Annual Report and Accounts of the Tayside Superannuation Funds
Administered by Dundee City Council 2009 - 2010 Annual Report and Accounts of the Superannuation Funds
Financial Year To 31 March 2010
Foreword by Director of Finance
Welcome to the Annual Report and Accounts produced by Dundee City Council for the Tayside Superannuation Funds for the year to 31st March 2010.
This was a very positive year for investment returns with equity markets bouncing back strongly from the poor performance of the previous year. The Main Fund value at 31 March 2010 of £1,749.2m reflected an increase of £508.3m or 41.0% on the equivalent value at 31 March 2009. The Transport Fund value at 31 March 2010 of £42.3m reflected an increase of £9.6m or 29.4% on the equivalent figure at 31 March 2009. The Main Fund has risen to £1,769.4m and the Transport Fund has risen to £43.9m as at 30 September 2010.
The Funds are managed on a fully discretionary basis by five external Fund Managers and the combined performance for the 12 month period to 31 March 2010 was positive in absolute terms. The longer term strategy return was as follows: Three managers achieved above their five year benchmark, the others were behind. The performance of each Fund Manager is monitored on a continuous basis and reported to the City Council’s Superannuation Sub-Committee on a quarterly basis. Senior officers of the City Council also have quarterly meetings with each of the Fund Managers where their performance, both in investment terms and more generally on matters such as administration and company engagement, is rigorously scrutinised.
In respect of Pension Fund Administration, the number of contributing members increased during the year to 31 March 2010 and there were over 18,500 public sector employees contributing to the Funds. The number of pensioners or relatives of ex-contributors who were in receipt of a pension from the Funds in 2009/10 grew and by 31 March 2010 stood at just over 11,600.
I would wish to acknowledge the efforts of Dundee City Council’s Pension Section for their patience and diligence in ensuring the smooth implementation of the revised scheme, implemented on 1 April 2009, for the courteous manner in which they look after the pension needs of 39,123 contributors, pensioners and deferred pensioners. Further, I would like to thank all the Trustees of the Superannuation Sub-Committee and Sandy Flight, Janice Logan, Helen Hepburn and Stuart Norrie of the City Council’s Finance Department for their effort and assistance in managing the Tayside Superannuation Funds and, in particular, the Chair, Willie Sawers for his leadership of the Investment Sub-Committee.
Marjory Stewart, FCCA, CPFA Director of Finance Dundee City Council
Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 1 Contents
Page
Introduction 3
Members and Advisors 4
Fund Administration 5
Statement of Investment Principles 7
Main Fund Accounts 13
Transport Fund Accounts 15
Statement of Accounting Policies 17
Valuation and Distribution of Assets 18
Investment Performance Report 21
Principal Equity Holdings (as at 31 March 2010) 23
Appendices 24
2 Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 Dundee City Council Superannuation Funds
Introduction
Dundee City Council is the administering authority for both the Tayside Superannuation Fund (Main Fund) and the Tayside Transport Superannuation Fund (Transport Fund). The scheme covering these Funds is statutory, approved by the Inland Revenue and contracted out of S2P (the State Second Pension).
The Scheme is a “defined benefit scheme”. This means that the benefits to which members and their spouses are entitled are determined by final pensionable pay and pensionable service.
The Tayside Superannuation Fund is maintained for the benefit of its membership (including existing and deferred pensioners). This comprises the majority of Local Government employees within Dundee City Council, Perth and Kinross Council and Angus Council as well as 43 other “scheduled bodies” and “admitted bodies” (see appendix A). Teachers are not included in the Scheme as they have a separate, nationally established, statutory arrangement.
The Tayside Transport Superannuation Fund
As a result of the 1985 Transport Act, the employees of the former Dundee City Bus Unit which formed part of Tayside Regional Council’s Roads and Transport Department were transferred to a new company, Tayside Public Transport Company Ltd. A separate Superannuation Fund for those transferred employees was set up on 26 October 1986.
During 1991/92 Tayside Public Transport Company Ltd was subject to an employee buy-out. Any employees in post at the time of the buy-out may remain in the Fund, however, any new employees are not eligible for entry into the Fund.
Tayside Public Transport Company Limited was bought out by West Midlands Travel on 22 February 1997 and renamed as Travel Dundee, but this had no effect whatsoever on the Fund.
Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 3 Members and Advisors
Superannuation Investment Sub-Committee
Dundee City Council is the administering authority for the Funds. This responsibility is delegated through the Council’s Policy and Resources Committee to the Superannuation Investment Sub-Committee. Membership of the Sub-Committee as at 31 March 2010 is as noted below:
Councillors:
Bailie Willie Sawers (Chair) Bailie George Regan Cllr Kevin Keenan Cllr Jimmy Black Cllr Andy Dawson Bailie Rod Wallace
Representatives (non voting)
Mr S Rice (Tayside Full-time Trade Unions Officers Group) Mr R MacKay (UNISON) Mr R McKelvie (TGWU representing Travel Dundee Ltd)
Fund Managers
Baillie Gifford & Co (Appointed November 1992) Fidelity Pension Management (Appointed November 1997) Schroder Property Investment Management (Appointed July 1997) Goldman Sachs Asset Management (Appointed July 2003) Alliance Bernstein (Appointed July 2003)
Investment Advisers Hymans Robertson
Actuaries Barnett Waddingham (Appointed July 2004)
Custodian Northern Trust (Appointed 1 April 2002)
Auditors Audit Scotland
Corporate Governance Advisors Pension & Investment Research Consultants Limited (PIRC)
Performance Measurement Northern Trust
4 Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 Fund Administration
Membership
The Local Government Pension Scheme is voluntary and is open to all employees of the Scheduled and Admitted Bodies (see Appendix A).
Membership of the Tayside Funds at 31 March 2010 was:
Main Transport Total Fund Fund Fund
Contributing Members 18,425 91 18,516 Pensioners 11,229 421 11,650 Deferred Pensioners 7,019 91 7,110 Undecided and Frozen 1,841 6 1,847 38,514 609 39,123
Membership Funding
The Funds are financed by the contributions made by members and their employers as well as income earned from the investment of the Funds’ monies.
The contribution rates for 2009/2010 were as follows:
% of Basic Pay Main Fund Transport Fund Employees Employers Employer
All Employees 5.5% - 12% 18.5% £1,000,000
The employees’ contribution levels are now tiered based on a percentage of pensionable pay, whereas the employers’ contribution levels are reviewed every three years by the Funds’ actuaries as part of their actuarial valuation of the Funds. If the actuaries believe that a surplus is likely to materialise they will recommend a reduction in the employers’ contribution rate and if they believe a deficit is likely to materialise they will recommend an increase in the employers’ contribution rate.
Barnett Waddingham carried out an actuarial valuation as at March 2008. The result of the valuation for the two Funds were as follows:
Main Fund Transport Fund
Actuarial Value of Assets £1,558.3m £41.0m Actuarial Value as a percentage of Accrued Liabilities 97.6% 92.3%
Recommended Employers’ Contributions as a Percentage of Pensionable Payroll Main Fund and as a lump sum Transport Fund
Financial Year 2010/2011 18.5% £1,030,000 2011/2012 18.5% £1,060,000
Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 5 The common rate of contribution is the rate, which, in addition to the accumulated assets and contributions paid by members is sufficient to meet 100% of the liabilities of the Fund. This rate takes into account the deficit at 31 March 2010. The deficit is spread over the average remaining working lifetime of the existing members (approximately 12 years).
The Main Fund contribution rates following the 31 March 2008 valuation were calculated using the projected unit actuarial method.
The Transport Fund contribution rates following the 31 March 2008 valuation were calculated using the attained age actuarial method.
The main actuarial assumptions were as follows:
Rate of return on investments - Equities 7.8% per annum - Gilts 4.6% per annum - Bonds & Property 5.9% per annum - Discount Rate 7.1% per annum Rate of general pay increases 5.2% per annum Rate of increases to pension in payment 3.7% per annum Valuation of assets 6 monthly smoothed market related
Market Value of Funds
The market value of investments can go down, as well as up. The total market value of the investments that are under external management was £1,762.3m Main Fund and £42.9m Transport Fund as at 30 September 2010.
Additional Contributions
Under Inland Revenue rules, scheme members are permitted to make contributions towards retirement and death in service benefits in addition to those which they are required to make as members of the Local Government Pension Scheme. These contributions are known as AVCs and are treated separately from the scheme’s assets under arrangement with the Standard Life Assurance Company. They are not recorded in the accounts of the Tayside Funds since the AVC scheme works on defined contribution basis (ie benefit eventually derived will depend upon the amount of the contributions made, the performance of the investments made with these monies and the annuity rates at the point of retiral).
Pension Increases
Pension and deferred pensions are increased every year under the Pension (Increase) Act 1971 in line with movements in the Retail Prices Index, which reflects general inflation. Recent increases under this provision are:
2006 2.7% 2007 3.6% 2008 3.9% 2009 5.0% 2010 0.0%
6 Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 Dundee City Council
Tayside Superannuation Fund
Statement of Investment Principles
1 INTRODUCTION The Local Government Pension Scheme (Management and Investment of Funds) (Scotland) Regulations 2010 require administering authorities to prepare, maintain and publish a written Statement of Investment Principles. A Statement of Investment Principles should cover the policy on:
• The types of investments to be held • The balance between different types of investments • Risk, including the ways in which risks are to be measured and managed • The expected return on investments • The realisation of investments • The extent to which social, environmental or ethical considerations are taken into account in the selection, retention and realisation of investments • The exercise of the rights (including voting rights) attaching to investments • Stock lending • The extent of compliance with the six principles of investment practice set out in CIPFA publication “Investment Decision Making and Disclosure in Local Government Pension Scheme: A Guide to the Application of the Myners Principles” (December 2009).
2 ADMINISTRATION Tayside Superannuation Fund is administered by Dundee City Council in accordance with Section 24 of its Financial Regulations. Investment policy and decisions are delegated to the Superannuation Investment Sub-Committee of the Policy and Resources Committee which comprises six elected members and three observer members who represent Scheme members. Decisions are made based on advice from Council Officers and professional external advisers. The Sub-Committee meets quarterly.
3 REMIT OF SUB-COMMITTEE The full remit of the Sub-Committee is shown at Appendix B.
4 OBJECTIVE OF THE FUND The primary objective of the Tayside Superannuation Fund is to provide for scheme members’ pension and lump sum benefits on their retirement or for their dependants on death before or after retirement, on a defined benefits basis. There is limited discretion to vary these benefits. The investment principles of the Fund have been set to ensure that the Fund meets its objective. This document outlines the investment principles governing the investment policy of the Fund.
Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 7 5 INVESTMENT OBJECTIVE The Fund’s investment policy will be directed to achieving and maintaining a fully funded scheme and where practical a stable employers contribution rate. The latest actuarial valuation of the Fund is shown in Appendix A. The investment objective is to maximise the overall return whilst maintaining a prudent and balanced investment exposure.
6 TYPES OF INVESTMENT TO BE HELD To achieve its investment objectives, the Fund will utilise the following different types of investments: Equities, Managed Funds, Unit Trusts, Investment Trusts, Open Ended Investment Companies, Bonds, Underwriting, Property, Stock Lending, Cash, Commission Recapture and Currency. Derivatives may be used for efficient portfolio management or the reduction of risk. The Stock Lending programme is currently suspended.
7 INVESTMENT MANAGERS The Fund will employ Investment Managers who are judged most suitable to manage the assets of the Fund. The current Managers and their targets are as follows:
Manager Performance Target (on rolling 3 year basis)
Fidelity Investments (Global Equity 21%) Specific Benchmark + 1.5% pa (gross of fees) Baillie Gifford (Global Equity 12%) Specific Benchmark + 1.75 to 2% pa (net of fees) Baillie Gifford (UK Equity 12%) Specific Benchmark + 1.75 to 2% pa (net of fees) Schroder Property Management (12%) HSBC IPD Pooled Property Median + 0.75% pa Goldman Sachs AM (Bonds 12%) Specific Benchmark + 1.25% pa (gross of fees) Alliance Bernstein (Global Equity 25%) Specific Benchmark + 1.5 to 2% pa (net of fees) Fidelity Investments (Bonds 6%) Specific Benchmark + 1.5% pa (gross of fees)
These have been set to ensure a prudent and balanced investment exposure.
8 ADVISERS Investment Consultant Hymans Robertson Corporate Governance Pensions Investment Research Consultants Ltd (PIRC) Actuarial Barnett Waddingham
9 PERFORMANCE MEASUREMENT Quarterly and Annual performance figures are provided by Northern Trust and considered by the Sub-Committee.
10 CUSTODIAN Northern Trust is the sole custodian for the Fund’s assets.
11 AUDITORS Audit Scotland.
8 Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 12 BALANCE BETWEEN DIFFERENT TYPES OF INVESTMENTS A target has been agreed with each Manager which gives the Manager the balance between different types of investments. These provide an efficient balance between risk and return. These are detailed in Section 5.
The Investment Managers will be given full discretion over the choice of individual stocks and are expected to maintain a diversified portfolio.
13 RISK The Fund will seek to control risk through proper diversification of investments and Investment Managers. The tracking error of each manager’s portfolio is reported to the Sub-Committee quarterly. A Risk Register is being prepared for the Fund.
14 EXPECTED RETURN Investment Managers will be held accountable for their performance through a regime of performance measurement against targets. The Benchmark and performance target set for each Manager are intended to ensure that the total fund investment returns achieved are in excess of that assumed in the Actuarial Valuation.
15 REALISATION OF ASSETS The Fund will hold sufficient cash to meet the likely benefit payments. Additionally, the Fund will hold sufficient assets in liquid or readily realisable form to meet any unexpected cashflow requirements so that the realisation of assets will not disrupt the Fund’s overall policy. The Managers may determine whether or not to sell particular investments and which investments to sell to raise cash as and when required for meeting cash requirements notified to the Manager.
16 SOCIALLY RESPONSIBLE INVESTMENT (SRI) Whilst recognising its over-riding fiduciary duties the fund will continue to encourage its managers to engage on issues with companies in which it holds investment. The managers will be instructed to summarise this engagement activity in their quarterly Investment Reports. The key areas will continue to be Employee Care, Human Rights, Sustainability and the Environment. In addition the fund believes that environmental, social and corporate governance (ESG) issues can affect the performance of investment portfolios through time. So, where it is consistent with its fiduciary duty, the Fund would follow the principles below: Incorporate ESG issues into investment analysis and decision-making processes - this would require to be done by the investment managers and monitored by the Fund. Be an active owner and incorporate ESG issues into ownership policies and practices - this will be mainly achieved by exercising voting rights and the engagement activity of managers. Seek appropriate disclosure of ESG issues by entities in which the Fund is invested - this will be achieved through investment manager engagement. Promote acceptance and implementation of the Principles within the investment industry - this can be met by seeking the quarterly reports from investment managers.
Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 9 Work to enhance effectiveness in implementing the Principles - this will be both by working with its investment managers and other Pension Funds (particularly other Scottish Local Authorities).
Report on activities and progress towards implementing the Principles - a six monthly Report will continue to be prepared for the Sub-Committee.
17 CORPORATE GOVERNANCE The Fund will vote through its Fund Managers on all UK security holdings in accordance with the recommendations of its voting consultants. Where there are no specific recommendations, the Managers will be advised to use its best endeavours to vote in accordance with its voting guidelines.
The Fund is extending its current approach to Corporate Governance in the UK to include major overseas markets.
The Fund has appointed PIRC to advise it on Corporate Governance Policy.
18 CLASS ACTIONS
Both the fund and its custodian monitor class actions in relation to any investments it has held. It will participate in these where any additional benefit can be achieved.
19 COMPLIANCE
The Superannuation Investment Sub-Committee will take advice on general investment matters from the Director of Finance and external advisers as appropriate.
The Superannuation Investment Sub-Committee will review this Statement annually or sooner if there is a change in policy in any of the areas covered.
20 SCOTTISH MINISTERS’ GUIDANCE
The Fund adheres to the six principles within CIPFA publication “Investment Decision Making and Disclosure in the Local Government Pension Scheme: A Guide to the Application of the Myners Principles” (December 2009).
Transport Fund Statement of Investment Principles are also available on request.
10 Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 APPENDIX A
SUMMARY OF ACTUARIAL VALUATION AS AT 31 MARCH 2008
£m £m
Assets 1,558.3
Past Service Liabilities
Active Members 928.3 Deferred Pensioners 119.7 No 2 Fund Recharges 4.4 Pensioners 543.5
Value of Scheme Liabilities 1,595.9 Deficit 37.6
Funding Level 97.6%
Employers Contributions (% of Payroll)
Future Service Funding Rate 16.0
Deficit Contribution (12 years)* 1.0
Post-Valuation Events 1.5
Total 18.5
* This is in line with Para 7.4 of the Funding Strategy Statement
Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 11 APPENDIX B
REMIT OF SUPERANNUATION INVESTMENT SUB-COMMITTEE
The supervision and control of the operations and investments of the Tayside Superannuation Fund and Tayside Transport Superannuation Fund and any other fund of a similar nature set up by the Council in pursuance of Statutory powers including:- i monitoring investment performance of Fund managers. ii the review of investments and managers. iii the review of asset allocation in light of the Funds’ maturity profiles. iv the investment of new funds at the disposal of the Council. v ensuring appropriate custody arrangements are made for all Funds’ assets. vi approving the Funds’ Statement of Investment Principles at least annually and ensuring ongoing compliance with this. vii monitoring the managers’ implementation of the Funds’ Socially Responsible Investment policy. viii approving and reviewing the Funds’ annual Business Plan. ix arranging the appointment of external advisers as required. x considering any other matters which may affect the management or value of the Funds’ investment.
12 Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 Tayside Superannuation Fund Accounts
2008/2009 FUND ACCOUNT 2009/2010 £000 £000 £000
CONTRIBUTIONS AND BENEFITS Contributions receivable: 65,915 From employers 68,398 21,090 From members 22,925
87,005 91,323 5,901 Transfers in 9,853 Benefits payable: (43,325) Pensions (47,117) (15,789) Lump Sums (17,094) (59,114) (64,211) Payments to and on account of Leavers: (242) Refund of Contributions to Members (249) (100) Refund of Contributions to State Scheme (117) (2,928) Transfers Out (5,042)
(3,270) (5,408) (1,216) Administration Expenses (1,247)
29,306 Net Deposits from dealings with Members 30,310
RETURNS ON INVESTMENTS
Investment Income 7,629 Interest from Fixed Interest Securities 6,261 27,549 Dividends from Equities 26,480 4,606 Income from Index Linked Securities 3,354 5,843 Income Pooled Investment Vehicles 5,504 1,138 Interest on Cash Deposits 222 2,052 Other Income 2,210 (382,664) Change in Market Value of Investments 440,773 (4,361) Investment Management Expenses (6,143) (691) Taxation (705) (338,899) Net Returns on Investments 477,956 (309,593) NET INCREASE / (DECREASE) IN FUND DURING THE YEAR 508,266 1,550,505 OPENING NET ASSETS OF THE SCHEME 1,240,912 1,240,912 CLOSING NET ASSETS OF THE SCHEME 1,749,178
Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 13 Tayside Superannuation Fund Accounts
2009 NET ASSETS STATEMENT (AS AT 31 MARCH) 2010 £000 £000 £000
INVESTMENT ASSETS AT MARKET VALUE Listed Investments 277,144 - UK Equities 449,631 50,985 - UK Fixed Interest - Public Sector 38,938 24,286 - UK Fixed Interest - Other - 46,211 - UK Index Linked - Public Sector 56,786 1,042 - UK Index Linked - Other - 342,914 - Overseas Equities 515,164 29,259 - Overseas Open Ended Investment Companies 50,824 2,445 - Overseas Fixed Interest - Other 1,045 32,445 - Overseas Fixed Interest - Public Sector - 1,582 - Derivatives (Futures) 175 Unlisted Investments 96,941 - UK Open Ended Investment Companies 213,886 163,976 - Overseas Open Ended Investment Companies 243,980 107,740 - Property Unit Trusts 143,960 47,437 Cash Balances held by Fund Managers 23,803 8,159 Financial Debtors 6,282 1,232,566 1,744,474
FINANCIAL LIABILITIES (262) Derivatives (Futures) (94) (2,084) Other Financial Liabilities (6,408) (2,346) Total Financial Liabilities (6,502) 1,230,220 Net Financial Assets 1,737,972
CURRENT ASSETS 3,133 Contributions Due from Employers 3,093 2,235 Sundry Debtors 4,156 7,947 Cash and Bank 8,860 13,315 16,109 LESS CURRENT LIABILITIES (2,623) Sundry Creditors (4,903)
10,692 NET CURRENT ASSETS 11,206
1,240,912 NET ASSETS 1,749,178
Marjory Stewart, FCCA, CPFA Director of Finance Dundee City Council
This is an extract from the Council’s full Annual Accounts which have been audited by the Council’s Auditor, Audit Scotland and given an Unqualified Audit Certificate.
14 Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 Tayside Transport Superannuation Fund Accounts
2008/2009 FUND ACCOUNT 2009/2010 £000 £000 £000
CONTRIBUTIONS AND BENEFITS Contributions receivable: 900 From employers 1,000 105 From members 110 1,005 1,110 - Transfers In - Benefits payable: (1,738) Pensions (1,808) (524) Lump Sums (263) (2,262) (2,071) Payments to and on account of Leavers: - Refund of Contributions - - Transfers Out (36) - (36)
(42) Administration Expenses (36)
(1,299) Net Withdrawals from dealings with Members (1,033)
RETURNS ON INVESTMENTS Investment Income 440 Interest from Fixed Interest Securities 205 472 Dividends from Equities 486 283 Income from Index Linked Securities 234 125 Income Pooled Investment Vehicles 90 38 Interest on Cash Deposits 8 2 Other Income - (7,708) Change in Market Value of Investments 9,743 (128) Investment Management Expenses (114) (7) Taxation (6) (6,483) Net Returns on Investments 10,646
(7,782) NET INCREASE / (DECREASE) IN FUND DURING THE YEAR 9,613 40,451 32,669 OPENING NET ASSETS OF THE SCHEME 32,669 CLOSING NET ASSETS OF THE SCHEME 42,282
Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 15 Tayside Transport Superannuation Fund Accounts
2009 NET ASSETS STATEMENT (AS AT 31 MARCH) 2010 £000 £000 £000
INVESTMENT ASSETS AT MARKET VALUE Listed Investments 6,335 - UK Equities 9,800 4,609 - UK Fixed Interest - Public Sector 3,285 2,195 - UK Fixed Interest - Other - 4,177 - UK Index Linked - Public Sector 4,791 94 - UK Index Linked - Other - 7,812 - Overseas Equities 12,167 221 - Overseas Fixed Interest - Other 88 2,933 - Overseas Fixed Interest - Public Sector - 133 - Derivates (Futures) 14 Unlisted Investments 283 - UK Open Ended Investment Companies 8,487 289 - Overseas Open Ended Investment Companies 172 2,311 - Property Unit Trusts 2,356 1,346 Cash Balances held by Fund Managers 777 32,738 41,937
FINANCIAL LIABILITIES (24) Derivatives (Futures) (8) (100) Other Financial Liabilities (65) (124) Total Financial Liabilities (73) 32,614 Net Financial Assets 41,864
CURRENT ASSETS 8 Sundry Debtors 103 71 Cash and Bank 343 79 446
LESS CURRENT LIABILITIES (24) Sundry Creditors (28)
55 NET CURRENT ASSETS 418 32,669 NET ASSETS 42,282
Marjory Stewart, FCCA, CPFA Director of Finance Dundee City Council
This is an extract from the Council’s full Annual Accounts which have been audited by the Council’s Auditor, Audit Scotland and given an Unqualified Audit Certificate.
16 Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 Superannuation Funds Accounts Statement of Principal Accounting Policies
1 Basis of Preparation The accounts for the Funds have been prepared in accordance with Statement of Recommended Practice (SORP): “The Financial Reports of Pension Schemes” and the Code of Practice on Local Authority Accounting published by the Chartered Institute of Public Finance and Accountancy. The accounts summarise the transactions and net assets of the Funds for the financial year to 31 March 2009. They do not take account of liabilities topay pensions and other benefits in the future.
2 Investments Investments are included at market values, which are assessed as follows:- a UK quoted securities are valued at middle market prices at close of business on the last working day of the financial year. b Overseas securities are valued at middle market prices from the relevant overseas stock exchanges converted at closing rates of exchange on the last day of the financial year. c Unlisted investments, which comprise the Fund Manager’s Unit Trusts and Open Ended Investment Companies, are valued at middle market prices on the last working day of the financial year as supplied by the Fund Manager.
3 Debtors and Creditors The accounts have been prepared on an accruals basis; that is income and expenditure is included as it is earned or incurred, not as it is received or paid, except for Transfer Values which are included when they are paid or received.
4 Investment Income Income from fixed interest, index linked securities and other interest receivable is taken into account on an accruals basis. Income from all other Marketable Securities is taken into account on the date when stocks are quoted ex-dividend.
5 Foreign Currency Income and expenditure arising from transaction denominated in a foreign currency should be translated into £ sterling at the exchange rate in operation on the date on which the transaction occurred. Where the transaction is to be settled at a contracted rate that rate should be used.
6 Investment Management Expenses Investment Management expenses consist of direct charges in line with Management Agreements, Management Charges levied on pooled funds, overseas charges and non-recoverable withholding tax, less Brokers’ commission rebate.
7 Acquisition Cost Any acquisition cost of investments, are included in the Book Cost of the investment.
Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 17 Valuation and Distribution of Assets of the Superannuation Funds
Valuation Main Fund Transport Fund 2008/09 2009/10 2008/09 2009/10 £m £m £m £m Value at Start of Year 1,550.5 1,240.9 40.5 32.7 New Cash Inflow/(Outflow) 29.3 30.3 (1.3) (1.0) Appreciation/(Depreciation) during the year (338.9) (478.0) (6.5) (10.6) Value at End of Year 1,240.9 1,749.2 32.7 42.3 2009 1,240.9 2009 32.7 2009 1,240.9 2009 32.7 2010 1,749.2 2010 42.3 2010 1,749.2 2010 42.3
Main Fund Five Year Movement Main Fund Five Year Movement 2,000 2,000 1,800 1,800 1,600 1,6001,400 1,4001,200 1,2001,000 1,000800 800600
Value of Fund £m Value 600400 Value of Fund £m Value 400200 200 - - 2006 2007 2008 2009 2010 2006 Year2007 Ending 200831st March2009 2010 2010 Year Ending 31st March 2010
Transport Fund Five Year Movement 50 Transport Fund Five Year Movement 50 40 40 30 30 20 20 10 Value of Fund £m Value 10 - Value of Fund £m Value - 2006 2007 2008 2009 2010 Year Ending 31st March 2010 2006 2007 2008 2009 2010 Year Ending 31st March 2010
18 Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 Main Fund
Valuation (£m) and Distribution (%) 31.03.09 31.03.10 Sector £m % £m % MainUK Fund Equities 282.6 22.8 458.0 26.2 UK Bonds 215.5 Valuation 17.4 (£M) and 206.0Distribution (%) 11.8 Overseas Bonds 36.5 31/03/2009 2.9 96.5 31/03/2010 5.5 SectorOverseas - Equities 533.0 43.0£M 807.9% 46.2£M % UK Equities 282.6 22.8 458.0 26.2 Property Unit Trusts 107.8 8.7 144.0 8.2 UK Bonds 215.5 17.4 206.0 11.8 OverseasActive Bonds Currency 1.6 36.5 0.1 2.9 2.0 96.5 0.1 5.5 OverseasCash - EquitiesBalance Held By Managers 47.4 533.0 3.8 43.0 23.8 807.9 1.4 46.2 PropertyNet Unit Current Trusts Assets 16.5 107.7 1.3 11.08.7 144.0 0.6 8.2 Active Currency 1,240.9 100.0 1.6 1,749.20.1 100.0 2.0 0.1 Cash Balance Held By Managers 47.5 3.8 23.8 1.4 Net Current Assets 16.5 1.3 11.0 0.6 1,240.9 100.0 1,749.2 100.0
Main Fund % Holding by Investment Category 2009/10
50.0
45.0
40.0
35.0
30.0
25.0 2009
Percentage 20.0 2010
15.0
10.0
5.0
0.0 Trusts Trusts UK Bonds UK Equities Property Unit Active Currency By Managers Overseas Bonds Net Current Assets Net Current Cash Balance Held
Overseas - Equities Catergories
Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 19 Transport Fund Valuation (£m) and Distribution (%) 31.03.09 31.03.10 Sector £m % £m % UK Equities 6.6 20.2 10.2 24.1 TransportUK FundBonds 11.2 34.2 16.1 38.1 Overseas Bonds 3.3Valuation (£M) 10.1 and Distribution 0.1 (%) 0.2 31/03/2009 31/03/2010 SectorOverseas - Equities 7.8 £M 23.9 % 12.2 £M 28.8 % UK EquitiesProperty Unit Trusts 2.3 6.6 7.0 20.2 2.4 10.2 5.7 24.1 UK BondsActive Currency 0.2 11.2 0.6 34.3 0.2 16.1 0.5 38.1 OverseasCash Bonds Balance Held By Managers 1.4 3.3 4.3 10.1 0.8 0.1 1.9 0.2 Overseas - Equities 7.8 23.9 12.2 28.8 PropertyNet Unit Current Trusts Assets (0.1) 2.3 (0.3) 7.0 0.3 2.4 0.7 5.7 Active Currency 32.7 0.2 100.0 0.6 32.7 0.2 100.0 0.5 Cash Balance Held By Managers 1.4 4.3 0.8 1.9 Net Current Assets -0.1 0.3- 0.3 0.7 32.7 100 42.3 100
Transport Fund % Holding by Investment Category 2009/10 45.0
40.0
35.0
30.0
25.0
20.0
15.0 2009 2010 Percentage 10.0
5.0
-
-5.0 UK Bonds UK Equities Active Currency Overseas Bonds Net Current Assets Net Current Overseas - Equities Property Unit Trusts Trusts Property Unit
Catergories Cash Balance Held By Managers
20 Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 Investment Performance Report
Introduction
The proportion of the funds under management attributable to each Fund Manager at 31 March 2010 along with comparable 2009 figures was as follows:
Main Fund 2009 2010 £m % £m % Baillie Gifford & Co 288.6 23.4 438.0 25.1 Fidelity Pension Management 355.4 28.8 504.2 28.9 Goldman Sachs AM 164.5 13.4 198.9 11.4 Alliance Bernstein 285.1 23.1 448.6 25.7 Schroder Properties Limited 129.3 10.5 148.3 8.5 Derivatives Futures 1.6 0.1 0.2 0.0 Financial Debtors 8.1 0.7 6.3 0.4 1,232.6 100.0 1,744.5 100.0
Purchases during year 608.7 746.8 Sales during year 534.5 672.5
Transport Fund 2008 2009 £m % £m % Schroder Properties Limited 2.8 8.5 2.4 5.7 Goldman Sachs AM 14.9 45.5 16.8 40.1 Baillie Gifford 15.0 45.7 22.7 54.2 Derivatives Futures 0.1 0.3 0.0 0.0 32.8 100.0 41.9 100.0
Purchases during year 17.6 13.5 Sales during year 17.3 14.0
Fidelity has 2 mandates - bonds and equities. Baillie Gifford and Alliance Bernstein have global equity mandates and Goldman Sachs Asset Management solely manages bonds. Each manager has discretion within overall benchmarks set by the funds to determine the stocks and markets they invest in to attempt to meet their performance targets.
Market Value of Funds
The market value of investments can go down, as well as up. The total market value of the investments that are under external management was £1,762.3m Main Fund and £42.9m Transport Fund as at 30 September 2010.
Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 21 Performance Returns
On a quarterly basis, the Council’s Superannuation Investment Sub-Committee convenes to review the performance of the investments made with the Funds. In that connection, the Council engages Northern Trust to produce performance measurement statistics for the Main Fund and the Transport Fund. From 1 July 2003, the Funds introduced their own specific benchmark to assess performance.
In the financial year to 31 March 2010 the benchmark for the Main Fund was a gain of 37.7% and for the Transport Fund 29.7%. Individual managers had their own benchmark within this.
22 Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 Principal Equity Holdings (Top Ten By Value) as at 31 March 2010
MAIN FUND AND TRANSPORT COMBINED
Investment Value % of Total Activities
(£000) Equity Holding HSBC Holdings PLC 28,095 2.2 Banks Vodafone Group PLC 19,719 1.5 Telecommunication Services BG Group 18,832 1.4 Oil and Gas Royal Dutch Shell 18,145 1.4 Oil and Gas Rio Tinto 18,123 1.4 Mining Glaxo Smithkline PLC 16,730 1.3 Pharmaceuticals BHP Billiton PLC 16,351 1.3 Mining British Amer Tobacco Ord 14,969 1.2 Tobacco Tesco Ord 13,779 1.1 Food Retailer Barclays Ord 12,106 0.9 Banks 176,849 13.7
Total Value of Equities £1.291m
Total Value of Funds £1,791.5m
Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 23 APPENDIX A
SCHEDULED AND ADMITTED BODIES AS AT 31 MARCH 2010
Scheduled Bodies: Angus College Angus Council Dundee City Council Dundee College Perth & Kinross Council Perth College Scottish Police Services Authority TACTRAN Tay Road Bridge Joint Board Tayside Contracts Tayside Fire Joint Board (Civilians) Tayside Joint Police Board (Civilians) Tayside Valuation Joint Board Visit Scotland
Admitted Bodies: Abertay Housing Association Balnacraig School Carnoustie Golf Links Carolina House Trust Dorward House Dovetail Enterprises Dundee Citizens’ Advice Bureau Dundee Contemporary Arts Ltd Dundee Leisure Trust Dundee Science Centre Dundee Society for Visually Impaired People Dundee University (formerly Duncan of Jordanstone College of Art) Dundee Voluntary Action Forfar Day Care Committee Forfarshire Society for the Blind Highlands & Islands Airports Ltd Mitie PFI Ltd Montrose Link Trust Montrose Port Authority Perth & Kinross Countryside Trust Perth & Kinross Leisure Perth & Kinross Society for the Blind Perth Citizens’ Advice Bureau Perth Theatre Co Ltd Pitlochry Leisure Company Robertsons Facilities Management Rossie School Scottish Commission for Regulation for Care Scottish Social Services Council Tayside Business Gateway Tayside Community Justice Authority Travel Dundee University of Abertay, Dundee University of Abertay, Students Association
24 Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 APPENDIX B
CONTACTS
Contacts within Dundee City Council Enquiries relating to investment matters should be addressed to: Sandy Flight, Head of Financial Services or Karen Beatt, Exchequer Officer Dundee City Council Tayside House, Floor 4 28 Crichton Street Dundee DD1 3RF (01382) 433559 or 433196 Enquiries regarding individual benefits, contributions or pensions in payment or requests for further information should be addressed to: Bob Hassall Pensions Administration Manager Dundee City Council Floor 7, City House Overgate Centre Dundee (01382) 435474 Enquiries regarding publications, please visit www.dundeecity.gov.uk/pensions
Other Contacts In the event of a dispute, members have recourse initially to an internal disputes procedures and if still not satisfied to the Scottish Minister and in addition may contact the following bodies. The Occupational Pensions Advisory Service (OPAS) 11 Belgrave Road London SW1V 1RB This organisation is available to assist members and beneficiaries of occupational pension schemes in connection with difficulties, which they have been unable to resolve with the trustees or administrators of their scheme. For problems that cannot be settled through OPAS, a Pensions Ombudsman (based at the same address as OPAS) has been appointed. The Ombudsman has power to investigate and determine complaints or disputes of fact or law in relation to occupational pension schemes. The Ombudsman can only become involved after a dispute has been to the Scottish Ministers. Registry of Occupational Pension Schemes PO Box 1NN Newcastle upon Tyne NE99 1NN The Registry acts as a central tracing agency to help individuals keep track of any benefits they may have in previous employers’ pension schemes. The Council’s Scheme and the names and addresses of all current and previous participating employers have been registered with the Registrar.
Annual Report and Accounts of the Tayside Superannuation Funds 2009-2010 25 For more information please contact: � Director of Finance � Tayside House � Crichton Street � Dundee DD1 3RF � Tel: 01382 433555 Fax: 01382 433045 � Email: [email protected] � www.dundeecity.gov.uk/pensions �
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