Pensions Fund Annual Report 2011-12 , item 18. PDF 4 MB

More documents

Recommendations

Info

F i n a n c i a l s t a t e m e n t s 24 Valuation of financial instruments carried at fair value The fund is required to classify its investments into three levels of a fair value hierachy according to the quality and reliability of information used to determine fair values. The three levels are detailed below. Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. Examples of financial instruments classified as Level 1 are quoted equities and fixed-interest securities. Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). An example of a Level 2 financial instrument is a pooled property fund as they are not traded in a market that is considered to be active and valuation techniques used to determine fair value use inputs based significantly on observable market data. Level 3 - Inputs for assets or liabilities that are not based on observable market data (unobservable inputs). Such instruments would include private equity and hedge funds (fund of funds), which are valued using valuation techniques that require significant judgement. The following table provides an analysis of the financial assets and liabilities of the fund by the three levels based on the level at which the fair value is observable. 31 March 2012 Level 1 Level 2 Level 3 Total £ 000 £ 000 £ 000 £ 000 Financial assets Fair value through profit and loss 2,183,834 29,539 179,901 2,393,274 Loans and receivables 93,311 0 0 93,311 Financial liabilities Fair value through profit and loss (3,358) 0 0 (3,358) Loans and receivables 0 0 0 0 Financial liabilities at amortised cost (10,456) 0 0 (10,456) 2,263,331 29,539 179,901 2,472,771 The previous years data is given below. 31 March 2011 Level 1 Level 2 Level 3 Total £ 000 £ 000 £ 000 £ 000 assetsDRAFT DRAFT Financial assets Fair value through profit and loss 2,189,539 24,292 132,027 2,345,858 Loans and receivables 129,933 0 0 129,933 DRAFT Financial liabilities Fair value through profit and loss (5,182) (6,984) 0 (12,166) Loans and receivables 0 0 0 0 Financial liabilities at amortised cost (9,497) 0 0 (9,497) 2,304,793 17,308 132,027 2,454,128 48
F i n a n c i a l s t a t e m e n t s 25 Nature and extent of risks arising from financial instruments The primary objective of the fund is to ensure that sufficient funds are available to meet all pension liabilities as they fall due for payment. The fund aims to do this by adopting an investment strategy that balances risk and return. The majority of the fund is invested through external managers. Each has an investment management agreement in place which sets out the relevant benchmark, performance target, asset allocation ranges and any restrictions. Risks are managed through diversification; by investing across asset classes, across managers and styles and ensuring managers maintain a diversified portfolio of investments within their mandate. The majority of the fund is invested in liquid investments. Market risk Market risk is the risk of loss from fluctuations in market prices, interest rates or currencies. The fund is exposed through its investment portfolio to all these market risks. Market risk also represents the risk that the value of a financial instrument will fluctuate caused by factors other than those mentioned above. These changes can be caused by factors specific to the individual instrument or those affecting the market in general and will affect each asset class the pension fund holds in different ways. A high proportion of the fund is invested in equities and therefore fluctuation in equity prices is the largest risk the fund faces. The fund relies on the fact that it has positive cash flows and a strong employer covenant to underpin its investment in equities and maintains its high exposure to equities over the long term as they are expected to deliver higher returns. The fund manages market risk through a diversified investment portfolio and instructing individual investment managers to diversify investments within their own individual portfolios in line with their investment strategies and mandate guidelines. The Pensions Panel and Pensions Committee regularly receive reports which monitor such risks. Market risk – sensitivity analysis DRAFT In consultation with the fund’s Investment Advisor the following movements in market prices have been judged as possible for the 2012/2013 financial year. The potential market movements figures also allow for interest rate and currency rate fluctuations. Asset type Potential market movements UK equity 18% Overseas equity 21% Private equity 29% UK fixed-interest bonds 13% UK Index-linked bonds 10% Corporate bonds 12% Cash 1% Property 14% Alternatives 12% This movement in the market prices would have increased or decreased the net assets at 31 March 2012 to the amounts shown on the next page. 49
Page 1 and 2: Staffordshire Pension Fund Annual r
Page 3 and 4: Contents 2 3 9 18 27 53 55 Chairman
Page 5 and 6: F u n d m a n a g e m e n t Governa
Page 7 and 8: 7 F u n d m a n a g e m e n t Pensi
Page 9 and 10: F u n d m a n a g e m e n t Adminis
Page 11 and 12: I n v e s t m e n t r e p o r t DRA
Page 13 and 14: I n v e s t m e n t r e p o r t DRA
Page 15 and 16: I n v e s t m e n t r e p o r t Inv
Page 17 and 18: I n v e s t m e n t r e p o r t Inv
Page 19 and 20: I n v e s t m e n t r e p o r t Cur
Page 21 and 22: F u n d m e m b e r s h i p Benefit
Page 23 and 24: F u n d m e m b e r s h i p aT New
Page 25 and 26: F u n d m e m b e r s h i p Benchma
Page 27 and 28: F u n d m e m b e r s h i p Custome
Page 29 and 30: Financial statements Staffordshire
Page 31 and 32: F i n a n c i a l s t a t e m e n t
Page 35 and 36: notesDRAFT DRAFT Assumptions The as
Page 37 and 38: Financial statements F i n a n c i
Page 49: F i n a n c i a l s t a t e m e n t
Page 55 and 56: G l o s s a r y Glossary of terms A
Page 57 and 58: C o n t a c t s If you have any que

Pensions Fund Annual Report 2011-12 , item 18. PDF 4 MB

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?