Executive Director s Report

Transcription

1 Syngenta Pension Fund Short Report on the Year 2009

2 Executive Director s Report The Swiss electorate decided against a further reduction in the conversion rate in the obligatory occupational pension fund on March 7, Consequently, the conversion rate will now be reduced on a step-by-step basis from the original 7.2% to 6.8% by the year 2014 as was already decided in 2006 within the framework of the 1st BVG revision. The conversion rate specifies how the retirement savings are converted into a life-long pension at retirement. It is determined by the following factors: The life expectancy to the point in time of retirement, interest on the retirement savings of the retiree and the life expectancy of surviving dependents that may exist. Employers in Switzerland are obligated to insure their employees in the scope of the statutory benefits in accordance with the Federal Act Regarding Company Retirement, Survivors and Disability Pensions (BVG) at the very least. They are at liberty to offer benefits that go beyond that, however. The Syngenta Pension Fund provides the people it insures with benefits that go far beyond the minimum that is statutorily required. Changes, for instance a reduction in the conversion rates, will be decided by the uppermost committee in the foundation, the Board of Trustees. That is why referendum results regarding obligatory benefits in accordance with BVG only have a conditional effect on our Pension Fund. On the internal website of the Pension Fund, you will find a comparison of the benefits of the Syngenta Pension Fund with the fund in accordance with the BVG. Since the funding ratio of the Pension Fund was below 100% at the end of 2008 as a result of the financial crisis, the Board of Trustees adopted a package of measures to remedy the deficit in May of The Pension Fund had an excellent investment result in 2009 with a yield of 14.6%, which contributed, along with the restructuring measures especially the substantial injection of capital by the company to the recovery of the funding ratio to 108.6%. The additional contributions were able to be canceled effective January 1, 2010, thanks to this development. 140% 130% 120% 110% 100% 90% 80% Development of funding ratio Although this is a positive development, the consequences of the global economic crisis have not yet been overcome. The support measures for the economy led to massive public debits; their long-term effects on the capital markets cannot yet be predicted. The discussions in connection with the referendum at the beginning of March showed the complexity of the questions involving the sustainable financing of our social security institutions. As part of the system, the Syngenta Pension Fund will also face these challenges. 20% Development investment performance The Executive Director Monika Schneider 10% 0% 10% 20%

3 Trust bodies Board of Trustees period of office from 1 July 2008 to 30 June 2011 Board of Trustees Members Employee representatives Aubin Olivier Cretton Christian, Vice President Gillieron Alain Nicolin Stéphane Plancherel Dominique Voirol Michel Employer representatives Cherix Jacques Mäder Christoph, Chairman Pinter Stefan Riebli Peter Ritter Walter Zürcher Nicolas Substitutes Gisin Verena Leimgruber Walter Nagel Martin Rouiller Evelyne Teige Verena Thiévent Fabienne Buser Heinz Meili Tobias Sozzi Dino Wuethrich Urs The Board of Trustees is the top-most body of the Pension Fund. Its most important duties include developing the benefits and funding plan (regulations), defining the strategy for the investment of assets, signing off the annual accounts and setting the interest rate on the capital savings of active insured members. Investments Committee The Investments Committee is responsible for the implementation of the investment strategy adopted by the Board of Trustees. The committee selects the Asset Manager and monitors his activity. The investment process is monitored by the Investments Controller, who reports regularly to the Board of Trustees. Investments Committee Nicolas Zürcher (Chairman), Board of Trustees Dominique Plancherel, Board of Trustees Verena Teige, Substitute on the Board of Trustees Tobias Meili, Substitute on the Board of Trustees Christian Nistler, Investments Strategist Daniel Biedermann, External Investments Consultant Hansruedi Scherer, PPCmetrics AG, Zurich, Investments Controller Monika Schneider, Executive Director (minutes) Inspectorate BVG Inspectorate and foundation supervision Rheinsprung 16, 4001 Basel Auditors PricewaterhouseCoopers AG St. Jakobs-Strasse, Postfach 3877, 4002 Basel Inspectorate Supreme supervisory body for the monitoring of occupational benefit schemes. The pension funds are in principle supervised by the inspectorate of that canton in which they have their headquarters. Auditor Auditing company for the Pension Fund. The auditors check the business management, the accounts and the investments. They report in writing on the results of their audit. The report must be submitted to the inspectorate together with the annual statement of accounts. Expert The expert for occupational benefits undertakes all of the actuarial calculations of the Pension Fund. Every year, the expert draws up a technical appraisal of the financial situation of the Pension Fund for the attention of the Board of Trustees. Expert LCP Libera AG Stockerstrasse 34, Postfach 5272, 8022 Zürich Executive Director Monika Schneider 3

4 Investments Equity markets in will go down in history as an excellent year for stocks. The stock markets recouped part of the losses of the year 2008 with increases of around 20% to 25%. The stock markets in the so-called BRIC countries (Brazil, Russia, India, China) were among the top performers with increases of over 50%. The situation was more complex in the bond markets. In particular, longerterm US government bonds had substantial price drops after the 10-year US interest rates increased by more than 1.5% in the course of the year. In Switzerland, on the other hand, the 10-year level of return dropped slightly once again to just under 2%, which led to slight gains in the price was a true «year of the century» for corporate bonds. Fears about recession and about company bankruptcies had driven the risk premiums up to record levels at the end of These risk premiums dropped successively due to the increasingly positive prospects for the economy starting in mid-march at the same time that the stock markets started to recover. Hedge fund indices increased by approx. 15% and were therefore able to recoup around two-thirds of the losses from the year The profits of listed Swiss real estate funds were of a similar magnitude. Investment structure of the Syngenta Pension Fund on Bonds/liquidity 42% Stocks 21% Real estate 8% Alternative investments 29% Investment strategy of the Pension Fund An asset-liability management study was conducted around the end of The risk-bearing ability of the Pension Fund was reduced due to the structural changes (increasing number of retirees) and as a consequence of the funding ratio that had fallen below 100%. The challenge of the Investments Committee involved a reduction of risks that was not excessive in the case of investments with a significant potential for recovery. Stocks and alternative investments were therefore reduced in the second half of the year after the market recovery in favor of an increase in bonds. At the end of the year, more than 75% of the bond portfolio was invested in Swiss bonds with a AAA or AA rating. Investment structure of the Syngenta Pension Fund on Bonds/liquidity 46% Stocks 20% Real estate 8% Alternative investments 26% 4

5 Investment performance The investment performance of 14.6% in the year 2009 can be described as very good. The Syngenta Pension Fund was in the forefront of the Swiss pension funds with that. The Swiss pension fund index calculated by Credit Suisse assumed an average return of just under 11%. The investment strategy was adapted to the reduced risk budget and has a somewhat higher risk profile than the BVG-25 Plus Index. This index, which is frequently used as a reference for Swiss pension funds, had a return of 13.7% for the year The stock investments contributed a substantial portion of the good return. The other investment categories also generated returns of 20% and more. The total return of the Pension Fund can be roughly broken down as follows: Investment category Average weighting Performance Bonds 46% 8% Shares 20% 27% Real estate 8% 19% Alternative 26% 16% Infrastructure funds Funding of infrastructure through private equity companies. Infrastructure investments are subdivided into Energy & Supplies, Transport, Communications and Social Infrastructure. Investors are usually limited partners. Convertible bond A convertible bond is a hybrid security, which is usually issued at a nominal interest rate by the issuer and which gives the owner the right to convert it into shares at a predefined ratio during a conversion period. Private equity Private equity is the general term for the capital provided by private and institutional investors for investment in companies that are not traded on an exchange (publicly) as a rule. It is subdivided into so-called leveraged buyouts (established companies) and venture capital. In the area of bonds, the shrinkage of credit spreads was the primary cause of the price gains in addition to the slightly lower interest-rate level in Switzerland. It has to be assumed that further price gains cannot be expected in 2010 due to the very low level of interest rates. Proportion of alternative investments Hedge Funds 13% Raw materials 2% Private equity/mezzanine/infrastructure 5% Convertible bonds 3% CAT bonds 3% 5

6 Financial statement Accounting regulations The bookkeeping, accounting and valuation were done according to the regulations of the Law of Obligations (OR) and the Federal Act Regarding Company Retirement, Survivors and Disability Pensions (BVG). The annual statement of accounts, consisting of the balance sheet, income statement and notes, conveys the actual financial situation as defined by the legislation regarding the company retirement plan and is in accordance with the regulations of Swiss GAAP FER 26 (Technical Accounting Recommendations). Assets CHF CHF Liquid funds Receivables Prepaid expenses Shares Bonds Real estate Alternative investments Currency overlay Total assets Liabilities CHF CHF Liabilities Deferred income Actuarial reserves for active members and retirees Special fund for conversion rate Technical privisions Fluctuation reserve Trust funds/loss Total liabilities Active members Women Men Total Obligations of the Pension Fund The actuarial reserves for the active insured members and the retirees, together with the so-called technical reserves (increase in the life expectancy), constitute the essential obligations of the Pension Fund. Of the total actuarial reserves of the active insured members of CHF million, CHF million is allotted to the retirement savings in accordance with the BVG, and thus the obligatory part of the retirement plan. This clearly shows the extent to which the Syngenta Pension Fund exceeds the obligations. Age structure on To make sure that pension obligations were met, the Pension Fund had to provide actuarial reserves of CHF million at the end of The current number of pension recipients increased by 54 persons < On December 31, 2009, the funding ratio was 108.6% compared with 93.8% in the previous year. The net profit of the Pension Fund of around CHF 200 million was used to cover the loss from the year 2008 (around CHF 82 million) and to increase the fluctuation reserves in a scope of CHF 120 million. They are therefore around 50% of the target value. Women Men 6

7 Operating result Operating result CHF CHF Contributions of employees/ employer, deposits Vested benefits, repayment of early withdrawals for home ownership and divorce Inflow from contributions and deposits Pension benefits paid out Lump-sum benefits paid out Disbursements upon termination/ advance withdrawals under the home-ownership support program and divorce Outflow for benefits and early withdrawals Liquidation/setup of retirement capital and technical reserves Contributions to security funds Claims history The Pension Fund can once again show a positive claims history for the year This means that, on the one hand, fewer cases of disability and death occurred compared with the statistical reference data and, on the other hand, the benefits were able to be fully funded out of the risk contributions. Fluctuation reserve The amount of fluctuation reserves that are required are determined based on a financial-economic method using the current distribution of the individual investment classes. The target value of the fluctuation reserve is at 15.7% of the balance sheet total. Pension increase The Board of Trustees makes a decision every year with regard to an adjustment of the ongoing pension payments. The pensions were not adjusted in 2010 due to the financial situation of the Pension Fund (no free funds, limited risk tolerance). Net result from insurance part Net result from investments Earnings from services provided Administrative expenses Expenditure/earnings surplus before release of fluctuation reserve ( /+) Release/formation of fluctuation reserve Expenditure/earnings surplus ( /+) Development of lifelong pensions Number of pension recipients Pension recipients Retirees Surviving dependents pensions Disability pensions Children s pensions Total Retirees Recipients of disability pensions Widow(er)s pensions 7

8 Contact address Do you have any questions for your Pension Fund or do you need some expert advice? Don t hesitate to contact us: Guy Mellinger, guy.mellinger@syngenta.com or Verena Danuser Joseph, verena.danuser_joseph@syngenta.com Phone You will find the detailed annual report on the Syngenta intranet at