2008/09

Annual Report

The City of Westminster Superannuation Fund

CONTENTS CONTENTS ...................................................................................................................................1

FOREWORD .................................................................................................................................2

OVERVIEW ...................................................................................................................................3

MARKET OVERVIEW 2008/09 ..................................................................................................5

IMPLEMENTING THE INVESTMENT STRATEGY IN 2008/09 ...........................................8

FUND AND MANAGER BENCHMARKS..................................................................................9

VALUATION SUMMARY...........................................................................................................11

STATEMENT OF ACCOUNTS ................................................................................................12

STATEMENT OF RESPONSIBILITIES ..................................................................................24

FUND MANAGEMENT AND ADVISERS ...............................................................................26

SCHEME OF DELEGATION ....................................................................................................27

RISK MANAGEMENT AND GOVERNANCE.........................................................................30

GOVERNANCE MATRIX ..........................................................................................................34

GOVERNANCE DOCUMENTS................................................................................................35

PENSION ADMINISTRATION REPORT................................................................................37

CONTACTS .................................................................................................................................45

APPENDIX 1 PARTICIPATING EMPLOYERS......................................................................46

APPENDIX 2 STATEMENT OF INVESTMENT PRINCIPLES............................................47

APPENDIX 3 GOVERNANCE COMPLIANCE STATEMENT .............................................64

APPENDIX 4 COMMUNCIATIONS POLICY .........................................................................70

- 1 -

FOREWORD Dear Member of the City of Westminster Superannuation Fund, I am pleased to provide the attached Annual Report for the City of Westminster Superannuation Fund. I am very much aware of the responsibility, as are the Committee members, of looking after the pension interests of the City Council’s employees and pensioners. At the start of the 2008/09 financial year, few could have predicted the events of the year and the dramatic changes to the global economic landscape. The disappearance of cheap credit and the global recession have resulted in a very difficult year for the world’s financial markets, with the FTSE All Share index for UK shares falling by 29.3% and the world index for shares globally falling by 19.8%. The financial turmoil has resulted in the City of Westminster Superannuation Fund falling in value by 19.7% during 2008/09. At 31 March 2009, the Fund’s total assets were £487.2 million. In 2008/09, the global credit crisis effectively wiped out much of the growth experienced in recent years. Nonetheless, the Fund’s market value this year still remains higher than it was a few years ago. Moreover, world financial markets have been showing some signs of recovery over recent months and the total value of the Fund had increased to £613.9 million at 30 September 2009. This is a rise of £126.7 million (26%) over the first half of 2009/10. The Fund’s long-term objective is to achieve and maintain a funding level of 100% of liabilities to past and present contributors. We aim to continue to meet the cost of future benefit promises and gradually restore the funding level to 100%, whilst keeping employers’ contribution rates stable and affordable. There has recently been some ill-informed press comment about Local Government pension fund’s 'black holes'. There is no black hole. The Pension Fund’s assets and liabilities will be valued by the Fund’s actuary on 31 March 2010 and the contributions required from employers will then be agreed. The UK Government is continuing to look at ways in which pension funds can continue to be affordable, viable and fair. In the meantime, I can assure pensioners and contributors that their pensions are not at risk. I trust you find the following report helpful and we will continue to keep you informed of any developments. Yours sincerely, Peter Hayday Director of Finance

- 2 -

OVERVIEW The City of Westminster Superannuation Fund (the Fund) is part of the Local Government Pension Scheme (LGPS), occupational public sector pension scheme. The LGPS is a funded defined benefit statutory provision and was set up under the Superannuation Act 1972. It is governed by LGPS regulations, subsequent amendments and statutory instruments. This means its benefits are established and payable according to statute. The Council is an Administering Authority and is therefore subject to a statutory obligation for investment performance and the funding position. The Director of Finance has authority as Section 151 Officer, to make statutory decisions under LGPS. Notwithstanding, the Council has authority under Section 101 of the Local Government Act 1972, to delegate their pension investment function to the Superannuation Committee and in this context, includes Governance and Compliance; Investment and Performance Management; Pensions Administration; Preparation of the Annual Report and Preparation of Statement of Accounts, in accordance with the CIPFA Code of Practice. The Fund may admit employees of community or non scheme employers, to the fund, under an admission agreement. Admitted Bodies, Scheduled Bodies and Community Bodies are subject to the standard employer requirements in relation to their employees in LGPS and may need to satisfy further provisions to protect the taxpayer from bearing the cost of their pension liabilities. The fund objective is to achieve a funding ratio of 100%, over a recovery period of 30 years. This period of recovery is appropriate to meet pension fund liabilities, (future cash payments or member benefits) assuming the fund continues as a going concern and outlined in the funding strategy statement. The financial health of the fund depends on how much cash is paid in by employees and employers in contributions; how well assets perform in financial markets and the level of benefits payments to members past and present. Contributions & Benefits Legislation requires regular three yearly actuarial valuations of local authority pension funds to determine the annual contributions to be made by the employing bodies. The valuation on which the employers’ contributions for 2008/09 were based was carried out as at 31 March 2007 and will apply for the three years from 1 April 2008. The next actuarial valuation will be carried out as at 31 March 2010.

- 3 -

Investment Policy and Performance

MARKET OVERVIEW 2008/09 The year to end March 2009 was the worst fiscal year recorded by WM Local Authority Universe. The average fund return was -20% (Westminster -24.4%) with no funds in the WM universe achieving a positive return. In the third quarter of 2008, both the credit and money markets almost ceased functioning as banks and others were unable to gauge counterparty risk. As the world slipped into recession precipated by the global credit crisis, equity markets plummeted whilst volatility surged. Whilst government bonds benefited from the global “flight to quality” the value of corporate bonds collapsed. Just under half of the UK bond exposure was held as corporate bonds. The performance of alternatives was mixed. Only private equity returned a positive for the year at 2% and it seems this will be given up through the remainder of 2009 as valuations are updated. Infrastructure returned -5%, while hedge funds lost 16% over the year. Active currency lost 18%, commodities lost 24% and Global Tactical Asset Allocation (GTAA) lost 27%. Property with a return of -27% had its worst year since WM Universes began. Currency had a major effect with the Euro gaining 16%, and the Yen and the US Dollar almost 40% relative to Sterling over the year. This helped most funds as it cushioned the decline in overseas equity markets but meant that funds had hedged their currency suffered large losses. (Source WM Performance Services – UK Local Authority Annual Review 2008/09 - exception – reference to Westminster average fund return line 2) Fund performance, Risk and Allocation Highlights Pension funds assets had an audited market value of £487.2 at 31 March 2009. The charts below illustrate the asset allocation by region and instrument:

Asset Allocation by Region(as at 31 March 2009)

Other0%

Pacific (ex Japan)3%

UK36%

GBP21%Japan

2%North America

16%

Emerging Markets2%

Europe20%

Emerging Markets Europe GBP Japan North America Other Pacific (ex Japan) UK

- 5 -

Asset Allocation by Instrument(as at 31 March 2009)

Equities51%Fixed Interest

27%

Pooled Funds18%

Cash Instruments4%

Derivatives0%

Cash Instruments Derivatives Equities Fixed Interest Pooled Funds The fund returned -24.4% against the composite benchmark of -23.5% and over three years it has also underperformed the composite benchmark returning -6.8% against -6.6%. The global equity sector returned the poorest performance both annually and since inception returning -37.0% and -12.0% respectively. This was due in part to equity risk together with hedging 75% of the overseas equity currency exposure to Sterling. With the collapse of Sterling during 2008/09, this had a large negative impact on the performance of these funds. Prior to 30 June 2008, the bond manager had a benchmark allocation of 50% fixed interest gilts and 50% non-gilts with a target to outperform the composite bonds benchmark by 1.25% gross of fees over a three year rolling period with a tracking error of 0%-2.5%. Approximately 25% or £150m of the portfolio is invested in bonds. On 30 June 2008, the bond portfolio was split into a passive fixed interest gilts portfolio and an active sterling non gilts portfolio. The benchmark allocation for bonds changed to 60% sterling non gilts and 40% fixed interest gilts as a response to the narrowing of credit spreads in government bonds and to take advantage of a small but attractive premium over government bonds. The flight “to quality” government bonds resulted in the undervaluation non government bonds. This has increased the overall duration of the bond portfolio. At manager level, Majedie, SSgA, Newton and Insight outperformed their benchmarks over the year. Majedie had the strongest results demonstrating the highest capital preservation with -17.6% against -29.3%. As expected managers with higher volatility such as Alliance Bernstein have the largest tracking errors against their benchmarks.

- 6 -

Top 25 Holdings (as at 31 March 2009) Top Holdings Shares/Par Market Value % MPF UK EQUITY 44,470,782.56 76,843,288.72 15.62 UNIVERSAL STERLING FUND 12,806,299.91 12,806,299.91 2.60 BP PLC ORD USD 25. 2,149,341.00 10,128,769.46 2.06 VODAFONE GROUP ORD USD0.11428571 8,205,009.00 10,067,546.04 2.05 ROYAL DUTCH SHELL 'B' SHS 525,497.00 8,040,104.10 1.63 TREASURY 4.750% 07-DEC-2038 6,074,000.00 6,674,111.20 1.36 GLAXOSMITHKLINE ORD GBP0.25 600,242.00 6,524,630.54 1.33 INSIGHT LIQUIDITY ILF GBP LIQUIDITY 2 6,383,723.67 6,383,723.67 1.30 MAJEDIE ASSET MGT SPECIAL SITS INV B ACC NAV 6,000,432.60 5,210,175.62 1.06 HSBC HLDGS ORD USD0.50 (UK) 1,000,053.00 3,947,709.22 0.80 BG GROUP PLC ORD GBP0.10 364,254.00 3,839,237.16 0.78 UK TREASURY 5.750% 07-DEC-2009 3,478,000.00 3,604,564.42 0.73 UNILEVER PLC ORD GBP0.031111 268,812.00 3,540,254.04 0.72 UK TREASURY 8.000 07-JUN-2021 2,221,000.00 3,244,858.79 0.66 ROCHE HLDG AG GENUSSCHEINE NPV 31,658.00 3,032,177.11 0.62 SPRINT NEXTEL CORP COM SER 1 1,156,834.00 2,865,148.57 0.58 ANGLO AMERICAN USD0.54(POST CONSOLIDATION) 236,324.00 2,800,439.40 0.57 GRACECHURCH MORTGAGE FINANCING VAR RT 20-NOV-2056 EUR REGS 3,000,000.00 2,778,732.83 0.56 MORRISON (W) SUPMKT ORD 10P 1,083,800.00 2,766,399.50 0.56 INSIGHT GLOBAL FUNDS II INSIGHT EMER MKT DEBT FD CLS S 305,000.71 2,751,502.91 0.56 CADBURY PLC ORD GBP0.10 464,835.00 2,447,356.28 0.50 PFIZER INC COM STK USD0.05 252,574.00 2,400,012.47 0.49 CANDIDE FINANCING 2006 B.V. VAR RT 20-NOV-2051 EUR 3,000,000.00 2,386,497.56 0.49 STATOIL ASA NOK2.50 191,735.00 2,355,548.96 0.48 WYETH COM 78,581.00 2,354,113.19 0.48 TOP 25 SELECTED HOLDINGS: 104,348,788.45 189,793,201.67 38.57 REMAINING HOLDINGS (666): 199,577,111.59 302,256,028.03 61.43 TOTAL SELECTED HOLDINGS: 303,925,900.04 492,049,229.70 100.00

- 7 -

IMPLEMENTING THE INVESTMENT STRATEGY IN 2008/09 At the beginning of 2008/09, the investment strategy for the pension fund was based predominantly on active equity management. The retained investment managers differ in terms of their investment style, idea generation and portfolio construction resulting in independent and uncorrelated strategies. The fund thereby achieves diversification of equity and investment risk across the portfolio and maximises long term returns through active fund management. Further strategies included spreading investment risk across different asset classes and minimising sector risk by spreading geographical exposure. The performance target for active equity management is to outperform the benchmark by 2.0% p.a. (gross of fees) over a rolling three year period. Material changes to the Fund’s Investments

• £114.7m from State Street Global Assets (SSGA) to a SSGA (MPF) passive UK Equity fund.

• At 31 March 2009, the Fund’s allocations to UK equity and bonds were overweight by 1.7% and 5.5% respectively. Consequently the allocation to global equity was underweight by 7.2%.

• £36.4m from the passive bond portfolio to enhanced financial portfolio as part of a strategic tactical investment given market opportunities.

Whilst the purpose of the investment strategy is to promote the investment interest of Fund, the Superannuation Committee exercise their influence as institutional shareholders in promoting corporate social responsibility and high standards of corporate governance in the companies in which they invest. The Superannuation Committee has therefore adopted, on the behalf of the Fund, policies in respect of Socially Responsible Investment held by its investment managers. Voting arrangements, in this respect, are conducted by the investment managers and this obligation is specified in the investment management agreements. The Fund is a member of the following organisations:

• National Association of Pension Funds (NAPF); • Local Authority Pension Fund Forum (LAPFF); • Chartered Institute of Public Finance Accountants (CIPFA).

- 8 -

FUND AND MANAGER BENCHMARKS The current structure of the Fund was implemented on 1 June 2006 Benchmark Allocation (revised 30 June 2008) Asset Class Allocation Benchmark UK Equity 37.5% FTSE All-Share Index North America Equity 11.3% FTSE AW North America Index (a) Europe (ex-UK) Equity 13.1% FTSE AW Developed Europe (ex-UK) Index

(a) Japan Equity 7.5% FTSE AW Japan Index (a) Asia Pacific (ex-Japan) Equity 4.3% FTSE AW Developed Asia Pacific (ex-

Japan) Index Emerging Markets Equity 1.3% 50% MSCI Emerging Markets Free Index

50% FTSE AW Emerging Markets Index Fixed Interest Gilts 10.0% FTSE A Gilts up to 15 Years Index Sterling Non-Gilts 15.0% iBoxx Sterling Non-Gilt 1-15 Years Index

(a) 75% currency exposure hedge back to sterling

12-month performance and valuation summary to 31 March 2009 Asset class performance summary

Year to 31 March09 Since Inception Asset Class Fund (%) Benchmark% Fund (%) Benchmark%

UK Equity -23.1 -29.3 -6.5 -9.5 Global Equity -37.0 -31.5 -12.0 -9.7 Fixed Interest Gilts

n/a n/a 14.4 15.4

Sterling Non-Gilts

-11.6 -7.8 -2.7 -1.0

ABS Debt n/a n/a -2.4 n/a Total -24.4 -23.5 -6.8 -6.6 12-month performance and valuation summary to 31 March 2009 Manager performance summary

Year to 31 March 09 Since Inception Manager Fund (%) Benchmark% Fund (%) Benchmark%

Majedie -17.6 -29.3 -2.8 -9.5 SSGA -28.8 -29.3 -10.5 -9.5 Alliance Bernstein

-44.0 -31.6 -17.1 -9.6

Newton -30.7 -31.5 -7.4 -9.7 Insight -4.4 0.0 0.0 1.9 Total -24.4 -23.5 -6.8 -6.6 Fund manager performance against benchmarks over rolling 3 year and 10 year periods are not available since Fund’s structure was only implemented 1 June 2006.

- 9 -

Fund Allocation – relative analysis 1 April 2008

Fund Allocation – relative analysis 31 March 2009

- 10 -

VALUATION SUMMARY

Actual Asset Allocation Asset Class 31.03.08 31.03.09

Benchmark Allocation

% £m % £m % UK Equity (Active)

220.5 34.4 92.4 19.3 16.9

UK Equity (Passive)

n/a 0.00 77.0 16.1 16.9

Total UK Equity

220.5 34.4 169.4 35.4 33.8

Global Equity 266.5 41.6 163.3 34.1 41.3 Fixed Interest Gilts

- - 30.9 6.4 10.0

Sterling Non-Gilts

- - 78.8 16.5 15.0

ABS Debt - - 36.4 7.6 0.00 Total Bonds 153.1 23.9 146.1 30.5 25.0 Westminster In-House

8.6 100.0 8.8 100.0 100.0

Total 648.7 - 487.6 - - Source: Mercer

- 11 -

STATEMENT OF ACCOUNTS

Basis of preparation of financial statements

Prior year adjustments

Westminster City Council has adopted the provisions of the Revised Pension SORP to the Pension Fund accounts.

Employees' Contributions

Benefits Paid

Normal Additional Deficit Normal£'000 £'000 £'000 £'000 £'000

Westminster City Council 13,105- 1,808- 341- 6,847- 22,061 Tenant Services Authority 542- 301- - 237- -St Marylebone School 67- - - 34- -St Augustine's School 43- - - 21- -College Park School 21- - - 10- -Housing Corporation. 2,290- 425- - 955- 2,474 Age Concern 39- 9- - 10- 12

Housing 21 485- - - 131- 123 Grey Coat School 86- - - 42- -Hallfield School 63- - - 28- -City West Homes 976- - - 465- 132 Housing & Communities Agency 536- - - 219- -Westminster Academy 127- - - 63- 14 Paddington Academy 91- - - 57- 14 Queens Park School 109- - - 53- 33 Westminster City School 56- - - 27- -Soho Parish 24- - - 11- -King Solomon Academy 9- - - 14- -Housing 21 Scheme 2 4- - - 2- -Pimlico Academy 94- - - 36- -Elonex - - - - 14 Association of Local Government - - - - 57 Capital Careers Limited - - - - 41 Institute of Public Finance - - - - 20 Total Employers Contributions 18,992- 2,543- 341- 9,356- 25,042

The Council has regard to the Local Government Pension Scheme (Amendment) (no.3) Regulations 2007 to prepare aPension Fund annual report by 1 December, annually.

Employers' Contributions Scheduled bodies contributing to the fund and benefits paid

As a result the accounting policy for valuing investments has been changed from using mid prices to bid or offer prices for investment assets and liabilities respectively where there is a bid/offer spread. A prior year adjustment has been made for this change in policy resulting in a diminution of asset value at 5 April 2008 of £2.4 million. An adjustment to the opening net assets of the scheme at 1 April 2008 of £2.4 million and a net decrease in the fund during the year ended 31 March 2008.

The financial statements have been prepared in accordance with the provisions of Chapter 2: Recommended AccountingPractice of the Pension SORP 2007 (revised May 2007) and The Financial Reports of Pension Schemes - A Statement ofRecommended Practice 2007. The 2008 Statement of Recommended Practice has been updated to incorporate therequirements of the new Pensions SORP, The Financial Reports of Pension Schemes - A Statement of RecommendedPractice 2007, published in July 2007 and to take account of the financial instrument reporting standards FRSs 25:Financial Instruments: Disclosure and Presentation and parts of FRS 26 Financial Instruments: Recognition andMeasurement. This is the first year the revised Pension SORP has applied to the Scheme’s financial statements. As aresult amendments to the accounting policy, disclosures and presentation have been made to comply with the RevisedSORP. Where appropriate prior year comparatives have been amended. The pension fund financial statements do nottake account of liabilities to pay pensions and other benefits after the period end.

Benefits paid excludes payments of lump sum retirement benefits and death benefits.

94- 47 Independent Housing Ombudsman 225- - -

- 12 -

STATEMENT OF ACCOUNTS

1. Investments

All gains and losses arising on derivative contracts are reported within “Change in Market Value”.

2. Investment Income

Dividends from quoted securities are accounted for when the security is declared ex-div. Interest is accrued on a daily basis.

3. Foreign Currencies

4. Accruals Concept

5. Contributions

6. Payments to members

Forward foreign exchange contracts are valued by determining the gain or loss that would arise from closing out thecontract at the reporting date by entering into an equal and opposite contract at that date.

Investment income is reported net of attributable tax credits but gross of withholding taxes which are accrued in line withthe associated investment income. Irrecoverable withholding taxes are reported separately as a tax charge.

Investment income arising from the underlying investments of the Pooled Investment Vehicles is reinvested within thePooled Investment Vehicles and reflected in the unit price. It is reported within “Change in Market Value”.

Fixed interest securities are stated at their clean prices, that is, excluding accrued income. Accrued income is accounted for within investment income.

Over the Counter (OTC) derivatives are stated at market value using pricing models and relevant market data as at the year end date.

Westminster City Council have adopted and applied the Revised Pension SORP to the Pension Fund accounts. Theprincipal accounting policies of the scheme are as follows:

Quoted Investments are included at market value. Investments are stated at the bid price or the last traded pricedepending on the convention of the stock exchange on which they are quoted at the date of the net asset statement.Unquoted investments are included at fair value based on valuation advice from the investment manager.

Pooled Investment Vehicles are stated at bid price for funds with bid/offer spreads or single price where there are nobid/offer spreads as provided by the investment manager.

Derivatives are stated at market value. Exchange traded derivatives are stated at market values determined using marketprices. For exchange traded derivative contracts which are assets market value is based on quoted bid prices. Forexchange traded derivative contracts which are liabilities market value is based on quoted offer prices.

Balances denominated in foreign currencies are translated at the rate ruling at the net asset statement date. Asset andliability balances are translated at the bid and offer rates respectively. Transactions denominated in foreign currencies aretranslated at the rate ruling at the date of the transaction. Differences arising on investment balance translation areaccounted for in the change in market value of investments during the year.

Local Government Pension Scheme (LGPS) financial statements are drawn up under the accruals concept (i.e. to reflectincome and expenditure as it is earned or incurred rather than when received or paid) on a consistent basis. The policiesadopted in applying the accruals concept to significant categories of income and expenditure is set out in paragraphs 5 to8.

Employees normal contributions including additional voluntary contributions are accounted for at the time equivalent towhen they are deducted from pay or when they have been remitted from participating authorities. Employer normalcontributions are accounted for in the period they are due under a schedule of contributions.Employer deficit funding contributions are accounted for on the due date on which they are payable in accordance with therecovery plan under which they are paid.

Benefits are accounted for in the period in which the member notifies the Fund of the decision on the type or amount ofbenefit to be taken (a liability arises at the date at which a choice is made) or if there is no member choice on the date ofretirement or leaving.

- 13 -

STATEMENT OF ACCOUNTS

8. Expenses

9. Additional Voluntary Contributions

The AVC assets held at the year end and their respective investment performance is set out below:

Additional Voluntary Contributions Equitable Life Total £'000 £'000

Opening balance of AVC investment 1,025 548 1,573Contributions received in the year 99 - 99Interest and bonuses - - -Sales of investments to settle benefits due to members -64 -35 -99Subtotal 1,060 513 1,573Change in market value of AVCs -109 -29 -138Closing balance as at 31 March 2009 951 484 1,435

10. Recharges from General Fund

£'000

The authority recharge officer time undertaken working on pension fund requirements. This includes financial, legal, andhuman resources recharges as well as LPFA (London Pension Fund Authority) who administer the fund.

7. Transfers Individual transfers in or out are accounted for on a cash basis when paid or received which is normally when memberliability is accepted / discharged. Group transfers are accounted for in accordance with the terms of the transferagreement.

The scheme provides for members to pay Additional Voluntary Contributions (AVCs) to increase their benefit entitlement atretirement subject to HMRC limits. Such contributions attract tax relief and provide increased benefits. AVCs for thedefined benefit scheme are not included within the accounts and are paid over to be invested separately from the pensionfund in the form of individual insurance policies with Aegon (Scottish Equitable) and Equitable Life. Members participatingin this arrangement receive an annual statement made up to the 31 December confirming the amounts held to theiraccount and movements in the year. At 31 March 2009 the total value of these AVCs was £1.4 million (31 March 2008 -£1.6 million).

Aegon (Scottish Equitable)

Additional Voluntary Contributions are not included in the pension fund accounts in accordance with Regulation 5(2) (c) of the Pension Scheme (Management and Investment of Funds) Regulations 1998 (SI 1998 no. 1831).

Expenses are accounted for on an accruals basis to ensure expenses for the full accounting period are accounted for in the fund account.

- 14 -

STATEMENT OF ACCOUNTS

City of Westminster Superannuation Fund

Income and Expenditure (Fund Account) for the Year Ended 31 March 2009

Contributions and benefits Note 2008/09 2007/08£'000 £'000

Contributions 1 31,232 25,228Transfers in 2 4,650 6,210Other Income 3 10 -

35,892 31,438

Benefits 4 -30,619 -28,317Payment to and on account of leavers 5 -4,776 -5,082Other Payments 6 -25 -Administrative & other expenses borne by scheme 7 -1,228 -896

-36,648 -34,295

Net additions/withdrawals from dealing with members -756 -2,857

Returns on investmentInvestment income 8 21,680 23,178Change in market value of investments (realised & unrealised) 9(a) -174,426 -37,403Investment management expenses 10 -2,319 -3,107Taxation 8 -1,015 -1,395

Net return on investments -156,080 -18,727

Net increase/decrease (-) in fund in year -156,836 -21,584

Net assets of the scheme at 1 April as previously reported 640,074 664,089Prior year adjustment - -2,431

As restated 640,074 661,658

Net assets of the scheme at 31 March 483,238 640,074

- 15 -

STATEMENT OF ACCOUNTS

City of Westminster Superannuation Fund

Net Asset Statement as at 31 March 2009

Note 2008/09 2007/08as restated

£'000 £'000Investment Assets 9

Fixed interest securities 9(b) 132,858 139,154Equities 9(c) 249,230 469,707Pooled investment vehicles 9(d) 89,895 26,859Derivative contracts 9(e) 35 -Cash 9(f) 20,031 15,360Other investment balances 9(g) 3,876 4,616Other investments 9(g) 48 56

Investment liabilities 9

Derivative contracts - Forward FX 9(e) -6,484 -6,454 Other investment balances 9(g) -2,172 -1,211

Current assets 11

Contributions due from employers 1,200 346Contributions due from employees 226 183Other current assets 42 -Internal mortgage 1 -

Current liabilities 12

Cash Overdrawn 9(g) -4,540 -7,486 Unpaid benefits -454 -169 Accrued Expenses -484 -832 Other current liabilities -70 -56

Net assets of the scheme as at 31 March 2009 483,238 640,073

The pension fund's financial statements do not take account of liabilities to pay pensions and other benefits after the period end.

- 16 -

STATEMENT OF ACCOUNTS

1 Contributions 2009 2008£'000 £'000

EmployersNormal 18,992 14,198Deficit Funding 341 2,832Additional 2,543 945MembersNormal 9,356 7,159Additional Contributions - 94

31,232 25,228

2 Transfers in 2009 2008£'000 £'000

Group transfers in from other schemes - -Individual transfers in from other schemes 4,650 6,210

4,650 6,210

3 Other income 2009 2008£'000 £'000

Interest from loan to general fund 3 -Income from Other Investments 7 -

10 0

4 Benefits 2009 2008£'000 £'000

Pensions 25,042 24,356Commutations & lump sum retirement 5,080 3,391Purchase of annuities - -Lump sum death benefits 497 570

30,619 28,317

5 Payment to and on account of Leavers 2009 2008£'000 £'000

Refunds to members leaving service 16 19Payment for members joining state scheme - -Purchase of annuities to match preserved benefits - -Group transfers to other schemes - -Individual transfers to other schemes 4,760 5,063

4,776 5,082

6 Other payments 2009 2008£'000 £'000

Premiums on term insurance policies - -Any other category of expenditure 25 -

25 -

The Employer's regular contibutions to the Fund for the accounting period 31 March 2010 are estimated to be £15.59M Westminster City Council; £145,000 LPFA. In addition the Employer expects to pay £2.82M directly to beneficiaries as part of unfunded benefits.(Source: Hewitts Associates Limited; Hymans Robertson LLP)

- 17 -

STATEMENT OF ACCOUNTS

7 Administrative expenses 2009 2008£'000 £'000

Administration and processing 690 543Actuarial fees 116 43Legal and other professional fees 19 -London Pension Fund Authority 403 310

1,228 896

8 Investment Income 2009 2008£'000 £'000

Income from fixed interest securities 7,812 7,557Dividends from equities 12,346 15,456Income from Index-linked securities - -Income from pooled investment vehicles 854 -Net rents from properties 0 -Interest on cash deposits 668 165Annuity income - -

Total investment income 21,680 23,178Irrecoverable withholding tax -1,015 -1,395

Net investment income 20,665 21,783

9 Investments9(a) Change in market value( realised & unrealised)

Statement of Accounts

Value at 31 Mar 08

Mid Pricing categorised as per BNY

MellonPrior Year

Adjustment

Bid Value as at 1 April

2008

Cost of Purchases

and derivative payments

Sale proceeds

and derivative receipts

Change in market value

Value as at 31-Mar-09

£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Fixed interest securities 153,798 139,136 18 139,154 186,724 -183,423 -9,597 132,858Equities 484,851 472,157 -2,449 469,707 271,226 -402,056 -89,647 249,230Pooled investment vehicles - 31,031 -4,173 26,859 117,592 -9,137 -45,419 89,895Derivative contracts - - - - 3,008 -3,487 514 35Cash Instruments - 11,186 4,173 15,360 248,768 -244,523 426 20,031

638,649 653,510 -2,431 651,080 827,318 -842,626 -143,723 492,049Derivative Forward FX - - - -6,454 50,620 -19,537 -31,113 -6,484

Cash deposits - -7,664 - -1,211 - -1,154 193 -2,172other investment balances 56 4,616 - 4,616 - -957 217 3,876

638,705 650,462 -2,431 648,031 877,938 -864,274 -174,426 487,269

The change in market value of investments during the year comprises all increases and decreases in the market value ofinvestments held at any time during the year including profits and losses realised on sales of investments during the year.

Transaction costs are included in the cost of purchases and sale proceeds. Transaction costs include costs charged directly to thescheme such as fees, commissions, stamp duty and other fees. Transaction costs incurred during the year amounted to £1.08M(2007/08:£1.9M). In addition to the transaction costs disclosed above, indirect costs are incurred through the bid-offer spread oninvestments within pooled investment vehicles. The amount of indirect costs is not separately provided to the scheme.

Cash balances of £11m were presented in the 2007/08 accounts as Current Assets and therefore do not form part of theInvestment Asset Table in Note 9a. In 2008/09 Westminster City Council have presented all investment assets (which include cashbalances managed by fund managers) within Investment Assets. Cash managed internally by Westminister City Council is shownas "Current Assets/Liabilities" in the net asset statement.

- 18 -

STATEMENT OF ACCOUNTS

9(b) Fixed interest securites 2009 2008£'000 £'000

UK public sector quoted 36,130 139,154UK corporate quoted 47,654 -Overseas corporate quoted 49,074 -

132,858 139,154

9(c) Equities 2009 2008£'000 £'000

UK quoted 92,609 215,104UK unquoted - -Overseas quoted 156,621 254,603Overseas unquoted - -

249,230 469,707

9(d) Pooled investment vehicles 2009 2008£'000 £'000

UK Managed Funds Property - -Other 89,895 26,859

UK Unit Trusts Property - -Other - -

89,895 26,859

9(e) Derivative contracts 2009 2008£'000 £'000

Future contracts 35 -

35 -

Type of future Expiration

Economic Exposure

Value

Market Value

£'000 £'000< 1 YEAR -1,109 -11< 1 YEAR -864 -7< 1 YEAR -3,009 -8< 1 YEAR 1,991 38< 1 YEAR 220 23

-2,771 35

£'000 £'000

Forward foreign exchange -6,484 -6,454

Alliance Bernstein Investment Managers -39 -1,241Newton Investment Managers -5,860 -5,070Insight Investment Managers -595 -143

-6,494 -6,454Insight Investment Managers 10 -

Total -6,484 -6,454

Derivative receipts and payments represent the realised gains and losses on futures contracts.

The scheme's objective is to decrease risk in the portfolio by entering into futures positions to match assets that are already held inthe portfolio without disturbing the underlying assets.

TOPIX Index Future - TSE

UK Long Gilt Future - LIFEuro BOBL Future - EUXEuro Schatz Future - EUXUS Treasury Bond - CBT

- 19 -

STATEMENT OF ACCOUNTS

9(f) Cash Instruments 2009 2008£'000 £'000

UK 19,190 15,360Overseas 841 -

20,031 15,360

9(g) Other investment balances 2009 2008£'000 £'000

Amounts due from broker - -Internal mortgage 48 56Outstanding dividends & Recoverable Witholding Tax 3,876 4,616Cash deposits -2,172 -1,211Cash margin - -

1,752 3,461

10 Investment management expenses 2009 2008£'000 £'000

Investment management fees 2,824 3,107Over provision of management fees -505 -

2,319 3,107

11 Current Assets 2009 2008£'000 £'000

Internal Mortgage 1Contribution -due from Ees & Ers in respect of Normal 737 529Contribution - Early Retirements 689 -Debtors 42 -

Total 1,469 529

12 Current Liabilities 2009 2008£'000 £'000

Cash Overdrawn -4,540 -7,486Unpaid benefits -454 -169Accrued expenses -484 -832AVC Creditor -70 -56

Total -5,548 -8,543

13 Details of scheme membership and a list of the employers contributing to the fund is shown below:

Membership Statistics as at March 2009Employer Actives Deferred Pensioners DependantsWestminster City Council 3,387 4,206 3,390 878 Housing Corporation 1 591 318 40IPF - 3 6 -Queens Park FSU - 6 5 1Age Concern 2 15 8 2Association of Local Government - 14 6 1Capital Careers Ltd - 49 9 -Independent Housing Ombudsman 28 12 3 1Housing 21 123 52 58 2City West Homes 178 81 16 -Elonex Ltd - 3 1 -Paddington Academy 34 23 3 -Westminster Academy 44 16 2 -King Soloman's Academy 3 - - -Pimlico Academy 36 2 1 -Homes & Communities Agency 254 - - -Tenants Services Authority 229 - 2 -

4,319 5,073 3,828 925

Source: LPFA Monthly Report (March 2009) for City of Westminster

- 20 -

STATEMENT OF ACCOUNTS14 Asset allocation

The actual allocation of investments at 31 March 2009 is set out in note 9 (Investments), and below:

Segregated Funds

Pooled Investment

Vehicles

Derivatives Total

£’000 £’000 £’000 £’000Majedie 87,229 5,210 - 92,439 18.97StateStreet 6 76,843 - 76,850 15.77Insight 138,230 7,081 12 145,323 29.82Berstein 68,502 - 23 68,524 14.06Newton 94,537 760 - 95,297 19.56City 8,823 - - 8,823 1.81Other 12 - - 12 0.01Total 397,339 89,895 35 487,269 100.00

15 Related Party Transactions

Asset Class Mandate

%

Asset Manager

The Superannuation Committee invests in segregated portfolios, pooled investment vehicles and derivative contracts.The Superannuation Committee have authorised the use of derivatives for efficient portfolio management purposes toreduce certain investment risks.

It is still the Council’s view that due to the nature of the Committee’s membership, there are no relevant related party transactions for accounting purposes.

UK EquityUK Equity

Global Equity

The exposure to equities and fixed interest include futures on an economic exposure basis. Other than the PooledInvestment Vehicles and OTC derivatives (foreign exchange contracts) all the investments described above arequoted on recognised stock exchanges. The Superannuation Committee regard all the investments of the DefinedBenefit Scheme as readily marketable.

BondsGlobal Equity

Cash

- 21 -

STATEMENT OF ACCOUNTSSTATEMENT OF THE ACTUARY FOR THE YEAR ENDED 31 MARCH 2009

Introduction

Actuarial Position

1.

2.

3.

• 14.1% of pensionable pay to meet the liabilities arising in respect of service after the valuation date.Plus•

Less• 2.6% of pensionable pay in respect of assumed additional investment returns over the period to 1 April 2011.

•

• Changes were made consistent with the Finance Act 2004.•

4.

5.

The Scheme Regulations require that a full actuarial valuation is carried out every third year. The purpose of this is toestablish that the City of Westminster Pension Fund (the Fund) is able to meet its liabilities to past and present contributorsand to review employer contribution rates. The last full actuarial investigation into the financial position of the Fund wascompleted as at 31 March 2007, in accordance with Regulation 77(1) of the Local Government Pension SchemeRegulations 1997.

The valuation as at 31 March 2007 showed that the funding ratio of the Fund had improved since the previous valuationwith the market value of the Fund’s assets at that date (of £664.1M) covering 79% of the liabilities allowing, in the caseof current contributors to the Fund, for future increases in pensionable remuneration. The main reasons for theimprovement in the funding ratio since 31 March 2004 were higher than expected investment returns on the Fund'sassets, and use of a more optimistic discount rate for Scheduled Bodies once their members have left service. Thesehad been partially offset by the impact of changes in the actuarial assumptions used to reflect higher price inflationexpectations and longevity improvements.

The valuation also showed that the required level of contributions to be paid to the Fund by participating Employers (inaggregate) with effect from 1 April 2008 was as set out below:

6.1% of pensionable pay to restore the assets to 100% of the liabilities in respect of service prior to the valuationdate, over a recovery period of 30 years from 1 April 2008.

Rates of contributions paid by the participating Employers during 2008/09 were based on the actuarial valuation carried out as at 31 March 2007.

These figures are based on the Regulations in force, or enacted by Parliament and due to come into force, at the timeof signing the valuation report and, in particular, allowed for the following changes to the Fund benefits since theprevious valuation:

The Rule of 85 retirement provisions were reinstated, and subsequently removed again. Transitional protections forsome categories of member were extended to widen their coverage.

A new scheme has been put in place which came into effect as at 1 April 2008. All existing members transferred tothe new scheme as at that date.

The cost of future benefit promises had increased compared with the costs identified in the previous valuation. This wasdue to the combined impact of benefit changes, changes in economic conditions and increased life expectancy.

The majority of Employers participating in the Fund pay different rates of contributions depending on their pastexperience, their current staff profile, and the recovery period agreed with the Administering Authority.

The rates of contributions payable by each participating Employer over the period 1 April 2008 to 31 March 2011 are setout in a certificate dated 28 March 2008 which is appended to our report of the same date on the actuarial valuation.

If the assumptions are borne out in practice, the rate of contribution for each employer would increase as at 1 April2011 due to the cessation of the allowance for assumed additional short term investment returns. It would then continueat the resultant level for the balance of the recovery period used for that employer, before reverting to the relevant longterm rate. In practice contribution rates will be reviewed at the next actuarial valuation which is due to be carried out asat 31 March 2010.

The contribution rates were calculated using the projected unit actuarial method and taking account of the Fund’sfunding strategy as described in the Funding Strategy Statement.

- 22 -

STATEMENT OF THE ACTUARY FOR THE YEAR ENDED 31 MARCH 2009

Actuarial Position (Continued)

6. The main actuarial assumptions were as follows:

Discount rate for periods

In Service

Admitted Bodies 6.2% a yearScheduled Bodies 6.2% a year

Left Service

Admitted Bodies: 5.2% a yearScheduled Bodies: 6.2% a year

Short term investment returns until 1 April 2011

Equity / Property assets 7.1% a yearOther investments 5.2% a year

Rate of general pay increases 4.7% a year

Rate of increases to pensions in paymen3.2% a year

Valuation of Assets market value

7.

Hewitt Associates LimitedMay 2009

This statement has been prepared by the Actuary to the Fund, Hewitt Associates Limited (previously Hewitt Bacon &Woodrow Limited), for inclusion in the accounts of Westminster City Council. It provides a summary of the results of theactuarial valuation which was carried out as at 31 March 2007. The valuation provides a snapshot of the fundingposition at the valuation date and is used to assess the future level of contributions required.

This statement must not be considered without reference to the formal valuation report which details fully the contextand limitations of the actuarial valuation.

Hewitt Associates Limited does not accept any responsibility or liability to any party other than our client, WestminsterCity Council, in respect of this statement.

- 23 -

STATEMENT OF RESPONSIBILITIES The authority is required:

• To make arrangements for the proper administration of its financial affairs and

to secure that one of its officers has the responsibility for the administration of

those affairs (usually that officer is the Director of Finance);

• To manage its affairs to secure economic, efficient, and effective use of

resources to safeguard its assets;

• To approve the statement of accounts.

The Director of Finance’s Responsibilities The Director of Finance is responsible for the preparation of the fund’s statement of accounts in accordance with proper practices set out in the CIPFA Code of Practice on Local Authority Accounting. In preparing this statement of accounts the Director of Finance has:

• Selected suitable accounting policies and then applied them consistently;

• Made judgements and estimates that were reasonable and prudent;

• Complied with the Code of Practice on Local Authority Accounting;

• Kept proper accounting records which were up to date;

• Taken reasonable steps for the prevention and detection of fraud and other

irregularities.

Peter Hayday Director of Finance

- 24 -

GOVERNANCE ARRANGEMENTS

FUND MANAGEMENT AND ADVISERS Administering Authority The City of Westminster Superannuation Committee Cllr Suhail Rahuja (Chair) Cllr. Anthony Devenish Cllr. Margaret Doyle

Cllr. Cyril Nemeth Cllr. Ian Rowley Cllr. Robert D’Cruz

Officers: Peter Hayday (Director of Finance) Peter Carpenter (Deputy Director of Finance) Ian Woodall (Chief Investment Officer) Permitted Observers: Lord Mayor Leader of the Council Leader of the Opposition Union Representative Advisers: Mercer Actuaries Hewitt Hymans Robertson (LPFA) AVC Providers AEGON (Scottish Equitable) Equitable Life Auditors Audit Commission Custodians Bank of New York Mellon SA/NV Investment Managers AllianceBernstein Limited Insight Investment Management Majedie Asset Management Newton Investment Management State Street Global Advisors Legal Advisors Sharpe Pritchards LLP

- 26 -

SCHEME OF DELEGATION The governance policy sets out the pension fund’s scheme of delegation and terms of reference, structure and operational procedures of the delegation. The Council is the Administering Authority for the Pension Fund. The Council has delegated to the Superannuation Committee various powers and duties in respect of its administration of the fund. The Superannuation Committee is an Executive body. The formal decision making body is the Superannuation Committee. It has full delegated powers from the council and considers the following activities of the fund:

• Investment management arrangements; • Monitoring investment activity and performance; • Overseeing administrative activities; • Ensuring compliance with relevant laws and regulations; • Provision of guidance to officers in exercising delegated powers.

Superannuation Committee The Committee is comprised of 6 members, all of whom are Elected Members from the Council. The majority party provides 5 Members and the Opposition provides one. Committee meetings may have 4 others who attend as Observers. A Trade Union Official may represent the Fund’s members. All Observers receive copies of agendas and reports. The Superannuation Committee meets at least four times a year. Its responsibilities are:

1. To agree the investment strategy having regard to the advice of the Fund Managers and the independent adviser.

2. To monitor performance of the Fund and of the individual Fund Managers.

3. To determine the Fund management arrangements, including the appointment and termination of the appointment of the Fund Managers, Custodians and Fund Advisers.

4. To agree the Statement of Investment Principles, the Funding Strategy Statement, the Business Plan for the Fund, the Governance Policy Statement, the Communications Policy Statement and the Governance Compliance Statement and to ensure compliance with these.

5. To approve and publish the pension fund annual report.

6 To prepare and publish a pension administration strategy.

7. To make an admission agreement with any admission body.

- 27 -

8. To ensure compliance with all relevant statutes, regulations and best practice with both the public and private sectors.

9. To determine the compensation policy on termination of employment and to make any decisions in accordance with that policy other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council (which fall within the remit of the Appointments Sub-Committee).

10. To determine policy on the award of additional membership of the pension fund and to make any decisions in accordance with that policy other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council (which fall within the remit of the Appointments Sub-Committee).

11. To determine policy on the award of additional pension and to make any decisions in accordance with that policy other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council (which fall within the remit of the Appointments Sub-Committee).

12. To determine policy on retirement before the age of 60 and to make any decisions in accordance with that policy other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council (which fall within the remit of the Appointments Sub-Committee).

13. To determine a policy on flexible retirement and to make any decisions in accordance with that policy other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council (which fall within the remit of the Appointments Sub-Committee).

14. To determine any other investment or pension policies that may be required from time to time so as to comply with Government regulations and to make any decisions in accordance with those policies other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council which fall within the remit of the Appointments Sub-Committee).

Role of S151 Officer: Director of Finance The role of section 151 officer is delegated to the Director of Finance of City of Westminster, pursuant to Section 101 of the Local Government Act 1972 and by the Executive under Section 15 of the Local Government Act 2000: “Undertake all day to day administration of the Pension Fund within the policy laid down by the Superannuation Committee including the authorisation of admission agreements with transferee admission bodies pursuant to Best Value arrangements, as required by the Local Government Pension Scheme Regulations.” The Director of Finance may authorise officers in his department to exercise on his behalf, functions delegated to him. Any decisions taken under this authority shall remain the responsibility of the Director of Finance and must be taken in his name and he shall remain accountable for such decisions.

- 28 -

Accountability and publication of information Details of Superannuation Committee meetings are published on the Council’s website together with agendas. Most Committee reports are confidential and may not available on the website. An Annual Pension Fund Reports and Accounts, reporting on activities and investment performance of the fund during the year are published and circulated to all participating employers. The Council’s Statement of Accounts and Statement of the Actuary is, included in this report at Appendix 5 is also available on the website http://www.westminster.gov.uk/services/councilgovernmentanddemocracy/councils/counciltaxandfinance/pensions/ All Reports and Policies relating to the pension fund are available on request or via the website http://www.westminster.gov.uk/services/councilgovernmentanddemocracy/councils/counciltaxandfinance/pensions/. Governance Compliance Statement The Local Government Pension Scheme (Administration) Regulations 2008 and its predecessor regulation 73A of the Local Government Pension Scheme Regulations 1997 (as amended) require administering authorities to prepare, publish and maintain a governance compliance statement; and to measure its governance arrangements against a set of best practice principles, on a continuum of not compliant to fully compliant.. Where the fund’s governance arrangements are not compliant, there is a further requirement to explain departures from best practice principles. The governance compliance statement adopts a principles based approach requiring the Council, as administering authority to act in the spirit of promoting good governance across public pension schemes. The Department of Communities and Local Government has also issued guidance which indicates in detail the governance principles against which compliance should be measured. These are

• Formal committee structure;

• Committee membership and representation;

• Selection and role of lay members;

• Voting rights;

• Training / Facility time/ Expenses.

The Governance Compliance Statement included in this document at Appendix 3 is also available on the website: http://www.westminster.gov.uk/services/councilgovernmentanddemocracy/councils/counciltaxandfinance/pensions/ Policy and Process of Managing Conflict of Interest Committee Members and Officers directly involved with the administration of the Fund are required to declare any conflicts of interests or potential conflicts at the commencement of all meetings. Where a conflict is considered material, the Member or Officer may be asked to either refrain from participating or to exclude themselves from the meeting for the discussion and consideration of the agenda item.

- 29 -

RISK MANAGEMENT AND GOVERNANCE The legal responsibility for the prudent and effective stewardship of the Local Government Pension Scheme (LGPS), administration of benefits and strategic management of fund assets rests with the Superannuation Committee, established by the Council. This Committee has full delegated authority to make investment decisions, terms of which are set out in the constitution and terms of reference. It receives advice from the Director of Finance and as necessary from the Fund’s appointed actuary, investment managers, custodian and investment advisors. The membership of the Superannuation Committee comprises of officers and six elected members of the Council, who each have voting rights and meet quarterly. The Committee has regard for the Myners best practice principles and the government’s six new investment principles issued in 2008. The committee manages the pension fund in accordance with LGPS regulations. Independent observers provide effective scrutiny of the decision making process. The Committee has published a Governance Compliance Statement reporting its compliance against a set of best practice principles (on a continuum of not compliant to fully compliant). All Committee Members attend formal training to enable the effective challenge and evaluation of reports and advice they receive from external advisors and managers. Decision making, due diligence and discharge of the fiduciary duty to pension fund stakeholders is therefore supported by current policies and procedures. How risks are identified, managed and reviewed The control environment represents the overall framework within the City of Westminster for establishing and reviewing the effectiveness of specific controls. In this context the Superannuation Committee provide an overall framework for strategy and planning, directing and controlling investment management, investment administration and pension fund administration for members and employers. The Committee meets on a quarterly basis to address risk issues and to review asset manager performance and other risk reporting measures. The activities of the Superannuation Committee may be overseen by the Observers. The implementation and ongoing maintenance of comprehensive and effective risk management is the responsibility of all City of Westminster Employees, Elected Members and Third Parties providing services on its behalf. The authority maintains a system of internal control to identify potential events that may affect the pension fund and manage risk to be within its risk appetite to provide reasonable assurance regarding the achievement of specified pension Fund objectives. The Fund’s objectives are to provide a pool of assets sufficient to meet the long-term pension and benefits liabilities (as prescribed by the Local Government Pension Scheme Regulations) for its members. The investment objectives are to maximise investment returns over the long term within acceptable risk tolerances. Investment returns are defined as the overall rates of return (capital growth and income combined). This is set out in the Statement of Investment Principles.

- 30 -

There are clear roles, responsibility and accountability for the management of risk. The Superannuation Committee accepts its fiduciary responsibility to ensure it manages risk to provide reasonable assurance. The Director of Finance is proactive in the identification and evaluation of risks inherent in the Council’s business processes. The risk management system consists of internal controls, policies, procedures and practices to identify, measure, mitigate and monitor risk. The Director of Finance is responsible for monitoring the risk environment continuously and identifying and reducing risks on a daily basis. The Director of Finance ensures as far as possible that all financial and non financial risks are identified and managed within acceptable parameters, as required by the Superannuation Committee and Internal Audit. These accountabilities are set out in the sections below: Reporting to the Superannuation Committee is the responsibility of the Director of Finance who monitors and directs all activities to ensure:

• Authority and responsibility is assigned within the organisation structure;

• Provision of adequate staffing;

• Adequate training in job functions and related policies and risk management;

• Efficient use of resources;

• Management information and reporting; and,

• Establishing risk monitoring and control systems within the City Council.

Reporting to the Director of Finance is the Human Resources Department and London Pension Fund Authority (LPFA). The Human Resources Department has policies and practices in place relating to pension fund administration and use a risk based approach to ensure compliance with policies and laws and regulations. The internal audit department performs independent evaluation of the control environment using a risk based approach including compliance with policies and laws and regulations. Significant issues identified by internal audit are reported through formally established and agreed channels including, ultimately, the Audit Committee and/or the Police where serious fraud is uncovered. All issues raised with line managers are documented and monitored by Internal Audit to determine if and when corrective measures have been taken. The Finance Support Unit, under the Chief Investment Officer, is responsible for:

• Ensuring financial and regulatory compliance;

• Management information and reporting;

• Analysis of custodian and fund manager accounting;

• Analysis of membership information from human resources and LPFA;

• Analysis of actuarial information; and,

• Analysis of information from the Investment Advisor.

- 31 -

• Independent oversight of custodian and fund manager reconciliation;

• Reflecting all pension fund transactions in the general ledger;

• Independent oversight of pension administration (human resources & LPFA)

reconciliations; and,

• Management of information received from the Actuary.

Key risks facing the fund: The key risks facing the fund are set out in the statement of investment principles. By way of summary these risks and mitigating actions are set out below:

1. Strategic risk relating to investment strategy including asset allocation: a. Appointment of five specialist investment managers to secure a wider

level of diversification of investment strategies and investments; b. Consideration of alternative investments; c. Alignment of risk appetite to funding objectives

2. Investment risks (including equity, credit and other asset class risk): a. investments should be quoted on a recognised stock exchange and be

readily tradable, unless an exemption has been agreed; b. adherence to LGPS regulations on holdings and manager limits;

3. Performance risks a. asset allocation benchmarks are used and performance is monitored

relative to the targets set Investment Risk Management Reporting to the Chief Investment Officer is the Investment Advisor who carries out the following: independent evaluation and analysis of fund performance; reviewing benchmarks and asset allocation; financial markets review; and, changes in the Investment Manager’s business. Reports are received from the fund manager to the investment advisor for independent evaluation. These evaluations are presented to the Chief Investment Officer for review. Investments are monitored to ensure they are in accordance with the current requirements of the LGPS Regulations, which specify certain limitations on investments. Principally, these place a limit of 10% of the total value of the fund in any single holding, or deposits with a single bank or institution, or investments in unlisted securities, and not more than 35% of a portfolio can be invested in collective investment schemes managed by a single manager. Investment manager performance is monitored quarterly by the Superannuation Committee. The performance target for each Investment Manager is to achieve a return of two percent (2%) in excess of the specific benchmarks, incorporated into the relevant Investment Management Agreements over a rolling 3 year period. Managers are monitored carefully to ensure any under allocations or over allocations in relation to the benchmark are temporary. This approach effectively constrains the risk that

- 32 -

investment managers’ target. The Council has further adopted the Investment Managers’ policies for Socially Responsible Investment. Management of third party risks At the end of the reporting year a report of the Statement on Auditing Standards (SAS) 70 is received from the Custodian, Bank of New York Mellon. Similarly, AAF01/06 or SAS70 statements are received for each Fund Manager. These reports describe internal controls, in operation and tests of operating effectiveness, in the third party’s control environment. The statement also provides information on third party controls that may be relevant to the internal controls of clients. In addition to the end of year reports, the Chief Investment Officer receives on a daily basis, reports from the Custodian. The Custodian maintains a web-based real time platform with management information and reporting tools. The Custodian identifies all out of balance positions and together with the Fund Managers reconciles all transactions. A further independent evaluation of the fund manager is carried out by the Chief Investment Officer prior to reporting to Superannuation Committee. Typically, the view will encompass:

• Analysis of out of balance positions; • Review of holdings including largest holdings/ breakdown by sector/ asset

class/ security type; • Review of out performance / underperformance; • Review of actual asset allocation and planned asset allocation; • Review of investment style bias; and, • Degree of leverage / uninvested cash balances.

This review is presented to the Superannuation Committee with appropriate recommendations and an appropriate action plan.

- 33 -

GOVERNANCE MATRIX

Voting rights

All elected members of the administering authority have voting rights as a matter of course. Voting is in accordance with the Council’s Standing Orders, namely a simple majority of those present who can vote with the Chairman having a second or casting vote.

Training

The Myners Review of Institutional Investment in 2001 emphasised the need to undertake trustee training. This recommendation is applicable to the LGPS. The Chief Investment Officer ensures that Committee Members receive regular training. This is to enable them to make effective decisions and ensure they are fully aware of their statutory and fiduciary responsibilities, and their stewardship role.

Training is provided by either courses and seminars provided by the City of Westminster, external Fund Managers, or other professional development training events.

- 34 -

GOVERNANCE DOCUMENTS Funding Strategy Statement Since 2004 administering authorities have been required to publish and maintain funding strategy statements initially under regulation 76A of the 1997 regulations, but since 1 April 2008, under regulation 35 of the administration regulations. Under that regulation the authority is required to keep its statement under review and to make revisions as are appropriate following a material change. There have been no material changes to report in the funding strategy statement since the document was initially prepared on 31 March 2007, The financial position of the fund was assessed by the actuary against the agreed funding target at 31 March 2007. Analysis showed a shortfall of £179.1M relative to the agreed funding target, equivalent to a funding level of 78%. The next triennial valuation is due on 31 March 2010 and this will determine the funding strategy for the next three years. The current funding strategy statement is available on request or via the website: http://www.westminster.gov.uk/services/councilgovernmentanddemocracy/councils/counciltaxandfinance/pensions/ Statement of Investment Principles The Local Government Pension Scheme (Management and Investment of Funds) (Amendment) Regulations 1999 require administering authorities to prepare and review from time to time a written statement recording the investment policy of their Pension Fund. The purpose of this document is to satisfy the requirements of these Regulations, and to explain to Fund members, employers, and other interested parties how the Fund is managed, and the factors taken into account in doing so. The Statement of Investment Principles (SIP) outlines the broad investment principles governing the investment policy of the City of Westminster Superannuation Fund and demonstrates compliance with the “10 Investment Principles” identified in the Myners Review of Institutional Investment in the UK, together with the new investment principles issued in 2008 by Communities and Local Government. This policy was presented to the Superannuation Committee on 7 September 2009, and replaces the version approved by the Committee on 4 July 2006 (reviewed May 2008). The SIP is included in this report at Appendix 2 and is available via the website: http://www.westminster.gov.uk/services/councilgovernmentanddemocracy/councils/counciltaxandfinance/pensions/ Communications Policy Statement Regulation 106B of the 1997 Regulations introduced in December 2005 require administering authorities to prepare, maintain and publish a written statement of their policy concerning communication with members, representatives of members and employing authorities. This policy is included in this report at Appendix 4 and is available on the website: http://www.westminster.gov.uk/services/councilgovernmentanddemocracy/councils/counciltaxandfinance/pensions/

- 35 -

ADMINISTRATION, MANAGEMENT & FINANCIAL PERFORMANCE REPORT

PENSION ADMINISTRATION REPORT

Pension administration is outsourced to LPFA who operate under a service level agreement. The LPFA provide a front line service to both employers in the fund and fund members, managing all aspects of pensions’ administration, development of a website and self service initiatives and managing communication. The City of Westminster retains investment management functions. Administration costs for the year 2008/09 amounted to £1.228m or £63.85 per member.

The LPFA provides a website for City of Westminster to allow Fund members and the Council to access benefit information for the Fund. The website holds the Fund’s policies and guides together with a pension ready reckoner and compensation (efficiency and redundancy) calculator. Self service initiatives are promoted via the website, through the use of calculators to provide estimates of efficiency and redundancy entitlements. A key self service tool is the introduction of pin number access. PIN number access allows members to see the status of their records and to independently perform calculations without the need to refer to LPFA or City of Westminster. On 1st April 2008, the provisions of the LGPS were significantly amended with the aim of ensuring the defined benefit scheme remains affordable for the foreseeable future and continues to provide a generous level of benefits for its members. The LPFA held workshops for all admitted bodies, and a DVD was produced and made available to all stakeholders. Staff were sent an email in March 2008 to advise of the changes to their fund.

Information is transmitted quickly and efficiently between employing organisations through the innovation of electronic forms, which allow employers to notify joiners, leavers, change of hours, address changes and estimate requests.

Data Quality

The City of Westminster and LPFA manage data quality in accordance with the approved data quality policy. This policy is constantly under review and all parties work together to ensure data is accurate, complete and reliable. . Processes employed include checking all data to identify errors and measure error rates over a prescribed tolerance levels. Data not meeting minimum quality thresholds are returned to relevant employer(s). The actuary also conducts data checks to ensure data is accurate and complete Communications The provisions of the LGPS were significantly amended from 1st April 2008, with the aim of ensuring the fund remains affordable and providing a generous level of benefits for its members. Staff were sent an email in March 2008 to advise of scheme changes. The LPFA and the Chief Investment Officer held workshops and information seminars for stakeholders. A DVD outlining the changes to the benefit structure was circulated to all Employers and Schools.

- 37 -

The pension fund promotes use of the website. An Annual Benefits Statements was sent to active members and deferred beneficiaries. A Pensions Update newsletter was introduced to formalise the communications process to fund members.

Internal Dispute Resolution Procedure

The City of Westminster as Administering Authority make decisions under pension fund rules that affect members and their dependents. In the event that fund members are not satisfied with decision, they reserve the right to use the complaints procedure known as the Internal Dispute Resolution Procedure (IDRP). While any complaint is progressing, fund members are entitled to contact the Occupational Pensions Advisory Service (OPAS), who can provide free advice.

IDRP stage one involves making a formal complaint in writing. This would normally be initially considered by the body that made the decision. In the even t that the fund member is not satisfied with actions taken at stage 1 the complaint will progress to stage 2.

Stage 2 involves the referral to the administering authority, Westminster City Council to take an independent view. The final stage three is the referral of the complaint to the Occupational Pensions Advisory Service, followed by Stage four which is the referral to the Pension Ombudsman.

Management Performance: Administration Performance Indicators The London Pension Fund Authority carries out fund administration for the City of Westminster. The LPFA have reported an excellent level of service reflected by more than three quarters of all cases processed on time or in advance of their contractual timescales. Customer satisfaction as measured by the number of complaints received continues to be good with a total of five complaints for the year (0.005% as a percentage of caseload) which are now resolved. The key administration performance indicators are set out below as at 31 March 2009. Indicator : The number and trend of top 10 case types and other cases

Case Type Completed

% On time

Admissions 1318 99.39Transfers in 833Transfers out 292

99.47

Estimates 705 99.86Deferred Benefits 584 100Retirements 215 98.45Refunds 62 100Deaths 171 98.45Correspondence (customer)

600 N/A

Complaints 11 N/A

- 38 -

Indicator: The percentage of cases completed on time against targets Staffing Indicators Staff numbers and trends exhibit a strong bias to activities within the Administering Authority, Westminster City Council. Active Members employed by the administering authority represent 78% of total “Active Members”. The full time staff for Westminster City Council will decrease due to a council wide reorganisation in 2009/10. Staff numbers cannot be compared to active members in the pension fund as staff may opt out of the pension fund. Staff/fund member ratios and average cases per member of staff LPFA Performance data shows the average cases per member of staff (Admin only) totalled 2,279, with a total number of six staff (including payroll). The City of Westminster directly employs two members of staff in human resources to manage pensions’ administration and a further two full time equivalent posts to manage pensions accounting and investment. Membership Data Contributors to the fund have increased by 389 since 2004/05 whilst pensioners (figure includes dependants) have increased but at a slower rate, increasing by 195 since 2004/05.

- 39 -

Five year profile of active members, deferred members and pensioners Pensioners in receipt of enhanced retirement benefits Analysis of LPFA management information shows that out of 4,789 pensioners and dependants 486 are in receipt of added years due to either ill health or redundancy/early retirement. Age profile of members within 5 year bandings The bar chart shows the most active members are in the age range of 50-55 closely followed by 40-45 years. The chart also shows one dependent in the age band of 100-105 years.

- 40 -

Certified contribution rates The certified employer contribution rates to the Fund are agreed to 31 March 2010 as set out in the chart below. It can be observed from the chart that the contribution rates differ for each employer. The actuary calculates both a common contribution rate for the fund and an individual adjustment which is unique to each employer’s particular circumstance. The triennial review of the fund at the 31 March 2010 will determine the contribution rates for the next three years to 2012. The table below details contributions received and receivable for 2008/09 for employers and employees. This is split into normal, additional and deficit contributions for employers. Normal contributions refer to contributions payable at the rate exemplified in the chart above. Additional contributions are payable by employers where members retire earlier than their retirement date. Deficit contributions are payable where the actuary has agreed with an employer, a deficit recovery plan. Employees pay normal contributions and have the discretion to pay Additional Voluntary Contributions (AVCs) to increase their benefit entitlement at retirement subject to HMRC limits. AVCs for the defined benefit scheme are not included within the accounts and are invested separately with Aegon (formerly Scottish Equitable) and Equitable Life. These contributions are not included in the following table.

- 41 -

Contributions to the Fund

Employers' Contributions Employees' Contributions

Scheduled bodies contributing to the fund

Normal Additional Deficit Normal Employers £'000 £'000 £'000 £'000

Westminster City Council -13,105

-1,808 -341 -6,847

Tenant Services Authority -542 -301 - -237

St Marylebone School -67 - - -34

St Augustine's School -43 - - -21

College Park School -21 - - -10

Housing Corporation. -2,290 -425 - -955

Age Concern -39 -9 - -10

Independent Housing Ombudsman -225 - - -94

Housing21 -485 - - -131

Grey Coat School -86 - - -42

Hallfield School -63 - - -28

City West Homes -976 - - -465

Housing & Communities Agency -536 - - -219

Westminster Academy -127 - - -63

Paddington Academy -91 - - -57

Queens Park School -109 - - -53

Westminster City School -56 - - -27

Soho Parish -24 - - -11

King Solomon Academy -9 - - -14

Housing 21 Scheme 2 -4 - - -2

Pimlico Academy -94 - - -36

Elonex - - - -

Association of Local Government - - - -

Capital Careers Limited - - - -

Institute of Public Finance - - - - Total Employers Contributions 18,992 2,543 341 9,356

- 42 -

Employee Contribution by Contribution Band The contribution rate depends on how much each employee is paid and ranges between 5.25 (applicable to staff on protected provisions) to 7.5% of pay. The pay bands that apply from April 2008 are as follows.

Pay band Number of members Contribution band Contributions paid

£’000 % £’000 Up to £12,600 18 5.25% £13,009.16 Up to £12,600 72 5.5% £16,790.97 £12,601 to £14,700 115 5.8% £63,237.10 £14,701 to £18,900 520 5.9% £294,166.74 £18,901 to £31,500 1134 6.5% £1,588,416.07 £31,501 to £42,000 1055 6.8% £2,314,106.74 £42,001 to £78,700 798 7.2% £2,861,065 More than £78,700 64 7.5% £491,348.97

The data presented above reflects the position at the time this report has been produced some amendments to data may only become apparent once the previous years pension contributions have been posted. Financial Performance: 2009/10 Budgeted Income and Expenditure

2008/09 Actual £’000

2009/10 Estimate £’000

Contributions Employees Employers

9,356 21,876

8,986 23,685

Transfers In

4,650 2,325

Other Income

10 -

Income

35,892 34,996

Pensions

25,042 26,295

Lump sums: retirement

5,080

5,190

Lump sums: death

497 497

Transfers Out

4,776 7,140

Administrative expenses

1228 1,232

Investment management fees

2,319 3,400

Other Payments 25 0 Expenditure

39,967

43,754

Net Outflow

4,075

8,758

- 43 -

In 2008/09, Employers’ Contributions exceeded the actuary’s estimate of £13.4m due to salary increases, deficit payments and compensation to the Fund for members approved for early retirement. Similarly, the 2009/10 budget estimates for City of Westminster include compensation to the fund for staff leaving service, following implementation of the Councils new organisation structure. The administrative budget for the pension fund is outlined below. In 2009/10, the triennial valuation will be carried out by the actuary. The costs of which are included in the administrative budget.

Administrative Costs 2008/09 2009/10 £’000 £’000 Legal Services 19 18 Finance Services 477 400 Other Business Overheads 49 Banking Services 29 24 Payroll & Pension Services 184 188 Actuarial Services 116 150 LPFA Service Level Agreement 403 403 Total Cost 1,228 1,232

To aid comparability, finance services, banking, payroll and pension services are classified within Administrative Expenses as Administration and processing in the statement of accounts 2008/09. The movement in assets and liabilities from 2007/08 to 2008/09 is:

2008/09 2007/08 £m £m

Notional value of assets 378.8 515.6 Present value of liability 710.7 673.6 Net pension liability 331.9 158.0 Funding level 53.3% 76.6% Receipt of Contributions Contributions due from admitted and scheduled bodies were received in keeping with local arrangements, by the statutory deadlines during the year. The Council has taken the decision to waive the option to levy interest on overdue contributions.

- 44 -

CONTACTS Pension Corporate Governance, Investment Management & Accounts Peter Hayday Director of Finance Telephone: 0207 641 2904 E-mail: phayday@westminster.gov.uk Peter Carpenter Deputy Director of Finance Telephone: 0207 641 2832 E-mail: pcarpenter@westminster.gov.uk Pensions Administration, Contributions Policy, Benefit Calculations &, Membership Enquiries Sarah Hay Pensions Human Resource Telephone: 0207 641 6015 E-mail: shay@westminster.gov.uk Or: City of Westminster Pension Fund Human Resources 17th Floor West City Hall 64 Victoria Street London SW1E 6QP London Pension Fund Authority (LPFA) Westminster Team Dexter House 2 Royal Mint Court London EC3N 4LP 020 7369 6066 Complaints and Advice The Occupational Pension Advisory Scheme 11 Belgrave Road London SW1v 1RB Email: enquiries@opas.org.uk Fax: 0207 233 8016 The Office of the Pensions Ombudsman 11 Belgrave Road London SW1V 1RB Telephone: 020 7630 2200 Fax: 020 7821 0065 Website: www. pensions-ombudsman.org.uk E-mail: enquiries@pensions-ombudsman.org.uk

- 45 -

APPENDIX 1 PARTICIPATING EMPLOYERS Age Concern

Association of Local Government

Capital Careers Limited

City West Homes

College Park School

Elonex

Grey Coat School

Hallfield School

Housing & Communities Agency

Housing 21

Housing 21 Scheme 2

Housing Corporation.

Independent Housing Ombudsman

Institute of Public Finance

King Solomon Academy

Paddington Academy

Pimlico Academy

Queens Park School

Soho Parish

St Augustine's School

St Marylebone School

Tenant Services Authority

Westminster Academy

Westminster City Council

Westminster City School

- 46 -

APPENDIX 2 STATEMENT OF INVESTMENT PRINCIPLES

CITY OF WESTMINSTER SUPERANNUATION FUND

STATEMENT OF INVESTMENT PRINCIPLES INTRODUCTION The City of Westminster operates the Local Government Pension Scheme (“the Fund”) which was established in accordance with statute to provide death and retirement benefits for all eligible employees of the City Council and the admitted bodies. The Local Government Pension Scheme (Management and Investment of Funds) (Amendment) Regulations 1999 require administering authorities to prepare and review from time to time a written statement recording the investment policy of their Pension Fund. The purpose of this document is to satisfy the requirements of these Regulations, and to explain to Fund members, employers, and other interested parties how the Fund is managed, and the factors taken into account in doing so. The Council have delegated the management of the Fund to the Superannuation Committee (“the Committee”) who decide on the investment policy most suitable to meet the liabilities of the Fund and the ultimate responsibility for the investment strategy lies with them. The Committee has five specialist investment managers to manage the Fund’s investments. The managers’ activities are constrained by their detailed Investment Management Agreements, which incorporate the statutory restrictions. The managers and their respective investment mandate types are listed below.

Name of Investment Manager Mandate Type Majedie Asset Management UK Equity Mandate State Street Global Advisors UK Equity Mandate (passive) Alliance Bernstein Global Equity Mandate Newton Investment Management Global Equity Mandate Insight Investment Management Bond Mandate

The Fund has BNY Mellon Asset Servicing B.V. as its Global Custodian. The Committee have appointed an independent advisor to advise on investment strategy, oversee the activities of the investment managers, and to be generally available for consultation on fund investment matters. Mercer were appointed to this role in 2004.

- 47 -

This document outlines the broad investment principles governing the investment policy of the City of Westminster Superannuation Fund (“the Fund”), and comments on the compliance with the “10 Investment Principles” identified in the Myners Review of Institutional Investment in the UK. The Fund has two investment managers for the Fund’s Additional Voluntary Contributions. These managers are Scottish Equitable and Equitable Life. The Fund has Hewitt Bacon & Woodrow as the actuaries to the Fund The Fund is subject to audit inspection by the City Council’s internal auditors and their external auditors, the Audit Commission. This document was presented to the Committee on 7 September 2009, and replaces the version approved by the Committee on 4 July 2006 (reviewed May 2008). AIMS AND OBJECTIVES OF THE FUND The aim of the Fund is to provide a pool of assets sufficient to meet the long-term pension and benefits liabilities (as prescribed by the Local Government Pension Scheme Regulations) for the members of the Fund. The performance target for the investment managers is to achieve a return of two percent (2%) in excess of the specific benchmarks incorporated into the relevant Investment Management Agreements (these are detailed in Appendix F) over a rolling 3 year period. The Fund’s prime responsibility is to the present and future pensioners, with the responsibility to Council Taxpayers as secondary. The Fund should never fall below minimum funding levels as set out in the Funding Strategy Statement. The Fund is a long term Fund; therefore the investment strategy must reflect this. INVESTMENT RESPONSIBILITIES Westminster City Council is the Administering Authority and responsible for managing the Fund in accordance with the Regulations. The responsibility for the Fund’s investments has been delegated to the Committee, which meets at least four times a year and comprises six elected Members of the Council (including 1 minority party Member). The Lord Mayor, the Leader of the Council and the Leader of the Opposition are invited to attend as observers. Representatives from the employees Union are invited to attend as observers and receive published Agenda.

- 48 -

COMMITTEE RESPONSIBILITIES The Superannuation Committee is responsible for all aspects of the investment and other management of the Council’s Superannuation Fund, including but not limited to the following matters:

• to agree the investment strategy having regard to the advice of the Fund’s managers and the independent adviser;

• to monitor performance of the Fund and the individual Fund Managers;

• to determine the Fund management arrangements, including the appointment and termination of the appointment of Fund Managers, Custodians and Fund Advisers;

• to agree the Statement of Investment Principles, the Funding Strategy Statement, the Business Plan for the Fund, the Governance Policy Statement, the Communications Policy Statement and the Governance Compliance Statement and to ensure compliance with these;

• to approve and publish the pension fund annual report; • to prepare and publish a pension administration strategy; • to make an admission agreement with any admission body; • to ensure compliance with all relevant statues, regulations

and best practices with both the Public and Private Sectors; • to determine the compensation policy on termination of

employment and to make any decisions in accordance with that policy other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council;

• to determine policy on the award of additional membership of the pension fund and to make any decisions in accordance with that policy other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council;

• to determine policy on the award of additional pension and to make any decisions in accordance with that policy other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council;

• to determine policy on retirement before the age of 60 and to make any decisions in accordance with that policy other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council;

• to determine a policy on flexible retirement and to make any decisions in accordance with that policy other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council;

• to determine questions and disputes pursuant to the Internal Disputes Resolution Procedures;

• to determine any other investment or pension policies that may be required from time to time so as to comply with Government regulations and to make any decisions in

- 49 -

accordance with those policies other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council.

INVESTMENT MANAGER RESPONSIBILITIES The Investment Managers are responsible for -:

• attending meetings of the Committee and meetings with officers, as requested,

• preparation of quarterly reports including a recommended policy for the next six - twelve months, and a review of recent investment performance and investment activity,

• the investment of the pension fund assets in compliance with prevailing legislation, the constraints imposed by this document and the detailed Investment Management Agreements, and the policy agreed with the Committee,

• voting shares in accordance with the agreed policy, • ensure timely information is passed to the Custodian and

Performance Measurement Service Provider • security selection within asset classes, and • active management of any cash balances.

CUSTODIAN RESPONSIBILITIES The Custodian is responsible for:-

• its own compliance with all prevailing legislation, • providing the administering authority with monthly valuations

of the Scheme’s assets and details of all transactions during the month,

• providing details in a timely manner to the Performance Measurement Service Provider.

• collection of income, tax reclaims, and • voting shares in accordance with the agreed policy.

INDEPENDENT ADVISOR RESPONSIBILITIES The Independent Advisor is responsible for: -

• assisting the Director of Finance and the Committee in the preparation and review of this document,

• assisting the Director of Finance and the Committee in their regular monitoring of the investment manager’s performance,

• assisting the Director of Finance and the Committee in the selection and appointment of investment managers and custodians,

• to undertake specific tasks as commissioned, e.g. selection of new managers, asset liability study etc., and

• to be generally available for consultation on fund investment matters.

- 50 -

ACTUARY RESPONSIBILITIES The Actuary is responsible for: -

• undertaking a triennial actuarial valuation of the fund, • providing advice as to the maturity of the Scheme and its

funding level, in order to aid the Committee in balancing the short term and long term objectives of the Pension fund,

• to be generally available for consultation on Fund matters, and

• to undertake specific tasks as commissioned, e.g. selection of new managers, asset liability study etc.

THE DIRECTOR OF FINANCE RESPONSIBILITIES The Director of Finance is responsible for: -

• acting as a professional advisor to the Fund, • the appointment of any professional external consultants, as

required and subject to the approval of the Chairman of the Committee,

• alerting the Committee of any problems in the funding level or administration of the Fund (in their capacity as the Council’s Section 151 Officer),

• to give such authorisation and sign such documents as may be required for the proper administration of the Fund

• ensuring compliance with this document and bringing breaches thereof to the attention of the Committee, and

• ensuring that this document is regularly reviewed and updated in accordance with the Regulations.

DESCRIPTION OF THE FUND’S LIABILITIES The City of Westminster Pension Fund is a defined benefit scheme, which provides benefits related to final salary for members. Each member’s pension is specified in terms of a formula based on salary and service and is unaffected by the investment return achieved on the Scheme’s assets. Full details of Scheme benefits are set out in the LGPS regulations. All active members of the Scheme are required to make pension contributions, which are based upon a fixed percentage of their pensionable pay as defined in the LGPS regulations, and currently set at 6%. The City Council is responsible for meeting the balance of costs necessary to finance the benefits payable from the Scheme. Employers’ contribution rates are determined triennially, based on the advice of the Scheme’s actuary, but may be subject to inter-valuation monitoring. The City Council therefore has a direct financial responsibility for the investment return achieved on the Scheme’s assets. The Council has powers to allow other organisations to join the Council’s Pension Fund. Currently there are seven Admitted Bodies.

- 51 -

The most recent actuarial valuation was based on 2007 values. The draft report has been received, and indicates that at 31 March 2007 the fund had a deficit of £179.1 million. The next actuarial valuation date is 31 March 2010. INVESTMENT POLICY The investment policy of the Pension Fund is intended to ensure that all statutory payments made from the fund are at the least possible cost to local taxpayers, consistent with the aims of the Fund, and maintaining Fund solvency. The investment objectives are to maximise investment returns over the long term within acceptable risk tolerances. Investment returns are defined as the overall rates of return (capital growth and income combined). Regulations specify certain limitations on investments. Principally, these place a limit of 10% of the total value of the fund in any single holding, or deposits with a single bank or institution, or investments in unlisted securities, and not more than 35% of a portfolio can be invested in collective investment schemes managed by a single manager. The investment policy is implemented by the appointment of expert Investment Managers with clear performance benchmarks and by placing maximum accountability for performance against that benchmark on the Investment Managers. The authority has adopted an active specialist approach with five managers in order to give diversification and spread of risk. Investment in Property, Hedge Funds and other ‘Alternative’ investments are under consideration by the Committee. INVESTMENT MANAGERS RESPONSIBILITIES The five Investment Managers are responsible for portfolios as follows;

Name of Investment Manager Mandate Type Majedie Asset Management UK Equity Mandate State Street Global Advisors UK Equity Mandate (passive) Alliance Bernstein Global Equity Mandate Newton Investment Management Global Equity Mandate Insight Investment Management Bond Mandate

Investment Managers have discretion to determine tactical asset allocation within specified control ranges and individual stock selection. Twice a year, the Investment Managers will attend a meeting of the Committee. Their proposed investment strategy will be reviewed and agreed at these meetings, including the individual manager’s activity and transactions. Fund performance is reviewed quarterly and annually upon receipt of the data from the Performance Measurement Service Provider.

- 52 -

Investment must be in accordance with the current requirements of the LGPS Regulations. The current limits are set out in the Table below

Maximum permitted under Regulations

Limits for Westminster Fund

Any single sub-underwriting contract.

5% 1%

Contributions to any single partnership.

5% (N/A)

All contributions to partnerships. 15% (N/A) All deposits with any local authority, or similar.

10% 10%

All investments in unlisted securities of companies.

15% 10%

Any single holding 10% 10% All deposits with any single bank, institution or person (other than the National Savings Bank).

10% 10%

All sub-underwriting contracts. 15% 15% All investments in units subject to the trusts of unit trust schemes and all investments in open-ended investment companies, where the unit trust schemes and the collective investment schemes constituted by those companies are managed by any one body.

35% 35%

Any single insurance contract. 35% (N/A) All securities transferred by the authority under stock lending arrangements.

25% (Nil)

ELIGIBLE ASSETS The Investment Managers are required to determine a suitable asset mix (real assets, fixed interest and cash) for approval by the Investments Committee having regard to cash needs and risk tolerance. The limits on individual investments are those specified in Schedule 1 of the Local Government Pension Scheme (Management and Investment of Funds) Regulations 1998.

- 53 -

Acceptable asset classes are • UK equities • UK fixed interest (gilts and corporate bonds) • UK index linked gilts • Overseas equities, major classes being

• North America • Japan • Europe • Far East Pacific Rim • Other Emerging Markets

• Global Bonds, including index-linked • Unquoted securities via pooled funds • Direct investment in development capital and private finance if

specifically authorised • Direct property and pooled property funds • Cash

INVESTMENT CONSTRAINTS Use of derivatives and other financial instruments is only permitted within pre-agreed limits or for the specific purpose of currency hedging. Underwriting is permitted provided that the underlying stock is suitable on investment grounds and complies with existing investment criteria. Stock lending is permitted, but the permission of the Superannuation Committee and the Director of Finance is required before the Fund can undertake stock lending. Any instrument not explicitly permitted under section 13.2 may only be purchased for the fund with the express written consent of the Chairman of the Committee and the Director of Finance SOCIAL, ENVIRONMENTAL AND ETHICAL CONSIDERATIONS The Council expects that the boards of companies in which the Pension Fund invests will pay due regard to social environmental and ethical matters and that this will be in the long-term financial interests of the shareholders. The Council has a fiduciary duty to obtain the best possible financial returns on its investments, without taking undue risk. The Council has adopted the investment managers’ standard socially responsible investment policies (as attached at Appendices A, B, C, D and E). CORPORATE GOVERNANCE Investment Managers (or Custodian as may be required) have delegated authority to exercise voting rights in accordance with the authority’s corporate governance policy. Contentious motions and voting actions are to be referred to the Director of Finance. The general policy is to accept the recommendations of the Boards of UK companies, unless there are over-riding reasons for not doing so. In exceptional circumstances

- 54 -

the Director of Finance (after consultation with the Chairman of the Committee) is authorised to direct the Investment Managers how to vote the Fund’s shareholdings if this is considered to be in the Fund’s best interests. Voting actions are to be included in the half-yearly reports to the Committee. Special attention is to be drawn to any vote cast against the Board’s recommendation, and reasons given. COMPLIANCE Investment Managers are required to provide an annual certificate to the Committee confirming their compliance with this document. The Committee is responsible for monitoring the Scheme’s performance both at global level and manager by manager. The Committee is responsible for monitoring the qualitative performance of the managers and custodians employed to ensure that they remain suitable Investment Managers/custodians for the scheme. These qualitative aspects include, inter alia, changes in ownership, changes in personnel, poor administration etc. Officers will review the Statement annually, and a revised Statement prepared and circulated to the Committee for approval as necessary, and at least once a year. CONTROL OF RISK Investment is never without risk, but measures are in place to balance risk and reward. The Council has appointed five Investment Managers to secure a wider level of diversification of investment strategies and investments. The degree of risk to which the individual portfolios are exposed is monitored regularly. To further diversify the Fund, Alternative investments are being considered, and these will be subjected to review by the Committee and an acceptable level and control of risk. Reduction of Investment Risk Unless prior permission has been obtained from the Chairman of the Committee and the Director of Finance, investments should be quoted on a recognised stock exchange and be readily tradable. The LGPS Regulations also contain restrictions on the proportion of the Fund which can be invested in a single security (currently 10%), and the proportion which can be invested in unit trusts managed by a single manager (currently 35%) Reduction of Strategic Risk the strategic asset allocation has been determined recognising the pension fund’s overall risk tolerance in relation to funding objectives Reduction of Performance Risk asset allocation benchmarks are used and performance is monitored relative to the targets set. This is to ensure the investment manager does not deviate significantly from the Board’s intended approach, while permitting flexibility to manage the portfolio and enhance returns over the longer term.

- 55 -

MYNERS COMPLIANCE COMPLIANCE WITH THE “10 INVESTMENT PRINCIPLES” IDENTIFIED BY PAUL MYNERS CIPFA Guidance for Local Authorities’ - Response to Myners “Ten Investment Principles” At the meeting of the Committee on 13 November 2002 it was agreed that, although the Fund complies with the spirit of the recommendations, there are four areas where, with the support of the Committee, current practises differ from the Myners recommendations. Effective Decision Making – Business Plan although there is no formal business plan for the Fund at present it is under review. Clear Objectives Investment objectives specific to Fund’s liabilities. At present the investment objectives are stated in terms of investment performance rather than with respect to the Fund liabilities. Activism Measuring Effectiveness. There is no mechanism in place at present to measure the effectiveness of the voting policy. Appropriate Benchmarks The Fund uses specific benchmarks, as detailed in Appendix F. A comparison of the Myners recommendations and Westminster practise is attached as Appendix G FURTHER INFORMATION Any enquiries about this Statement of Investment Principles should be addressed to Ian R Woodall, Chief Investment Officer 16th Floor, Westminster City Hall 64 Victoria Street, LONDON SW1E 6QP Phone: 020 7641 1804 Fax: 020 7641 2142 Email: iwoodall@westminster.gov.uk

- 56 -

57

Investment Manager Benchmarks UK Equity Mandates: Mandate 1.

Name of Investment Manager

Benchmark

Majedie Asset Management 100% FTSE All Share (TR) Index Mandate 2.

Name of Investment Manager

Benchmark

State Street Global Advisors 100% FTSE All Share (TR) Index Global Equity Mandates: Mandate 1.

Name of Investment Manager

Benchmark

Alliance Bernstein 10% FTSE All Share (TR) 32% FTSE AW Developed Europe ex UK (TR)* 27% FTSE AW North America (TR)* 18% FTSE AW Japan (TR)* 10% FTSE AW Developed Asia Pacific ex Japan (TR) 3% MSCI Emerging Markets *Euro, US Dollar and Yen Hedged to Sterling

Mandate 2. Name of Investment Manager

Benchmark

Newton Investment Management

10% FTSE All Share (TR) 32% FTSE AW Developed Europe ex UK (TR)* 27% FTSE AW North America (TR)* 18% FTSE AW Japan (TR)* 10% FTSE AW Developed Asia Pacific ex Japan (TR) 3% FTSE All World Emerging (TR) *75% Hedged to Sterling

Bond Mandate:

Name of Investment Manager

Benchmark

Insight Investment Management (core mandate)

iBoxx Sterling Non-Gilts 1-15 Year Index

Insight Investment Management (gilts mandate)

FTSE-A Under 15 Year Gilt Index

Insight Investment Management (enhanced mandate)

3M Sterling LIBOR

CITY OF WESTMINSTER PENSION FUND

STATEMENT OF COMPLIANCE WITH MYNERS “10 INVESTMENT

PRINCIPLES” ITEM COMMENTS 1. EFFECTIVE DECISION-MAKING 1.1 Define who takes investment decisions. Included in Statement of

Investment Principles (SIP) 1.2 Consider whether Members have sufficient skills Training would be of

assistance as Members are not necessarily finance professionals

1.3 Determine whether appropriate training is being

provided. Members are advised of training opportunities, and encouraged to attend.

1.4 Assess whether in-house staffing support is

sufficient. No formal assessment undertaken yet.

1.5 Establish an investment committee with suitable

terms of reference. The Committee is part of Council’s constitution, and terms of reference are included in Council’s Standing Orders and also the Fund’s SIP

1.6 Draw up a business plan. The aims and objectives for

the Pension Fund are set out in the SIP. A business plan will be presented to the next (autumn) meeting of the Committee

2. CLEAR OBJECTIVES 2.1 Set overall investment objective specific only to

the fund’s liabilities. Current Investment Objectives refer to investment performance

2.2 Determine parameters for employer

contributions. Set by actuaries as part of triennial actuarial review

2.3 Specify attitude to risk and limits. Covered in SIP 2.4 Identify performance expectations and timing of

evaluation. Included in SIP. Managers fees are performance related

58

ITEM

COMMENTS

2.5 Peer group benchmark in use for comparison purposes only.

Peer group benchmark currently used for comparison and as target objective for the Portfolio Managers, but a change is being considered.

3. FOCUS ON ASSETS ALLOCATION 3.1 Priority is given to strategic asset allocation

decisions. Investment Managers recommend an asset allocation and then select stocks to fit. (Top down approach)

3.2 All asset classes permitted within the regulations

have been considered. Yes – except Stock lending

3.3 Asset allocation is compatible with liabilities and

diversification requirements. Asset allocation meets diversification requirements but as dividend income still exceeds the amount withdrawn to meet day-to-day expenses. The Fund had an asset liability review in 2003

4. EXPERT ADVICE 4.1 Separate contracts in place for actuarial services

and investment advice. Yes Actuary, Investment Managers(5), Custodian and Investment Advisor

4.2 Terms of reference specified. Included in SIP 4.3 Specify role of S151 officer in relation to

advisers. Included in SIP

4.4 Tender procedures followed without cost

constraint factor. Contract cost was not a deciding factor in the last manager selection process

5. EXPLICIT MANDATES 5.1 Written mandate included in management

contract containing elements specified.

Yes

59

ITEM

COMMENTS

5.2 Constraints on the types of investment are in line

with regulations. Yes

5.3 Reasons stated if soft commissions permitted. No statement yet 6. ACTIVISM 6.1 Incorporate US Principles on activism into

mandate. Managers report on corporate actions taken

6.2 Engage external voting agencies if appropriate. Not considered as a

separate issue yet 6.3 Review manager strategies. Half-yearly meetings with

managers to discuss strategy. (Could be more frequent if necessary).

6.4 Establish means to measure effectiveness. No action taken yet 7. APPROPRIATE BENCHMARKS 7.1 Consider whether index benchmarks selected

are appropriate. Under consideration

7.2 Limits on divergence from index are relevant. Not applicable - Funds

actively managed 7.3 Active or passive management considered. Active management

Passive management not considered appropriate

7.4 Targets and risk controls reflect performance

expectations. Minimal constraints placed on managers to enable them to meet performance targets

8. PERFORMANCE MEASUREMENT 8.1 Formal structure for regular monitoring in

operation. Performance measured by WM Company, reported quarterly, annually and over longer periods. Individual managers measured separately against local authority peer group

60

ITEM COMMENTS

8.2 Arrangements in place to assess procedures and

decisions of members. No formal arrangements, but decisions will be reflected in performance, which is regularly monitored

8.3 Similar arrangements established for advisers

and managers. No formal arrangements, but Managers report to the Members, and investment decisions will be reflected in performance, which is regularly monitored

9. TRANSPARENCY 9.1 SIP updated as specified. First issued in 2000, minor

amendments since then: due for major review in 2003

9.2 Consultation undertaken on amendments. Revised SIP to be

presented to Investments Committee for approval

9.3 Changes notified to stakeholders. Stakeholders have been

advised that SIP has been published, and copies will be sent out on request.

10. REGULAR REPORTING 10.1 Publish changes to SIP and its availability. Information about SIP

availability included in (annual) report to scheme members

10.2 Identify monitoring information to report. As included in annual report 10.3 Inform scheme members of key monitoring data

and compliance with principles. As included in annual report

61

SUPERANNUATION COMMITTEE 6 Members of the Council TERMS OF REFERENCE The Superannuation Committee is responsible for all aspects of the investment and other management of the Council’s Superannuation Fund, including but not limited to the following matters:

• to agree the investment strategy having regard to the advice of the Fund’s managers and the independent adviser;

• to monitor performance of the Fund and the individual Fund Managers;

• to determine the Fund management arrangements, including the appointment and termination of the appointment of Fund Managers, Custodians and Fund Advisers;

• to agree the Statement of Investment Principles, the Funding Strategy Statement, the Business Plan for the Fund, the Governance Policy Statement, the Communications Policy Statement and the Governance Compliance Statement and to ensure compliance with these;

• to approve and publish the pension fund annual report;

• to prepare and publish a pension administration strategy;

• to make an admission agreement with any admission body;

• to ensure compliance with all relevant statues, regulations and best practices with both the Public and Private Sectors;

• to determine the compensation policy on termination of employment and to make any decisions in accordance with that policy other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council;

• to determine policy on the award of additional membership of the pension fund and to make any decisions in accordance with that policy other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council;

• to determine policy on the award of additional pension and to make any decisions in accordance with that policy other than decisions in respect of the Chief

62

Executive, Chief Officers and Deputy Chief Officers of the Council;

• to determine policy on retirement before the age of 60 and to make any decisions in accordance with that policy other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council;

• to determine a policy on flexible retirement and to make any decisions in accordance with that policy other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council;

• to determine questions and disputes pursuant to the Internal Disputes Resolution Procedures;

• to determine any other investment or pension policies that may be required from time to time so as to comply with Government regulations and to make any decisions in accordance with those policies other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council.

63

APPENDIX 3 GOVERNANCE COMPLIANCE STATEMENT

Pension Fund Governance Compliance

Statement Background The Local Government Pension Scheme Regulations require administering authorities to prepare a written statement setting out compliance with best practice governance principles. The following statement sets out in turn:

(a) the principles against which compliance is to be measured; (b) a table showing whether the City of Westminster Pension Fund is compliant; (c) if appropriate, reasons for non-compliance and comments.

A - Structure a) The management of the administration of benefits and strategic management of fund assets clearly rests with the main committee established by the appointing council. b) That representatives of participating LGPS employers, admitted bodies and scheme members (including pensioner and deferred members) are members of either the main or secondary committee established to underpin the work of the main committee. c) That where a secondary committee or panel has been established, the structure ensures effective communication across both levels. d) That where a secondary committee or panel has been established, at least one seat on the main committee is allocated for a member from the secondary committee or panel. Not Compliant Fully

Compliant a) √ b) √ c) N/A d) N/A

64

Reason for non-compliance: b) Admitted bodies are not represented at Committee meetings but are consulted on a regular basis. Pensioners and deferred members are not formally represented, though a union representative is entitled to attend all meetings as an observer. Comments on ratings given above: a) The Superannuation Investments Committee consists of 6 Members of the Council, with membership allocated proportionally to party political representation on the Full Council. The Terms of Reference of the Committee are as follows:

• The investment and other management of the Superannuation Fund. • To agree the investment strategy having regard to the advice of the

Fund’s managers and the independent adviser, to monitor performance.

• To monitor performance. • To determine the Fund management arrangements and appointments

of Fund Managers, Custodians and Fund Advisers, and to agree the Statement of Investment Principles, the Funding Strategy Statement, the Business Plan for the Fund, the Governance Policy Statement and the Communications Policy Statement and to ensure compliance with these.

• To ensure compliance with all relevant statutes, regulations and best practices with both the Public and Private Sectors.

B - Representation a) That all key stakeholders are afforded the opportunity to be represented. Within the main or secondary committee structure; these include:- i) Employing authorities (including non-scheme employers, e.g., admitted bodies); ii) Scheme members (including deferred and pensioner scheme members), iii) Independent professional observers IV) Expert advisors (on an ad-hoc basis). b) That where lay members sit on a main or secondary committee, they are treated equally in terms of access to papers and meetings, training and are given full opportunity to contribute to the decision making process, with or without voting rights.

65

Not Compliant Fully Compliant

a) √ b) N/A Reason for non-compliance: a) Admitted bodies are not represented at Committee meetings but are consulted on a regular basis. Pensioners and deferred members are not formally represented. Comments on ratings given above: a) Professional advice is provided at the Committee by the Director of

Finance and the Director of Legal and Administrative Services. In addition, specialist advice on pension matters is provided by independent investment advisors who can assist in terms of compliance against Myners’ principles and the management of risk.

b) Councillor members are treated equally in accordance with the governance principles. There are no lay members (in the sense of ‘non- Councillor members’).

C – Selection and role of lay members a) That committee or panel members are made fully aware of the status, role and function they are required to perform on either a main or secondary committee. Not Compliant Fully

Compliant a) N/A Reason for non-compliance: Comments on ratings given above: a) Councillor members are made aware of their status, role and function.

There are no lay members (in the sense of ‘non- Councillor members’). D – Voting a) The policy of individual administering authorities on voting rights is clear and transparent, including the justification for not extending voting rights to each body or group represented on main LGPS committees. Not

Compliant Fully Compliant

a) √

66

Reason for non-compliance: Comments on ratings given above: Voting is in accordance with the Council’s Standing Orders, namely a simple majority of those present who can vote with the Chairman having a second or casting vote. E – Training / Facility time / Expenses a) That in relation to the way in which statutory and related decisions are taken by the administering authority, there is a clear policy on training, facility time and reimbursement of expenses in respect of members involved in the decision-making process. b) That where such a policy exists, it applies equally to all members of committees, sub-committees, advisory panels or any other form of secondary forum. Not

Compliant Fully

Compliant a) √ b) √ Reason for non-compliance: a) There is no specific policy on facility time or re-imbursement of expenses for the Superannuation Investments Committee - the Council’s general guidance to members applies. Members receive allowances and Committee meetings take place at a time that is convenient for members. Comments on ratings given above: Members are required to attend appropriate training. The training is provided by the Fund’s investment advisers. F - Meetings (frequency/quorum) a) That an administering authority's main committee or committees meet at least quarterly. b) That an administering authority's secondary committee or panel meet at least twice a year and is synchronised with the dates when the main committee sits.

67

c) That administering authorities who do not include lay members in their formal governance arrangements, provide a forum outside of those arrangements by which the interests of key stakeholders can be represented Not

Compliant Fully

Compliant a) √ b) N/A c) √ Reason for non-compliance: c) There are no lay members (in the sense of ‘non- Councillor members’) but

a union representative is entitled to attend all meetings as an observer. Comments on ratings given above: The Superannuation Investments Committee meets quarterly. G - Access a) That subject to any rules in the Council’s constitution, all members of main and secondary committees or panels have equal access to committee papers, documents and advice that falls to be considered at meetings of the main committee. Not

Compliant Fully

Compliant a) √ Reason for non-compliance: Comments on ratings given above: H - Scope

a) That administering authorities have taken steps to bring wider scheme issues within the scope of their governance arrangements

68

Not Compliant

Fully Compliant

a) √ Reason for non-compliance: Comments on ratings given above: The Superannuation Investments Committee considers wider issues from time to time as part of its work programme. The remit of the Committee needs to reflect formally the scope of these wider issues. I - Publicity a) That administering authorities have published details of their governance arrangements in such a way that stakeholders with an interest in the way in which the scheme is governed, can express an interest in wanting to be part of those arrangements. Not

Compliant Fully

Compliant a) √ Reason for non-compliance: Comments on ratings given above: The Fund has published a Communications Policy that sets out how it communicates with stakeholders. In addition, this Compliance Statement will be published on the Council’s website and will be included in the Pension Fund Annual Report which will be published on or before 1 December 2008.

69

APPENDIX 4 COMMUNCIATIONS POLICY CITY OF WESTMINSTER SUPERANNUATION FUND COMMUNICATIONS POLICY Outline The Local Government Pension Scheme (Amendment (No 2) Regulations 2005 require administering authorities to prepare, publish and maintain a policy statement setting out its communication strategy for communicating with scheme members, scheme members’ representatives, prospective scheme members and their employing authorities. The Regulations require each administering authority in England and Wales to prepare, maintain and publish a statement setting out their policy on communicating with:

• Scheme Members, • Members’ Representatives • Prospective members • Employers participating in the Fund

This document sets out the mechanisms that are used to meet our communication needs. We aim to use the most appropriate communication method for the audiences receiving the information. This may involve using more than one medium of communication. General Communication Correspondence The Fund uses the postal service and e-mail to receive and send correspondence. Telephone The London Pension Fund Authority (LPFA), the Council’s third party administrators, have one contact number which is widely publicised in scheme literature together with the Council’s Pensions Manager and Clientside Monitoring Officer’s phone numbers. Pension’s workshop These are held as a when required by the business, i.e. organisation changes, scheme regulation changes. Prospective Scheme Members Scheme Guides Scheme guides are provided to all new prospective scheme members on appointment and can be viewed on the intranet.

70

Pension Road-shows This is a valuable aid for scheme members. Road-shows will be used to target groups of employee requiring additional more detailed pensions information. This will ensure members receive the information required to make an informed choice with regards to their pension provision. Pension’s Intranet site The councils Intranet pensions Website is regularly updated with current pensions information including legislative changes and scheme member notifications. It additionally contains all employee pension guides, electronic forms, discretion policies, more detailed pensions information on specific issues, links to other relevant and important websites and email addresses to scheme administrators and Pension Scheme Manager. It is seen as a key method of communication. Trade Unions/Employer Representatives We will work with the relevant Trade Unions and Employer Representatives to ensure the Scheme is understood by all interested parties. All efforts will be made to ensure that all pension related issues are communicated effectively with the Trade Unions. Scheme Employers All Employer Forums Meetings are held periodically for employers; specifically this has been used as a mechanism for communicating major strategic issues, significant legislation changes, triennial valuation matters and the Funding Strategy Statement. Employers’ are kept informed throughout the process of the tri-annual valuation which is carried out by the Councils “Actuaries. The employers’ comments are always encouraged and welcomed and where appropriate taken into consideration. Employers’ Guide An Employers’ guide has been produced in Partnership with the LPFA to assist the smaller employers in discharging their pension administration responsibilities. Other Bodies London Pensions Officer’s Group Pensions Officers from other London Boroughs meet regularly in order to share information and ensure uniform interpretation of Local Government Pension Scheme, and other prevailing regulations. National Information Forum All administering Authorities are invited to attend, these meetings provide an opportunity to discuss issues of common interest and share best practice. The Office Government Pensions Committee are represented at each meeting. National Association of Pension Funds (NAPF).

71

72

All administering Authorities who are members of the NAPF are invited to attend, these meetings provide an opportunity to discuss issues of common interest and share best practice. Seminars Representatives of the Council regularly participate at seminars and conferences. The table below shows the availability of Fund publications along with their publication frequency and review periods. Further Information If you need more information about the Scheme you should contact the London Pensions Fund Authority at the following address: London Pension Fund Authority Dexter House 4 Royal Mint Court Tower Hill London EC3N 4LP Tele: 0207 369 6000 Fax: 0207 369 6111 Email: Westminster@lpfa.org.uk Westminster City Council Sarah Hay Pensions and Payroll Manager City Hall Victoria Street SW1E 6QP Tele: 020 7641 6015 Fax: 0207 641 2376 Email:shay@westminster.gov.uk