annual report and accounts of the tayside superannuation

2004 - 2005

Designed by Dundee City Council, Public Relations FA/12/05

For further information please contact: Depute Chief Executive (Finance)

Tayside HouseCrichton Street

Dundee DD1 3RF

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Welcome to the Annual Report and Accounts produced by Dundee City Council for the Tayside Super-annuation Funds.

The Tayside Superannuation Fund value at 31 March 2005 of £1,123.0m reflected an increase of £171.8m or 18.1% on the equivalent value at 31 March 2004. The Tayside Transport Superannuation Fund value at 31 March 2005 of £34.9m reflected an increase of £1.6m or 4.9% on the equivalent figure at 31 March 2004. The overall performance of world stock markets showed a significant recovery during 2004/05 although it should be remembered that the investment of the Fund assets is a long term strategy.

The Funds are managed on a fully discretionary basis by five external Fund Managers and the combined performance for the 12 month period to 31 March 2005 was very positive in absolute terms, although slightly below the benchmark target set. The performance of each Fund Manager is monitored on a continuous basis and reported to the City Council’s Superannuation Sub-Committee on a quarterly basis. The senior officers of the City Council responsible for the overall management of the Superannuation Funds also have quarterly meetings with each of the Fund Managers where their performance, both in investment terms and more generally on matters such as administration, is rigorously scrutinised.

In respect of Pension Fund Administration, the number of contributing members continued to grow during the year, and by 31 March 2005 there were over 18,000 public sector employees contributing to the Funds. The number of pensioners or relatives of ex-contributors who were in receipt of a pension from the Funds in 2004/05 also grew and by 31 March 2005 stood at just over 10,000.

I would wish to acknowledge the efforts of Dundee City Council’s Pension Section headed by Clive Ross and Bob Hassall for the diligent and courteous manner in which they look after the pen-sion needs of over 34,000 Tayside Superannuation Fund contributors, pensioners and deferred pensioners. Further, I would like to thank all the Trustees of the Superannuation Sub-Committee and officers of the City Council Finance Department for their effort and assistance in managing the Tayside Superannuation Funds and, in particular, the Finance Convener, George Regan, Sandy Flight, Janice Logan, Helen Hepburn, Brian Fleming and Marjory Stewart of the City Council’s Finance Department.

David K Dorward CPFADepute Chief Executive (Finance)

Dundee City Council

Annual Report and Accounts of the Superannuation Funds

Financial Year to 31 March 2005

Foreword by Depute Chief Executive (Finance)

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Contents

Introduction .............................................................................. 3

Members and Advisors ............................................................. 4

Fund Administration ................................................................. 5

Statement of Investment Principles (Main Fund) ........................ 7

Statement of Investment Principles (Transport Fund) ................. �3

Main Fund Accounts ................................................................ �8

Transport Fund Accounts .......................................................... �9

Statement of Accounting Policies ............................................. �0

Valuation and Distribution of Assets ........................................ ��

Investment Performance Report ............................................... �4

Principal Equity Holdings (as at 31 March 2005) ..................... �6

Appendices .............................................................................. �7

Annual Report and Accounts of the Superannuation Funds 2004 - 2005 3

Dundee City CouncilSuperannuation Funds

Introduction

Dundee City Council is the administering authority for both the Tayside Superannuation Fund (Main Fund) and the Tayside Transport Superannuation Fund (Transport Fund). The scheme covering these Funds is statutory, approved by the Inland Revenue and contracted out of S2P (the State Second Pension).

The Scheme is a “defined benefit scheme”. This means that the benefits to which members and their spouses are entitled are determined by final pensionable pay and pensionable service.

The Tayside Superannuation Fund is maintained for the benefit of its membership (including existing and deferred pensioners). This comprises the majority of Local Government employees within Dundee City Council, Perth and Kinross Council and Angus Council as well as 40 other “scheduled bodies” and “admitted bodies” (see appendix A). Teachers are not included in the Scheme as they have a separate, nationally established, statutory arrangement.

The Tayside Transport Superannuation Fund

As a result of the 1985 Transport Act, the employees of the former Dundee City Bus Unit which formed part of Tayside Regional Council’s Roads and Transport Department were transferred to a new company, Tayside Public Transport Company Ltd. A separate Superannuation Fund for those transferred employees was set up on 26 October 1986.

During 1991/92 Tayside Public Transport Company Ltd was subject to an employee buy-out. Any employees in post at the time of the buy-out may remain in the Fund, however, any new employees are not eligible for entry into the Fund.

Tayside Public Transport Company Limited was bought out by West Midlands Travel on 22 February 1997 and renamed as Travel Dundee, but this had no effect whatsoever on the Fund.

Annual Report and Accounts of the Superannuation Funds 2004 - 20054

Members and Advisors

Superannuation Investment Sub-Committee

Dundee City Council is the administering authority for the Funds. This responsibility is delegated through the Council’s Finance Committee to the Superannuation Investment Sub-Committee. Membership of the Sub-Committee during 2004/05 is as noted below:

Councillors:Cllr George Regan (Convener)Cllr Joe Morrow (Vice Convener)Bailie Charles FarquharCllr William SawersCllr Nigel DonCllr Joe FitzpatrickBailie Neil Powrie

Representatives (non voting)Mr W Gowans, Tayside Full-time trade Unions Officers GroupMr R MacKay (UNISON)Mr R McKelvie (TGWU representing Travel Dundee Ltd)

Fund Managers

Baillie Gifford & Co (Appointed November 1992)Fidelity Pension Management (Appointed November 1997)Schroder Property Investment Management (Appointed July 1997)Goldman Sachs (Appointed July 2003)Alliance Bernstein (Appointed July 2003)

Investment Advisers

Hymans Robertson

Actuaries

Punter Southall (Appointed July 2004)

Custodian

Northern Trust (Appointed 1 April 2002)

Auditors

Audit Scotland

Corporate Governance Advisors

Pension & Investment Research Consultants Limited (PIRC)

Performance Measurement

Northern Trust


Fund Administration

Membership

The Local Government Pension Scheme is voluntary and is open to all employees of the Scheduled and Admitted Bodies (see Appendix A).

Membership of the Tayside Funds at 31 March 2005 was:

Main Transport Total Fund Fund Fund Contributing Members 18,550 136 18,686Pensioners 9,777 399 10,176Deferred Pensioners 5,094 95 5,189 33,421 630 34,051

Membership Funding

The Funds are financed by the contributions made by members and their employers as well as income earned from the investment of the Funds’ monies.

The contribution rates for 2004/2005 were as follows

% of Basic Pay Main Fund Transport Fund Employees Employers Employer Manual Workers Pre 01.04.98 5.0% 13.25% 9.75%All Other Employees 6.0% 15.9% 11.7%

The employees’ contribution levels (as a percentage of pensionable pay) are fixed, whereas the employers’ contribution levels are reviewed every three years by the Funds’ actuaries as part of their actuarial valuation of the Funds. If the actuaries believe that a surplus is likely to materialise they will recommend a reduction in the employers’ contribution rate and if they believe a deficit is likely to materialise they will recommend an increase in the employers’ contribution rate.

Hymans Robertson carried out an actuarial valuation as at March 2002. The result of the valuation for the two Funds were as follows:

Main Fund Transport Fund Actuarial Value of Assets £927.0m £36.2mActuarial Value as a percentage of Accrued Liabilities 97% 107%

Employers’ Contributions as a Percentageof Employees’ Contributions

Financial Year Main Fund Transport Fund

2003/2004 250% 150% 2004/2005 265% 195%2005/2006 275% 240%


The common rate of contribution is the rate, which, in addition to the accumulated assets and contributions paid by members is sufficient to meet 100% of the liabilities of the Fund. This rate takes into account the surplus at 31st March 2002. The deficit is spread over the average remaining working lifetime of the existing members (approximately 12 years).

The Main Fund contribution rates following the 31st March 2002 valuation were calculated using the projected unit actuarial method.

The Transport Fund contribution rates following the 31st March 2002 valuation were calculated using the attained age actuarial method

The main actuarial assumptions were as follows:

Rate of return on investments - Equities 6.5% per annum - Bonds 5.2% per annumRate of general pay increases 4.1% per annumRate of increases to pension in payment 2.6% per annumValuation of assets market related

Additional Contributions

Under Inland Revenue rules, scheme members are permitted to make contributions towards retirement and death in service benefits in addition to those, which they are required to make as members of the Local Government Pension Scheme. These contributions are known as AVCs and are treated separately from the scheme’s assets under arrangement with the Standard Life Assurance Company. They are not recorded in the accounts of the Tayside Funds since the AVC scheme works on defined contribution basis (ie benefit eventually derived will depend upon the amount of the contributions made, the performance of the investments made with these monies and the annuity rates at the point of retiral).

Pension Increases

Pension and deferred pensions are increased every year under the Pension (Increase) Act 1971 in line with movements in the Retail Prices Index, which reflects general inflation. Recent increases under this provision are:

2001 3.3%2002 1.7%2003 1.7%2004 2.8%2005 3.1%


Dundee City CouncilTayside Superannuation Fund

Statement of Investment Principles

1 Introduction The Local Government Pension Scheme (Management and Investment of Funds) (Scotland)

Regulations 1998 require administering authorities to prepare, maintain and publish a written Statement of Investment Principles. A Statement of Investment Principles should cover the policy on:

• The types of investments to be held • The balance between different types of investments • Risk • The expected return on investments • The realisation of investments • The extent (if at all) to which social, environmental or ethical considerations are taken

into account in the selection, retention and realisation of investments • The exercise of the rights (including voting rights) attaching to investments • The extent of compliance with the ten principles of investment practice set out in “CIPFA Pensions Panel Principles for Investment Decision Making in Local

Government Pension Scheme in the United Kingdom.”

2 Administration

Tayside Superannuation Fund is administered by Dundee City Council in accordance with Section 24 of its Financial Regulations. Investment policy and decisions are delegated to the Superannuation Investment Sub-Committee of the Finance Committee which comprises seven elected members and three observer members who represent Scheme members. Decisions are made based on advice from Council Officers and professional external advisers. The Sub-Committee meets quarterly.

3 Remit of Sub-Committee

The full remit of the Sub-Committee is shown at Appendix B.

4 Objective of the Fund

The primary objective of the Tayside Superannuation Fund is to provide for scheme members pension and lump sum benefits on their retirement or for their dependants on death before or after retirement, on a defined benefits basis. There is limited discretion to vary these benefits.

The investment principles of the Fund have been set to ensure that the Fund meets its objective.

This document outlines the investment principles governing the investment policy of the Fund.

5 Investment Objective

The Fund’s investment policy will be directed to maintaining a fully funded scheme and where practical a stable employers contribution rate. The latest actuarial valuation of the Fund is shown in Appendix A.

The investment objective is to maximise the overall return whilst maintaining a prudent and balanced investment exposure.


6 Types of investment to be held

To achieve its investment objectives, the Fund will utilise the following different types of investments:

Equities, Managed Funds, Unit Trusts, Investment Trusts, Open Ended Investment Companies, Bonds, Underwriting, Property, Stock Lending, Cash, Commission Recapture.

Derivatives may be used for efficient portfolio management or the reduction of risk.

7 Investment Managers

The Fund will employ Investment Managers who are judged most suitable to manage the assets of the Fund.

The current Managers and their targets are as follows:

Manager Performance Target (on rolling 3 year basis)

Fidelity Investments (Multi Asset 29%) Specific Benchmark + 1.5% pa (gross of fees) Baillie Gifford (Global Equity 25%) Specific Benchmark + 1.5% pa (gross of fees) Schroder Property Management (9%) HSBC IPD Pooled Property Median + 0.5% pa Goldman Sachs (Bonds 12%) Specific Benchmark + 0.5% pa (net of fees) Alliance Bernstein (Global Equity 25%) Specific Benchmark + 1.5 to 2% pa (net of fees)

These have been set to ensure a prudent and balanced investment exposure.

8 Advisers

Investment Consultant Hymans Robertson Corporate Governance Pensions Investment Research Consultants Ltd (PIRC) Actuarial Punter Southall

9 Performance Measurement

Quarterly and Annual performance figures are provided by Northern Trust and considered by the Sub-Committee.

10 Custodian

Northern Trust is the sole custodian for the Fund’s assets.

11 Auditors

Audit Scotland.

12 Balance between different types of investments

A target has been agreed with each Manager which gives the Manager the balance between different types of investments. These provide an efficient balance between risk and return. These are detailed in Section 5.

The Investment Managers will be given full discretion over the choice of individual stocks

and are expected to maintain a diversified portfolio.

13 Risk

The Fund will seek to control risk through proper diversification of investments and Investment Managers.


14 Expected Return

Investment Managers will be held accountable for their performance through a regime of performance measurement against targets.

The Benchmark and performance target set for each Manager are intended to ensure that the total fund investment returns achieved are in excess of that assumed in the Actuarial Valuation.

15 Realisation of Assets

The Fund will hold sufficient cash to meet the likely benefit payments. Additionally, the Fund will hold sufficient assets in liquid or readily realisable form to meet any unexpected cashflow requirements so that the realisation of assets will not disrupt the Fund’s overall policy. The Managers may determine whether or not to sell particular investments and which investments to sell to raise cash as and when required for meeting cash requirements notified to the Manager.

16 Socially Responsible Investment (Sri)

The Fund recognises that some social, environmental and ethical concerns may, over time, have an impact on the value of the shares of those companies in which it invests. It has discussed with its Investment Managers the extent to which they take such issues into account, so far as they are able, in making investment decisions on behalf of the Fund. The Fund will work with its Investment Managers to develop processes whereby the Fund will engage with companies where its Managers identify shortcomings of a social, envi-ronmental or ethical nature that might adversely affect the value of the company’s shares in the UK with a view to improving company practice.

The Fund has a separate SRI policy with which Managers must comply. Reports on this are considered by the Sub-Committee every six months.

17 Corporate Governance

The Fund will vote through its Fund Managers on all UK security holdings in accordance with the recommendations of its voting consultants. Where there are no specific recom-mendations in respect of quoted UK security holdings, the Managers will be advised to use its best endeavours to vote in accordance with its voting guidelines.

The Fund is extending its current approach to Corporate Governance in the UK to include major overseas markets.

The Fund has appointed PIRC to advise it on Corporate Governance Policy.

18 Compliance

The Superannuation Investment Sub-Committee will take advice on general investment matters from the Depute Chief Executive (Finance) and external advisers as appropriate.

The Superannuation Investment Sub-Committee will review this Statement annually or sooner if there is a change in policy in any of the areas covered.

Annual Report and Accounts of the Superannuation Funds 2004 - 2005�0

19 Cipfa Pension Panel Principles for Investment Decision Making in the Local Government Pension Scheme in the Uk

The Fund adheres fully to the ten principles and CIPFA’s measure of compliance.

i Effective decision-making ii Clear objectives iii Focus on assets allocation iv Expert advice v Explicit mandates vi Activism vii Appropriate benchmarks viii Performance measurement ix Transparency x Regular reporting

Annual Report and Accounts of the Superannuation Funds 2004 - 2005 ��

APPENDIX A

Summary of Actuarial Valuation as at 31 March 2002

Past Service Liabilities £m Active Members 517.6Deferred Pensioners 59.6No 2 Fund Recharges 3.4Pensioners 375.6 956.2

Assets 927.0 Deficit (29.2) Funding Level 97%

Employer Contribution Rates % of Employees Contributions Future Service Funding Rate 240% Past Service Adjustment 25% Total Contribution Rate 265%

Annual Report and Accounts of the Superannuation Funds 2004 - 2005��

APPENDIX B

Remit of Superannuation Investment Sub-Committee

The supervision and control of the operations and investments of the Tayside Superannuation Fund and Tayside Transport Superannuation Fund and any other fund of a similar nature set up by the Council in pursuance of Statutory powers including:-

i monitoring investment performance of Fund managers.

ii the review of investments and managers.

iii the review of asset allocation in light of the Funds’ maturity profiles.

iv the investment of new funds at the disposal of the Council.

v ensuring appropriate custody arrangements are made for all Funds’ assets.

vi approving the Funds’ Statement of Investment Principles at least annually and ensuring ongoing compliance with this.

vii monitoring the managers’ implementation of the Funds’ Socially Responsible Investment policy.

viii approving and reviewing the Funds’ annual Business Plan.

ix arranging the appointment of external advisers as required.

x considering any other matters which may affect the management or value of the Funds’ investments.

Annual Report and Accounts of the Superannuation Funds 2004 - 2005 �3

Dundee City CouncilTayside Transport Superannuation Fund

Statement of Investment Principles

1 Introduction

The Local Government Pension Scheme (Management and Investment of Funds) (Scotland) Regulations 1998 require administering authorities to prepare, maintain and publish a written Statement of Investment Principles. A Statement of Investment Principles should cover the policy on:

• The types of investments to be held• The balance between different types of investments• Risk• The expected return on investments• The realisation of investments• The extent (if at all) to which social, environmental or ethical considerations are taken into account in the selection, retention and realisation of investments• The exercise of the rights (including voting rights) attaching to investments• The extent of compliance with the ten principles of investment practice set out in “CIPFA Pensions Panel Principles for Investment Decision Making in Local Government Pension Scheme in the United Kingdom” and reasons for any non-compliance.

2 Administration

Tayside Transport Superannuation Fund is administered by Dundee City Council in accordance with Section 24 of its Financial Regulations. Investment policy and decisions are delegated to the Superannuation Investment Sub-Committee of the Finance Committee which comprises seven elected members and three observer members who represent scheme members. Decisions are made based on advice from Council Officers and professional external advisers. The Sub-Committee meets quarterly.

3 Remit of Sub-Committee

The full remit of the Sub-Committee is shown at Appendix B.

4 Objective of the Fund

The primary objective of the Tayside Transport Superannuation Fund is to provide for scheme members pension and lump sum benefits on their retirement or for their dependants on death before or after retirement, on a defined benefits basis. There is limited discretion to vary these benefits.

The investment principles of the Fund have been set to ensure that the Fund meets its objective.

This document outlines the investment principles governing the investment policy of the Fund.

5 Investment Objective

The Fund’s investment policy will be directed to maintaining a fully funded scheme and where practical a stable employers contribution rate. The latest actuarial valuation of the Fund is shown in Appendix A.

The investment objective is to maximise the overall return whilst maintaining a prudent and balanced investment exposure.


6 Types of Investment to be held

To achieve its investment objectives, the Fund will utilise the following different types of investments:

Equities, Managed Funds, Unit Trusts, Investment Trusts, Open Ended Investment Companies, Bonds, Underwriting, Property, Stock Lending, Cash, Commission Recapture.

Derivatives may be used for efficient portfolio management or the reduction of risk.

7 Investment Managers

The Fund will employ Investment Managers who are judged most suitable to manage the assets of the Fund.

The current Managers and their targets are as follows:

Manager Performance Target (on rolling 3 year basis) Baillie Gifford (Global Equity 50%) Specific benchmark +1.5% pa (gross of fees) Goldman Sachs (Bonds 40%) Specific benchmark +0.5% pa (net of fees) Schroder Property (10%) HSBC/IPD Pooled Property Median + 0.5% pa

These have been set to ensure a prudent and balanced investment exposure.

8 Advisers

Investment Consultant Hymans Robertson Corporate Governance Pensions Investment Research Consultants Ltd (PIRC) Actuarial Punter Southall

9 Performance Measurement

Quarterly and Annual performance figures are provided by Northern Trust and considered by the Sub-Committee.

10 Custodian

Northern Trust is the sole custodian for the Fund’s assets.

11 Auditors

Audit Scotland.

12 Balance between different types of Investments

A target has been agreed with each Manager which gives the Manager the balance between different types of investments. These provide an efficient balance between risk and return. This is detailed in Section 5.

The Investment Managers will be given full discretion over the choice of individual stocks and are expected to maintain a diversified portfolio.

13 Risk

The Fund will seek to control risk through proper diversification of investments.

14 Expected Return

The Investment Manager will be held accountable for performance through a regime of performance measurement against targets.

The Benchmark and performance target set for the Managers are intended to ensure that the total fund investment returns achieved are in excess of that assumed in the Actuarial Valuation.


15 Realisation of Assets

The Fund will hold sufficient cash to meet the likely benefit payments. Additionally, the Fund will hold sufficient assets in liquid or readily realisable form to meet any unexpected cashflow requirements so that the realisation of assets will not disrupt the Fund’s over all policy. The Manager may determine whether or not to sell particular investments and which investments to sell to raise cash as and when required for meeting cash requirements notified to the Manager.

16 Socially Responsible Investment (Sri)

The Fund recognises that some social, environmental and ethical concerns may, over time, have an impact on the value of the shares of those companies in which it invests. It has discussed with its Investment Managers the extent to which they take such issues into account, so far as they are able, in making investment decisions on behalf of the Fund. The Fund will work with its Investment Managers to develop processes whereby the Fund will engage with companies where its Managers identify shortcomings of a social, environmental or ethical nature that might adversely affect the value of the company’s shares in the UK with a view to improving company practice.

17 Corporate Governance

The Fund will vote through its Fund Managers on all UK security holdings in accordance with the recommendations of its voting consultants. Where there are no specific recommendations in respect of quoted UK security holdings, the Managers will be advised to use its best endeavours to vote in accordance with its voting guidelines.

The Fund is extending its current approach to Corporate Governance in the UK to include major overseas markets.

The Fund has appointed PIRC to advise it on Corporate Governance Policy.

18 Compliance

The Superannuation Investment Sub-Committee will take advice on general investment matters from the Depute Chief Executive (Finance) and external advisers as appropriate.

The Superannuation Investment Sub-Committee will review this Statement annually or sooner if there is a change in policy in any of the areas covered.

19 Cipfa Pension Panel Principles for Investment Decision Making in the Local Government Pension Scheme in the Uk

The Fund adheres fully to the ten principles and CIPFA’s measure of compliance.

i Effective decision-making ii Clear objectives iii Focus on assets allocation iv Expert advice v Explicit mandates vi Activism vii Appropriate benchmarks viii Performance measurement ix Transparency x Regular reporting


APPENDIX A

Summary of Actuarial Valuation as at 31 March 2002

Past Service Liabilities £m Active Members 11.0Deferred Pensioners 2.2 Main Fund Recharges (4.0)Pensioners 24.6 33.8

Assets 36.2 Surplus 2.4 Funding Level 107% Employer Contribution Rates % of Employees Contributions Future Service Funding Rate 490% Past Service Adjustment (250%) Total Contribution Rate 240%


APPENDIX B

Remit of Superannuation Investment Sub-Committee

The supervision and control of the operations and investments of the Tayside Superannuation Fund and Tayside Transport Superannuation Fund and any other fund of a similar nature set up by the Council in pursuance of Statutory powers including:-

i monitoring investment performance of Fund managers.

ii the review of investments and managers.

iii the review of asset allocation in light of the Funds’ maturity profiles.

iv the investment of new funds at the disposal of the Council.

v ensuring appropriate custody arrangements are made for all Funds’ assets.

vi approving the Funds’ Statement of Investment Principles at least annually and ensuring ongoing compliance with this.

vii monitoring the managers’ implementation of the Funds’ Socially Responsible Investment policy.

viii approving and reviewing the Funds’ annual Business Plan.

ix arranging the appointment of external advisers as required.

x considering any other matters which may affect the management or value of the Funds’ investments.


Tayside Superannuation Fund Accounts for Year to 31 March 2005

2003/2004 MAIN FUND ACCOUNT 2004/2005 £000 £000 £000 CONTRIBUTIONS AND BENEFITS Contributions receivable: 40,292 From employers 45,602 15,865 From employees 17,215 56,157 62,817 12,664 Transfers in 27,693 Benefits payable: (32,251) Pensions (33,774) (5,976) Lump Sums (5,483) (38,227) (39,257) Payments to and on account of Leavers: (278) Refunds of Contributions (290) (4,934) Transfers Out (8,201) (5,212) (8,491) (1,039) Administration Expenses (1,098) 24,343 Net Deposits from dealings with Members 41,664

RETURNS ON INVESTMENTS 28,454 Investment Income 34,072 143,742 Change in Market Value of Investments 99,303 (3,388) Investment Management Expenses (3,202) 168,808 Net Returns on Investments 130,173 193,151 NET INCREASE/(DECREASE) IN FUND DURING THE YEAR 171,837 758,059 OPENING NET ASSETS OF THE SCHEME 951.210 951,210 CLOSING NET ASSETS OF THE SCHEME 1,123,047

2004 NET ASSETS STATEMENT (AS AT 31 MARCH) 2005 £000 £000 £000 INVESTMENT ASSETS AT MARKET VALUE Listed Investments 367,145 - UK Equities 431,119 28,565 - UK Fixed Interest - Public Sector 24,306 22,967 - UK Fixed Interest - Other 12,588 28,689 - UK Index Linked 31,542 179,734 - Overseas Equities 219,206 - - Overseas Fixed Interest - Public Sector 14,096 17,755 - Overseas Fixed Interest - Other 36,950 Unlisted Investments - - UK Unit Trusts 9,582 71,400 - UK Open Ended Investment Companies 69,278 115,971 - Overseas Unit Trusts 124,238 85,448 - Property Unit Trusts 101,795 24,487 Cash Balances held by Managers 26,927 942,161 1,101,627 CURRENT ASSETS 9,145 Sundry Debtors 13,426 6,974 Revenue Deposits with Dundee City Council Loans Fund 11,614 16,119 25,040 LESS CURRENT LIABILITIES (7,070) Sundry Creditors (3,620) 9,049 NET CURRENT ASSETS 21,420 951,210 NET ASSETS 1,123,047

David K Dorward CPFA Depute Chief Executive (Finance) Dundee City Council 23 June 2005

This is an extract from the Council’s full Annual Accounts which have been audited by the Council’s auditor, Audit Scotland and given an Unqualified Audit Certificate.


Tayside Superannuation Fund Accounts for Year to 31 March 2005

2003/2004 TRANSPORT FUND ACCOUNT 2004/2005 £000 £000 £000 CONTRIBUTIONS AND BENEFITS Contributions receivable: 195 From employers 238 129 From employees 123 324 361 - Transfers in 7 Benefits payable: (1,501) Pensions (1,558) (75) Lump Sums (206) (1,576) (1,764) Payments to and on account of Leavers: (28) Transfers Out (25) (52) Administration Expenses (38) (1,332) Net Withdrawals from dealings with Members (1,459) RETURNS ON INVESTMENTS 1,342 Investment Income 1,166 3,877 Change in Market Value of Investments 1,986 (112) Investment Management Expenses (78) 5,107 Net Returns on Investments 3,074 3,775 NET INCREASE IN FUND DURING THE YEAR 1,615 29,508 OPENING NET ASSETS OF THE SCHEME 33,283 33,283 CLOSING NET ASSETS OF THE SCHEME 34,898

2004 NET ASSETS STATEMENT (AS AT 31 MARCH) 2005 £000 £000 £000 INVESTMENT ASSETS AT MARKET VALUE Listed Investments 9,378 - UK Equities 9,920 3,588 - UK Fixed Interest - Public Sector 2,650 2,910 - UK Fixed Interest - Other 1,385 3,603 - UK Index Linked 3,439 5,411 - Overseas Equities 5,961 2,230 - Overseas Fixed interest - Other 1,549 - - Overseas Fixed interest - Public Sector 4,028 Unlisted Investments - - UK Unit Trusts 520 468 - UK Open Ended Investment Companies - 912 - Overseas Open Ended Investment Company 795 3,468 - Property Unit Trusts 3,051 962 Cash Balances held by Managers 1,218 32,930 34,516 CURRENT ASSETS 331 Sundry Debtors 44 49 Revenue Deposits with Dundee City Council Loans Fund 369 380 413 LESS CURRENT LIABILITIES (27) Sundry Creditors (31) 353 NET CURRENT ASSETS 382 33,283 NET ASSETS 34,898

David K Dorward CPFA Depute Chief Executive (Finance) Dundee City Council 23 June 2005

This is an extract from the Council’s full Annual Accounts which have been audited by the Council’s auditor, Audit Scotland and given an Unqualified Audit Certificate.


Superannuation Funds AccountsStatement of Principal Accounting Policies

1 Basis of Preparation The accounts for the Funds have been prepared in accordance with Statement of Recommended Practice (SORP): “The Financial Reports of Pension Schemes” and the Code of Practice on Local Authority Accounting published by the Chartered Institute of Public Finance and Accountancy.

The accounts summarise the transactions and net assets of the Funds’ for the financial year to 31 March 2005. They do not take account of liabilities to pay pensions and other benefits in the future.

2 Investments

Investments are included at market values, which are assessed as follows:-

a UK quoted securities are valued at middle market prices at close of business on the last working day of the financial year.

b Overseas securities are valued at middle market prices from the relevant overseas stock exchanges converted at closing rates of exchange on the last day of the financial year.

c Unlisted investments, which comprise the Fund Manager’s Unit Trusts and Open Ended Investment Companies, are valued at middle market prices on the last working day of the financial year as supplied by the Fund Manager.

3 Debtors and Creditors

The accounts have been prepared on an accruals basis; that is income and expenditure is included as it is earned or incurred, not as it is received or paid, except for Transfer Values which are included when they are paid or received.

4 Investment Income

Income from fixed interest, index linked securities and other interest receivable is taken into account on an accruals basis. Income from all other Marketable Securities is taken into account on the date when stocks are quoted ex-dividend.

5 Foreign Currency

Income and expenditure arising from transaction denominated in a foreign currency should be translated into £ sterling at the exchange rate in operation on the date on which the transaction occurred. Where the transaction is to be settled at a contracted rate that rate should be used.

6 Investment Management Expenses

Investment Management expenses consist of direct charges in line with Management Agreements, Management Charges levied on pooled funds, overseas charges and non-recoverable withholding tax, less Brokers’ commission rebate.

7 Acquisition Cost

Any acquisition cost of investment, are included in the Book Cost of the investment.

Annual Report and Accounts of the Superannuation Funds 2004 - 2005 ��

Valuation and Distribution of Assets of the Superannuation Funds

Valuation

Main Fund Transport Fund 2003/04 2004/05 2003/04 2004/05 £m £m £m £m Value at Start of Year 758.1 951.2 29.5 33.3New Cash Inflow/(Outflow) 24.3 41.6 (1.3) (1.5)Appreciation/(Depreciation) during the year 168.8 130.2 5.1 3.1Value at End of Year 951.2 1,123.0 33.3 34.9

1,200.0

1,000.0

800.0

600.0

400.0

200.0Val

ue o

f Fu

nd £

M

2001 2002 2003 2004 2005

Year Ending 31st March 2005

Main Fund Five Year Movement

50.0

40.0

30.0

20.0

10.0Val

ue o

f Fu

nd £

M

2001 2002 2003 2004 2005

Year Ending 31st March 2005

Transport Fund Five Year Movement

Annual Report and Accounts of the Superannuation Funds 2004 - 2005��

Main Fund Valuation (£M) and Distribution (%) 31/03/04 31/03/05Sector £M % £M %UK Equities 367.0 38.6 431.1 38.4UK Fixed Interest - Public Sector 28.6 3.0 24.3 2.2UK Fixed Interest - Other 23.0 2.4 12.6 1.1UK Index Linked 28.7 3.0 31.5 2.8Overseas - Equities 179.7 18.9 219.2 19.5Overseas Fixed Interest - Public Sector 0.0 0.0 37.0 3.3Overseas Fixed Interest - Other 17.8 1.9 14.1 1.3 UK Unit Trusts 0.0 0.0 9.6 0.9UK Open Ended Investment Companies 71.4 7.5 69.3 6.2Overseas Open Ended Investment Companies 116.0 12.2 124.2 11.1Property Unit Trusts 85.4 9.0 101.8 9.1Cash Balance Held By Managers 24.5 2.6 26.9 2.4Net Current Assets 9.1 1.0 21.4 1.9 951.2 100.0 1,123.0 100.0

PER

CEN

TAG

E

CATEGORIES

Main Fund % Holding by Investment Category

45.0

40.0

35.0

30.0

25.0

20.0

15.0

10.0

5.0

Uk Equ

ities

Uk Fixe

d Int

eres

t - Pub

lic Se

ctor

Uk Fixe

d Int

eres

t - O

ther

Uk Ind

ex Li

nked

Overse

as Eq

uities

Overse

as Fi

xed I

nter

est -

Public

Secto

r

Overse

as Fi

xed I

nter

est -

Oth

er

Uk Unit

Trus

ts

Uk Ope

n End

ed In

vest

Compa

nies

Overse

as O

pen E

nded

Inve

st Com

panie

s

Prope

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nit Tr

usts

Cash B

alanc

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By M

anag

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Net Cur

rent

Asse

ts

2004

2005


Transport Fund Valuation (£M) and Distribution (%) 31/03/04 31/03/05Sector £M % £M %UK Equities 9.4 28.2 9.9 28.4 UK Fixed Interest - Public Sector 3.6 10.8 2.7 7.7 UK Fixed Interest - Other 2.9 8.7 1.4 4.0 UK Index Linked 3.6 10.8 3.4 9.7 Overseas - Equities 5.4 16.2 6.0 17.2 Overseas Fixed Interest - Other 2.2 6.6 1.5 4.3Overseas Fixed Interest - Public Sector 0.0 0.0 4.0 11.5 UK Unit Trusts 0.0 0.0 0.5 1.4 UK Open Ended Investment Companies 0.5 1.5 0.0 0.0 Overseas Open Ended Investment Companies 0.9 2.7 0.8 2.3 Property Unit Trusts 3.5 10.5 3.1 8.9 Cash Balance Held By Managers 0.9 2.7 1.2 3.4 Net Current Assets 0.4 1.2 0.4 1.1 33.3 100.0 34.9 100.0

PER

CEN

TAG

E

CATEGORIES

Transport Fund % Holding by Investment Category

30.0

25.0

20.0

15.0

10.0

5.0

Uk Equ

ities

Uk Fixe

d Int

eres

t - Pub

lic Se

ctor

Uk Fixe

d Int

eres

t - O

ther

Uk Ind

ex Li

nked

Overse

as - E

quiti

es

Overse

as Fi

xed I

nter

est -

Oth

er

Overse

as Fi

xed I

nter

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Public

Secto

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Uk Unit

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ts

Uk Ope

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Compa

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Overse

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Inve

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panie

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Prope

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Net Cur

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2004

2005


Investment Performance Report

Introduction

The proportion of the funds under management attributable to each Fund Manager at 31 March 2005 along with comparable 2004 figures was as follows:

Main Fund 2004 2005 £m % £m %

Baillie Gifford & Co 237.7 25.1 272.3 24.7Fidelity Pension Management 280.7 29.8 311.3 28.3Goldman Sachs 101.3 10.8 125.9 11.4Alliance Bernstein 235.1 24.9 284.2 25.8Schroder Properties Limited 88.4 9.4 107.9 9.8 942.2 100.0 1,101.6 100.0

Purchases during year 691.3 340.8 Sales during year 616.7 277.3

Transport Fund 2004 2005 £m % £m %

Schroder Properties Limited 3.6 10.9 3.2 9.3Goldman Sachs 12.7 38.6 13.8 40.0Baillie Gifford & Co 32.9 50.5 17.5 50.7 29.1 100.0 34.5 100.0

Purchases during year 32.5 18.0 Sales during year 32.2 15.2

Fidelity has a multi - asset mandate which include bonds and equities. Baillie Gifford and Alliance Bernstein have global equity mandates and Goldman Sachs solely manages bonds. Each manager has discretion within overall benchmarks set by the funds to determine the stocks and markets they invest in to attempt to meet their performance targets.

Market Value of Funds

The market value of investments can go down, as well as up. The total market value of the investments that are under external management was £1,221m Main Fund and £37m Transport Fund as at 31 July 2005.


Performance Returns

On a quarterly basis, the Council’s Superannuation Investment Sub-Committee convenes to review the performance of the investments made with the Funds. In that connection, the Council engages the Northern Trust to Produce performance measurement statistics for the Main Fund and the Transport Fund.

From 1 July 2003, the Funds introduced their own specific benchmark to assess performance.

In the financial year to 31 March 2005 the benchmark for the Main Fund was a return of 12.3% and for the Transport Fund 11.0%. Individual managers had their own benchmark within this.

New managers Alliance Bernstein and Goldman Sachs have not managed assets for the whole 3-year period so their figures cannot be included.

% R

ETU

RN

MANAGERS

Average Annual Return - 3 Years to 31 March 2005

20.0

10.0

Main

Fund

Fideli

ty

Baillie

Giff

ord

Schr

oder

Prope

rty

Allianc

e Ber

nstie

n

Goldman

Sach

s

Tran

spor

t Fun

d

Actual Returns

Benchmark

3.83.2

2.4 2.5

12.513.6 14.2 13.3

3.71.8

% R

ETU

RN

MANAGERS

Average Annual Return - Year to 31 March 2005

20.0

10.0

Main

Fund

Fideli

ty

Baillie

Giff

ord

Schr

oder

Prope

rty

Allianc

e Ber

nstie

n

Goldman

Sach

s

Tran

spor

t Fun

d

Actual Returns

Benchmark

13.012.3

8.710.5

12.513.6

19.613.3

11.311.0

18.6

13.6

8.0

6.2


MAIN FUND

Investment Value % of Total Activities (£) Fund

Vodafone Group PLC 37,517,352 4.9 Telecommunication ServicesBP PLC 34,628,874 4.5 Oil and GasGlaxo Smithkline PLC 22,761,842 3.0 PharmaceuticalsRoyal Bank of Scotland Group 25,068,259 3.3 BanksHSBC Holdings PLC 19,027,976 2.5 BanksBarclays 14,148,264 1.9 BanksBrit Amer Tobacco 11,564,055 1.5 TobaccoAviva 10,605,686 1.4 Life AssuranceBHP Billiton PLC 10,391,595 1.4 MiningBG Group 9,122,928 1.2 Oil and Gas 194,836,830 25.5

Principal Equity Holdings (Top Ten by Value)as at 31 March 2005

TRANSPORT FUND

Investment Value % of Total Activities (£) Fund Vodafone Group 1,180,278 4.9 Telecommunication ServicesBP 1,089,408 4.5 Oil and GasGlaxo Smithkline 716,077 3.0 Pharmaceuticals Royal Bank of Scotland Group 788,635 3.3 BanksHSBC Holdings PLC 698,611 2.5 BanksBarclays 445,098 1.9 BanksBrit Amer Tobacco 363,800 1.5 TobaccoAviva 333,650 1.4 Life AssuranceBHP Billiton PLC 326,915 1.4 MiningBG Group 287,003 1.2 Oil and Gas 6,129,472 25.5


APPENDIX A

Scheduled and Admitted Bodies as at 31 March 2005

Scheduled Bodies:

Angus CollegeAngus CouncilDundee City CouncilDundee CollegePerth & Kinross CouncilPerth CollegeTay Road Bridge Joint BoardTayside Contracts Tayside Fire Joint Board (Civilians)Tayside Joint Police Board (Civilians)Tayside Valuation Joint Board

Admitted Bodies:

Abertay Housing AssociationAngus & Dundee Tourist BoardAngus Digital Media TVBalnacraig SchoolCarnoustie Golf Links Carolina House TrustDorward HouseDovetail EnterprisesDuncan of Jordanstone College of ArtDundee Citizens’ Advice BureauDundee Contemporary Arts LtdDundee Science CentreDundee Society for Visually Impaired PeopleDundee Voluntary ActionForfar Day Care CommitteeForfarshire Society for the BlindMontrose Link TrustMontrose Port AuthorityPerth & Kinross Countryside TrustPerth & Kinross LeisurePerth & Kinross Society for the BlindPerth Citizens’ Advice BureauPerth Theatre Co LtdPerthshire Tourist BoardPitlochry Leisure CompanyScottish Commission for Regulation for CareScottish Social Services CouncilRossie SchoolTayside Business GatewayTravel DundeeUniversity of Abertay, DundeeUniversity of Abertay, Students Association

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APPENDIX B

Contacts

Contacts within Dundee City Council

Enquiries relating to investment matters should be addressed to:

Mr David Dorward, Depute Chief Executive (Finance) or Mr Sandy Flight, Chief Exchequer OfficerDundee City CouncilTayside House, Floor 428 Crichton StreetDundee DD1 3RF(01382) 433359 or 433196

Enquiries regarding individual benefits, contributions or pensions in payment or requests for further information should be addressed to:

Mr Clive RossPensions Administration ManagerDundee City Council5 Whitehall Crescent, Floor 3DundeeDD1 4AR(01382) 435470

Other Contacts

In the event of a dispute, members have recourse initially to an internal disputes procedures and if still not satisfied to the Scottish Minister and in addition may contact the following bodies.

The Occupational Pensions Advisory Service (OPAS)11 Belgrave RoadLondonSW1V 1RB

This organisation is available to assist members and beneficiaries of occupational pension schemes in connection with difficulties, which they have been unable to resolve with the trustees or administrators of their scheme.

For problems that cannot be settled through OPAS, a Pensions Ombudsman (based at the same address as OPAS) has been appointed. The Ombudsman has power to investigate and determine complaints or disputes of fact or law in relation to occupational pension schemes. The Ombudsman can only become involved after a dispute has been to the Scottish Ministers.

Registry of Occupational Pension SchemesPO Box 1NNNewcastle upon TyneNE99 1NN

The Registry acts as a central tracing agency to help individuals keep track of any benefits they may have in previous employers’ pension schemes. The Council’s Scheme and the names and addresses of all current and previous participating employers have been registered with the Registrar.

annual report and accounts of the tayside superannuation

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