Page 1

WEST MIDLANDS PENSION FUND

ANNUAL REPORT & ACCOUNTS 2012


.


WEST MIDLANDS PENSION FUND

CONTENTS

CHAIR’S AND DIRECTOR’S STATEMENTS 3 Councillor Tersaim Singh, Chair’s Statement 4 Geik Drever, Director’s Statement

STATUTORY INFORMATION 5 6 9 10

Superannuation Committee Participating Employers of the Fund Member Training Report Introduction to the Fund

SENIOR MANAGEMENT REPORTS 11 13 14 15 17 18

Operations Report Financial Services Report Communications, Marketing and Business Report Investment Policy and Performance Report Top Twenty Equity Holdings Top Twenty Indirect Holdings

STATISTICAL INFORMATION AND RISK MANAGEMENT 19 Overall Fund Statistical Information 25 Risk Management 26 Corporate Social Responsibility and Corporate Governance 28 Compliance with the Myners’ Report 29 Myners’ Principles and the Compliance Report 31 Statement of the Consulting Actuary

FINANCIAL STATEMENTS 32 Independent Auditor’s Report to the Members of Wolverhampton City Council 33 Statement of Responsibilities 34 Fund Account 35 Net Assets Statement 36 Notes to the Fund Accounts 52 Annual Governance Statement 2011/2012

APPENDICES 56 Administration and Investment Statements

October 2012 • Report and Accounts • Page 2


WEST MIDLANDS PENSION FUND THE CHAIR’S AND DIRECTOR’S STATEMENTS

CHAIR’S STATEMENT COUNCILLOR TERSAIM SINGH CHAIR OF THE SUPERANNUATION COMMITTEE

Having announced his departure in September 2011, the West Midlands Pension Fund’s longstanding Director of Pensions, Brian Bailey, retired from his role in March 2012, and I would like to take this opportunity on behalf of the Committee to pay tribute to Brian, and to thank him for his dedication to serving the Fund and its stakeholders throughout his years at the helm.

During 2011/2012 the Fund, UBS Global Asset Management and Squire Sanders produced a joint guide to assist elected representatives, officers and advisors in the interpretation and implementation of the CIPFA Knowledge and Skills Framework. The guide is intended as a contribution to encouraging the development of knowledge and skills across LGPS funds.

Under Brian’s watchful eye and guidance, the Fund has gone from strength to strength and is left with a strong framework of policies in place for his successor, Geik Drever, and her team to implement and build upon.

During the year, the Fund was recognised at the Investors in Excellence awards for the achievements made within the LEAN Programme. The purpose of the LEAN Process Review Programme is to continuously improve the service provided in order to improve the efficiency of the service and the experiences of Fund members and staff alike. The judges were impressed by the capacity savings that had been achieved over a relatively short period of time which everyone across the Fund helped achieve.

Geik joined the Fund in March 2012 from Lothian Pension Fund where she was the Head of Pensions and Investments, and I would like to wish Geik well in her new role. I look forward to working closely with her in the management of the Fund. There have been some recent changes to the membership of the Committee, with new trustees being appointed following the May 2012 local elections. A key area of focus for 2012/2013, will be the availability of structured training, designed to support all trustees in the execution of their roles. Particularly pertinent subjects over the coming year will be the Fund’s investment strategy, auto-enrolment, the 2013 actuarial valuation, planning for implementation of the new LGPS 2014 and engagement with employers participating in the Fund. The above topics represent substantial projects for the Fund and the LGPS, as a whole, over the next two years with the need for affordability and sustainability being paramount at a local and national level.

Page 3 • Report and Accounts • October 2012

Investment markets remain nervous over the outcome of the eurozone sovereign debt crisis and the potential long-term implications for investors. While most economic commentators expect this uncertainty to continue for some time yet, I am sure that the Fund’s investment strategy will remain robust through these difficult times. Investment returns are likely to be lower during this period and this may have implications for future contribution rates. The Fund’s trustees and officers are dedicated to engaging with employers, members and other stakeholders to ensure effective and efficient service delivery, and to support them through the challenges that lie ahead.


WEST MIDLANDS PENSION FUND THE CHAIR’S AND DIRECTOR’S STATEMENTS

DIRECTOR’S STATEMENT GEIK DREVER DIRECTOR OF PENSIONS

Having joined the Fund in March 2012, I would firstly like to pay tribute to my predecessor, Brian Bailey, who retired on the 31 March 2012. Brian dedicated many valuable years to both the administering authority, as Director of Finance, and to the Fund in his capacity as Director of Pensions. Under Brian’s direction, a strong framework of policies has been developed, and it is an exciting challenge for me and my team to continue with their implementation and to drive the Fund forward in challenging times. A key factor in the Fund’s service design, delivery and outcomes is customer focus – over the coming years, efforts will be concentrated on engagement with members, employers and other stakeholders in order to ensure that the Fund delivers an efficient, effective and high standard of service that meets the needs of all parties.

In order to support the Fund’s trustees in their specialist role, some of whom are newly appointed following the May 2012 local elections, a programme of training and development is planned during 2012/2013 through structured and focussed events, which will further enhance the trustees’ knowledge and understanding and assist with their overall responsibility of managing the Fund. Specific focus will be on current practices and policies along with future strategic plans for the Fund, and also the implementation of the new LGPS 2014 arising from the comprehensive review of public sector pension arrangements. Over the next two years, preparation for and the implementation of the LGPS 2014 scheme will be a key project for our team.

Planning and preparation for the forthcoming 2013 actuarial valuation will form the emphasis in engagement with the Fund’s employers, as crucial factors including auto-enrolment, cash flow, affordability and funding strategies will be debated and implemented.

October 2012 • Report and Accounts • Page 4


WEST MIDLANDS PENSION FUND STATUTORY INFORMATION

SUPERANNUATION COMMITTEE 2011/2012

WOLVERHAMPTON CITY COUNCIL

DISTRICTS

Councillor T Singh* Chair Councillor J Yardley* Vice-Chair Councillor TH Turner* Councillor P Bilson* Councillor N Clarke Councillor S Evans Councillor M Heap Councillor M Holdcroft Councillor K Inston Councillor S Jevon Councillor A Johnson Councillor Mrs S Samuels

Councillor V Silvester* Councillor Z Ali* Councillor S Bains* Councillor F Robinson* Councillor A W Martin* Councillor A Taylor*

Sandwell MBC Walsall MBC Coventry City Council Birmingham City Council Solihull MBC Dudley MBC

OBSERVER MEMBERS

*Denotes member of Investment Advisory Sub-Committee

J Daly M Clift I Smith M Cantello

ADMINISTERING AUTHORITY OFFICERS

MAIN EXTERNAL ADVISERS & SERVICE PROVIDERS

Delivery Civic Centre, St. Peter’s Square, Wolverhampton WV1 1SL

Investments P Gale Hermes GPE E A Owens Mercer Investment Consulting Ltd Hymans Robertson (from January 2012)

S Warren S Kembrey P Main B Baileyˆ G Drever J Saundersˆ N Perrins P Wild M Crutchley

Chief Executive Chief Legal Officer Section 151 Officer Director of Pensions (retired 31 March 2012) Director of Pensions (joined 1 March 2012) Chief Investment Officer (retired July 2012) Chief Pensions Services Manager Head of Financial Control Head of Communications, Marketing & Business Services

GMB Unite Unite/Amicus Unison

Property CBRE Global Investors J Fender John Fender Consultancy Pension Scheme Registration No. 10079176 Actuary Mercer Human Resource Consulting Ltd Custodian of Assets HSBC Global Investment Services Banker National Westminster Bank plc Auditor PricewaterhouseCoopers

HMRC REFERENCES

SCON number ECON number PSTR number PSTR sub-number

AVC Providers Prudential Assurance Company Ltd Equitable Life Assurance Society

S2700178F E3900002R 00329946RE 49/16109

Corporate Governance Pensions Investment Research Consultants (PIRC)

SUPERANNUATION JOINT CONSULTATIVE PANEL (JCP)

The subjects considered by the panel during 2011/2012 include the following: – Membership of the Fund

– Fund events and communication with members

– Corporate governance activity

– Investment management

– Implications of the Hutton review

– Admitted bodies’ policy

– Application for admission agreements

– LGPS 2014 regulations

Page 5 • Report and Accounts • October 2012


WEST MIDLANDS PENSION FUND STATUTORY INFORMATION

PARTICIPATING EMPLOYERS OF THE FUND AT 31 MARCH 2012

SCHEDULED BODIES District councils Birmingham City Council Coventry City Council Dudley Metropolitan Borough Council Sandwell Metropolitan Borough Council Solihull Metropolitan Borough Council Walsall Metropolitan Borough Council Wolverhampton City Council Universities Birmingham City University Coventry University University of Wolverhampton (The) CoIleges of further education and higher education Birmingham Metropolitan College Bournville College of Further Education Cadbury Sixth Form College City College, Birmingham City College, Coventry City of Wolverhampton College Dudley College of Technology Halesowen College Henley College Hereward College Joseph Chamberlain College King Edward VI College Sandwell College Solihull College Solihull Sixth Form College South Birmingham College Stourbridge College University College Birmingham Walsall College Wolverhampton College Major employers Centro Staffordshire & West Midlands Probation Trust West Midlands Fire & Civil Defence Authority West Midlands Police Authority Other bodies Alderbrook School Arden Academy Trust ARK Schools Aston Manor Academy Balsall Parish Council (no active members) Barr Beacon School Trust Bartley Green School Bickenhill Parish Council (no active members) Black Country University Technical College Blue Coat Church of England Academy Limited (The) Castle Bromwich Parish Council Central Learning Partnership Trust (Heath Park Academy) Chelmsley Wood Town Council City of Wolverhampton Academy Trust Collegiate Academy Trust (The) Coventry and Solihull Waste Disposal Company Ltd CTC Kingshurst Academy Deanery Church of England School E-ACT Heartlands Academy E-ACT North Birmingham Academy E-ACT Shenley Academy E-ACT Willenhall Academy Earls High School (The) Fairfax School

Finham Park School Fordbridge Parish Council Grace Academy Hall Green Secondary School Harborne Academy Hillcrest School and Sixth Form Centre High Arcal School Academy Trust (The) Heart of England School Holly Hall Academy (The) Holyhead School John Henry Newman Catholic College (The) Joseph Leckie Academy Trust King Edward VI Aston School* King Edward VI Camp Hill School for Boys* King Edward VI Camp Hill School for Girls* King Edward VI Five Ways School* King Edward VI Handsworth School* (*became academies with effect from 1 August 2011) King Edward VI Sheldon Heath Academy Kings Norton Girls’ School and Language College Kingshurst Parish Council Kingswinford School and Science College (The) Langley School Light Hall School Lode Heath School Lordswood Girls School and Sixth Form Centre Meriden Parish Council Ninestiles Academy Trust Oldbury Academy Ormiston Forge Academy Ormiston George Salter Academy Ormiston Sandwell Community Academy Park Hall Academy Park Hall Infant Academy Park Hall Junior Academy Plantsbrook School Queen Mary’s High School (Walsall) Q3 Academy Queen Mary's Grammar School (Walsall) Rookery School RSA Academy Ryder Hayes Academy Trust Sandwell Academy Trust Limited Sandwell Homes Limited Sandwell Leisure Trust Shelfield Community Academy Shire Oak Academy Trust Sidney Stringer Academy Trust Smiths Wood Parish Council Solihull Community Housing Limited St Patrick’s Church of England Primary Academy Streetly Academy (The) Sutton Coldfield Grammar School for Girls Academy Trust Tile Hill Wood School and Language College Tudor Grange Academy Solihull Trust Valuation Tribunal Service (formerly Birmingham Valuation Tribunal) Walsall City Academy Trust Limited Walsall College Academies Trust (The Mirus Academy) Westwood Academy (The) Whitley Academy Windsor High School and Sixth Form Wood Green Academy Woodlands Academy Wolverhampton Homes October 2012 • Report and Accounts • Page 6


WEST MIDLANDS PENSION FUND STATUTORY INFORMATION

PARTICIPATING EMPLOYERS OF THE FUND AT 31 MARCH 2012

COMMUNITY OF INTEREST ADMISSION BODIES With active members ACUA Limited Age Concern Birmingham Age Concern Birmingham (VSOP) Age Concern Wolverhampton Aston University BID Black Country Consortium Limited Black Country Museum Trust Limited (The) Black Country Partnership NHS Foundation Trust Bloomsbury Local Management Organisation Limited BME United Limited Brownhills Community Association Limited Bushbury Hill Estate Management Board Limited Chuckery Tenant Management Organisation Limited Coventry & Solihull Waste Disposal Company Limited Coventry Heritage & Arts Trust Coventry Law Centre Ltd Coventry Sports Trust Limited CSW Partnership Limited Delves East Estate Management Dovecotes TMO Edith Cadbury Nursery School Family Care Trust Friendship Care and Housing Limited (formerly Beechdale) Heart of England Care Home Start Northfield Home Start Stockland Green/Erdington Home Start Walsall Leamore Residents Association Leisure & Community Partnership Limited Lieutenancy Services (West Midlands) Limited Life Education Centres West Midlands Light House Media Centre Manor Farm Community Association Marketing Birmingham Limited Midland Heart Ltd Milbury Community Services Millennium Point Trust Museum of British Road Transport Trust (Coventry) Murray Hall Community Trust Limited New Park Village Tenant Management Organisation Northern Housing Consortium Limited Optima Community Association Palfrey Community Association Penderels Trust Limited (The) Pool Hayes Community Association Riverside Housing Association Limited (formerly Riverside Group Limited) Sandwell Arts Trust Sandbank Tenant Management Sandwell Community Caring Trust (The) Sickle Cell and Thalassaemia Support Project Solihull Care Limited Solihull Care Trust St Columba's Day Care Centre Steps to Work (Walsall) Ltd Titan Partnership University of Warwick Voyage Care Limited (formerly Milbury Community Services Limited) Walsall Housing Group Limited Watmos Community Homes West Midlands Transport Information Services Limited Whitefriars Housing Group Limited Wildside Activity Centre Wolverhampton Family Information Service Limited Page 7 • Report and Accounts • October 2012

Wolverhampton Grammar School Wolverhampton Network Consortium Wolverhampton Voluntary Sector Council Without active members Adoption Support (terminated 31 March 2011) All Saints Haque Centre Aquarius Action Projects Asian Welfare Centre Asian Women's Adhikar Association (AWAAZ) Belgrade Theatre Trust (Coventry) Limited Bilston and Ettingshall SureStart Birmingham and Solihull Connexions Services Birmingham and Solihull Learning Exchange (The) Birmingham Heartlands Development Corporation Black Business in Birmingham Black Country Connexions Black Country Museum Development Trust (The) BXL (terminated 10 February 2012) Cannon Hill Trust (now Midlands Arts Council) Cerebral Palsy Midlands Community Justice National Training Organisation Coventry Voluntary Service Council CV One Limited (terminated 31 December 2011) Druids Heath TMO Dudley Zoo Development Trust East Birmingham Family Service Unit Heath Town Estate Management Board (terminated 4 August 2008) Job Change Limited Metropolitan Authorities Recruitment Agency (METRA) Moseley and District Churches Housing Association Limited National Urban Forestry Unit National Windows (Homes Improvements) Limited Newman College (terminated 31 March 2008) Relate RM Education (terminated 19 September 2011) Sandwell Regeneration Company Limited (terminated 31 March 2010) Select Windows (Homes Improvements) Limited Serco Limited (Stoke) Smethwick Asra Limited Solihull Community Caring Trust South Birmingham Family Services Unit Springfield/Horseshoe Housing Management Co-operative Ltd St Basil's Centre Sunderland ARC Limited Target Excel pic (Walsall MBC) The Chris Laws Day Care Centre for Older People (terminated 30 November 2010) TSB Bank plc (formerly Birmingham Municipal Bank) University of Birmingham Walsall Enterprise Agency Limited Walsall Regeneration Company Limited Wednesbury Action Zone West Bromwich Afro-Caribbean Resource Centre (terminated 31 October 2008) West Midlands Councils (formerly West Midlands Leaders Board) West Midlands (West) Valuation Tribunal West Midlands Examination Board (The) West Midlands Local Authorities Employers' Organisation Wolverhampton Community Safety Partnership (terminated 30 April 2009) Wolverhampton Development Corporation Limited Wolverhampton Race Equality Council


WEST MIDLANDS PENSION FUND STATUTORY INFORMATION

PARTICIPATING EMPLOYERS OF THE FUND AT 31 MARCH 2012

TRANSFEREE ADMISSION BODIES (BEST VALUE) With active members Agilisys Limited Alliance in Partnership - Camp Hill Alliance in Partnership - Ernesford Grange Alliance in Partnership - President Kennedy Alliance in Partnership - Stoke Park Amey Highways Limited Amey LG Limited APCOA Parking (UK) Limited APCOA Parking (UK) Limited -Solihull Balfour Beatty Workplace Limited (Birmingham) Balfour Beatty Workplace Limited (Coventry) BAM Construct UK Limited Bespoke Cleaning Services Bovis Lend Lease Management British Telecom pic Capita IT Services Limited Creative Support Limited Enterprise Managed Services Ltd - Solihull Enterprise (AOL) Limited (Shrewsbury) Enterprise (AOL) Limited (Shropshire) Enterprise (AOL) Limited (Telford and Wrekin) Enterprise Managed Services (Wolverhampton) Galliford (UK) Limited GF Tomlinson (Birmingham) Housing 21 lcare (GB) Limited Initial Catering Services Ltd (Rowley) Initial Catering Services Ltd (Smethwick) Integral UK Limited KGB Cleaning & Support Services Limited Lawrence Cleaning Limited Leisure Living Limited Mears Group plc Mears Limited Mitie PFI Limited Mouchel Limited New Heritage Regeneration Limited NSL Limited NSL Limited (Solihull) Pell Frischmann Consultants Limited Premier Security Services Ltd Quadron Services Limited Redcliffe Catering Limited (Bordesley Green Girls School) Regent Office Care Limited (COWAT) Regent Office Care Limited (Henley College) Regent Office Care Limited (Hereward College) Serco Limited Serco Limited (Sandwell) Service Birmingham Limited Sodexo Limited Tarmac Limited Taylor Shaw Limited (COWAT) Taylor Shaw Limited (St Albans) Thomas Vale Construction plc Willmott Dixon Partnership Limited (North Contract) Willmott Dixon Partnership Limited South Contract)

Without active members Accord Operations (Birmingham) Alliance in Partnership - Aston APCOA Parking (UK) Limited – Solihull (terminated 30 September 2011) AWG Facilities Services Limited Birmingham Accord Limited Burrowes Street Tenant Management Organisations Limited Central Parking Systems Forest Community Association Interserve Project Services Limited (Smethwick Campus) JDM Accord Limited (Shrewsbury & Atcham) JDM Accord Limited (Shropshire) JDM Accord Limited (Tamworth) JDM Accord Limited (Telford & Wrekin) Kite Food Services Limited Liberata UK Limited Methodist Homes for the Aged (terminated 31 March 2010) Mitie Cleaning (Midlands) Limited - Birmingham City Council Mitie Managed Services (S&SW) Limited (terminated 31 December 2009) Mitie Managed Services (S&SW) Limited - Coventry (terminated 31 December 2009) Mitie Cleaning (Midlands) Limited - Wednesfield Mitie Property Services (UK) Limited MLA West Midlands (terminated 31 March 2009) Morrison Facilities Services Limited Redcliffe Catering Limited (Aston School) Redcliffe Catering Limited (Camp Hill School) Regent Office Care Limited Regent Office Care Limited (City College) Regent Office Care Limited (Whitefriars) Research Machines plc Revenue Management Services Serco Limited (Stoke) Service Team Limited South Warwickshire Tourism Limited Strand Limited (terminated 31 July 2009) Superclean Services Target Excel plc (Magistrates Courts) Target Excel plc (Solihull MBC) Technology Innovation Centre (terminated 31 March 2009) Temple Security Limited Veolia Environmental Serviced Cleanaway (UK) Limited Vertex Data Science Limited Wates Construction Limited (Birmingham) West Midlands E-Learning Company Other major employers who have participated in the Fund Birmingham International Airport plc Department of Transport Department of Health and Social Security Severn Trent Water Authority West Midlands Magistrates’ Courts Committee

October 2012 • Report and Accounts • Page 8


WEST MIDLANDS PENSION FUND STATUTORY INFORMATION

MEMBER TRAINING REPORT

The West Midlands Pension Fund develops its elected members through training and education using a variety of means which include a minimum of two presentations built into quarterly meetings, ad hoc seminars and conferences, plus access to the Fund’s comprehensive website.

The Fund’s Sub-Committee members have been attending the annual conference for a number of years and a flavour of the issues addressed is illustrated in the outline 2011 agenda as shown below: – Owners and directors: challenges to board integrity

The elected members meet three times per year with local trade union representatives and receive updates on benefit administration changes and actuarial matters. At Committee meetings a wide range of topical issues are embraced, covering asset classes and investment products, the economy and market conditions. Delivery is by investment managers, consultants, investment specialists and senior officers.

– Roundtable on board responsibility – Pay & behaviour: incentivising executives – Women on the board: achieving change – Managing change Department for Communities & Local Government

During 2011/2012 the Fund, UBS Global Asset Management and Squire Sanders produced a joint guide to assist elected representatives, officers and advisors in the interpretation and implementation of the CIPFA Knowledge and Skills Framework. The guide is intended as a contribution to encouraging the development of knowledge and skills across LGPS funds.

– Out of the crisis, creative investment – Social finance roundtable

The Fund facilitates between two and four days’ intensive off-site structured training when there is any proposed revision to the Fund’s investment strategy, whether it is a change in benchmark or the introduction of new asset classes, or when training is required in a particular asset class. Training would ordinarily follow the three-year actuarial valuation; however, when opportunity or circumstances dictate, it is undertaken more frequently. In October 2011, over the course of two days, members received presentations from the Fund’s property manager and visited a number of properties, in order to enhance their knowledge of the asset class and to review and agree the Fund’s ongoing property investment strategy. ESG investing (environmental, socially responsible and governance) is another area of member development and training. The Fund is a member of LAPFF, which is a body consisting of 55 UK public funds that engages with investee companies on issues such as climate change, child labour and breaches of the Combined Code. The Chair attends LAPFF meetings and its activities are reported on a quarterly basis to Committee. LAPFF holds an annual two-day conference covering many different topics including those mentioned above. However, LAPFF also focus on other areas surrounding best practice and receive presentations from managers specialising in ESG investing.

Area

Investment governance

Superannuation Committee Reports

– Investor challenges of the climate change agenda Asset allocation and minimising climate risk Engaging with Exxon, lessons learned and what next Details of the relevant linked and awareness-raising training reports and presentations provided to the Superannuation Committee during 2011/2012 are as follows: Information on the LGPS and LGPS developments/ implementation

April 2011 June 2011 September 2011 December 2011

Governance activity report on LAPFF meeting

April 2011 June 2011 September 2011 December 2011 (including LAPFF Annual Report 2011)

Investment strategy and economic updates

April 2011 June 2011 September 2011 December 2011

In summary, the Fund invests significant resources into training and developing its Committee members, firmly believing that the returns over the long-term are essential to the effective governance and management of the Fund. Overall, the outlined training scheme agreed as part of the Fund’s Business Plan is as shown below: Sub-Committee

Presentation

Reports

Presentation



Conferences/Seminars

Visits

Off-site Training & Education

LAPFF December Conference

Partial



 

 





Investment i) Strategies ii) Asset use iii) Corporate governance iv) Economies

   

Role of members



(Annual/Website) Page 9 • Report and Accounts • October 2012

Occasionally



Occasionally

  Quarterly




WEST MIDLANDS PENSION FUND STATUTORY INFORMATION

INTRODUCTION TO THE FUND

The Fund’s main purpose – to provide a sustainable and affordable final-salary pension to its members, both present and future; – to provide an effective service for the members of the West Midlands Metropolitan Authorities Pension Fund.

The aims of the Fund

A diversified portfolio of assets amounting to £8.9bn is managed primarily in-house by a team of investment professionals, having due regard to risk and return objectives and liability requirements. The issues or challenges facing the Fund can be summarised as follows: i) The affordability of the LGPS which has various elements:

– Delivering the investment strategy and returns over time that ease the pressure on funding levels;

– to enable employer contribution rates to be kept as stable as possible and at reasonable cost to the taxpayers, scheduled and admitted bodies, having regard to the benefits being paid and those due to be paid at a future date; – to manage employers' liabilities effectively through regular review of contributions and additional contributions for early retirements which lead to a strain on funding; – to encourage membership; – to ensure that sufficient resources are available to meet all liabilities as they fall due;

– Responding to legislation changes in benefits awarded; – Monitoring and increasing the membership of the Fund; – Communicating the issues to interested parties. ii) Demonstrating value for money. iii) Demonstrating good governance in terms of the arrangements for managing the LGPS in the West Midlands, the individual investment holdings and the decision-making process. iv) Responding to the expectations arising from Government, the public, interested groups, etc around:

– to maximise the returns from investments within reasonable risk parameters;

– Corporate company behaviour of the Fund’s investments;

– to achieve excellent customer care;

– Sustainability;

– to continually improve service delivery.

– Social responsibility;

The Fund has 255,173 members and 245 Scheme employers. The service aims to provide a quality service delivered cost-effectively and within a published timescale. There are three main categories of membership, comprising of actively contributing members employed at one of the Scheme employers (95,478), members who have left employment but who have a deferred entitlement (76,422) and members in receipt of pensions (75,228 including beneficiaries).

Total Scheme members*

Scheme employers

– Demand for communication and access to information; – Need for public organisations to demonstrate their ability and worth. v) Responding to changes in regulation both in investments and administration activities.

Net assets of the Fund

Total contributions

255,173 245

£8.9bn

£413m

Contributing members

Deferred members**

Members in receipt of pension

95,478

76,422

75,228

*includes unpaid/unclaimed refunds and beneficiaries **excludes unpaid/unclaimed refunds

October 2012 • Report and Accounts • Page 10


WEST MIDLANDS PENSION FUND SENIOR MANAGEMENT REPORTS

OPERATIONS REPORT NADINE PERRINS CHIEF PENSIONS SERVICES MANAGER - OPERATIONS

Since the last report in 2011, changes have occurred which highlight the requirement to drive the ‘performance culture’ which was implemented at the end of 2011.

MEMBERSHIP MOVEMENTS

Staff have completed their professional qualifications in pensions, finance, management and project management (Prince 2) and senior managers are undertaking leadership development training. All qualifications will help prepare staff to deliver the new LGPS 2014 CARE regulations and assist all employers (currently 245) to implement the Government’s plan of auto-enrolment.

15,000

Page 11 • Report and Accounts • October 2012

12,604

227

197

183

296

181

272

168

172

360

190

5,304

8,657

6,854

Employees with no service

Employees with transfers from other pension schemes

Employees with transfers from other local government funds

 2007/08  2008/09  2009/10  2010/11  2011/12

Withdrawals from the Fund 8,000

Members entitled to deferred benefits or refunds of contributions

Members awarded immediate retirement benefits

88

123

102

110

0

90

1,000

2,431

2,000

2,250

3,000

3,796

4,000

3,243

5,000

4,935

6,000

1,901

During the last 12 months, customer services have received 62,790 telephone calls from scheme members and 3,891 calls using the employer dedicated helpline number, a total of 66,681 calls. The service has now begun the process of ‘customer journey mapping’ (CJM) which will involve our customer base determining the type of pension service it wants for the future. This procedure is externally facilitated and provides an independent verification of customer requirements. Superannuation Committee and JCP receive a quarterly statistical report demonstrating trends and service increases, particularly at notification periods for deferred and annual benefits statement communications. Fund administration staff continue to focus heavily on the need to cleanse all data being received from employers. This is a key priority as it reflects longstanding concerns about the quality and timeliness of the data provided to the Fund. We have developed a pensions administration strategy which will be discussed with all employers to determine levels of performance both for themselves and the Fund. In consultation with relevant parties we will promote ‘partnership’ working relationships at a time when auto-enrolment and the new Local Government Pension Scheme 2014 regulations change to a career average revalued earnings (CARE) scheme. In terms of the current scheme, membership has not varied considerably as the table below denotes; however, as a Fund, we continue to monitor trends and utilise events, publications and employer engagement to ensure a robust membership for the future.

12,646

0

7,000

Organisations requiring admitted body status to the Fund continue to grow, as more schools opt for academy status and authorities outsource local government contracts to the private sector.

10,781

3,000

5,150

20 83 29 15 9 156 days

6,000

4,743

Refunds Retirements Deferred awards Investment invoicing Early retirement costing Total savings

Capacity savings (working days)

9,000

7,152

Process (samples)

12,000

6,613

In terms of performance outturn, we have streamlined the following processes using LEAN systems thinking and have achieved both monetary and capacity savings.

 2007/08  2008/09  2009/10  2010/11  2011/12

Admissions to the Fund

Benefits awarded following a member’s death in service

Since April 2011, there has been pressure on contribution rates, and the Fund continues to see improvements in longevity as shown in the table on the next page. During the year, the Fund has dealt with 88 death-in-service cases and a total of 5,699 members have joined the Scheme since 2011. Of this total, 227 were employees transferring in from other local government funds and 168 transferred into the Scheme from private schemes or other pension arrangements. There were 3,796 retirements where members had left LGPS with immediate entitlement to benefits. A further 1,794 benefits were put into payment following the member reaching an age at which a deferred benefit could be bought into payment automatically, or where the member had elected to do so early. The Fund also dealt with deferring members who have ceased membership of the Fund before becoming entitled to the payment of immediate benefits. In total, there were 4,935 such cases.


WEST MIDLANDS PENSION FUND SENIOR MANAGEMENT REPORTS

OPERATIONS REPORT

NUMBER OF MEMBERS Status (age in years)

Active Beneficiary Deferred Pensioner Preserved refund Status (age in years)

Active Beneficiary Deferred Pensioner Preserved refund

0-4

5-9

10-14

15-19

20-24

25-29

0 8 0 0 0

0 46 0 0 0

0 131 0 0 0

211 249 50 0 3

2,450 117 1,515 0 88

5,798 9 4,770 4 369

8,346 12 6,373 4 747

35-39

40-44

45-49

50-54

9,812 18 7,925 17 965

15,431 80 11,880 110 1,372

18,635 190 14,472 373 1,621

16,687 335 12,901 897 1,286

100+

Total

55-59

60-64

65-69

70-74

75-79

80-84

85-89

90-94

95-99

11,533 537 12,595 3,914 1,005

5,369 845 3,539 15,084 386

1,041 1,315 161 16,202 68

161 1,509 55 11,020 42

4 1,764 71 7,897 42

0 1,753 63 5,166 11

0 1,228 38 2,548 27

0 648 14 878 11

0 135 0 154 2

KEY MEMBERSHIP STATISTICS

0 95,478 19 10,948 0 76,422 12 64,280 0 8,045 Total 255,173

Active

Deferred

Preserved refunds

Pensioner

Beneficiary

Totals

107,845 108,224 104,612 102,011 95,478

58,082 62,472 69,605 73,040 76,422

8,239 8,311 8,181 8,121 8,045

51,180 53,576 56,433 59,833 64,280

10,005 10,264 10,438 10,688 10,948

235,351 242,847 249,269 253,693 255,173

Year

31 March 2008 31 March 2009 31 March 2010 31 March 2011 31 March 2012

30-34

Active members The Fund has a total active membership of 95,478. Since 31 March 2011, the number of contributing employees in membership has decreased by 6,533.

Deferred members These are former contributors who have left their pension rights with the Fund until they become payable at normal retirement date.

Pensioner members Pensions and other benefits amounting to £328 million each year are paid to retired members.

Performance within the Fund has always been a key priority, as we aim to work together and in partnership with our employers to put the requirements and expectations of all our customers first in the delivery of our service. We aim to make a complex function of pensions into a simpler, straightforward, right-first-time service for all our customers. The Fund is committed to continuous improvements through high team and individual performance by: – providing a pension service in consultation with Scheme members and elected members; – Working in partnership with all of our employers to provide quality data and working methods that enhance the customer experience; and – ensuring that all our staff are supported through periods of change and developed to a professional standard.

October 2012 • Report and Accounts • Page 12


WEST MIDLANDS PENSION FUND SENIOR MANAGEMENT REPORTS

FINANCIAL SERVICES REPORT PHIL WILD HEAD OF FINANCIAL CONTROL

The primary functions performed by the service are the payment of pensions, the collection of employer and employee contributions and the day-to-day collection and accounting for other payments and income due to the Fund. The fully integrated administration and payroll computer system is used to pay £328 million per year to over 75,000 pensioner and beneficiary members. The number of members being paid has increased by 6.7% in the year, which reflects the consequences of employer staffing reductions and increased longevity of existing members.

Basic contributions to the Fund of £391 million were collected in the year, analysed in detail below. Employer’s contributions

Employee’s contributions

£281m

£110m

Authority

Birmingham Coventry

The Fund continues to seek to minimise, and recover, where appropriate, any overpayments made to members. The majority of these cases arise from late notification of a member’s death. The trend of overpayments made requiring recovery in the last five years is shown below:

194,478.56 143,897.04

2008/09

114,321.45 118,864.39 182,531.21

2009/10 2010/11 2011/12

Sandwell Solihull

% of gross pension

PENSION OVERPAYMENTS 2007/08

Dudley

0.08

W’hampton

0.06 0.04 0.04 0.06

Others

The service is also responsible for the Fund’s participation in the National Fraud Initiative, which is a biennial process undertaken in conjunction with the Audit Commission. Data has been analysed for year 2010/11 and the necessary recoveries, arising from identified overpayments, are being pursued. The results from previous years are shown in the following table: NFI RESULTS 8

 Number of cases  Value of overpayment

25

7 6

£20,290

5

20

6

£16,927

6

15

4 3

4

10

2

£7,556

1

1

0

2006/07

2008/09

Page 13 • Report and Accounts • October 2012

5 0

2010/11

Walsall

Total

Contributions received during the year

£391m Total contributions

122,799,610 30,822,053 31,755,772 30,543,353 16,978,944 27,116,462 29,323,983 101,501,166 390,841,343

In response to the need for more complex administration of contributions receivable, arising from the triennial valuation process, work has been undertaken to adjust the control structures used to ensure that all contributions due are collected by their required dates.


WEST MIDLANDS PENSION FUND SENIOR MANAGEMENT REPORTS

COMMUNICATIONS, MARKETING & BUSINESS REPORT MARK CRUTCHLEY HEAD OF COMMUNICATIONS, MARKETING & BUSINESS SUPPORT

During 2011/2012, the Fund continued to look at new ways to communicate with our members. The basis of our communication is the formal communications policy required by the Scheme’s rules. This policy currently sets out the following: – How the Fund communicates with its stakeholders – The format, frequency and method of communication – How the Fund promotes the LGPS to prospective members and employers The Fund continues to develop the required Communications Policy Statement. The policy is to review this statement annually, with it being formally agreed by the Superannuation Committee every two years to ensure it reflects the wishes of the members and utilises any available advancements in technology. The primary communication and marketing activity is to educate and inform members in relation to the LGPS and the options available by virtue of their membership. A significant number of Fund publications were updated throughout the year, including: – All About Your Scheme – All About Your Deferred Benefits – All About Your Retirements Benefits

Work on retirement planning events continued throughout the year with many successful sessions held in the West Midlands area. Following requests by members, the events were rotated around the area during the period, with new venues being sought to access hard-to-reach groups or areas. With the content remaining largely the same, the opportunity has been taken to also provide an update to the recent 2014 LGPS developments. The events now cover the following: – LGPS and the benefits it provides – Tax tips – Protecting your inheritance – Securing the best pension income for you – The 2014 LGPS The Fund will continue to further enhance these events over coming months, along with other communication material which will benefit members regarding the intended changes in 2014. The major communication development advancement over the period has been the introduction of the Fund’s web portal. This facility, which went live in 2012/2013, will give all members the ability to view their own pension records online, as well as conducting their business with the Fund in a number of key areas via online forms.

As it was identified that members had difficulty understanding the complex topics covered in general publications such as All About Your Retirements Benefits, abridged versions of specific documents were also produced to assist members’ understanding of the topics covered. While the full guide is still maintained for reference, the shortened version is now issued at the appropriate time of retirement, enabling members to focus on the issues immediately at hand.

Although initially introduced to deferred members and, more recently, pension members, it now provides instant access for all members who wish to change the address details or other key data entries held. This facility will also enable the Fund during 2012/2013 to rationalise the production of payslips going forward with potential payslip production being limited to an annual event, or when a significant change occurs in the amount paid, as payslips will be available automatically online.

To reduce overall costs and to assist in the expenditure of the new and increased number of guides, full-colour production was ceased for member Scheme literature with two-colour publications introduced as a standard approach. This will aid the identification of previous guides as we moves towards post-2014 implementation.

We hope in the future to develop the web-portal facility and expand the range of material available along with the suite of calculations that members will be able to perform under a range of ‘what-if’ scenarios.

October 2012 • Report and Accounts • Page 14


WEST MIDLANDS PENSION FUND SENIOR MANAGEMENT REPORTS

INVESTMENT POLICY AND PERFORMANCE REPORT

INVESTMENT STRATEGY Following the unprecedented market turmoil of 2008, the Superannuation Committee approved a new benchmark in January 2009. The revised investment strategy quantified the investment risks being taken by the Fund and designed a benchmark that best balanced the risk and likelihood of improving the funding position over the medium- to long-term. Essentially, it was a continuation of the process of diversification which had evolved from the 2004 and 2007 actuarial reviews. The benchmark was adjusted again in April 2011 following the success of the Fund’s complementary investments portfolio. Both benchmarks, along with the Fund’s current allocation, are shown below: Medium-Term Asset Allocation January 2009 %

Quoted equities UK Europe North America Japan & Far East Frontier & emerging markets Global equities Total quoted equities Private equity *Total equities Fixed interest UK index-linked UK gilts UK corporate bonds Emerging market debt** Cash Total fixed interest Complementary Property Commodities Infrastructure Absolute return strategies Total complementary Total non-equities Total Fund

April 2011 Actual 2012 % %

14 11 8 5.5 5.5 6 50 10 60

10 6 9 6.5 8.5 5 45 10 55

10 7 9 5 6 6 43 12 55

4.7 4.7 4.6 2 1 17

5.5 4 5 4.5 1 20

7 4 5 3 2 21

9 3 3 8 23 40 100

9 3 3 10 25 45 100

10 2 3 9 24 45 100

*Includes private equity **Emerging market debt transferred from ‘Complementary’ to ‘Fixed interest’

Cash Flow Overall, the Fund is still cash flow positive with some £157m of new money becoming available for investment during 2011/12: £179m from investment income together with net out flows of £22m, made up of income received from contributions, net income from transfer values and all payments from the Fund, principally in respect of pensions and benefits. Market value Net investment 31 March 2012 2011/12 £m

£m

UK equities 865 Overseas equities 2,409 Global equities 485 Private equity 1,099 Total equities UK gilts and other fixed interest 325 Index-linked gilts 605 Non-government bonds 425 Emerging market debt 280 Cash 183 Total Fixed Interest Property 851 Absolute return strategies 791 Other complementary investments* 473 Total complementary Total

£m

(111) (73) 14 115 (55) (63) 20 33 228 (104) 114 194 114 (210) 98 157

4,858

1,818

2,115 8,791

*Other complementary investments include commodities, and infrastructure

INVESTMENT PERFORMANCE The Fund’s returns over one, three, five and ten years compared to the benchmark, retail prices index (RPI) and average earnings are illustrated in the chart shown below. Comparative returns over one, three, five and ten years To 31 March 2012 % 16 14 12 10 8 6 4 2 0 One year

 Fund

Page 15 • Report and Accounts • October 2012

Three year

 Benchmark

Five year

 RPI

Ten year

 Average earnings


WEST MIDLANDS PENSION FUND SENIOR MANAGEMENT REPORTS

INVESTMENT POLICY AND PERFORMANCE REPORT

Short-term (one year) The Fund delivered a return of 2.3%, slightly below its bespoke benchmark of 3.1%.The main contributors to the underperformance were the European equities and emerging market debt portfolios. Medium-term (three years) Strong returns over the medium-term were achieved mainly due to equity market strength since 2009. However, the Fund underperformed its bespoke benchmark by 1.0% mainly due to lower returns from the property and infrastructure portfolios. Long-term (ten years) The Fund’s long-term performance of 5.4% is below the benchmark of 6.1% but is comfortably ahead of increases in RPI and average earnings.

Throughout the 12 months to March 2012, fixed interest performance was again dominated by events throughout Europe. With several countries losing their ‘AAA’ credit rating, gilts rallied as one of the few ‘safe havens’, at one point pushing yields to a historic low. CPI peaked at 5.2% halfway through the period followed by steady falls, standing at 3.5% at the end of the period. The Bank of England maintained the base rate at 0.5% for the whole of the period. The best performing sector within fixed interest was index-linked gilts returning 18.2% for the year, against a benchmark return of 18.0%. Uncertainty over UK inflation prospects, along with the eurozone problems, drove demand for this asset class for the majority of the period. The Fund’s passively managed exposure to this sector was complemented by an actively managed investment in May 2011.

QUOTED EQUITIES COMPLEMENTARY RETURNS

Equity returns one year ending 31 March 2012  Fund

% 10.0

 Benchmark

Complementary returns one year ending 31 March 2012  Fund

%

7.5

8.0

5.0

6.0

2.5

 Benchmark

4.0

0.0 2.0 -2.5 0.0

-5.0 -7.5

-2.0

-10.0

-4.0

-12.5

-6.0

-15.0

UK equities

Global

Europe

US

Japan

Pacific Basin

Emerging markets

-8.0 -10.0

The Fund’s quoted equities portfolios delivered a slightly negative return of -1.8% over the year. US equities had a volatile early period but turned positive late in the year as investors appetite for risk returned following some improved data on the US economy. European equities were dragged lower amidst the continuing concerns surrounding some countries’ sovereign debt crisis. Emerging markets fell on fears of contagion and uncertainty relating to the underlying challenges facing the developed world. FIXED INTEREST RETURNS

Private equity

Property

Commodities Infrastructure

Absolute return strategies

There was mixed performance from the complementary assets over the 12 months to 31 March 2012. Property was the best performing asset class due to the nature of its consistent income yield that the class continually generates. Property returned 7.0% for the year against the benchmark return of 6.0%. Commodities were again the worst performing asset class, resulting in a loss of 8.0% against a benchmark loss of 5.8%. This is the result of the continuing fall in commodity prices that we have witnessed for some time, mirrored also by the benchmark performance.

Fixed interest returns one year ending 31 March 2012  Fund

% 20.0

 Benchmark

18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0

UK gilts

UK corporates

UK index-linked

Emerging market debt

October 2012 • Report and Accounts • Page 16


WEST MIDLANDS PENSION FUND SENIOR MANAGEMENT REPORTS

TOP TWENTY EQUITY HOLDINGS

at 31 March 2012 80

70 67.2 60

50 48.2 42.6 41.8

40

34.6 30

30.2 26.2 23.9 23.7

20 19.6 19.5 19.3 18.4 18.0 17.2 15.1 14.6 14.0 10

1

0

2

3

4

5

6

7

8

9

No.

Constituent name

Fund value GBP

1

Royal Dutch Shell

2

HSBC

3 4 5 6

10

11

12

13

14

15

16

17

18

12.9 12.9

19

20

No.

Constituent name

£67,235,900

11

Nestlé

£19,469,206

£48,212,120

12

Exxon Mobil Corporation

£19,270,313

BP

£42,554,600

13

Diageo

£18,405,625

Vodafone Group

£41,844,600

14

Standard Chartered Bank

£18,018,000

GlaxoSmithkline

£34,563,375

15

AstraZeneca

£17,229,800

British American Tobacco

£30,244,800

16

Anglo American

£15,073,650

7

Apple Inc

£26,188,701

17

SABMiller

£14,555,100

8

Rio Tinto

£23,949,700

18

Barclays

£14,032,663

9

BG Group

£23,747,200

19

Unilever

£12,900,000

10

BHP Billiton

£19,551,875

20

Tesco

£12,853,500

Page 17 • Report and Accounts • October 2012

Fund value GBP


WEST MIDLANDS PENSION FUND SENIOR MANAGEMENT REPORTS

TOP TWENTY INDIRECT HOLDINGS

at 31 March 2012 600

500

400

300

200

100

0

1

2

3

4

5

6

No. Constituent name

7

8

9

Fund value GBP

10

11

12

13

14

15

16

17

18

No. Constituent name

19

20

Fund value GBP

1

Legal & General – All Stocks Index Linked Gilts Funds

512.6

11 UBS Inflation Linked Bond

92.1

2

Schroder All Maturities Bond Fund

211.2

12 Schroder Emerging Markets Fund (Guernsey)

81.6

3

Blackrock – Ascent Life European Equity Fund

163.4

13 Capital International Emerging Markets Fund

80.8

4

Royal London Asset Management Corporate Bonds

158.8

14 Legal & General – Overseas Bond Fund

77.8

5

Massachusetts Financial Services Global Equity Fund

155.4

15 CF Ruffer Total Return Fund

72.4

6

Blackrock – Global Composite Fund

153.0

16 Aspect Diversified Fund

72.3

7

Legal & General – All Stocks Gilts Index Fund

128.8

17 Capital International Partners Emerging Market Debt Fund 67.0

8

Aberdeen Emerging Markets

112.9

18 Emerging Markets Strategic Fund

9

Templeton Emerging Markets Investment Trust

104.6

19 Pioneer Emerging Market Debt Fund

63.5

20 Pictet Fund Emerging Markets

60.9

10 Ashmore Emerging Markets Liquid Investment Portfolio

94.6

64.9

October 2012 • Report and Accounts • Page 18


WEST MIDLANDS PENSION FUND STATISTICAL INFORMATION AND RISK MANAGEMENT

OVERALL FUND STATISTICAL INFORMATION

FUND MANAGEMENT UNIT COSTS AS A % OF ASSETS UNDER MANAGEMENT 2011/2012  Fund actual unit cost  Fund budget  DCLG actual all funds/latest data

Fund management unit costs

Supplies and services as a % of assets under management

£

%

80

0.0050

 Actual

 Budget

2011

2012

0.0045

70

0.0040 60 0.0035 50

0.0030

40

0.0025 0.0020

30

0.0015 20 0.0010 10

0.0005 0.0000

0

2008

2009

2010

2011

 Actual

%

2009

2010

Accommodation as a % of assets under management

Staff cost as a % of assets under management 0.018

2008

2012

 Budget

% 0.0035

 Actual

 Budget

2011

2012

0.016 0.0030 0.014 0.0025

0.012

0.0020

0.010 0.008

0.0015

0.006 0.0010 0.004 0.0005

0.002 0.000

0.0000

2008

2009

2010

2011

2012

IT cost as a % of assets under management % 0.012

 Actual

 Budget

2011

2012

0.010

0.008

0.006

0.004

0.002

0.000

2008

2009

2010

Page 19 • Report and Accounts • October 2012

2008

2009

2010


WEST MIDLANDS PENSION FUND STATISTICAL INFORMATION AND RISK MANAGEMENT

OVERALL FUND STATISTICAL INFORMATION

BENEFIT OPERATIONS COSTS AS A % OF TOTAL MEMBER COST 2011/2012 Staff costs as a % of total member cost

Premises costs as a % of total member cost  Actual

% 1.40

 Budget

 Actual

% 0.16

 Budget

0.14

1.20

0.12

1.00

0.10 0.80 0.08 0.60 0.06 0.40

0.04

0.20

0.02 0.00

0.00

2007/08

2008/09

2009/10

2010/11

IT costs as a % of total member cost

2008/09

2009/10

2010/11

2011/12

Other costs as a % of total member cost  Actual

% 0.25

2007/08

2011/12

 Budget

 Actual

% 0.35

 Budget

0.30 0.20 0.25 0.15

0.20 0.15

0.10

0.10 0.05 0.05 0.00

0.00

2007/08

2008/09

2009/10

2010/11

Total costs as a % of total member cost

2008/09

2009/10

2010/11

2011/12

Supplies and services costs as a% of total member cost  Actual

% 3.00

2007/08

2011/12

 Budget

 Actual

% 0.70

 Budget

0.60

2.50

0.50 2.00 0.40 1.50 0.30 1.00 0.20 0.50

0.10 0.00

0.00

2007/08

2008/09

2009/10

2010/11

2011/12

2007/08

2008/09

2009/10

2010/11

2011/12

October 2012 • Report and Accounts • Page 20


WEST MIDLANDS PENSION FUND STATISTICAL INFORMATION AND RISK MANAGEMENT

OVERALL FUND STATISTICAL INFORMATION

MEMBERSHIP OF THE FUND Active

Deferred

Preserved refunds

Pensioner

Beneficiary

Totals

107,845 108,224 104,612 102,011 95,478

58,082 62,472 69,605 73,040 76,422

8,239 8,311 8,181 8,121 8,045

51,180 53,576 56,433 59,833 64,280

10,005 10,264 10,438 10,688 10,948

235,351 242,847 249,269 253,693 255,173

Year

31 March 2008 31 March 2009 31 March 2010 31 March 2011 31 March 2012

Active members The Fund has a total active membership of 95,478. Since 31 March 2011, the number of contributing employees in membership has decreased by 6,533.

Deferred members These are former contributors who have left their pension rights with the Fund until they become payable at normal retirement date.

Average cases per member of Benefits Operations staff

Benefit Operations staff/Fund member ratios Active

Deferred (includes Pensioner preserved refunds (includes beneficiaries)

Number of processes Processes outstanding as at 31 March 2011

Processes completed 2011/12

Processes outstanding as at 31 March 2012

84,467

16,327

143,665

12,861

100

95,478

80

Pensioner members Pensions and other benefits amounting to £328 million each year are paid to retired members.

75,228

60 40

Average processes per member of staff Total

20

255,173

0

95.5 Staff 2,672 Ratio (Fund members per member of staff)

Processes outstanding as at 31 March 2011

Processes completed 2011/12

Processes outstanding as at 31 March 2012

172

1,504

135

BENEFIT OPERATIONS MEMBERSHIP MOVEMENT Member movements during the year Admissions to the Fund

5,304   

168

227

Withdrawals from the Fund Total

5,699

Employees with no previous service Employees with transfers from other pension schemes Employees with transfers from other local government pension schemes

Complaints Number of complaints/number as % of workload Total member-related processes completed Number of complaints processes started in 2011/12 in 2011/12 Of which, completed in 2011/12 Total complaints completed in 2011/12

28   

28

28

143,665

4,935   

3,796

88

Total

8,819

Members entitled to deferred benefits, etc. Members awarded immediate retirement benefits Benefits awarded following a member’s death in service

Comparison of operating costs with other funds CIPFA provide an annual benchmarking service for LGPS funds who choose to participate in their CIPFA Pensions Club. The 2011/12 analysis provides a comparison of member service costs per Scheme member, with the full set of participating funds.  West Midlands Pension Fund £20.08  Latest full CIPFA Club average £21.54 Large urban area funds have similar costs to West Midlands Pension Fund.

Page 21 • Report and Accounts • October 2012


WEST MIDLANDS PENSION FUND STATISTICAL INFORMATION AND RISK MANAGEMENT

OVERALL FUND STATISTICAL INFORMATION

NUMBER OF MEMBERS Status (age in years)

0-4

5-9

10-14

15-19

20-24

25-29

0 8 0 0 0

0 46 0 0 0

0 131 0 0 0

211 249 50 0 3

2,450 117 1,515 0 88

5,798 9 4,770 4 369

Active Beneficiary Deferred Pensioner Preserved refund Status (age in years)

Active Beneficiary Deferred Pensioner Preserved refund

30-34

8,346 12 6,373 4 747

35-39

40-44

45-49

50-54

9,812 18 7,925 17 965

15,431 80 11,880 110 1,372

18,635 190 14,472 373 1,621

16,687 335 12,901 897 1,286

100+

Total

55-59

60-64

65-69

70-74

75-79

80-84

85-89

90-94

95-99

11,533 537 12,595 3,914 1,005

5,369 845 3,539 15,084 386

1,041 1,315 161 16,202 68

161 1,509 55 11,020 42

4 1,764 71 7,897 42

0 1,753 63 5,166 11

0 1,228 38 2,548 27

0 648 14 878 11

0 135 0 154 2

0 95,478 19 10,948 0 76,422 12 64,280 0 8,045 Total 255,173

Internal dispute resolution procedure (IDRP)

Comparisons of operating costs with other funds

During the financial year 2011/12, twenty two cases have been received.

Government collects information from all LGPS funds - on their administration and fund management costs - on a yearly basis. The latest figures are for 2010/11 and these show the following comparison:

Of these cases, twelve were non-medical matters and ten related to ill-health matters. The latter cases were referred for independent medical opinion, where appropriate.

 

In total, four cases were upheld and eighteen were dismissed.

Fund management (£ per Scheme member) Administration costs (£ per Scheme member)

West Midlands Pension Fund NFI RESULTS 8

28.93

 Number of cases  Value of overpayment £20,290

5

20

6

£16,927

6

15

4 3

50.69

25

7 6

Total

21.76

4

Average for LGPS: Metropolitan funds

38.91

23.05

10

2

£7,556

1

1

0

2006/07

2008/09

61.96

English shires 5

79.46

25.66

Total

50.47

Total

0

2010/11

Total

105.12

Inner London

159.33

209.80

Outer London

120.45

61.99

Total

182.44

All authorities

76.89

30.18

Total

107.07

October 2012 • Report and Accounts • Page 22


WEST MIDLANDS PENSION FUND STATISTICAL INFORMATION AND RISK MANAGEMENT

OVERALL FUND STATISTICAL INFORMATION

MANAGEMENT PERFORMANCE - NUMBER AND TREND OF TOP TEN CASE TYPES Joiner processes commenced in 2011/12...

...of which, processes completed in 2011/12

...of which, outstanding processes at 31 March 2012

Commenced and completed in the period 2011/12

371

94%

...of which, outstanding processes at 31 March 2012

Commenced and completed in the period 2011/12

0

100%

...of which, outstanding processes at 31 March 2012

Commenced and completed in the period 2011/12

36

99%

...of which, outstanding processes at 31 March 2012

Commenced and completed in the period 2011/12

979

88%

...of which, outstanding processes at 31 March 2012

Commenced and completed in the period 2011/12

46

98%

...of which, outstanding processes at 31 March 2012

Commenced and completed in the period 2011/12

85

31

73%

...of which, processes completed in 2011/12

...of which, outstanding processes at 31 March 2012

Commenced and completed in the period 2011/12

101

47

68%

...of which, outstanding processes at 31 March 2012

Commenced and completed in the period 2011/12

263

87%

...of which, processes completed in 2011/12

...of which, outstanding processes at 31 March 2012

Commenced and completed in the period 2011/12

16,669

393

98%

...of which, processes completed in 2011/12

...of which, outstanding processes at 31 March 2012

Commenced and completed in the period 2011/12

52

99%

6,435 Refund processes commenced in 2011/12...

54 Retirement processes commenced in 2011/12...

3,951

6,064 ...of which, processes completed in 2011/12

54 ...of which, processes completed in 2011/12

3,915

Deferment processes commenced in 2011/12...

...of which, processes completed in 2011/12

7,835 Deferred retirement processes commenced in 2011/12...

2,039

6,856 ...of which, processes completed in 2011/12

1,993

Death-in-service processes commenced in 2011/12...

...of which, processes completed in 2011/12

116 Death in deferment processes commenced in 2011/12...

148 Death in retirement processes commenced in 2011/12...

...of which, processes completed in 2011/12

2,103 Maintain member data processes commenced in 2011/12...

17,062 Change of address and/or bank processes commenced in 2011/12...

8,417

1,840

8,365

Page 23 • Report and Accounts • October 2012


WEST MIDLANDS PENSION FUND STATISTICAL INFORMATION AND RISK MANAGEMENT

LIST OF BODIES OF WHICH THE FUND IS A MEMBER: National Association of Pension Funds (NAPF)

Institutional Investors Group on Climate Change (IIGCC)

The National Association of Pension Funds (NAPF) seek to influence the outcome of, and proactively shape, UK pension policy to achieve a viable and sustainable workplace pensions sector that instils public confidence. This means for a fair and affordable pensions system and an environment that encourages good workplace pensions.

The Institutional Investors Group on Climate Change (IIGCC) is a forum for collaboration on climate change for European investors. The IIGCC brings investors together to use their significant collective influence to engage in dialogues with policymakers, investors and companies to accelerate the shift to a low carbon economy.

Local Authority Pension Fund Forum (LAPFF)

Hedge Funds Standards Board (HFSB) – (www.hfsb.org)

The Local Authority Pension Fund Forum (LAPFF) exists to promote the investment interests of local authority pension funds, and to maximise their influence as shareholders while promoting corporate social responsibility and high standards of corporate governance amongst the companies in which they invest.

The Hedge Fund Standards Board (HFSB) is the guardian of the Standards drawn up by international investors and hedge fund managers to create a framework of discipline for the hedge fund industry. The Standards serve the interests of all market participants and of the economy at large.

United Nations Principles for Responsible Investment (UNPRI)

The United Nations-backed Principles for Responsible Investment Initiative (PRI) is a network of international investors working together to put the six Principles for Responsible Investment into practice.

October 2012 • Report and Accounts • Page 24


WEST MIDLANDS PENSION FUND STATISTICAL INFORMATION AND RISK MANAGEMENT

RISK MANAGEMENT

The Fund has to manage a wide range of risks and evaluate how this will be achieved. It is done through regular review, analysis, effective controls and management action, both proactive and reactive.

Investment risk is potentially significant and recognised as falling into distinct areas: market risk (beta) and manager skill (alpha). The structure of the investment strategy reflects this and is designed with the support of external expert advice.

The Fund’s objectives are achieved through a risk management framework.

Details are contained in the Investment Strategy, Statement of Investment Principles and the Funding Strategy Statement. The operational management of the investment strategy is covered by a compliance testing programme, designed with the help of Deloitte, leading to quarterly reports to the Superannuation Committee. This provides continual monitoring and review of investment activity and associated risks. In addition, Deloitte also review the compliance testing programmes. The Fund’s approach to risk is dynamic, hence the investment strategy was subject to a major review in January 2009 by the Investment Sub-Committee in response to the unprecedented market turmoil of 2008, and a further revision in April 2011 to complete the phased implementation.

The key elements are: – Annual risk management review involving senior officers and use of a detailed template designed to cover all significant Fund activities. This is supported by the work of internal audit and specialist expertise engaged regularly in respect of operational investment risks supported by the use of the compliance testing programme. – The external audit of the Fund’s accounts and activities through experienced private sector staff supported by experienced pension partners combined with an actuarial expertise. – Analysis of key processes enabling appropriate internal control procedures to be developed and maintained. – A robust process for developing, monitoring and managing the investment strategy, and associated risk budget. A key element to risk management is the structured delegation of powers from the Council to the Superannuation Committee and then to the Director of Pensions, supported by senior officers. To complement the delegation, there is an extensive and detailed accountability back to committee on how these delegations have been exercised on a regular basis, with the Director submitting an Annual Assurance report. The purpose of the Annual Report is to demonstrate that the Fund meets its objectives, is adequately resourced, managed to high professional standards, meets legislative requirements and best practices (when appropriate) and has high customer service functions satisfaction. In particular, risk management arrangements are robust and the reports to Superannuation Committee have given that assurance.

Page 25 • Report and Accounts • October 2012

The investment strategy is monitored weekly by officers, enabling appropriate corrective action to be taken if deemed necessary. A quarterly report is submitted to the Investment Sub-Committee on the current asset allocation relative to the benchmark and the actions taken during the quarter to implement the Superannuation Committee’s investment policy. Any positions outside the shortterm TAA and strategic risk ranges are reported and explained. The risks associated with the operational payment of benefits and recording of pensioner records produces a complex set of risks, which are mitigated with the use of an IT system that is thoroughly and regularly tested, combined with the technical hierarchy checking of output by pension staff. It is recognised that Fund services are very dependent upon third party contracts ranging from IT through to investment managers. All are subject to regular review and monitoring, with compliance visits targeted at the more significant risk areas.


WEST MIDLANDS PENSION FUND STATISTICAL INFORMATION AND RISK MANAGEMENT

CORPORATE SOCIAL RESPONSIBILITY & CORPORATE GOVERNANCE

The Fund’s ethos is that corporate governance is not something to be separately considered, but is mainstream and integral to its overall investment strategy. There are essentially four elements to the Fund’s approach. Each one can be undertaken separately, though are most effective when combined, representing best practice: ESG BEST PRACTICE Litigation (shareholder)

Partnerships (through engagement)

One issue that raised a high level of opposition was the appointment of non-executive directors, hence where there appears to be insufficient independent representation on the board of directors, the Fund will vote against the appointment. Investor opposition to executive remuneration reports continued to receive a high level of institutional attention during the year as shareholder opposition to unjustified levels of remuneration continues to be a contentious issue. The Fund is reluctant to reward management for poor or irresponsible behaviour and in such circumstances will oppose the remuneration report regardless of the economic backdrop. During the year, the Fund signed up to the United Nations Principles of Responsible Investment. Signatories are required to comply with the following principles. 1) To incorporate ESG issues into investment analysis and decision-making. 2) To be active owners and incorporate ESG issues into ownership policies and practices.

Investing (active)

Voting (shareholdings)

3) To seek appropriate disclosure on ESG issues by the entities in which investments are made.

Although the Fund believes that litigation, engagement through partnerships and active investing are all essential elements of the corporate governance process, it acknowledges that global voting is a particularly effective tool being transparent, simple and in the public domain.

4) To promote acceptance and implementation of the principles within the investment industry.

The Fund has been actively exercising its right to vote as a UK company shareholder since 1999, expanding to include voting of European, US and Japanese holdings in 2002, 2004 and 2010 respectively. During the 12 months ending March 2012 it voted globally at over 1,200 company meetings including 392 UK company meetings (a mixture of AGMs and EGMs). The Fund was able to vote in favour of all resolutions at only 1% of AGMs and opposed more than 26% of all resolutions.

6) To report on activities and progress towards implementing the principles.

The overall analysis of the Fund’s voting at UK meetings for the 12 months ending March 2012 is as follows: Number of % of total Fund UK AGMs oppose votes

AGMs in total Voted in favour of all resolutions Voted against in respect of: Appointment of directors Remuneration reports Appointment of auditors Issue/re-purchase of shares Report and accounts Executive pay Corporate donations Articles of association Corporate actions

340 4 36 20 12 12 10 6 2 1 1

5) To work together to enhance effectiveness in implementing the principles.

The principles allow the Fund to demonstrate its commitment to ESG issues and to further collaborate with other signatories to better understand ESG issues and improve best practice. In addition to voting, the Fund works in partnership with a US lawyer to return value back to the Fund through class actions where shareholder value has been lost through fraudulent or irresponsible corporate behaviour, recovering to date in excess of $1,100,000. The Fund is also an active member of the Local Authority Pension Fund Forum (LAPFF). LAPFF is made up of 55 UK public funds which engage as a united front with investee companies on issues such as climate change, child labour and breaches of best practice including the UK Code on Corporate Governance. Executive remuneration has been an important governance issue for LAPFF for many years, and over the past four years, LAPFF has focused on the subject of incorporating non-financial performance metrics into long-term reward. They believe that poor management of non-financial areas such as risk management can be detrimental to performance and that such measures could be used more effectively to align the interests of managers and owners.

October 2012 • Report and Accounts • Page 26


WEST MIDLANDS PENSION FUND STATISTICAL INFORMATION AND RISK MANAGEMENT

CORPORATE SOCIAL RESPONSIBILITY & CORPORATE GOVERNANCE

The Fund has actively committed to date somewhere in the region of 2% of its assets to ESG investing (environmental, social and governance), as it perceives this to be a sustainable, long-term growth story. These investments include funds in alternative and clean energy, climate change, regeneration of brown field sites, waste and a pure water play, the essential common criteria being that they are attractive on fundamental investment grounds and perceived as sustainable. There is no set target for the Fund’s ESG investments as it perceives it as mainstream, with holdings across most asset classes.

In summary, the Fund believes that achieving best practice in this area will have a material impact on the Fund’s long-term returns, hence its integration into the Fund’s investment strategy. Although there is strong pressure for corporates to reduce costs in the current climate, it is good business sense to demonstrate responsible and sustainable policies and practices which should enhance a company’s reputation, efficiency and long-term profitability, benefiting both its own stakeholders over the long term and those of the Fund.

Examples of such investments are illustrated in the following chart:  Property  Private Equity  Infrastructure Igloo Urban Regeneration Virgin Green HG Renewable Power Bridges Sustainable Climate Change Capital Impax New Energy Property Fund Bridges Community Ventures I & II Pictet Clean Energy Robeco Sam Co-Investment Fund III Sarasin New Power Robeco Sam Fund of Funds III  Global Equities Waste Resources Fund Robeco Sam Secondary Fund III Sarasin OekoSar Aqua Resources Fund Impax Environmental Markets Riverstone/Carlyle Renewable Energy Governance for Owners Khosla Ventures Blackstone Cleantech Ventures Impax New Energy Investors II

Page 27 • Report and Accounts • October 2012


WEST MIDLANDS PENSION FUND STATISTICAL INFORMATION AND RISK MANAGEMENT

COMPLIANCE WITH THE MYNERS’ REPORT

Introduction In 2000, UK government commissioned Paul Myners to undertake a review of institutional investment, publishing a report in 2001 which became established as the Myners’ Principles on Good Investment Governance. The principles were updated through a Treasury report in October 2008, ‘Updating the Myners’ Principles: A Response to Consultation’. Local government pension funds are required, by regulation, to produce a statement on their compliance with the Myners’ Principles on the basis of ‘comply or explain’, including the statement in their annual report. CIPFA produces guidance and advises on the application of the Myners’ Principles to local government pension funds. This guidance (Investment Decision Making and Disclosure 2009) has been followed in the production of this statement. Executive summary The West Midlands Pension Fund aims to comply with all of the Myners’ Principles, recognising it is in all parties’ interests if the Fund operates to standards of investment decision-making and governance identified as best practice. It is also recognised as important to demonstrate how the Fund meets such principles and best practice. The power to establish and maintain pension

funds is set out in various local government regulations, some of which establish limits and controls on investment activity. The Myners’ Principles support and complement these regulations. The Secretary of State has previously highlighted the principle contained in Roberts v Hapwood whose administering bodies exercise their duties and powers under regulations governing the investment and management of funds: A body charged with the administration for definite purposes of funds contributed in whole or in part by persons other than members of that body owes, in my view, a duty to those latter persons to conduct that administration in a fairly business-like manner with reasonable care, skill and caution, and with a due and alert regard to the interest of those contributors who are not members of the body. Towards these latter persons the body stands somewhat in the position of trustees or managers of others The Myners’ Principles are seen as supporting this approach. This statement links with and is supported by the Fund’s Investment Strategy, SIP (Statement of Investment Principles), FSS (Funding Strategy Statement) and Governance Strategy, where much supporting detail is contained.

Demonstration of Compliance with Myners’ Principles The table demonstrates how Myners-compliant the Fund is, details of which are further described on the following pages. Myners’ Principles

Supporting Documents and Operational Arrangements

1

a) City Council Constitution



b) Fund Strategies and Statement – Investment Strategy – SIP – FSS – Social Responsibility Statement – Fund Governance Statement – Communication Strategy

     

c) Procedures – Compliance Manual – External Audit – Internal Audit – Risk Assessment – Business Plan – Valuation Report – Annual Report and Governance Report d) Fund Reporting – Quarterly Technical Asset Allocation – Property Strategy – Annual Returns – Quarterly Compliance Report – Quarterly Governance Activity – Quarterly Investment Activity – Pension Newsletter – Employing Body Brief – Annual Benefits Statements

2

3

4

5

6

   

  

  

 

     













   

  

        

    

 

e) Advisors – Investments – Actuary – Company Governance – Finance and Legal

   

   

 

f) Support Arrangements – Custodian – Management Agreements

 







 





  

      





October 2012 • Report and Accounts • Page 28


WEST MIDLANDS PENSION FUND STATISTICAL INFORMATION AND RISK MANAGEMENT

MYNERS’ PRINCIPLES AND COMPLIANCE BY THE FUND

Principles

Key points

Demonstration of Compliance

1)Elected members have a fiduciary duty to the Fund, Scheme members and local taxpayers. 2)Functions can be delegated and investment managers used, but overall responsibility rests with members. 3)Proper advice should be taken and the regulations define this as: “the advice of a person who is reasonably believed...to be qualified by his ability in and practical experience of financial matters.”

The Fund produces a business plan and a medium-term financial plan, together with supporting codes and policies: – Investment Strategy – SIP (Statement of Investment Principles) – FSS (Funding Strategy Statement) – Governance Statement The functions delegated and the administration of the Fund’s activities are undertaken with appropriately trained staff, use of professional advisors where necessary, in accordance with the Council’s constitution and Fund’s compliance manual and procedures.

Principle 1: Effective Decision-Making Administering authorities should ensure that: – decisions are taken by persons or organisations with the skills, knowledge, advice and resources necessary to make them effective and monitor their implementation; and – those persons or organisations have sufficient expertise to be able to evaluate and challenge the advice they receive, and manage conflicts of interest.

4)The Wednesbury Principle (1945) applies to all parties involved in the arrangements and ensures they direct themselves properly in law and demonstrate reasonable behaviour. 5)All councils must appoint one of its officers to have responsibility for ensuring arrangements are in a place for the proper/ financial administration of its financial affairs. 6)The role of the Superannuation Committee and key officers should be clear in the Council’s constitution. 7)Best governance practices should be followed. 8)The Superannuation Committee should ensure it has appropriate skills and is run in a way to facilitate effective decision-making.

Principle 2: Clear Objectives An overall investment objective(s) should be set out for the fund that takes account of the Scheme’s liabilities, the potential impact on local tax payers, the strength of the covenant for non-local authority employers, and the attitude to risk of both the administering authority and scheme employers, and these should be clearly communicated to advisors and investment managers.

1) A three-yearly actuarial valuation as required by regulation. 2) A full range of investment opportunities should be considered. 3) A strategic asset allocation should be used and reviewed regularly. 4) Robust investment management agreements should be used. 5) The targeted investment return and associated risks should reflect the liabilities, assets held and link to the actuarial process. 6) The provision for taking proper advice should be demonstrated.

Page 29 • Report and Accounts • October 2012

The Fund takes a range of specialist advice in formulating its Investment Strategy, SIP and FSS, ensuring all link to the common objectives that arise from the actuarial process with emphasis on managing investment risk relative to fund cash flows and need for stable contribution rates. These policies are reviewed regularly and interim valuations used to track progress between valuations. The Superannuation Committee places significant emphasis on reviewing and monitoring the investment strategy with regular reviews and input from professional and experienced advisors. The Investment Sub-Committee regularly reviews new investment opportunities and make up of asset portfolios.


WEST MIDLANDS PENSION FUND STATISTICAL INFORMATION AND RISK MANAGEMENT

Principles

Key points

Demonstration of Compliance

Principle 3: Risks and Liabilities In setting and reviewing their investment 1)The Superannuation Committee should set a strategy, administering authorities should clear investment objective. take account of the form and structure of 2)Investment risk should be fully evaluated, liabilities. monitored and the link to employing bodies’ These include the implications for local tax ability to meet liabilities recognised. payers, the strength of the covenant for 3) Appropriate guarantees should be used to participating employers, the risk of their protect against employer default. default and longevity risk. 4) The need for affordable, stable contributions should be reflected in the work of the Pension Committee. 5)The Superannuation Committee should satisfy itself about the standards of internal controls applied are sound and robust. 6) An understanding of risk should be demonstrated and reported upon.

Members set the Fund’s investment strategy having regard to the liabilities and achieving stable affordable contributions, consulting with interested parties regularly. The investment setting process takes account of short-term market volatility, but with strong positive cash flows places great emphasis on the medium to long-term view. The Fund’s annual report includes a statement on overall risk management of all activities.

Principle 4: Performance Assessment Arrangements should be in place for the formal measurement of performance of the investments, investment managers and advisors. Administering authorities should also periodically make a formal assessment of their own effectiveness as a decision-making body and report on this to Scheme members.

1)Extensive formal performance measurement of investments, managers and advisors should be in place and relate to the investment objectives. 2)Effectiveness of the Superannuation Committee should be reported upon at regular intervals. 3)Returns should be measured on a quarterly basis in accordance with the regulations; a longer time frame (three to seven years) should be used in order to assess the effectiveness of fund management arrangements and review the continuing compatibility of the asset/liability profile.

The overall investment objectives link to portfolios and the individual investment objectives. The performance measurement is made up of targets driven by the investment strategy and its component parts. An external measurement service is used to provide robust and reliable information. Off-target performance is reviewed by the Superannuation Committee and Investment Sub-Committee and appropriate action agreed. The regular annual report details the work and achievement of the Committee.

1)Disclose approach to company governance matters and socially responsible issues in SIP. 2)Define expectations of managers on company governance matters. 3)The Institutional Shareholders’ Committee of Principles for institutional shareholders and/or agents should be followed.

The Fund co-ordinates its corporate governance activity, voting its holding in companies with the help of a specialist advisor, in accordance with its company voting template. It publishes on a quarterly basis its actions, and a clear statement of its position on SRI matters is produced. Works in partnership with other funds are actively promoting good company governance, eg, LAPFF.

Principle 5: Responsible Ownership Administering authorities should: – adopt, or ensure their investment managers adopt, the Institutional Shareholders’ Committee Statement of Principles on the responsibilities of shareholders and agents. – include a statement of their policy on responsible ownership in the statement of investment principles. – report periodically to Scheme members on the discharge of such responsibilities.

Principle 6: Transparency and Reporting Administering authorities should: – act in a transparent manner, communicating with stakeholders on issues relating to their management of investment, its governance and risks, including performance against stated objectives. – provide regular communication to Scheme members in the form they consider most appropriate.

1) Maintain a sound governance policy and demonstrate its implementation. 2) Maintain a communication policy and strategy. 3) Ensure all required strategies and policies are published in a clear transparent manner. 4) Annual reports are a demonstration of accountability to stakeholders and should be comprehensive and readily available.

The Fund produces and reviews regularly its key policy and strategy documents, publishing them on its website. All members, actives, deferred and pensioners receive regular communications on the Fund’s activities and performance. A comprehensive annual report is produced.

October 2012 • Report and Accounts • Page 30


WEST MIDLANDS PENSION FUND STATISTICAL INFORMATION AND RISK MANAGEMENT

STATEMENT OF THE CONSULTING ACTUARY PAUL MIDDLEMAN FIA, FELLOW OF THE INSTITUTE OF ACTUARIES MERCER LIMITED, AUGUST 2012

A full actuarial valuation of the Fund was made as at 31 March 2010 by the Fund’s actuary, P Middleman of Mercer Human Resource Consulting Limited. The actuary has determined the contribution rates with effect from 1 April 2011 to 31 March 2014. On the basis of the assumptions adopted, the valuation revealed that the value of the Fund’s assets of £8,008 million represented 75% of the funding target of £10,622 million at the valuation date. The valuation also showed that a common rate of contribution of 11.9% of pensionable pay per annum was required from employers. The common rate is calculated as being sufficient, together with contributions paid by members, to meet all liabilities arising in respect of service after the valuation date. Adopting the same method and assumptions as used for assessing the funding target, the deficit would be eliminated by an average additional contribution rate of 6.2% of pensionable pay for 25 years. This would imply an average employer contribution rate of 18.1% of pensionable pay in total. In practice, each individual employer’s position is assessed separately and the contributions required are set out in our report dated 31 March 2011. These contributions were determined having regard to the individual circumstances of each employer and included specific allowances (zero for some employers) for early retirement costs. Additional payments will be made by employers where the non-ill-health early retirement costs exceed the allowances certified. The funding plan adopted in assessing the contributions for each individual employer is in accordance with the Funding Strategy Statement (FSS). Different approaches adopted in implementing contribution increases and deficit recovery periods are as determined through the FSS consultation process. For certain employers, in accordance with the FSS, an increased allowance has been made for assumed investment returns on existing assets and future contributions, for the duration of the employer’s deficit recovery period.

Page 31 • Report and Accounts • October 2012

The valuation was carried out using the projected unit actuarial method and the main actuarial assumptions used for assessing the funding target and the common contribution rate were as follows:

Rate of return on investments: – pre-retirement – post-retirement Rate of pay increases Rate of increases in pensions in payment (in excess of guaranteed minimum pension

For past service liabilities

For future service liabilities

6.5% pa 5.5% pa 4.75% pa 3.0% pa

6.75% pa 6.75% pa 4.75% pa 3.0% pa

The assets were assessed at market value and the value at 31 March 2010 (excluding AVCs) was £8,008 million. Full details of the assumptions adopted for the valuation are set out in the actuarial valuation report. The next triennial actuarial valuation of the Fund is due as at 31 March 2013. Based on the results of this valuation, the contribution rates payable by the individual employers will be revised with effect from 1 April 2014.


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WOLVERHAMPTON CITY COUNCIL We have audited the pension fund accounting statement included in the pension fund annual report of Wolverhampton City Council for the year ended 31 March 2012 which comprise the fund account, the net assets statement and the related notes. The financial reporting framework that has been applied in their preparation is the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2011/12. Respective responsibilities of the Assistant Director Corporate Services (Section 151 Officer) and the auditor The Assistant Director - Corporate Services (Section 151 Officer) is responsible for the preparation of the pension fund accounting statements and for being satisfied that they give a true and fair view in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2011/12. Our responsibility is to audit and express an opinion on the pension fund accounts in accordance with Part II of the Audit Commission Act 1998, the Code of Audit Practice 2010 – Local Government Bodies issued by the Audit Commission and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for [ Wolverhampton City Council’s members as a body in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 48 of the Statement of Responsibilities of Auditors and of Audited Bodies – Local Government, published by the Audit Commission in March 2010. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of the audit of the financial statements 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 pension fund’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by Wolverhampton City Council; 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. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements In our opinion, the pension fund’s accounting statements: – give a true and fair view, in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2011/12, of the financial transactions of the pension fund during the year ended 31 March 2012, and the amount and disposition of the fund’s assets and liabilities as at 31 March 2012; and – have been properly prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2011/12. Opinion on other matter In our opinion, the information given in the Annual Report for the financial year for which the accounting statements are prepared is consistent with the accounting statements.

Richard Bacon for and on behalf of PricewaterhouseCoopers LLP Appointed Auditors Birmingham 29 October 2012 Notes: a) The maintenance and integrity of the West Midlands Pension Fund website is the responsibility of senior officers; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

October 2012 • Report and Accounts • Page 32


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

STATEMENT OF RESPONSIBILITIES

The Council’s Responsibilities The Council is required to: i) Make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this council, that officer is the Assistant Director – Corporate Services (Section 151 Officer). ii) Manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets. iii) Approve the Statement of Accounts.

The Assistant Director – Corporate Services (Section 151 Officer)’s Responsibilities The Assistant Director – Corporate Services (Section 151 Officer) is responsible for the preparation of the Council’s Statement of Accounts in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Code). In preparing this Statement of Accounts, the Assistant Director – Corporate Services (Section 151 Officer) has: i) Selected suitable accounting policies and then applied them consistently. ii) Made judgements and estimates that were reasonable and prudent. iii) Complied with the Code. The Assistant Director – Corporate Services (Section 151 Officer) has also: i) Kept proper accounting records which were up to date. ii) Taken reasonable steps for the prevention and detection of fraud and other irregularities.

Page 33 • Report and Accounts • October 2012

Certification of the Assistant Director – Corporate Services (Section 151 Officer) I certify that the above responsibilities have been complied with and the Statement of Accounts herewith presents a true and fair view of the financial position of the council as at 31 March 2012 and its income and expenditure for the year ended the same date. Pat Main Assistant Director – Corporate Services (Section 151 Officer) 24 September 2012

Member Approval of the Accounts Responsibility for member approval of the Council’s Statement of Accounts lies with the Audit Committee. The Statement of Accounts was presented by the Assistant Director – Corporate Services (Section 151 Officer) to the Audit Committee on 24 September 2012, and was formally approved at that meeting. Councillor Keith Inston Chair, Audit Committee 24 September 2012


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

FUND ACCOUNT FOR THE YEAR ENDING 31 MARCH 2012

CONTRIBUTIONS AND BENEFITS Notes

2010/11 £000

2011/12 £000

Contributions receivable Transfers in Other income Total contributions and other income

7 8 9

434,996 20,950 44,451 500,397

412,714 65,024 16,241 493,979

Benefits payable Payments to and on account of leavers Other payments Administration expenses Total benefits and other expenditure

10 11

395,994 21,751 192 5,518 423,455

469,189 41,344 281 5,372 516,186

12

Net additions/(reductions)

76,942

(22,207)

2010/11 £000

2011/12 £000

129,755 285,592 179,283 (7,337) 587,293

179,342 (72,581) 92,742 (15,607) 183,896

RETURNS ON INVESTMENTS Notes

Investment income Changes in value of investments Profit and losses on disposal of investments Investment management expenses Net return on investments Net increase in the Fund during the year Net assets of the Fund at the beginning of the year Net assets of the Fund at the end of the year

13

12

664,235 8,007,875 8,672,110

161,689 8,672,110 8,833,799

The notes on pages 36 to 51 form part of these financial statements

October 2012 • Report and Accounts • Page 34


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NET ASSETS STATEMENT BALANCE AT 31 MARCH 2012

Notes

Investment assets (at market value) Fixed interest securities UK equities Overseas equities Pooled investment vehicles Property Foreign currency holdings Cash deposits Other investments assets Outstanding dividend entitlement and recoverable withholding tax Investment assets

14

Investment liabilities (at market value) Other investments liabilities Investment liabilities

14

Net investment assets Current assets Current liabilities Net assets of the Fund at the end of the year

17 18

2010/11 £000

2011/12 £000

152,799 975,369 1,901,451 4,871,019 571,100 28,269 99,272 5 12,302 8,611,586

158,770 861,175 1,735,590 5,236,270 615,422 43,709 139,297 248 11,104 8,801,585

0 0

0 0

8,611,586

8,801,585

77,399 (16,875) 8,672,110

70,043 (37,829) 8,833,799

The accounts summarise the transactions of the Scheme and deal with the net assets at the disposal of the Committee. 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 certificate/statement. The notes on pages 36 to 51 form part of these financial statements

Page 35 • Report and Accounts • October 2012


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

1 GENERAL The West Midlands Pension Fund is administered by Wolverhampton City Council on behalf of all local authorities in the West Midlands and other employers who have members in the Fund. The City Council Superannuation Committee administers the Fund function. It meets at approximately quarterly intervals, and has members from each of the seven metropolitan district councils in the West Midlands region. An Investment Advisory Sub-Committee and a Joint Consultative Panel have been established to deal with these two areas of management and administration of the Fund.

Where member employing organisations have not submitted certified returns of contributions payable by the due date for preparation of these accounts, an estimate has been made based on the monthly returns of these bodies. iii) Transfers to and from other schemes Transfer values represent the amounts received and paid during the year for members who had either joined or left the Scheme as at 31 March 2012, calculated in accordance with the Local Government Pension Scheme Regulations (see notes 8 and 11). They are not accounted for on an accruals basis. (iv) Investment Income

The Fund is administered under the rules of the Local Government Pension Scheme as set out in the Local Government Pension Scheme regulations. Membership of the Fund is available for all local government employees including non-teaching staff of schools and further and higher education corporations in the West Midlands region, together with employees of admitted bodies. Employees’ contributions are payable at a percentage of pensionable pay (between 5.5% and 7.5%, based on gross pay), while employers’ contributions are payable at the rate specified for each employing authority by the Fund’s actuary.

a) Interest income Interest income is recognised in the Fund account as it accrues, using the effective interest rate of the financial instrument as at the date of acquisition or origination.

The Fund’s Statement of Investment Principles (SIP) can be found in the annual report and on the Fund’s website: www.wmpfonline.com

c) Distributions from pooled funds Distributions from pooled funds are recognised at the date of issue. Any amount not received by the end of the reporting period is disclosed in the net assets statement as a current financial asset.

2 BASIS OF PREPARATION The Statement of Accounts sumarises the Fund's transactions for the 2011/2012 financial year and its position at the year-end as at 31 March 2012. The accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2011/2012 which is based upon International Financial Reporting Standards (IFRS), as amended for the UK public sector. The accounts summarise the transactions of the Fund and report on the net assets available to pay pension benefits. The accounts do not take account of obligations to pay pensions and benefits which fall due after the end of the financial year. The actuarial present value of promised retirement benefits, valued on an International Accounting Standard (IAS) 19 basis, is disclosed at note 5 of these accounts. 3 STATEMENT OF ACCOUNTING POLICIES a) Inclusion of income and expenditure i) Fund account In the Fund account, income and expenditure are accounted for in the year in which they arise by the creation of debtors and creditors at the year-end, where necessary. However, provision has not been made where the amount payable or receivable in relation to transfers was not agreed at the year-end (see note 8). ii) Contribution income Contributions receivable have been included in the accounts on the accruals basis at the rates set out in notes 1 and 5 for basic contributions. Additional contributions as notified by employers for the period have also been included.

b) Dividend income Dividend income is recognised on the date the shares are quoted ex-dividend. Any amount not received by the end of the reporting period, where known to be due, have been accrued for in the accounts.

d) Property-related income Property-related income consists primarily of rental income. Rental income from operating leases on properties owned by the Fund is recognised on a straight-line basis over the term of the lease. Any lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Contingent rents based on the future amount of a factor that changes other than with the passage of time, such as turnover rents, are only recognised when contractually due. During 2011/2012, due to improved reporting facilities, an additional quarter property rental income was posted into the accounts in order to bring the data up to date and to reduce the reporting in arrears by one quarter. v) Benefits Payable Pensions and lump-sum benefits payable include all amounts known to be due as at 31 March 2012 relating to the financial year 2011/12. vi) Foreign currency transactions Dividends, interest and purchases and sales of investments have been accounted for at the spot market rates at the date of transaction. End-of-year spot market exchange rates have been used to value cash balances held in foreign currency bank accounts, market values of overseas investments and purchases and sales outstanding at 31 March 2012.

October 2012 • Report and Accounts • Page 36


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

b) Valuation of investments The market values of investments as shown in the net assets statement have been determined as follows: i) Quoted securities Securities have been valued at the bid-market price ruling on 31 March 2012 where a quotation was available on a recognised stock exchange or unlisted securities market. ii) Unquoted securities The valuation of unquoted securities is based on the latest investor reports and financial statements provided by the Fund managers of the underlying funds, adjusted for transactions arising after the date of such reports. A discount may be applied by the fund manager where trading restrictions apply to such securities. Where the first investor report has not been received from the fund manager, the security is valued at cost. iii) Pooled investment vehicles Pooled investment vehicles are stated at the bid-point of the latest prices quoted or the latest single market prices. In the case of the pooled investment vehicles which are accumulation funds, change in market value also includes income, net of withholding tax, which is reinvested in the Fund. iv) Freehold and leasehold properties These have been valued at their open market value. Property is valued by the Fund’s valuers on an annual basis. The market values included in these accounts are contained in a valuation report by Knight Frank LLP, Chartered Surveyors as at 31 March 2012. Agricultural properties were valued by Savills Plc, Agricultural valuers at the same date. One-third of the commercial property portfolio is valued fully in March each year, with the remaining two-thirds being a 'desktop' valuation. The valuation undertaken at 31 March 2012 was therefore one-third full valuation, and the remaining two-thirds desktop valuations. v) Foreign currencies Investments held in foreign currencies have been valued as set out in paragraphs (b) (i) to (b) (ii) above and translated at exchange rates ruling at 31 March 2012. vi) Movement in the net market value of investments Any gains or losses arising on translation of investments into sterling are accounted for as a change in market value of investment. c) Cash and cash equivalents Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to minimal risk of changes in value. d) Financial liabilities The Fund recognises financial liabilities at fair value as at the reporting date. A financial liability is recognised in the net assets statement on the date the Fund becomes party to the liability. From this date, any gains or losses arising from changes in the fair value of the liability are recognised by the Fund.

Page 37 • Report and Accounts • October 2012

e) Investment management expenses All investment management expenses are accounted for on an accruals basis. External investment management and custodian fees are agreed in management or custody agreements governing the administration of the individual mandates. Fees are generally based on the valuation of the underlying investments, either being managed or in safe custody, and as such will fluctuate as the valuations change. In addition, performance-related fees are negotiated with a number of managers, and performance-related fees totalled £7.0m in 2011/2012 and £0.5m in 2010/2011. Where a management fee notification has not been received by the 31 March, an estimate is used for inclusion in the Fund account. The cost of using advice from external consultants is included in investment management fees. The cost of in-house management is charged to the Fund, as is an element of the administering authority's officers time spent on management of the Fund. f) Membership Overall membership of the Fund at the end of the year was as follows:

31 March 2010/11 2011/12

Active members Pensioner members Deferred members

102,011 70,521 81,161

95,478 75,228 84,467

A detailed list of member bodies is available at note 21. 4 CRITICAL JUDGEMENTS IN APPLYING ACCOUNTING POLICIES Unquoted private equity investments The valuation of unquoted securities is based on the latest investor reports and financial statements provided by the fund managers of the underlying funds, adjusted for transactions arising after the date of such reports. A discount may be applied by the fund manager where trading restrictions apply to such securities. Where the first investor valuation report has not been received from the fund manager, the security is valued at cost. The value of unquoted private equity at 31 March 2012 was £1,099 million (£926 million at 31 March 2011). Fund liability The Fund liability is calculated every three years by the appointed actuary, with annual updates in the intervening years. The methodology used is in line with accepted guidelines and in accordance with lAS 19. Assumptions underpinning the valuations are agreed with the actuary and are summarised in note 5. This estimate is subject to significant variances based on changes to the underlying assumptions.


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

4a ASSUMPTIONS MADE ABOUT THE FUTURE AND OTHER MAJOR SOURCES OF ESTIMATION UNCERTAINTY Actuarial present value of promised retirement benefits

Uncertainties Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on Fund assets. Mercer Limited, the Fund's consulting actuaries, are engaged to provide expert advice about the assumptions to be applied. Effect if actual results differ from assumptions The effects on the net pension liability of changes in individual assumptions can be measured. For instance, an increase in the discount rate assumption would result in a decrease in the pension liability; however, an increase in assumed earnings inflation or assumed life expectancy would significantly increase the pension liability as detailed by the Fund's consulting actuary below: Change in assumptions year ended 31 March 2012

Approx. % increase Approx. monetary in liabilities value (£m)

0.5% pa decrease in discount rate One-year increase in member life expectancy 0.5% pa increase in salary increase rate 0.5% pa increase in pensions increase rate*

9% 2%

1,253 260

3%

336

7%

897

5 ACTUARIAL VALUATION OF THE FUND A full actuarial valuation of the Fund was made as at 31 March 2010 by the Fund’s actuary, P. Middleman of Mercer Human Resource Consulting Limited. The actuary has determined the contribution rates with effect from 1 April 2011 to 31 March 2014. On the basis of the assumptions adopted, the valuation revealed that the value of the Fund’s assets of £8,008 million represented 75% of the funding target of £10,622 million at the valuation date. The valuation also showed that a common rate of contribution of 11.9% of pensionable pay per annum was required from employers. The common rate is calculated as being sufficient, together with contributions paid by members, to meet all liabilities arising in respect of service after the valuation date. Adopting the same method and assumptions as used for assessing the funding target, the deficit would be eliminated by an average additional contribution rate of 6.2% of pensionable pay for 25 years. This would imply an average employer contribution rate of 18.1% of pensionable pay in total. In practice, each individual employer’s position is assessed separately and the contributions required are set out in our report dated 31 March 2011. These contributions were determined having regard to the individual circumstances of each employer and included specific allowances (zero for some employers) for early retirement costs. Additional payments will be made by employers where the non-ill-health early retirement costs exceed the allowances certified.

*including allowance for change to deferred pension increases Private equity

Uncertainties Private equity investments are not publicly listed and as such there is a degree of estimation involved in the valuation. Effect if actual results differ from assumptions The total private equity investments in the financial statements are £1,099 million. There is a risk that this investment may be understated or overstated in the accounts. Hedge funds

Uncertainties Hedge funds valued at the sum of the fair values provided by the administrators of the underlying funds, plus adjustments that the directors or independent administrators judge necessary. Where these investments are not publicly listed, there is a degree of estimation involved in the valuation.

The funding plan adopted in assessing the contributions for each individual employer is in accordance with the Funding Strategy Statement (FSS). Different approaches adopted in implementing contribution increases and deficit recovery periods are as determined through the FSS consultation process. For certain employers, in accordance with the FSS, an increased allowance has been made for assumed investment returns on existing assets and future contributions, for the duration of the employer’s deficit recovery period. As a result of the valuation, a revised rates and adjustments certificate was prepared for the three years commencing 1 April 2011. The rates payable by the unitary authorities were certified on the following page.

Effect if actual results differ from assumptions The total hedge funds’ value in the financial statements is £537 million. There is a risk that these investments may be understated or overstated in the accounts. Given a tolerance of say +/-5% around the net asset values on which the valuation is based, this would equate to a tolerance of +/-£27 million.

October 2012 • Report and Accounts • Page 38


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

FUTURE SERVICE RATE (% OF PAY) PLUS LUMP-SUM (£) Birmingham City Council Coventry City Council Dudley MBC Sandwell MBC Solihull MBC Walsall MBC Wolverhampton City Council

2011/12

2012/13

2013/14

12.1% plus £26,500,000 12.1% plus £6,300,000 11.8% plus £5,500,000 11.7% plus £7,500,000 11.7% plus £4,100,000 11.7% plus £7,700,000 12.2% plus £7,100,000

12.1% plus £27,800,000 12.1% plus £6,600,000 11.8% plus £5,700,000 11.7% plus £7,900,000 11.7% plus £4,300,000 11.7% plus £8,000,000 12.2% plus £7,400,000

12.1% plus £29,100,000 12.1% plus £6,900,000 11.8% plus £6,000,000 11.7% plus 8,300,000 11.7% plus £4,500,000 11.7% plus £8,400,000 12.2% plus £7,800,000

The valuation was carried out using the projected unit actuarial method and the main actuarial assumptions used for assessing the funding target and the common contribution rate were as follows: For past service liabilities

Rate of return on investments: – Pre-retirement – Post-retirement Rate of pay increases Rate of increases in pensions in payment (in excess of guaranteed minimum pension)

For future service liabilities

6.5% per annum 6.75% per annum 5.5% per annum 6.75% per annum 4.75% per annum 4.75% per annum 3.0% per annum 3.0% per annum

The assets were assessed at market value. The administering authority determined that certain employers with a lesser financial covenant (based on criteria set by the administering authority) would have their contribution requirement assessed with reference to more cautious actuarial assumptions based on gilt yields. Further details surrounding this approach can be found in the FSS and the administering authority’s separate document on admitted bodies. The next triennial actuarial valuation of the Fund is due as at 31 March 2013. Based on the results of this valuation, the contribution rates payable by the individual employers will be revised with effect from 1 April 2014. Actuarial present value of promised retirement benefits for the purposes of IAS 26 IAS 26 requires the present value of the Fund’s promised retirement benefits to be disclosed and, for this purpose, the actuarial assumptions and methodology used should be based on IAS 19, rather than the assumptions and methodology used for funding purposes. To assess the value of the benefits on this basis, we have used the following financial assumptions: Rate of return on investments (discount rate) Rate of pay increases Rate of increases in pensions in payment (in excess of guaranteed minimum pension)

Thursday 31 March 2011

Saturday 31 March 2012

5.5% per annum 4.9% per annum 4.65% per annum 4.25% per annum 2.9% per annum 2.5% per annum

We have also used valuation methodology in connection with ill-health and death benefits which is consistent with IAS 19. Demographic assumptions are the same as those used for funding purposes. On this basis, the value of the Fund’s promised retirement benefits as at 31 March 2011 and 31 March 2012 were £12,086 million and £13,226 million respectively. During the year, corporate bond yields reduced significantly, resulting in a lower discount rate being used for IAS 26 purposes at the year end than at the beginning of the year (4.9% pa versus 5.5% pa), and in addition there was a reduction in inflation expectations (from 2.9% pa to 2.5% pa). The net effect of these changes is an increase in the Fund’s liabilities for the purposes of IAS 26 of about £469 million.

Page 39 • Report and Accounts • October 2012


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

6 TAXATION

Payments can be analysed by type of member body as follows:

i) Value added tax (VAT) The Fund pays VAT collected on income in excess of VAT payable on expenditure to HMRC. The accounts are shown exclusive of VAT. (ii) Taxation of overseas investment income The Fund receives interest on its overseas bonds gross, but a variety of arrangements apply for the taxation of dividends on overseas equities in the various markets. Where relief is available it may be either in full at source (USA, Belgium, Australia, Finland and Norway), or partial relief by claim (Austria, Denmark, France, Germany, Netherlands, Switzerland and Spain). In some markets (Poland, Canada, Italy, and Sweden) tax is deducted at the treaty rate so that no further adjustment is required, and there are also markets (Malaysia, Hong Kong and Singapore) where no double taxation agreements exist and where the full amount is payable.

Administering authority Scheme employers Admitted employers

8 TRANSFERS IN Individual transfers in from other schemes

2010/11 £000

2011/12 £000

31,263 376,341 27,392 434,996

31,054 360,361 21,299 412,714

2010/11 £000

2011/12 £000

20,950

65,024

Following the transfer of Staffordshire probation staff from Staffordshire Pension Fund on 1 April 2010, the Fund received a payment of £46m on 27 March 2012. A further residual balance is expected in 2012/13 following full finalisation of the required calculations.

7 CONTRIBUTIONS RECEIVABLE 9 OTHER INCOME

Contributions receivable are analysed below:

From employers Basic contributions Deficit funding Augmented membership Additional cost of early retirement From employees Basic contributions Additional contributions Subtotal Total contributions

2010/11 £000

2011/12 £000

293,197 6,800 466 14,718 315,181

281,356 6,725 158 13,909 302,148

118,414 1,401 119,815 434,996

109,486 1,080 110,566 412,714

The additional contributions above represent the purchase of added membership or additional benefits under the Scheme and are included in the revenue accounts. Several organisations made small augmented membership payments as one-offs to remove liability relating to individual employees who had left their employment. In 2011/12 one admitted body, BXL Services, went into liquidation with an outstanding liability identified by the actuary of £4,040,836. It is anticipated that the Fund will receive in the order of £300,000 once the liquidation is finalised. A further admitted body, Adoption Support, terminated their agreement in January 2012 without the necessary funds to meet their outstanding liabilities of £98,200. The Fund has since recovered £30,000 from the remaining assets.

Benefits recharged to employers Compensatory added years Pensions increases Magistrates’ courts committee

2010/11 £000

2011/12 £000

10,192 6,582 27,677 44,451

9,327 6,914 0 16,241

Note: Following the bulk transfer of magistrates’ courts committee staff to the Civil Service Pension Scheme on 31 March 2005, it has now been calculated by Mercer Ltd that the Fund is due to receive a total of £27,677,168. This is to be paid in ten equal and annual instalments commencing on 15 April 2011 and finishing on 15 April 2020 together with interest payments resulting in annual income of £3,261,152. The balance due included in ‘Other Debtors’ is £24,909,451. 10 BENEFITS PAYABLE An analysis of expenditure on benefits by type is given below:

Pensions Retirement pensions Widows’ pensions Children’s’ pensions Widowers’ pensions Ex-spouse Equivalent pension benefits Civil partnership Cohabiting partners Lump-sum benefits Retiring allowances Death grants Total benefits payable

2010/11 £000

2011/12 £000

269,447 23,320 865 2,353 77 91 5 3 296,161

299,939 24,365 900 2,732 102 98 11 4 328,151

89,808 10,025 99,833 395,994

130,341 10,697 141,038 469,189

October 2012 • Report and Accounts • Page 40


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

The total benefits payable can be analysed by type of member body as follows:

Administering authority Scheme employers Admitted employers

2010/11 £000

2011/12 £000

32,608 337,081 26,305 395,994

37,551 405,088 26,550 469,189

11 PAYMENTS TO AND ON ACCOUNT OF LEAVERS

Individual transfers out from other schemes Refunds of contributions State scheme premiums Bulk transfer pension increases

2010/11 £000

2011/12 £000

21,701

16,568

42 8 0 21,751

30 (30) 24,776 41,344

The bulk transfer pension increases payment of £24,776m relates to amounts included within current liabilities at the year end, in respect of back payments to cover pre-October 1986 pension increase payments between 1995 and 31 March 2012 for former retiring employees of West Midlands Passenger Transport Executives. 12 INVESTMENT AND ADMINISTRATION EXPENSES

Investments External management of investments In-house management of investments Performance measurement service Property and legal fees Safe custody expenses

2010/11 £000

2011/12 £000

5,142 296 59 21 5,518

4,893 400 62 17 5,372

4,729 2,191 31 39 347 7,337

13,101 2,199 33 126 148 15,607

The pensions administration function and the in-house management of investments are performed by Wolverhampton City Council, and the costs shown in the table above are recharged to the Fund each year on an estimated basis with an end-of-year adjustment for actual costs shown as a debtor or creditor in the accounts. This is a related-party transaction as Wolverhampton City Council is also a member body of the Fund. Key management personnel who are employees of the administering authority and members of the Fund are disclosed in the administering authority's statement of accounts along with details of remuneration and pensions contributions.

Page 41 • Report and Accounts • October 2012

13 INVESTMENT INCOME Investment income is analysed below: Dividends and interest Fixed-interest securities UK private sector – quoted Equities UK Overseas Pooled investment vehicles UK UK - reinvested income (prior years) Overseas equities Private equity Interest on cash deposits Stocklending UK tax (irrecoverable) Overseas taxation Total dividends and interest

Costs incurred in the management of the investments of the Fund and the administration of the Fund have been charged to the Fund in accordance with the Local Government Pension Scheme regulations and can be analysed as follows:

Administration Pensions administration Actuarial fees Audit fees Legal and other professional fees

Performance-related fees are negotiated with a number of managers. Included in external management of investments in are performance-related fees of £7.0m in 2011/2012 and £0.5m in 2010/2011.

Property management income Property management expenses Total investment income

2010/11 £000

2011/12 £000

9,531

8,557

33,213 44,496

33,868 45,883

9,825 0 1,972 133 749 1,766 (68) (2,194)

32,389 23,064 3,336 414 670 1,092 (27) (2,428)

99,423

146,818

37,823 (7,491) 30,332 129,755

42,956 (10,432) 32,524 179,342

During 2011/2012, reinvested income of £31.7m was allocated to UK pooled investment vehicles in relation to the Fund’s holding in the Schroders All Maturities Corporate Bond Fund. A corresponding purchase of units is included in the purchase costs detailed in note 15 to the accounts. Stocklending The stocklending programme provides for direct equity investments to be lent. At the year-end, the value of quoted equities on loan was £69.6m (2011: £60.9m) in exchange for which the custodian held collateral worth £74.0m (2011: £63.9m). Collateral consists of acceptable securities and government debt.


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

14 NET INVESTMENT ASSETS

31 March

Further analysis of the market value of investments as set out in the net assets statement is given below. Segregated accounts are held separately from the main account by the global custodian and contain assets managed by some of the Fund's external managers. 31 March 2011 £000

Fixed-interest securities UK companies - segregated (external) 152,799 152,799 UK equities Quoted 975,369 Quoted – segregated (external) 975,369 Overseas equities Quoted 1,583,899 Quoted – segregated (external) 317,552 1,901,451 Pooled investment vehicles Managed funds UK quoted - fixed interest 207,091 Other fixed interest 187,524 UK quoted - index-linked 735,084 Overseas equities 913,541 UK unquoted equities 341,666 Overseas unquoted equities 1,347,075 UK absolute returns 593,760 Overseas absolute returns 68,495 UK property 21,065 Foreign property 147,248 Unit trusts UK quoted equities 25,223 Overseas equities 274,256 Overseas property 8,991 4,871,019 Property UK freehold 545,100 UK leasehold* 26,000 571,100

2012 £000

158,770 158,770 861,175 861,175 1,438,079 297,511 1,735,590

188,770 416,332 870,714 828,862 232,252 1,339,192 699,319 92,169 32,792 194,615 3,528 329,147 8,578 5,236,270 589,072 26,350 615,422

Foreign currency holdings United States dollars Euro Canadian dollars Danish kroner Hong Kong dollars Swedish kroner Swiss francs Japanese yen Norwegian kroner Malaysian ringgits Singapore dollars Australian dollars New Zealand dollars Hungarian florints Polish zloty Israeli shekels Turkish lira Czech koruna Korean won

2011 £000

2012 £000

13,024 8,000 706 690 590 378 571 1,031 751 474 1,097 17 388 415 137 28,269

29,462 1,049 979 1,085 1,907 449 669 1,053 551 1 641 4,168 17 553 27 297 801 43,709

Cash deposits UK 99,272 Other Investments Broker balances 5 Outstanding dividend entitlement and recoverable withholding tax 12,302 Total net investment assets 8,611,586

139,297 248 11,104 8,801,585

* All leasehold properties are held on long leases. The following investments represent more than 5% of the net assets of the Scheme:

Security

Legal & General All Stocks Index-Linked Gilts Fund

31 March 2011 % of total Market market value value £000 %

485,117

5.6

31 March 2012 % of total Market market value value £000 %

512,558

5.8

October 2012 • Report and Accounts • Page 42


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

The proportion of the market value of investment assets managed in-house and by each external manager at the year-end is set out below. 31 March In-house Managers: UK quoted Managers: US quoted Managers: European quoted Managers: Japanese quoted Managers: Pacific Basin Managers: Emerging markets Managers: Global equities Managers: Fixed interest Managers: Indirect property Managers: Emerging market debt Managers: Commodities Managers: Infrastructure funds Managers: Absolute return Managers: Private equity Outstanding dividend entitlement and recoverable withholding tax Total investment assets

Page 43 • Report and Accounts • October 2012

£000

2011 %

2012 000

%

3,243,015 49,115 99,481 206,120 34,530 98,974 608,446 457,797 1,282,498 168,312 262,316 248,867 251,471 662,255 926,087 8,599,284

37.6 0.6 1.2 2.4 0.4 1.2 7.1 5.3 14.8 2.0 3.1 2.9 2.9 7.7 10.8 100.00

3,077,223 24,236 107,739 174,908 34,390 97,096 556,858 484,529 1,634,586 235,984 0 202,678 269,897 791,488 1,098,869 8,790,481

35.0 0.3 1.2 2.0 0.4 1.1 6.3 5.5 18.6 2.7 0.0 2.3 3.1 9.0 12.5 100.00

12,302 8,611,586

11,104 8,801,585


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

15 INVESTMENT - MARKET VALUE MOVEMENTS ANALYSIS The change in the value of investments during 2011/12 is set out below:

Fixed-interest securities UK equities Overseas equities Pooled investment vehicles Property Broker balances Outstanding dividend entitlement and recoverable withholding tax Foreign currency Cash deposits Total investments

Value at 1 April 2011 £000

Purchases at cost £000

Sales proceeds £000

152,799 975,369 1,901,451 4,871,019 571,100 8,471,738 5 12,302

0 20,366 53,964 1,100,500 46,694 1,221,524

0 (74,445) (155,290) (774,949) (8,770) (1,013,454)

Change in market value £000

Value at 31 March 2012 £000

5,971 (60,115) (64,535) 39,700 6,398 (72,581)

158,770 861,175 1,735,590 5,236,270 615,422 8,607,227 248 11,104

28,269 99,272 8,611,586

43,709 139,297 8,801,585

Purchases also include transfers in of investments, take-over of shares, etc, and invested income. Sales proceeds represent change in book value from sales of investments, transfers out of investments, corporate activity proceeds and reductions in cash deposits. The change in market value of investments comprises of increases and decreases in the market value of investments held at any time during the year. In addition to this change in market value, the Fund account shows £92,742K which represents profit on the disposal of investments. There were 110 late payments amounting to £2.693m of contributions during the year which constituted employer-related investments until the amounts were received. Other than this there were no employer-related investments. 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 during the year amounted to £0.551m (20102011: £0.449m). In addition to the transaction costs disclosed above, indirect costs are incurred through the bid-offer spread of investments within pooled investment vehicles. The amount of indirect costs is not separately provided to the Scheme. 31 March 2011 £000

Equities - UK quoted Equities - Overseas quoted

219,229 229,651 448,880

2012 £000

126,009 424,768 550,777

October 2012 • Report and Accounts • Page 44


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

The volatility of investment markets is an ever-present and longstanding feature of pension fund management and valuations may vary, either up or down, throughout each day when exchanges are open. 31 March

Net gains and losses on financial instruments

2011 £000

Financial assets Fair value through profit and loss

Fair value of financial instruments and liabilities The following table summarises the carrying values of the financial assets and financial liabilities by class of instrument compared with their fair values. Financial assets Fair value through profit and loss Loans and receivables

Page 45 • Report and Accounts • October 2012

285,592 285,592

31 March 2011 Carrying Fair value value £000 £000

6,730,710 98,550 6,829,260

8,467,818 98,550 8,566,368

2012

£000

(72,581) (72,581)

31 March 2012 Carrying Fair value value £000 £000

7,103,781 138,748 7,242,529

8,607,228 138,748 8,745,976


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

VALUATION OF FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE The valuation of financial instruments has been classified into three levels, according to the quality and reliability of information used to determine fair values. Criteria utilised in the instrument classifications are detailed below: Level 1 Financial instruments at level 1 are those where the fair values are derived from unadjusted quoted prices in active markets for identical assets or liabilities. Products classified as level 1 comprise quoted equities, quoted fixed securities, quoted index-linked securities and unit trusts. Listed investments are shown at bid prices. The bid value of the investment is based on the bid market quotation of the relevant stock exchange. Level 2 Financial instruments at level 2 are those where quoted market prices are not available; for example, where an instrument is traded in a market that is not considered to be active, or where valuation techniques are used to determine fair value and where these techniques use inputs that are based significantly on observable market data. Level 3 Financial instruments at level 3 are those where at least one input that could have a significant effect on the instrument's valuation is not based on observable market data. Such instruments would include unquoted equity investments and hedge fund of funds, which are valued using various valuation techniques that require significant judgement in determining appropriate assumptions. The values of the investment in private equity are based on valuations provided by the general partners to the private equity funds in which West Midlands Pension Fund has invested. These valuations are prepared in accordance with the International Private Equity and Venture Capital Valuation Guidelines, which follow the valuation principles of IFRS and US GAAP. The valuation of unquoted securities is based on the latest investor reports and financial statements provided by the fund managers of the underlying funds, adjusted for transactions arising after the date of such reports as appropriate. The values of the investment in hedge funds are based on the net asset value provided by the fund manager. Assurances over the valuation are gained from the independent audit of the value. The following table provides an analysis of the financial assets and liabilities of the Fund grouped into levels 1 to 3, based on the level at which the fair value is observable.

Values at 31 March 2012 Financial assets Financial assets at fair value through profit and loss Loans and receivables Total financial assets

Values at 31 March 2011 Financial assets Financial assets at fair value through profit and loss Loans and receivables Total financial assets

Quoted market price Level 1 £000s

Using observable inputs Level 2 £000s

With significant unobservable inputs Level 3 £000s

4,976,558 191,611 5,168,169

1,267,740

2,362,932

1,267,740

2,362,932

8,607,229 191,611 8,798,840

Quoted market price Level 1 £000s

Using observable inputs Level 2 £000s

With significant unobservable inputs Level 3 £000s

Total £000s

5,193,140 139,848 5,332,988

1,198,244

2,080,354

1,198,244

2,080,354

Total £000s

8,471,738 139,848 8,611,586

October 2012 • Report and Accounts • Page 46


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

16 INVESTMENT CAPITAL COMMITMENTS

18 CURRENT LIABILITIES

Investment commitments at the end of the financial year in respect of future payments were:

Creditors and receipts in advance

31 March

Non-equities Property

2011 £000

2012 £000

1,360,514 256,256 1,616,770

1,071,469 184,470 1,255,939

These commitments relate to outstanding commitments due on funds held in the private equity, property and infrastructure portfolios. 17 CURRENT ASSETS Debtors and prepayments Contributions receivable Employers Employees Wolverhampton City Council Other debtors Cash

31 March 2011 £000

2012 £000

24,820 9,264 42,973 77,057 342 77,399

7,558 8,841 43,658 60,057 9,986 70,043

Note: Following the bulk transfer of magistrates’ courts committee staff to the Civil Service Pension Scheme on 31 March 2005, it has now been calculated by Mercer Ltd that the Fund is due to receive a total of £27,677,168. This is to be paid in ten equal and annual instalments commencing on 15 April 2011 and finishing on 15 April 2020 together with interest payments resulting in annual income of £3,261,152. The balance due included in ‘Other Debtors’ is £24,909,451.

Pension and lump-sum benefits Other creditors Trustee account Bulk transfer pension increases

2012 £000

(6,981) (9,557) (337) (16,875)

(4,510) (8,543) 24,776 (37,829)

Note: Following an ongoing dispute by the beneficiaries of a pensioner who died in 2008 and on advice from the Chief Legal Officer, the sum due to the beneficiaries of £337,349 was paid into a trustees of the deceased account in 2010/11. The dispute was resolved in 2011/12 and the monies due to the beneficiaries was paid from the account. The bulk transfer pension increases payment of £24,776m relates to amounts included within current liabilities at the year end, in respect of back payments to cover pre-October 1986 pension increase payments between 1995 and 31 March 2012 for former retiring employees of West Midlands Passenger Transport Executives. Analysis of creditors

31 March 2011 £000

Central government bodies Other local authorities Other entities and individuals

(7,311) (2,131) (7,433) (16,875)

2012 £000

(3,082) (1,836) (32,911) (37,829)

Following a review of debtor and creditor balances, central government creditors which were previously netted off against debtors are now shown in creditors; therefore, a £7.3m adjustment has been made to the 2011 figures to show the true comparison. 19 ADDITIONAL VOLUNTARY CONTRIBUTIONS

Analysis of debtors

Central government bodies Other local authorities Public corporations Other entities and individuals

31 March 2011 £000

31 March 2011 £000

2012 £000

56,263 20 20,774 77,057

49,786 13 10,258 60,057

Following a review of debtor and creditor balances, central government creditors which were previously netted off against debtors are now shown in creditors; therefore, a £7.3m adjustment has been made to the 2011 figures to show the true comparison.

As well as joining the Fund, Scheme members can pay into an additional voluntary contribution (AVC) scheme run by two AVC providers. Contributions are paid directly from Scheme members to the AVC providers. The contributions are not included within the Fund accounts, in line with regulation 4 (2) (c) of the Pension Scheme (Management and Investment of Funds) Regulations 2009. The table below shows the activity for each AVC provider in the year. Equitable Life 31 March 2011 2012 £000 £000

Opening value 4,119 of the Fund Prior year adjustment* Income 55 Expenditure (480) Change in market value 161 Closing value 3,855 of the Fund

Prudential 31 March 2011 2012 £000 £000

3,855

24,509

28,145

57 (1,097) 86 2,901

8,550 (5,977) 1,063 28,145

(23) 8,429 (10,319) 1,234 27,466

*Prior year adjustment of £21,000 relating to a member incorrectly associated with the Fund and £2,000 in cash/interest adjustments made after year-end in 2010/11. Page 47 • Report and Accounts • October 2012


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

20 POST-YEAR END TRANSACTIONS There were no major events following the end of the financial year that would affect the validity of the figures shown in the Accounts Statement. 21 THE NATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS Risk management The Fund’s activities expose it to a variety of financial risks including: Credit risk

- the possibility that the other parties might fail to pay amounts due to the Authority.

Liquidity risk

- the possibility that the Authority might not have funds available to meet its commitments to make payments.

Market risk

- the possibility that financial loss might arise as a result of stock market movements.

The Fund’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the resources available to Fund services. Policies covering specific areas relating to the Fund are as follows: Investment risk In order to achieve its statutory obligations to pay pensions, the Fund invests its assets, including employer and employee contributions, in a way that allows it to meet its liabilities as they fall due for payment. It does this by matching assets to liabilities through the triennial actuarial valuation followed by an appropriate asset allocation. During the year, the Fund targeted an 85% exposure to ‘growth’ assets, such as equities, property and other alternatives with equity like returns, but with less volatility and lower correlation to quoted equities. The remaining 15% being allocated to ‘matching’ assets, such as UK bonds or gilts which provide the best match for liabilities, ie, payments of benefits to members in future years.

Counterparty risk In deciding to effect any transaction for the Fund, considerable steps are taken to ensure that the counterparty is suitable and reliable, that the transaction is in line with the Fund’s strategy and that the terms and circumstances of the transaction are the best available in the relevant market at the time. Comprehensive due diligence processes are in place to ensure that any potential counterparty is authorised and regulated, competent to deal in investments of the type and size contemplated and has appropriate administration arrangements with regard to independent auditors, robust administration and accounting, relevant legal structure and experienced staff. Legal agreements are implemented and continuous monitoring of counterparties is undertaken by Fund officers in relation to suitability and performance, in addition to compliance with regulatory and Fund-specific requirements. Credit risk The Fund’s deposits with financial institutions as at 31 March 2012 totalled £138.7m in respect of temporary loans and treasury management instruments. The Fund’s surplus cash may be placed with an approved financial institution on a short-term basis and in accordance with the cash management policy and restrictions set out in the Compliance Manual. The policy specifies the cash deposit limit with each approved counterparty, as determined by a comprehensive scoring exercise undertaken by Fund officers using specialist rating and market research data, which is reviewed on a regular basis. Proposed counterparties are assessed using an amalgamation of credit ratings and market research with the resulting ‘score’ determining the suitability and individual limit in each case. Due diligence is conducted on potential money market funds with criteria such as AAA rating, same-day access and minimum assets under management being prerequisite. A credit rating sensitivity analysis as at 31 March 2012 is shown on the following page.

Risks in growth assets include market risk (the greatest risk), issuer risk and volatility, which are partly mitigated by diversification across asset classes, global markets and investments funds. Mitigating interest rate risk and inflation risk points to significant investment in bonds, but doing so at the expense of ‘growth’ assets would increase the costs of funding. ‘Matching’ assets backed by the UK Government are considered low risk. However, corporate bonds carry some additional issuer risk. Emerging market debt, although within fixed interest, is not viewed as a ‘matching’ asset.

October 2012 • Report and Accounts • Page 48


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

CREDIT RATING SENSITIVITY Summary Money market funds AIM STIC Global Sterling Portfolio HSBC Sterling Liquidity Fund Northern Trust Global Sterling Fund Short-term deposits Banco Santander Principality Building Society Coventry Building Society West Bromwich Building Society Newcastle Building Society

Balances as at Balances as at Rating

31 March 2011 £000

31 March 2012 £000

AAA AAA AAA

16,029 19,776 5,245

13,178 12,219 1,245

A+ BBB+ A BBBBB+

13,000 9,000

10,000 5,000 5,000 5,000 1,000

A

35,500 98,550

86,106 138,748

Bank deposit accounts

NatWest Liquidity Select Total

Liquidity risk The Fund has a comprehensive daily cash flow management procedure which seeks to ensure that cash is available as needed. Due to the cash flow management procedures and the liquidity of certain asset types held, there is no significant risk that the Fund will be unable to raise cash in order to meet its liabilities. The Fund actually uses this liquidity risk to its benefit, taking advantage of the illiquidity premium found in investments such as private equity. Foreign exchange risk The Fund’s exposure to foreign exchange risk is managed through the diversification of portfolios across sectors, countries and geographic regions, along with continuous monitoring and management of holdings. In addition, the Fund’s currency exposure is managed in line with the daily cash management policy. Securities lending As at 31 March 2012, £69.6m of stock was on loan to an agreed list of approved borrowers through the Fund’s custodian in its capacity as agent lender. The loans were covered by non-cash collateral in the form of equities, gilts, DBVs and G10 sovereign debt, totalling £74.0m, giving a margin of 6%. Collateral is marked to market, adjusted daily and held by a tri-party agent on behalf of the Fund. Income from stocklending amounted to £1.1m during the year and is detailed in note 13 to the accounts. The Fund retains its economic interest in stocks on loan, and therefore the value is included in the Fund valuation. However, there is an obligation to return collateral to the borrowers; therefore, its value is excluded from the Fund valuation. The securities lending programme is indemnified, giving the Fund further protection against losses. Reputational risk The Fund’s prudent approach to the collective risks listed above and through best practice in corporate governance, ensures that reputational risk is kept to a minimum. Other price risk Other price risk represents the risk that the value of a financial instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or foreign exchange risk), whether those changes are caused by factors specific to the individual instrument or its issuer, or factors affecting all such instruments in the market. The Fund is exposed to share and derivative price risk, which arises from investments held by the fund for which the future price is uncertain. The Fund mitigates price risk through diversification and the selection of securities and other financial instruments is monitored by the council to ensure it is within limits specified in the fund investment strategy.

Page 49 • Report and Accounts • October 2012


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

Other price risk - sensitivity analysis Following analysis of historical data and expected investment return movement during the financial year, in consultation with the fund's performance advisors, the Fund has determined that the following movements in market price risk are reasonably possible for the 2012/13 reporting period: PRICE RISK Asset type UK equities Overseas equities Global equities Total bonds Index-linked Cash Alternatives Property Total assets

Value as at 31 March 2012 (£)

864,702,970 2,409,036,081 484,528,813 1,029,967,581 604,618,684 193,643,975 2,362,966,777 851,407,144 8,800,872,025

% change

15.0% 15.9% 13.5% 4.4% 6.7% 0.1% 5.1% 6.9%

Value on increase

Value on decrease

994,062,534 2,791,831,914 549,794,844 1,075,698,142 645,128,136 193,818,255 2,482,296,600 910,409,659 9,643,040,084

735,343,406 2,026,240,248 419,262,782 984,237,021 564,109,232 193,469,696 2,243,636,955 792,404,629 7,958,703,969

Currency risk - sensitivity analysis Currency risk represents the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The fund is exposed to currency risk on financial instruments that are denominated in any currency other than the functional currency of the fund (GBP). The Fund holds both monetary and non-monetary assets denominated in currencies other than GBP. The following tables summarise the Fund's currency exposure as at 31 March 2012: Currency Australian dollar Canadian dollar Czech Republic koruna Danish krone Euro Hong Kong dollar Hungarian forint Japanese yen Malaysian ringgit New Zealand dollar Norwegian krone Polish zloty Singapore dollar South Korean won Swedish krona Swiss franc Taiwan dollar Turkish lira US dollar Global basket Global ex-UK basket Europe ex-UK basket Asia Pacific basket Asia Pacific ex-Japan basket Emerging basket Total

Value as at 31 March 2012 (£)

% change

Value on increase

Value on decrease

73,799,925 55,242,088 2,152,364 13,693,760 752,806,999 39,541,465 1,910,798 171 ,019,295 11,923,731 18,604 11,255,636 4,141,518 27,106,552 13,752,457 48,258,541 84,101,524 21,933,187 5,127,768 2,243,149,569 484,528,813 49,109,677 186,593,232 90,862,371 83,366,493 556,858,028 5,032,254,395

10.5% 9.6% 11.2% 8.3% 8.4% 9.6% 14.2% 13.3% 8.3% 10.8% 10.5% 13.4% 7.5% 10.3% 10.2% 10.2% 9.0% 9.7% 9.8% 6.5% 7.1% 7.8% 8.8% 7.2% 7.9% 9.0%

81 ,544,249 60,560,226 2,392, 702 14,831,582 815,745,139 43,335,552 2,182,381 193,753,736 12,908,624 20,612 12,439,652 4,695,736 29,137,673 15,165,134 53,192,314 92,720,577 23,900,866 5,627,136 2,461,913,942 516,252,465 52,619,999 201,187,921 98,872,707 89,357,022 600,794,962 5,485,152,909

66,055,601 49,923,950 1,912,026 12,555,938 689,868,859 35,747,378 1,639,215 148,284,854 10,938,838 16,596 10,071,620 3,587,300 25,075,431 12,339,780 43,324,768 75,482,471 19,965,508 4,628,400 2,024,385,196 452,805,162 45,599,355 171 ,998,543 82,852,035 77,375,964 512,921,094 4,579,355,882

2,893,564,892 950,476,227 650,784,440 194,615,023 342,813,813 5,032,254,395

9.0% 9.0% 9.0% 9.0% 9.0% 9.0%

3,153,983,212 1,036,018,260 709,354,473 212,130,206 373,666,758 5,485,152,909

2,633,146,572 864,934,194 592,214,407 177,099,840 311,960,869 4,579,355,882

Currency risk (by asset class) Overseas equities Private equity Alternatives Property Liquid assets Total

October 2012 • Report and Accounts • Page 50


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

NOTES TO THE FUND ACCOUNTS

Interest rate risk The Fund invests in financial assets for the primary purpose of obtaining a return on investments. These investments are subject to interest rate risks, which represent the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Fund's direct exposure to interest rate movements as at 31 March 2012 and 31 March 2011 is set out below. These disclosures present interest rate risk based on the underlying financial assets at fair value. Interest rate risk - sensitivity analysis The Council recognises that interest rates can vary and can affect both income to the Fund and the value of the net assets available to pay benefits. The Fund's consulting actuary has advised that the assumed interest rate volatility is 180 basis points per annum. The analysis that follows assumes that all other variables, in particular exchange rates, remain constant, and shows the effect in the year on the net assets available to pay benefits of a +/-180 BPS change in interest rates: Asset type Cash & cash equivalents Cash balances Fixed interest securities Total

Asset type Cash & cash equivalents Cash balances Fixed interest securities Total change in assets available

Carrying amount as at 31 March 2012 £000

138,748 44,257 2,651,099 2,834,104

As at 31 March 2011 £000

As at 31 March 2012 £000

98,550 28,991 845,007 972,548

138,748 44,257 2,651,099 2,834,104

Change in year in the net assets available to pay benefits +180BPS £000

-180BPS £000

2,497 797 47,720 51,014

-2,497 -797 -47,720 -51,014

22 IMPAIRMENT FOR BAD AND DOUBTFUL DEBTS In 2011/12 one admitted body, BXL, went into liquidation with an outstanding liability identified by the actuary of £4,040,836. It is anticipated that the Fund will receive in the order of £300,000 once the liquidation is finalised. A further admitted body, Adoption Support, terminated their agreement in January 2012 without the necessary funds to meet their outstanding liabilities of £98,200. The Fund has since recovered £30,000 from the remaining assets. The following write-on and write-offs of pension payments were reported in this financial year, in line with the Fund’s policy: WRITE-ON ANALYSIS Individual value Less than £50 £50 - £100 £100 - £500 Over £500 Total

Number

Total

10 5 1 0 16

209.52 404.60 119.47 0.00 733.59

WRITE-OFF ANALYSIS Individual value Less than £50 £50 - £100 £100 - £500 Over £500 Total

Page 51 • Report and Accounts • October 2012

Number

Total

12 78 74 18 182

277.03 5,480.54 16,743.74 17,818.89 40,320.20


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

ANNUAL GOVERNANCE STATEMENT 2011/2012

1 SCOPE OF RESPONSIBILITY

3 THE GOVERNANCE FRAMEWORK

1.1 Wolverhampton City Council is responsible for ensuring that its business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively.

3.1 The key elements of the systems and processes which comprise the Council’s governance arrangements include the following:

1.2 The Council also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness. In discharging this overall responsibility, the Council is also responsible for putting in place proper arrangements for the governance of its affairs, facilitating the effective exercise of its functions, which includes arrangements for the management of risk. 1.3 The Council has approved and adopted a Local Code of Corporate Governance, which is consistent with the principles of the CIPFA/SOLACE Framework Delivering Good Governance in Local Government. The Local Code of Corporate Governance is incorporated within Part 5 of the Council’s Constitution, which is available for review on the Council’s website. 1.4 Copies of the Local Code of Corporate Governance can be obtained from the Monitoring Officer or Section 151 Officer. This statement explains how the Council has complied with the Code and also meets the requirements of regulation 4 of the Accounts and Audit Regulations 2011 in relation to the publication of an annual governance statement. 1.5 The authority is also responsible for the strategic management and administration of the West Midlands Authorities Pension Fund with the Council’s Chief Executive, Monitoring Officer and Section 151 Officer holding specific responsibilities for supporting the members of the Superannuation Committee in their role. 2 THE PURPOSE OF THE GOVERNANCE FRAMEWORK 2.1 Good governance is about running things properly. It is the means by which a public authority shows it is taking decisions for the good of the people of the area, in a fair, equitable and open way. It also requires standards of behaviour that support good decision making – collective and individual integrity, openness and honesty. It is the foundation for the delivery of good quality services that meet all local people’s needs. It is fundamental to showing public money is well spent. Without good governance councils will struggle to improve services when they perform poorly. 2.2 The system of internal control is a significant part of the framework and is designed to manage risk to a reasonable level. It cannot eliminate all risk of failure to achieve policies, aims and objectives and can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of the Council’s and Fund’s policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically.

3.2 The overarching ambitions for the city are contained in the City Strategy which is the master plan for development over the next 25 years. The Council adopted this document in December 2010. The strategy has also been adopted by the Wolverhampton Partnership which is the city’s local strategic partnership (LSP). 3.2 The Council’s business priorities are outlined in the corporate plan; it provides the operational focus for services and effectively presents the Council’s delivery offer to the local strategic partnership. 3.4 The policy thread is maintained through service plans which connect with corporate priorities and through their translation into individual work plans. 3.5 The authority has pursued arrangements for determining and delivering the key strategic priorities, supported by a number of related measures. These measures are cascaded throughout the authority and are included in service plans which define service and individual objectives and which are subject to ongoing review and monitoring. 3.6 The Council’s Cabinet (Performance) Panel receives regular reports on delivery and performance. In addition, the Strategic Executive Board also receive performance reports and the Corporate Delivery Board and the Strategic Executive Board now oversee project and programme management in a structured, consistent and comprehensive manner, using an enhanced corporate project and programme management toolkit. 3.7 The Council ensures value for money through the economical, effective and efficient use of resources, and secures continuous improvement in the way in which its functions are exercised. The Council plans its spending through an established planning cycle for policy development, budget setting and performance management designed to ensure that, as far as possible, resources are aligned to priorities. 3.8 The Council also recognises the challenges and risks in working with over 100 people/organisations with separate, but linked, joint working arrangements, and accepts that improvements in the governance arrangements may be required. It does, however, have extensive experience of partnership working in complex service and project delivery environments. 3.9 The Council has an organisational framework for decision making based on a cabinet structure and scrutiny panels with an overarching scrutiny board. In addition, there are a number of regulatory committees which include Planning Committee and Licensing Committee. There is also an Audit Committee which has specific responsibility for overseeing the Council’s corporate governance and risk management arrangements. The Audit Committee works closely with the Council’s Standards Committee and there are two joint meetings of the committees in order to ensure that their roles and responsibilities are co-ordinated.

2.3 The governance framework has been in place at Wolverhampton City Council for the year ended 31 March 2012 and up to the date of approval of the statement of accounts. October 2012 • Report and Accounts • Page 52


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

ANNUAL GOVERNANCE STATEMENT 2011/2012

3.10 The Standards Committee has appointed three subcommittees (the Assessment Sub-Committee, the Review Sub-Committee and the Hearings Sub-Committee) in order to comply with the legislative requirements which have ensued from the development of the strategic role which has been adopted by the Standards Board for England. A training programme has been adopted in order to ensure that the independent membership have been made aware of their roles and responsibilities. Training has also taken place for all Standards Committee members. Further training is envisaged for the forthcoming year. 3.11 The Council has adopted a constitution which sets out how the Council operates, the roles and responsibilities of the various executive, scrutiny and officer functions, how decisions are made and the procedures which are followed to ensure that these are efficient, transparent and accountable to local people. Some of these processes are required by the law, while others are a matter for the Council to choose. An Officer Constitution Review Group reviews the constitution on an ongoing basis. Further changes to the constitution were approved by Council this year and an amended constitution has been issued. A further detailed review of the constitution has been undertaken and reported to Council on the 16 May 2012. 3.12 The Constitution establishes a framework incorporating protocols, schemes of delegation and financial frameworks upon which the Council is to operate. The Council requires compliance with these elements of the Constitution in order that established policies, procedures, laws and regulations, including the Council’s risk management practice, is adhered to. Amendments have been made to the Members’ Code of Conduct where this has been necessitated by law. There has been training in connection with the provisions of the Code of Conduct and further training is anticipated. There is an induction programme in place for both officers and members and further work will continue in developing training as appropriate to officers and members according to their specific roles and responsibilities. The Council has a strong Internal Audit function with a close working relationship and established protocols for working with External Audit. 3.12 The Council has implemented a risk management strategy through a process involving executive members, the Chief Executive, strategic directors, assistant directors and representatives from External and Internal Audit and Risk Management and Insurance. The strategy is subject to regular review and risk management arrangements are in place which enables the corporate directors, managers and other senior officers to identify, assess, manage and monitor risks within their own work areas which impact on the ability of the Council and its services to meet objectives. Headline assessments of risk are also included in respective service plans and project plans by service managers. 3.12 Arrangements are in place for all new members to receive an induction which consists of several elements including (but not limited to) an introduction to political and decision-making processes, key developments, standards of ethics and behaviour expected of members and local government finance. For some panels, members also receive training in order to meet legislative requirements. Additional support is provided through tailored member guides, books, CDs or one-to-one officer support.

Page 53 • Report and Accounts • October 2012

3.15 Risk management is an integral part of the member induction process and a guide has been produced for issue to all members. Specific training in risk management and corporate governance is also provided to members of the Audit Committee. 3.16 The Council acknowledges its responsibility for ensuring that an effective system of internal control is maintained and operated in connection with the resources concerned. The system of internal control can provide only reasonable and not absolute assurance that assets are safeguarded, that transactions are authorised and properly recorded, and that material errors or irregularities are either prevented or would be detected within a timely period. The system of internal control is based on a framework of regular management information, financial regulations, administrative procedures (including segregation of duties), management supervision, and a system of delegation and accountability. The system includes: – a robust medium-term financial planning process linking budgets to Council priorities; – comprehensive revenue and capital budgeting systems; – setting targets to measure financial and other performance; – the preparation of regular financial monitoring reports which measure actual expenditure and income against forecasts; – clearly defined expenditure guidelines and formal project management disciplines. All of the above are subject to continuous monitoring and review. Regular financial reports are submitted to Council, Cabinet, Audit Committee and scrutiny panels for member information, review and approval as necessary. 3.17 With regard to the West Midlands Pension Fund, day-today management of the Fund is carried out by team of staff who report to a Director of Pensions with support from the Chief Executive, Section 151 Officer and Monitoring Officer. 3.18 The key elements of the Fund internal control environment include: – Procedures for establishing and monitoring the achievement of the Fund’s objectives. – The facilitation of policy making and decision making. – Ensuring compliance with established policies, procedures, laws and regulations. – Ensuring the economical, effective and efficient use of resources and for securing continuous improvement in the way in which the functions of the Fund are exercised. – The financial management of the Fund and the reporting of financial performance. – The performance management of the Fund and the reporting of performance management.


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

ANNUAL GOVERNANCE STATEMENT 2011/2012

4 REVIEW OF EFFECTIVENESS 4.1 The Council has responsibility for conducting, at least annually, a review of the effectiveness of its governance framework including the system of internal control. The review of effectiveness is informed by the work of the senior managers within the authority who have responsibility for the development and maintenance of the governance environment, the head of Internal Audit’s annual report, and also by comments made by the external auditors and other review agencies and inspectorates. 4.2 The Council’s Constitution clearly sets out the responsibilities of members and senior managers, particularly those of the three statutory posts of the Head of Paid Service, Monitoring Officer and Section 151 Officer. There is a requirement to report in this Statement that the authority is not fully compliant with CIPFA’s Statement on the Role of the Section 151 Officer in Local Government (2009) because the Section 151 Officer post is not at the same level in the authority as members of the Corporate Management Team and they do not report directly to the Chief Executive. Alternative arrangements are in place whereby the Section 151 Officer attends meetings of the Corporate Management Team and has direct access to the Chief Executive when required. 4.3 The Constitution also sets out the responsibilities of members and senior managers in relation to operation of the Fund and the Section 151 Officer to the Fund has responsibility to review independently and report regularly to the Superannuation Committee to provide assurance on the adequacy and effectiveness of the Code of Corporate Governance and the extent of compliance with it both in respect of the Council and the Fund. The Chief Legal Officer occupies the role of legal advisor to the Fund, together with external legal support as and when required. 4.4 The Council continually assesses the manner in which its corporate governance responsibilities are discharged as identified by the CIPFA/SOLACE guidance and is able to satisfy itself that its approach to corporate governance is both adequate and effective in practice. The Council has an Audit Committee which has clearly defined terms of reference in relation to the Authority’s accounting and stewardship functions. The Audit Committee has specific responsibility to oversee the Council’s corporate governance arrangements, the work of the Council’s internal auditors and the Council’s response to external audit and other external inspections that relate to the Committee’s work. The Committee regularly receives risk and governance reports on each of the Service Directorate’s activities and major projects within the Council. Two sub-committees currently are in place: one to focus on receiving Audit Services’ reports on selected financial transaction reviews and current audit investigations, and the other to review the preparation of the annual financial statements. The delegation of these functions to sub committees has allowed the main Audit Committee to focus on priority strategic and corporate issues.

4.6 Arrangements for the provision of internal audit are contained within the Council’s Constitution. The Section 151 Officer is responsible for ensuring that there is an adequate and effective system of internal audit of the Council’s accounting records and of its systems of internal control as required by the Accounts and Audit Regulations 2003 and Amendment Regulations 2006. Internal Audit operates in accordance with the Code of Practice for Internal Audit in Local Government in the United Kingdom under the day to day control of the Head of Audit Services who acts independently. Since January 2012 the post holder is also Head of Audit at Sandwell MBC under a joint working arrangement. The Internal Audit Division plans and prioritises its work through a combination of assessment and review of the Council’s corporate governance arrangements, risk management processes and key internal control systems, supplemented by a programme of managed audit and scheduled visits to Council establishments. The resulting work plan is discussed and agreed with strategic directors and assistant directors, shared with the Council’s external auditor and approved by the Audit Committee. Reports, including an assessment of the adequacy of control and action plans to address weaknesses, are submitted to elected members, strategic directors, assistant directors, school heads and chairs of governors, as appropriate. The review of the effectiveness of the system of internal control is informed by: – the work of managers within the Council; – the work of the internal auditors as described above; – the external auditors in their annual audit letter; and – reports by other independent inspection bodies (Audit Commission, CQC, OFSTED, etc.). 4.7 The Audit Committee has reviewed and updated the Council’s fraud-related policies, including the anti-fraud and corruption policy and the whistleblowing policy. Copies are published on the Council’s intranet and internet sites.

4.5 The Council operates under a cabinet structure with special advisory groups and three cabinet panels reporting up to the main cabinet. There are also six scrutiny panels who work with a scrutiny board.

October 2012 • Report and Accounts • Page 54


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

ANNUAL GOVERNANCE STATEMENT 2011/2012

5 SIGNIFICANT GOVERNANCE ISSUES 5.1 The Council recognises that the identification, evaluation and monitoring of risks is a key aspect in the governance of the organisation. The following matters represent the most significant current governance issues that are subject to attention in order to ensure that lessons are learnt and good practice is embedded. 5.2 Partnership governance arrangements include responsibility for monitoring performance and managing risk. Improvements are required to the risk management arrangements within the major partnerships in order to ensure that the risks associated with joint working are adequately identified and managed by the Council in conjunction with the appropriate partner. A partnership protocol has been agreed. Work continues in collating a partnership register and a reporting mechanism whereby the status of partnerships in which the Council is involved at a significant level are monitored. This is to ensure that adequate risk management arrangements are in place. 5.3 The Council still has to implement single status, a national agreement between the National Joint Council (NJC) for Local Government Services and the signatory trades unions made on 1 April 1997. The Council has a dedicated project team to implement and govern this process. During the year the Cabinet has developed and approved a strategy for addressing the risks relating to historic equal pay claims and has commenced a process of implementing this and also meeting the requirements under the single status agreement.

Page 55 • Report and Accounts • October 2012

5.4 The Council invited the Information Commissioner’s Office to carry out a consensual audit in order to provide the basis for an improvement plan. Basic frameworks are now in place and additional resources are being targeted at ‘information governance’. However, detailed policies, process and training need to be embedded to reduce the profile of this ongoing governance issue. 5.5 Elections are due in November for police and crime commissioner. There are currently many uncertainties around the likely impact on local issues, but there are likely to be significant governance issues around proper scrutiny and appropriate representation on the police and crime panel, as well as ensuring local democratic accountability. 5.6 The Council recognises that there will be significant governance issues arising from welfare reform and the expected increase in responsibilities and duties. There is a high level of uncertainty as to detail at this time, but the Council will undertake a full risk assessment as soon as practicable. APPROVAL In approving this statement, the views of all directors and a number of senior managers have been obtained and suitable assurances obtained confirming that this statement is an accurate representation of the current position. Simon Warren Chief Executive Date: 25 June 2012

Councillor Roger Lawrence Leader of the Council


WEST MIDLANDS PENSION FUND FINANCIAL STATEMENTS

APPENDICES

Statement of Investment Principles 2011

Funding Strategy Statement 2011

Socially Responsible Investment Statement 2011

Investment Strategy Statement 2011

April 2011

April 2011

April 2011

April 2011

1 Statement of Investment Principles www.wmpfonline.com/NR/rdonlyres/ AE95705C-10B0-4A4F-B7AF695903ED696A/0/SIP3March2011.pdf

2 Funding Strategy Statement www.wmpfonline.com/NR/rdonlyres/ FFAA4AB6-B0FF-414C-8F2C7D80AC251BB8/0/FSS3March2011.pdf

3 Socially Responsible Investment Statement www.wmpfonline.com/NR/rdonlyres/ 934867B7-0679-4038-BBD506DA82CDD36D/0/SRI3March2011.pdf

Governance Compliance Statement 2011

Communications Policy Statement 2011

Administering Authority Policy Statement

April 2011

September 2011

September 2011

5 Governance Compliance Statement www.wmpfonline.com/NR/rdonlyres/ 2DD48AE3-2B45-424B-96F34CE225D40E13/0/GCS3March2011pdf.pdf

6 Communications Policy Statement www.wmpfonline.com/NR/rdonlyres/ 0E3FA6C7-BD2C-466D-A508972B44A2F691/0/Communications PolicyStatement.pdf

4 Investment Strategy Statement www.wmpfonline.com/NR/rdonlyres/ 3D1B32AE-83BA-4F93-962A3BD7056E29FD/0/ISS3March2011.pdf

7 Administering Authority Policy Statement www.wmpfonline.com/NR/rdonlyres/ C138B297-3D87-43DF-A97B8C115CE1D12C/0/ AdministeringAuthoritypas104.pdf

October 2012 • Report and Accounts • Page 56

Report and Accounts 2012  

Fund accounts

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