ICI SPECIALTY CHEMICALS PENSION FUND

Transcription

1 ICI SPECIALTY CHEMICALS PENSION FUND Registered with the Pensions Regulator Registration Number REPORT OF THE TRUSTEE AND FINANCIAL STATEMENTS 31 March 2015

2 CONTENTS HIGHLIGHTS OF THE YEAR 2 TRUSTEE, DIRECTORS, ADVISERS & SERVICE PROVIDERS 3 REPORT OF THE TRUSTEE 4 MEMBERSHIP REPORT 9 INVESTMENT REPORT 10 SCHEDULE OF CONTRIBUTIONS DATED 26 JUNE SCHEDULE OF CONTRIBUTIONS DATED 30 APRIL ACTUARIAL CERTIFICATE 19 FINANCIAL STATEMENTS-FUND ACCOUNT 20 FINANCIAL STATEMENTS-NET ASSETS STATEMENT 21 NOTES FORMING PART OF THE FINANCIAL STATEMENTS 22 AUDITOR S REPORT TO THE TRUSTEE 29 AUDITOR S REPORT ON CONTRIBUTIONS 30 STATEMENT OF TRUSTEE S RESPONSIBILITIES IN RESPECT OF CONTRIBUTIONS 31 1

3 HIGHLIGHTS OF THE YEAR ENDED 31 MARCH 2015 HIGHLIGHTS OF THE Fund s assets at 1 April How the money came in - Income m Employer contributions 1.3 Total m Investment income 2.3 Total income 3.6 How it was used - Expenditure m Pensions Commutation lump sums -0.8 Payments to and on account of leavers -0.9 Total expenditure Change in the Fund m Balance of Income and Expenditure Change in market value of investments Total change in the Fund Fund's Assets at 31 March 2015 The Fund provides for: million Contributing members 72 Pensioners 829 Deferred pensioners 950 Total number of members 1,851 2

4 TRUSTEE, DIRECTORS, ADVISERS & SERVICE PROVIDERS AS AT 2 OCTOBER 2015 Trustee: ICI Specialty Chemicals Pensions Trustee Limited Directors: M H Smith (Board & ARAC Chairman) IC, ARAC Other Director A Atkinson (AAC Chairman) AAC, ARAC Other Director A A Bate (IC & AVC Chairman) IC, ARAC, AVC Member-Nominated Director N R E Cribb IC, ARAC Other Director R Eden-Green AAC, ARAC Member-Nominated Director M C Harrow AAC, ARAC Member-Nominated Director The Law Debenture Pension Trust Corporation p.l.c. IC, AAC, ARAC, AVC Committee Roles: IC - Investment Committee AAC - Administration and Appeals Committee ARAC - Audit and Risk Assurance Committee AVC - AVC Committee Board Secretary Pensions Secretariat Services Limited 3 rd Floor, 38 Lombard Street, London EC3V 9BS Scheme Actuary A Barnes FIA Towers Watson Limited Watson House, London Road, Reigate, Surrey RH2 9PQ External Auditor: KPMG LLP 15 Canada Square, London E14 5GL Internal Auditor: Deloitte LLP 2 New Street Square, London EC4 3BZ Solicitors: Squire Patton Boggs (UK) LLP 7 Devonshire Square, Cutlers Gardens, London EC2M 4YH Allen & Overy LLP One Bishops Square, London E1 6AD Bank: HSBC plc 18 High Street, Reigate, Surrey RH2 9BB Genesis Investment Management LLP 21 Grosvenor Place, London SW1X 7HU M&G Investment Management Limited Laurence Pountney Hill, London EC4R 0HH Securis Investment Partners LLP 12 th Floor, Heron Tower, 110 Bishopsgate London EC2N 4AY Investment Adviser: Lane Clark Peacock LLP 95 Wigmore Street, London W1U 1DQ Custodian: JP Morgan Chase Bank NA 25 Bank Street, London E14 5JP Administrator: Towers Watson Limited Administration Offices, ICI Pensions Services PO Box 545, Redhill, Surrey RH1 1YX iciscpf@towerswatson.com Communication Adviser: Ferrier Pearce (Communications) Limited County House, Hatton Garden London EC1N 8AT Insurance Broker: Lockton Companies LLP: The St Botolph Building, 138 Houndsditch London EC3A 7AG Investment Performance Measurer: WM Performance Services 525 Ferry Road, Edinburgh, EH5 2AW AVC Providers: Clerical Medical Investment Group Limited PO Box 174, Walton Street Aylesbury, Bucks. HP21 7YP The Equitable Life Assurance Society PO Box 177, Walton Street Aylesbury, Bucks. HP21 7YH Annuity Provider: Prudential Retirement Income Limited Craigforth, Stirling, FK9 4UE Investment Managers: BlackRock Advisors (UK) Limited 12 Throgmorton Avenue, London EC2N 2DL 3

5 REPORT OF THE TRUSTEE 31 MARCH 2015 The Trustee Board submits the Annual Report on the operations of the ICI Specialty Chemicals Pension Fund (the Fund ), together with the Financial Statements of the Fund for the year ended 31 March Principal Employer The Principal Employer of the Fund is Imperial Chemical Industries Ltd (formerly Imperial Chemical Industries p.l.c), 26 th Floor, Portland House, Bressenden Place, London SW1E 5BG ("ICI"). On 2 January 2008, ICI was acquired by Akzo Nobel N.V. ("AkzoNobel"), a company based in the Netherlands. Guarantor Under a deed executed on 29 February 2012 AkzoNobel guarantees all ICI obligations to make payments to the Fund arising under legislation and under the Trust Deed and Rules. The continuation of the guarantee is conditional on the maintenance of the Fund s asset allocation within a range agreed between the Trustee and AkzoNobel. Trustee The Fund has a corporate trustee - ICI Specialty Chemicals Pensions Trustee Limited (the Trustee ). This company is owned by The Law Debenture Pension Trust Corporation p.l.c. ("Law Debenture"), a professional trustee which is entirely independent from ICI. The Trustee Board comprises seven Directors, made up as follows: 1 Independent Director - Law Debenture 3 Member-Nominated Directors 3 Other Directors appointed by Law Debenture. As the holder of all the share capital in the Trustee, Law Debenture has the power under the articles of association to appoint and remove directors, subject to legislation. Status of the Fund The Fund was established with effect from 1 April It was set up to provide pension benefits to the employees of the Specialty Chemicals businesses acquired by ICI from Unilever (in what is now referred to as the "Main Section"). It is a defined benefit occupational pension scheme. In July 1998 a separate section was created to provide pension benefits to former members of the Williams Holdings Pension Plan. Since 1 October 2000, the Fund has been closed to new members, except for transfers from other ICI Group defined benefit pension schemes with the consent of the Principal Employer and the Trustee. Member-Nominated Directors ("MNDs") Under the Pensions Act 2004, the Trustee is responsible for determining the procedure for nomination and selection of Member-Nominated Directors, subject to certain requirements set out in that Act. The Trustee also has regard to guidance issued by the Pensions Regulator. Under the current arrangements determined by the Trustee: By law, MNDs must comprise a minimum of one third of all Directors but ICI has agreed that MNDs may comprise up to half of all Directors, excluding Law Debenture The total number of Directors is seven, three of whom are to be MNDs Any Fund member may be nominated as an MND, except those who are dependant pensioners or only have AVC benefits within the Fund. After a shortlisting process conducted by the Administration and Appeals Committee, selection is undertaken by a selection panel including the chairman of the Trustee Board, Law Debenture and an MND (or, failing which, another Trustee Director who is also a member of the Fund or, failing which, a member of the Fund nominated by the Administration and Appeals Committee); and MNDs may be drawn from any part of the membership (but so that, if possible, at least one of the MNDs should come from the active membership of the Fund). Directors The Directors held four scheduled Board meetings during the year ended 31 March A list of the Directors at the date of this report is given on page 3. During the year there were no changes to Director appointments. The term of appointment of the chairman of the Board, M H Smith, is due to expire on 7 October M H Smith has indicated 4

6 REPORT OF THE TRUSTEE 31 MARCH 2015 that he will retire as a Trustee Director of the Board at that time. A A Bate has been appointed by the Directors to assume the role of chairman of the Board in his place. Secretary and Administrators Pensions Secretariat Services Limited (which is wholly-owned by the ICI Pension Fund) served as Secretary throughout the year, providing all strategic support services to the Fund. The administrators of the Fund are Towers Watson Limited. Committees of the Trustee Board The Board has appointed an Investment Committee, an Administration and Appeals Committee and during the year the Board has also appointed an AVC Committee. There is also an Audit and Risk Assurance Committee which currently comprises all the members of the Board. Administration and Appeals Committee The role of the Administration and Appeals Committee is to lead policy development in areas other than funding and investment, to supervise the work of the administrator and to hear individual member appeals under the Internal Dispute Resolution procedure. The Administration and Appeals Committee had four scheduled meetings during the year. AVC Committee The AVC Committee was established to assume responsibility for matters relating to the Fund s additional voluntary contribution (AVC) arrangements. The AVC Committee met twice during the year. Audit and Risk Assurance Committee The role of the Audit and Risk Assurance Committee is to make recommendations to the Board as to the appointment of external and internal auditors, to agree the scope of their audit work and to discuss with them any issues arising. The Committee also reviews the Fund s annual financial statements and reviews the effectiveness of the Fund s internal control and risk management systems. The Audit and Risk Assurance Committee had two scheduled meetings during the year. Investment Committee The Investment Committee had six scheduled meetings during the year. Its role is to make recommendations to the Board on investment strategy and risks; to implement changes to strategy (within limits set by the Board); to review and monitor investment managers and the custodian and to determine their remits and terms of appointment. Further details are contained in the Investment Report on pages 10 to 12. Trustee Training The Trustee Board believes that all Directors should receive appropriate training to enable them to undertake their duties and operates its own in-house training programme, utilising external contributors. Trustee Directors are also required to complete the Pensions Regulator s Trustee Toolkit (an online training programme) within six months of appointment, to provide a common foundation training for all. Investment Principles The Trustee has approved a statement of investment principles which is available on the Trustee website, Statement of Trustee Responsibilities The audited accounts are the responsibility of the Trustee. Pensions legislation requires the Trustee to make available to Fund members, beneficiaries and certain other parties, audited accounts for each Fund year which: - show a true and fair view of the financial transactions of the Fund during the Fund year and of the amount and disposition at the end of the Fund year of the Fund s assets and liabilities, other than liabilities to pay pensions and benefits after the end of the Fund 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 5

7 REPORT OF THE TRUSTEE 31 MARCH 2015 have been prepared in accordance with the Statement of Recommended Practice (revised May 2007), 'Financial Reports of Pension Schemes'. The Trustee has arranged for the preparation of the accounts and has agreed suitable accounting policies, to be applied consistently, making estimates and judgements on a reasonable and prudent basis. The Trustee is also responsible for making available each year, commonly in the form of a Trustee s annual report, information about the Fund prescribed by pensions legislation, which the Trustee should ensure is consistent with the audited accounts it accompanies. The Trustee is responsible under pensions legislation for ensuring that there is prepared, and from time to time reviewed and if necessary revised a Schedule of Contributions showing the rates of contributions payable to the Fund by or on behalf of the employer and the active members of the Fund and the dates on or before which such contributions are to be paid. The Trustee is also responsible for keeping records of contributions received in respect of any active member of the Fund and for monitoring whether contributions are made to the Fund in accordance with the Schedule of Contributions. The Trustee also has a general responsibility for ensuring that adequate accounting records are kept and for taking such steps as are reasonably open to it to safeguard the assets of the Fund and to prevent and detect fraud and other irregularities. Financial Statements The Annual Financial Statements of the Fund have been prepared and audited in accordance with the requirements of Section 41 (1) and (6) of the Pensions Act 1995 and are shown on pages 18 to 26 of this report. It must be emphasised that market value is a snapshot at the date of the Financial Statements and that there can be sharp short-term fluctuations in market value. Given the long-term nature of pension funds, too much emphasis should not be given to short-term rises or falls in market value of the Fund's investments. Therefore it is advised that the Fund s Financial Statements are read in conjunction with the Actuarial Certificate on page 17. The Trustee also issues a Summary Funding Statement to members as at 31 March each year, a copy of which is available on the Fund s website ( Post Balance Sheet Developments Since the balance sheet date, the Trustee has entered into a significant transaction with the aim of reducing risk and increasing the security of members benefits by purchasing a bulk annuity policy from Prudential Retirement Income Limited at a cost of 222 million. The cost of the policy was funded by the transfer or sale of some of the assets of the Fund s portfolio of matching assets. The policy will be held as part of that portfolio. Within the Fund s portfolio of return seeking assets, the Trustee sold equity investments to a value of 30 million and invested the proceeds in absolute return funds managed by BlackRock and Standard Life. Custodian The Fund has a single independent custodian for its direct investments, JP Morgan Chase Bank NA. Investments in pooled funds use independent custodians appointed by the manager of each Fund. Additional Voluntary Contributions AVC arrangements are no longer open to new contributions. However, members who wish to do so are able to continue to maintain existing AVC savings accounts. Benefit Statements Benefit Statements are sent to most active members during the summer of each year. Those members for whom statements cannot be produced automatically are able to request them individually. Pension Increases For most members, the Fund's Rules provide a guaranteed annual pension increase of 5% or the annual increase in the Retail Prices Index (RPI) if lower, calculated on pensions in payment after commutation. The RPI reference period for Main Section members is the increase in RPI in the year to 31 July 2014, for all Section A members it is the increase in the year to 31 August The rules for the separate section for former members of the Williams 6

8 REPORT OF THE TRUSTEE 31 MARCH 2015 Pension Plan ( Section A ) vary according to which employer (if any) they worked for prior to Williams ownership. Since inflation during the relevant reference periods did not exceed 3%, pension increases for each section of the Fund were as follows: Main Section members increase from 1 October % Section A former Hunting members increase from 1 January 2015 for service up to 5 April % for service between 6 April 1993 and 5 April % for service from 6 April % Section A former BJN members* increase from 1 January 2015 tested individually All other Section A members increase from 1 January 2015 for service up to 5 April % for service from 6 April % * The majority of these members received an increase of 5.0% on their pension in excess of the GMP. However, some members received the underpin guaranteed increase of 3.0% on their total pension (inclusive of the GMP) as this was greater. All of the above increases apply to the pension in excess of the Guaranteed Minimum Pension ( GMP ); statutory increases were given on the GMP on 1 April The above increases were not discretionary. Self Investment The Fund has no direct investments in ICI or any other companies within the AkzoNobel group. Indirect investment arises only via pooled investment vehicles and represents less than 0.1 % of Fund assets. Risk Controls As a result of the European Pensions Directive, regulations require pension fund trustees to ensure adequate internal financial controls and policies for risk control. The Trustee considers that its policies and procedures comply with these regulations. Actuarial Valuation and Determination of Contributions The Scheme Actuary carried out a formal valuation of the Fund as at 31 March This was the third valuation of the Fund to be conducted under the scheme-specific funding regulations established by the Pensions Act 2004 and agreement between the Trustee and ICI on the level of deficit and a Recovery Plan and a new Schedule of Contributions was reached in April The deficit shown by this valuation was 44.5 million. In accordance with the Schedule of Contributions dated 30 April 2015 deficit repair contributions of 6.0 million were paid on 15 May Additional contributions in respect of the difference between the employer contributions payable from 1 April 2014 to 31 May 2015 and those required to meet the cost of accruing benefits, plus interest, amounting to million were also paid on 15 May No deficit repair or additional contributions were payable in respect of the year ended 31 March During the period 1 April 2014 to 31 March 2015, contributions were made by the employers in accordance with the Schedule of Contributions dated 26 June 2012 at the following rates: Main Section: 30.9% of contribution pay. Section for ex Williams employees: 32.2% of pensionable pay Additional contributions from time to time to fund early retirement costs In addition ICI has continued to meet certain non-investment expenses directly on behalf of the Fund. 7

9 REPORT OF THE TRUSTEE 31 MARCH 2015 Contributions were payable by contributing members (or by their employers under salary sacrifice arrangements) at the following rates: Main Section: 5% of contribution pay. Section for ex Williams employees: 4% of pensionable pay for joiners before 6 April 1997 and 5% of pensionable pay for joiners after 6 April All payments were received by the respective due dates. A copy of the Scheme Actuary s Certificate appears on page 17. Further information on the funding position of the Fund is contained in the Summary Funding Statement available on the Fund s website ( Transfers All transfer values paid to other pension schemes or credits given in respect of transfer values received from other pension schemes during the year, were either calculated and verified by the Scheme Actuary, or calculated in accordance with instructions prepared by him, in accordance with statutory regulations. Discretionary benefits are not included in the calculation of transfer values. The Fund is closed to new members, except for transfers from other ICI Group defined benefit pension schemes. No transfers-out have been made at less than the cash equivalent value. Equal Treatment The Directors believe that the Fund has equalised benefits between men and women as required by law except for GMPs where in common with most other schemes the Directors are awaiting further clarification of the law. Internal Dispute Resolution Procedure The Fund has instituted a procedure in accordance with the requirements of the Pensions Act 1995 and details can be obtained from the Fund s administrator, whose address is shown on page 3. Contracting-out of State Second Pension Contributing members of the Fund have been contracted-out of the State Second Pension ( S2P, formerly the State Earnings Related Pension Scheme or SERPS) and have been since the Fund was established in The basis for contracting-out of S2P for the Fund is the Reference Scheme Test. Appointment of Advisers The advisers listed on page 3 have all been appointed by the Trustee or under authority of the Trustee. Tax Status The Fund is registered with HMRC in accordance with the Finance Act 2004 and the Directors know of no reason why this registration may be prejudiced or withdrawn. Enquiries Any enquiry concerning the Trustee's Report, Financial Statements or any provisions of the Fund should be addressed to the administrator, whose contact details are shown on page 3. BY ORDER OF THE BOARD OF ICI SPECIALTY CHEMICALS PENSIONS TRUSTEE LIMITED B J Picknett for and on behalf of Pensions Secretariat Services Limited Secretary 2 October

10 MEMBERSHIP REPORT 31 MARCH 2015 Membership Statistics Contributing Pensions Deferred Total Members in Payment Pensioners At 1 April ,862 Additions Cessations At 31 March ,851 Additions to Pensions in Payment Contributing member at normal retirement 1 Contributing member at early retirement 1 Deferred member at normal retirement 5 Deferred member at early retirement 11 Spouse on death of a pensioner 5 Cessations of Contributing Members Pension at normal retirement 1 Pension at early retirement 1 Deferred pension 11 Cessations of Pensions in Payment Death of a pensioner 7 Death of a spouse 2 Child pension ceased 2 Cessations of Deferred Pensioners Pension at normal retirement 4 Pension at early retirement 12 Transfer out 5 Commutation of Pensions During the year 18 members were eligible to exercise their option to commute part of their pensions and 16 (i.e 88.9%) decided to do so. The total pensions commuted during the period under review amounted to 40,370 per annum. Dependants' and Spouses' Pensions Of the 829 pensions in payment at 31 March 2015, 90 were payable to dependants or spouses Additional Voluntary Contributions (AVC) Scheme AVCs are invested in individual accounts with Clerical Medical and/or Equitable Life. The membership statistics reflect the number of individuals with AVCs. AVCs have been closed to new contributions since 6 April Equitable Life Clerical Medical AVC Members at 1 April Less: Retirements -1 - Transfers - -1 AVC Members at 31 March

11 INVESTMENT REPORT 31 MARCH 2015 Statement of Investment Principles In accordance with the Pensions Act 1995, the Directors of ICI Specialty Chemicals Pensions Trustee Limited have produced a Statement of Investment Principles ( SIP ) after having consulted with ICI. A copy is available on the Fund s website at Investment Advisers During the course of the year under review Towers Watson Limited (TW) and Lane Clark & Peacock LLP (LCP) acted as investment advisers to the Trustee. LCP were appointed with effect from 1 April 2014, TW s appointment was terminated with effect from 30 April Investment Management Structure The investments of the Fund are managed according to remits and control limits laid down by the Trustee after having consulted ICI. The Directors have established an Investment Committee to which a number of operational powers are delegated, but key decisions about long-term strategy and governance are taken by the Board of Directors. The Trustee has, directly or indirectly, delegated all day-to-day investment decisions to its investment managers: BlackRock Advisors (UK) Limited ("BlackRock") M&G Investment Management Limited ( M&G ) Genesis Investment Management LLP ( Genesis ) Securis Investment Partners LLP ( Securis ) Each remit includes a benchmark against which performance is measured. BlackRock has two remits, one to manage equities on a passive basis and one to manage bonds, swaps and cash so as to match a proportion of the Fund s liabilities. M&G is a specialist Leveraged Loans manager and a Long Lease Property manager. During the year the Fund also invested in a new M&G Illiquid Credit Fund. Genesis is a manager specialising in Emerging Market Equities and Securis is a manager specialising in Reinsurance. During the year the Ashmore Emerging Market Bonds, PIMCO High Alpha Bonds and Rogge Emerging Market Currencies mandates were terminated. Investment Strategy The Trustee maintained its investment strategy, originally adopted in 2010 (following consultation with ICI) of maintaining a large proportion of its assets in bonds, cash and swaps that closely match expected future cash outflows, in order to minimize volatility of assets relative to liabilities. The remainder of the assets are returnseeking assets which, over time, it is expected will generate returns in excess of the increase in liabilities. In quarter , the Fund increased the strategic hedge ratio to 78% of liabilities, in line with the portfolio funding level at the time. In the year to 31 March 2015, falls in yields caused the liability proxy to return 23.6% in the period. Increasing the hedge ratio has largely immunized the portfolio from the volatilty caused by the falls in yields and the Fund returned 25.4% in the period. The Investment Committee has been reviewing the return-seeking portfolio to reflect the progress in the 2014 Actuarial Valuation negotiations and a number of changes were made during the year. The Ashmore Emerging Market Bonds, PIMCO High Alpha Bonds and Rogge Emerging Market Currencies mandates were terminated during the year with M&G appointed for a further mandate, The M&G Illiquid Credit Fund. Since 31 March 2015 changes have been made to the Fund s matching and return-seeking portfolios as noted on page 6 above. Further changes are planned. 10

12 INVESTMENT REPORT 31 MARCH 2015 As a result of the changes undertaken, the strategic benchmark allocation of the Fund at 31 March 2015 was as set out below: Black Rock % M&G % Genesis % Securis % Total % Matching Assets UK Equities Overseas Equities Leveraged Loans Illiquid Credit Long Lease Property Reinsurance Cash Subject to rounding differences Investment Performance The Fund subscribes to the independent WM Company service for performance measurement of UK pension funds. The returns for each manager who served throughout the relevant period and for the total Fund against benchmark to 31 March 2015 were as shown in the following table. Since Q2 2010, the Fund has set a strategic benchmark which takes into account the Fund s liability profile. The purpose of this strategic liability benchmark is to allow the Fund to compare the performance of its investments against the change in value of its future liabilities. The benchmark shown in the table for the Total Fund Return for the year to 31 March 2015 is the strategic liability benchmark. However, for three and five years it is a weighted benchmark calculated from individual managers benchmarks. The returns reported for the BlackRock matching portfolio are as calculated by the manager taking into account returns not only on the assets it mamages, but also on notional assets. These are included to adjust for the difference in size between the assets managed and the liabilities in the manager s benchmark. This can lead to the reported returns being either higher or lower than the actual returns on the assets managed. This adjustment is necessary to give a fair view of the manager s performance against its benchmark. The manager s calculations are verified by WM. However, the return on these assets which is included in Total Fund Returns is the actual return on the assets managed. As a result, the sum of the weighted returns in the table shown below would differ from the Total Fund Return figure. Year to 31 March 2015 Actual % Benchmark % Last 3 years (Annualised) Actual % Benchmark % Last 5 years (Annualised) Actual % Benchmark % BlackRock Matching assets BlackRock Equities Ashmore M&G Leveraged Loans M&G Long Lease Property n/a n/a Genesis n/a n/a Securis n/a n/a n/a n/a Total Fund Return n/a = not applicable as not invested for the whole period 11

13 INVESTMENT REPORT 31 MARCH 2015 Relative to their own benchmarks, for the year, the best performers were BlackRock (Matching Assets) and M&G (Leveraged Loans) while negative performers were Ashmore, Genesis, M&G (Long Lease Property) and Securis. Compared to the liability benchmark, outperformance came from Leveraged Loans while Long Lease Property, Reinsurance, Emerging Market Equities and Emerging Market Bonds performed worse than the liabilities. For those investment managers where there is a longer-term performance history, BlackRock Matching Assets performed above their benchmarks over the five year period. Dramatic changes in investment markets, such as those occurring in recent years, emphasise the importance of judging performance of pension fund investments over long periods of time, taking account of the limited tolerance of the Trustee and of ICI for volatility in the level of funding/solvency of the Fund and the level of deficit contributions required from ICI. Over the last 3 years the Fund has outperformed its weighted benchmark by 2.4% p.a. and over the last 5 years it has outperformed by 1.8% p.a. Over the last 10 years, the Fund has delivered a positive return of 9.9% p.a., 0.8% p.a. above its weighted benchmark. Myners Report - Trustee Compliance Statement In 2008, the government published an updated version of its Myners Principles, a voluntary code of practice, on the governance of pension fund investment processes. The Trustee supports Myners Principles and believes that, in general, they coincide with the interests of the Fund. The Trustee conducts an annual assessment to confirm that the Trustee complies with all the Principles. Social, Environmental and Ethical Issues The Trustee's policy is that the extent to which social, environmental or ethical considerations are taken into account in investment decisions is left to the discretion of its investment managers. However, the Trustee expects that the extent to which such issues may have a fundamental impact on the portfolios managed by them will be taken into account by the investment managers in the exercise of their delegated duties. Rights Attaching to Investments The Trustee s policy is to delegate responsibility for the exercising of rights (including voting rights) attaching to investments to the investment managers. Voting Investment managers are encouraged, but not directed, to vote on all resolutions at annual and extraordinary meetings of companies. It is expected that voting power will be exercised by investment managers with the objective of preserving and enhancing long-term shareholder value in accordance with the ISC Code where applicable. Corporate Governance The Trustee expects investment managers to report quarterly on an exceptions basis on the exercise of corporate governance, and particularly on their voting record. The investment managers may also be requested from time to time to provide a report on the overall impact of social, environmental and ethical considerations on investment management, and to comment in particular on situations in which such considerations have been decisive to a transaction or shareholder action (including voting) 12

14 SCHEDULE OF CONTRIBUTIONS 26 JUNE 2012 Name of Principal Employer: Period covered by schedule: Imperial Chemical Industries Limited Five years from the date of certification of this schedule by the Actuary. This schedule of contributions has been prepared by ICI Specialty Chemicals Pensions Trustee Limited, the Trustee of the ICI Specialty Chemicals Pension Fund ( ISCPF ) after obtaining the advice of the Actuary, Nigel Perkins. The total contributions are the sum of the normal future service contributions, deficit contributions and any additional contributions as set out below. This schedule of contributions revokes and replaces the schedule of contributions dated 8 June 2009 that was signed on behalf of the Trustee on 8 June 2009 and certified by the Actuary on 9 June 2009, which shall be of no further effect. Terms used in this schedule have the meanings given to them in the Definitive Deed and Rules dated 6 April 2006 governing the ICI Specialty Chemicals Pension Fund (as amended), unless the context requires otherwise. The term salary sacrifice member refers to a Contributor who participates in an Employer s Salary Sacrifice Arrangement. 1 Rates of contribution normal future service contributions: by Contributors: Salary sacrifice members: Other members: Nil. The rates set out in the Rules. by Employers: Until 30 June 2012: In respect of Contributors who are not former members of the Williams Holdings Pension Plan: In respect of Contributors who are former members of the Williams Holdings Pension Plan Additional amounts in respect of salary sacrifice members: 27.4% of Contributors' total Pensionable Pay. 27.3% of Contributors' total Pensionable Earnings. The amount of any member contributions which are not required to be paid because the member concerned participates in a Salary Sacrifice Arrangement. With effect from 1 July 2012: In respect of Contributors who are not former members of the Williams Holdings Pension Plan: 30.9% of Contributors' total Pensionable Pay. 13

15 SCHEDULE OF CONTRIBUTIONS 26 JUNE 2012 In respect of Contributors who are former members of the Williams Holdings Pension Plan Additional amounts in respect of salary sacrifice members: 32.2% of Contributors' total Pensionable Earnings. The amount of any member contributions which are not required to be paid because the member concerned participates in a Salary Sacrifice Arrangement. By 31 March 2013: Additional amount in respect of the difference between the employer contributions payable from 1 April 2011 to 30 June 2012 and those required to meet the cost of accruing benefits, plus interest A contribution of million payable no later than 31 March Rates of contribution deficit contributions payable by the Principal Employer in accordance with the recovery plan dated 26 June 2012: by the Principal Employer: In 2013: A contribution of 3.7 million payable no later than 31 March Rates of contribution - additional contributions: by Contributors: by the Employers: Any additional voluntary contributions Additional contributions as may be determined from time to time by the Actuary to be necessary to meet the estimated cost of benefit augmentations granted under the Definitive Deed and Rules. Any sum due under Section 75 of the Pensions Act 1995 as a result of a Employer s cessation of participation in the Fund. In the event that a sum becomes due under Section 75 of the Pensions Act 1995, the Trustee and the Employers may agree to a corresponding reduction in the normal future service contributions or deficit contributions that would otherwise be payable. Additional amounts as may, from time to time, be agreed between the Trustee and the Principal Employer. 14

16 4 Expenses and Pension Protection Fund levies ICI SPECIALTY CHEMICALS PENSION FUND SCHEDULE OF CONTRIBUTIONS 26 JUNE 2012 The Employers will reimburse the ISCPF for all costs and expenses relating to the Fund (other than such costs and expenses directly related to investment as the Trustee determines) and Pension Protection Fund (PPF) levies that have been met out of the ISCPF s assets. Alternatively, the Employers may pay these expenses and PPF levies directly. Calculation errors The Employers may contribute smaller amounts than those described in the previous paragraphs provided that these result from calculation errors and that, at any time, the cumulative amounts paid are no more than 50,000 lower than the cumulative amounts due in accordance with the previous paragraphs. The Employers shall make good the shortfall as soon as reasonably practicable after they become aware of any such calculation error. Due dates of payment (where not already shown) Contributions by Contributors: Contributions by Employers under 1 above (other than the additional amount shown to be payable by 31 March 2013): Additional contributions by Employers under 3 above and the expenses and PPF levies under 4 above: To be received by the Trustee no later than the 19th day of the month following the calendar month in which contributions are deducted from earnings. To be received by the Trustee no later than the 19th day of the month following the calendar month to which they relate. To be received by the Trustee within three months of being properly demanded by the Trustee. Nothing in this schedule shall preclude the payment of higher contributions as may from time to time be agreed between the Trustee and the Employers. 15

17 SCHEDULE OF CONTRIBUTIONS 30 APRIL 2015 Actuarial Valuation as at 31 March 2014: Schedule of Contributions This schedule of contributions has been prepared by the Trustee of the ICI Specialty Chemicals Pension Fund ( the Fund ) to satisfy the requirements of Section 227 of the Pensions Act 2004, after obtaining the advice of the Scheme Actuary, Andrew Barnes, and replaces the schedule of contributions dated 26 June The Trustee has discussed and agreed this schedule of contributions with Imperial Chemical Industries Limited ( the Principal Employer ). The Principal Employer has agreed this schedule of contributions on behalf of itself and the other participating Employers. This schedule specifies the rates and due dates of regular Employer and members contributions to the Fund under Rule C1 and Appendix 1 Rule 3 (members), Rule C3 and Appendix 1 Rule 5 (salary sacrifice), and Clause 4.3 (Employers) for a period of five years from the date of certification of this schedule. Terms used in this schedule have the meanings given to them in the Definitive Deed and Rules dated 6 April 2006 governing the Fund (as amended), unless the context requires otherwise. The term salary sacrifice member refers to a Contributor who participates in an Employer s Salary Sacrifice Arrangement. The schedule is subject to review and, if necessary, revision from time to time as required by legislation and following actuarial valuations. 1 Employer contributions The Principal Employer and other participating Employers shall contribute the amounts set out below by the dates shown 1.1 Future service contributions, including a premium for ill-health benefits based on prospective service Until 31 May 2015: In respect of Contributors who are not former members of the Williams Holdings Pension Plan: In respect of Contributors who are former members of the Williams Holdings Pension Plan Additional amounts in respect of salary sacrifice members: 30.9% of Contributors' total Pensionable Pay. 32.2% of Contributors' total Pensionable Earnings. The amount of any member contributions which are not required to be paid because the member concerned participates in a Salary Sacrifice Arrangement. With effect from 1 June 2015: In respect of Contributors who are not former members of the Williams Holdings Pension Plan: 42.3% of Contributors' total Pensionable Pay. 16

18 SCHEDULE OF CONTRIBUTIONS 30 APRIL 2015 In respect of Contributors who are former members of the Williams Holdings Pension Plan Additional amounts in respect of salary sacrifice members: 44.4 % of Contributors' total Pensionable Earnings. The amount of any member contributions which are not required to be paid because the member concerned participates in a Salary Sacrifice Arrangement. By 31 May 2015: Additional amount in respect of the difference between the Employer contributions payable from 1 April 2014 to 31 May 2015 and those required to meet the cost of accruing benefits, plus interest A contribution of million payable no later than 31 May Employer future service contributions, other than the contribution payable by 31 May 2015, are due to be received by the Fund no later than the 19 th day of the month following the calendar month to which they relate. 1.2 Additional contributions payable in accordance with the recovery plan Additional contributions will be paid into the Fund by the Principal Employer at the rate of 6 million per annum for each of the Fund years from 1 April 2014 to 31 March The contributions payable in respect of the Fund year to 31 March 2015 will be paid by 31 May 2015 and the contributions in respect of each subsequent Fund year shall be due no later than the end of that Fund year (ie 31 March). 1.3 Expenses and Pension Protection Fund levies The Employers will reimburse the Fund for all costs and expenses relating to the Fund (other than such costs and expenses directly related to investment as the Trustee determines) and Pension Protection Fund (PPF) levies that have been met out of the Fund s assets. Reimbursement of such costs, expenses and levies will be due within three months of being demanded by the Trustee or such earlier date as may be agreed between the Trustee and the relevant Employer. Alternatively, the Employers may pay any costs, expenses and levies directly. 1.4 Other Employer contributions The Employers will pay additional contributions in accordance with Clause 11 as may be determined from time to time by the Actuary to be necessary to meet the estimated cost of benefit augmentations granted under the Trust Deed and Rules. The Employers will also pay additional amounts as, from time to time, may be agreed between the Trustee and the Principal Employer. The additional contributions will be due within three months of being demanded by the Trustee or such earlier date as may be agreed between the Trustee and the relevant Employer. 17

19 2 Contributors contributions ICI SPECIALTY CHEMICALS PENSION FUND SCHEDULE OF CONTRIBUTIONS 30 APRIL 2015 Salary sacrifice members: Other members: Nil. The rates set out in the Rules. Members contributions are due to be received by the Fund no later than the 19 th day of the month following the calendar month in which they were deducted from pay. Any AVCs made by the members are payable in addition to these rates. Calculation errors The Employers may contribute smaller amounts than those described in the previous paragraphs provided that these result from calculation errors and that, at any time, the cumulative amounts paid are no more than 50,000 lower than the cumulative amounts due in accordance with the previous paragraphs. The Employers shall make good the shortfall as soon as reasonably practicable after they become aware of any such calculation error. Date of schedule of contributions: 30 April

20 ACTUARIAL CERTIFICATE Actuary s certification of the schedule of contributions Name of scheme: Adequacy of rates of contributions ICI Specialty Chemicals Pension Fund I certify that, in my opinion, the rates of the contributions shown in this schedule of contributions are such that the statutory funding objective could have been expected on 31 March 2014 to be met by the end of the period specified in the recovery plan dated 30 April Adherence to statement of funding principles I hereby certify that, in my opinion, this schedule of contributions is consistent with the Statement of Funding Principles dated 30 April The certification of the adequacy of the rates of contributions for the purpose of securing that the statutory funding objective can be expected to be met is not a certification of their adequacy for the purpose of securing the scheme s liabilities by the purchase of annuities, if the scheme were to be wound up. A Barnes FIA Fellow of the Institute and Faculty of Actuaries 18 May 2015 Towers Watson Limited Watson House London Road Reigate Surrey RH2 9PQ 19

21 FUND ACCOUNT FUND ACCOUNT FOR THE YEAR ENDED 31 MARCH 2015 Year to Year to 31 Mar Mar 14 Note m m Contributions and Benefits Contributions receivable Benefits payable Payments to and on account of leavers Net withdrawals from dealings with members and employers Returns on investments Investment income Change in market value of investments Net returns on investments Net change to the Fund during the year Net assets of the Fund at the start of the year Net assets of the Fund at the end of the year

22 NET ASSETS STATEMENT AS AT 31 MARCH 2015 Year to Year to Note 31 Mar Mar 14 m m Investment assets 7 Direct Pooled Investment vehicles Other Total Investments Current assets and liabilities Net assets of the Fund at end of the year The notes on pages form part of the financial statements The financial statements summarise the transactions of the Fund and deal with the net assets at the disposal of the Trustee. They do not take account of obligations to pay pensions and other benefits in the future. The actuarial position of the Fund, which does take account of such obligations, is dealt with in the Actuarial Certificate on page 19 of the annual report and these financial statements should be read in conjunction with it and with the Summary Funding Statement which is available on the Fund's website These financial statements were approved by the board of the Trustee Company on 2 October 2015 and were signed on its behalf by: M.H.Smith Director B.J.Picknett for and on behalf of Pensions Secretariat Services Limited Secretary 21

23 NOTES FORMING PART OF THE FINANCIAL STATEMENTS 31 MARCH 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 (revised May 2007), Financial Reports of Pension Schemes, (the Revised SORP ). 2. Accounting Policies (a) Accruals Basis The Financial Statements have been prepared on an accruals basis, except where noted. (b) Additional Voluntary Contributions (AVCs) All investments and transactions in AVCs are included in these accounts under the relevant heading. Investment gains and losses notified later than six weeks after the year-end are included in the following year s accounts, on the grounds that the amounts involved are immaterial and that this is necessary to avoid inordinate delay to the production of the Financial Statements. (c) Contribution Income Ordinary contributions relating to wages and salaries earned in the financial year are calculated at rates determined for the period by the Principal Employer after consulting with the Scheme Actuary and are accounted for in the month when the corresponding wages and salaries are paid. Additional contributions from the participating employers are accounted for when due in accordance with the agreed timetable. (d) Investment Income Investment income is accounted for on an accruals basis. Interest income is accrued for on a daily basis whereas dividends are accrued for on the basis of the date when the corresponding share price becomes quoted on an ex-dividend basis. Dividends and interest are grossed up for the amount of any taxation recoverable. (e) Benefits Payable Benefits payable represent all material valid benefit claims in respect of the scheme year. Where a member has a choice in connection with his benefits (e.g. to commute part of the pension), the benefit choice is accounted for in the month of receipt by the Trustee of a notification from the member. (f) Administration Expenses All the Fund's administration and investment management administration fees are borne by Imperial Chemical Industries Limited. Custody and investment management advice fees, amounting to 0.3 million, were paid out of investment income (see Note 6). (g) Foreign Currency Conversion All assets and liabilities stated in foreign currencies are converted at rates of exchange ruling at the year end date. Exchange adjustments arising are then incorporated in the Fund Account, being included in the change in market value of investments. (h) Valuation of Investments The Fund's investments are reported in the Financial Statements on the basis of market values. Market values at the year-end are assessed as follows: 22

24 NOTES FORMING PART OF THE FINANCIAL STATEMENTS 31 MARCH Listed ordinary shares, government, fixed interest and index linked securities are valued at bid price or last traded price, depending on the convention of the stock exchange on which they are quoted. Government, fixed interest and index linked securities are valued on a clean basis, excluding accrued income. Any excluded income is accounted for in investment income. - Pooled investment vehicles are valued at bid price for funds with a bid/offer spread or single price where there are no bid/offer spreads provided by the investment manager. 23

25 NOTES FORMING PART OF THE FINANCIAL STATEMENTS 31 MARCH Contributions receivable Employers Year to Year to 31 Mar Mar 14 m m Normal payroll related Transfers from AVC providers Benefits payable On or during retirement Year to Year to 31 Mar Mar 14 m m Pensions Commutation and lump sum retirement benefits AVC benefits paid Payments to and on account of leavers Year to Year to 31 Mar Mar 14 m m Individual transfers to other schemes

26 NOTES FORMING PART OF THE FINANCIAL STATEMENTS 31 MARCH Investment income Year to Year to 31 Mar Mar 14 m m Income from UK non government bonds Income from index-linked securities Income from pooled investment vehicles Income from cash deposits Investment management fees In addition to the above, income is received from pooled investment vehicles which is re-invested and is reflected in the change in market value of those funds. 7. Investments (a) Change in market value of investments Market Purchases Sales Change in Market Value at at cost and proceeds and market Value at 31 Mar 14 derivative derivative value 31 Mar 15 payments receipts m m m m m Direct investments UK non government bonds Pooled investment vehicles invested in: Fixed interest securities Liability-linked funds Equity funds Other asset classes Cash deposits and other investment balances AVC investments Total investments The change in market value of investments during the year comprises all increases and decreases in the market value of investments held at any time during the year, including profits and losses on sales of investments during the year. 25