Newsletter February 2002

rexampensionplan.co.uk

Newsletter February 2002

Rexam Pension Plan

Report to Members

A newsletter for members of the Rexam Pension Plan February 2002

Who said that pensions are boring

After a hectic year in the investment markets life

has certainly not been dull for the Plan Trustee.

This is the first annual Report to Members from

the Trustee of the Rexam Pension Plan. Many of

you will remember that the Plan commenced on 6

April 2000 following the merger of The Rexam

Employee Benefit Plans, The Rexam Executive

Benefit Plan, The Redfearn plc Pension Scheme

and The Redfearn plc Pension Scheme C.

INSIDE THIS ISSUE:

Financial Position

of the Plan

Myners Review

This issue of Report to Members includes a

summary of the Plan’s financial position at 5 April

2001 and also gives you some information about

how your money is invested. A recent

review into institutional investment in the UK, the

Myners Review, is detailed on page 5. You will also

find information about how the Plan is affected by

the Data Protection Act.

A lot of thought is put into the preparation of this

Report. I hope you will find it useful and that it

provides an insight to the complexity of managing

the Plan. The Trustee would appreciate any

comments you may have on the content and style

of this first issue of Report to Members. You can

pass any comments or suggestions in writing to

Sharon Thompsett at the address on page 6.

Data Protection

Peter Moxom

Chairman of Rexam Pension Trustees Limited.


Financial position of the Plan

Income

£000’s

Contributions Employers 5,865

Members 6,211

Transfers-in 244,461

Investment income 17,906

Other income 2,725

Expenditure

£000’s

Benefits payable 30,748

Payment to leavers 92,822

Life Assurance Premiums 106

Administration expenses 1,721

Investment management expenses 4,879

Total Income

£277,168,000

Total Expenditure

£130,276,000

Net Assets of the Plan at 6 April 2000 £930,735,000

Change in market value of investments £(56,568)

Difference between income and expenditure £146,892,000

Net Assets of the Plan at 5 April 2001 £1,021,059,000

Top five largest UK equity

holdings

Company

Market Value

£000’s

GlaxoSmithKline 12,172

Vodafone Group 9,468

BP Amoco 9,155

British Telecommunications 9,050

Royal Bank of Scotland 7,116

Actuarial

valuation

Since April 2001 world stock

markets have been very volatile

and overall they have fallen in

value. The Trustee and Rexam

regularly monitor the estimated

funding position of the Plan,

which remains strong. Monitoring

will continue throughout 2002.

The next actuarial valuation is due

to take place at 6 April 2003.

2


Report &

Formal Report and

Accounts

Investment Manager

Allocation

A copy of the Plan’s formal Report and

Accounts is available on request from the

Pensions Department at the address on page 6.

The Plan has 7 investment managers who each

invest a proportion of the total investments, which

as at 5 April 2001 was £1,024m.

Rexam Pension Plan

D

E F G

Financial Statements

A

for the year 6 April 2000 to 5 April 2001

C

B

Membership

13,774

10,992

A. 36.4% Barclays Global Investors Limited

B. 29.5% Phillips & Drew Fund Management Limited

C. 25.9% Frank Russell Company Limited

D. 4.6% Prudential Portfolio Managers Limited

E. 1.6% Prudential Venture Managers Limited

F. 1.3% Equitable Life Assurance Society (AVC provider)

G. 0.7% Merrill Lynch Investment Managers Limited

Split of Investments

4.0% 1.0%

2,834

8.3%

UK Equities

Overseas Equities

Active

Members

Deferred

Pensioners

Retired

Pensioners

13.1%

40.4%

Fixed interest bonds

Index linked bonds

Property

33.2%

Unquoted Equities

3


Investment

performance

The Investment

Committee

For the period ending 31 March 2001 the Plan

showed a return of –4.4%. This was ahead of the

Plan benchmark of –8.2% and the CAPS median of

–6.6%. CAPS is an independent organisation who

measures investment performance.

This period of investment performance showed

modest returns in many sectors of the market but

volatility and weakness in technology shares were

what characterised the overall equity market.

It is important to remember that pensions are a longterm

investment. The results of a single year should

not be viewed in isolation. It is likely that the lows in

one year will be balanced out by highs in another

year.

The results of the Plan’s investments over the rolling 3

and 5 year periods are shown below:

The Trustee is responsible for the Plan’s

investments but in order to maintain the

highest possible level of vigilance on all

investment issues the Trustee has appointed an

Investment Committee. The Committee

currently has 8 members, including 2 external

investment specialists. The Committee work

together to monitor the investments and

recommend changes to the Trustee.

One of the key topics the Investment

Committee has had to consider over the past

year has been the Trustee ‘Statement of

Investment Principles’. In accordance with the

Pensions Act 1995, the Trustee has to

describe the main elements of the investment

arrangements of the Plan. The Plan’s Statement

of Investment Principles was last updated in

June 2001. A copy is available on request.

The main features of the statement are:

1 year

3 years

5 years

Key

Return of

Plan

-4.4

-8.2

-6.6

Fund

benchmark

4.5

3.7

4.3

10.3

9.3

8.7

CAPS Median

Fund

• Acquire suitable assets which will generate

income and growth to meet the cost of

current and future benefits from the Plan.

• Limit the risk of assets failing to meet

liabilities over the long term.

• Minimise the long term costs of the Plan by

maximising the return on the assets.

A further consideration for the Investment

Committee has been the Myners Review. Full

details of the Myners Review are shown on

the following page.

The results for the Plan’s investments over a 3 year

rolling period are 4.5% against a Plan benchmark

of 3.7% and the CAPS median of 4.3%. 5 year

rolling periods are 10.3% against a Plan benchmark

of 9.3% and the CAPS median of 8.7%. Against its

benchmark it can be seen that the Plan has provided

above average returns over the 1, 3 and 5 year

periods.

4


Myners Review of Institutional Investment

In March 2000 the Government commissioned

Paul Myners (then Chairman of Gartmore

Investment Management) to carry out a review

into institutional investment in the UK, including

the investment activities of UK pension plans.

Following a period of consultation, Mr.

Myners’ report was published in March 2001.

The Government accepted all of the report’s

main recommendations, which it has used to

establish a set of investment principles.

Trustees of pension plans are expected to

adopt the principles as a matter of good

practice, and should take an alternative

approach only if they notify plan members

and explain their decision.

The Government’s principles have the ultimate

aim that trustees generally should improve their

ability to make strategic investment decisions.

Using expert advice in an open and

appropriate way, they should keep their

members informed about their actions and

about the effect of their decision making and

that of their advisers.

The principles for defined benefit pension

plans, like the Rexam Pension Plan, concern

the following areas:

• Effective decision making

• Plan-specific investment objectives

• Focus on asset allocation

• Sources of expert advice

• Clear mandates and fee structures

• Explicit strategy on shareholder activism

• Care in setting performance benchmarks

• Performance measurement of managers,

advisers, and of trustees themselves

• Incorporating all the above in the trustees’

Statement of Investment Principles

• Regular reporting to plan members

To comply with the principles, trustees would

need to have taken measures to ensure that

those taking investment decisions have the

skill, information and resources to do so.

The Government intends to legislate in the

following two areas, and consultation is

expected to start shortly.

• To raise the standard of care required of

trustees

• To make intervention in investee companies,

when in shareholders’ and beneficiaries’

interests, a duty for trustees and fund

managers.

Starting in March 2003, the Government will

assess how effective the principles have been

in bringing about improvements and the

Government has indicated that if there has not

been sufficient acceptance then it will consider

legislation. The Government expects trustees to

disclose the extent of their compliance with the

principles publicly.

The Rexam Pension Plan’s Trustee already

meets the spirit of the principles although there

may be some minor actions to take to gain full

compliance. The Trustee and Investment

Committee will be examining the principles,

and considering whether to comply fully with

each principle or advise members why it is not

in the best interests of members to fully comply

with any individual principle. This will be set

out in the 2002 Trustee Report and Accounts

of the Rexam Pension Plan which will be

available in October 2002, and through its

Statement of Investment Principles which is

regularly reviewed. The Report to Members

2002 will be issued following the signing of

the formal Trustee Report and Accounts and

will be issued to all Plan members.

5


Trustee

The current Directors and Officers of the Plan are shown below:

Directors

Company Nominated

P R Moxom, Chairman

Director, Human Resources, Rexam PLC

P Bentley

Director of Group HR Policies, Rexam PLC

T B Faulkner (from 1 April 2001)

Group Pensions and Benefits Manager, Rexam PLC

D W Gibson

Company Secretary, Rexam PLC

M J R Shepherd

Sector HR Director, Speciality Food Packaging

Member Nominated

G Chappell (from 1 June 2000)

Weighman, Rexam Glass Barnsley Limited

C G Kirkham

Process Engineer, Rexam Image Products

P D Parsons

Trained Trainer, Rexam Medical Packaging Limited

L Wilson

Quality Co-ordinator, Rexam Plastic Packaging Limited

Secretary

J L Westwood (from 1 January 2001)

Pensions Manager, Rexam PLC

The following Directors and Officers also held office during

the year ending 5 April 2001:

A P Gould (until 30 April 2000)

HR Development Manager, Rexam Drums Limited

G P Hooper (from 1 May 2000 until 23 March 2001)

Managing Director, Rexam Medical Packaging Limited

R J Martin (until 31 December 2000)

Group Compensation and Benefits Manager, Rexam PLC

S Peter (until 5 April 2001)

Compositor, Bowater Business Forms

Advisers and Administration

The Trustee has appointed the following advisers:

Plan Actuary A Woodhouse, William M

Mercer Limited

Actuarial Services William M Mercer Limited

Solicitors

Allen & Overy

Sacker & Partners

Auditors

Ernst & Young LLP

Banker

Lloyds TSB Bank Plc

Investment Managers As shown on page 3

Custodians

Bank of New York (Europe) Limited

Barclays Global Investors Limited

Deutsche Bank Global Securities Services

UBS Asset Management Holding Limited

Investment Adviser Watson Wyatt Partners

Investment Performance

Measurement CAPS

Data protection

Contact Details

From 1 March 2000 the 1998 Data Protection Act came into

effect and most of its provisions were applied from October

2001.

Under the Act the Trustee is considered to be the data

controller. From time to time it may be necessary to pass

members details to the Plan’s actuary, auditor or administrator,

in order to maintain the smooth running of the Plan and to

obtain calculations for the processing of members’ benefits.

The Trustee is responsible for the confidentiality and security of

each members records.

Under the Act members are entitled to request a copy of the

information held about them. If you would like to see your

information or if you have any change of circumstances that

you think should be passed to the Trustee please send your

request in writing to the Pensions Department at the address

opposite. There may be a small administration charge to

cover the costs of retrieving this information for you.

6

If you have a query regarding your pension or if you

have a general comment about this first Report to

Members then please write to:

Rexam PLC,

Pensions Department,

Bridge House,

97-101 High Street,

Tonbridge, Kent.

TN9 1DP

Telephone: 01732 226 226

Email: pensions@rexam.com

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