Bank of America Merrill Lynch UK Pension Plan Statement of Investment Principles

Transcription

1 Bank of America Merrill Lynch UK Pension Plan Statement of Investment Principles This Statement of Investment Principles ( SIP ) covers both the defined benefit (also known as final salary ) and the defined contribution (also known as money purchase ) sections of the Bank of America Merrill Lynch UK Pension Plan (the Plan ). Each of the two sections of the Plan are covered individually below. This SIP also covers the Trustee s policy on issues that apply equally to both sections. Defined Benefit Section 1. Investment Objective The Trustee aims to invest the assets of the Plan prudently to ensure that the benefits promised to Plan members are provided. In setting the Plan s investment strategy, the Trustee took advice from its investment adviser and consulted with the sponsoring employer. The asset allocation strategy selected is designed to achieve a higher return than the lowest risk strategy while maintaining a prudent approach to meeting the Plan s liabilities. 2. Strategy The current planned asset allocation strategy chosen to meet the objective above is set out in the table below. Asset Class Target Weight Benchmark Performance Target (p.a) Return Section 37% Multi Asset 19.0% 3 Month LIBOR +3% Global Equity 5.0% MSCI World (NDR) +2% Private Equity 3.0% FTSE All World Developed +5% Property 10.0% IPD All Balanced Funds +1% Protection Section 63% Asset Back Securities 13.0% 3 Month LIBOR +2% Absolute Return Bond 9.5% 3 Month LIBOR +2% Investments Loans 6.0% 3 Month LIBOR +5% Asset Swapped Gilts 25.0% 3 Month LIBOR +0.3% Cash/Money Market 9.5% 7 Day LIBID +0.5% This Statement of Investment Principles is produced to meet the requirements of the Pensions Acts 1995 & 2004, the Occupational Pension Schemes (Investment) Regulations 2005 and to reflect the Government's Voluntary Code of Conduct for Institutional Investment in the UK. The Trustee also complies with the requirements to maintain and take advice on the Statement and with the disclosure requirements. 1

2 The Plan also has an interest rate and inflation swap overlay. The value of the swap overlay will vary over time in line with its objective of mitigating the interest rate and inflation risks faced by the Plan. As at 31 December 2013 the mark to market value of the swap overlay was 28m (representing approximately 3% of the Plan's total assets). The Trustee monitors the actual asset allocation versus the target weights listed above on a quarterly basis. Cash flows to and from the Plan are directed or sourced as appropriate to keep the asset allocation close to the target. The current investment strategy was determined with regard to: The actuarial characteristics of the Plan, i.e. the nature and timing of the Plan s expected future liability cash flows. These characteristics were considered when designing the Plan s swap overlay. The strength of the current funding position and sponsoring employer s covenant. The sponsoring employer s contribution policy. The Trustee s policy is to make the assumption that equities and other return seeking asset classes will outperform the Plan's liabilities over the long term. The Trustee also assumes that active fund management can be expected to add value. However, the Trustee recognises the potential volatility in return seeking assets relative to the present value of the Plan s liabilities. Prior to setting the current investment strategy, the Trustee considered written advice from its investment adviser and in doing so addressed the following: The need to consider a full range of asset classes including private equity, property, hedge funds and other alternative assets. The overall risks and expected returns of a range of alternative asset allocation strategies. The suitability of each asset class. The need for appropriate diversification. The Trustee also consulted with the sponsoring employer when setting the Plan s investment strategy. 3. Risk Measurement and Management The Trustee maintains a Statement of Funding Principles which specifies that the funding objective is to have sufficient assets so as to make provision for 100% of the Scheme s liabilities as determined by an actuarial calculation. The Trustee recognises that the key risk to the Plan is that it has insufficient assets to make provisions for 100% of its liabilities ( funding risk ). The Trustee has identified a number of risks which have the potential to cause a deterioration in the Plan s funding level and therefore contribute to funding risk. These are as follows: The risk of a significant difference in the sensitivity of asset and liability values to changes in financial and demographic factors ( mismatching risk ). The Trustee and its advisers considered this mismatching risk when setting the investment 2

3 strategy and have specifically structured the Plan s assets so as to mitigate this risk. The risk of a shortfall of liquid assets relative to the Plan s immediate liabilities ( cash flow risk ). The Trustee and its advisers will manage the Plan s cash flows taking into account the timing of future payments in order to minimise the probability that this occurs. The failure by the fund managers to achieve the performance targets set by the Trustee relative to the benchmark ( manager risk ). This risk is considered by the Trustee and its advisers both upon the initial appointment of the fund managers and on an ongoing basis thereafter. The failure to spread investment risk ( risk of lack of diversification ). The Trustee and its advisers considered this risk when setting the Plan s investment strategy and when appointing multi asset fund managers. The possibility of failure of the Plan s sponsoring employer ( covenant risk ). The Trustee and its advisers considered this risk when setting investment strategy and consulted with the sponsoring employer as to the suitability of the proposed strategy. The risk of fraud, poor advice or acts of negligence ( operational risk ). The Trustee has sought to minimise such risk by ensuring that all advisers and third party service providers are suitably qualified and experienced and that suitable liability and compensation clauses are included in all contracts for professional services received. Due to the complex and interrelated nature of these risks, the Trustee considers the majority of these risks in a qualitative rather than quantitative manner as part of each formal investment strategy review (normally triennially). Some of these risks may also be modelled explicitly during the course of such reviews. In particular, mismatching and lack of diversification risks were modelled explicitly as part of the most recent investment strategy review. The Trustee s policy is to monitor, where possible, these risks quarterly. The Trustee receives quarterly reports showing: Estimated current funding level versus the Plan s specific funding objective. Performance of the Plan s assets versus the overall investment objective. Performance of individual fund managers versus their respective targets. Evaluative comments and any significant issues regarding the Plan s current fund managers. Performance of the Plan s swap overlay and its success at reducing mismatching risk. Projected risk attribution for the Plan's assets relative to the liabilities. More broadly the Trustee maintains a risk register which looks at the whole range of risks to which the Plan may be subject. This includes the risks described above. 3

4 4. Implementation The fund manager structure and investment objectives for each fund manager are as follows: Returns Section Asset Class Target Weight Details Multi Asset 19.0% Investment Objective: To achieve long-term performance in line with the target of 3 month LIBOR +3% p.a. gross of fees over rolling 3 year periods. Fund Managers: Two fund managers have been appointed - BlackRock (Strategic Investment Group) and Standard Life Investments. BlackRock To outperform 3 month LIBOR by +3% p.a. gross of fees over rolling 3 year periods. Standard Life To outperform 3 month LIBOR by +3% p.a. gross of fees over rolling 3 year periods. There is no specified allocation between the two managers. Global Equity 5.0% Investment: Bank of America Merrill Lynch UK Pension Plan Global Equity - Active Investment Objective: To out perform the MSCI World Index (NDR) after fund fees and expenses. Fund Managers: Three fund managers have been appointed; Sands, Veritas and Schroder: Sands Global (33.34% allocation). Veritas Global Focus (33.33% allocation). Schroder QEP Global Active Value (33.33% allocation). Private Equity 3.0% Investment Objective: The overall objective is to outperform the FTSE All World Developed index by 5% p.a. net of fees over rolling 10 year periods. Fund Managers: Four fund managers have been appointed; BlackRock Private Equity Partners, HgCapital, Pantheon Investments and HarbourVest Partners. Property 10.0% Investment Objective: To outperform the IPD All Balanced Funds Weighted Average index by +1% p.a. gross of fees over rolling 3 year periods. Fund Managers: BlackRock and Aberdeen (historic European property allocation) 4

5 Protection Section Asset Class Target Weight Details Asset Back Securities 13.0% Investment Objective: To outperform 3 Month LIBOR by +2% p.a. Fund Manager: Insight Absolute 9.5% Investment Objective: To outperform 3 Month LIBOR by +2% p.a. Return Bond Investments Fund Manager: Insight Loans 6.0% Investment Objective: To outperform 3 Month LIBOR by +5% p.a. Cash/Money Market Fund Manager: Babson 9.5% Investment Objective: To outperform 7 day LIBID by +0.5% p.a. gross of fees. Fund Manager: BlackRock Asset Swapped Gilts 25.0% Investment Objective: to outperform 3 Month LIBOR Fund Manager: The asset swapped gilts were implemented by BlackRock on behalf of the Trustee. Swap Overlay n/a Investment Objective: To partially hedge the Plan against changes in long-term interest rate and inflation expectations which affect the present value of the Plan's expected future liabilities. Fund Manager: The swaps were implemented by BlackRock on behalf of the Trustee. BlackRock now manage the Plan's collateral payments. The interest rate and inflation hedges use the umbrella agreements that BlackRock has in place with a range of counterparties. The Plan s interest rate and inflation swap overlay has been implemented through a portfolio of fixed interest and RPI swaps of various maturities. The swap portfolio is not designed to achieve a profit for the Plan. Instead, it has been implemented to try and reduce the volatility of the Plan s overall funding level through time. Movements in long-term interest rates and inflation expectations affect the present value of the Plan s expected future liabilities. The swap overlay partially hedges the Plan against these movements. The Bank of America Merrill Lynch UK Pension Plan Global Equity Active Fund is a unitised pooled vehicle established and administered by Fidelity on behalf of the Trustee. The Trustee has appointed Bank of New York Mellon as custodian of the Plan s segregated investments. 5

6 Defined Contribution Section 1. Investment Objective The Trustee is responsible for providing an appropriate range of investment options to members. Its key aim is to provide a range of investments that are suitable for meeting members' long and short-term investment objectives. It has taken into account members' circumstances, in particular the range of members' attitudes to risk and term to retirement. 2. Strategy As of the beginning of 2013 the pension arrangements of legacy Merrill Lynch and legacy Bank of America employees were harmonised. As part of this harmonisation, the DC Section of the Bank of America Merrill Lynch UK Pension Plan was chosen as the scheme within which Bank of America Merrill Lynch employees will accrue their future benefits. Initially the investment options of the Bank of America UK Pension Plan were replicated within the DC section of the Bank of America Merrill Lynch UK Pension Plan, while the Trustee undertook a thorough review of the of the investment options that should be made available to members of the new combined Plan. The Trustee's policy is to provide suitable information for members so that they can make appropriate investment decisions. The range of funds was chosen by the Trustee after taking expert advice from the Trustee's investment advisers. In choosing the Plan's investment options, it is the Trustee's policy to consider: A full range of asset classes. The suitability of each asset class for a defined contribution plan. The need for appropriate diversification of asset classes. The suitability of the possible styles of investment management and the need for manager diversification. In addition the Trustee will consider the characteristics of various member types or groups and the potential differences between these in relation to attitude to risk over the period of their membership of the Plan. The Trustee expects the long-term return on the investment options that invest predominantly in equities to exceed price inflation and general salary growth. The long term returns on the bond and cash options are expected to be lower than returns on predominantly equity options. However, bond funds have the potential to broadly offset changes in the price of annuities, giving some protection to the amount of pension that can be secured by members closer to retirement. Cash funds will provide protection against changes in short-term capital values. The review concluded that the investment strategy of the defined contribution section of the Plan should offer a number of freestyle and lifestyle options. The Trustee does 6

7 not allow members to have simultaneous investments in both freestyle and lifestyle strategies. A member must invest solely either in freestyle options or in one of the lifestyle options Freestyle options Freestyle allows the member to choose how their money is invested from a range of different funds. The Trustee has used multiple managers in active funds to reduce manager risk and with reference to the complementary nature of manager styles where appropriate. The available freestyle options are as follows: Freestyle - Equities (Active) Fund name Benchmark Index Performance target Underlying Fund Emerging Markets Equity Active Global Equity Active UK Equity Active MSCI Emerging Markets Index MSCI World Index (net dividends reinvested) FTSE All Share Index To out perform the benchmark after fund fees and expenses To out perform the benchmark after fund fees and expenses To out perform the benchmark after fund fees and expenses 50% Lazard Emerging Markets 50% Schroder Global Emerging Markets 33.34% Sands Global 33.33% Schroder QEP Global Active Value 33.33% Veritas Global Focus 33.34% BlackRock DC Optimum 33.33% Jupiter UK Growth 33.33% Lindsell Train UK Equity Freestyle - Equities (Passive) Fund name Benchmark Index Performance target Underlying Fund Asia Pacific (ex-japan) Equity Passive FTSE All World Developed Asia Pacific Ex-Japan Index Pacific Rim Equity Index Ethical Global Equity Passive FTSE 4Good Global Equity Index 100% L&G Ethical Global Equity Index European (ex-uk) Equity Passive FTSE All World Developed Europe ex-uk Index Japanese Equity Passive FTSE All World Japan Index North American Equity Passive FTSE All World USA Index UK Equity Passive FTSE All Share Index World (ex-uk) Equity Passive FTSE All World Developed ex-uk Index European Equity Index Japanese Equity Index US Equity Index UK Equity Index World (ex-uk) Equity Index Freestyle - Bonds and Gilts Fund name Benchmark Index Performance target Underlying Fund Pre-Retirement Gilt Index-Linked Gilts Composite of gilts and corporate bond indices as determined by the underlying manager FTSE UK Gilts Over 15 Years Index FTSE UK Gilts Index-Linked Over 5 Years Index UK Corporate Bond iboxx Non-Gilts Index 100% L&G Pre-Retirement Over 15 years UK Gilt Index Over 5 Years Index-Linked Gilt Corporate Bond All Stocks 7

8 Freestyle - Other Fund name Benchmark Index Performance target Underlying Fund 33.33% Barings Multi Asset Diversified Growth UK RPI + 2% To outperform UK RPI by 2% over the medium term 33.34% BlackRock DC Diversified Growth 33.33% Standard Life GARS Money Market 7 Day LIBID Rate UK Property Shariah AREF/IPD UK Quarterly Property Fund Index - Weighted Average Dow Jones Islamic Market Titans Index To out perform the benchmark after fund fees and expenses 100% BlackRock Sterling Liquidity 100% Threadneedle Pensions Property 100% HSBC Amanah 2.2. Lifestyle options In addition to providing a range of freestyle funds for members to invest in the Trustee decided to include three lifestyle options. The lifestyle options are: Tay, Thames and Severn. The lifestyle options are designed based on analysis of the demographics of the Plan s membership to provide a range of options offering members a choice of investment risk and potential for growth. These will be reviewed on an ongoing basis to ensure they remain appropriate for a broad range of the membership. These are designed using a retirement age that can be pre-selected by the member, otherwise a default age is used. It should be noted that the lifestyle options may be less suitable for members who retire earlier or later than their chosen or the Plan default age and/or who opt for income drawdown. The lifestyle options use a combination of the underlying funds in the table below which are selected from those used within the funds offered as part of the freestyle range: Lifestyle Funds Fund name Benchmark Index Performance target Underlying Fund Equity Lifestyle Fund Composite of UK, World and emerging market indices, weighted by the allocation of the corresponding funds To out perform the benchmark after fund fees and expenses 15% BlackRock DC Optimum 15% Jupiter UK Growth 15% Lindsell Train UK Equity 15% Sands Global 15% Schroder QEP Global Active Value 15% Veritas Global Focus 5% Lazard Emerging Markets 5% Schroder Global Emerging Markets 33.33% Barings Multi Asset Diversified Lifestyle Fund UK RPI + 2% To outperform UK RPI by 2% over the medium term 33.33% BlackRock DC Diversified Growth 33.34% Standard Life GARS 8

9 Pre-Retirement Lifestyle Fund Money Market Lifestyle Fund Composite of gilts and corporate bond indices as determined by the underlying manager 7 Day LIBID Rate 100% L&G Pre-Retirement 100% BlackRock Sterling Liquidity The Tay lifestyle option aims to achieve growth through exclusively diversified investments, which provide potential growth over the long term while reducing volatility when compared to fully investing in equities for members with more than 15 years to retirement. Within 15 years of a members target retirement date, the Member Account is gradually switched into bonds to further reduce volatility. This helps those planning to take their income in retirement in the form of an annuity to provide a closer match to pension annuity price changes. With in 3 years of a members target retirement date a proportion of the Member Account is also switched in to money market assets. The Thames lifestyle option aims to achieve growth through investing fully in equities for members with more than 20 years to retirement. Within 20 years of a members target retirement date this is moved in to diversified investments over a 12 year period. There is still the objective to achieve growth, but with the additional aim of reducing the volatility of being fully invested in equities. Within 10 years of a members target retirement date, the Member Account is gradually switched into bonds to further reduce volatility. This helps those planning to take their income in retirement in the form of an annuity to provide a closer match to pension annuity price changes. With in 3 years of a members target retirement date a proportion of the Member Account is also switched in to money market assets. The Thames Lifestyle option was selected as the default option for members who did not wish to make their own selection of funds. The Severn lifestyle option aims to achieve growth through investing fully in equities for members with more than 10 years to retirement. Within 10 years of a members target retirement date this equity investment is moved in to diversified investments still with the objective of achieving potential growth, but also to reduce volatility. Within 5 years of a members target retirement date, the Member Account is gradually switched into bonds to further reduce volatility. This helps those planning to take their income in retirement in the form of an annuity to provide a closer match to pension annuity price changes. With in 3 years of a members target retirement date a proportion of the Member Account is also switched in to money market assets. We have included charts in Appendix 1 showing the rate at which the lifestyle funds switch between asset classes. 3. Risk Measurement and Management The Trustee recognises the key risk is that members will have insufficient income in retirement or an income that does not meet their expectations. The Trustee considered this risk when setting the investment options and strategy for the Plan. The Trustee s policy in respect of risk measurement methods and risk management processes is set out below. 9

10 The Trustee considers the following sources of risk: Risk of not meeting the reasonable expectations of members, bearing in mind members contributions and fund choices. Risk of fund managers not meeting their objectives ( manager risk ). This risk is considered by the Trustee and its advisers both upon the initial appointment of the fund manager and on an ongoing basis thereafter. Risk of asset classes(s) not delivering the anticipated rate of return over the long term. Risk of the lifestyle options being unsuitable for the requirements of some members. The risk of fraud, poor advice or acts of negligence ( operational risk ). The Trustee has sought to minimise such risk by ensuring that all advisers and third party service providers are suitably qualified and experienced and that suitable liability and compensation clauses are included in all contracts for professional services received. Due to the complex and interrelated nature of these risks, the Trustee considers these risks in a qualitative rather than quantitative manner as part of each formal defined contribution strategy review. The Trustee undertakes, from time to time, surveys of members to ensure that a sufficient range of funds are offered to meet members needs. The Trustee s policy is to review the range of funds offered and the suitability of the lifestyle option at regular intervals. The Trustee measures risk in terms of the performance of the funds compared to the respective benchmarks on a quarterly basis. The Trustee also monitors any significant issues with the fund managers that may impact their ability to meet the performance targets set by the Trustee. 4. Implementation The Trustee has implemented the above investment strategy by offering members of the Plan a range of funds and lifestyle options via an investment only platform operated by Fidelity (Policy number INVE/MLDB/100157). The investment options available have been designed, following advice from the Plan's investment adviser, with the specific needs of members in mind. The funds have been structured as tailored portfolios and the Trustee retains the right to add, remove or replace fund managers within each of the tailored portfolios, as well as make changes to the asset allocation between the underlying funds, as and when required. The tailored portfolio structure ensures this is applied in an efficient manner for the benefit of all members invested in them. The allocation to each of the underlying fund managers within the tailored portfolios is set out in the earlier tables. These funds are formally rebalanced to the initial weightings on an annual basis. During the year the asset weighting of the funds within each portfolio are measured against tolerances agreed by the Trustee to ensure the funds are brought back to the expected allocations if they move beyond these tolerance thresholds. The rebalancing is monitored and executed by Fidelity. 10

11 Each of the tailored portfolios that have the word 'active' in their name invest in funds that are managed using an active management approach. This means that the underlying fund manager makes decisions on the appropriate asset mix and selection of the securities within their fund. Active management may result in periods of outperformance and underperformance of the investment benchmark. Each of the tailored portfolios that have the word 'passive' in their name invest in funds that are managed using an index tracking ( passive ) approach. This means that the underlying fund manager will hold all securities in line with the corresponding stock market index. Performance achieved should match closely the performance of the relevant investment markets as a whole. Members are provided with information on each of the tailored portfolios through individual fund factsheets that are provided by Fidelity and updated on a quarterly basis. 11

12 Appendix 1 Lifestyle table Tay % 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% at retirement Diversified Lifestyle Fund 0.62% Pre-Retirement Lifestyle Fund 0.18% Money Market Lifestyle Fund 0.15% Thames % 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Equity Lifestyle Fund 0.66% Diversified Lifestyle Fund 0.62% Pre-Retirement Lifestyle Fund 0.18% Money Market Lifestyle Fund 0.15% at retirement Severn % 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Equity Lifestyle Fund 0.66% Diversified Lifestyle Fund 0.62% Pre-Retirement Lifestyle Fund 0.18% Money Market Lifestyle Fund 0.15% at retirement 12

13 Defined Benefit and Defined Contribution Sections Implementation Aon Hewitt has been selected as investment adviser to the Trustee. They operate under an agreement to provide a service which ensures the Trustee is fully briefed to take decisions itself and to monitor those it delegates. Aon Hewitt are paid on a time cost basis for all the work they undertake for the Scheme although fixed fees may be negotiated by the Trustee for certain projects. This structure has been chosen to ensure that cost-effective, independent advice is received. The Trustee has delegated all day-to-day decisions about the investments that fall within each mandate, including the realisation of investments, to the relevant fund manager through a written contract. When choosing investments, the Trustee and the fund managers (to the extent delegated) are required to have regard to the criteria for investment set out in the Occupational Pension Schemes (Investment) Regulations 2005 (regulation 4). The managers duties also include: Taking into account social, environmental or ethical considerations in the selection, retention and realisation of investments. Voting and corporate governance in relation to the Plan's assets including taking into account the principles of the Financial Reporting Council's Stewardship Code. The Trustee periodically reviews the voting activity and statements on corporate governance issued by each of its equity fund managers. 13

14 Governance The Trustee is responsible for the investment of the Plan s assets. The Trustee takes some decisions itself and delegates others. When deciding which decisions to take itself and which to delegate, the Trustee has taken into account whether it has the appropriate training and expert advice in order to take an informed decision. The Trustee has established the following decision making structure: Trustee Monitor actual returns versus Plan investment objective. Appoint and monitor investment advisers, fund managers (including those within the Merrill Lynch private funds) and custodians. Set structures and processes for carrying out its role. Select and monitor planned asset allocation strategy. Make ongoing decisions relevant to the operational principles of the Plan s investment strategy. Select and review direct investments (see below). The Trustee has set up an administration and governance sub-committee to exercise powers in relation to the Plan's administration and governance. The powers delegated by the Trustee are documented in a terms of reference. Investment Adviser Advise on all aspects of the investment of the Plan assets, including implementation. Advise on this statement. Provide required training. Fund Managers Operate within the terms of this statement and their written contracts. Select individual investments with regard to their suitability and diversification. Advise Trustee on suitability of the indices in its benchmark. Part of Aon Hewitt's role as investment adviser is to evaluate equity managers as to their stewardship capabilities. This evaluation is provided to the Trustee as part of Aon Hewitt's standard manager monitoring service. The Pensions Act 1995 distinguishes between investments where the management is delegated to a fund manager under a written contract and those where a product is purchased directly, e.g. the purchase of an insurance policy or units in a pooled vehicle. The latter are known as direct investments. The Trustee s policy is to review its direct investments and to obtain written advice about them at regular intervals. These include vehicles available for members' DC contributions and AVCs. When deciding whether or not to make any new direct investments the Trustee will obtain written advice and consider whether future decisions about those investments should be delegated to the fund manager(s). The written advice will consider the issues set out in the Occupational Pension Schemes (Investment) Regulations 2005 and the principles contained in this statement. The regulations require all investments to be considered by the Trustee (or, to the extent delegated, by the fund managers) against the following criteria: 14

15 The best interests of the members and beneficiaries Security Quality Liquidity Profitability Nature and duration of liabilities Tradability on regulated markets Diversification Use of derivatives The Trustee s investment adviser has the knowledge and experience required under the Pensions Act The Trustee expects its fund managers to manage the assets delegated to them under the terms of their respective contracts and to give effect to the principles in this statement so far as is reasonably practicable. The majority of the Plan s fund managers are remunerated on an ad valorem fee basis. This means that the total fee is based on the total size of assets under management. The Plan s private equity fund managers and are remunerated on a performance-based fee scale. The level of remuneration paid to fund managers is reviewed at regular intervals by the Trustee against market rates to ensure the fund managers interests are aligned with those of the Plan. Fund managers pay commissions to third parties on many trades they undertake in the management of the Plan s assets and also incur other costs. The Trustee receives statements from its fund managers setting out these costs and reviews them from time to time with its investment adviser. This is to ensure that the costs incurred are commensurate with the goods and services received. The Trustee reviews its SIP at least every three years and immediately following any significant change in investment policy. The Trustee takes investment advice and consults with the sponsoring employer over any changes to the SIP. Dated: May