siemens benefits scheme - home - english - … siemens benefits scheme limited chairman phil tizzard...
TRANSCRIPT
SIEMENS BENEFITS SCHEME
Annual Report
for the year ended 30 September 2009
PSO reference: SF19/78032Pension Schemes Registry No : 10126751
TABLE OF CONTENTS
Contents Page
Trustee and Advisors 1
Trustee's Report 4
Investment Report 13
Actuary's Statement 19
Independent Auditors' Report 20
Fund Account 21
Net Assets Statement 22
Notes to the Financial Statements 23
Independent Auditors' Statement about Contributions 34
Summary of Contributions 35
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
Trustee Siemens Benefits Scheme Limited
Chairman Phil Tizzardformerly Managing Director of Siemens Communications Limited, Milton Keynes(Retired from full time employment but continues as company nominated Chairman of the Corporate Trustee)
Directors Jonathan Boles (with effect from 1 July 2009)Finance DirectorEnergy Sector UK and Sector Cluster Controller for Energy in the North West Europe RegionFrimley
Craig Buckley*Clinical ScientistMedical Solutions
Andrew Fletcher*HR Director Siemens Industry Sector UK, Manchester
Clive Gilmour**Formerly Lead AuditorSiemens plc - Corporate Audit, Frimley(Retired from full time employment but continues as Pensioner-Nominated Director)
Gavin Hayward HR DirectorSiemens IT Solutions and Services Limited, Frimley
Stuart Jones (with effect from 5 May 2009)Deputy Finance DirectorTraffic Solutions and Infrastructure Logistics, Mobility Division UK, Poole
Andrew Kennedy* (with effect from 5 May 2009)Senior Commercial ManagerSiemens Mobility, Traffic Solutions, Northampton
Declan McDonnell*Business ArchitectSiemens IT Solutions and Services Limited - National Savings, Glasgow
Richard MellorFormerly Finance DirectorSiemens plc - Automation and Drives, Manchester(Retired from full time employment but continues as Company-Nominated Director)
Capital Cranfield Pension Trustees LtdRepresented by Joanna Matthews5th Floor, New Liverpool House, 15-17 Eldon Street, London, EC2M 7LD
Resignations David Bartlett (with effect from 3 December 2008)Head of Business DevelopmentCIT/GSS, Frimley
Phillip McFadian* (with effect from 25 March 2009)Team Leader - Solution Realisation TeamSiemens Enterprise Networks, Wellingborough
Clark MacFarlane (with effect from 30 June 2009)Managing DirectorSiemens IT Solutions and Services Limited, Frimley
** Denotes Pensioner-Nominated Director
** Denotes Member-Nominated Director
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
TRUSTEE AND ADVISORS
Page 1
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
TRUSTEE AND ADVISORS
Secretary J Mark Wilson (until 31 December 2009)
Trustee Secretarial Services Ltd (with effect from 1 January 2010)Represented by J Mark Wilson, Director, TSS Ltd.
Registered Office Sir William Siemens Square, Frimley, Camberley, Surrey, GU16 8QD
Principal Employer Siemens Plc
Scheme Actuary Richard Whitelam FIA, Hewitt Associates Limited
Legal Advisors Sacker & Partners LLP Hammonds LLP (commencing 04 November 2009)
Independent Auditors PricewaterhouseCoopers LLP
Scheme Administrators Pension Services, CIT/GSS, Siemens PlcAon Consulting Limited (for the Investor Plan)
Investment Advisors Towers Watson (known as Watson Wyatt Worldwide until 28 June 2009)
Investment Managers Babson Capital European Senior Loans Ltd (commencing 3 July 2009)
Blackstone Partners Offshore Sterling Fund Ltd
CB Richard Ellis Limited
Invesco Asset Management Limited
K2 Overseas Investors Ltd
Legal & General Assurance (Pensions Management) Limited
Record Currency Management Limited (until 23 January 2009)
Standard Life Investments Limited
UBS Global Asset Management (UK) Limited (until 31 July 2009)
Blackrock (formerly Barclays Global Investors) (commencing 20 July 2009)
Page 2
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
TRUSTEE AND ADVISORS
Swaps Counterparties Barclays Bank plc
Deutsche Bank AG
HSBC Bank plc
Morgan Stanley & Co. International plc
The Royal Bank of Scotland plc
Goldman Sachs International
FX Trading Counterparties Barclays Bank plc
Deutsche Bank AG
HSBC Bank plc
Commonwealth Bank of Australia
The Royal Bank of Scotland plc
Citibank
BNP Paribas
UBS
Custodian BNY Mellon Asset Services B.V.
Bankers National Westminster Bank plcThe Royal Bank of Scotland plc
Scheme Advisors
There are written agreements in place between the Trustee and each of the Scheme advisors listed above and also with the Principal Employer. There were nochanges to the key Scheme advisors during the year.
Page 3
Introduction
Booster PlanChemfeed PlanElectric PlanFoundation PlanHorizon Saver PlanLegacy PlanSaver PlanSaver Plus PlanTower Plan
Siemens Investor Plan
The Trustee formally meets on a quarterly basis to review all aspects of the Scheme. Additional meetings are also convened as necessary. The Scheme’sadvisors and service providers are invited to attend and report on a regular basis.
Quarterly Board Meetings
Defined Contributions Section:
Member-Nominated and Pensioner-Nominated Directors (MNDs / PNDs)
Changes over the year
Scheme Governance
Andrew Kennedy replaced Phillip McFadian as MND with effect from 5 May 2009.
Stuart Jones replaced David Bartlett as CND with effect from 5 May 2009.
Other logs in operation include: Conflicts of Interest Log; Risk Log; Covenant Log; Duties of Directors Log and Scheme Governance Log.
TRUSTEE'S REPORT
The Trustee is appointed and empowered in accordance with the Trust Deed and Rules. The Trustee also appoints a number of advisors to assist it in therunning of the Scheme.
Constitution of the Board
Trustee Information
This is the nineteenth annual report and financial statements issued by the Trustee of the Siemens Benefits Scheme for the year to 30 September 2009. TheScheme is established and governed by the Trust Deed and Rules and approved as a registered fund under the Finance Act 2004.
The Siemens Benefits Scheme is made up of nine Defined Benefits Sections, four of which are closed to future accrual. There is also a Defined ContributionsSection. Each section has its own benefits structure.
The Full Board of the Trustee company consists of eleven Directors, six appointed by the Principal Company (Company-Nominated Directors or CND,including the Chairman), four by the active membership of the Scheme (Member-Nominated Directors or MND) and one by Pensioner members of the Scheme(Pensioner-Nominated Directors or PND).
Jonathan Boles replaced Clark MacFarlane as CND with effect from 1 July 2009.
Defined Benefits Section:
SIEMENS BENEFITS SCHEME
The Company has defined five regions within the UK for the purpose of electing MNDs and PNDS: North; North East & Scotland; Central; South andPensioner. Active members elect MNDs for each region except Pensioner. Pensioners elect a PND for the Pensioner region. Each MND/PND generally servesfor four years, although each MND/PND can be re-elected after their term of office has expired.
TRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
The Trustee maintains a number of logs and registers to cover various aspects of Scheme Governance. This includes a Notifiable Events Log, which is usedto record any significant Scheme events that need to be notified to The Pensions Regulator, as well as a Whistleblowing Log, which records any suspectedbreaches of law which may also be reportable to The Pensions Regulator.
Page 4
TRUSTEE'S REPORT
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
The Communications Sub-Committee determines the style and content of all trustee communications relating to the Scheme.
Scheme Governance - continued
Myners Review of Institutional Investment
The Benefits Sub-Committee determines discretionary payments such as ill health and death benefits.
The Merger Sub-Committee reviews the impact upon the Scheme of potential mergers proposed by the Company.
The Administration Sub-Committee supervises the delivery of pension services by the in-house and external providers.
The Covenant Sub-Committee evaluates the employer’s ability and willingness to support the Scheme.
Trustee Sub-Committees
In order to effectively manage the Scheme between the quarterly board meetings, a number of sub-committees are in operation, each with its own delegatedpowers and Terms of Reference.
• With effect from April 2010, the minimum early retirement age will increase from age 50 to age 55 except for those members with a contractual right tocontinue to retire from age 50. Again, the Siemens Benefits Scheme Trust Deed and Rules simply cross - refers to the relevant Act so no formal changes tothe Scheme Rules are required.
The Myners Principles were revised with effect from 3 October 2008 and the Trustee fully implemented the changes.
• Provisions to allow deferment of Annual Management Incentive Scheme (AMIS) payments from December to January and to treat these payments as paid inDecember for calculation of member benefits and,
• an ‘Apportionment’ clause to allow the Trustee's discretion whether to allow any Section 75 debts to be apportioned to Siemens Plc.
A Deed of Amendment was completed in December 2009. Changes to the Scheme rules include:
Legislative Changes
Review of Scheme Advisors
Changes to Scheme Rules
• For members leaving the Defined Benefits section of the Siemens Benefits Scheme after 6 April 2009, any post 6 April 2009 accrued pension will revalueeach year by RPI to a maximum of 2.5%.
The Documentation Sub-Committee reviews proposed changes to formal Scheme documents.
The Risk Sub-Committee ensures that the risks associated with running the Scheme are identified and evaluated and suitable mitigations identified andimplemented.
The Investment Sub-Committee monitors the Scheme’s investment managers and their performance, as well as implementing strategic investment decisionsmade by the Full Board.
The Finance and Audit Sub-Committee supervises the Scheme’s accounts and budget and liaises with the Scheme Auditor with respect to the Scheme AnnualReport and Accounts.
• Pension accrued prior to 6 April 2009 continues to revalue each year by RPI to a maximum of 5%.
As part of its Governance Plan, the Trustee formally reviews its advisors on a regular basis. The services provided by the Scheme’s investment advisor,Towers Watson, were reviewed during the year and the Trustee decided to retain their services for a further period (normally three years).
Company/Trustee Changes
A new Legacy Plan was set up during 2009 to accept new deferred members from other Siemens pension schemes as part of an ongoing merger project.
The Siemens Magnet Technology Pension Scheme (SMT) merged with the Siemens Benefits Scheme in October 2009.
The Pensions Act 2008 received Royal Assent on 26 November 2008.
At present the sub-committees are responsible for: administration, benefits, communications, covenant, documentation, finance and audit, investment, mergersand risk. A Scheme Valuation sub-committee also operated during the year.
Within its provisions, the Act allowed for the reduction in the Statutory Cap on revaluing deferred pensions. As the Siemens Benefits Scheme Trust Deed andRules simply cross-refers to the relevant revaluation provisions under the Pension Schemes Act 1993 (as amended by subsequent legislation), the followingchanges were automatically applied:
The Trustee follows the guidelines set out in the Myners Report and undertakes a review of the recommendations annually.
Page 5
TRUSTEE'S REPORT
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
General
Rate of salary increases
Price inflationRate of pension and deferred pension Mortality
£ millionMarket value of assets 2,062Technical provisions 2,817Past service deficit 755Funding ratio 73%
Booster Plan 32.7%Chemfeed Plan Not ApplicableElectric Plan 27.2%Foundation Plan 15.9%Horizon Plan Saver Plan Not ApplicableLegacy Plan Not ApplicableSaver Plan 19.8%Saver Plan Plus 31.3%Tower Plan 30.1%
Based on the Scheme’s pensioner mortality experience, a 65 year old male pensioner is expected to live to 88.4 years and a 65 year old female pensioner is expected to live to 88.8 years.
Discount rate - post retirement 5.2% p.a.3.5% p.a. in 2009
The main assumptions underlying the 2008 valuation calculations were:
Valuation Results
A summary of the funding position at the 2008 valuation date is as follows:
3.6% p.a.
With effect from 1 January 2009, a number of the Scheme factors changed based on advice from the Scheme Actuary. These included the Scheme’scommutation factors, AVC conversion factors, protected rights conversion factors, spouse commutation factors, trivial commutation factors and the levelpension option factors.
3.5% p.a. for pension increasing at RPI capped at 5%. 2.7% p.a. for pension increasing at RPI capped at 3%.
5.6% p.a. in 2012 and later years
The promotional pay scale used at the previous valuation has been removed.
3.7% p.a. in 2011
5.7% p.a.Discount rate - pre retirement
2008 Valuation
The most recent actuarial valuation of the Scheme was completed as at 30 September 2008 (the valuation date) and was signed off by the Scheme Actuary on30 September 2009.
2.0% p.a. in 2010
With respect to the 30 September 2008 valuation and following discussions with the Company and the Actuary, the Trustee determined and agreed with theCompany the assumptions to be used to calculate the "technical provisions". This is the amount needed to be held by the Scheme to provide for benefitsalready accrued that will be paid from the Scheme in the future, assuming the Scheme continues in its present form. It is based on pensionable service to thevaluation date and assumptions about various factors that will influence the Scheme in the future, such as the levels of investment returns and pay increases,when members will retire and how long members will live.
Technical Provisions
Actuarial Valuation
This was the second valuation of the Scheme carried out under the provision of the Pensions Act 2004. A summary of the valuation is issued to members via aSummary Funding Statement and the latest statement was issued to members in February 2010.
If the Scheme had no surplus (or shortfall) and its assets were exactly equal to the technical provisions, contributions would normally still be required to coverthe cost of benefits expected to accrue to members in the future. The Projected Unit Method with a three year control period has been used to calculate thisfuture service contribution rate.
A copy of the 2008 Valuation can be downloaded from the pensions website.
Future Service Contribution Rates
Page 6
TRUSTEE'S REPORT
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
Defined Benefits Section
Defined Contributions
Section
Total
£000 £000 £000
2,110,359 168,872 2,279,231
134,430 96,840 231,270
(86,324) (13,388) (99,712)
(71,173) 33,031 (38,142)
(4,717) 4,717 -
(27,784) 121,200 93,416
2,082,575 290,072 2,372,647
Financial Review
During the year the employer contributed £43 million to the Scheme in addition to the rates of contribution specified in the table below.
Normal Contributions to the Scheme
An administration fee of £41,000 was paid to The Pensions Regulator and a risk-based levy of £0.9m was paid to the Pension Protection Fund (PPF) duringthe year. The risk-based levy payable to the PPF between March 2009 and September 2009 was accrued at the year end and amounts to £525,000. Inaccordance with the prevailing Schedule of Contributions, the Company is obliged to reimburse the Scheme for the full amount of PPF-related levies.
Net Return on Investments
Benefits and other payments
A revised Schedule of Contributions was certified by the Actuary on 30 September 2009, in respect of the period 1 October 2009 to 30 June 2025 whichreflects the contributions required from the company following the valuation of the Scheme at 30 September 2008. The changes to the contribution rates wereeffective from 1 October 2009.
Actuarial Valuation - continued
Deficit Repair
Following the completion of the Scheme Valuation, a Recovery Plan and Schedule of Contributions is agreed with the Company. The Recovery Plansummarises the plan of action for correcting the deficit over an agreed period. The Schedule of Contributions sets out what contributions are payable andwhen they need to be paid. Details are available in the Scheme Documents section of the Pensions website.
Income from Contributions and other income
Net Assets at 1 October 2008
Scheme Finances
The financial statements shown on pages 21 to 33 of the Annual Report have been prepared and audited in accordance with regulations made under sections41 (1) and (6) of the Pensions Act 1995.
At the year end the Scheme’s net assets totalled £2.4 billion, an increase of £93 million during the year.
The Schedule of Contributions is designed to clear the deficit of £755m as at the valuation date by 30 June 2025. The Company has committed to paying atleast £64m per annum to remove this deficit.
The Schedule of Contributions dated 30 September 2009 has been adopted by the Trustee and the Company and the Actuary's certification of this schedule isshown on page 20.
Transfers between sections
Net movement in fund during the year
Net Assets at 30 September 2009
Contributions to the Scheme are paid at the rates detailed below (as percentages of pensionable salaries).
Page 7
TRUSTEE'S REPORT
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
Section Member EmployerSaver Plus Plan 25.0%
Electric Plan 23.6%
Tower Plan 23.8%
Investor Plan
Section Member EmployerFoundation Plan 15.9%
Saver Plan 19.8%
Booster Plan 32.7%
Saver Plus Plan 31.3%
Electric Plan 27.2%
Tower Plan 30.1%
Investor Plan
Normal Contributions to the Scheme - continued
85% of the rates paid by the members (2011)
80% of the rates paid by the members (2012)
Period 1 October 2009 to 30 June 2025
1.5% / 5% / 6%
6.0%
6.0% or such rates as have been advised to certain older members
3.5% or such rates as have been advised to certain older members
6.0%
95% of the rates paid by the members (2009)
90% of the rates paid by the members (2010)
3% plus any additional contributions paid at the member’s option up to an overallmaximum of 7% (equivalent to an overall maximum of 10%).
55% of the rates paid by the members (2017)
75% of the rates paid by the members (2013)
60% of the rates paid by the members (2016)
70% of the rates paid by the members (2014)
90% of the rates paid by the members (2010)
85% of the rates paid by the members (2011)
70% of the rates paid by the members (2014)
75% of the rates paid by the members (2013)
50% of the rates paid by the members (2018 to 2022)
65% of the rates paid by the members (2015)
80% of the rates paid by the members (2012)
Scheme Finances - continued
100% of the rates paid by members (2008)
3% plus any additional contributions paid at the member’s option up to an overallmaximum of 7% (equivalent to an overall maximum of 10%).
At rates paid by members plus 2.5%, plus for members of theFoundation, Saver, Booster and Horizon Plans who transferredto the Investor Plan on 1 January 2008:-
Period 1 January 2008 to 30 September 2009
95% of the rates paid by the members (2009)
At rates paid by members plus 2.5%, plus for members of theFoundation, Saver, Booster and Horizon Plans who transferredto the Investor Plan on 1 January 2008:-
9.0% or such rates as have been advised to certain older members
1.5% / 5% / 6%
6.0% or such lower rate as may have been notified to certain members for the duration ofthe period that the reduced rate applies.
6% or such lower rate as may have been notified to certain members for the duration ofthe period that the reduced rate applies.
Page 8
TRUSTEE'S REPORT
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
£mPaid September 2007 86,750 Paid October 2007 133,800 Paid September 2009 43,312
263,862 (127,992)135,870
Pre - 06 0.9% n/a n/a n/aPost - 06 0.9%
0.9% 0.9% n/a 0.9% on 50% of pension
Electric Plan 5.0% 5.0% n/a 3.0%Chemfeed Plan Pre - 97 0.9% 0.9% n/a 3.0%
Post - 97 0.9% 0.9%Horizon Plan Pre - 06 0.9% 0.9% n/a 3.0%
Post - 06 0.9% 0.9%Tower Plan 0.9% 0.9% n/a 3.0%
Recovery Plan contributions received by the Scheme
Recovery Plan
To eliminate the funding shortfall revealed by the latest actuarial valuation of the Scheme as at 30 September 2008, the Trustee and the Employer haveagreed contributions in addition to normal contributions that will be paid to the Scheme by Siemens plc and other participating companies.
Saver, Booster and Foundation Plans
Pre 88 - GMP
Pensions in payment for less than one year as at 1 April 2009 were increased pro rata. Deferred pensions increased in accordance with the Scheme Rules. Nodiscretionary increases were awarded.
Saver Plus Plan
Transfers
These contributions will be paid according to the principle that at any point in time, the cumulative amount should be no less than had the contributions beenpaid at the rate of £5.333 million per month from the valuation date. However, this cumulative contribution calculation will bring into account contributions paidprior to the date of signing of the Recovery Plan, in excess of the minimum required under the previous recovery plan, which was £135,870 million:
Before State Pension Age Excess over
GMP
Future additional contributions required to be paid by the employers are £2.788 million in November 2011 and £5.333 million per month for the period 1December 2011 until 30 June 2025.
Post 88 - GMP
The Trustee reviewed and agreed increases to pensions in payment effective 1 April 2009 as follows:
Cash equivalents paid during the year with respect to transfers out of the Scheme have been calculated and verified in the manner prescribed by Section 97 ofthe Pension Schemes Act 1993. No cash equivalents paid during the year were less than the amount provided for by Section 94(1) of the Pension SchemesAct 1993. To comply with the Transfer Agreements covering the transfer from the Plessey Pension Funds, benefits in respect of service prior to 1 April 1991 inthe Plessey Pension Funds are assumed to be payable from age 60 with no reduction to reflect early payment. This is reflected in the cash equivalents. Thecash equivalents assume that all members are married, reflecting the Trustee’s discretion to pay the spouse’s pension to children or other dependants. Thetransfer values do not allow for discretionary increases to pensions in deferment or payment.
After State Pension Age
Pensions Increases
Less amounts due 1 Oct 2007 to 30 Sept 09
Page 9
TRUSTEE'S REPORT
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
Actives Continuing Deferreds Pensioners Dependants Life TotalDefined Benefits 2,195 3,489 17,469 7,174 743 3 31,073 Defined Contributions 12,991 - 6,581 - - - 19,572 Continuing members - (3,489) - - - - (3,489)
Total membership 2009 15,186 - 24,050 7,174 743 3 47,156
Total membership 2008 17,507 - 21,266 6,457 702 3 45,935
Defined Benefits Actives Continuing Deferreds Pensioners Dependants Life TotalAt 1 October 2008 3,063 3,835 16,882 6,457 702 3 30,942 Prior year adjustments * (137) 139 (2) - - - - Revised 1 October 2008 2,926 3,974 16,880 6,457 702 3 30,942 Joiners ** - 70 95 142 14 - 321 New dependants - - - - 60 - 60 benefits (508) (433) 941 - - - - Transfers out - - (114) - - - (114)Members retiring (220) (120) (309) 649 - - - Death with dependants (3) (2) (24) (72) (15) - (116)Pensions ceasing - - - (2) (18) - (20)
At 30 September 2009 2,195 3,489 17,469 7,174 743 3 31,073
Notes:
Defined Contributions Actives Deferreds TotalAt 1 October 2008 14,444 4,384 18,828 Prior year adjustments (242) 104 (138)Revised 1 October 2008 14,202 4,488 18,690 Joiners 1,420 - 1,420 Transfers out (12) (145) (157)Members retiring (132) (138) (270)Leavers (no benefits) (47) (37) (84)Deaths (20) (7) (27)Members deferring (2,420) 2,420 -
At 30 September 2009 12,991 6,581 19,572
** Defined Benefits Sections are closed to new entrants however, some exceptions are made due to deferred applications or in special business circumstances.
The members who retired during the year received their full benefits by way of a commutation or the purchase of an annuity on the open market and are,therefore, not entitled to any further pension benefit.
* Prior year adjustments relate to the timing of updates to continuing members' records.
Changes in the membership during the year are set out in the following tables:
Scheme Membership
The membership at the year end was as follows:
2 2 2 2 22 22 22 22 22 22 222 222 222 222 22
Page 10
TRUSTEE'S REPORT
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
Pension Tracing Service
Newcastle upon TyneNE98 1BA
Serious complaints about the Scheme are rare and are generally resolved informally. However, if members are not happy with the result of the informalprocess or the information or explanation given by the administrators or the Trustee, there is a formal procedure for resolving disputes, details of which areavailable from Pension Services, the pensions website or the Scheme Booklet. In addition, members can consult with The Pensions Advisory Service (TPAS)based at 11 Belgrave Road, London SW1V 1RB. TPAS is available to assist members and beneficiaries of pension schemes in connection with anycomplaints, which have been or are being considered by the Trustee.
Further Information
Scheme Administration
Internal Dispute Resolution Procedure
All enquiries about the Scheme or an individual’s entitlement to benefits should be directed to: The UK Pensions Contact Centre, CIT/GSS, Sir WilliamSiemens Square, Frimley, Camberley, Surrey GU16 8QD.Telephone 0845 603 9972; E-mail [email protected].
Alternatively, please go to the Pensions Website at http://intranet.gss.siemens.co.uk/pensions.
The Investor Plan is administered by The Siemens Investor Plan Team, Aon, 131 St Vincent Street, Glasgow G2 5JF.
Requests for additional information about the Scheme generally or queries relating to members’ own benefits should be made to Pension Services, CIT/GSS,Sir William Siemens Square, Frimley, Camberley, Surrey, GU16 8QD.
The Scheme as a whole is administered by Pension Services, CIT/GSS, Sir William Siemens Square, Frimley, Camberley, Surrey GU16 8QD.
If TPAS does not resolve the dispute, members can approach the Pensions Ombudsman (based at the same address as TPAS). The Pensions Ombudsmanhas the power to investigate and determine complaints or disputes of fact or law in relation to occupational pension schemes. The Pensions Ombudsmangenerally expects the administrators and the Trustee of a Scheme and TPAS to have been approached before investigating any complaint.
Registry of Occupational and Personal Pension Schemes
Whitley Road
The Registry’s main purpose is to act as a central agency to help individuals keep track of benefits they may have in other pension schemes. The address is:
Siemens Benefits Scheme is registered with the Registry under Reference number 10126751.
Page 11
The significant changes and points to note during the year were:
Market Value atBrief 30 September
2009£000
HSBC Index tracking 516,553
Swaps (22,698)
Index-linked 930,814
UK Treasury Bills 2,208
Corporate Bonds 55,528
Currency Overlay (7,926)
1,474,479
Fund of Hedge Funds 96,399
Fund of Hedge Funds 80,322
Citibank UK Equity 87,071
Babson Capital La Salle GTS Secured Loans 60,383
Credit Screened Bond 55,722
Property 130,865
Farm Property 2,227
Investor Plan 283,136
N/A 49,792
N/A 1,476
N/A (398)
2,321,474
First Republic Trust Company
N/AOther investments
Invesco Asset Management Limited
Blackrock
N/A
Total net assets
AVC fund managers
Citibank
Cash and cash equivalents
Blackstone Partners Offshore Sterling Fund Ltd
3. Two new investment managers were appointed in July 2009: Babson Capital European Senior Loans Ltd (with effect from 6 July 2009) and Barclays GlobalInvestors Ltd (commencing 30 July 2009).
1. Contributions of £43m were received from the Company in September 2009.
2. A revised Statement of Investment Principles (SIP) was signed on behalf of the Trustee on 27 May 2009.
BNY Mellon Asset Services B.V.
BNY Mellon Asset Services B.V. provides core custody services which includes safekeeping of assets; settlement of transactions; proxy voting services;monitoring of corporate actions and tax reclaims. In addition ancillary services are provided which include investment accounting, performance measurementand risk reporting.
The Trustee monitors investment performance on a quarterly basis and reviews the overall Scheme portfolio on an annual basis. The Trustee maintains aStatement of Investment Principles in accordance with Section 35 of the Pensions Act 1995 (a copy is available on request). The latest version of theStatement of Investment Principles was signed on 27 May 2009.
The Scheme holds a range of different investments that are appropriate to its needs and having taken advice from the Scheme's investment advisor TowersWatson. These include equities (company shares), bonds, property, derivatives (Swaps and Forward FX contracts), alternatives (Fund of Hedge Funds),Credit, Loans and Index-Linked Gilts. Equities offer a higher potential for long-term growth than other forms of investment. However, the nature of the stockmarket is such that the value of equities can be very volatile. In contrast, bonds offer a lower likely level of return, but are more stable than equities (althoughare still subject to a level of volatility).
The Scheme invests with both passive and active managers and a property manager. Passive managers invest with the aim of tracking the performance of themarkets, producing returns that are in line with those achieved by the market and active managers aim to outperform the market.
Investment Managers
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
INVESTMENT REPORT
CMS Cameron McKenna LLP
N/A
J.P. Morgan Bank plc
Custodian Manager
The valuation of assets by investment manager at 30 September 2009 is as follows:
HSBC
HSBC
Legal & General Assurance (Pensions Management) Limited
BNY Mellon Asset Services B.V.
K2 Overseas Investors Ltd
Blackstone Partners Offshore Sterling Fund Ltd
BNY Mellon Asset Services B.V.
CB Richard Ellis Limited
Smithsgore/Bidwells and Property Consultants CMS Cameron McKenna LLP
Standard Life Investments Limited
Page 13
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
INVESTMENT REPORT
Benchmark
2009 1.4 1.7 2008 (5.8) (4.6)2007 7.4 6.0 2006 10.0 12.0 2005 17.4 18.3
5.9 6.3 1.2 1.2
Asset Class Index Index Return
Managed since 01 May 2002 Various * 3.2 3.3
23 September 2009 iBoxx £ Non-Gilt 10 Year N/A N/A
30 June 2008 3 Month LIBOR (1.4) 2.9
30 June 2008 3 Month LIBOR (1.5) 2.9
01 September 2006 FTSE All-Share 7.0 10.8
6 July 2009 N/A N/A
30 July 2009 N/A N/A
01 July 1993 IPD UK Monthly (14.8) (19.2)
01 September 2006 1 Week LIBOR minus 0.1% (29.2) 4.9
Active Corporate Bonds - Legal & General
Defined Benefits Section - 1 year returns
Defined Benefit Scheme Performance
* Scheme returns include returns from currency hedging and exclude the change in value of SWAP contracts which are intended to track changes in the value of certain future Schemeliabilities.
Semi-passive global corporate bonds - BGI ***
Property - CBREI
A summary of the Scheme’s performance over the last five years is shown below. The table shows the total returns* achieved by the Scheme compared with the benchmark which has been in place since 1 June 2003.
Year to 30 September
Currency - Record **
Credit Suisse WesternEuropean Leveraged LoanIndex
Barclays Capital Corporate500 USD/EUR/GBP
*** These portfolios commenced in the last quarter of the year and it is too early to provide meaningful performance information.*** The Record Currency Mandate was terminated on 5 February 2009. This step was taken following a review of the investment performance.
Annualised return over 5 years to 30 September 2009
Inception Date
*** FTSE All-Share, FTSE World ex UK, iBoxx £ Non-Gilts ex BBB in excess of SWAP yields + 6 month rolling LIBOR, LIBID 7 day notice and Siemens Index Linked Gilts Benchmark.
Portfolio Return
Fund of Hedge Fund - Blackstone
Fund of Hedge Fund - K2
UK Equities - Invesco
Secured Loans - Babson Capital ***
Scheme return %*
Annualised return over 3 years to 30 September 2009
Multi asset passive - Legal & General
During the year to 30 September 2009 the Scheme underperformed its benchmark by 0.3%.
Page 14
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
INVESTMENT REPORT
Pooled Segregated Total DBInvestment Investments Investments
£000 £000 £000 %
UK
Equity 98,256 - 98,256 4.8
Treasury Bills 2,208 - 2,208 0.1
Index-linked securities - 930,814 930,814 45.6
Derivatives contracts - (30,624) (30,624) (1.5)
Corporate Bonds 400,710 - 400,710 19.7
Property - Freehold - 122,742 122,742 6.0 - 10,350 10,350 0.5
Overseas
Equities - Global 160,186 - 160,186 7.9
Corporate Bonds 116,105 - 116,105 5.7
Fund of Hedge Funds 176,721 - 176,721 8.7
954,186 1,033,282 1,987,468 97.5
Other Investment assets
49,792 - 49,792 2.4
Cash 1,476 - 1,476 0.1
(398) - (398) 0.0
1,005,056 1,033,282 2,038,338 100.0
2009 2008 2009 2008Market Value Market Value
£000 £000 % %Legal & General - LDI AAA-AA-A Corp Bond 345,182 343,203 14.5% 15.0%
- 213,871 - 9.4%
Total investments held under management
Legal & General - World (ex UK) Index
Investments exceeding 5% of the value of net assets are detailed below:
% of Net Assets
Defined Benefits Section - continued
Investment Securities
Distribution of Assets
Accrued Income and Management Expenses
Defined Benefit AVCs/EDCs
Property - Leasehold
Page 15
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
INVESTMENT REPORT
---------
-----
2009 2008£000 £000
Scottish Equitable 44,536 43,071Equitable Life 3,838 3,903Prudential 635 475Scottish Widows 419 497Siemens Investor Plan 364 468
49,792 48,414
Members can choose to switch AVC/EDC investments between the investment funds (or to a new provider), subject to the conditions of the particular policies.
Scottish Equitable BGI World (Ex UK) Index Tracker BWI
Scottish Equitable BGI Consensus Lifestyle Fund
(ex International Fund) (ex Mixed Fund)
Long Gilt Fund
Following recommendations from the Scheme’s Investment Advisors, the Trustee stopped all contributions to Equitable Life with the exception of bulk transfers-in resulting from mergers and acquisitions.
Equitable Life
With Profits Fund
Members currently invest in one or more of the following funds:
Building Society Fund Unit Linked Fund
Post April 2006 AVCs/EDCs in excess of 15% of pensionable salary are separately identified and must be used to purchase an annuity outside the Scheme.
DEFINED BENEFITS SECTION MEMBERS’ AVC/EDC ARRANGEMENTS
In addition, there are also AVC policies held with Scottish Widows and Prudential which have been closed to new members and new contributions for existingmembers.
Ethical Fund
(ex Balanced Lifestyle Fund)
Defined Benefits Section Members' AVC/EDC Assets
Long Gilt FundUK Index Tracker Fund
The Scottish Equitable policies have been in force since 1 April 2001. Until early 2010, members were able to invest in one or more of the following funds:
Scottish Equitable
At retirement, the funds are used to secure additional pension from the main Siemens Benefits Scheme using conversion rates set by the Trustee in conjunctionwith its advisors.
The Trustee reviews the AVC/EDC arrangements every 3 years in line with its Governance Policy, although changes in provider circumstances and investmentperformance are monitored on a quarterly basis.
Ethical Fund
Lifestyle Fund
From early 2010, AVCs were directed to the DC Platform.
The Trustee provides for members to invest in additional voluntary contributions (AVCs/EDCs) with a variety of investment options on a defined contributionsbasis, details of which are described below.
High Equity With Profits FundCash Fund
Scottish Equitable SBS Baillee Gifford Balanced Fund
Page 16
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
INVESTMENT REPORT
-----------
Distribution of Assets Market Value£000 %
Standard Life
3,907 1.4
111 0.0
1,826 0.6
14,057 5.0
6,463 2.3
3,294 1.2
2,280 0.8
237,307 83.7
2,374 0.8
4,210 1.5
7,671 2.7
283,500 100.0
Siemens Fixed Annuity
Shariah
Cash
In February 2009, all pre 1 January 2008 DC members switched from their UBS / LGIM investments onto the DC Platform.
This section is a defined contributions pension plan where the assets are invested on an individual member-by-member basis according to the member’s fundselection.
Siemens Global Equity - Active
UK Equity - PassiveProperty Fund
Shariah
Ethical UK
UK Equity - Passive
Fixed Annuity TargetInflation-Linked Annuity Target
Global Equity - Passive
Siemens Private
Siemens Global Equity - Passive
Siemens Inflation Linked Annuity
Siemens Property
Siemens UK Equity - Active
Siemens Cash
Total Investments held under Management *
Defined Contributions Section
UK Equity - Active
Private Fund
In the early part of 2009, some issues were highlighted with the Cash Fund. Following a thorough investigation and advice from the Scheme’s investmentadvisor, the Trustees changed the underlying cash fund on the DC Platform.
Global Equity - Active
Ethical
The DC Platform offers a range of bespoke or “white label” investment funds for members. These funds allow DC members to invest in a range of asset classesvia actively and passively managed underlying funds through the Standard Life Fund Platform. The funds available are:
* Includes Defined Benefits Section Members' AVCs/EDCs held within the Investor Plan to the value of £363,705 (2008 £350,645).
Page 17
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
INVESTMENT REPORT
Asset Class Index Return
13.7 13.2
10.3 11.3
9.2 5.8
14.7 15.4
16.1 11.8
14.5 14.8
8.7 8.9 #REF!
11.0 6.9
(17.5) (31.2)
7.1 11.7
(1.5) 1.9
Investor Plan Members
Composite Benchmark
FTSE All-Share
Overnight LIBOR
Composite Benchmark
Siemens UK Equity - Active
Siemens Property
Defined Contributions Section - 1 year returns
Siemens Private
UK Equity - Passive
Shariah
Siemens Fixed Annuity
Ethical UK
Siemens Global Equity - Active
Composite Benchmark
Morningstar IMA UK ALL Companies Ethical Subsector
Composite Benchmark
Dow Jones Islamic Titan 100 index
Index
Members of the Investor Plan have the opportunity to pay AVCs/EDCs, using the same investment funds as the Investor Plan. At retirement, the funds are usedto purchase additional pension benefits through an annuity.
Composite Benchmark
FTSE All-Share
Portfolio Return
Composite Benchmark
Defined Contributions Section Members' AVC/EDC Arrangements
Siemens Cash
Siemens Global Equity - Passive
Siemens Inflation Linked Annuity
Page 18
Name of scheme:
Adequacy of rates of contributions
Adherence to statement of funding principles
Signature RJ Whitelam Date
Name Richard Whitelam
Address 6 More London Place Name of employer: Hewitt Associates LtdLondonSE1 2DA
Qualification: FIA
1. I certify that, in my opinion, the rates of contributions shown in this schedule of contributions are such that the statutory funding objective could have beenexpected on 30 September 2008 to be met by the end of the period specified in the recovery plan dated 30 September 2009.
YEAR ENDED 30 SEPTEMBER 2009
The certification of the adequacy of the rates of contributions for the purpose of securing that the statutory funding objective can be expected to be met is not acertification of their adequacy for the purpose of securing the scheme's liabilities by the purchase of annuities, if the scheme was wound up.
2. I hereby certify that, in my opinion, this schedule of contributions is consistent with the Statement of Funding Principles dated 15 September 2009.
30 September 2009
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTS
ACTUARIAL CERTIFICATION OF THE SCHEDULE OF CONTRIBUTIONS
Siemens Benefits Scheme
Page 19
FUND ACCOUNTNotes Defined Defined 2009 2008
Benefits Contributions Total TotalSection Section
£000 £000 £000 £000
Contributions receivable 3 78,913 94,820 173,733 278,841
Transfers in 4 55,517 1,953 57,470 5,572
Other income 5 - 67 67 19
134,430 96,840 231,270 284,432
Benefits 6 73,520 10,622 84,142 75,855
Leavers 7 5,609 2,302 7,911 32,779
Administrative expenses 8 7,195 464 7,659 7,528
86,324 13,388 99,712 116,162
Net additions from dealings with members 48,106 83,452 131,558 168,270
Returns on investment
Investment income 9 28,390 54 28,444 27,210
Change in market value of investments 11 (95,513) 33,404 (62,109) (129,013)
Investment management expenses 10 (4,050) (427) (4,477) (5,464)
Net returns on investments (71,173) 33,031 (38,142) (107,267)
Net increase in fund during the year (23,067) 116,483 93,416 61,003
Transfer between the sections 16 (4,717) 4,717 - -
Net Movement (27,784) 121,200 93,416 61,003
Net assets at 1 October 2,110,359 168,872 2,279,231 2,218,228
Net assets at 30 September 2,082,575 290,072 2,372,647 2,279,231 .
The Notes on Pages 23 to 33 form an integral part of these financial statements.
Contributions and Benefits
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
Page 21
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
NOTES TO THE FINANCIAL STATEMENTS
1 BASIS OF PREPARATION
2 ACCOUNTING POLICIES
(a) CONTRIBUTIONS
(b) TRANSFER VALUES
(c) AGE-RELATED REBATES
(d) BENEFITS AND OTHER EXPENSES
(e) ADMINISTRATIVE EXPENSES
Additional voluntary contributions from the members are accounted for, on an accruals basis, in the month deducted from the payroll.
Employers’ deficit funding contributions are accounted for in accordance with the agreement under which they are being paid for in the absence of an agreement on a receipt basis.
Employers’ contributions in respect of Section 75 debts are accounted for in accordance with the agreement.
Administrative expenses are accounted for on an accruals basis.
Where members can choose whether to take their benefits as a full pension or as a lump sum with reduced pension, retirement benefits are accounted foron an accruals basis on the later of the date of retirement and the date the option is exercised.
The financial statements have been prepared in accordance with the Occupational Pension Schemes (Requirement to obtain Audited Accounts and aStatement from the Auditor) Regulations 1996 and with the guidelines set out in the Statement of Recommended Practice, Financial Reports of PensionSchemes (Revised May 2007).
Transfer values represent the capital sums either received in respect of new members from the pension schemes of their previous employers or paid to thepension schemes of new employers for members who have left service.
Transfer values to or from other pension arrangements are accounted for when the member exercises the option to transfer their benefits.
Group transfer values received and paid from other arrangements, are accounted for on an accruals basis once an agreement regarding the liability hasbeen reached in advance of the transfer of funds, in accordance with the terms of the agreement.
Age-related rebates are accounted for on an accruals basis.
The accounting policies that have been applied consistently in the preparation of the financial statements are set out below:
Normal contributions, both from the members and from the employer, are accounted for on an accruals basis in the month employee contributions are deducted from the payroll. Contribution of PPF levies and administrative expenses are accounted for on an accruals basis.
Employers’ augmentation contributions from the employer are accounted for in accordance with the agreement under which they are paid, or in the absence of such an agreement, when received.
Other benefits are accounted for on an accruals basis on the date of retirement, death or leaving the Scheme as appropriate.
Page 23
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
NOTES TO THE FINANCIAL STATEMENTS
(f) INVESTMENTS
PROPERTY
AVCs
(g) FOREIGN CURRENCY TRANSACTIONS
(h) INVESTMENT MANAGER EXPENSES
Accrued interest is excluded from the market value of fixed interest securities and index linked securities but is included in investment income receivable.
Investment holdings above 20% of the total value of a fund have been treated as a subsidiary or associate of the Scheme within the definition of FinancialReporting Standards, except where the Trustee has no ability to exercise control or significant influence. The percentage holding is derived from either thelatest available audited financial statements or interim management statements of the companies, adjusted to the Scheme year end date.
The fair value of the interest rate swaps and currency swaps is calculated using pricing models based on the market price of comparable instruments at theyear end date, if they are publicly traded. Interest is accrued monthly on a basis consistent with the terms of the contract. The amounts included in changein market value are the realised gains and losses on closed contracts and the unrealised gains and losses on open contracts. Net receipts or payments onswap contracts are either reported in investment income (where the economic purpose relates to income) or change in market value (where the economicpurpose relates to assets).
The fair value of the forward currency contracts is based on market forward exchange rates at the year end date and determined as the gain or loss thatwould arise if the outstanding contract was matched at the year end with an equal and opposite contract.
Rental income is accounted for in the period it falls due under the terms of the lease.
Pooled investment vehicles are valued at the closing bid price if both bid and offer prices are published, or, if single priced, at the closing single price.
Quoted investments including fixed interest securities, index-linked securities, other UK equities and convertibles are valued at bid market prices at theperiod end date adjusted, where applicable, by accrued interest. Where appropriate, market values listed in overseas currencies are translated into sterlingat the rates of exchange ruling at the period end date.
Derivative contracts are valued at fair value. Derivative contract assets are fair valued at bid prices and liabilities are fair valued at offer prices.
Income from equities is accounted for on the dates the stocks are quoted ex-dividend. Interest is accounted for on an accruals basis.
Transaction costs are included in the cost of purchases and sale proceeds. Transaction costs include costs charged directly to the Scheme such as fees,commissions, stamp duty and other fees.
Derivative contract changes in fair value are included in change in market value where the economic purpose of the contracts relates to assets. Where theeconomic purpose relates to income the change in fair value is included in investment income.
The commercial property was valued as at 30 September 2009 by Knight Frank LLP and the Great Dunmow farm property was valued at 30 September2009 by Bidwells Property Consultants, both in accordance with guidelines issued by the Royal Institute of Chartered Surveyors. No depreciation isprovided on freehold buildings or long leasehold properties.
The Scheme bears the cost of expenses incurred in the purchase or sale of properties from the property portfolio.
The market value of the additional voluntary contributions has been taken as the last valuation of the policies at the period end as advised by the provider,with an adjustment for subsequent cash movements.
Investment manager expenses are accounted for in the period they fall due. The expenses are calculated on an agreed basis between the Trustee andeach investment manager. The basis is reviewed periodically.
Performance fees are accounted for on an accruals basis.
Investments and monetary balances in foreign currencies are translated at the rates of exchange ruling at the net assets statement date.
Fund account items are translated into sterling at the rates of exchange prevailing at the date of the transaction.
Unquoted securities are valued by the fund managers at the year end in accordance with generally accepted guidelines.
Page 24
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
NOTES TO THE FINANCIAL STATEMENTS
3. CONTRIBUTIONS Defined Defined 2009 2008Benefits Contributions Total TotalSection Section
£000 £000 £000 £000
Employer - Normal * 32,167 87,888 120,055 124,332 - Recovery Plan ** 43,312 - 43,312 140,825 - Augmentations - 179 179 857 - Additional (Employee Directed Contributions) 139 2,136 2,275 1,816 - PPF Levy 1,066 - 1,066 1,476
76,684 90,203 166,887 269,306
Members - Normal 639 2,831 3,470 4,590 - Additional Voluntary 513 1,786 2,299 2,380
1,152 4,617 5,769 6,970
Age related rebates 1,077 - 1,077 2,565 1,077 - 1,077 2,565
78,913 94,820 173,733 278,841
* An analysis of the Employer normal contributions is noted below: Defined Defined 2009 2008Benefits Contributions Total TotalSection Section
£000 £000 £000 £000
Normal contributions 7,753 7,584 15,337 22,353 Flexed Contributions 11,506 80,304 91,810 90,697 DC Ill Health, Life Assurance and Administration Fees 12,908 - 12,908 11,282
32,167 87,888 120,055 124,332
** An analysis of the Deficit Repair Programme is noted below :
Deficit Repair as agreed under the Pensions Review *** 43,312 - 43,312 133,800 Fujitsu Siemens transfer out top up payment - - - 6,778 BBC Transfer in top up payment - - - 247
43,312 - 43,312 140,825
4. TRANSFERS IN Defined Defined 2009 2008Benefits Contributions Total TotalSection Section
£000 £000 £000 £000
Group transfers in from other schemes 55,377 - 55,377 911 Individual transfers in from other schemes 140 1,953 2,093 4,661
55,517 1,953 57,470 5,572
5. OTHER INCOME Defined Defined 2009 2008Benefits Contributions Total TotalSection Section
£000 £000 £000 £000
Other Income - 67 67 19 - 67 67 19
*** The employer has agreed to pay additional contributions to eliminate the funding shortfall of £755 million revealed by the actuarial valuation as at 30September 2008. A further £2.788 million is receivable in November 2011 and £5.333 million per month during the period 1 December 2011 to until 30 June2025.
The group transfer in relates to Siemens Magnet Technology becoming a participating employer during the year. The transfer was made by a transfer ofassets.
Page 25
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
NOTES TO THE FINANCIAL STATEMENTS
6. BENEFITS Defined Defined 2009 2008Benefits Contributions Total TotalSection Section
£000 £000 £000 £000
Pensions in payment 47,094 - 47,094 42,498 Commutation and lump sum benefits 25,083 4,025 29,108 29,108 Purchase of annuities - 2,205 2,205 1,479 Lump sum death benefits 1,343 4,374 5,717 2,767 Refunds to members on death - 18 18 3
73,520 10,622 84,142 75,855
7. LEAVERS Defined Defined 2009 2008Benefits Contributions Total TotalSection Section
£000 £000 £000 £000
Refunds to members leaving service - 29 29 99 Group transfers to other schemes during the year - - - 24,029 Individual transfers to other schemes 5,609 2,273 7,882 8,651
5,609 2,302 7,911 32,779
8. ADMINISTRATIVE EXPENSESDefined Defined 2009 2008Benefits Contributions Total TotalSection Section
£000 £000 £000 £000
Administration and processing 5,341 360 5,701 5,396 Audit fees 103 - 103 85 Actuarial fees 239 - 239 156 Trustee fees 277 - 277 163 Pension Protection Fund Levy 1,060 - 1,060 1,476 Legal and other professional fees 175 104 279 252
7,195 464 7,659 7,528
All other administration costs are borne by the employer.
9. INVESTMENT INCOMEDefined Defined 2009 2008Benefits Contributions Total TotalSection Section
£000 £000 £000 £000
Dividends from equities 38 - 38 4,961 Income from index-linked securities 16,507 - 16,507 4,975 Income from pooled investment vehicles 904 - 904 1,081 Net rents from properties 10,607 - 10,607 13,498 Annuity income 54 - 54 94 Income from cash instruments and deposits 194 54 248 2,553 Other 86 - 86 48
28,390 54 28,444 27,210
10. INVESTMENT MANAGEMENT EXPENSESDefined Defined 2009 2008Benefits Contributions Total TotalSection Section
£000 £000 £000 £000Investment managers' fees Fees calculated on market value (2,228) (427) (2,655) (3,228) Performance fees (649) - (649) (335) Investment Consultancy Fees (775) - (775) (1,431)Fees and Stamp Duty on property transactions (31) - (31) (27)Other professional fees (367) - (367) (443)
(4,050) (427) (4,477) (5,464)
Page 26
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
NOTES TO THE FINANCIAL STATEMENTS
11. INVESTMENTS
UK Overseas Total UK Overseas Total£000 £000 £000 £000 £000 £000
Investment Assets
Index-Linked Securities 930,814 - 930,814 926,638 - 926,638 930,814 - 930,814 926,638 - 926,638
Pooled Investment vehicles- Managed Funds 501,174 276,291 777,465 377,141 295,275 672,416 - Fund of Hedge Funds - 176,721 176,721 - 176,286 176,286 - Currency Fund - - - - 40,472 40,472
501,174 453,012 954,186 377,141 512,033 889,174 Derivatives- SWAPS 73,703 - 73,703 65,475 - 65,475 - Forward FX 13 - 13 -
73,716 - 73,716 65,475 - 65,475
Properties 133,092 - 133,092 175,862 - 175,862 133,092 - 133,092 175,862 - 175,862
AVC/EDC investments (See Note 13) 49,792 - 49,792 48,414 - 48,414 49,792 - 49,792 48,414 - 48,414
Cash deposits 1,476 - 1,476 943 - 943 Other investment assets 5,456 - 5,456 - - -
6,932 - 6,932 943 - 943
Total Investment Assets 1,695,520 453,012 2,148,532 1,594,473 512,033 2,106,506
Investment Liabilities
Derivatives- SWAPS (96,401) - (96,401) (608) - (608)- Forward FX (7,939) - (7,939) - - -
(104,340) - (104,340) (608) - (608)
Other investment liabilities (5,854) - (5,854) (4,130) - (4,130)(5,854) - (5,854) (4,130) - (4,130)
Total Investment Liabilities (110,194) - (110,194) (4,738) - (4,738)
Total 1,585,326 453,012 2,038,338 1,589,735 512,033 2,101,768
DEFINED CONTRIBUTIONS SECTION
Pooled Investment vehicles- Managed funds 283,136 - 283,136 160,208 - 160,208 - Cash deposits - - - 51 - 51
- - - Total 283,136 - 283,136 160,259 - 160,259
Total Scheme 1,868,462 453,012 2,321,474 1,749,994 512,033 2,262,027
30 September 2009 30 September 2008
All managed funds are registered in the UK with the exception of the following:
K2 and Blackstone who are both registered in the Cayman IslandsBabson Capital and Blackrock who are both registered in Ireland
DEFINED BENEFITS SECTION
Page 27
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
NOTES TO THE FINANCIAL STATEMENTS
Market Purchases at Sales Change in Marketvalue at cost and proceeds market value at
30 Sep 08 derivative and derivative value 30 Sep 09payments receipts
£000 £000 £000 £000 £000
Defined Benefits SectionIndex-linked securities - UK public sector quoted 921,805 - - 9,009 930,814 Pooled Investment Vehicles 889,174 285,499 (240,658) 20,171 954,186 Derivative contracts 64,867 1,387 (233) (96,645) (30,624)Properties - UK 175,862 - (9,700) (33,070) 133,092 AVCs/EDCs 48,414 763 (4,407) 5,022 49,792
2,100,122 287,649 (254,998) (95,513) 2,037,260
Cash and cash equivalents 943 - (942,057) - 1,476 Other investment balances (4,130) - 4,125,870 - (398)
(3,187) - 3,183,813 - 1,078
Total DB 2,096,935 287,649,265 (251,813,814) (95,513,354) 2,038,338 - -
Market Purchases at Sales Change in Marketvalue at cost and proceeds market value at
30 Sep 08 derivative and derivative value 30 Sep 09payments receipts
£000 £000 £000 £000 £000
Defined Contributions Section
Pooled investment vehicles 160,208 183,996 (94,472) 33,404 283,136 160,208 183,996 (94,472) 33,404 283,136
Cash deposits 51 - 51 -
Total DC 160,259 183,996 (94,472) 33,404 283,136
Total Scheme 2,257,194 471,645 (349,470) (62,109) 2,321,474
The following is a breakdown of the defined contributions assets at the period end.2009 2008£000 £000
Assets designated to members 282,930 160,259 Trustee undesignated account 206 - Total defined contributions pooled investment assets 283,136 160,259
Movements during the year
Change in the market value of investments comprises both realised and unrealised gains and losses on investments held at any time during the year. Theportfolio of SWAP contracts, which matches part of the Scheme liabilities, incurred an unrealised loss of £88m. Further losses of £9m were incurred within theforeign currency hedging programme, of which £5.8m is being actively reviewed by the Trustee and the Scheme's legal advisors.
Transaction costs are included in the cost of purchases and sale proceeds. Transaction costs include commissions, stamp duty and other fees. Transactioncosts incurred in the year amounted to £0.1 million (2008: £0.9m). In addition, further indirect costs are inherent in the bid-offer spread on investments withinpooled investment vehicles and are not separately provided to the Scheme.
The movements on the investments during the year are shown below.
11. INVESTMENTS - continued
Where the Scheme has a holding in a fund which is greater than 20% of the total value of the fund, the accounting will normally be on a proportionate basis.The Scheme's holding in Babson Capital European Senior Loans Ltd as at 30 September 2009 is 37% (2008:nil). No significant influence is exercised by theTrustee and any responsibility for decision making is delegated to the investment manager. As such, the holding has been treated as an investment and not anassociate as defined in Financial Reporting Standards.
Page 28
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
NOTES TO THE FINANCIAL STATEMENTS
Derivative contracts
2009 2008£000 £000
Swaps contracts (22,698) 64,867 Forward FX (7,926) -
(30,624) 64,867
Swaps contracts
Counterparty Type Of Notional 2009 2009 2008Swap Principal Assets Liabilities
£000 £000 £000 £000
RBS Interest Rate (OTC ZCS Rec Fix) 122,166 13,664 7 8,578 Inflation Rate (Rec RPI Pay Fix) 158,369 - 16,343 4,238 Interest Rate (OTC ZCS Rec) 25,000 1,528 - 2,066
Total RBS 305,535 15,192 16,350 14,882
Morgan Stanley Interest Rate (OTC ZCS Rec Fix) 172,312 18,046 34 10,862 Inflation Rate (Rec RPI Pay Fix) 88,357 - 9,632 3,757
Total Morgan Stanley 260,669 18,046 9,666 14,619
Barclays Interest Rate (OTC ZCS Rec Fix) 45,454 4,709 12 2,815 Inflation Rate (Rec RPI Pay Fix) 74,189 - 8,191 3,259
Total Barclays 119,643 4,709 8,203 6,074
Goldman Sachs Interest Rate (OTC ZCS Rec Fix) 121,401 9,831 44 4,928 Inflation Rate (Rec RPI Pay Fix) 175,825 - 23,606 (244)
Total Goldman Sachs 297,226 9,831 23,650 4,684
Interest Rate (OTC ZCS Rec Fix) 125,393 17,530 5 10,452 Inflation Rate (Rec RPI Pay Fix) 168,656 - 22,460 5,008
Total Deutsche Bank 294,049 17,530 22,465 15,460
HSBC Interest Rate (OTC ZCS Rec Fix) 75,306 8,395 8 5,262 Inflation Rate (Rec RPI Pay Fix) 134,019 - 16,059 3,886
Total HSBC 209,325 8,395 16,067 9,148
TOTAL SWAPS (By Counterparty) 1,486,447 73,703 96,401 64,867 The notional principal of the swap is the amount used to determine the value of the swapped interest receipts and payments.
11. INVESTMENTS - continued
Swaps – the Trustee aim is to match as far as possible the Scheme’s long term liabilities, in particular in relation to their sensitivities to interest rate andinflation movements.
Forward Foreign Exchange – In order to maintain appropriate diversification of investments within the portfolio and take advantage of overseas investmentreturns the underlying investment portfolio includes overseas investments. A currency hedging programme, using forward foreign exchange contracts is inplace to manage the currency exposure of these overseas investments.
The main objectives for the use of derivatives and the policies followed during the year are summarised as follows:
Page 29
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
NOTES TO THE FINANCIAL STATEMENTS
Swaps contracts - continued
Expiration Date Type Of Notional 2009 2009 2008Swap Principal Assets Liabilities
£000 £000 £000 £000
Less Than 20 years Interest Rate (OTC ZCS Rec Fix) 27,321 4,196 - 1,504 Interest Rate (OTC ZCS Rec) 7,344 1,166 - 439 Inflation Rate (Rec RPI Pay Fix) 41,671 - 5,253 (390)
76,336 5,362 5,253 1,553
20 - 29 years Interest Rate (OTC ZCS Rec Fix) 149,571 22,215 - 9,956 Interest Rate (OTC ZCS Rec) 30,754 4,718 - 2,068 Inflation Rate (Rec RPI Pay Fix) 214,890 - 28,675 2,558
395,215 26,933 28,675 14,582
30 - 39 years Interest Rate (OTC ZCS Rec Fix) 271,000 28,118 - 18,096 Interest Rate (OTC ZCS Rec) 59,686 6,315 - 4,383 Inflation Rate (Rec RPI Pay Fix) 382,487 - 46,356 13,725
713,173 34,433 46,356 36,204
40 years and longer Interest Rate (OTC ZCS Rec Fix) 116,974 5,510 104 6,829 Interest Rate (OTC ZCS Rec) 24,382 1,465 7 1,688 Inflation Rate (Rec RPI Pay Fix) 160,367 - 16,006 4,011
301,723 6,975 16,117 12,528
TOTAL SWAPS (By Expiration) 1,486,447 73,703 96,401 64,867 The notional principal of the swap is the amount used to determine the value of the swapped interest receipts and payments.
Forward FX
Settlement date Currency Amount Currency Amount 2009 2009bought bought sold sold Assets Liabilities
£000 £000
02 November 2009 GBP 175,153,707 USD 152,176,830 13 1502 November 2009 EUR 111,820,663 GBP 103,063,589 - 85502 November 2009 GBP 154,581,354 EUR 176,855,005 - 7,069
13 7,939
As at 1 October 2009 collateral delivered for the unrealised loss on swaps was £22.9 million (2008: £53.3 million) comprised of gilts.
11. INVESTMENTS - continued
Page 30
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
NOTES TO THE FINANCIAL STATEMENTS
Other Investment balances 2009 2008£000 £000
Net rent receivable 1,487 3,058 Recoverable tax 59 103 Interest receivable 3,909 (887)Rent demanded in advance (4,058) (4,416)Investment management fees payable (1,121) (898)Other creditors (674) (1,090)
(398) (4,130)
2009 2008 2009 2008Market Value Market Value
£000 £000 % %Legal & General - LDI AAA-AA-A Corp Bond 345,182 343,203 14.5% 15.0%
- 213,871 - 9.4%
AVC Investments
2009 2008£000 £000
Scottish Equitable 44,536 43,071 Equitable Life 3,838 3,903 Prudential 635 475 Scottish Widows 419 497 Siemens Investor Plan 364 468
49,792 48,414
11. INVESTMENTS - continued
The Trustee holds assets invested separately from the main Defined Benefits Section securing additional benefits on a money purchase basis for thosemembers electing to pay Additional Voluntary Contributions or electing to transfer their retained benefits from a previous employer to the Scheme. Membersparticipating in these arrangements each received an annual statement as at 30 September confirming the amounts held to their account and the movementsin the year. The aggregate amount of AVC investments are as follows:
Investments exceeding 5% of the value of net assets are detailed below:
% of Net Assets
Legal & General - World (ex UK) Index
CONCENTRATION OF INVESTMENTS
Page 31
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
NOTES TO THE FINANCIAL STATEMENTS
DEFINED BENEFITS SECTION 30 September 30 September2009 2008£000 £000
Contributions due from the employer in respect of: Employer - normal 176 - Employer - PPF levy 525 497 Group transfers receivable 235 - Other debtors 6 27 Cash balances 49,576 11,640 Current assets for the defined benefits section 50,518 12,164
DEFINED CONTRIBUTIONS SECTION
Designated to members 2009 2008£000 £000
Contributions due from the employer in respect of: Employer - 3 Member - 3 Other debtors 181 - Cash balances 9,040 8,847
9,221 8,853
Not designated to members 2009 2008£000 £000
Other debtors 2 188 Cash balances 265 -
267 188
Current assets for the defined contributions section 9,488 9,041
Employer contributions were received subsequent to the year end within the timescales required by the Schedule of Contributions except for £130,605 (2008:nil) which were received late by the Scheme on 13 November 2009.
12. CURRENT ASSETS
Page 32
SIEMENS BENEFITS SCHEMETRUSTEE'S REPORT AND FINANCIAL STATEMENTSYEAR ENDED 30 SEPTEMBER 2009
NOTES TO THE FINANCIAL STATEMENTS
DEFINED BENEFITS SECTION 30 September 30 September2009 2008£000 £000
Age related rebates received in advance (235) (85)Contributions paid in advance by participating employers (121) (100)Unpaid benefits (4,715) (2,622)Other creditors (1,210) (766)Current liabilities for the defined benefits section (6,281) (3,573)
DEFINED CONTRIBUTIONS SECTION
Designated to members 2009 2008£000 £000
Unpaid benefits (2,423) (366)(2,423) (366)
Not designated to members 2009 2008£000 £000
Accrued expenses (6) - Contributions paid in advance by participating employers (111) - Other creditors (12) (62)
(129) (62)
Current liabilities for the defined contributions section (2,552) (428)
30 September 30 September2009 2008£000 £000
Contributions received after the due date required by the Schedule of Contributions 131 - Contributions received in advance (21) -
(100) - 10 -
15. RELATED PARTY TRANSACTIONS
16. TRANSFER BETWEEN SECTIONS2009£000
DC Market Valuation Fees 12DC Administration Expenses 351DC Other investment management fees 415DC Ill Health Payments 455DC Life Assurance Payments 3,484Total transfer between sections 4,717
The Chairman receives a pension and also charges fees, as agreed by the remaining Trustee directors, in respect of services provided in his role as Chairmanof the Trustee Board.
Cash advance received from Employers
13. CURRENT LIABILITIES
During the year there were contributions due to the Scheme which were paid late as prescribed by the Schedule of Contributions. Whilst these amountsremained unpaid, they constituted employer related investments. The cumulative position of contributions received late during the year was £955k (2008 = nil).This is less than 1% of the Scheme's total net assets.
The cost of administrative services provided to the Scheme are borne by the participating employers.
14. EMPLOYER RELATED INVESTMENT
Page 33