funding position over the year, with the funding ratio estimated to be 85% at 5 April 2014. This year we were pleased to receive an award for innovation in the 2014 Scheme of the Year Awards organised by Professional Pensions magazine. The award recognises the work, done jointly with the other Finmeccanica UK pension schemes, to introduce and govern our shared defined contribution (AVC) investment strategy and improve the flexibility and efficiency of our AVC arrangements which were launched in September 2013. We were also finalists in the categories for communication, AVC investment strategy and medium sized defined benefit pension scheme. The Trustee is committed to developing communications with the membership. In 2013 we carried out a survey about our communications which shows that the membership view our communications positively. We have built on feedback from the survey and are now offering a series of workshops to the membership which have been very well received. The Scheme website is well used and we continue to develop modelling capabilities and in 2014 hope to offer information about State Pension forecasts alongside our existing modeller. Our Trustee board continues to demonstrate great commitment to the role in the interests of all members. I am grateful to them and our support staff for all their hard work. Unfortunately, this year we have said goodbye to two of our Trustee Directors, Janie Beizsley and Jim Hawke, and I am sure you would like to join me in thanking them for their hard work for the Scheme.

Martin Flavell Chairman of the Trustee

Page 1

Report and Accounts For the year ended 5 April 2014

Trustee and Advisers Scheme

AgustaWestland UK Pension Scheme (registered no: 10260073)

Principal Employer

AgustaWestland Limited

Trustee

AgustaWestland UK Pension Scheme (Trustee) Limited

Trustee Directors

Martin Flavell Caroline Beaumont Janie Beizsley Malcolm Gillam Colin Grindle Jim Hawke Steve Jenkins Steve Pym Richard Smith

Secretary

Kate Webber

Actuary

Chris Vaughan-Williams of Aon Hewitt Limited

Investment Advisers

P-Solve Asset Solutions

Covenant advisors

Ernst & Young LLP

Auditor

Ernst & Young LLP

Solicitors

Burges Salmon LLP

Bankers

National Westminster Bank PLC Bank of Scotland PLC

(Chairman and employer nominee) (employer nominee) (employer nominee) (retired 22 May 2014) (member nominee) (employer nominee) (member nominee) (retired 31 May 2014) (member nominee) (member nominee) (employer nominee)

Page 2

Report and Accounts For the year ended 5 April 2014

Trustee and Advisers (continued) AVC Providers

Old Mutual Wealth Life Assurance Limited (formerly Skandia Life Assurance Company Limited) Prudential Assurance Company Limited The Equitable Life Assurance Society Scottish Widows PLC

Custodian

KAS Bank NV

Investment Manager

P-Solve Investments Limited

Administration services AgustaWestland UK Pension Scheme Lysander Road Box 205 Yeovil BA20 2YB & Aon Hewitt Limited 25 Marsh Street Bristol BS1 4AQ Administration address

AgustaWestland UK Pension Scheme Lysander Road Box 205 Yeovil BA20 2YB Telephone 01935 705353

Page 3

Report and Accounts For the year ended 5 April 2014

Introduction This Report reviews the operations of the Scheme for the year ended 5 April 2014. The Scheme is a defined benefits arrangement which provides pension and life assurance benefits for employees of AgustaWestland companies in the United Kingdom. The accounts have been prepared and audited in accordance with regulations made under section 41(1) and (6) of the Pensions Act 1995. Governance The Rules which govern the Scheme provide for there to be up to nine trustees or a sole corporate trustee. The Scheme has one corporate trustee, called AgustaWestland UK Pension Scheme (Trustee) Limited. The directors of the trustee company are referred to throughout this report as Trustee Directors and the Trustee Board. The Trustee Board is made up of nine Trustee Directors consisting of five Trustee Directors nominated by the Principal Employer (one of which is the Chairman of the Trustee Board) and four nominated by the membership. For valid decisions to be taken a minimum of two employer nominees and two member nominees must be present at Trustee meetings. Decisions require the support of a majority of the Trustee Directors present with the Chairman having a casting vote. During the year, the Trustee Board and its committees met a total of 13 times. Of these meetings, 4 were as a full body and, in addition, the investment committee met 4 times, the administration committee met 4 times, and the newly established joint defined contribution investment committee met once. Attendance averaged 92% at these meetings, with three Trustee Directors achieving 100% attendance. The committees are responsible for matters delegated by the Trustee for detailed work or implementation and drawing up of recommendations. The current members of the Investment Committee are Martin Flavell (chair), Colin Grindle, Steve Pym and Richard Smith (with one vacancy). The current members of the Administration Committee are Martin Flavell (chair), Caroline Beaumont, Malcolm Gillam and Steve Jenkins (with one vacancy). All Trustee Directors are able to attend these committees even if they are not a member. The attendance measure above excludes meetings that a Trustee Director is not expected to attend under this governance practice. The newly formed Joint DC Investment Committee is a joint committee for the AgustaWestland UK Pension Scheme, Finmeccanica FuturePlanner and the Selex Pension Scheme. The purpose of the DC Committee is to review the AVC investment strategy of the AgustaWestland UK Pension Scheme (together with the investment strategy of Finmeccanica FuturePlanner and the defined contribution elements of the Selex Pension Scheme. The committee consists of five trustees of Finmeccanica FuturePlanner, two Trustee Directors of the AgustaWestland UK Pension Scheme and two Trustee Directors of the Selex Pension Scheme. The scheme representatives on this committee are Martin Flavell (chair) and Steve Jenkins. The Trustee produces a business plan for each calendar year which sets out the objectives of the full Trustee and each of the committees. Achievement of the business plan is monitored by the Trustee and the plan for 2013 has been fully actioned. The Trustee has appointed auditors and other external advisers to give advice on legal, actuarial, and investment issues. A list of the advisers can be found on pages 2 and 3 of this Report. Knowledge and understanding The Pensions Act 2004 requires the Trustee Directors to be conversant with key documents and to have knowledge and understanding of areas of importance in pensions. This requirement is being fulfilled through the Trustee Training Policy which provides for induction and ongoing training. Training has been held within meetings and some trustee directors have attended various external courses. The average amount of training per trustee director during the Scheme Year was 20.8 hours. Trustee directors are encouraged to obtain external certification of their knowledge and understanding at a level that is equivalent or better than that implied by the Pensions Regulator’s Trustee Toolkit. All the Trustee Directors have achieved this certification.

Page 4

Report and Accounts For the year ended 5 April 2014

Financial Development The fund at 5 April 2014 was valued at £922 million. This represents a decrease of £25.4 million over the value at the start of the year. Total contributions to the Scheme exceeded benefit payments and expenses by £6.3 million. The Employer paid deficit recovery contributions of £15 million and normal future service contributions of £7.3 million. The members paid ordinary contributions of £0.1 million and the Employer paid £9.6 million on behalf of the members through the salary sacrifice smart option. Members paid AVC contributions of £1 million during the year. Further details can be found on page 25. Benefits payable were marginally lower than last year. Due to a decrease in the number of people retiring, the lump sum retirement benefits were £7.0 million (compared to £8.5 million previously). The increase in pensioners over the year resulted in the pensioner payroll increasing to £19.1 million (previously £17.9 million). Other benefit payments amounted to £0.9 million. Total benefit payments were £27 million. The return on investments was negative £31.7 million (compared to a positive return the previous year of £143 million). Whilst the return seeking assets in the portfolio produced a 4.9% return, the liability matching portfolio reduced in value which resulted in this negative return. The liability matching portfolio moves broadly in line with Scheme liabilities and the funding ratio of the Scheme improved from 82% to an estimated 85%. More information is provided in the Investment Report on pages 10 to 14 . Actuarial valuation The latest formal actuarial valuation of the Scheme was completed as at 5 April 2011. This was the third valuation to be prepared under the Scheme Specific Funding requirements of the Pensions Act 2004. The Trustee has prepared a Statement of Funding Principles that sets out their policy to reach the Scheme’s funding objective. Copies of the Statement are available to members from the Secretary to the Trustee and a copy of the Actuary’s certificate that the Statement conforms to the requirements of the Pensions Act 2004 can be found on pages 37 to 39. The Trustee chose long-term assumptions, based on the advice of the Actuary, which were agreed with the Principal Employer. There were a number of reasons why the valuation was carried out one year early including:   

a desire to bring the valuation dates in line with statutory requirements on the Scheme; a desire to check that future service contribution rates set as part of the 2009 valuation remain appropriate in light of the new Career Salary benefit structure; and a view that bringing the valuation forward would help maintain the stability of the Scheme.

The Actuary finalised his valuation as at 5 April 2011 in his report dated 12 June 2012. The final funding deficit was £117 million and the funding ratio was 85.1%. The cost of the future service after 1 January 2013 payable by the Employer is 6.2% of relevant salary. The Employer also pays, as agreed with the Trustee, contributions to make good the deficit as follows: January 2013 January 2014 January 2015 January 2016 January 2017 January 2018 January 2019 January 2020

£14.1M £15.0M £15.9M £16.8M £17.8M £10.4M £11.1M £11.8M

The Employer pays each calendar year’s future service contributions in advance with an adjustment at the end of the period for any under or over payment based on the actual membership. From 1 January 2013, the Employer will also pay £1.5 million each year for expenses.

Page 5

Report and Accounts For the year ended 5 April 2014

The agreement between the Principal Employer and the Trustee is recorded in a Schedule of Contributions. There is also an agreed Recovery Plan for the deficit dated 12 June 2012 which, on the assumptions made, forecasts that the deficit will be recovered in January 2020, which is eight years after the beginning of the Recovery Plan. A copy of the Actuary’s certification of the Schedule can be found on page 39. The Recovery Plan has been submitted to the Pensions Regulator and all payments due under the Recovery Plan to date have been received. Funding update The Trustee conducted its latest interim review of the valuation position as at 5 April 2013 which showed the deficit was £207.6 million and the funding ratio was 82%. The next formal actuarial valuation of the Scheme is required as at 5 April 2014. This valuation should be completed by 5 July 2015. Employer's covenant In considering the valuation position and investment strategy, the Trustee takes into account the financial strength of the Employer and its ability to meet the contribution rates required. Factors reviewed include the cash resources, profitability and current and anticipated future orders and contracts of the Principal Employer and the commitment to the UK business of the ultimate parent company. The Trustee works with Ernst & Young to provide them with independent advice and assistance in assessing the covenant. The Trustee regularly monitors the covenant to ensure the appropriate support is available for the Scheme. The participating employers of the Scheme are now AgustaWestland Limited (Principal Employer), AgustaWestland Holdings Limited and Aviation Training International Limited. Scheme changes A deed of amendment was entered into on 25 June 2013 which made changes to ensure the Scheme was a Qualifying Scheme for Auto Enrolment purposes. A deed of amendment was entered into on 31 July 2013 which made changes to the Scheme to allow members to pay Additional Voluntary Contributions through the “smart” arrangements. A deed of amendment was entered into on 1 April 2014 which made changes to:   

ensure that the Scheme is compliant with the new Same Sex Marriage legislation i.e. provides the same benefits as are provided to civil partnerships; clarify how benefits are calculated in relation to the death of pensioners who die within 30 months of retirement on an ill health pension; and provide that death benefits of part-time members are calculated based on part-time salary (rather than the full time equivalent)

A new payroll provider was put in place by AgustaWestland Limited with effect from 1 January 2014.

Page 6

Report and Accounts For the year ended 5 April 2014

Scheme Membership Total membership at 5 April 2013

5,029

Active members at 5 April 2013 Less: Adjustment for late notification

2,532 (9) (9)

Less: Retirements Members becoming deferred members Death in service

(35) (21) (4) (60)

Active members at 5 April 2014

2,463

Pensioners at 5 April 2013 Less: Adjustment for late notification

1,421 9 9

New Retirees New pensions to widows/dependants

62 11 73

Less: Deaths

(12) (12)

Pensioners at 5 April 2014

1,491

Deferred members at 5 April 2013 Plus:

1,076

Adjustment for late notification Early leavers with deferred pension

2 21 23

Less: Retirements

(27) (27)

Deferred members at 5 April 2014

1,072

Total membership at 5 April 2014

5,026

Page 7

Report and Accounts

ForReport the yearand ended 5 April 2014 Accounts For the year ended 5 April 2014

Administration Administration Responsibility for certain functions in relation to governance is delegated to AgustaWestland which retains an Responsibility certain functions in relation governance is delegated to AgustaWestland retains an in house team for to support the Trustee and thetoEmployers in relation to pension matters, and towhich provide a point in house to support the Trustee andhas the also Employers in relation pension to provide a point of contactteam for members. The Trustee appointed a thirdtoparty, Aonmatters, Hewitt and Limited, to look after of contact for members.including The Trustee alsoand appointed a third party, The Aonperformance Hewitt Limited, to third look party after member administration, record has keeping benefit calculations. of the member administration, including record keeping and benefit calculations. The performance of the to third party administrator is reviewed regularly by the Trustee. Over the year the performance compared service administrator is Hewitt reviewed regularly by the Trustee. Over the year the performance compared to service standard of Aon Limited was 98.6%. standard of Aon Hewitt Limited was 98.6%. Administrative expenses during the period were £1.2 million. Management fees of £0.4 million were payable to Administrative theHewitt periodLimited were £1.2 million weredepartment payable to to expenses duringAon Management fees of £0.4 were payable the third party expenses administrators, andmillion. AgustaWestland (in relation to themillion pensions the third administrators, Hewitt and (in(inrelation the pensions department at third party party administrators, Aon HewittLimited Limited andAgustaWestland AgustaWestland relationtoto pensions department at Yeovil). Actuarial, legal andAon professional fees associated with the administration of the Scheme amounted to at Yeovil). Actuarial, legal professional fees associated the administration ofScheme the the Scheme amounted to Yeovil). Actuarial, legal andand professional associated withwith the the amounted to £0.3 £0.3 million. However £0.3 million of VATfees paid was reclaimed by administration Scheme. Inofaddition Scheme’s levy for £0.3Pension million. However million of VAT paid was reclaimed the Scheme. addition the Scheme’s levy for million. In addition the £0.3 Scheme’s formillion the Pension Protection Fund was £0.5Inmillion (previously £0.6 the Protection Fund waslevy £0.5 (previously £0.6by million). Insuring the lump sum death in million). service the Pension Protection Fund was £0.5 million (previously £0.6 Insuring the lump sum death A incosts service Insuring lumpcost sum£0.2 death in service benefit to Aviva costAmillion). £0.2 million (previously million). detailed benefit tothe Aviva million (previously £0.3 million). detailed breakdown of £0.3 administration is benefit on to page Aviva cost £0.2 million (previously A detailed breakdown of administration costs is breakdown of administration costs is shown on £0.3 pagemillion). 24. shown 24. shown on page 24. Communication Communication “intouch”, a newsletter for Scheme members, is normally issued by the Trustee twice a year. In 2013 we also “intouch”, newsletter for Scheme is normally issued by the twice a year. In 2013 also issued an aadditional special edition members, in August to explain our changes to Trustee AVCs and salary sacrifice. Wewe issued issued an additional August explainnominated our changes to AVCs and selection salary sacrifice. WeBenefits issued an additional edition special in July edition 2014 toinstart the to member trustee director process. an additionalare edition in July themembers member setting nominated trustee director selectionbuilt process. Statements issued each2014 year to to start active out the amount of pension up so Benefits far and Statements are issued each year to active members setting out the amount of pension built up so far and forecasts at normal retirement age. forecasts at normal retirement age. The Trustee maintains a Scheme website which gives access to information about the Scheme and allows The Trustee maintains Scheme website which access information about the Scheme and allows members access to theirarecords and to model theirgives benefits. Thetoweb address is www.awpensions.co.uk. members access to their records and to model their benefits. The web address is www.awpensions.co.uk. The Trustee carried out a communications survey in May 2013 which showed that the membership viewed the The Trustee carried out a communications May 2013 showed that the membership the Scheme's communications positively. The survey Trusteeinhas built on which this solid foundation and taken stepsviewed to further Scheme's communications positively. Thecourse Trustee built ontothis solid foundation and taken steps to further improve communications. A retirement is has available members nearing retirement and, from May improve communications. A retirement course is available to members. members nearing retirement and, from May 2014, a series of pensions workshops have also been offered to 2014, a series of pensions workshops have also been offered to members. Transfers Transfers Transfer values paid during the year in respect of transfers to other pension schemes have been calculated Transfer values paid during thethe year in respect of transfers to other pension schemes have been calculated and verified in accordance with Pensions Schemes Act 1993. and verified in accordance with the Pensions Schemes Act 1993. Voluntary contributions Voluntary contributions The Additional Voluntary Contribution (AVC) option provides members with an opportunity to make further The Additional Voluntary Contribution option provides with anMembers opportunity make provision for their retirement in addition (AVC) to the benefits providedmembers by the Scheme. cantonow payfurther AVCs provision for their retirement in addition to the benefits provided by the Scheme. Members can now pay AVCs through the salary sacrifice smart option. through the salary sacrifice smart option. From September 2013, the AVC provider is Old Mutual Wealth Life Assurance Limited (formerly Skandia Life Life From September 2013, the AVC provider ischoices Old Mutual Wealth Life Assurance (formerly Skandia Assurance Company Limited). Investment are available in the form of aLimited “Lifestyle” arrangement and a Assurance Limited). Investment choices are the fund form automatically of a “Lifestyle”between arrangement a “Pick & Mix”Company option. The Lifestyle product switches the available members in AVC blend and funds “Pick a& period Mix” option. The Lifestyle product switches the members AVC fund automatically funds over of thirty years before retirement, resulting in it being invested in bonds andbetween cash atblend retirement. over a period of thirty years before retirement, resulting in it being invested in bonds and cash at retirement. The Pick & Mix option allows members to make their own allocations between three blend funds which are The Pickmanaged, & Mix option allows members makebonds, their own between funds which are actively and five passive funds to (equity, gilts,allocations index linked gilts andthree cashblend funds). actively managed, and five passive funds (equity, bonds, gilts, index linked gilts and cash funds). In addition to AVCs, members of the Main section have an option to “buy up” to an accrual rate of 65ths or In addition AVCs, of the Main (from section haveeach an option toofanpensionable accrual rateservice. of 65thsThe or 60ths rathertothan the members standard rate of 67ths 6 April year) to for“buy eachup” year 60ths than standard ratethe of Trustee 67ths (from April each year) for each year of pensionable service. The cost ofrather the buy up the option is set by each6year. cost of the buy up option is set by the Trustee each year. In April 2014, there were 1,030 members using the “buy up” option (43.8% of all members who are eligible to In April 2014, there 1,030paying members using the “buy up” option (43.8% of all members who are eligible to participate) and 275 were members AVCs. participate) and 275 members paying AVCs. Risk management Risk management There is a requirement for the Trustee Board to put in place adequate arrangements and procedures to There is a the requirement for tothe Trustee Board to put into place arrangements and procedures to administer Scheme and monitor those procedures ensureadequate the safe custody and security of the assets administer the Scheme and to monitor those procedures to ensure the safe custody and security of the assets of the Scheme. of the Scheme.

Page 8 Page 8

Report and Accounts For the year ended 5 April 2014

The Trustee Board has put in place steps to monitor areas of potential risk to the Scheme. They regularly monitor, amongst other aspects of the Scheme, investments, the funding of the Scheme and the administration of the Scheme. The risk register is reviewed on a quarterly basis by the administration committee and updated as necessary. Further information Further information about the Scheme can be obtained by writing to the AgustaWestland UK Pension Scheme, Box 205, Lysander Road, Yeovil, Somerset BA20 2YB.

Martin Flavell Chairman AgustaWestland UK Pension Scheme (Trustee) Limited on behalf of the AgustaWestland UK Pension Scheme 4 November 2014

Page 9

Report and Accounts For the year ended 5 April 2014

INVESTMENT REPORT Background At the Scheme year end, 5 April 2014, the net investments of the Scheme were valued at £922 million, compared to £947.4 million at the start of the Scheme year. The Scheme’s return seeking assets continue to be invested in the Total Investment Governance Solution (TIGS) which is managed by P-Solve Investments Limited. The Trustee also has a liability hedging portfolio through which the impact of movements in long-term interest rate and inflation expectations are managed. This report gives information about the assets as at 5 April 2014. Investment Principles The Trustee has produced a Statement of Investment Principles showing how it invests the assets of the Scheme. The Statement of Investment Principles is reviewed regularly by the Trustee and was last updated in August 2014. The primary objective of the Scheme is to provide, on a defined benefit basis, pension and lump sum benefits for members on their retirement and/or benefits on death, before or after retirement, for their dependants. The Trustee aims to fund the Scheme in such a manner that there are always sufficient assets of the Scheme (at their realisable value) to meet the benefit payments promised as they fall due. The Trustee has translated its objectives into a benchmark for the Scheme. The benchmark is consistent with the Trustee’s views on the appropriate balance between maximising the long-term return on investments and minimising short-term volatility and risk measured relative to liabilities. The Trustee sets general investment policy but all day-to-day investment duties have been delegated to PSolve. Copies of the Statement of Investment Principles are available to members from the Secretary to the Trustee. Investment Advisers The Trustee has delegated responsibility for the day-to-day management of the assets to the Scheme’s investment manager, P-Solve Investments Limited (“P-Solve”). An Investment Management Agreement between the Trustee and P-Solve Investments Limited governs this relationship. The Investment Manager has been appointed in two capacities:  

To implement the liability hedging strategy; and To actively manage assets through its Total Investment Governance Solution (TIGS) investment product that covers a wide range of asset classes and investment managers.

Page 10

Report and Accounts For the year ended 5 April 2014

INVESTMENT REPORT Asset Allocation The Trustee reviews the strategic asset allocation of the Scheme on a regular basis. However, investment decisions within this framework are delegated to P-Solve. The Trustee had allocated 65% of assets to return seeking assets and 35% of assets for liability hedging. In August 2014 the Trustee revised this allocation to 70% of assets in return seeking assets and 30% of assets in the collateral fund. The Trustee continues to monitor the strategy through regular reviews. In addition, the Trustee will review on an on-going basis the extent to which risk and volatility can be reduced further as the deficit for the Scheme is recovered over time. Liability Risk The Trustee has put a liability hedging strategy in place to reduce some of the unrewarded risks that the Scheme faces in relation to the value of the liabilities. P-Solve manage the liability hedge through trading derivative instruments with a number of counterparty banks. The Trustee has decided to hedge 75% of the interest rate risk and 90% of the inflation risk of the liabilities. The Trustee will continue to consider further opportunities to reduce unrewarded risks where this can be done cost effectively. There are appropriate arrangements in place to provide collateral for the liability hedging strategy. Investment Expenses Investment management expenses amounted to £1.7 million during the period (previously £1.2 million). It should be noted that, in addition to these direct expenses, the majority of underlying managers’ fees are reflected in unit prices and these are not separately disclosed. Discounts on investment management fees are negotiated where possible. Market Commentary Continued loose monetary policy in developed markets was supportive of many equity markets despite the beginning of the US Federal Reserve tapering their Quantitative Easing program. Over the 12 month period interest rate expectations rose materially leading to many bond instruments posting negative returns, in particular UK gilts, however the rises in interest rate expectations would have also reduced pension scheme liabilities. In sterling terms, global equities produced returns of 6.8%, with Europe and the US being strong performers. Emerging markets continued to significantly lag developed markets, producing returns of -10.9%. Within credit markets, high yield bonds returned -0.8%, however this negative performance was primarily due to sterling strengthening against the dollar by nearly 9% over the 12 months. Therefore in local terms this asset class returned nearer 8.9%. UK corporate bonds returned 1.1%, however emerging market debt returned 9.9% in sterling terms as emerging markets continued to struggle and sterling strengthened materially against the majority of emerging market currencies. Both fixed interest and index-linked gilts produced negative returns of between -2% to -4% as interest rate expectations rose and inflation fell slightly.

Page 11

Report and Accounts For the year ended 5 April 2014

INVESTMENT REPORT Total investments The overall return on the Scheme’s investments for the year ended 5 April 2014 was -3.6%. Liability Matching Portfolio The liability hedge is designed to protect the Scheme from adverse movements in bond markets (linked to changes in long-term interest rates and inflation) which directly impact the value of the liabilities. The value of the gilts that are part of the liability hedge portfolio tend to move in line with the Scheme’s liabilities when the price of these bonds changes on the back of changes to long-term interest rates and inflation. Similarly, the swaps in the liability hedge portfolio are such that, if interest rates fall significantly (and so the liabilities rise in value through an increase in bond prices) the swap counterparty pays the Scheme to cover the rise in the value of the liabilities. Conversely, if the value of the liabilities falls due to interest rate and inflation changes (leading to falls in bond prices), the Scheme pays the counterparty under the swap contracts an amount that is in line with this fall in the liabilities. The liability matching portfolio, which consists of interest rate and inflation swaps, gilts and total return swaps, has been managed by P-Solve since 18 May 2012. As at 5 April 2014, the valuation of the swap contracts resulted in an unrealised gain as follows: Interest rate swaps Inflation swaps Gilts total return swaps Total

£000 45,826 (6,083) (4,678) 35,065

At the year end the liability hedge was hedging 74% of the interest rate risk and 92% of the inflation risk as a proportion of liabilities. Return Seeking Portfolio From May 2012, the return seeking assets are held under an investment service called TIGS. TIGS is a fully delegated service designed to deliver performance in excess of a client specific target through exposure to diversified investment arrangements. P-Solve invest and manage the Scheme’s assets on behalf of the Trustee. The service reduces the risks and costs of decision delay and provides access to a broad range of asset classes and increased investment specialisation. As well as the delegated responsibility for dynamic asset allocation, P-Solve are also responsible for selecting, combining and replacing fund managers. The core strength of the TIGS proposition lies in the delegation to the manager of the flexibility to dynamically allocate across all asset classes in accordance with medium to long-term views on global markets, and to ‘defend’ by increasing the allocation to cash and/or bonds when the risk/return attributes of other asset classes seem poor. The return on the return seeking portfolio for the year ended 5 April 2014 was 4.9%.

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Report and Accounts For the year ended 5 April 2014

INVESTMENT REPORT Investment Performance The split of assets between the return seeking assets and the liability matching portfolio at the current and prior year ends is as follows: 5 April 2014 Market value % of fund £000 (ex AVCs)

5 April 2013 Market value % of fund £000 (ex AVCs)

Return seeking portfolio (Investment Fund Liability Matching

591,924 327,490

64.4 35.6

578,164 367,930

61.1 38.9

Total investments (excluding AVCs)

919,414

100.0

946,094

100.0

AVCs

6,507

Total Investments

925,921

-

6,185

100.0

952,279

100.0

Total Portfolio Investment Performance The Scheme's total investment strategy, as at 31 March 2014, has returned: Total Portfolio Investment return

1 Year -2.0%

3 years p.a. 10.5%

5 years p.a. 11.1%

The return on the return seeking portfolio for the year to 5 April 2014 was 4.9%. The table below shows how the assets have changed over the year:

Asset Class

5 April 2014 Market value % of fund £000 (ex AVCs)

5 April 2013 Market value % of fund £000 (ex AVCs)

Equity Private Equity Alternatives Bonds Commodities Cash and accrued income Currency Hedge Liability Matching

220,122 60,808 82,369 209,604 18,647 374 327,490

24.0 6.6 9.0 22.8 2.0 35.6

203,197 67,469 120,210 132,446 41,393 10,542 2,907 367,930

21.5 7.1 12.7 14.0 4.4 1.1 0.3 38.9

Total assets (excluding AVCs)

919,414

100.0

946,094

100.0

The Trustee monitors the performance of P-Solve on a quarterly basis and is provided with a valuation of all of the Scheme’s assets on a monthly basis. Custody of assets The assets managed through TIGS are held by KAS Bank N.V. through bankruptcy remote nominee companies. In addition, KAS Bank act as custodian in relation to the assets not held within TIGS and the collateral for the liability hedging contracts.

Page 13

Report and Accounts For the year ended 5 April 2014

INVESTMENT REPORT Social responsibility The Trustee is seeking to maximise overall investment returns subject to an acceptable level of risk. The Trustee recognises that social, environmental and ethical considerations are among the factors which investment managers could take into account, where relevant, when selecting investments for purchase, retention or sale. Where appropriate, the managers have produced, or will be requested to produce, statements setting out their policy in this regard. Corporate Governance The majority of the Scheme’s investments are made via pooled investment funds, in which the Scheme’s investments are pooled with those of other investors. As such, direct control of the process of engaging with the companies that issue these securities, whether for corporate governance purposes or social, ethical or environmental factors, is delegated to the manager of the pooled investment fund. The extent to which these factors are taken into account in the selection, retention and realisation of investments are considered by the investment manager as part of the process of selecting organisations with which to invest.

Page 14

Report and Accounts For the year ended 5 April 2014

STATEMENT OF TRUSTEE'S RESPONSIBILITIES IN RESPECT OF THE ACCOUNTS The Scheme’s Trustee is responsible for obtaining audited financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) and for making available certain other information about the Scheme in the form of an Annual Report. The audited accounts are the responsibility of the Trustee. Pension Scheme regulations require the Trustee to make available to Scheme members, beneficiaries and certain other parties, audited accounts for each Scheme year which: -

show a true and fair view of the financial transactions of the Scheme during the Scheme year and of the 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, in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), and

-

contain the information specified in the Schedule to the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a 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" (Revised May 2007).

The Trustee has supervised the preparation of the financial statements and has agreed suitable accounting policies, to be applied consistently, making any estimates and judgements on a prudent and reasonable basis. The Trustee is responsible under pensions legislation for ensuring that there is prepared, maintained and from time to time revised a schedule of contributions showing the rates of contributions payable to the Scheme by or on behalf of the employer and the active members of the Scheme and the dates on or before which such contributions are to be paid. The Trustee is also responsible for keeping records in respect of contributions received in respect of any active member of the Scheme and for monitoring whether contributions are made to the Scheme by the employer in accordance with the schedule of contributions. Where breaches of the schedule occur, the Trustee is required by the Pensions Act 1995 and 2004 to consider making reports to the Pensions Regulator and the Members. The Trustee also has a general responsibility for ensuring that adequate accounting records are kept and for taking such steps as are reasonably open to them to safeguard the assets of the Scheme and to prevent and detect fraud and other irregularities, including the maintenance of an appropriate system of internal control.

Martin Flavell Chairman, on behalf of the Trustee of the AgustaWestland UK Pension Scheme Date: 4 November 2014

Page 15

Report and Accounts For the year ended 5 April 2014

INDEPENDENT AUDITOR'S REPORT TO THE TRUSTEE OF AGUSTAWESTLAND UK PENSION SCHEME We have audited the accounts of the AgustaWestland UK Pension Scheme for the year ended 5 April 2014 which comprise the fund account, the net assets statement and the related notes 1 to 16. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Trustee, as a body, in accordance with regulation 3 (c) of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act 1995. Our audit work has been undertaken so that we might state to the Trustee those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Trustee as a body, for our audit work, for this report, or the opinions we have formed. Respective responsibilities of Trustee and Auditor As explained more fully in the Statement of Trustee’s Responsibilities set out on page 15, the Scheme’s Trustee is responsible for the preparation of accounts which show a true and fair view. Our responsibility is to audit and express an opinion on the accounts in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the accounts An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the scheme’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the trustees; and the overall presentation of the financial statements. In addition, we read all the financial and non- financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on the accounts In our opinion the accounts: •

show a true and fair view of the financial transactions of the Scheme during the year ended 5 April 2014, and of the amount and disposition at that date of its assets and liabilities, other than the liabilities to pay pensions and benefits after the end of the year;

•

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and,

•

contain the information specified in Regulation 3 of, and the Schedule to, the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act 1995.

Ernst & Young LLP Statutory Auditor Reading Date:

Page 16

Report and Accounts For the year ended 5 April 2014

FUND ACCOUNT FOR THE YEAR ENDED 5 APRIL 2014

Note

For the year ended 5 April 2014 £000

For the year ended 5 April 2013 £000

Contributions and Benefits Contributions Other income

3 4

Benefits Leavers Other payments Administrative expenses

5 6 7 8

Net additions from dealings with members

34,570 643

33,693 585

35,213

34,278

(26,976)

(26,975)

(533)

(652)

(216)

(277)

(1,221)

(1,394)

(28,946)

(29,298)

6,267

4,980

Returns on investments Investment income Change in market value of investments Investment management expenses

9 10 11

14,043

18,656

(43,984)

125,310

(1,738)

(1,206)

Net returns on investments

(31,679)

142,760

Net increase (decrease)/increase in the fund during the year

(25,412)

147,740

Net assets of the Scheme at the start of the year

947,388

799,648

Net assets of the Scheme at the end of the year

921,976

947,388

The notes on pages 19 to 32 form an integral part of these accounts.

Page 17

Report and Accounts For the year ended 5 April 2014

NET ASSETS STATEMENT AS AT 5 APRIL 2014

Note 10 10 12 12

Investment assets Investment liabilities Current assets Current liabilities Net Assets at 5 April

5 April 2014 £000

5 April 2013 £000

955,538 (29,617) 1,881 (5,826)

966,224 (13,945) 1,465 (6,356)

921,976

947,388

The accounts summarise the transactions of the Scheme and deal with the net assets at the disposal of the Trustee. They do not take account of obligations to pay pensions and benefits which fall due after the end of the Scheme year. The actuarial position of the Scheme, which does take account of such obligations, is dealt with in the actuarial statement included in the annual report and these accounts should be read in conjunction with it. The notes on pages 19 to 32 form an integral part of these accounts. Trustee Director: Trustee Director: Date:

Page 18

Report and Accounts For the year ended 5 April 2014

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 5 APRIL 2014

1.

BASIS OF PREPARATION The accounts have been prepared in accordance with the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, and with the guidelines set out in the Statement of Recommended Practice, "Financial Reports of Pension Schemes" (SORP) (revised May 2007). The accounts summarise the transactions of the Scheme and deal with the net assets at the disposal of the Trustee. They do not take account of obligations to pay pensions and benefits which fall due after the end of the Scheme year.

2.

ACCOUNTING POLICIES The following principal accounting policies have been adopted in the preparation of the accounts. 2.1 Accruals concept The accounts have been prepared on an accruals basis. 2.2 Contributions and benefits Employers' contributions, members' contributions, including those paid under the smart option, and employer deficit funding are accounted for on an accruals basis in accordance with the schedule of contributions. Age related National Insurance rebates and additional voluntary contributions are accounted for on an accruals basis. Augmentation contributions are accounted for in accordance with the agreement under which they are payable, or, in the absence of an agreement, on a receipt basis. AVCs are accounted for on an accruals basis, and the resulting investments are included within the net assets statement on the basis of values provided by the AVC investment managers. Benefits are accounted for in the period in which the member notifies the Trustee of his decision on the type or amount of benefit to be taken or, if there is no member choice, on the date of retirement or leaving. Pensions are accounted for in the period to which they relate. For members with whom contact has been lost, benefits are accounted for on the later of the date that contact is re-established and the date that the relevant benefit payable has been identified. Individual transfers in and out are accounted for when the transfer has been agreed by both parties and the receiving scheme has accepted liability for the transfer. 2.3

Administration expenses and investment management expenses Administration and investment management expenses are accounted for on an accruals basis.

Page 19

Report and Accounts For the year ended 5 April 2014

NOTES TO THE ACCOUNTS 2.

ACCOUNTING POLICIES (continued) 2.4 Investment income i) Income from cash and short term deposits is dealt with in these accounts on an accruals basis. ii) Dividends and interest on securities are accounted for to the extent that they are declared and payable. iii) Income arising from the underlying investments of the pooled investment vehicles, that is reinvested within the pooled investment vehicles, is reflected in the unit price. Such income is reported within the change in market value. iv) Income earned on a distributing unit trust is accounted for in the period in which it falls due. v) Income from derivative contracts is dealt with in these accounts on an accruals basis. vi) Income arising from annuity policies held by the Trustees and received by the Scheme is included within investment income. vii) Income from foreign currency holdings is translated into sterling at the rate applicable on the date of the transaction. viii) Return of capital on private equity holdings are reflected as sales and are reflected in the change in market value in the year they are paid. Distributions in the prior year were included in investment income.

Page 20

Report and Accounts For the year ended 5 April 2014

NOTES TO THE ACCOUNTS 2.

ACCOUNTING POLICIES (continued) 2.5 Valuation of investments Investment assets and liabilities are included at market value at the end of the Scheme Year as follows: (i) Investments in pooled investment vehicles (unit trusts/managed funds) are valued at the bid price ruling at the year end. Where no bid price is available they are valued using the available single price. Certain funds for which a year end price is not available have been valued using the latest available price. (ii) Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the year end. (iii) Additional voluntary contribution investments are taken as the surrender values of the accounts and policies of assurance at the year end, as advised by the AVC providers. (iv) Quoted securities are valued at closing prices on the recognised stock exchange as at the year end, which are either the last quoted trade price or bid price depending on the market on which they are quoted. (v) Fixed interest securities and index linked securities are valued on a clean basis which excludes the value of the interest accruing from the previous interest payment date and the valuation date. Index linked securities are valued inclusive of indexation. (vi) Private equity holdings are valued at the latest available price as provided by the managers. (vi) Derivatives Derivatives are investment assets and investment liabilities that derive their value from the price or rate of some underlying item. They are included in the net assets statement at the appropriate fair value. Investment assets are valued at bid prices, whilst investment liabilities are valued at offer prices. Derivatives with a purchase price are reported as purchases. Those that do not have an initial purchase price but required a deposit, such as an initial margin to be placed with the broker, are recorded at nil cost. The deposit is recorded as a balance due from the broker, and as such is reported within cash balances. Amounts payable or receivable from brokers and counterparties, such as margins and interest on margins, are included within cash deposits within investment assets and investment liabilities. Forward Foreign Exchange Contracts Forward foreign exchange contracts outstanding at the year end are stated at fair value, which is determined as the gain or loss that would arise if the outstanding contract was matched at the year end with an equal and opposite contract at that date. Changes in the fair value of the forward contract are reported within change in market value. Options Traded options are valued at the fair value as determined by the exchange price for closing out the option as at the year end. Options which are over the counter contracts are valued at fair value using a pricing model such as Black-Scholes, where inputs are based on market data at the year end date. Changes in the value of the option are reported within change in market value.

Page 21

Report and Accounts For the year ended 5 April 2014

NOTES TO THE ACCOUNTS 2.

ACCOUNTING POLICIES (continued)

Swaps Interest rate and inflation swaps are over the counter derivative contracts whereby two parties (in this case the Trustee of the AgustaWestland UK Pension Scheme and a bank with whom the Trustee has ISDA documentation in place) agree to exchange future cashflow(s). The cashflows exchanged are either fixed or floating in nature. A floating cashflow changes in line with some pre-agreed index. For sterling interest rate swaps the swap floating leg payments are calculated with reference to the London Interbank Offered Rate (LIBOR) with rolling 3 month and 6 month maturities respectively. For inflation swaps the swap floating leg payments are calculated with reference to changes in the UK Retail Price Index. Swaps are valued on a market consistent basis that allows for the time value of money by calculating the current value of the future expected net cash flows arising from each swap contract. Aggregating the value of all of the swap positions provides the overall marked-to-market position of the Scheme's swap contracts. The cashflow amounts payable under a swap contract are calculated with reference to an underlying notional amount. For accounting purposes, net receipts or payments on swap contracts are reported within change in market value. Realised gains and losses on closed contracts and unrealised gains and losses on open contracts are included within change in market value. Fair value for swaps is calculated by discounting the expected cash flows using year end market data from recognised sources. Foreign currencies Amounts denominated in foreign currencies at the year end are translated at rates ruling at the year end. Investment income denominated in foreign currencies is recorded at the rate of exchange on the date of receipt. 2.6

Annuities Annuities purchased by the Trustee, which fully provide the benefits for certain members, are held with four providers; Canada Life, Equitable Life, Scottish Widows and Prudential. These policies remain assets of the Trustee, but as is permitted under current regulations and accounting practice, the Trustee has decided that these policies need not be valued in the net assets statement and they are therefore included at nil cost. The cost of purchasing immediate annuities in respect of pensioners is reported within the Fund Account under ’Benefits payable’.

Page 22

Report and Accounts For the year ended 5 April 2014

NOTES TO THE ACCOUNTS 3.

CONTRIBUTIONS For the year ended 5 April 2014 £000 Employers Normal future service Contributions in respect of smart option Contributions in respect of fees Age related rebates Deficit funding Augmentation

7,326 9,638 1,500 15,000 -

Members Normal Additional voluntary contributions

For the year ended 5 April 2013 £000 7,198 9,682 1,500 (1) 14,100 4

140 966

179 1,031

34,570

33,693

Contributions received from members and participating employers were in accordance with the Schedule of Contributions. The deficit funding is payable under the current recovery plan. The deficit payments continue to be paid to the end of the recovery plan in 2020. 4.

OTHER INCOME For the year ended 5 April 2014 £000 Claims on term insurance policies Other income

For the year ended 5 April 2013 £000

643 -

554 31

643

585

Other income consists of monies received from an insurance policy to cover the cost of providing the spouse's pension. 5.

BENEFITS For the year ended 5 April 2014 £000 Pensions Commutations and lump sum retirement benefits Lump sum death benefits Purchase of annuities

Page 23

For the year ended 5 April 2013 £000

19,145 7,050 599 182

17,896 8,500 579 -

26,976

26,975

Report and Accounts For the year ended 5 April 2014

NOTES TO THE ACCOUNTS 6.

PAYMENTS TO AND ON ACCOUNT OF LEAVERS For the year ended 5 April 2014 £000 Transfers out - individual

7.

533

For the year ended 5 April 2013 £000 652

OTHER PAYMENTS For the year ended 5 April 2014 £000 Premiums on term insurance policies

216

For the year ended 5 April 2013 £000 277

Term insurance policies are secured by a policy underwritten by Aviva. 8.

ADMINISTRATIVE EXPENSES For the year ended 5 April 2014 £000 Administration and processing Actuarial fees Audit fee Legal fees Regulator levies Communication fees Bank charges Covenant fees Trustee liability insurance Sundry expenses

Page 24

For the year ended 5 April 2013 £000

408 225 25 25 475 13 36 11 3

439 243 30 30 591 11 3 36 11 -

1,221

1,394

Report and Accounts For the year ended 5 April 2014

NOTES TO THE ACCOUNTS 9.

INVESTMENT INCOME For the year ended 5 April 2014 £000 Income from fixed interest securities Income from index-linked securities Income from pooled investment vehicles Derivative income Interest on cash deposits Income from annuities Other investment income

For the year ended 5 April 2013 £000

2,188 1,918 5,465 4,147 11 61 253

975 2,131 11,687 3,788 12 63 -

14,043

18,656

Other investment income in 2014 was US tax recovered in relation to investment income received in 2012.

Page 25

Report and Accounts For the year ended 5 April 2014

NOTES TO THE ACCOUNTS 10.

INVESTMENTS MOVEMENTS IN INVESTMENTS Value at 06/04/2013 £000

Purchases at Sales cost and proceeds and derivative derivative Change in payments receipts market value £000

£000

£000

Value at 05/04/2014 £000

Fixed interest securities Index-linked securities Pooled investment vehicles Derivative contracts AVC investments

39,802 278,719 493,785 101,847 6,185

81,803 25,899 451,698 1,430 5,326

(26,912) (471,167) (33,338) (5,383)

(6,519) (20,940) 11,832 (28,736) 379

88,174 283,678 486,148 41,203 6,507

Sub total

920,338

566,156

(536,800)

(43,984)

905,710

Cash deposits Dividends and withholding tax

31,082

18,691

859

1,520

952,279

925,921

The change in market value of investments during the year comprises all increases and decreases in the market value of investments held at any time during the year, including profits and losses realised on sales of investments during the year. Transaction costs are included in the cost of purchases and sale proceeds. Transaction costs include costs charged directly to the scheme such as fees, commissions, stamp duty and other fees. Transaction costs are considered by the Trustee, however, given the complexity of the investment strategy, it is not practical to provide an estimate of the total transaction costs incurred. In addition to the transaction costs, indirect costs are incurred through bid-offer spread on investments within pooled investment vehicles. The amount of indirect costs is not separately provided to the scheme. Whilst some of the investments are long term in nature (eg private equity), there are no significant restrictions affecting the ability of the Scheme to realise investments at the accounting date, at the value at which they are included in the financial statements. FIXED INTEREST SECURITIES 5 April 2014 £000 UK public sector quoted Overseas public sector

Page 26

5 April 2013 £000

60,941 27,233

37,326 2,476

88,174

39,802

Report and Accounts For the year ended 5 April 2014

NOTES TO THE ACCOUNTS 10

Investments continued INDEX-LINKED SECURITIES 5 April 2014 £000 UK quoted

283,678

5 April 2013 £000 278,719

POOLED INVESTMENT VEHICLES 5 April 2014 £000 Managed funds - other Unit Trusts - other

5 April 2013 £000

486,148 -

451,122 42,663

486,148

493,785

DERIVATIVE CONTRACTS 5 April 2014 £000

5 April 2013 £000

Derivative contracts - assets Swaps Options Forward foreign exchange

50,746 19,380 694

96,260 16,625 2,907

Sub total

70,820

115,792

Derivative contracts - liabilities Swaps Options Forward foreign exchange

(17,287) (12,010) (320)

(4,429) (9,516) -

Sub total

(29,617)

(13,945)

41,203

101,847

Page 27

Report and Accounts For the year ended 5 April 2014

NOTES TO THE ACCOUNTS 10

Investments continued Interest rate swaps Type of contract Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC) Interest rate swap (OTC)

Expiration

Counterparty

13/06/2018 13/06/2023 05/10/2024 05/10/2026 13/06/2028 05/10/2031 08/08/2033 0 - 5 years 6 - 10 years 11 - 15 years 22/01/2030 22/01/2041 22/01/2053 22/01/2060 02/03/2021 02/03/2056 02/03/2021 02/03/2034 02/03/2048 02/03/2056

Barclays Barclays Barclays Barclays Barclays Barclays Barclays Morgan Stanley Morgan Stanley Morgan Stanley Morgan Stanley Morgan Stanley Morgan Stanley Morgan Stanley RBS RBS UBS UBS UBS UBS

Notional £000 63,040 12,095 7726 8,275 73.675 8,459 17,586 23,596 37,020 27,973 8,317 5,513 3,723 6,567 9,524 5,407 9,524 6,957 3,938 5,407

Total

Asset £000

Liability £000

4,490 3,855 3,456 509 4,498 17,016 13,433 24 271 397 240 176 168 345

(773) (280) (1,655) (115) (66) (162) -

48,878

(3,051)

Inflation swap Type of contract Inflation swap (OTC) Inflation swap (OTC) Inflation swap (OTC) Inflation swap (OTC) Inflation swap (OTC) Inflation swap (OTC) Inflation swap (OTC) Inflation swap (OTC) Inflation swap (OTC) Inflation swap (OTC) Inflation swap (OTC) Inflation swap (OTC) Inflation swap (OTC) Inflation swap (OTC)

Expiration

Counterparty

0 - 5 years 6 - 10 years 11 - 15 years 05/10/2029 05/10/2049 20/11/2063 15/11/2018 05/10/2024 05/10/2026 05/10/2031 05/10/2034 05/10/2036 05/10/2040 24/07/2027

Morgan Stanley Morgan Stanley Morgan Stanley Morgan Stanley RBS RBS Credit Suisse Barclays Barclays Barclays Barclays Barclays Barclays Goldman Sachs

Total

Page 28

Notional £000 14,790 44,043 24,386 9,224 5,421 8,600 115,000 9,946 9,945 9,746 9,551 9,053 8,461 30,000

Asset £000

Liability £000

29 1,774

(130) (1,594) (1,339) (509) (326) (332) (639) (697) (706) (678) (566) (371) -

1,803

(7,887)

Report and Accounts For the year ended 5 April 2014

NOTES TO THE ACCOUNTS 10

Investments continued Total return swaps Type of contract

Expiration

Total return swap Total return swap Total return swap Total return swap Total return swap

05/03/2015 06/10/2014 06/10/2014 05/03/2015 06/10/2014

Counterparty Barclays RBS RBS Credit Suisse Credit Suisse

Notional £000 75,404 24,526 24,526 18,248 49,279

Asset £000

Liability £000

Total

43 22 -

(693) (2,341) (3,315)

65

(6,349)

At 5 April 2014 the net collateral position was £43.9 million made up of amounts posted by the counterparties, Barclays, Goldman Sachs, RBS, Morgan Stanley and UBS which was held by the custodian on behalf of the Scheme and £3.7 million posted by the Scheme to counterparties Credit Suisse. Options Type of contract

Expiration

Call Option Call Option Call Option Call Option Call Option

30/05/2015 30/05/2015 30/05/2015 30/05/2015 30/05/2015

Underlying investment FTSE100 FTSE100 FTSE100 FTSE100 FTSE100

Notional £000 24,950 24,950 24,950 24,950 24,950

Total

Asset £000

Liability £000

19,349 31

(52) (11,493) (465) -

19,380

(12,010)

Forward foreign exchange Type of contract Euro US Dollar Japanese Yen

Expiration Less than 1 year Less than 1 year Less than 1 year

Currency bought

Currency sold €13,417,000 £ 11,230,029 $217,730,000 £130,921,049 JPY 4,344,500,000 £ 25,632,550

Total

Asset £000

Liability £000 134 560

(320) -

694

(320)

CASH DEPOSITS 5 April 2014 £000 Sterling cash deposits Foreign currency cash deposits

Page 29

5 April 2013 £000

8,989 9,702

30,781 301

18,691

31,082

Report and Accounts For the year ended 5 April 2014

NOTES TO THE ACCOUNTS 10

Investments continued AVC INVESTMENTS The Trustee holds assets which are separately invested from the main fund. These secure additional benefits, on a money purchase basis, for those members who have elected to pay additional voluntary contributions. Members participating in this arrangement receive an annual statement made up to 5 April each year, confirming the amounts held to their account and movements during the year. The total amount of AVC investments at the year end is shown below. 5 April 2014 £000 Equitable Life Prudential Scottish Widows Old Mutual Wealth (formerly Skandia)

5 April 2013 £000

779 1,330 6 4,392

829 5,350 6 -

6,507

6,185

CONCENTRATION OF INVESTMENTS The following investments, excluding UK Government securities, account for more than 5% of the Scheme's net assets as at 5 April 2014. 5 April 5 April 2014 2013 Market value Market value £000 % £000 % Vanguard S&P 500 - EFT (USD) 11.

49,603

5.38 %

20,480

2.16 %

INVESTMENT MANAGEMENT EXPENSES For the year ended 5 April 2014 £000 Administration, management & custody Performance measurement services Investment fee rebate Investment Consultancy fees Investment Custodian fees

For the year ended 5 April 2013 £000

2,008 (391) 121

1,311 7 (281) 76 93

1,738

1,206

Within the investment portfolio there are certain managers who charge a flat fee which is deducted from the overall unit price and is included in the change in market value of the asset. Some of these managers then pay rebates depending on the value of the holdings with that manager.

Page 30

Report and Accounts For the year ended 5 April 2014

NOTES TO THE ACCOUNTS 12.

CURRENT ASSETS AND LIABILITIES 5 April 2014 £000

5 April 2013 £000

Current assets Prepayments Cash in transit from AVC provider Cash balances

215 148 1,518

1,465

1,881

1,465

920 513 4,159 234 -

301 568 5,190 225 72

5,826

6,356

(3,945)

(4,891)

Current liabilities Unpaid benefits Accrued expenses Employer contributions paid in advance HM Revenue & Customs Due to Company

Current assets and liabilities

13.

EMPLOYER RELATED INVESTMENTS There were no employer related investments within the meaning of section 40(2) of the Pension Act 1995.

14.

RELATED PARTY TRANSACTIONS The following related party transactions occurred during the year:

15.

(i)

The cost of operating the AgustaWestland Pensions Department (including salaries and employment related expenses, computer services costs, accommodation charges and other operating expenses) was met by AgustaWestland. AgustaWestland agreed with the Trustee a management fee for payment by the Scheme in reimbursement of these costs.

(ii)

Six of the nine current Trustee Directors were contributing members of the Scheme during the Scheme year. Their contributions are in accordance with the Scheme Trust Deed and Rules.

CONTINGENT LIABILITIES There were no contingent liabilities as at 5 April 2014 (2013: nil).

Page 31

Report and Accounts For the year ended 5 April 2014

NOTES TO THE ACCOUNTS 16.

CAPITAL COMMITMENTS The Scheme has made capital commitments to its private equity and infrastructure managers which are drawn down by the relevant managers over time as the investments are made. The outstanding commitments are set out in the table below: US Dollar denominated Commitment Outstanding $000 $000 Private Equity Cerberus Harbour Vest Matlin Patterson Pantheon

Infrastructure Alinda

Euro demoninated Commitment Outstanding €000 €000

10,000 20,000 25,000 30,000

4,035 3,180 3,266 2,482

12,000 8,000

905 840

85,000

12,963

20,000

1,745

22,000

3,130

-

-

22,000

3,130

-

-

Page 32

Report and Accounts For the year ended 5 April 2014

COMPLIANCE STATEMENT FOR THE YEAR ENDED 5 APRIL 2014 Constitution of the Scheme The AgustaWestland UK Pension Scheme is a defined benefits scheme, constituted and administered in accordance with the Rules. Copies of the Rules which govern the Scheme are available to members for inspection on request to the Secretary to the Trustee, AgustaWestland UK Pension Scheme, Box 205, Lysander Road, Yeovil, Somerset BA20 2YB. Taxation The Scheme is registered with HM Revenue & Customs under the Finance Act 2004. Members of the Scheme are in contracted out employment for the purposes of earnings-related pension provision under Pension Schemes Act 1993. Pension Increases On 1 April 2013 the pension increase paid to pensioners and dependant pensioners under the rules of the Scheme was 2.6%, pension increase for service after 5 April 2005 is capped at 2.5%. Relevant deductions or additions were made for statutory obligations to provide increases in relation to Guaranteed Minimum Pension. Transfer Values The Trustee makes no allowance in the calculation of transfer values for discretionary benefits.

Page 33

Report and Accounts For the year ended 5 April 2014

COMPLIANCE STATEMENT FOR THE YEAR ENDED 5 APRIL 2014 Queries relating to Scheme benefits and administration Enquiries about the Scheme generally, about individual entitlement to benefits or requests for Scheme documentation should be directed to: AgustaWestland UK Pension Scheme Aon Hewitt Limited 25 Marsh Street Bristol BS1 4AQ Telephone: 0845 600 8796 The Trustee has adopted a dispute resolution procedure in line with the requirements of the Pensions Act 1995. Details of this procedure are available from the Pension Administrator at the above address. If a member has a complaint against the Scheme which has not been resolved to their satisfaction through the Scheme's internal dispute resolution procedure, the Pensions Advisory Service (TPAS), an independent voluntary organisation, may be able to offer advice. TPAS 11 Belgrave Road London SW1V 1RB

Email: [email protected] Telephone: 0845 601 2923 Website: www.pensionsadvisoryservice.org.uk

For problems that cannot be settled through TPAS, the Pensions Ombudsman (based at the same address) has power to investigate and determine complaints or disputes of fact or law in relation to occupational pension schemes. The Pensions Ombudsman will only investigate cases where the internal dispute resolution procedure has been exhausted and TPAS have been unable to resolve the complaint. The Pensions Ombudsman can be contacted at 11 Belgrave Road, London, SW1V 1RB. The Pensions Regulator can intervene if it considers that a Scheme's trustee, advisers, or the employer are not carrying out their duties correctly. The address for the Pensions Regulator is Napier House, Trafalgar Place, Brighton, BN1 4DW. Full details about the Pensions Regulator’s role are available on its website: www.thepensionsregulator.gov.uk. Pensions Tracing A pensions tracing service is carried out by the Department for Work and Pensions. This service can be contacted at: Pension Tracing Service The Pension Service Whitley Road Newcastle upon Tyne NE98 1BA (i)

Telephone: 0845 6002 537 Website: www.thepensionservice.gov.uk

The Pensions Ombudsman may investigate and determine any complaint or dispute of fact or law in relation to an Occupational Pension scheme. Any such complaints should be addressed in the first instance to the Scheme Adjudicator. Enquiries should be addressed to: The Pensions Ombudsman 11 Belgrave Road London SW1V 1RB

Page 34

Report and Accounts For the year ended 5 April 2014

COMPLIANCE STATEMENT FOR THE YEAR ENDED 5 APRIL 2014 (ii)

TPAS The Pensions Advisory Service exists to assist members and beneficiaries of schemes in connection with difficulties which they have failed to resolve with the Trustees or Administrators of the scheme. TPAS may be contacted at: TPAS The Pensions Advisory Service 11 Belgrave Road London SW1V 1RB

(iii)

The Pensions Regulator (TPR) took over from OPRA (the Occupational Pensions Regulatory Authority) on 6th April 2005 and is the UK regulator of work-based pension schemes. The Pensions Act 2004 gives the Pensions Regulator a set of specific objectives: to protect the benefits of members of work-based pension schemes; to promote good administration of work-based pension schemes; and to reduce the risk of situations arising that may lead to claims for compensation from the Pension Protection Fund. TPR can be contacted at: The Pensions Regulator Napier House Trafalgar Place Brighton BN1 4DW

(iv)

The Pensions Compensation Scheme was introduced to protect members' interests in certain circumstances, i.e. to provide compensation where an employer has become insolvent and the scheme assets have been reduced due to fraud, theft, or misappropriation. It does not cover losses resulting from adverse investment returns. The Compensation Scheme is funded by a retrospective levy on occupational pension schemes.

(v)

The Trust Deed and rules, the scheme details, and a copy of the payment schedule and Statement of investment principles are available for inspection free of charge by contacting the Trustee at the address shown for enquiries in this report. Any information relating to the members' own pension position, including estimates of transfer values, should also be requested from the administrators of the scheme, Aon Hewitt Limited at the address detailed in this report.

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Report and Accounts For the year ended 5 April 2014

Appendix 1: CONTRIBUTIONS FOR THE YEAR ENDED 5 APRIL 2014 Summary of contributions payable during the Scheme Year ended 5 April 2014 Contributions payable to the Scheme under the Schedules of Contributions in respect of the year ended 5 April 2014 were as follows: Employers £'000 Required by the Schedules of Contributions Employer: Normal future service Contributions in respect of SMART option Deficit funding Expenses Member: Normal

7,327 9,089 15,000 1,500 -

Total contributions required by the Schedules of Contributions Other contributions payable: Augmentation Additional voluntary contributions Age related rebates

32,916

-

Total contributions per note 3

32,916

Members £'000 -

Total £'000 7,327 9,089 15,000 1,500

140

140

140

33,056

966 -

966 -

1,106

34,022

The Schedule of Contributions in place during the year was applicable from 12 June 2012. The Employer contributions in relation to smart is the amount of salary sacrificed by members of the Scheme during the year. During the year there were no reportable incidents of late payment of contributions. As recommended by the Pensions Regulator’s code of practice 01 “Reporting breaches of the law”, a log of any potential breaches of regulatory requirements is maintained by the Secretary to the Trustee. All incidents are reported to the Trustee and discussed with the Actuary as appropriate.

Martin Flavell Chairman on behalf of the Trustee of the AgustaWestland UK Pension Scheme Date: 4 November 2014

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Report and Accounts For the year ended 5 April 2014

INDEPENDENT AUDITOR'S STATEMENT ABOUT CONTRIBUTIONS Independent Auditor's Statement about Contributions to the Trustee of the AgustaWestland UK Pension Scheme We have examined the summary of contributions to the AgustaWestland UK Pension Scheme for the scheme year ended 5 April 2014. The summary can be found on page 36. This statement is made solely to the Trustee, as a body, in accordance with Regulation 4 of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act 1995. Our work has been undertaken so that we might state to the Trustee those matters we are required to state to them in an auditor’s statement and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Trustee as a body, for our work, for this statement, or the opinion we have formed. Respective responsibilities of Trustee and Auditor As described in the Statement of Trustee’s Responsibilities, (set out on page 15) the Scheme’s Trustee is responsible for ensuring that there is prepared, maintained and from time to time revised a schedule of contributions showing the rates and due dates of contributions payable towards the Scheme by or on behalf of the employer and the active members of the Scheme. The Trustee is also responsible for keeping records in respect of contributions received in respect of active members of the Scheme and for monitoring whether contributions are made to the Scheme by the employer in accordance with the schedule of contributions. It is our responsibility is to provide a statement about contributions paid under the schedules of contributions and to report our opinion to you. Scope of work on statement about contributions Our examination involves obtaining evidence sufficient to give reasonable assurance that contributions reported in the attached summary of contributions have in all material respects been paid at least in accordance with the schedule of contributions . This includes examination, on a test basis, of evidence relevant to the amounts of contributions payable to the scheme and the timing of those payments under the schedules of contributions. Statement about contributions In our opinion contributions for the Scheme year ended 5 April 2014, as reported in the attached summary of contributions, have, in all material respects, been paid at least in accordance with the schedules of contributions certified by the scheme actuary on 12 June 2012.

Ernst & Young LLP Statutory Auditor Reading Date

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Report and Accounts For the year ended 5 April 2014

ACTUARIAL STATEMENTS Actuarial Certificate given for the purposes of Regulation 7(4)(a) of the Occupational Pension Schemes (Scheme Funding) Regulations 2005 AgustaWestland UK Pension Scheme – Actuarial Valuation as at 5 April 2011 1.

Actuary’s Certificate of the Calculation of Technical Provisions

Name of scheme: AgustaWestland UK Pension Scheme Calculation of Technical Provisions I certify that, in my opinion, the calculation of the Scheme’s Technical Provisions as at 5 April 2011 is made in accordance with regulations under section 222 of the Pensions Act 2004. The calculation uses a method and assumptions determined by the Trustee of the Scheme and set out in the statement of funding principles dated 12 June 2012. Signature:

Chis Vaughan-Williams

Date: 12 June 2012

Chris Vaughan-Williams Fellow of the Institute and Faculty of Actuaries Scheme Actuary Aon Hewitt Limited 25 Marsh Street Bristol BS1 4AQ

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Report and Accounts For the year ended 5 April 2014

Actuary’s certification of schedule of contributions Name of scheme:

AgustaWestland UK Pension Scheme

Adequacy of rates of contributions 1.

I certify that, in my opinion, the rates of contributions shown in this schedule of contributions are such that the statutory funding objective could be expected on 5 April 2011 to continue to be met for the period specified in the recovery plan dated 12 June 2012.

Adherence to statement of funding principles 2.

I hereby certify that, in my opinion, this schedule of contributions is consistent with the Statement of Funding Principles dated 12 June 2012.

The certification of the adequacy of the rates of contributions for the purpose of securing that the statutory funding objective can be expected to be met is not a certification of their adequacy for the purpose of securing the Scheme’s liabilities by the purchase of annuities, if the Scheme were to be wound up. Signature: Chris Vaughan-William

Date: 12 June 2012

Chris Vaughan-Williams Fellow of the Institute and Faculty of Actuaries Scheme Actuary Aon Hewitt Limited 25 Marsh Street Bristol BS1 4AQ

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