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    Trustees' report and financial statements Trustees' report and financial statements Document Transcript

    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements Registered number 100222535 31 July 2007
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Contents Trustees and Advisors 1 Report of the Trustees 2 Statement of Trustees’ responsibilities 9 Independent auditors’ report to the Trustees of the University of Leicester Pension and Assurance Scheme 10 Fund account 12 Net assets statement 13 Notes to the financial statements 14 Independent Auditors’ statement about Contributions, made under regulation 4 of the Occupational Pension Schemes (requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, to the Trustees of the University of Leicester Pension & Assurance Scheme. 19 Summary of contributions 20 Appendix I - Actuary’s Certificate - Disclosure Statement 21 Appendix II - Investment report - Legal & General Investment Management 22 Appendix III - Investment report – Black Rock Investment Management (UK) Limited 23 Appendix IV - Investment report – Fidelity Investments 24 Appendix V - Investment report –Russell Investment Group 25 Appendix VI - Investment report – Artemis Investment Management 26 Appendix VII - Summary Funding Statement 2007 27
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Trustees and Advisors as at 31 July 2007 Latest Trust deed dated 25 June 1999 Scheme Trustees Dr MA Chamberlain Professor JH Holloway Chairman Mr HJ Hunt Mr C Marlow Member Nominated Trustee (resigned 27 July 2007) Mrs L Stirk Member Nominated Trustee Secretary to the Trustees Mr GR Hague Pensions Office Room 170 – Finance Office Fielding Johnson Building University of Leicester University Road Leicester LE1 7RH Telephone: (0116) 252 2404 Consultants and Actuaries Gissings Consultancy Services Limited Finsbury House 23 Finsbury Circus London EC2M 7UH Legal Advisors Hammonds Rutland House 148 Edmund Street Birmingham B3 2JR Investment Advisors Aon Consulting 3 The Embankment Sovereign Street Leeds LS1 4BJ Investment Managers Legal and General Investment Merrill Lynch Management Investment Managers Limited Bucklersbury House 33 King William Street 3 Queen Victoria Street London EC4R 9AS London EC4N 8NH Fidelity Investments Russell Investment Group Beech Gate Rex House Millfield Lane 10 Regent Street Lower Kingswood London SW1Y 4PE Tadworth Surrey KT20 6RB Artemis Investment Bank of Scotland Management 14 Friar Lane Cassini House Leicester LE1 5RA 57 St James Street London SW1A 1LD Auditors KPMG LLP Chartered Accountants 2 Cornwall Street Birmingham B3 2DL Bankers HSBC 31 Granby Street Leicester LE1 6EP 1
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Report of the Trustees The Trustees present their Annual Report and the Audited Financial Statements for the year ended 31 July 2007, which have been prepared in accordance with regulations made under the Pensions Act 1995. The University of Leicester Pension and Assurance Scheme is a defined benefit scheme and was closed to new members on 31 July 2004. The University has a new and separate defined contribution scheme offered by Friends Provident for support staff joining the University after 31 July 2004. The Scheme’s AVC scheme was also closed to new members on 31 July 2004 and the University replaced this with a money purchase AVC facility offered through Prudential. Management of the Scheme The Scheme was established with effect from 23 July 1962 to provide retirement and death benefits for support staff of the University of Leicester and for certain employees of the University of Leicester Students’ Union. The Scheme is governed by its Fifth Definitive Trust Deed and Scheme Rules of 25 June 1999. Up to 5 April 2006, the Fund was approved by the HMRC as a exempt approved scheme under the provisions of Chapter I Part XIV of the Income and Corporation Taxes Act 1988. From 6 April 2006, the Fund became a “registered pension scheme” for tax purposes. It is registered under the Data Protection Act 1998 (Registration number Z8179467) and with the Pensions Scheme Registry (Reference Number 100222535). Members are currently contracted out of the State Earnings Related Pension Scheme. The Trustees of the Scheme have the responsibility for its proper and correct management. The Scheme is administered by the Pensions Office, which forms part of the Finance Office, at the University of Leicester. All enquiries in relation to the Scheme should be made to the Pensions Office. Subject to the provisions of the Trust Deed and Scheme Rules, the power of appointing and removing Trustees is exercised by deed and is invested in the principal employer, the University of Leicester. The employer nominates three trustees and the active and pensioner members elect two trustees. Member Nominated Trustees may only be removed if all other Trustees or the Pensions Act allows. The Trustees are: Dr MA Chamberlain Professor J H Holloway (Chairman) Mr H J Hunt Mr C Marlow (Member Nominated Trustee) Mrs L Stirk (Member Nominated Trustee) All Trustees, with the exception of Mr Marlow, served for the full year. Mrs Stirk came to the end of her term of office and was re-nominated. Mr M Patel was nominated and joined the Trustees in September 2007, to fill the vacancy left by Mr Marlow. Membership of the Scheme The number of members fell in the year to 2,232 as at 31 July 2007 and was, by category, as follows: 2007 2006 2005 Active members 682 802 869 Preserved Benefit 961 885 858 Pensioners 496 470 453 Dependents 93 84 85 Total 2,232 2,241 2,265 2
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Report of the Trustees (continued) Membership of the Scheme (continued) A significant change to the membership structure of this Scheme ‘PAS’ occurred during the year as a result of the University implementing the national Framework Agreement for pay and conditions and the consequent job evaluation exercise. As a result of this, the University changed the eligibility for the University Superannuation Scheme from being determined by category of staff to one being determined by grade. University employees who were assessed as being level 6 and above became eligible to joint USS. The University arranged for all level 6 employees who were in PAS to obtain advice from independent financial advisers and as a result some 76 active members joined USS from 1 April 2007. A further 67 members who were eligible to transfer to USS preferred to remain in PAS. All 76 members who joined USS preserved their past service membership in the PAS so that there was no overall loss of members from the scheme. The University’s implementation of the Framework Agreement was phased and a further 18 members, employed by the University on a weekly paid basis, have the opportunity to join USS as from 1 August 2007. Any transfers required will be made in 2007/08. Actuarial and Administrative Services Until his resignation on 12 June 2007, the Scheme’s Actuary was Mr W Sharp of Gissings Consultancy Services Limited. In his resignation statement then dated he declared “in connection with my resignation as Scheme Actuary, I declare that I know of no circumstances connected with my resignation which in my opinion significantly affect the interests of the members or prospective members of, or beneficiaries under, the Scheme”. On 27 June 2007, Mr L Patel of Gissings Consultancy Services Limited was appointed Scheme Actuary. Gissings Consultancy Services Limited also provide administrative services to the Pension Office Legal Advisers Hammonds are the legal advisers to the Scheme. Statement of Investment Principles The Scheme has in place an agreed statement of investment principles. The statement is in accordance with the requirements of Section 35 of the Pensions Act 1995. The principles comply with the Occupational Pensions Amendment Regulations 1999 and have been designed to take into consideration the recommendations made by the Myners Review of Institutional Investment. The Trustees’ primary investment objectives are: • A funding objective. To ensure that the Scheme is fully funded using assumptions that contain a modest margin for prudence. Where an actuarial valuation reveals a deficit, a recovery plan will be put in place that will take into account the financial covenant of the employer. • A security objective. To ensure that the solvency position of the Scheme (as assessed on a Gilts basis) is expected to improve. The Trustees will take into account the strength of the employers covenant when determining the expected improvement in the solvency position of the Scheme. • A stability objective. To have due regard to likely level and volatility of required contributions when setting the Scheme’s investment strategy. The Trustees recognise that these objectives may conflict and that in resolving this conflict, it is necessary to accept some risk that not all the objectives will be achieved. Investment structure and performance Over the year, the Scheme’s investment assets have increased by £9.3 million from £78.2 million to £87.5 million. This increase is welcomed and is the result of improved performance of world stock markets and the considerable work the Trustees have put into restructuring the investment portfolio over the last five years. There has been a surplus of contributions over outgoings in the year of approximately £1.9 million. Annual surpluses are required to contribute to the repayment of the Scheme’s past service deficit and meet future liabilities as they fall due. 3
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Report of the trustees (continued) Investments structure and performance (continued) The Scheme currently holds investments with five institutions: Legal and General Investment Management Limited UK equities and corporate bonds Black Rock Investment Management (UK) Limited UK equities and a target return fund Russell Investment Group Overseas equities Fidelity Investments Corporate bonds Artemis Investment Management UK equities A review of the Scheme’s investment strategy during 2005/06 concluded that there should be a phased investment of up to 20% of the Scheme’s assets in the Black Rock Institutional Jersey Funds Target Return Fund. This was aimed at reducing the Scheme’s risk from too great an exposure to equities whilst achieving an overall higher return than could be achieved through holding corporate bonds. During the year, the Trustees completed the second and final phase of his investment, moving a further £6 million into the Black Rock Target Return Fund by reducing the overseas equities held by the Russell Investment Group by £4 million and the corporate bonds held by Fidelity by £2 million. The day-to-day management of the Scheme’s assets is delegated to the investment managers who are authorised and regulated by the Financial Services Authority. Performance is measured by the ability to meet or exceed industry benchmarks over rolling three year periods. The information below reviews investment performance over the three year period to 31 July 2007: Legal & General Investment Management The values of the investments at 31st July 2007 were £22.433 million in the UK Equity Index and £7.755 million in the Active Corporate Over-10 year bond fund. Last three years Index Target Last twelve months (from September 2004) Fund Index Fund Index % % % % UK Equity Index FTSE All Share Index To track 13.0 12.9 18.2 18.2 Active Corp The iBoxx Sterling To exceed over rolling Bond over 10 year Non-Gilt over 10 year 3 year period by Fund + Index 0.75% pa (1.7) (2.1) 5.1 4.9 The target of UK Equity Index fund is to track the FTSE All Share Index and the performance has been satisfactory. The Active Corporate Bond Fund was above the index for the past twelve months and for the past three years. However, it did not achieve its out performance target. Black Rock Investment Management (UK) Limited The Scheme holds two investments with Black Rock Investment Management (UK) Limited, an investment in the UK Specialist Equity Fund and also an investment in its Target Return Fund. The value of the investment in the UK Specialist Equity Fund at 31 July 2007 was £6.772 million and performance relative to the benchmark was: Index Target Last twelve months Last three years Fund Index Fund Index % % % % UK Specialist Equity FTSE All Share To exceed by 2% pa Fund Index over a rolling 3 year period 14.0 12.9 19.1 18.2 Target return Fund RPI To exceed by 5% over rolling 3 year periods 6.7 3.8 n/a n/a 4
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Report of the Trustees (continued) Investments structure and performance (continued) The UK Specialist Equity Fund achieved a return of 19.1% over the past three years which exceeded the index by 0.9% which was below the target of 2% out performance. The Scheme’s investment in the Black Rock Jersey Funds Target Return Fund had a value of £16.163 million at 31 July 2007. The Target Return Fund aims to achieve a return of RPI plus 5% (towards the end of the year, Black Rock changed this to LIBOR plus 3%). In its first year, the fund achieved a return of 6.7% which was 2.9% over RPI and therefore fell short of its target of a 5% out performance. The Trustees have expressed their concerns to Black Rock about this disappointing start to the investment. The performance will be kept under constant review. Russell Investment Group The Scheme’s overseas equity assets are held by the Russell Investment Group spread across six funds with a total value of £20.474 million at 31 July 2007 after transferring £4 million to the Black Rock Target Return Fund. The investment with the World Equity Fund RIC II was made on 30 June 2006. Index Target Last twelve months Last three years Fund Index Fund Index % % % % Continental World Europe To exceed by 2% pa 19.0 21.5 22.8 23.3 European Equity (ex UK) over a rolling 3 year Fund FRIC period US Equity Fund The Russell 1000 To exceed by 1.25% 8.3 7.0 9.2 8.4 L.P. pa over a rolling 3 year period US Quantum The Russell 1000 To exceed by 1.15% 5.1 7.0 8.1 8.4 Fund L.P. pa over a rolling 3 year period Japan Equity Fund Topix To exceed by 2% pa (1.2) (3.1) 11.1 9.1 FRIC over a rolling 3 year period Pacific Basin MSCI AC Pac FreeTo exceed by 2% pa 38.1 39.2 30.1 30.5 (ex Japan) exc over a rolling 3 year equity Fund RIC Japan GDR period RIC II World MSCI World GDR To exceed by 2.5% 13.9 10.9 n/a n/a Equity Fund Taking each fund in turn in the table above, performance over the past three years shows that: The Continental European Equity Fund fell short of the index over the three years by 0.5% and consequently fell short of the out performance target by a margin of 2.5%. The Trustees have expressed their disappointment to Russell on a number of occasions about the continued poor performance of this fund. However, Russell have assured the Trustees that they believe that they have rectified some issues with the fund and that the positioning of the Fund’s investments will achieve the target performance over the long term. Over the three year period the US Equity Fund LP increased by 9.2% which was 0.8% above the index but 0.45% below the target over the three year period. 5
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Report of the Trustees (continued) Investments structure and performance (continued) The US Quantum Fund LP increased by 8.1% but the index increased by 8.4%. the fund fell short of the index in the three years which was disappointing. Overall the performance of Russell was disappointing and the Trustees have impressed upon Russell the need for consistent performance to be achieved, given the higher fees being paid for active managed funds compared to tracker funds. The Pacific Basin (ex Japan) Fund RIC reported strong performance in the three years with an 11.1% increase compared to the index which increased by 9.1%, thereby meeting its target of 2% out performance. Equity Fund RIC achieved growth of 30.1% over the last three years. However, the index achieved growth of 30.5% which was greater than the fund growth. This was disappointing when the objective was to out perform the index by 2%. The World Equity fund is a relatively new fund and this did well in the past twelve months with a return of 13.9% which was 3% above the index. This was 1% in excess of the target which was to out perform the index by 2%. Overall, the performance of Russell was disappointing and the Trustees have impressed upon Russell the need for consistent performance to be achieved given the higher fees being paid for active managed funds compared to tracker funds. The performance will be monitored by the Trustees and regular meetings will be held with Russell. Fidelity Investments The value of the fund at 31 July 2007 was £6.645 million, following the transfer of £2 million to Black Rock Investment Management (UK) Limited. Index Target Last twelve months Last three years Fund Index Fund Index % % % % Fidelity Institutional The Merrill Lynch To exceed by 0.75% (1.9) (1.9) 5.1 5.6 UK Long Corporate Euro-sterling (10+ pa over a rolling 3 Bond years) Index year period The investment in the Fidelity Institutional UK Long Corporate Bond matched the benchmark index in the twelve- month period and over the three year period exceeded it by 0.1%. However, the target was to out-perform the benchmark by 0.75% performance and therefore the three year performance was disappointing. Artemis Investment Management The value of the fund at 31 July 2007 was £7.197 million. Index Target Last twelve months Last three years Fund Index Fund Index % % % % Institutional Equity FTSE All-Share To exceed by 2% pa 15.8 12.9 N/A N/A Income Fund index over a rolling 3 year period The investment with Artemis commenced in March 2005 and therefore the performance measure met is for the past twelve months. The fund achieved a pleasing rather than target out performance of 2.9% over the year. Detailed statements from the investment managers confirming the level of the funds invested and commenting on their respective performance are given in the appendices. 6
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Report of the Trustees (continued) A representative from each of the institutions attends the meetings of the Trustees on a regular and rolling basis and each quarterly report is scrutinised as part of a continuous process of review and appraisal of performance. Where performance is deemed to be unsatisfactory over the medium term the Trustees may disinvest, after taking appropriate advice from the Scheme's investment advisers, Aon Consulting Services. Actuarial Valuation The latest actuarial valuation of the Scheme was undertaken by the Scheme actuary, Mr Bill Sharp of Gissings Consultancy services Limited and this examined the position at 1 August 2004. The results of that valuation are summarised in the table below and show that at 1 August 2004 the Scheme had a deficit of some £16,760,000. The Scheme’s assets were £54,380,000 million and this represented some 76% of the benefits earned. £000 Assets (market value) 54,380 Accrued liabilities 71,140 Deficit 16,760 Following the outcome of the 2004 actuarial valuation the University re-affirmed its support to the Scheme and increased the employer’s contribution to the Scheme from a rate of 21.35% of the pensionable earnings of each member to a new rate of 28.7% with effect from 1st August 2005. The revised contribution rate represents a normal ongoing contribution of 15.9% and an additional contribution of 12.8% which is aimed at eliminating the Scheme deficit over a period of 12 years. The contribution rates have changed over time as follows: Period Commencing University Contribution % of Employee Contributions % of Pensionable Earnings Pensionable Earnings 1 August 2001 12.70 5.50 1 August 2002 18.65 6.35 1 August 2003 21.35 6.35 1 August 2005 28.70 6.35 Statutory increase for Pensioners Pensions in payment in excess of the Guaranteed Minimum pension (GMP) were generally increased with effect from 1st April 2007 in accordance with the Pensions Increase (Review) order 2007. This was an increase of 3.6% in respect of pensions, which commenced before 27th April 2004 with proportionally smaller increases applying to pensions commencing after that date. The GMP element was increased in accordance with statutory requirements. Provision of Information to Members In line with the legislation introduced as part of the Pensions Act 2004, members were provided with the summary funding statements in September 2006. Trustee Training Age discrimination Following the Government’s introduction of the Employment Equality (Age) Regulations 2006, the scheme must address a number of age equality issues. The Trustees have established a sub-committee to give consideration to these issues and the Scheme’s solicitors, Hammonds, have provided advice to the sub committee which aims to have completed their work by the Spring of 2008. Over the past 12 months, the Trustees were provided with training sessions from Gissings on a number of subjects including in the role of a trustee, internal audit controls, the role of member nominated trustees and age equality issues. In addition the Scheme’s Actuary provided regular updates on developments at each meeting and Mr Kite from the Scheme’s investment advisers, Aon, provided guidance and information on annual investment developments. 7
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Report of the Trustees (continued) Levy to Pension Protection Fund The Pension Protection Levy for 2006/07 was £29,961. The University has agreed to meet the levy costs incurred by the Scheme. Internal dispute resolution procedure There have been no disputes in the year. The Scheme’s dispute resolution procedures are set out in the Scheme Information Booklet. Members involved in a dispute can contact “tPAS”, the Office of the Pensions Advisory Service, which is an independent voluntary organisation, at any time about their complaint. The address is tPAS, 11 Belgrave Road, London SW1 1RB. In addition, from 6 April 2006, the Pensions Regulator took over the Occupational Pensions Regulatory Authority’s responsibility for regulating company pension schemes and enforcing the law as it relates to them. It has wide ranging powers which include the power to: • suspend, disqualify and remove Trustees for not carrying out their duties; • wind up Schemes where necessary; • apply for information to prevent the misuse and misappropriation of scheme assets and enforce restitution where necessary; and • take action to prevent Schemes being left in deficit with nobody to meet the liability. Scheme Auditor KPMG LLP continues as the Auditor to the Scheme. On Behalf of the Trustees GR Hague Secretary to the Trustees 8
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Statement of Trustees’ responsibilities The audited financial statements, which are to be prepared in accordance with UK Generally Accepted Accounting Practice (“UK GAAP”), are the responsibility of the Trustees. Pension Scheme regulations require the Trustees to make available to Scheme members, beneficiaries and certain other parties, audited accounts for each Scheme year which: • show a true and fair view of the financial transactions of the Scheme during the Scheme year and of the amount and disposition at the end of the Scheme year of the assets and liabilities, other than liabilities to pay pensions and benefits after the end of the Scheme year; and • contain the information specified in the Schedule to the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, including a statement whether the accounts have been prepared in accordance with the Statement of Recommended Practice, ‘Financial Reports of Pension Schemes’. The Trustees have supervised the preparation of the accounts and have agreed suitable accounting policies, to be applied consistently, making estimates and judgements on a reasonable and prudent basis. They are also responsible for making available each year, commonly in the form of a Trustees’ annual report, information about the Scheme prescribed by pensions legislation, which they should ensure is consistent with the audited accounts it accompanies. The Trustees also have certain responsibilities in respect of contributions which are set out in the statement of Trustees responsibilities accompanying the Trustees’ summary of contributions. The Trustees also have a general responsibility for ensuring that adequate accounting records are kept and for taking such steps as are reasonably open to them to safeguard the assets of the Scheme and to prevent and detect fraud and other irregularities, including the maintenance of appropriate internal controls. 9
    • ABCDKPMG LLP 2 Cornwall Street Birmingham B3 2DL Independent auditors’ report to the Trustees of the University of Leicester Pension and Assurance Scheme We have audited the financial statements of University of Leicester Pension and Assurance Scheme for the year ended 31 July 2007 which comprise the fund account, the net assets statement and the related notes. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the scheme Trustees, as a body, in accordance with the Pensions Act 1995 and Regulations made thereunder. Our audit work has been undertaken so that we might state to the scheme Trustees those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the scheme Trustees, as a body for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Trustees and auditors As described in the Statement of Trustees’ responsibilities on page 9, the scheme Trustees are responsible for obtaining an annual report, including audited financial statements prepared in accordance with applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice). Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements show a true and fair view and contain the information specified in the Schedule to the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996 made under the Pensions Act 1995. We also report to you if, in our opinion, we have not received all the information and explanations we require for our audit. We read the trustees’ report and other information contained in the annual report and consider whether it is consistent with the audited financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by or on behalf of the Trustees in the preparation of the financial statements, and of whether the accounting policies are appropriate to the scheme’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. 10
    • Independent Auditors’ report to the Trustees of University of Leicester Pension and Assurance Scheme (continued) Opinion In our opinion the financial statements: • show a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the financial transactions of the scheme during the scheme year ended 31 July 2007 and of the amount and disposition at that date of its assets and liabilities (other than liabilities to pay pensions and benefits after the end of the scheme year); and • contain the information specified in Regulation 3 of, and the Schedule to, the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996 made under the Pensions Act 1995. KPMG LLP Date: Chartered Accountants Registered Auditor 11
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Fund account year ended 31 July 2007 Note 2007 2006 £ £ Contributions and benefits Contributions receivable 3 4,341,499 4,496,187 Benefits payable 4 (2,099,749) (1,839,012) Payments to and on account of leavers 5 (98,048) (123,248) Administrative expenses 6 (253,652) (295,093) (2,451,449) (2,257,353) Net additions from dealing with members 1,890,050 2,238,834 Returns on investments Investment income 7 3,914 104,985 Investment management expenses 8 (144,071) (122,845) Change in market value of investments 9 7,599,624 7,829,095 Net returns on investments 7,459,467 7,811,235 Net increase in the fund during the year 9,349,517 10,050,069 Net assets of the Scheme At 1 August 2006 78,239,484 68,189,415 At 31 July 2007 87,589,001 78,239,484 12
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Net assets statement year ended 31 July 2007 Note 2007 2006 £ £ Assets not designated to members Investments Managed funds 9 87,557,280 78,225,498 Bank deposits - 10,483 87,557,280 78,235,981 Current assets and liabilities 10 31,721 3,503 Net assets of the Scheme at 31 July 2007 87,589,001 78,239,484 These financial statements were approved by the Trustees on Signed on behalf of the Trustees: Professor JH Holloway Trustee H J Hunt Trustee 13
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Notes to the financial statements 1 Basis of preparation The financial statements have been prepared in accordance with the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996 and with the guidelines set out in the Statement of Recommended Practice, Financial Reports of Pension Schemes (revised November 2003). The financial statements summarise the transactions of the Scheme and deal with the net assets under the control of the Trustees. They do not take account of obligations to pay pensions and benefits which fall due after the end of the Scheme year. 2 Accounting policies Basis of accounting The accounts have been prepared on an accruals basis. Actuarial valuation The actuarial position of the fund, which takes account of future liabilities, is dealt with in the statement by the actuary given in Appendix 1 to this annual report and these financial statements should be read in conjunction therewith. Further the actuary has provided a certificate on the adequacy of future rates of contributions, this is also disclosed in Appendix I. Income and expenditure (a) Contributions - Members’ and employer’s contributions are taken into account on the basis of rates presently agreed between the actuary, the Trustees and the employers for the applicable period in which they fall due. (b) Transfer values - Transfer values in respect of members transferred from the fund during the year are included in the accounts when paid or received which is normally when the liability is accepted. (c) Scheme benefits and withdrawals - Scheme benefits and withdrawals are accounted for in the period in which the member notifies the Trustees of his decision on the type or amount of benefit to be taken or if there is no member choice on the date of retirement or leaving. Retirement and post retirement death benefits The Legal and General Assurance Society Limited are responsible for the payment of basic pensions in respect of members who died or retired before August 1984. All other pensions, including cost of living increases attaching to the pre 1 August 1984 pensions are paid by the Scheme through the University’s payroll. Investments Investments in managed funds are stated at their mid value as provided by the respective investment managers, at the end of the financial year. Investment income is recognised in the following ways: • separately identifiable investment income is shown as income receivable, • income from unit funds is included within the value of the unit funds. Additional voluntary contributions Additional voluntary contributions (AVCs) are made to purchase additional years under the principal Scheme and are shown in the income of the Scheme. The assets acquired with the AVCs are included in the net assets statement. It is not possible to separately identify those investments that were purchased specifically by AVCs. The AVC Scheme was closed to new members on 31 July 2004. 14
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Notes (continued) 3 Contributions receivable 2007 2006 £ £ Employers: Normal 3,502,295 3,626,891 Special 23,552 21,500 Members: Normal 774,455 801,883 Additional voluntary contributions 41,197 45,913 4,341,499 4,496,187 The special employer contribution relates to an additional payment by the employer to fund the levy to the Pension Protection Fund which was paid by the Scheme but is a cost to the employer. In 2006 the special contributions related to contributions from the employer and employees in respect of part time workers who have now joined the Scheme, and had their membership back dated, having previously been excluded from membership. 4 Benefits payable 2007 2006 £ £ Pensions 1,696,816 1,581,363 Commutations and lump sum retirement benefits 381,005 225,328 Lump sum death benefits 21,928 32,321 2,099,749 1,839,012 5 Payments to and on account of leavers 2007 2006 £ £ Refunds to members leaving service 1,934 2,329 Individual transfers to other Schemes 95,462 120,660 Payments for members joining State Scheme (contributions equivalent premiums) 652 259 98,048 123,248 6 Administrative expenses 2007 2006 £ £ Administration, processing and actuarial fees 243,223 283,890 Audit fee 10,429 11,203 253,652 295,093 The administrative fees include an accrual for the levy to the Pension Protection Fund that is refunded by the University see note 3 above. 15
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Notes (continued) 6 Administrative expenses (continued) Within the administration and processing costs are costs of £39,429 (2006: £38,281) which have been recharged by the University to the Scheme. These costs represent the time spent by University staff in performing administration and accounting work for the Scheme. All other costs of administration are borne by the University of Leicester. 7 Investment income 2007 2006 £ £ Bank interest 3,914 2,022 Interest on investments - 102,963 3,914 104,985 Income from Pooled Investment Vehicles has been included within the change in market value of investments. 8 Investment management expenses 2007 2006 £ £ Investment administration: Legal & General Investment Management 1,500 1,500 Black Rock Investment Management (UK) Limited 30,147 24,905 31,647 26,405 Fund management charges: Legal & General Investment Management 42,074 38,329 Black Rock Investment Management (UK) Limited 70,350 58,111 112,424 96,440 Total investment management expenses 144,071 122,845 The investment management expenses comprise: Legal & General Investment Management An annual basic administration fee of £500. plus a quarterly percentage charge on the value of the fund. The percentage charges for the two funds are as follows: UK Equity Index 0.1%pa for the first £10 million and 0.075% for the next £10 million Active Corp Bond over 10 years 0.20%pa 16
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Notes (continued) 8 Investment management expenses (continued) Black Rock Investment Management (UK) Limited The UK Specialist Equity Fund 0.5% of the funds invested and there is a performance fee which is 20% of out performance. The Target Return Fund fee is 0.5% of the funds invested. Fidelity, Russell and Artemis These investment managers deduct their fees from the units held rather than raising specific invoices. Fidelity The annual management charge is 0.35% on the funds currently invested. Russell The annual management charge is 0.65% of the total assets invested. Artemis The annual management charge is 0.75% of the funds invested. 9 Investment assets Summary by Investment Manager 2007 2006 £ £ Pooled investment vehicles Legal & General Assurance (Pensions Management) Limited 30,188,050 27,748,875 Black Rock Investment Managers 22,934,716 13,917,577 Russell 20,473,900 21,552,596 Fidelity 6,645,373 8,789,461 Artemis Fund Managers 7,197,051 6,216,989 87,439,090 78,225,498 Bank deposits Bank of Scotland - 10,483 Cash at investment managers Black Rock Investment Managers 118,190 - Net value of investment assets 87,557,280 78,235,981 17
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Notes (continued) 9 Investment assets (continued) The movement in the market value of investments is analysed below: Purchase Sales Change Opening cost/ proceeds/ in market Closing value additions withdrawals value value £ £ £ £ £ Pooled investment vehicles: UK Equity 32,016,097 - - 4,385,577 36,401,674 Overseas Equity 21,552,596 - (4,000,000) 2,921,304 20,473,900 Corporate Bonds 16,680,726 - (2,000,000) (279,844) 14,400,882 Target Return Fund 7,741,778 7,848,269 - 572,587 16,162,634 Cash held for investment by Black Rock 234,301 - (116,111) - 118,190 Cash held by Bank of Scotland 10,483 - (10,483) - - Total 78,235,981 7,848,269 (6,126,594) 7,599,624 87,557,280 10 Current assets and liabilities 2007 2006 £ £ Current assets Cash balances 137,058 95,566 Bank interest 18 344 Pensions paid in advance (see below) 143,991 134,631 Other debtor 33,806 2,193 314,873 232,734 Current liabilities Contribution equivalent premiums (18,316) (17,480) Scheme administration costs (5,144) (30,185) Investment manager fees (30,697) (6,879) Audit fee (10,740) (9,200) Amounts due to the University of Leicester (127,178) (113,018) Other accruals and deferred income (77,264) (38,948) Six monthly pension (13,813) (13,521) (283,152) (229,231) 31,721 3,503 Pensions paid in advance represent an amount prepaid in respect of pensions paid in July that related to the pension payroll for August. 18
    • ABCD KPMG LLP 2 Cornwall Street Birmingham B3 2DL Independent Auditors’ statement about Contributions, made under regulation 4 of the Occupational Pension Schemes (requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, to the Trustees of the University of Leicester Pension & Assurance Scheme. We have examined the summary of contributions payable under the schedule of contributions to the University of Leicester Pension and Assurance Scheme in respect of the scheme year ended 31 July 2007 which is set out on page 20. This statement is made solely to the Scheme’s Trustees, as a body, in accordance with the Pensions Act 1995 and Regulations made thereunder. Our work has been undertaken so that we might state to the Scheme’s Trustees those matters we are required to state to them in an auditors’ statement about contributions and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Scheme’s Trustees, as a body, for our work, for this statement, or for the opinions we have formed. Respective responsibilities of Trustees and auditors As described on page 20, the Scheme’s Trustees are responsible, under the Pensions Act 2004, for ensuring that there is prepared, maintained and from time to time revised a schedule of contributions which sets out the rates and due dates of certain contributions payable towards the Scheme by or on behalf of the employer and the active members of the Scheme. The Trustees have a general responsibility for procuring that contributions are made to the Scheme in accordance with the schedule of contributions. It is our responsibility to provide a statement about contributions paid to the Scheme and to report our opinion to you. We read the Trustees’ report and other information in the annual report and consider whether it is consistent with the summary of contributions. We consider the implications for our statement if we become aware of any apparent misstatements or material inconsistencies with the summary of contributions. Basis of statement about contributions We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to give reasonable assurance that contributions reported in the summary of contributions have been paid in accordance with the relevant requirements. For this purpose, the work that we carried out included examination, on a test basis, of evidence relevant to the amounts of contributions payable to the scheme and the timing of those payments. Our statement about contributions is required to refer to those exceptions which come to our attention in the course of our work. Statement about contributions payable under the Schedule In our opinion contributions for the Scheme year ended 31 July 2007 as reported in the summary of contributions and payable under the schedule have in all material respects been paid at least in accordance with the schedule of contributions certified by the actuary on 16 August 2005. Date: Chartered Accountants 19
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Summary of contributions Statement of Trustees’ responsibilities in respect of contributions The Scheme’s Trustees are responsible under pensions legislation for ensuring that there is prepared, maintained and from time to time revised a schedule of contributions showing the rates of contributions payable towards the Scheme by or on behalf of the employer and the active members of the Scheme and the dates on or before which such contributions are to be paid. The Scheme’s Trustees are also responsible for keeping records of contributions received in respect of any active members of the Scheme and for procuring that contributions are made to the Scheme in accordance with the schedule. Trustees’ summary of contributions payable under the schedule in respect of the Scheme year ended 31 July 2007 This summary of contributions has been prepared by, or on behalf of, and is the responsibility of the Trustees. It sets out the contributions payable to the Scheme under the schedule of contributions certified by the actuary on 16 August 2006 in respect of the Scheme year ended 31 July 2007. The Scheme auditor reports on contributions payable under the schedule in the auditors statement about contributions. Contributions payable under the schedule in respect of the Scheme year £ Employers 3,502,295 Members 774,455 Employers special 23,552 Contributions payable under the schedule (as reported on by the Scheme auditors) 4,300,302 Reconciliation of contributions £ Contributions payable under the schedule (as above) 4,300,302 Members additional voluntary contributions 41,197 Total contributions reported in the accounts 4,341,499 Signed on behalf of the Trustees: Date: 20
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Appendix I - Actuary’s Certificate - Disclosure Statement 21
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Appendix II - Investment report - Legal & General Investment Management 22
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Appendix III - Investment report – Black Rock Investment Management (UK) Limited 23
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Appendix IV - Investment report – Fidelity Investments 24
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Appendix V - Investment report –Russell Investment Group 25
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Appendix VI - Investment report – Artemis Investment Management 26
    • University of Leicester Pension and Assurance Scheme Trustees’ report and financial statements 31 July 2007 Appendix VII - Summary Funding Statement 2007 27