2010/11 (PDF, 48 Pages, 1013KB) - THE LOCAL GOVERNMENT ...

Contents3 Management Structure4 Chair’s Introduction6 Management Report8 Investment Report13 Financial Statements33 Statement of Responsibilities34 Audit Report36 Scheme Administration Report43 ConsultingActuary’s Statement44 Appendix AEmployer Membership45 Appendix BPensions Committee Items46 Appendix CInformation ContactsCover image: ‘Dream’, Sutton Manor, St. Helens2 Contents www.merseysidepensionfund.org.uk

eturning 8.7% compared to itsbespoke benchmark return of 7.5%.The average local authority fund returned8.2%. Financial markets continue to bevolatile and it is important to rememberthat local authority pension funds investover the long-term to pay benefits in fortyto fifty years time and it is imperative tomaintain this long-term perspective.Further information on the managementof the Fund, distribution of assets andperformance is provided later in this report.Actuarial ValuationThe triennial actuarial valuation at31 March 2010 was concluded duringthe year and, despite the turbulence infinancial markets in the preceding threeyears, showed only a small deteriorationin the funding level from 80% to 78%.With effect from 1 April 2011, the averageemployer contribution rate to meet thefunding objective will increase to 18%from its current level of 17.8% of which11.6% will relate to future service accrualand the balance of 6.4% to recoveringthe deficit over a 25 year period.Contributions for each separate employerwill be levied as a combination ofa percentage of payroll in respectof future accrual of benefits and£s amounts in respect of deficitcontributions under the recovery plan.Where known, the financial implicationsof the changes to the Local GovernmentPension Scheme (LGPS) were takeninto account by the actuary.Communication with FundEmployers and MembersEffective communication continuesto be very important to the Fundas it seeks to deal with issuesarising from new legislation andproposals for future changes.With increasing numbers of membersaffected by early retirement andredundancy programmes, it hasoffered a variety of courses tomembers and employers duringthe year in addition to the regularnewsletters for employers, employees,pensioners and deferred members.The Fund website continues to beupdated regularly and we are seeingincreasing use of the Employers website.The Annual Employers’ Conference heldat Aintree Racecourse, in November2010, was again well attended andfeatured speakers from the Fund’s Actuary,DCLG and officers from the Fund.Past Changes and the FutureThe Fund has established aGovernance and Risk Working Party.The Independent Public Service PensionsCommission, led by Lord Hutton,has published its recommendationson public pensions (including theLGPS) setting out broad principles forreform which have been welcomed byGovernment as a basis for consultation.Consultation is ongoing withfurther information unlikely to beavailable until later this year.The Fund is an active participant inall aspects of consultation includingthe Hutton review, legislation,taxation and benefit changes.The Fund has been delighted with theinterest from Scheme members andemployers to surveys it has undertakenand their contributions have helpedto inform the Fund’s responses.As ever, the continued success of theFund depends on the combined effortsof all those concerned with its operation.In conclusion, I should like to thank theCommittee, the Scheme employersand their staff, the financial advisors, theexternal investment managers and all ofthe Fund’s Investment and Administrationstaff for their considerable work in deliveringthe service to Scheme members.Preparation of reportThis Annual Report has been producedin accordance with Regulation 34 ofthe Local Government Pension Scheme(Administration) Regulations 2008.In preparing and publishing the PensionFund Annual Report, the AdministeringAuthority must have regard to guidanceissued by the Secretary of State.www.merseysidepensionfund.org.uk Chair’s Introduction 5

Management of the FundThe overall responsibility for themanagement of the Fund rests withthe Pensions Committee chairedby Councillor Geoffrey Watt.In 2010/11, the Committee comprised ofCouncillors from the Wirral Labour group(3), Conservatives (4), Liberal Democrats(3), representatives of the four otherDistrict Authorities (Liverpool, St. Helens,Knowsley and Sefton), an independentrepresentative from the other employersand employee representatives (3).The Director of Finance and other officersof the Fund also attend Committee,which meets around five times ayear to review the administrative andinvestment issues affecting the Fund.The Committee ensures that theadministration of the Fund accordswith the statutory framework withinwhich the LGPS operates.The Fund publishes a GovernanceCompliance Statement confirming that itcomplies fully with best practice guidanceissued by the Department of Communitiesand Local Government (DCLG).Committee also ensures that themanagement of the Fund’s assetsfalls within the requirements of theLocal Government Pension Scheme(Management and Investmentof Funds) Regulations 2009.These regulations require the Fund tohave regard to both diversification andsuitability of investments and stipulatethe requirement to take proper advicewhen making investment decisions.The Fund’s Funding Strategy Statement(FSS) and Statement of InvestmentPrinciples (SIP) provide further informationon the Fund’s investment philosophyand investment framework.The more detailed consideration ofinvestment strategy and asset allocationof the Fund’s portfolios is considered byan Investment Monitoring Working Party.The Working Party meets six times a yearto review investment strategy and toreceive reports on investment activityundertaken in the prior period.The Working Party comprises representativesfrom the Pensions Committee,an independent adviser, MercerInvestment Consulting and membersof the in-house investment team.Another of its important tasks is tomonitor the performance of the Fund’sexternal and internal managers.External and internal fund managers havebeen given specific benchmarks againstwhich performance is measured andmonitored quarterly. In addition, internalfund managers report to the Director ofFinance through regular Fund OperatingGroup meetings and follow laid downinternal compliance procedures.With regard to its investment managementactivities, the Fund uses a combinationof internal and external management,and active and passive strategies acrossthe various asset classes in which it invests.More comprehensive details of theFund’s managers, mandates andadvisers are set out in its SIP.Pensions administration andrelated matters are scrutinised by aGovernance and Risk Working Party;the inaugural meeting was held inJanuary and it will meet twice yearly.Risk ManagementThe Fund’s governance arrangements, setout in the preceding section, ensure thatthe management of fund administrative,management and investment risk isundertaken at the highest levels.The Fund recognises that risk is inherent inmany of its activities and makes extensiveuse of external advisers and industry bestpractice in assessing and establishingpolicies to identify and mitigate those risks.The principal documents relating to riskmanagement and control are the Fund’s:• Communications Policy• Funding Strategy Statement• Governance Policy• Governance Compliance Statement• Statement of Investment PrinciplesCopies of these documents areavailable from the Fund or may be viewedfrom pages 49 to 219 in the electronicversion of this year’s annual report at:www.merseysidepensionfund.org.uk/riskdocsThese documents are all subject toregular scrutiny by Pensions Committeeand officers, and provide details of thekey risks and explanations of the policiesand controls adopted to mitigate them.These arrangements are assessedat least annually by the Fund’sexternal and internal auditors.Additionally, and where applicable,the Fund adheres to theadministering authority’s constitutionin managing its operations.Legal opinion and advice is providedby Wirral’s legal team and fromexternal sources where appropriate.6 Management of the Fund www.merseysidepensionfund.org.uk

Knowledge and SkillsMerseyside Pension Fund recognises theimportance of ensuring that all staff andmembers charged with the financialmanagement and decision makingwith regard to the pension scheme,are fully equipped with the knowledgeand skills to discharge the duties andresponsibilities allotted to them.It therefore seeks to appoint individualswho are both capable and experiencedand it will provide/arrange training forstaff and members of the pensionscommittee to enable them to acquireand maintain an appropriate levelof expertise, knowledge and skills.Our training plan sets out how weintend the necessary pension financeknowledge and skills are to be acquired,maintained and developed.The plan reflects the recommendedknowledge and skills level requirementsset out in the CIPFA Pensions FinanceKnowledge and Skills Frameworks.The Pensions Committee hasdesignated the Director of Finance tobe responsible for ensuring that policiesand strategies are implemented.Activity in YearMerseyside Pension Fund has conducted atraining needs assessment and, based onthe outcome, formulated a training plan.This plan is reported to and approved byPensions Committee. The Fund developsits Pensions Committee membersand officers through training andeducation, using a variety of means.These include regular meetings, ad hocseminars and conferences, bespoketraining and a comprehensive website.Pensions Committee receives updateson legislative changes, benefitadministration changes, procurement,actuarial and investment matters.These are supplemented by the regularworking parties. The investment monitoringworking parties include a minimum oftwo presentations and cover all aspectsof investment; asset allocation, assetclasses, economics, performancemeasurement, risk managementand responsible investment.The governance and risk working partiesenable matters relating to other risks andpensions administration to be coveredin greater depth, as necessary.The internal training days cover a rangeof topical issues. This year, being avaluation year, the first training dayfocused on the triennial valuation, themethodology of actuarial valuation, assetliability modelling and asset allocation.In view of the Fund’s increasingallocation to complementary assets,the second training day reviewedsome alternative assets includinginfrastructure, waste management andagricultural investment opportunities.Behavioural finance and economics werealso covered. Bespoke training includes theLGE Trustee Fundamentals training whichwas attended by a number of committeemembers and a number of otherconferences and seminars as detailed.The Fund is a member of the Local AuthorityPension Fund Forum and the chair ofcommittee is a member of the executiveboard, attending regular meetings dealingwith all areas of responsible investment.The following training opportunitieshave been provided during the year:MonthAprilMayJuneJuneJuneJuneSeptemberSeptemberSeptemberOctoberOctoberOctoberNovemberNovemberDecemberJanuaryJanuaryFebruaryMarchMarchMarchEventInvestment Monitoring Working PartyNAPF Local Authority ConferenceInternal training dayInvestment Monitoring Working PartyPensions CommitteeCIPFA conferenceInvestment Monitoring Working PartyPensions CommitteeLGC Investment SummitInternal training dayInvestment Monitoring Working PartyPensions CommitteeMPF Annual Employers ConferenceInvestment Monitoring Working PartyLAPFF Annual ConferencePensions CommitteeGovernance & Risk Working PartyInvestment Monitoring Working PartyInternal training dayPensions CommitteeLGC Investment SeminarAs the officer nominated by the PensionsCommittee responsible for ensuring thatthe Fund’s training policies and strategiesare implemented, the Director of Finance,can confirm that the officers and memberscharged with the financial managementof and decision making for the pensionscheme collectively possessed the requisiteknowledge and skills necessary to dischargethose duties and make the decisionsrequired during the reporting period.www.merseysidepensionfund.org.uk Chair’s Introduction 7

Investment ReportYear ended 31 March 2011Market EnvironmentInvestment returns were positive for thefinancial year to the end of March 2011despite economic and geopoliticalheadwinds. Governments, particularly in thedeveloped world, maintained monetaryand fiscal stimulus measures to bolstertheir economies whilst economic activityrebounded in developing economies.Looking back over the 12 months,equity markets started poorly in the secondquarter of 2010 as the pace of economicrecovery in the United States and Europemoderated. The peripheral European debtcrisis dominated the headlines leading tomajor falls in share prices as the EuropeanCentral Bank and International MonetaryFund stepped in with aid packages forGreece. The BP oil spill in the Gulf of Mexicoalso weakened sentiment in the UK.However, equities rebounded in thethird quarter, driven by better thanexpected company earnings and inspite of the UK’s emergency budget andassociated austerity measures. Marketsremained volatile in the fourth quarter.Sentiment was boosted by the FederalReserve announcing another round ofquantitative easing but worries continuedover the European sovereign debt crisiswith the bailout of the Irish economyoccurring in November. Notwithstandingthis, global markets benefited from acombination of better than expectedmacroeconomic data and improvedprospects for the US economy. Mostmarkets finished the calendar year ator around their highs for the year.The first quarter of 2011 saw evidence ofheightened investor concerns with marketshit by the fallout from the earthquake inJapan and the further strength in oil pricesas a consequence of political instabilityin North Africa and the Middle East.Growth in Emerging Markets was cloudedwith uncertainty as inflation is in danger ofbecoming an entrenched problem in somecountries. Closer to home, the Europeandebt crisis remained to the fore withPortugal approaching the European Unionto request a bailout. Nonetheless, equitymarkets made further headway to give apositive outcome for the 12 month period.Once again, the Pacific Rim generatedthe highest returns for sterling basedinvestors of around 14% with all otherequity markets giving high single digitreturns other than Japan which, as aconsequence of the earthquake andassociated disasters, fell slightly in value.In the UK, government bond marketsalso gave positive returns with indexlinkedgilts benefiting from heightenedinflation expectations. Propertycontinued its recovery with a returnof around 10%. Full details are shownin the accompanying charts.Review of Investment PerformanceOver the financial year to the end of March2011, Merseyside Pension Fund returned8.7% compared to its bespoke benchmarkreturn of 7.5%, an out-performance of1.2%. The average UK Local Authority fundreturned 8.2% over the comparable period.The performance of the Fund againstits benchmark and against price andearnings indices over 1, 3, 5, and 10 yearperiods is shown in figure 3. The longerterm investment performance numberscontinued to hold up well and, over themedium term (5 years), the Fund hasperformed in line with its benchmark.Longer term, over 10 years, the Fundhas achieved an absolute annualisedreturn of 5.7%, which is comfortablyahead of the Retail Price Index at3.1% over the comparable period,yielding a real return of 2.6%.Over three, five and ten years, MerseysidePension Fund ranks around the topone third of all Local Authority funds.8 Investment Report www.merseysidepensionfund.org.uk

Figure 3. Comparative Returns for the Fund8.7% 6.0% 4.6% 5.7%7.5% 5.5% 4.6% 5.3%5.3% 3.1% 3.6% 3.1%1.7% 2.4% 3.7% 4.0%MPFBenchmark*RPIAverage Earnings1 Year 3 Year 5 Year 10 YearThe investment performance for the yearto 31 March 2011 is driven largely by‘stock selection’, i.e underlying managershave outperformed their respectivebenchmarks. Alternatives and propertyinvestments have led the way in this,but UK and overseas equities and Bondshave made a contribution. On a longerterm basis, Tactical Asset Allocationdecisions have been beneficial to theFund in terms of relative performance.During the year, the Fund re-tenderedits property management contract andactive equity mandates in Asia-Pacific andEmerging markets. CB Richard Ellis wasretained as property agent and, in relationto the equity mandates, the incumbentmanager, Nomura, was complementedwith a further four managers in view of thesignificant increase in assets in this area.www.merseysidepensionfund.org.uk Investment Report 9

Investment ReportYear ended 31 March 201120% of total assets3530252015101 Year 3 Year 5 Year 10 yearFigure1.Portfolio Distribution(Market Value at31 March 2011)201150UKEquitiesUSEquitiesEuropeanEquitiesMPF 8.9% 6.1% 4.6% 5.7%Benchmark * 7.5% 5.5% 4.6% 5.3%RPI 5.3% 3.1% 3.6% 3.1%1.7%3.7%Japanese Average EarningsEquitiesPacific Basinex JapanEquitiesEmerging 2.4%Market EquitiesUK Bonds 4.0% Index Linked Cash/AlternativesProperty2010Total Return (%)2015105Figure 2.Total return by Assetclass in year ended31 March 20110Fund-5UK EquitiesUS EquitiesEuropeanEquitiesJapaneseEquitiesPacificBasin exJapanEquitiesEmergingMarketingEquitiesUK BondsIndexLinkedAlternatives Cash PropertyBenchmark10 Investment Report www.merseysidepensionfund.org.uk

Strategic Asset Structure Largest UK Equity Holdings as at 31 March 2011 Largest Property Holdings as at 31 March 2011Asset ClassStrategicBenchmark %UK Equities 25Overseas Equities 30Detail %US 8European (Ex UK) 8Japan 4Asia Pacific 4Emerging Markets 6Fixed Interest 20UK Gilts 4Overseas Bonds 0UK Index Linked 12Corporate Bonds 4Property 10Alternatives 14Private Equity 4Hedge Funds 5Opportunities 3Infrastructure 2Cash 1Total 100CompanyMarket Value£ ‘000Equity%BP Plc £75,379 5.33%Royal Dutch Shell Plc £74,702 5.29%Vodafone Plc £62,936 4.45%HSBC Plc £58,207 4.12%Rio Tinto Plc £55,131 3.90%BG Group Plc £48,616 3.44%Glaxo Smithkline Plc £44,724 3.17%Astra Zeneca Plc £31,066 2.20%BHP Billington Plc £30,656 2.17%British American Tobacco Plc £27,592 1.95%£509,009 36.02%These figures represent the Fund’s entire exposureto UK equities. Where the assets are in a pooledFund structure, a pro rata calculation has beenmade. They represent 36% of total UK equityexposure and 10% of total Fund assets.PropertyMarket Value£’000Supermarket, Heswall 26,975Tunsgate Square Shopping Centre, Guildford 21,000Farnham Retail Park, Farnham 17,87537/38 Curzon Street, London 16,250Cunard Building, Liverpool 15,500Middlemarch Business Park, Coventry 15,350Willowbrook Retail Park, Loughborough 14,100Horns Road, Ilford 14,000www.merseysidepensionfund.org.uk Investment Report 11

12Knowsley Hall

Financial Statements - Notes to the Accounts1. GeneralThe Code of Practice on Local AuthorityAccounting in the United Kingdom2010/2011 is the first to be based onInternational Financial Reporting Standards(IFRS). It has been developed by the CIPFA/LASAAC Code Board under the oversightof the Financial Reporting Advisory Board.The Code for 2010/2011 has beenprepared on the basis of accountingstandards and interpretations in effectfor accounting periods commencingon or before 1 January 2010.It applies for accounting periodscommencing on or after 1 April 2010.The move to the IFRS-based Codefrom a UK GAAP-based Statementof Recommended Practice (theLocal Authority SORP) have resultedin a number of significant changesin accounting practice, and a newformat. As a requirement of IFRS 1 atransitional Net Asset Statement andassociated notes have been providedas at 1 April 2009. For Pension FundAccounts, where detailed technicalaspects are not addressed within the IFRSCode, the guidance within the continuingStatement of Recommended Practice,Financial Reports of Pension Schemes (theSORP) May 2007 continues to be utilised.The financial statements record thetransactions of the Scheme during theyear and summarise the net assets atthe disposal of the Managers at the endof the financial year. Under InternationalFinancial Reporting Standards (IFRS) theobligations to pay pensions and benefitswhich fall due after the end of the Schemeyear must now feature, and are shownwithin the statement by the Actuary onpage 43 of the actuarial position of theScheme. These financial statementsshould be read in conjunction with theActuarial Statement, which indicates theFund’s future liability to pay benefits.All such benefits so calculated are “vested”for the purpose of the IAS26/IAS19 figures.2. Accounting PoliciesBasis of PreparationThe financial statements represent the firstyear in which they have been primarilyprepared in accordance with InternationalFinancial Reporting Standards (IFRS),as reflected in the Local Authority Code,which applies to UK local authority pensionfunds. Where subsequently appropriate,they have followed UK accountingstandards with particular referenceto the Statement of RecommendedPractice, Financial Reports of PensionSchemes (the Pension’s SORP).Valuation of InvestmentsInvestments are stated at market value.For listed securities the stock exchangevalues are used. Such values are shownat bid price, i.e. the price which theFund would have obtained should thesecurities have been sold at the year end.For unlisted investments such as hedgefunds, wherever possible valuations havebeen obtained via the independentadministrator, although some remainat managers’ valuation. Valuations ofUK private equity are consistent with theguidelines and conventions of theBritish Venture Capital Association.Properties have been valuedindependently by Colliers Erdman Lewis,Chartered Surveyors as at 31 March 2011.Translation of foreign currenciesAssets and liabilities in foreign currenciesare translated into sterling at ratesruling at the year end. Foreign incomereceived during the year is translatedat the rate ruling at the date of receipt.All resulting exchange adjustments areincluded in the revenue account.Investment incomeInterest on fixed interest stocks and onshort term deposits has been accountedfor on an accruals basis. Income fromequities is accounted for when the relatedinvestment is quoted “ex-dividend”.14 Financial Statements www.merseysidepensionfund.org.uk

Rental incomeRental income from properties is takeninto account by reference to the periodsto which the rents relate and is shownnet of related expenses. The Fundaccrues rent up to 24 March eachyear. Rent received on the QuarterDay, 25 March, is accounted forin full in the following year.Contributions and benefitsContributions are accounted for on anaccruals basis. Benefits payable representthe benefits paid during the financialyear and include an estimated accrualfor lump-sum benefits outstandingas at the year end. Augmentationpayments due from employers infuture years are accrued for.Transfers to and from other schemesTransfer payments relate to those earlyleavers whose transfers have been paidduring the year plus an accrual for futurepayments in respect of members movingtheir service to other schemes underbulk transfer arrangements. Three bulktransfers into MPF are included in 2010/11,for which a cash payment will be received.Investment Management ExpensesIn accordance with the SORP, costsin respect of the internal investmentteam are classified as investmentmanagement expenses rather thanas administrative expenses.Prior Period AdjustmentsThere have been no changes to theApril 2009 totals of the Fund Accountor its Net Asset Statement in respectof the changes to IFRS accounting.With regards to the figures as at31 March 2010 and 1 April 2009 (whereapplicable), Prior Period Adjustmentshave been made as follows:• To reflect the elimination fromthe accounts of both payments ofCompensatory Added Years (CAYs)and their reimbursement by employers.These transactions net out to nil.Full details are now shown asNote 16 to these Accounts.• To reflect inclusion on the face ofthe accounts of “Taxes on Income”,table 6 “Investment Income”is now shown gross of tax.Basis of EstimatesEstimates for post year endoutstanding items have been usedfor the following activities: paymentsof retirement grants, death grantsand investment managers’ fees:• Retirement grants due for payment,but not paid by 31 March: using actualfigures as far as possible, and assumingmaximum commutation to be takenwhere the knowledge of the individualmember’s choice is still outstanding.• Death grants due for payment,but not paid by 31 March:for example awaiting Probate.• Investment managers’ fees outstanding:estimated using the Fund’s valuationsas at 31 March 2011.• To reflect changes in analysis in Note 7between equities, pooled investmentvehicles and “other investment balances”.www.merseysidepensionfund.org.uk Financial Statements 15

Financial Statements - Notes to the Accounts3. Contributions Receivable2011 2010£’000 £’000EmployersNormal 165,836 164,996Augmentation 45 522Pension Strain 28,471 23,811Deficit Funding 11,874 316EmployeesNormal 60,521 60,828266,747 250,473relating to: Administering Authority 41,317 38,254Statutory Bodies 187,628 176,471Admission Bodies 37,802 35,748266,747 250,473Employers Normal contributions includesan element of past service deficit. The2007 actuarial valuation calculated theaverage employer contribution rate of17.8%, 12.1% was determined the averageemployer rate in respect of future serviceonly and 5.7% for past service deficit.“Augmentation” represents paymentsby employers to the Fund for the costsof additional membership benefitsawarded under LGPS regulations.An accrual has been made for agreedfuture payments to the Fund.“Pension Strain” represents the cost toemployers when their employees retireearly to compensate the Fund for thereduction in contribution income and theearly payment of benefits. Payments to theFund for such costs are made over agreedperiods. An accrual has been made foragreed future payments to the Fund.“Deficit Funding” represents additionalpayments by employers to reduce apast service deficit, thereby potentiallyreducing their future contribution rates.Such payments may be made either aslump sum payments (£5.4m in 2010/11,nil in 2009/10) or as regular additionalcontributions. Also included is £6.4mrelating to Magistrates Courts which waspreviously an active member of the Fund.Figures for “Compensatory AddedYears” represent re-imbursements byemployers to the Fund for additionalpension payments awarded under theLocal Government (Early Termination ofEmployment) (Discretionary Compensation)Regulations 2000. As such pensionspayments lie outside the LGPS Regulations,with the Fund acting as agent for suchpayments, figures of both payments topensioners (previously shown under Note4 “Benefits Payable”) and the recoveryof such costs from employers (previouslyshown under Note 3 “ContributionsReceivable”) are now excluded fromthe Fund accounts. Instead they areshown within Note 16 to the Accounts.16 Financial Statements www.merseysidepensionfund.org.uk

4. Benefits Payable5. Payments to and on Account of Leavers2011 2010£’000 £’000Pensions 182,237 173,785Lump Sum Retiring Allowances 72,053 41,260Lump Sum Death Benefits 5,621 4,090259,911 219,135relating to: Administering Authority 40,647 31,326Statutory Bodies 186,790 158,176Admission Bodies 32,474 29,633259,911 219,1352011 2010£’000 £’000Refunds to members leaving service 15 41Payment for members joining state scheme 1 2Income for members from state scheme -18 -7Individual transfers to other schemes 18,591 19,62218,589 19,658www.merseysidepensionfund.org.uk Financial Statements 17

Financial Statements - Notes to the Accounts6. Investment Income2011 2010£’000 £’000Dividends from Equities 58,477 56,000Income from Pooled Investment Vehicles 8,555 7,730Net Rents from Properties 17,242 18,734Interest on Short Term Cash Deposits 705 1,279Income from Associate and Joint Ventures 2,405 1,732Income from Derivatives 257 0Other 899 89988,540 86,374Figures of income from “Dividends fromEquities” and “Income from PooledInvestment Vehicles” are now shownseparately. Within these headings isincluded recoverable taxation of £1.56m,(2009/10 £1.27m). Income from profitsfrom associate and joint ventures of £2.4m(2009/10 £1.7m) is now shown separately.These figures are now shown grossof tax, as the face of the accountsnow includes a figure of “Taxes onIncome” Figures for 31 March 2010have been appropriately changed.The Fund is seeking to recover tax witheldby UK and overseas tax regimes under theEU principle of free movement of capitalwithin its borders, but is not accruing forfuture receipt of such income within theseaccounts. Although no further repaymentswere received in 2010-2011 a further£54,613 was recovered after the year end.As at 31 March 2011, £65.37m of stockwas on loan to market makers, whichwas covered by non-cash collateral,in the form of G10 sovereign debt,totalling £69.31m, giving a margin of5.5%. Collateral is marked to market,and adjusted daily. Income from stocklending amounted to £859,109 and isincluded within “Other” Investment Income.As the Fund retains its economic interestin stock on loan, their value remainswithin the Fund valuation. As the Fundhas an obligation to return collateral tothe borrowers, collateral is excluded fromthe Fund valuation. The Fund used itsCustodian as agent lender, lending onlyto an agreed list of approved borrowers.An indemnity is in place which gives theFund further protection against losses.The risks associated with stocklendingare set out in the Fund’s “Statementof Investment Principles”.18 Financial Statements www.merseysidepensionfund.org.uk

7. InvestmentsMarket Value @31.3.10£’000Purchases at cost andderivative payments£’000Sale Proceeds andderivative receipts£’000Change inMarket Value*£’000Market Value@ 31.3.11£’000Equities 1,888,567 1,445,152 -1,692,547 84,448 1,725,620Pooled Investment Vehicles 2,459,616 916,309 -641,674 225,855 2,960,106Derivative Contracts 33 30,051 -29,882 554 756Direct Property 210,225 42,722 -10,317 9,305 251,9354,558,441 2,434,234 -2,374,420 320,162 4,938,417Short Term Cash Deposits 56,207 59,570Other Investment Balances 62,893 10,741 89,5554,677,541 330,903 5,087,542*Note: The change in market valueof investments during the yearcomprises all realised and unrealisedappreciation and depreciation.There has been a re-analysis of theallocation between equities, pooledinvestment vehicles and “other investmentbalances” as at the end of March 2010,as a net nil Prior Period Adjustment.There was an adjustment of UKEquities and £14.4m was movedto Pooled Investment Vehicles.Managed and Unitised Funds andOther Investments are now under theheading Pooled Investment Vehicles.Amounts due to stockbrokers arenow excluded from Other InvestmentBalances and instead shownunder Investment Liabilities.Investments in Limited Partnerships,worth £240.5m, (book value £166.4m)are not readily realisable. All otherassets are deemed “availablefor sale” financial assets.2011 2010 1.4.2009£’000 £’000 £’000Equities (segregated holdings)UK Quoted 855,304 788,134 550,034Overseas Quoted 870,316 1,100,433 727,1411,725,620 1,888,567 1,277,175www.merseysidepensionfund.org.uk Financial Statements 19

Financial Statements - Notes to the Accounts2011 2010 1.4.2009£’000 £’000 £’000Pooled Investment VehiclesUK Managed Funds:Property 26,000 0 0Equities 224,555 181,449 115,016Private Equity 143,309 120,397 98,455Hedge Funds 48,818 72,157 64,819Corporate Bonds 188,279 176,742 156,438Infrastructure 26,992 0 0Opportunities 96,680 81,506 18,485Overseas Managed Funds:Equities 292,919 29,205 10,566Private Equity 97,198 71,507 46,859Hedge Funds 176,358 158,628 154,820Infrastructure 11,321 0 0Opportunities 18,370 5,933 26,457UK Unit Trusts:Property 80,337 52,422 30,351Overseas Unit Trusts:Property 57,863 35,417 28,603Unitised Insurance Policies 1,471,107 1,474,253 1,157,8192,960,106 2,459,616 1,908,688The following holdings each represent more than 5% of the value of the whole Fund:Derivatives as at 31 March 2011Futures£’000 £’000Type of ContractExpirationEconomicExposureMarket ValueDJ Euro STOXX50 Index Futures June 2011 2,694 269A Futures contract is the obligation under alegal agreement to make or take deliveryof a specified instrument at a fixed futuredate, at a price determined at the time ofdealing. Merseyside Pension Fund’s indexfutures contracts are externally managedand their objective is to hedge overseasinvestment positions against adverse indexmovements. Futures dealing requires theposting of margin. Initial margin which2011 2010£’000 % £’000 %Legal & General Pooled UK Index Linked Gilts 487,795 9.7 462,775 9.94UBS USA Equity Tracker 417,291 8.3 350,591 7.53Legal & General Pooled UK Equities 371,470 7.4 477,651 10.26must be posted before you can trade andvariation margin, the mark-to-market valueof the futures contracts you hold. Variationmargin is exchanged daily and exists toreduce counterparty credit exposure.Collateral is held in Euro currency and theSterling equivalent is £234,606. DJ EuroSTOXX 50 Futures have a contract multiplierof x10 therefore the notional valueunderlying the futures contracts is £2.694m.20 Financial Statements www.merseysidepensionfund.org.uk

Forward Foreign ExchangeContract Settlement Date Currency Bought’000Forward CurrencyContractsForward CurrencyContractsForward CurrencyContractsForward CurrencyContractsCurrency Sold’000Asset£’000April 2011 GBP 89 AUD 139 0 0April 2011 GBP 2818 EUR 3198 8 0April 2011 EUR 1599 GBP 1415 10 0April 2011 EUR 170 GBP 149 0 0Forward Current Contracts are exchange traded and are used to hedge exposures to foreigncurrency back into sterling.OptionsType of Option Expiration UnderlyingInvestmentPurchased Call October 2012Etihad Etisalat CoSAR 10.00Notional Amountof OutstandingContractsAsset£’000469 0 19Liability£’000Liability£’000A call option is an agreement that gives an investor the right (but not the obligation) to buy a stock,bond, commodity, or other instrument at a specified price within a specific time period.2011 2010 1.4.2009£’000 £’000 £’000UK PropertiesFreehold 211,761 190,574 182,038Leasehold 40,174 19,651 17,497251,935 210,225 199,535Short Term Cash DepositsSterling 59,570 56,207 74,08959,570 56,207 74,089Short-term deposits only cover cashbalances held by the Fund. Cash heldby investment managers awaitinginvestment is now shown under“Other Investment Balances”.2011 2010 1.4.2009£’000 £’000 £’000Other Investment BalancesAmounts due from brokers 257 33 858Outstanding trades 35,523 6,636 19,171Outstanding dividend entitlementsand recoverable withholding tax16,034 12,796 6,110Cash deposits 37,741 43,428 37,72789,555 62,893 63,866“Other Investment Balances” includeamounts due from stockbrokers andalso cash with managers awaitinginvestment. There were no borrowings.www.merseysidepensionfund.org.uk Financial Statements 21

Financial Statements - Notes to the AccountsIFRS 7.4.2 requires an analysis of financialinstruments and financial liabilities bydifferent categories. These cover carryingamounts, and net gains and losses.For completeness, market value is shownin the same analysis. The followingtables analyse the carrying amountsof the financial assets and liabilities(excluding cash and cash equivalents)by category and by net asset statementheading, and by net gains and losses.At market value31 March 2011Loans andreceivablesAvailablefor Sale AssetsDesignated as atfair value throughprofit or loss£000 £000 £000Financial AssetsEquities 1,725,620Pooled Investment Vehicles 2,719,599 240,507Derivatives 756Direct Property 251,935Cash deposits 59,570Other investment balances 89,555Debtors 81,430Total financial assets 230,555 4,697,154 241,263Financial LiabilitiesOther investment balances 37,114Creditors 15,986Total financial liabilities 37,114 15,986At market value31 March 2010Loans andreceivablesAvailablefor Sale AssetsDesignated as atfair value throughprofit or loss£000 £000 £000Financial AssetsEquities 1,888,567Pooled Investment Vehicles 2,267,712 191,904Derivatives 33Direct Property 210,225Cash deposits 56,207Other investment balances 62,893Debtors 46,631Total financial assets 165,731 4,366,504 191,937Financial LiabilitiesOther investment balances 5,607Creditors 12,916Total financial liabilities 5,607 12,91622 Financial Statements www.merseysidepensionfund.org.uk

Carrying Amount31 March 2011Loans andreceivablesAvailablefor Sale AssetsDesignated as atfair value throughprofit or loss£000 £000 £000Financial AssetsEquities 1,460,447Pooled Investment Vehicles 2,203,901 166,361DerivativesDirect Property 275,382Cash deposits 59,570Other investment balances 89,555Debtors 81,430Total financial assets 230,555 3,939,730 166,361Financial LiabilitiesOther investment balancesCreditorsTotal financial liabilitiesCarrying Amount31 March 2010Loans andreceivablesAvailablefor Sale AssetsDesignated as atfair value throughprofit or loss£000 £000 £000Financial AssetsEquities 1,487,051Pooled Investment Vehicles 1,832,979 151,196DerivativesDirect Property 243,631Cash deposits 56,207Other investment balances 62,893Debtors 46,631Total financial assets 165,731 3,563,661 151,196Financial LiabilitiesOther investment balancesCreditorsTotal financial liabilitieswww.merseysidepensionfund.org.uk Financial Statements 23

Financial Statements - Notes to the AccountsNet Gains and Losses31 March 2011Loans andreceivablesAvailablefor Sale AssetsDesignated as atfair value throughprofit or loss£000 £000 £000Financial AssetsEquities 220,791Pooled Investment Vehicles 110,969 483Derivatives 319Direct Property -653Cash depositsOther investment balances 10,740DebtorsTotal financial assets 10,740 331,107 802Financial LiabilitiesOther investment balancesCreditorsTotal financial liabilitiesNet Gains and Losses31 March 2010Loans andreceivablesAvailablefor Sale AssetsDesignated as atfair value throughprofit or loss£000 £000 £000Financial AssetsEquities 94,327Pooled Investment Vehicles -2,168 14Derivatives 304Direct PropertyCash deposits 233Other investment balances -1,145DebtorsTotal financial assets -912 92,159 318Financial LiabilitiesOther investment balancesCreditorsTotal financial liabilities24 Financial Statements www.merseysidepensionfund.org.uk

Disclosure Note Re: Transaction CostsTransaction costs include fees andcommissions paid to agents, advisers,brokers and dealers, levies by regulatoryagencies and securities exchanges,transfer taxes and duties. They have beenadded to purchases and netted againstsales proceeds as appropriate. Transactioncosts during the year amounted to £2.1m(2009/10 £2.0m). In addition to thesecosts, indirect costs are incurred throughthe bid-offer spread on investments inpooled vehicles. The amount of indirectcosts is not provided directly to the Fund.Disclosure Note RE: Icelandic DepositsEarly in October 2008, the Icelandic bankscollapsed and their UK subsidiaries went intoadministration. The Fund had £5m depositedwith Glitnir Bank at an interest rate of 6.30%which was due to mature 15 October2008 and £2.5m deposited with HeritableBank at an interest rate of 5.94% whichwas due to mature 10 December 2008.All monies within these institutions arecurrently subject to the respectiveadministration and receivership processes.The amounts and timing of paymentsto depositors such as the Fund willbe determined by the administrators/receivers and court hearings.The current situation with regards torecovery of the sums deposited variesbetween each institution. Based on thelatest information available the Fund hasgiven consideration to an impairmentadjustment for the deposits, and hastaken the action outlined below. As theavailable information is not definitive as tothe amounts and timings of payments tobe made by the administrators/receivers,it is likely that further adjustments will bemade to the accounts in future years.Glitnir Bank hfGlitnir Bank hf is an Icelandic entity.Old Glitnir’s affairs are being administeredunder Icelandic law. The Glitnir Winding-Up Board had expressed the view thatlocal authority deposits do not havepriority status. However, the IcelandDistrict Court ruled for the test cases thatlocal authorities do have priority status.An appeal has been lodged against thisdecision by the Glitnir Winding-Up Board.The expected recovery rate forclaims that have priority status is100%. Full recovery is subject to thefollowing uncertainties and risks:• Confirmation that local authority depositsretain preferential creditor status, whichis to be tested through the IcelandicSupreme Court.• The impact of exchange ratefluctuations on the value of assetsrecovered by the resolution committeeand on the settlement of the Fund’sclaim, which may be denominatedwholly or partly in currencies other thansterling. Therefore the Fund has followedthe latest Local Authority AccountingPanel recommendation that theestimated recoverable amount isbased on the assumption that localauthority deposits have prioritystatus. The Fund therefore continuesto assume the future recovery on thefull amount of principal and interest upto 22 April 2009. However, animpairment is made to reflectthe loss of interest to the Funduntil the funds are repaid.Failure to retain preferential creditorstatus would have a significant impactupon the amount of the deposit that isrecoverable. Therefore, if preferentialcreditor status is not retained therecoverable amount is approximately 29%.No payment is expected to be receivedprior to the appeals hearing in respectof priority status. In calculating theimpairment the Fund has assumedthat the repayment of priority depositswill be made by December 2011.Recoveries are expressed as a percentageof the Fund’s claim in the administration,which it is expected may validly includeinterest accrued up to 22 April 2009.www.merseysidepensionfund.org.uk Financial Statements 25

9. Investment Management Expenses 10. Non Current AssetsFees paid to the thirteen major investmentmanagers amount to £9.2m (2009/10£8.2m), and constitute the bulk ofthe figure of £10.3m (2009/10 £9.7m)investment management expenses.Charges vary between fund managers andbetween markets and types of security.Charges are calculated as a percentageof the value of the investments.Internal investment managementexpenses are also included here.2011 2010 1.4.2009£’000 £’000 £’000Non Current Assets 30,844 15,670 11,54530,844 15,670 11,545relating to:central government bodiesother local authorities 22,502 12,792nhspublic corporations and trading funds 6,785 964bodies external to general government 1,557 1,91430,844 15,670Payments are being received in respect ofpensioner and deferred members of theMagistrates Courts, which was previouslyan active employer in the Fund. Year 1 isshown as a current asset, but years 2 - 10have been discounted at a rate of 4% andare included above. Also discounted arefuture payments of pension strain to bepaid by employers in 2012/13 onwards.www.merseysidepensionfund.org.uk Financial Statements 27

Financial Statements - Notes to the Accounts11. Current Assets and Liabilities2011 2010 1.4.2009£’000 £’000 £’000AssetsContributions due 24,280 17,687 20,885Amounts due from external managers 10,831 0 0Accrued and outstanding investment income 1,582 234 847Transfer values receivable 3,264 1,700 2,357Retirement Grants paid in advance 36 1,726 0Sundries 9,836 9,039 6,071Provision for bad debts -50 -149 -473Cash at bank 807 724 72550,586 30,961 30,412relating to:central government bodies 950 1,006other local authories 19,946 15,720nhs 0 0public corporations and trading funds 2,559 2,395bodies external to general government 27,131 11,84050,586 30,96128 Financial Statements www.merseysidepensionfund.org.uk2011 2010 1.4.2009£’000 £’000 £’000LiabilitiesTransfer values payable 0 0 0Retirement Grants due 4,408 1,647 4,080Provisions 873 596 541Miscellaneous 10,705 10,673 5,36515,986 12,916 9,986relating to:central government bodies 2,737 1,885other local authories 3,564 3,025nhs 0 0public corporations and trading funds 855 277bodies external to general government 8,830 7,72915,986 12,916Total Current Assets and Liabilities 34,600 18,045 20,426“Sundries” mainly covers generaldebtors, property arrears due, agents’balances and recoverable taxation.“Provision for Bad Debt” relates toproperty rental income, and is basedon an assessment of all individualproperty debts as at 31 March 2011.The main components of “MiscellaneousLiabilities” are the outstanding chargesfor investment management fees,payable quarterly in arrears, custodialand actuarial fees, plus income taxdue, pre-paid rent and administeringauthority re-imbursement.The breakdown of assets and liabilitiesas at 1 April 2009 has not beendisclosed with regards to what bodiesthey relate to as a different informationsystem was in use at that time and thisinformation was not a requirement.

12. Commitments 13. Related Party TransactionsCommitments for investments amountedto £187.69m as at 31 March 2011(2009/10£194.02m). These commitments relateto Private Equity £104.16m, Infrastructure& Opportunities £49.57m and IndirectProperty £33.97m. As some of these fundsare denominated in foreign currencies,the commitment in sterling is subject tochange due to currency fluctuations.There are three groups of related parties:transactions between Wirral Council,as Administering Authority, and the Fund,between employers within the Fundand the Fund, and between Membersand Senior Officers and the Fund.Administration and investmentmanagement costs include chargesby Wirral Council in providing servicesin its role as administering authority tothe Fund, which amount to £4.876m.(2010 £3.838m). Such chargesprincipally relate to staffing requiredto maintain the pension service.Central, finance and IT costs areapportioned to the Fund on the basis oftime spent on Fund work by Wirral Council.Employers are related parties in so faras they pay contributions to the Fundin accordance with the appropriateLocal Government Pension SchemeRegulations (LGPS). Contributions in respectof March 2011 payroll are includedwithin the debtors figure in note 11.A specific declaration has been receivedfrom Pension Committee Members andprincipal officers regarding membershipof, and transactions with, such persons ortheir related parties. A number of Membersact as Councillors or Board membersof particular scheme employers, listedbelow, who maintain a conventionalemployer relationship with the Fund:Liverpool City Council, Knowsley Council,Sefton Council and St Helens BoroughCouncil, all of whose Councillorsmay become scheme members,Wirral Council, Liverpool John MooresUniversity, CDS Housing, Greater HornbyHomes and Wirral Partnership Homes.The value of the transactions witheach of these related parties, namelythe routine monthly payments to theFund of employers’ and employees’contributions, is determined by the LGPSRegulations, and as such no related partytransactions have been declared.Patrick Dowdall, Investment Manager -Alternatives, acts in an un-remuneratedadvisory capacity on 5 investment bodies inwhich the Fund has an interest, Standard Life(£9.1m), F&C (£4.3m) and Zeus (£1.9m), bywhom travel expenses and accommodationwere paid, plus Key Capital (£2.1m) andEnterprise (£0.3m). As such no relatedparty transactions have been declared.Philip Hebson, former Senior UK InvestmentManager, who left the Fund in the secondhalf of the year, is a non-executivedirector of Aberdeen Private EquityFund, in which the Fund is invested,and for which role he received a fee.www.merseysidepensionfund.org.uk Financial Statements 29

Financial Statements - Notes to the Accounts14. Summary of Managers Portfolio Values as at 31 March 20112011 2010£’m % £’m %Externally ManagedJP Morgan (European Equities) 192 3.8 177 3.8UBS (US Equities) 417 8.2 381 8.1Nomura (Japan) 201 4.0 204 4.4Nomura (Pacific Rim) 0 0 182 3.9Nomura (Emerging Markets) 0 0 260 5.6Schroders (Fixed Income) 189 3.7 177 3.8Legal & General (Pooled Assets - UK Equities & Index Linked) 859 16.9 940 20.1Legal & General (Fixed Income) 195 3.8 183 3.9Unigestion (European Equities) 147 2.9 138 2.9M&G (UK Equities) 167 3.3 146 3.1M&G (Global Emerging Markets) 134 2.6 0 0TT International (UK Equities) 148 2.9 139 3.0Blackrock (UK Equities) 165 3.2 143 3.1Blackrock (Pacific Rim) 110 2.2 0 0Newton (UK Equities) 135 2.7 122 2.6Amundi (Global Emerging Markets) 139 2.7 0 0Maple-Brown Abbot (Pacific Rim Equities) 104 2.0 0 03,302 64.9 3,192 68.32011 2010£’m % £’m %Internally ManagedUK Equities 481 9.4 467 10.0European Equities 144 2.8 132 2.8Property (Direct) 252 5.0 210 4.5Property (Indirect) 172 3.4 88 1.9Private Equity 241 4.7 192 4.1Hedge Funds 225 4.4 231 4.9Infrastructure 38 0.8 0 0Opportunities 115 2.3 87 1.9Short Term Deposits & Other Investments 117 2.3 76 1.61785 35.1 1,483 31.7Nomura as at 31 March 2010 had amandate for Japanese, Pacific Rim andEmerging Markets equities. Followinga tender exercise they were retainedfor Japanese equity mandates,but their Pacific Rim and Emerging5,087 100.0 4,675 100.0Market mandates were reallocatedto Blackrock and Maple-Brown Abbot(Pacific Rim equities mandates). Amundiand M&G were appointed for theEmerging Markets equity mandates.30 Financial Statements www.merseysidepensionfund.org.uk

15. Additional Voluntary Contribution Investments 16. Compensatory Added Years (CAYs)The Committee holds assets investedseparately from the main fund.In accordance with regulation 5 (2) (c)of the Pensions Schemes (Managementand Investment of Funds) Regulations1998, these assets are excludedfrom the Pension Fund accounts.The aggregate amount of AVC investments is as follows:The Scheme providers are Equitable Life,Standard Life and Prudential. Individualmembers participating in this arrangementeach receive an annual statementconfirming the amounts held on theiraccount and the movements in the year.2011 2010£000 £000Equitable Life 2,898 3,100Standard Life 6,035 6,834Prudential 4,079 4,40013,012 14,334Changes during the year were as follows:Contributions 1,705 1,575Repayments 3,544 1,879Change in market values 517 1,863In previous years’ accounts, payments ofCAYs to pensioners, and the equivalentrecharge to the employers who grantedthese additional payments were includedwithin the figures of Benefits Payable(Note 4 to the accounts) and“Contributions Receivable” (Note 3 tothe accounts). Since the implementationof the LGPS (Miscellaneous) Regulations2009 SI 3150, which came into force 31December 2009, this has been technicallyincorrect. As it is now unlikely that employerswill take up the option within thoseregulations to convert current rechargeableCAY benefits into Scheme Pension oradditional pension, these transactionsare now shown outside the accounts as aseparate note. A prior period adjustmenthas been made in respect of the financialyear ended 31 March 2010 to removethese entries from the financial statements.2011 2010£000 £000Received from Employers 11,560 12,183Paid as Benefits 11,560 12,183Net Impact on MPF accounts 0 0www.merseysidepensionfund.org.uk Financial Statements 31

Financial Statements - Notes to the Accounts17. Investment Risk18. Financial PerformanceIn order to achieve its statutory obligationsto pay pensions, the Fund invests itsassets, including employer and employeecontributions, in a way that allows it to meetits liabilities as they fall due for payment.It does this by matching assets to liabilitiesvia an Asset Allocation exercise. Duringthe year, MPF targeted a 79% exposure to“growth” assets, such as equities, propertyand alternatives, and 21% to “matching”assets, such as UK bonds or gilts whichprovide the best match for liabilities, i.e.payments of benefits to members in futureyears. Risks in growth assets include issuerrisk and market risk (the greatest risks) whichare mitigated by diversification across assetclasses, markets and sectors. Mitigatinginterest rate risk and inflation risk points tosignificant investment in bonds, but doingso at the expense of “growth” assets wouldincrease the costs of funding. “Matchingassets” backed by the UK Government areconsidered low risk. However, corporatebonds carry some additional issuer risk.The Pension Fund is administered undera budget that is approved by PensionsCommittee each January. That budget isreviewed and, if appropriate, revised thefollowing January, based on the knownand anticipated pattern of expenditureand market movements. In January 2010a budget of £13.81m was approvedfor the financial year 2010/11. This wasrevised in January 2011 to £13.85m.The two main elements of the budget weresalaries and related costs of £2.96m andexternal investment management fees of£7.92m. The final accounts for the yearended 31 March 2011 indicate expenditurelevels of £4.78m on administration costsoverall and £10.3m on all investmentmanagement expenses. The primaryreason for the increase in administrationcosts from the 2010 level of £3.96m isthe payment of one-off severance costsplus the associated pension strain costsof reductions in staffing levels. Investmentmanagement expenses include, as itsmain element, external managers’ fees,but also cover custodian fees, advisorsfees and performance measurement fees.Fees of external managers and the Fund’scustodian are on an ad valorem basis,and will therefore vary as the value of eachportfolio changes. The marginal overspendon external manager fees reflects theincrease in the value of the Fund duringthe year. In addition, in the final accounts,the salaries and related expenses ofthe internal investment team are,in accordance with the PensionsStatement of Recommended Practice(the SORP), shown within investmentmanagement expenses.There is no budget as such for theFund itself. The payment of pensionsis in accordance with the Regulations.Receipts of employers’ contributions are inaccordance with the Triennial Valuation.Consequently, basic pensions transactions,eg. income from employers andemployees contributions, benefits payable,transfers in and out are only contained inthe fund account, and do not form part ofthe budget. However, the scale and timingof such transactions are taken into accountfor cash flow management purposes.The Fund does reserve the right tolevy interest charges on late receiptof contributions from employers. In2010/11 no such charges were levied.32 Financial Statements www.merseysidepensionfund.org.uk

Statement of ResponsibilitiesIan Coleman, Director of FinanceThe Authority’s ResponsibilitiesThe Council as Administering Authority ofMerseyside Pension Fund is required:• To make arrangements for the properadministration of the financial affairsof the Fund and to secure that oneof its officers has the responsibilityfor the administration of those affairs.In this authority, that officer is theDirector of Finance.• To manage the affairs of the Fundto secure economic, efficient use ofresources and safeguard its assets.The Director of Finance’s ResponsibilitiesThe Director of Finance is responsiblefor the preparation of the Fund’sStatement of Accounts which, in termsof the Chartered Institute of PublicFinance and Accountancy Code ofPractice on Local Authority Accountingin Great Britain (the Code), is requiredto present fairly the financial positionof the Fund at the accounting dateand its income and expenditure forthe year ended 31 March 2011.In preparing this statement of accounts,the Director of Finance has:• Selected suitable accounting policiesand then applied them consistently• Made judgments and estimatesthat were reasonable and prudent• Complied with the CodeThe Director of Finance has also:• Kept proper accounting recordswhich were up to date• Taken reasonable steps forthe prevention and detectionof fraud and other irregularitiesThe Director of Finance’s CertificateI certify that the Statement of Accountspresents fairly the financial position of theFund at 31 March 2011, and its incomeand expenditure for the year then ended.Director of Finance28 September 2011www.merseysidepensionfund.org.uk Statement of Responsibilities 33

Audit ReportIndependent auditor’s report onMerseyside Pension Fund to theMembers of Wirral Borough CouncilOpinion on the pension fundaccounting statementsI have audited the pension fundaccounting statements for the yearended 31 March 2011 under theAudit Commission Act 1998.The pension fund accounting statementscomprise the Fund Account, theNet Assets Statement and the relatednotes. These accounting statementshave been prepared under theaccounting policies set out in theStatement of Accounting Policies.This report is made solely to themembers of Wirral Borough Councilin accordance with Part II of the AuditCommission Act 1998 and for no otherpurpose, as set out in paragraph 48of the Statement of Responsibilities ofAuditors and of Audited Bodies publishedby the Audit Commission in March 2010.Respective responsibilities of theDirector of Finance and auditorAs explained more fully in the Statementof Responsibilities for the Statementof Accounts, the Director of Financeis responsible for the preparationof the pension fund’s Statement ofAccounts in accordance with properpractices as set out in the CIPFA/LASAACCode of Practice on Local AuthorityAccounting in the United Kingdom.My responsibility is to audit theaccounting statements in accordancewith applicable law and InternationalStandards on Auditing (UK and Ireland).Those standards require me to complywith the Auditing Practices Board’sEthical Standards for Auditors.Scope of the audit of thefinancial statementsAn audit involves obtaining evidenceabout the amounts and disclosures inthe accounting statements sufficientto give reasonable assurance thatthe accounting statements arefree from material misstatement,whether caused by fraud or error.This includes an assessment of: whetherthe accounting policies are appropriateto the fund’s circumstances and havebeen consistently applied and adequatelydisclosed; the reasonableness ofsignificant accounting estimates madeby the fund; and the overall presentationof the accounting statements.I read all the information in the annualreport to identify material inconsistencieswith the audited accounting statements.If I become aware of any apparentmaterial misstatements or inconsistenciesI consider the implications for my report.Opinion on accounting statementsIn my opinion the pension fund’saccounting statements:• give a true and fair view of thefinancial transactions of the pensionfund during the year ended31 March 2011 and the amount anddisposition of the fund’s assets andliabilities as at 31 March 2011 otherthan liabilities to pay pensionsand other benefits after theend of the scheme year; and• have been properly prepared inaccordance with the CIPFA/LASAACCode of Practice on Local AuthorityAccounting in the United Kingdom.34 Audit Report www.merseysidepensionfund.org.uk

Opinion on other mattersIn my opinion, the information givenin the annual report for the financialyear for which the accountingstatements are prepared is consistentwith the accounting statements.Matters on which I report by exceptionI am required to report to you if,in my opinion, the annual reportdoes not reflect compliance with theLocal Government Pension Scheme(Administration) Regulations 2008 andrelated guidance. The governancestatement is not included in the annualreport. However, the statement isavailable from the pension fund. Apartfrom this I have nothing to report inrespect of the governance statement.Michael ThomasOfficer of the Audit CommissionAudit Commission3rd Floor Millennium House60 Victoria Street, Liverpool, L1 6LD30 September 2011www.merseysidepensionfund.org.uk Audit Report 35

Scheme Administration ReportMerseyside Pension Fund operates theLocal Government Pension Scheme,which provides for the occupationalpensions of employees, other thanteachers, police officers and firefighters, of the local authorities withinthe Merseyside area. It also operatesthe Scheme for members of otherorganisations, which have madeadmission agreements with the Fund.A list of the participating employers isshown at Appendix A. The Schemeis a public service pension schemeregulated by statute through theDepartment for Communities andLocal Government (DCLG).It is a contributory final salary scheme,which is contracted-out of the SecondState Pension (S2P) and is exemptapproved for tax purposes.Development of the SchemeSince 1922 the Local GovernmentPension Scheme has developed from ascheme which just provided pensions forofficers only, to today’s Scheme whichprovides pensions and lump sums forall members, spouses, civil andcohabiting partners and children’spensions, ill health redundancyand death cover.Quite clearly it is a comprehensivescheme and yet, through the co-operationof the Government, employer andemployee representatives, the Schemeis constantly changing and adaptingto modern day needs and demands.Figure 4.Membership31 March 201130,946(+7.27%)42,454(+3.71%)31 March 201028,84840,93548,323(-4.83%)50,776LegislationThe principal regulations wereamended during the year by thefollowing statutory instruments: -The LGPS (Miscellaneous)Regulations 2010 S.I. 2010/2090(into force 30 September 2010)The regulations make a number ofmostly technical clarifications orcorrections to the principal regulations.In addition:Changes have been made that dealwith the new tier 3 ill health retirementregulations enabling a member toaccess their suspended benefits beforeage 65 with an actuarial reduction.Scheme members who are awarded ashare of LGPS retirement benefits in theirdivorce settlement are now permittedto receive benefit from age 60 ratherthan 65 provided an appropriateactuarial reduction is made.ContributorsPensionersDeferred beneficiariesNew rules are introduced aboutaggregating periods of membershipwhen members are re-employed.Explicit clarity is provided to allowadministering authorities to enforce thefunding of Pension Increase liabilities byScheme Employers, inclusive of employerswith no current active employees.Provision is made to enable better handlingof pensions for incapacitated pensionersunable to manage their own affairs.36 Scheme Administration Report www.merseysidepensionfund.org.uk

The LGPS (Benefits, Membershipand Contributions) (Amendment)Regulations 2011(Into force 1 April 2011)The Regulations amend the LocalGovernment Pension Scheme(Benefits, Membership andContributions) Regulations 2007.The provisions are corrective ones dealingwith certain ill-health related amendmentsmade in the Local Government PensionScheme (Miscellaneous) Regulations 2010.Two substantive alterations were madeas a result of the representationsmade on consultation; a reference toregistration with the General MedicalCouncil has been inserted into BenefitsRegulation 20(14). Regulation 4 of theoriginal draft SI, which deals with thesuggested changes that define theelements of the death grant calculationfor active members, has been omitted.Independent Pubic ServicePensions CommissionThe Independent Public Service PensionsCommission set up by the Governmentand Headed by Lord Hutton to look intoreform of the public sector pensionsschemes including the LGPS issued itsinitial call for evidence in June 2010.The Merseyside Pension Fund submittedstatistical information on the membershipof the Fund and a response on theissues raised in the call for evidence.Interim ReportThe Independent Public Service PensionsCommission issued its interim report on7 October 2010 on potential reform ofthe public service pension schemes.Whilst acknowledging the reforms thathad already been made in recent years,including the cap and share arrangementsin some of the schemes, the report saidthat the status quo was not tenable.It said that further reform is necessary inorder to strike a fairer balance, not justbetween current tax payers and publicservice employees, but also betweenfuture and current generations.The Commission issued a new call forevidence on 1 November 2010 to informits final report on public service pensionprovision to which the Fund also submitteda response having regard to the resultsof consultation carried out with schememembers and employers. Some 1,952people took part in a web based surveyon the Fund website over a five day periodand copies of all the comments receivedwere submitted to the Commission.Final ReportLord Hutton published his final reporton the future of public servicepensions on 10 March 2011The final report of the Commission sets outa number of detailed recommendationsto the Government on how public servicepensions can be made sustainable andaffordable in the future, while providingan adequate level of retirement income.The main recommendation of the reportis that existing final salary public servicepension schemes should be replacedby new schemes, where an employee’spension entitlement is still linked to theirsalary (a “defined benefit scheme”) but isrelated to their career average earnings,with appropriate adjustments in earlieryears so that benefits maintain their value.The report suggests that it should bepossible to introduce these new schemesbefore the end of this Parliament,in 2015, while allowing a longertransition, where needed, for groupssuch as the armed forces and police.Other key recommendationsin the report include:• Linking Normal Pension Age (NPA)in most public service pensionschemes to the State Pension Age.• Introducing a Normal PensionAge of 60 for those membersof the uniformed services – armedforces, police and firefighters – whocurrently have a NPA of less than 60;• Setting a clear cost ceiling for publicservice pension schemes byplacing a maximum limit on theproportion of pensionable paythat taxpayers will contribute toemployees’ pensions. Automaticstabilisers will be introduced tokeep future costs undermore effective control;• Honouring, in full, the pension promisesthat have been earned by schememembers (their “accrued rights”)and maintaining the final salary linkfor past service for current members;• Introducing more independent oversightand much stronger governance ofall public service pension schemes;• Encouraging greater memberinvolvement in consultations aboutthe setting up of new schemes,and in the running of schemes; and• Overhauling the current legalframework for public servicepensions to make it simpler.www.merseysidepensionfund.org.uk Scheme Administration Report 37

Scheme Administration ReportProposed Phased Increase in employeecontributions from April 2012As a short term method of reducingemployer costs the Commission reportrecommends increases to employeecontribution rates. The Governmentis seeking to make phased increasesof 3% on average phased in overthree years from April 2012 but withprotection for the lower paid.The impact of such increases in localgovernment where a large proportionof the workforce would be regarded aslow paid would result in increases muchgreater than 3% would be required fromthe remainder of the workforce raisingthe risk of large numbers of optants out.The full report is available from theIndependent Public Service CommissionWebsite. The Government is expectedto announce its proposals for thenew schemes and its decision onrequired increases in employeecontribution rates by autumn 2011.HM Revenue and Customs RegulationsIn his Budget statement on 22 April 2009the Chancellor announced that from6 April 2011 higher rate pensions tax relieffor individuals with an annual income of£150,000 or more would be tapered awayso that for those earning over £180,000tax relief would be worth 20 per cent.Further changes were announced inthe Pre-Budget Report statement on9 December 2009 where the Chancellorof the Exchequer announced that from6 April 2011 the restriction of higher ratepensions tax relief would apply to thosewhose gross income was £150,000 andover. However, individuals with pre-taxincomes, excluding employer pensioncontributions, of less than £130,000 wouldbe unaffected. These provisions wereincluded in the Finance Act 2010.In the June 2010 Emergency Budget,the Government announced that it wishedto consider the reform of pensions tax reliefas it had reservations about the approachadopted by the previous administrationand this resulted in the following revisedarrangements from April 2011:Lifetime AllowanceThe lifetime allowance (LTA) is the limit onthe total value of pension benefits you candraw at retirement without incurring a penaltax charge. The LTA is currently £1.8M butthe Government is proposing to reduce thisto £1.5M from April 2012. Within the LocalGovernment Pension Scheme (LGPS) thisreduction is only likely to impact on very highearners who have a large number of years’membership. The Government is looking atproviding some measure of protection forthose people who have made decisionsbased upon the current LTA limit. LTA usageis measured by multiplying the pensionby a factor of 20 and adding to it anylump sum taken together with thevalue of any Additional VoluntaryContribution (AVC) fund.Annual AllowanceAs its name implies the Annual Allowance(AA) is a limit that applies to the increasein pension benefits from one year to thenext. The current AA had a limit of £255,000and again within the LGPS was only likelyto impact upon high earners who had asignificant pay increase. The new proposalsreduce the AA to £50,000 with effect fromApril 2011 and change the method forvaluing pension benefits against the newlimit. From April 2011 the increase in pensionbenefits is calculated by comparing yourpension benefits adjusted by inflation at thestart of what is referred to as the PensionInput Period (PIP) with their value at the endof the PIP. Within the LGPS the PIP is definedas running from 1st April to 31st March.Members will be able to carry forwardany unused Annual Allowancefrom the previous 3 years.A fact sheet with further informationon the new provisions is available onthe Fund website or on request.Figure 5.Service Standards CharterResults of performance againsttarget are shown below:-TargetWithin target %Within target 7 days%971 Payment of retirement benefits100% 1002 Payment of monthly pensions7 days 1003 Payment of Transfer Values10 days 984 Provision of inward transfer quotes22 days5 Notification of deferred benefits10 days 996 Provide valuation in divorce cases10 days 807 Respond to members’ enquiries(Details given in respect of 12 monthperiod to 31 March 2011)9938 Scheme Administration Report www.merseysidepensionfund.org.uk

Pensions Administration Section -Position Update Report April 2011Actuarial Valuation 31 March 2010 ResultsThe Fund Actuary has completed theActuarial Valuation as at 31 March 2010having regard to the revised FundingStrategy Statement agreed last yearfollowing consultation with employers.The valuation report confirms thatthe market value of the Fund hasincreased from £4.301 billion asat 31 March 2007 to £4.690 billion(unaudited) at 31 March 2010.The past service liabilities havebeen assessed as follows:£millionActive members’ accrued benefits £2,724Deferred pensioners £704The deficit is in respect of past serviceliabilities to date, attributable to active,deferred and pensioner members andhas to be recovered from employers.The Actuary has updated the mortalityassumptions. The allowance madetakes account of recent improvingnational trends but modified to reflectlocal experience. This is an area whichwill need to be kept under review andit might be necessary to adjust thesemortality assumptions again at thenext actuarial valuation in 2013.The total average contribution ratewill therefore be 18% (25 year deficitrecovery) or 21.6% (15 year deficitrecovery, excluding any allowancefor the risk premium loading forcertain admission bodies).Method of expressing and paymentof employer contributionsWith effect from 1 April 2011 employercontributions will be expressed andcertified as two separate elements:1) a percentage of pensionable payroll inrespect of future accrual of benefits,and(2) a schedule of fixed £s amountsover 2011/14, building in anallowance for increases annually in linewith the valuation funding assumptionfor long term pay growth, inrespect of the past service deficit orsurplus subject to review fromApril 2014 based on the resultsof the 2013 actuarial valuation.Earnings Bands for employee contributionsThe earnings bands on which employeecontributions are calculated werechanged for the financial year 2011/2012in line with the Pension Increase Act.The Fund has written to employers toremind them of the correct employerrates to apply from April 2011 as follows:2011/12 Full timeequivalent pay rateContributionrate£0 to £12,900 5.5%£12,900.01 to £15,100 5.8%£15,100.01 to £19,400 5.9%£19,400.01 to £32,400 6.5%£32,400.01 to £43,300 6.8%£43,300.01 to £81,10 7.2%More than £81,100 7.5%Pensioners (including dependents) £2,588Total £6,016This gives a deficit of £1,310 millionand a funding level of 78% comparedto a deficit of £1,063 million and afunding level of 80%, at the previousvaluation as at 31 March 2007.This is compared to 17.8% (25 years)and 20.9% (15 years) at 31 March 2007.The actual rates vary however accordingto the individual experiences of employers.www.merseysidepensionfund.org.uk Scheme Administration Report 39

Scheme Administration ReportKey Improvement AreasThe key improvement areas identifiedfor the pension administrationunit are as follows: -1. Improved efficiency through furtherdevelopment of information technologycapability and application.Scheme members are able to gainonline access to their own pensiondetails and to perform benefitprojections, to enable them to seethe value of their benefits throughthe internet. Further developmentand enhancement of these facilitiesis to take place, following thecompletion of the replacement ofthe current pensions administrationand pensioner payroll I.T. system.2. Enhanced communications,consultation and marketing of thebenefits of the Scheme to employers,employees and beneficiaries.The Fund’s library of Scheme literature,which features a range of informationpacks for new members, dependantsand those planning to retire, hasbeen updated to reflect the changesin pension and tax legislation and isavailable on request and downloadablefrom the Fund’s redesigned websites.The Fund now has a website designedspecifically for Scheme employers’ use.It is password protected and providesassistance to practitioners in theirdaily pension administration duties.The members’ website has been alsobeen improved with separate areasfor pensioners, contributors, deferredpensioners, dependants and FundInvestments, together with a library givingaccess to downloadable Fund literature.3. Development of training policies andprocedures to ensure the quality ofservice provision to Scheme members.’Mid-life’ and ‘Pre-Retirement’ planningcourses have been designed anddelivered to a number of larger Schemeemployers, at their own premises,for many years. They feature speakersfrom the Fund as well other expertsin finance matters such as ‘The StatePension’, ‘Tax and Investments’,‘Additional Voluntary Contributions’and ‘Wills & Probate’.As Employers with a relatively smallworkforce can rarely justify hostingevents solely for their staff, the Fund isdeveloping a programme of centrallyhosted courses, aimed at thosemembers approaching retirement or withat least ten years until retirement age.Hosted at the Fund’s own CunardBuilding, these events will providevaluable information to members whowould not have otherwise benefited.4. Efforts to increase takeup of Scheme membership.Having designed and produced anew range of promotional literature foruse both by Scheme members andemployers, an exercise is required toascertain whether it is being distributedby Scheme employers in accordancewith agreed procedures, to ensuremembers are fully aware of thebenefits of membership of the LocalGovernment Pension Scheme.5. Monitoring Performanceand Quality of ServiceFurther development of procedures to50403020100monitor and evaluate the performanceof the Fund and scheme employersin meeting the agreed servicestandards set out in the Fund PensionsAdministration Strategy will be a priorityover the forthcoming year.Comparisons/BenchmarkingThe Fund continues to participatein the Chartered Institute of PublicFinance and Accountancy (CIPFA)annual benchmarking survey.The results of unit cost comparisonfor the most recent report published(2009/2010) were as follows:£20.25 £19.27 £22.72 £21.77 £47.00 £46.00 £41.00 £39.00MerseysidePension FundCIPFAAverageThe individual totals within the survey showedthat the Fund had a lower cost pensionpayroll than the CIPFA average, but had ahigher expenditure on Communications,which includes postage of relevantinformation to members’ home addresses.Private Sectorin-HousePrivateSectorOutsourcedFigure 6.2009/102008/09The Fund is also continuing to participatein a benchmarking forum consistingof representatives of five of the largestMetropolitan Administering Authorities inan effort to seek out best practice.40 Scheme Administration Report www.merseysidepensionfund.org.uk

Internal Dispute Resolution CasesSince 1 June 2004, individual employersare responsible for considering stage1 appeals against decisions madeby them, with the Fund responsible forconsidering stage 1 appeals against itsown decisions and all stage 2 appeals.During the year to 31 March 2011,there were 4 new cases dealt with by thepanel of Appointed Persons responsiblefor complaints against decisions made bythe Fund. In 3 of these cases the decisiontaken by the Fund was upheld and inthe remaining case the appeal that themember should have been allowed toaggregate memberships was granted.A total of 10 new cases were dealtwith by the panel of Appointed Personsresponsible for considering Stage 2appeals against employer decisions.As in previous years, the majority ofcases have concerned either refusalto grant ill health retirement or to bringpreserved benefits into payment earlyon ill health grounds. Of these appealsagainst employer decisions, in allbut 2 of the cases completed, theemployer decision was upheld. Thetwo cases in which the appeals weregranted concerned early payment ofdeferred benefits on ill health groundsBreakdown of IDRP Cases 2010-2011Total IDRP Cases (Against Fundand Employer Decisions)Refused Ill Health Retirement 4Refused Deferred Benefiton Ill Health Grounds5Refused redundancy Retirement 1Early payment option at age 60 1Payment of death grant 3Total Appeals 14Appeals Against Employer DecisionsEmployer Number Employer DecisionEnterprise 1 OngoingKnowsley 2 1 upheld/1 ongoingLiverpool 3 1 upheld/2 grantedSefton 1 UpheldWirral 1 UpheldKnowsleyHousing Trust2 UpheldTotalAppeals10Appeals Against Fund DecisionsReason for Appeal Number Fund DecisionEarly paymentoption at age 601 UpheldDeath GrantPayment3 UpheldTotal Fundappeals4Ombudsman DecisionNo cases concerning the Fundwere considered by the PensionsOmbudsman during the period.www.merseysidepensionfund.org.uk Scheme Administration Report 41

42Merseyside Pension Fund

Consulting Actuary’s StatementThis is the statement required underRegulation 34(1)(d) of The LocalGovernment Pension Scheme(Administration) Regulations 2008.An actuarial valuation of the MerseysidePension Fund was carried out as at 31 March2010 to determine the contribution rates witheffect from 1 April 2011 to 31 March 2014.The results of the valuation are containedin our report dated 30 March 2011.On the basis of the assumptions adopted,the valuation revealed that the valueof the Fund’s assets of £4,706 millionrepresented 78% of the Funding Targetof £6,016 million at the valuation date.The valuation also showed that a commonrate of contribution of 11.6% of pensionablepay per annum was required fromemployers. The common rate is calculatedas being sufficient, together with contributionspaid by members, to meet all liabilities arisingin respect of service after the valuation date.Adopting the same method and assumptionsas used for assessing the Funding Target thedeficit would be eliminated by an averageadditional contribution rate of 6.4% ofpensionable pay for 25 years. This wouldimply an average employer contributionrate of 18.0% of pensionable pay in total.In practice, each individual employer’sposition is assessed separately and thecontributions required are set out in ourreport dated 30 March 2011. In addition tothe certified contribution rates, payments tocover additional liabilities arising from earlyretirements (other than ill-health retirements)will be made to the Fund by the employers.The funding plan adopted in assessingthe contributions for each individualemployer is in accordance with theFunding Strategy Statement (FSS).Different approaches adopted inimplementing contribution increases anddeficit recovery periods are as determinedthrough the FSS consultation process.The valuation was carried out using theprojected unit actuarial method andthe main actuarial assumptions used forassessing the Funding Target and thecommon contribution rate were as follows:The assets were assessed at market value.The next triennial actuarial valuation of theFund is due as at 31 March 2013. Based onthe results of this valuation, the contributionrates payable by the individual employerswill be revised with effect from 1 April 2014.Actuarial Present Value of PromisedRetirement Benefits for the Purposes of IAS 26IAS 26 requires the present value of theFund’s promised retirement benefits tobe disclosed, and for this purpose theactuarial assumptions and methodologyused should be based on IAS 19 ratherthan the assumptions and methodologyused for funding purposes.In order to assess the value of the benefitson this basis, we have used the sameactuarial assumptions as those used forfunding purposes, other than the discountrate where we have used a rate of 5.6% p.a.both before and after retirement, rather thanthe rates as outlined above. We have alsoused valuation methodology in connectionwith ill-health and death benefits which isconsistent with IAS 19. On this basis, the valueof the Fund’s promised retirement benefitsas at 31 March 2010 was £6,381 million.We have also carried out similar calculationsas at the previous actuarial valuationdate of 31 March 2007, using the sameactuarial assumptions as those used forfunding purposes at that date, other thanthe discount rate where we have used arate of 5.4% p.a. both before and afterretirement. On this basis, the value, for IAS 26purposes, of the Fund’s promised retirementbenefits at that date was £5,877 million.Paul MiddlemanFellow of the Institute of ActuariesMercer LimitedJune 2011For past serviceliabilities(Funding Target)per annumFor future serviceliabilities (CommonContribution Rate)per annumRate of return on investments (discount rate):- pre retirement 6.5% 6.75%- post retirement 5.5% 6.75%Rate of pay increases: 4.5% 4.5%Rate of increases in pensions in payment (in excessof Guaranteed Minimum Pension):3.0% 3.0%www.merseysidepensionfund.org.uk Consulting Actuary’s Statement 43

Appendix AScheme employers with active members as at 31 March 2011Scheduled Bodies Rainhill Parish Council Enterprise Liverpool Cleansing Merseyside Welfare RightsAcademy of St Francis Sefton M.B.C. Enterprise (Liverpool Highways) Ltd Merseyside Youth AssociationArena & Convention Centre Liverpool Southport College Enterprise Liverpool Neighbourhood Grounds Mott Macdonald (M.I.S.)Belvedere Academy St. Helens College Geraud Markets Liverpool Ltd Mouchel (2020 Knowsley Ltd)Birkenhead Sixth Form College St. Helens M.B.C. Glendale (Liverpool Parks Services) Ltd Mouchel (2020 Liverpool/Parkman)Burton Manor Residential College Whiston Town Council Glenvale Transport Ltd/Stagecoach. North Huyton New Deal New FutureCarmel College Wirral Council Graysons Restaurants Ltd North Liverpool Citizens Advice BureauEnterprise South Liverpool Academy Wirral Metropolitan College Greater Hornby Homes Novas GroupHalewood Parish Council Greater Merseyside Connexions Nugent CareHugh Baird College Admission Bodies Helena Partnerships Ltd. One Vision Housing Ltd.King George V College Age UK - Liverpool Higher Education European Partners Credit UnionKnowsley Community College Arriva North West Funding Services Ltd. Port Sunlight Village TrustKnowsley M.B.C. arvato Public Sector Services Limited Hochtief Liverpool Schools Sefton Education Business PartnershipKnowsley Parish Council Association of Police Authorities Hochtief Wirral Schools Sefton New Directions Ltd.Liverpool City Council Balfour Beatty Workplace Ltd Kingswood Colomendy Ltd. South Liverpool Housing LtdLiverpool Community College Beechwood and Ballantyne Housing Assoc. Knowsley Housing Trust Southern Neighbourhood CouncilLiverpool John Moores University Berrybridge Housing Ltd LACORS Taylor Shaw Catering (St Wilfred’s RC School)Merseyside Fire & Rescue Authority Birkenhead Market Services Ltd Lairdside Communities Trust University of LiverpoolMerseyside Integrated Transport Authority Birkenhead School (2002) Lee Valley Housing Association Ltd Vauxhall Neighbourhood Council(MITA) Capita Symonds (Sefton) Liberata (UK) Ltd. Veolia ES Merseyside & HaltonMerseyside Passenger Transport Executive Care Quality Commission Liverpool Association for the Disabled Village Housing Association Ltd(MPTE) Catholic Children’s Society Liverpool Citizens Advice Bureau Wavertree Citizens Advice BureauMerseyside Police Authority CDS Housing Liverpool Hope University Welsh Local Government AssociationMerseyside Valuation Tribunal Cobalt Housing Ltd Liverpool Housing Trust Wirral Autistic SocietyMerseyside Waste Disposal Authority COLAS Liverpool Mutual Homes Ltd. Wirral Citizens Advice BureauNational Probation Service Compass (Scolarest) Liverpool Schools Liverpool Vision Limited Wirral Council for Voluntary ServiceNorth Liverpool Academy Ltd Compass (Scolarest) Wirral Schools Local Government Association Wirral Partnership Homes LtdPrescot Town Council Comtechsa Limited Merseyside LieutenancyRainford Parish Council Crime Reduction Initiatives Merseyside Society for Deaf People44 Appendix A www.merseysidepensionfund.org.uk

Appendix BPensions Committee Items28 June 2010Appointment of Vice-ChairLocal Government ChronicleInvestment ConferenceEngaged Investor Trustee AwardsJune Training EventLGPS - Reform UpdateRepresentation on Outside BodiesTreasury ManagementAnnual Report 2009/10Audit Commission FeesInvestment Performance 2009-10Governance & Risk Working PartyTransferee Admission BodyApplication - Graysons RestaurantsManagement of Alternatives PortfolioMPF Accounts - Year Ended 31 March 2010Audit Commission Progress ReportIMWP Minutes 9/6/2010Merseyside Special Investment Fund27 September 2010Accounts 2009-2010Draft Annual ReportAudit Commission AnnualGovernance ReportOctober Training EventAnnual Employers’ ConferenceLAPFF Conference BournemouthPublic Sector PensionsCommission Altair IT HardwareCommittee MembershipLGPS ReformKnowledge and Skills FrameworkLGPS Trustee Training FundamentalsBanking Contract - Item DeferredFRC Stewardship CodeManagement of Japanese EquitiesManagement of Asia/Pacific EquitiesManagement of Emerging Market EquitiesProvision of Pension AdministrationServices to London BoroughNon Recovery of Sum on Closureof Admission Body - Green ApprenticesMerseyside Special Investment FundTransferee Admission Body Application- Computacenter (UK)Acquisition of Supermarket StoreInvestment Monitoring WorkingParty Minutes 8/9/201016 November 2010Asset AllocationLGC Pension Fund Investment ConferenceStatement of Investment PrinciplesPublic Service Pensions CommissionRestricting Pensions Tax Reliefthrough Existing AllowancesFunding Strategy StatementActuarial Valuation as at 31 March 2010Minutes of Investment MonitoringWorking Party 13/10/2010Payment of Death Grant11 January 2011Pension Fund Budget 2011-12Treasury Management Policyand Strategy 2011/12Appointment of Property Asset ManagerMembers Training 2011Restricting Pensions Tax ReliefAudit Commission Audit PlanRefurbishment at 241 BrooklandsRoad, Weybridge, SurreyGovernance and Risk Working PartyPublic Service Pensions CommissionPassive ManagementStaffing StructureInvestment Monitoring WorkingParty Minutes 24/11/2010Review of Potential Unfunded Liabilitiesfor Admission BodiesWrite off of Property Rental ArrearsLocal Government (Discretionary Payments)(Injury Allowances) Regulations 2011Tuesday, 29 March 2011National Association of PensionsFund ConferenceLGPS Trustees ConferenceCIPFA Annual ConferenceBank SignatoriesPublic Service Pensions CommissionLGPS UpdateMembers’ TrainingCIPFA Knowledge andSkills Framework - InterimCompliance StatementExtension of PIRC ContractCharging PolicyGovernance and Risk Working Party - Minutes241 Brooklands Road, Weybridge,Surrey – Air ConditioningGlobal Custodian ServicesPrivate Equity Programme 2011-14Tax RecoveryInvestment Monitoring WorkingParty-Minutes 23/2/2011Admission Body Application -Northgate Managed ServicesAdmission Body Application -Elite Cleaning and Environmental ServicesAdmission Body Application - Taylor ShawPIRC Contract ExtensionStaffing ReportLease of Part of Castle Chambers,Castle Street, Liverpoolwww.merseysidepensionfund.org.uk Appendix B 45

Appendix CInformation ContactsPosition Name Telephone numberHead of Pension Fund Peter Wallach 0151 242 1309Principal Pensions Officer Yvonne Caddock 0151 242 1333Area Name Telephone numberAccounts Patrick Dowdall 0151 242 1310Investments Leyland Otter 0151 242 1316Members Services Margaret Rourke/Sue Roberts 0151 242 1369Benefits/Payroll Barbara King 0151 242 1352Operations (IT/Communications) Guy Hayton 0151 242 1361Resolution of DisputesEmployer Decisions Principal Pensions Officer 0151 242 1333Fund Decisions Director of Finance 0151 666 3056Scheme Employers ContactsArriva North West Anne Hughes 0151 522 2807Knowsley MBC Yvonne Ashton 0151 443 4177Liverpool City Council Vanessa Duncan 0151 225 4128Liverpool John Moores University Jayne Brown 0151 231 8756Merseyside Fire & Rescue Service Helen Jones 0151 296 4219Merseytravel Linda Gedman 0151 330 1191Merseyside Police Authority Joan Dullahan 0151 777 8189Merseyside Waste Disposal Authority Paula Pocock 0151 255 1444National Probation Service (Merseyside) Kevin Stamper 0151 920 9201Sefton MBC Lynn Abbott 0151 934 4126St. Helens MBC Cathy O’Connor 0174 467 6627Wirral Council Helen Watkins 0151 666 352446 Appendix C www.merseysidepensionfund.org.uk

Report & Accounts 2010/11Merseyside Pension FundPO Box 120, Castle Chambers43 Castle StreetLiverpoolL69 2NWTel: 0151 242 1390Email: mpfadmin@wirral.gov.ukwww.merseysidepensionfund.org.uk