The pension trustees handbook

The Pensions Management InstituteRAISING STANDARDS FOR PENSION PROFESSIONALS AND TRUSTEES Professional membership Qualifications for staff at all levels Study support Conferences and se

THE DEFINITIVE GUIDE TO THE TRUSTEE’S ROLE AND OBLIGATIONS

‘The most comprehensive yet readable

review of this subject on the market.’

BENEFITS AND COMPENSATION INTERNATIONAL

Endorsed by the Pensions

The Pensions Management Institute

RAISING STANDARDS FOR PENSION

PROFESSIONALS AND TRUSTEES

Professional membership

Qualifications for staff at all levels

Study support Conferences and seminars

Trustee development

Publications

On line pensions jobs

www.pensions-pmi.org.uk

The Pensions Trustee’s Handbook 5th edition

The new 5th edition of Robin Ellison’s definitive guide to the trustee’s role and obligations has been fully updated to take into account all changes to the law and regulations since the last edition It is fully

up to date as at autumn 2006.

Crystal clear and jargon-free, it is designed to meet your needs as a trusteeand to answer all your questions in a no-nonsense, practical manner

It is helpfully divided into three parts – I Trusteeship in Law, II Trusteeship

in Practice and III The Bluffer’s Guide, an invaluable source of information.Both the Finance Act 2004 and the Pensions Act 2004 significantly increasedthe responsibilities and liabilities of trustees There has never been a greaterneed for a book that is both expert and accessible

This book:

• focuses on what the rules mean in practice

• teaches the trustee to anticipate problems and how to solve them

• contains no legalese and no jargon

• ends each chapter with summary of points to remember

• includes case studies, checklists and useful addresses

PRAISE FOR THE PENSIONS TRUSTEE’S HANDBOOK

‘A very useful book – one for the shelves of all pension trustees.’

PERSONNEL TODAY

‘Written in a beautifully direct style… it clearly communicates what

UK trustees need to know in order to do a good job… the most comprehensive yet readable review of this subject on the market.’

BENEFITS AND COMPENSATION INTERNATIONAL

‘Scores very highly… mandatory education for your trustee board.’

PENSIONS TODAY

‘Very straightforward and accessible… this is a useful and practical primer for trustees.’

PENSIONS NEWS

Robin Ellison is Head of Strategic Development, Pensions at leading law

firm Pinsent Masons He is a highly experienced speaker and writer, withmany years’ experience of lecturing to pension fund trustees and sitting onboards of trustees, as well as acting as a solicitor He is the author of manybooks including Sweet & Maxwell’s Pensions Law loose leaf service RobinEllison is currently Chairman of the NAPF

PMI is very pleased to be able to offer

two new Awards accredited by the

Qualifications & Curriculum Authority

(QCA) which will be of value to trustees

and others interested in trusteeship

The Pensions Regulator has developed

an e-learning programme to meet its

Trustee Knowledge and Understanding

requirements, which provides a useful

resource for those preparing for the

Awards.

To view the Awards titles and unit

structure please visit the PMI website at

These consistently successful one day seminars are organised twice a year by the PMI Trustee Group Held in June and November, these events help trustees to focus on areas of risk and provide them with the information and guidance they need in order to ensure that their company’s scheme

is running effectively

Trustees at all levels of experience, be they company or member nominated, and those charged with the responsibility of organising and managing trustee boards should definitely not miss out

For further details please contact Samantha Gaffney on

sgaffney@pensions-pmi.org.uk

or phone 020 7392 7425.

The Pensions Management Institute

Independent Pension

Trustee Group (IPTG)

Independent Pension Trustees have

an increasingly important function with many of them acting as chairs of trustee boards and the link between the board and the employer.

Under the auspices of PMI, independent trustees have joined together to form a self-governing group Members sign up to a Comprehensive Code of Guidance and are then part of a network which offers discussion forums, newsletters and support.

For further details please contact Gillian King on

gking@pensions-pmi.org.uk

or visit www.pensions-pmi.org.uk

www.pensions-pmi.org.uk

The Pensions Management Institute

PMI News

-revamped for

trustee readers

PMI has recently amalgamated two

publications, PMI News and PMI Trustee

Group News.

Over the last 10 years, the pensions

world has radically changed and the

level of technical content in both

publications has increased considerably.

We see this opportunity to offer a

combined publication covering technical

and topical pension issues as extremely

beneficial to both pensions professionals

The Pensions Management

Institute (PMI)

Penny Green, President, The

Pensions Management Institute

The Pensions Management Institute (PMI) was one of the first

organisations to recognise that pensions trustees needed greater knowledge and support in order to fulfil their legal and fiduciary responsibilities In 1993 PMI introduced the Trustee Certificate of Essential Pensions Knowledge which quickly became the benchmark for trustees to obtain in order to give themselves insight and

confidence that they were acting in the best possible interests of their pension scheme's members More than 2,400 trustees around the UK have now passed the Certificate

This Certificate has evolved in line with regulatory and best practice changes over the past 13 years and has now been replaced by two separate Awards

in Pension Trusteeship – one purely Defined Contribution (DC) based and one that is both DC and Defined Benefit (DB) These have been developed

in line with the Pensions Regulator's Trustee Knowledge and Understanding (TKU) requirements and, we believe, offer the best possible independent assessment of a trustee’s knowledge

Even before Paul Myners made his recommendations about trustees needing to improve their levels of understanding, PMI had established the PMI Trustee Group offering regular newsletters and two annual seminars with leading pensions practitioners PMI is now developing

Trusteeweb as an even more effective communication forum for

trustees to keep in contact with changes in legislation and exchange ideas on problems and solutions More information on trustee support

from the PMI is available from our website www.pensionspmi.org.uk

As you can see therefore, PMI has been a leading crusader in the campaign to assist pension trustees, at all levels, come to terms with the growing complexities of the task in hand

We are delighted therefore to lend our support and endorsement to this new 5th edition of ‘The Pension Trustee‘s Handbook’ which Robin Ellison has produced in his usual clear and concise fashion In an industry populated by ‘experts’ who actually make pension issues more difficult for the man in the street to comprehend, Robin has justly earned a reputation for clarity, vision and accessibility PMI looks forward to the 5th edition becoming even more popular with trustee readers than its predecessors

THE PENSION

TRUSTEE’S HANDBOOK

5th edition

The definitive guide to the trustee’s

role and obligations

Robin Ellison

Advertising sales negotiated by

All rights reserved No part of this publication may

be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, photocopying, recording or otherwise, without the prior permission of the publisher.

This book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, re- sold, hired out or otherwise circulated without the publisher’s prior consent in any form of binding or cover other than in which it is published and without a similar condition including this condition being imposed upon the subsequent purchaser.

No responsibility for loss occasioned to any person acting or refraining from action as a result

of any material in this publication can be accepted

by the author or publisher.

A catalogue record for this book is available from the British Library

BlackRock is a premier provider of global investment management, risk management and advisory services to institutional and retail clients around the world

We bring our clients a compelling combination of award-winning capabilities and

OPPORTUNITY FAVOURS THE PREPARED MIND.

Issued by BlackRock Investment Management (UK) Limited (authorised and regulated by the Financial Services Authority),

a subsidiary of BlackRock, Inc Registered office: 33 King William Street, London EC4R 9AS Registered in England No 2020394 For your

Reviewing the Employer’s Covenant

Chantrey Vellacott DFK

The Pensions Regulator requires trustees to perform a regular review

of the financial strength of the sponsoring employer This is referred to

as an Employer Covenant Review The main triggers for an employer covenant review are listed below:

Meeting trustee knowledge and understanding requirements

The Regulator requires trustees to have a knowledge and

understanding of the nature and strength of the employer’s covenant and the potential risks to the scheme

Assessing the impact of ‘Events’

The Regulator defines Events as ‘all transactions, acts or failures to act, and in some cases circumstances which effect a company’ Trustees need

to assess the impact of Events on the employer’s covenant.

Informing the technical provisions

The Regulator requires that trustees take account of the employer’s covenant when negotiating the technical provisions

Negotiation of the recovery plan

Where an actuarial valuation reveals a funding deficit (i.e a shortfall in assets compared to the funding target), the trustees and employer are required to agree a recovery plan to bring the scheme up to the target level of funding Trustees need to take account of likely future

cashflows generated by the employer and on alternative ways of protecting the scheme.

Dealing with an insolvent employer

There will be occasions when the size of the pension deficit combined with the employer’s non-pension liabilities mean that there is no realistic prospect of the liabilities ever being repaid from future

cashflows Whenever trustees are concerned that the employer may be insolvent, they should review the employer’s financial position

Chantrey Vellacott DFK has considerable experience of assisting trustees fulfil their obligations in all these areas We adopt a scheme specific approach to each assignment, matching the scope of the review to the needs of the trustees This enables us to provide a very cost effective service.

Insight Investment’s Liability Driven Investment (LDI) Solutions are about placing your pension scheme’s liabilities at the heart of your investment strategy By removing unrewarded risk and aligning your assets with your liabilities, you're better positioned to meet your pension commitments Insight Investment understands that no two pension schemes are the same, which is why we have been trusted with over £25bn in LDI mandates Our Financial Solutions Group, a team of 12 LDI specialists, can work with you and your consultant to design and implement a bespoke LDI solution that meets your specific needs To find out how we can build a solution to deliver against your pension scheme’s unique commitments, contact Roger Price-Haworth, Head of UK Institutional Business Development.

This advertisement is for investment professionals only and should not be passed to private investors Issued

FOREWORD 1

PREFACE 7

PART I TRUSTEESHIP IN LAW 1 INTRODUCTION 17

Background 18

Why the law is involved 20

What is not in this book 21

What is in this book 26

How to use this book 26

2 WHY HAVE A TRUST? 31

Why have a pension fund? 32

Drawbacks to pension funds 34

Why have a trustee? 34

Why have a trust? 36

Why is trust law so complicated? 37

Why were trusts invented? 38

What is a trust? 38

What is a trustee? 39

What kind of trustee am I? 40

Who makes a trust and how? 41

Trust law and other law 41

Jargon 41

Why is trust law different from other law? 42

Trust deed and rules 43

The deed is king… 43

THE PENSION TRUSTEE’S HANDBOOK 5th ed·xi

…but what about the announcements? 45

Do I need to be ‘authorised’? 45

Duties, discretions and powers .46

What kind of scheme am I trustee of? 46

3 TAKING OFFICE 51

Introduction 51

The differences between powers, duties and discretions 54

Duties 54

Discretions 54

Powers 55

Delegation 55

Acts of Parliament and other laws 56

What to watch out for 58

Conflicts of interest 59

A trustees’ meeting 59

4 THE PAPERWORK 65

Introduction 66

The deed 66

The rules 67

The booklet 67

The actuarial valuation 68

The accounts 68

The trustee’s report 68

Investment documents 69

The investment manager’s report 69

Drafting in English 69

5 INVESTING THE ASSETS 73

Introduction 74

Social and ethical investments .74

Choosing and controlling the investment manager 75

Authorisation 76

In-house investment management .76

Monitoring 77

The ‘customer agreement’ 77

Corporate governance .78

Self-investment and loanbacks .79

THE PENSION TRUSTEE’S HANDBOOK 5th ed·xiii

a more ositive

Do your embers

eed dministration

MNPA is a pension administration specialist.

Our priority is to ensure your members receive:

- A friendly and supportive service

- Clear, jargon-free communication

- Real people at the end of the phone who know

what they’re talking about

- Help and information when they need it.

We believe our customer-focused culture can delivery this and more!

For further information about how we can offer your members the level of attention and familiarity of service normally offered by in-house schemes, contact Mike McMillen:

Tel: 01372 200277 Email: mike.mcmillen@mnpa.co.uk Visit www.mnpa.co.uk

experience?

Fashion: risk and reward 79

Assets and liabilities 80

Tax 81

Statement of investment principles 82

Investment performance measurement 82

6 PROVIDING INFORMATION 87

Introduction 87

Failure to comply 90

Policy 90

Communication 90

7 PAYING BENEFITS 95

Introduction 95

Eligibility 96

Death benefits 96

Winding-up 96

Divorce 97

Members and other beneficiaries 97

Discretions 98

8 TAKING ADVICE 107

Introduction 107

Lawyers 109

Actuaries 110

Pension fund managers 111

Investment managers 112

Pensions consultants 114

The accountant 114

Conflicts of interest 115

9 TRUSTEES AND EMPLOYERS 117

Introduction 118

The balance of power 118

The legal relationship 119

Training 120

Disputes with the employer and employment protection 120

Payment 121

THE PENSION TRUSTEE’S HANDBOOK 5th ed·xv

Pictet Asset Management

Pictet Asset Management (PAM) is the institutional asset management arm of Pictet

& Cie, one of the leading independent asset managers in Europe Founded in 1805, Pictet & Cie is owned by eight managing partners

PAM includes all the operating subsidiaries and divisions of the Pictet group responsible for institutional asset management With eleven centres around the world, PAM enjoys a global reach, extending from Geneva, London, Frankfurt, Madrid, Milan, Paris and Zurich to Tokyo, Hong Kong, Singapore and Montreal

Of PAM's 300 employees, almost half are investment professionals We believe this ratio is one of the highest among asset managers.

Our focus is asset management and related areas Assets managed by the Pictet Group exceeded EUR133 billion at 30 September 2006, of which PAM accounted for over EUR68 billion, from clients worldwide

We offer a wide spectrum of investment products, among which are:

Japan and Small Cap products, Sector Funds.

Debt, Money Markets and Enhanced Cash.

An independent

mind Imagine the alternative.

Rod Hearn, Chief Marketing Officer,

10 PROTECTING YOURSELF 123

Introduction 124

The deed 125

Insurance 126

The court 126

Taking advice 127

Criminal liability 127

Corporate trustees 128

Appointing an independent professional trustee 129

The other trustees 129

PART II TRUSTEESHIP IN PRACTICE 11 FUNDING SURPLUSES AND DEFICITS 139

Introduction 139

Schedule of contributions 140

The trustees’ role on surpluses and deficits 141

The special case of insolvency 142

Pension Protection Fund 145

Trustees and contributions 145

12 BENEFIT CHANGES 149

Introduction 149

Benefit improvements 150

Benefit reductions 151

Recovering overpayments 151

13 TRADE UNIONS 153

Introduction 153

Representation and consultation 154

14 STATE PENSIONS 155

Introduction 155

Contracting-out 156

NPSS 157

THE PENSION TRUSTEE’S HANDBOOK 5th ed·xvii

15 EQUAL TREATMENT 161

Introduction 162

Sex discrimination 163

Race discrimination 164

Age discrimination 164

16 EARLY LEAVERS 169

Preservation and what it means 169

Transfers 170

The right to transfer 171

The value of transfers 171

Information about transfers 171

Why transfer payments from one scheme don’t buy years of service in the next scheme 172

Why the transfer won’t buy added years 174

The three transfer values 175

17 MERGERS AND ACQUISITIONS 177

Introduction 178

Background 178

Existing surpluses 179

Expectations 179

Practice 180

Requests for transfer payments 181

Corporate reconstructions 182

18 WINDING-UP THE SCHEME 187

Introduction 187

What winding-up means 188

The tontine 188

19 WHEN YOUR EMPLOYER GOES BUST 189

Introduction 190

Independent trustee 190

Telling the members 191

Deficits 191

THE PENSION TRUSTEE’S HANDBOOK 5th ed·xix

Our convenient, interactive CD-ROM fully covers the PMI’s Trustee Certificate.

For a free introductory pack, contact:

www.ariespensions.co.uk/public/software/trt.htm

tku@ariespensions.co.uk tel: 01536 763 352

Trustee Training

TKU gap?

Aries will help bridge it

THE PENSION TRUSTEE’S HANDBOOK 5th ed·xxi

20 MEMBERS’ RIGHTS 193 Introduction 193 Membership 194 Information 194 Transfers 194 Equal treatment 195 The members and the employer 195

21 GIVING ADVICE 197 Introduction 197 The state pension 200

22 REGULATION 201 Introduction 202 The Pensions Regulator 203 HMRC 203 The Pensions Registry 204 TPAS – the pensions advisory service 204 The Pensions Ombudsman 205 The DWP – The Department of Work and Pensions 205 Financial Services Authority 206 The Pension Protection Fund 206

23 DISPUTES 213 Introduction 214 Internal dispute resolution 215 Alternative dispute resolution 215 The Pensions Ombudsman 216 The courts 217 Disputes with the employer 218 Disputes with the members 218

24 DIVORCE AND FAMILY MATTERS 219 Introduction 219 Gender reassignment 220 Civil partnerships 220

IV BLUFFER’S CASES 245 Investments 245 Surpluses – whose money is it? 246 Equal treatment 248 Employers and trustees 249

V ADDRESSES 251

VI FURTHER READING 257 General 257 Periodicals 258 Law 260

THE PENSION TRUSTEE’S HANDBOOK 5th ed·xxiii

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That’s why Euronext.liffe offers a

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The pensions system 261 Accounting 262 Investment 263 Policy 263 Statistics 266 VII THE PENSIONS YEAR 269 VIII QUALIFICATIONS AND TRAINING 273

IX THE NAPF CHECKLIST FOR PENSION FUND TRUSTEES 275

X THE MYNERS PRINCIPLES 277 Defined Benefit Pension Schemes 277 Defined Contribution Pension Schemes 281

1) Proxy Voting 286 2) Statements of Investment Policy .288 3) Shareholder Activism 291 XII PENALTIES 293 OFFENCES AND CIVIL PENALTIES UNDER

THE PENSIONS ACT 2004 293 OFFENCES 293 CIVIL PENALTIES 296 CIVIL PENALTIES UNDER REGULATIONS UNDER

THE PENSIONS ACT 2004 303 XIII THE PENSIONS REGULATOR TRUSTEE GUIDES 305 Pensions Act 2004 305 XIV CODE OF PRACTICE: TRUSTEE KNOWLEDGE

AND UNDERSTANDING (TKU) 309

INDEX OF ADVERTISERS 351

THE PENSION TRUSTEE’S HANDBOOK 5th ed·xxv

Services for people of working age

Combined Pensions Forcasting

Background – who are we?

The Future Pensions Division, part of the Department for Work and Pensions (DWP), provides a range of information services to help working age people plan for their future financial security

Understanding your likely retirement income is vital when making informed choices about further pension provision, thus enabling individuals to consider whether current provision is adequate to meet their expectations in retirement

The services currently offered by The Future Pensions Division are:

Combined Pension Forecasts (CPFs)

CPF is a Government scheme launched in October 2001 as part of the Government’s plans to encourage individuals to take responsibility for planning and saving for retirement.

CPFs allow individuals to receive details of both their private pension

and their State Pension forecast together This provides them with an

estimate of the income they may expect to receive at retirement from these two vital components of their retirement provision Not only is

the State Pension information available free of charge, but DWP also

provides technical support, standard documentation and IT packages to support the process

Some employers issue CPFs to non-scheme members, showing their occupational pension as ‘nil’ alongside their State Pension forecast Such forecasts are often accompanied by an invitation to join the company pension scheme and usually generate interest Also, by providing an individual’s private and State Pension information

together it can lead many to review their retirement planning and increase contributions.

The CPF exercise also provides an opportunity to ensure personal details held by an employer or provider are consistent with information held

by the DWP Where key data does not match with the Department’s records, we will be unable to supply a State Pension forecast This should prompt the individuals concerned to contact the DWP call centre

to establish why they did not receive a State Pension forecast and correct their record, either with their employer, personal pension provider or DWP.

Recent independent research on the CPF service (DWP Research Report

No 293) and a summary are available free from the DWP website: http://www.dwp.gov.uk/asd/asd5/rrs2005.asp#combined

Individual Pension Forecasts (IPFs)

The IPF concentrates on providing information to support future

planning for working age people The IPF letter is detailed and high quality, tailored to the individual’s circumstances and based on additional personal information provided by the customer This forecast shows:

• The amount of weekly State Pension the customer may get at State Pension Age, to the date of the forecast.

• The amount of weekly State Pension the customer may get at State Pension Age, making assumptions about certain

circumstances after the date of the forecast.

• How future changes to working patterns and employment can impact on future State Pension provision, for example, deferral

of State Pension.

• What can be done to improve basic State Pension, for example, paying voluntary contributions for years that have a deficient record.

Automatic Pension Forecasts (APFs)

Part of the Government’s Informed Choice initiative, the APFs were introduced in May 2003, providing an unsolicited State Pension Forecast

to working age people who have not previously received an Individual Pension Forecast or a Combined Pension Forecast within the preceding

12 months Issue of APFs has been approached in segments:

Pension Tracing Service (PTS)

From April 2005, pension tracing became the responsibility of the Pension Tracing Service (PTS), which operates within The Pension Service The Pension Tracing Service assist individuals to locate any pension pots they may have ’lost touch‘ with.

The Pension Tracing Service has access to a database of over 200,000 occupational and personal pension schemes and can be used, free of charge to search for a scheme.

Pensions Reform in Relation to Forecasting

At the moment forecasts are based on the current law and show how much State Pension an individual may get when they claim it A forecast

is designed to give someone an idea – it is not a guarantee.

There is some important information that we would like people to bear

in mind when they are reviewing their forecasts this year.

The Government launched its White Paper on Pensions Reform ‘Security

in retirement: towards a new pensions system’ on the 25 May 2006 It

contains major proposals that set the direction for the long-term future

of pensions and retirement savings You can access further information about the White Paper or download a copy of the document at: www.dwp.gov.uk/pensionsreform

A message intended for recipients of forecasts about the proposals can

be found at:

www.pensions.gov.uk/combinedpensionforecast/recipient/home.asp The proposals include changes designed to increase the number of people who receive a full basic State Pension.

If Parliament agrees these proposals, State Pension would be worked out differently for people who reach State Pension age from 6th April

2010 – that is men born on or after 6th April 1945 and women born on

Implementing hedge funds in an

institutional portfolio

Stephen Oxley

Managing Director, Pacific Alternative

Asset Management Company

Trustees are being encouraged by their consultants to diversify their investment policy to include alternative investments like hedge funds There is a spectrum of implementation methods used by pension fund investors in hedge funds from fully external management to virtual do-it-yourself

It makes sense, when investing in hedge funds, to spread investments across a number of different styles and managers Some institutional investors have outsourced the difficult business of hedge fund selection, portfolio construction and risk control to external funds of hedge fund managers Others do this while also making direct investments in individual hedge funds Some of the world’s largest pension funds have established an internal fund of funds to do the work themselves Hedge funds are complex There are a huge number of funds to choose from Most, are small businesses with short track-records They have opaque and sometimes exotic investment strategies and success is often dependent on the brilliance of one or two individuals rather than a

“process” They are also dynamic The hedge fund world never stands still, which means what you buy now may not be what you end up with All these aspects are what collectively make hedge fund investment attractive to trustees: high skill combined with low market exposure But they also turn manager research and monitoring into a particularly demanding job.

Most pension funds are initially making relatively small percentage allocations to hedge funds and, for these institutions, outsourcing to

a fund of funds remains the best option As the market develops, we can expect to see more of the core-satellite approach (core fund of funds with satellite direct investments) Investors may well look to their funds of hedge funds as they would their consultant, for strategic and specific advice

Alternative Investments Diversified Solutions for Institutional Investors

40 New Bond Street London W1S 2RX, UK Tel: + 44 207 518 8940 Fax: + 44 207 518 8941 Contact: Stephen Oxley

Authorised and Regulated by the Financial Services Authority

Contact: Von Hughes

Authorised and Regulated by the

Securities & Exchange Commission

Artemis Investment Management Ltd

Background

Established in 1997, Artemis Investment Management Ltd is a dedicated investment management house specialising in high performance active equity management.

Artemis employs experienced people who share the same flair and enthusiasm for fund management Artemis attracts clients looking for above average performance We have established a reputation for strong investment performance in up as well as down markets.

Artemis manages both segregated accounts and unit trusts specifically for institutional investors Fund managers typically have an equity stake in the business and invest their own money in the funds they manage.

Investment Style and Philosophy

Artemis’ philosophy for delivering outstanding investment returns is based on beating the markets Fund managers are not restricted to a house style or process

We seek to exploit market inefficiencies with an absolute return

mindset In practice this means that we only buy a share if we believe that it is undervalued, be it through its capital growth potential or its income stream, and not because it represents a significant proportion of the index Capital is allocated on the basis of perceived share price upside and conviction.

Key features of Investment Process

When looking at larger cap stocks we use our in-house proprietary stock screening system, SmartGARP™, which analyses fundamental data in a systematic fashion and combines this with trends in market behaviour to identify the best opportunities.

For mid and small cap stocks, fund managers generate, research and monitor investment ideas taking into account the long-term earnings prospects of a company in addition to other short term technical factors that may have a material impact on the share price Fund managers conduct their own research.

Product and Services

Institutional UK Alpha – bias to FTSE 350 stocks with at least 60% in FTSE

100 companies and no more than 10% in smaller companies Stock selection favours growth characteristics, whilst taking into account free cash flow returns on invested capital

Institutional UK Growth – this is a multi-cap fund looking for long term

capital appreciation

Institutional Equity Income – this is a predominantly multi-cap fund

that holds convertibles and fixed interest securities as well as European equities It aims to produce a rising income stream combined with capital growth

Institutional UK Special Situations – this is a multi-cap fund and aims to

provide long-term capital growth by exploiting special situations.

Institutional Global Capital – the fund invests in constituents of the MSCI

World Index Whilst diversified across sectors and investment styles, the fund takes significant positions when compared to the benchmark

UK Smaller Companies – the fund aims to provide long-term growth in

excess of the Hoare Govett Smaller Companies Index.

European Equities – the fund invests in FTSE Europe (inc/ex UK) index

constituents, and takes significant positions against the benchmark but

is diversified across sectors and investment styles

Strategic Bond – invests across the whole range of fixed interest securities

from government bonds through investment grade to high yield bonds.

Key Facts

Total Assets Under Management– as at 29th September 2006 £11.2 billion Total Institutional Assets – as at 29th September 2006 £3.6 billion Geographical Distribution of Assets

• UK Equity £7,048.7 million

• European Equity £3,267.9 million

• Global Equity £172.8 million

• Fixed Income £696.5 million

Contact details

Artemis Investment Management Ltd

Cassini House, 57 St James’s Street, London SW1A 1LD

Elaine Gordon – Head of Institutional Business

This advertisement is only intended for institutional investors and their professional advisers Issued by Artemis Investment Management Limited which is

Big Institutional Profits are notoriously shy

creatures who loathe a crowd Yet there are

still those who cannot bring themselves to

stray from the beaten track The Artemis

hunters shun these tired roads and instead

strike out in new directions, free to follow

their hunches and adapt their tactics to

changing conditions Drawing on

years of experience in their respective

fields: in Special Situations,

Equity Income, UK Alpha,

UK Growth or Global Growth.

Secure in the knowledge that they have a comprehensive back-up team in place geared

to the demands of the Institutional investor

If you’d like to join the Artemis hunters ring Elaine Gordon on 020 7399 6217 or e-mail her at elaine.gordon@artemisfunds.com Or alternatively, visit www.artemisonline.co.uk.

Fig 1: Aha! Finally, the search is rewarded.

While others cling to well-trodden

are free to follow their instincts.

THE PENSION TRUSTEE’S HANDBOOK 5th ed·1

FOREWORD

Thousands of individuals still volunteer each year to become trusteesand find it a worthwhile and interesting job Yet being a trustee hasnever been more demanding

The 2004 Pensions and Finance Acts imposed over 100 sets of newrules and regulations on schemes, including scheme specific fundingand tax simplification Trustees must now be familiar with corporatefinance issues in order to assess the strength of the scheme sponsor’scovenant; they are having to find new and innovative ways of fundingpension scheme deficits such as contingent assets and escrowaccounts; and they find themselves under pressure to be responsibleinvestors Meanwhile the new pro-active Pensions Regulator can imposeheavy penalties on trustees who breach the law

In addition to all this change, trustees are now required to have theappropriate level of trustee knowledge and understanding - TKU.Whilst many will acquire their TKU through training courses, it’salways helpful to have access to a handy, up-to-date, practical guide

Based on the author’s years of experience providing advice to pensionschemes and as a trustee, this fifth edition of Robin Ellison’s PensionTrustee’s Handbook provides an invaluable guide for trustees.Written in plain and accessible language, it covers every aspect oftrusteeship from taking advice to investment and paying benefits

The NAPF is continuing to lobby for pensions simplification and alighter regulatory burden for trustees And we have suggested ourown Code of Governance for scheme trust boards and managementcommittees which would replace many of today’s regulations

This handbook will help trustees carry out their day-to-day jobs moreeffectively

Joanne Segars

Chief Executive, NAPF

National Association of Pension Funds

2007

2·THE PENSION TRUSTEE’S HANDBOOK 5th ed

gold market intelligence

Knowledge Expertise Research Statistics

Gold has been hitting the headlines recently thanks to its spectacular performance But the real value of gold to long run investors lies in its uncorrelated returns To learn more about how an allocation to gold can reduce return volatility please contact investment@gold.org, citing "NAPF 2007a"

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Gold’s relevance to UK pension funds

Katharine Pulvermacher, Managing

Director of Investment Research and

Marketing, World Gold Council

Pension fund liabilities are bond-like in nature and the term Liability Driven Investment has become somewhat of an industry buzzword However, the argument that the only or best way to achieve a goal of matching bond-like liabilities, by investing only in bond-like assets, is flawed For even the most conservative schemes, most advisors would suggest that some level of diversification is a wise consideration

Despite this and until recently the majority of pension schemes have employed an asset allocation strategy that remains restricted to few asset classes

While gold, in particular, has investment properties that are more widely recognised in times of extreme events, its usefulness is not limited to times of crisis Several long-term investors have begun to make an allocation to gold, not for reasons of price return, but because

of the strategic role it can play in a portfolio.

First, let us tackle the question of how assets perform relative to one another The lack of correlation between commodities and other asset classes, and particularly the relationship between gold and inflation over the long term, provides pension funds seeking to match the returns on their assets to their liabilities, with an opportunity that should not be overlooked

A key investment characteristic of gold is its lack of correlation with other assets This means that it offers a very reliable diversification of risk that is arguably more valuable to long term investors than price returns alone On average correlation between gold and equities tends

to hover around zero, meaning it offers protection from equity market falls Moreover, when markets fail, historic data shows that this correlation actually falls In other words, the diversification benefits of gold are maintained and may even increase in periods of severe equity market distress – a result not common to other assets pension funds may consider as diversifiers.

Seemingly in sharper focus today, given the asset/liability shortfalls many schemes face, market volatility is an issue with which trustees continue to struggle Some are surprised to learn that gold is generally slightly less volatile than the S&P 500; particularly impactful when one considers that a blue chip stock market index is, as a whole, generally less volatile than each of its components Its low volatility lies in the structure of the underlying market It is worth mentioning that gold’s