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    Halcrow Pension Scheme (No.2) Forthe year ended 31 December 2019 Halcrow Pension Scheme (No.2) Trustee's Annual Report and Financial Statements Pension Scheme Registration No: 12013455


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2OL9 Page The Trustee and its Advisers 7 Trustee's Report 2 Financial development and Report on Actuarial Liabilities 5 Additional disclosure requirements 7 General information 9 Membership changes 10 lnvestment Report L1, DC Governance Statement 19 lndependent Auditor's Report 26 lndependent Auditor's Statement about Contributions 28 Summary of Contributions 29 Fund Account 30 Statement of Net Assets 31 Notes to the Financial Statements 32 Appendices Report on Actuarial Liabilities 43 Actuary's certification of schedule of contributions 44


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2Ot9 Trustee Halcrow Pension Trustees Limited Trustee directors L Power - Chairperson (appointed July 2020) JF lrwin RS Hoad lndependent Trustee Servlces Limited - C Martin J Billinghurst B A Hamer (resigned 22 January 20!9) M Carlin (appointed 22 January 2019) PensionsManager pi Gibbons Scheme Actuary I R H Scott (FlA) - Lane Clark & Peacock LLp Actuary, Consultant & lnvestment Adviser Lane Clark & peacock LLp lnvestment Managers BlackRock lnvestment Management (uK) Ltd UBS GlobalAsset Management (UK) Ltd Baillie Gifford Life Limited M&G lnvestments Limited Newton lnvestment Management Custodian Bank of New york lndependent Auditor Nortons Assurance Limited Legal Adviser Sacker & partners LLp Bank HSBC Bank, Victoria Branch, London DC/AVC providers Prudential AVIVA Phoenix Life NPI Equitable Life Principal Employer Jacobs UK Limited (JUK)from 20 December 2ol9 Halcrow Group Limited (HGL)to 19 December ZOIS Ultimate parent company Jacobs Engineering Group lnc. of JUK


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2019 lntroduction The Trustee presents its report for the year ending 3i- Decembe r zol9. The Halcrow Pension Scheme (No.2) ('the scheme) is a "defined benefit" scheme that was established on 11 March 2016 to provide retirement and death benefits for former members of the Halcrow pension Scheme. Under the Finance Act 2004, the Scheme is registered with Her Majesty's Revenue & Customs. The Principal Employer may at any time, by deed, appoint one or more persons or a body corporate (whether or not a trust corporation) to be a new Trustee Director (in place of a person who ceases to be Trustee Director for any reason) or an additional Trustee Director. The Principal Employer may also at any time, by deed, remove any of the Trustee Directors from office. This rule is subject to such of the provisions of sections 241,-243 of the Pensions Act 2004 and the occupational Pension schemes (Member-nominated Trustees and Directors) Regulations 2006 as may apply to it from time to time. Halcrow Pension Trustees Limited is the corporate trustee. The Financial Statements for the year ended 31 December 20L9, as set out on pages 32lo 42, have been prepared and audited in accordance with sections 41(1) and (6) of the pensions Act 1995. Statements of Trustee's Responsibilities Trustee's Responsibilities in Respect of the Financial Statements The Financial Statements, which are prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including the Financial Reporting Standard applicable in the UK ("FRS 102,,), are the responsibility of the Trustee. Pension Scheme regulations require, and the Trustee is responsible for ensuring, that the financial statements: ' show a true and fair view of the financial transactions of the Scheme during the Scheme year and of the amount and disposition at the end of the Scheme year of its assets and liabilities, other than liabilities to pay pensions and benefits after the end of the scheme year; and ' contain the information specified in Regulation 34 of the occupational pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, including making a statement whether the financial statements have been prepared in accordance with the relevant financial reporting framework applicable to occupational pension schemes. ln discharging the above responsibilities, the Trustee is responsible for selecting suitable accounting policies, to be applied consistently, making any estimates and judgements on a prudent and reasonable basis, and for the preparation of the financial statements on a going concern basis where it is appropriate to presume that the Scheme will not be wound up. The Trustee is also responsible for making available certain other information about the Scheme in the form of an Annual Report.


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    Halcrow Pension Scheme (No.2) Forthe year ended 31 December21tg The Trustee also has a general responsibility for ensuring that adequate accounting records are kept and for taking such steps as are reasonably open to it to safeguard the assets of the Scheme and to prevent and detect fraud and other irregularities including the maintenance of an appropriate system of internal control. Trustee's Responsibilities in Respect of Contributions The Trustee is responsible under pension legislation for preparing, monitoring and from time to time reviewing and if necessary revising a Schedule of Contributions showing the rates of contributions payable towards the Scheme by or on behalf of the Employer and the dates on or before which such contributions are to be paid. The Trustee is also responsible for keeping records in respect of contributions received and adopting a risk based process to monitor whether contributions are made to the Scheme by the Employer in accordance with the Schedule of Contributions. Where breaches of the Schedule occur, the Trustee is required by the Pensions Acts 1995 and 2004 to consider making reports to The Pensions Regulator and the members. Changes to the Scheme during the period ln January 2019 Ben Hamer resigned as Trustee Director and Michael Carlln was appointed in his stead. ln December 2019 the Trustee agreed to a change in the company that sponsors the Scheme, from Halcrow Group Limited (HGL)to Jacobs UK Limited (JUK). This was achieved using an accepted process (known as a "flexible apportionment arrangement") which transfers responsibility for pension scheme liabilities from one company to another provided that there is no reduction in member benefit security. The change of Scheme sponsor took place on 20 December 2019. It is expected that this change will improve the security of members' benefits under the Scheme.lUK, which was made directly responsible for funding and making decisions (where there is sponsor involvement) under the Scheme in place of HGL, is a much stronger company than HGL, wlth significantly greater resources available to support the Scheme. HGL's business has only been able to provide limited support to the Scheme for many years and its financial position has made it difficult to win new business. The role or powers of the Trustee in the running of the Scheme and Scheme benefits will not be affected as a result of the change of Scheme sponsor. At the same time as making this change, the Trustee also agreed to release the guarantee CH2M HILL (CH2M) had given HPS2 at the time of the benefit restructuring. As CH2M business becomes increasingly integrated into Jacobs, CH2M's revenues are expected to reduce. CH2M's liability under the guarantee was capped at €50 million, whereas JUK will now stand directly behind the full liabilities of the scheme. Equalisation of guaranteed minimum pension benefits On 26 October 20L8, the High Court handed down a judgment involving the Lloyds Banking Group,s defined benefit pension schemes. The judgment concluded the schemes should be amended to equalise pension benefits for men and women in relation to guaranteed minimum pension benefits. The issues determined by the judgment arise in relation to many other defined benefit pension schemes. The Trustee of the Scheme is aware that the issue will affect the Scheme and will be considering this at a future meeting and decisions will be made as to the next steps. Under the ruling schemes are required to


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2OL9 backdate benefit adjustments in relation to GMP equalisation and provide interest on the backdated amounts. Based on an initial assessment of the likely backdated amounts and related interest the Trustee does not expect these to be material to the financial statements and therefore has not included a liability in respect of these matters in these financial statements. They will be accounted for in the year they are determined. The judgement did not address transfers out which will be subject to a second hearing expected sometime in 2020. The Scheme has not experienced significant historicaltransfers out and therefore the Trustee does not believe the outcome of this judgement will have a material impact on the scheme. ln common with the majority of UK pension schemes, the Scheme is not yet in a position to calculate equalised benefits, back-payments and interest as the Trustee has been advised to wait until various regulatory issues have been clarified and industry-wide guidance produced before proceeding. Outstanding issues, in addition to past transfers out, include the tax treatment of additional payments where the Trustee awaits guidance from HMRC to avoid creating adverse tax consequences for scheme members. Material events after the Scheme year-end After the period covered by this report, the COVID-1,9 pandemic has developed. The pandemic has impacted on investment markets, with the Scheme's assets falling in value by around 5%o over the three months to 31 March 2020. However, over the second quarter of 2020, the value of the Scheme's assets has recovered. The Scheme has continued to receive deficit recovery payments in line with the agreed Schedule of Contributions. While the pandemic has had a detrimental impact on the global economy, the Trustee remains comfortable with the Employer's ongoing solvency. Regulatory easement in relation to CETV requests The COVID-1-9 pandemic caused significant market instability and the deterioration in funding levels in the first quarter of 2020. To tackle these problems and given the increased risks and financial uncertainties regarding transfers, the Trustee felt it was appropriate to suspend transfer value quotations for a period of three months until market conditions have been stabilised. The Trustee's decision to suspend transfer values has been in line with guidance issued by the pensions Regulator in relation to the COVID-19 crisis allowing the scheme trustees to suspend transfer value quotations until 30 June 2020 without being penalised for breaching disclosure requirements.


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2019 Fund value The value of the scheme's assets were f630,1-47,ooo as at 31 December 201-9. Report on Actuarial Liabilities Under Section 272 of the Pensions Act 2014, every scheme is subject to the Statutory Funding Objective, which is to have sufficient and approprlate assets to covers its technical provisions. The technical provisions represent the present value of the benefits members are entitled to based on pensionable service to the valuation date. This is assessed using assumptions agreed between the Trustee and the Employer and set out in the Statement of Funding Principles, which is available to Scheme members on request. A formal actuarial valuation of the Scheme was carried out as at 31 December 20i-6 which determined a funding deficit of f57.9 million at that date. A Report on Actuarial Liabilites and the Actuary's certification of the schedule of contributions can be found as appendices on page 43 and 44 of this report. Pension lncreases Pensions are increased in January each year except for former members of the Pension and life Assurance Plan of Halcrow Fox Associates Ltd which are increased in october each year. Members who had "contracted-out" benefits under the Halcrow Pension Scheme (HPS) continue to be entitled to those benefits under HPS2. This means penslon entitlements accrued between 6 April 1978 and 5 April 1997 are subject to a minimum value known as a Guaranteed Minimum Pension (GMp). This effectively replaces the state benefits members would have earned in SERPS had they not been "co ntra cted-out". GMP entitlement earned before 6 April 1988, does not attract any increase. For GMP entitlement earned after 5 April L988, from age 60 for females and 65 for males, HPS2 increases this value in payment by a rate published by the Government each year. This is the lesser of 3% or the increase in the CPI (and the Government measures this to the previous September each year). Accordingly, with effect the January 2019 payment there was an increase of 2.4% applied to members' post 1988 GMp. For pension, or transferred-in pension entitlement, that relates to benefit accrued before 6 April 1997, that pension, in excess of the Guaranteed Minimum Pension (GMP), does not attract any increase. For pension, or transferred in pension entitlement, that relates to benefit accrued on or after 6 April 1997 to 5 April 2005, the increase to that pension is the lower of 5% or the change in the CPl. The Trustee used the increase in the Consumer Prices lndex (CPl) in the 12 months to october 2018, which was the latest published CPI index available in December. Accordingly, with effect the January 2019 payment an increase of 2.4% was applied. For pensionable service on or after 6 April 2005 the increase to a member's pension is the lower of 2.5% or the change in the CPl. Accordingly, with effect the January 2019 payment an increas e of 2.4% was applied. Any Additional Voluntary Contribution (AVC) pension payable was increased by the level of increases selected and costed for at retirement. For AVC pension increasing at LPl, the increase to that pension is the lower of 5%or the change in the RPl. TheTrustee used the increase in the Retail Prices lndex (Rpl) in the 12 months to october 2018, which was the latest published RPI index available in December. Accordingly, with effect the January 2019 payment an increase of 3.3% was applied.


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2019 HPS2 has been designed to ensure, as far as possible, that if at any point members or their survivors would have received more pension if they had chosen to go into the Pension protection Fund at the date of transfer, HPS2 will pay the amount the PPF would have paid based on the law in force on 5 October 2016. Pensions for members who transferred from the Pension and Life Assurance plan of Halcrow Fox Associates Ltd (the Plan) are increased in October each year. For pension that relates to benefit accrued before 6 April L997, or transferred-in pension entitlement that was received by the Plan on a non-increasing basis, that pension does not attract any increase. For pension that relates to benefit accrued on or after 6 April 1997 to 5 April 2005, or transferred in pension entitlement where a CPI increase was agreed, the increase to that pension is the lower of 5% or the change in the CPl. The Trustee used the increase in the Consumer Prices lndex (Cpl)in the 12 months to July 2019, which was the latest published CPI index available in October. Accordingly, with effect the October 201-9 payment an increase of Z% was applied. For pensionable service on or after 6 April 2005 the increase to a member's pension is the lower of 2.5% or the change in the CPl. Accordingly, with effect the October 2019 payment an increas e of 2% was applied. There were no discretionary increases paid during the period. Deferred pensions Preserved pensions were increased in accordance with the Scheme Rules, which are in line with statutory requirements. Transfer Values Transfer values paid during the period of this report were calculated and verified in the manner prescribed by regulations under Part lV of the Pension Schemes Act 1993 and do not take into account discretionary benefits.


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2Ot9 Pensions Regulator The Pensions Regulator is the regulator of work-based pensions in the UK, with wider and more flexible powers under the Pensions Act 2004. lts powers include the ability to: o issue improvement notices and third party notices, allowing the Regulator to ensure problems are put right; o freeze a scheme at risk, while the Regulator investigates; o disqualify trustees who are judged not fit and proper to carry out their duties; and o collect more detailed scheme information. The Pensions Regulator can be contacted at: Napier House Trafalgar Place Brighton BN14DW Tel:0345 600 0707 Email : customersupport@tpr.gov. uk www.thepensionsregu lator.gov. uk TPAS - The Pensions Advisory Service (now part of MapS) This is an independent voluntary organisation with local advisers who are experts in pension matters. lt was established to provide free advice at any time to scheme members and their dependants who have problems concerning pension rights. Since January 2019, TPAS is a part of the Money and Pensions Service (MapS). MaPS brings together the services previously delivered by the Money Advice Service, the pensions Advisory Service and Pension Wise. TPAS can be contacted at: 11 Belgrave Road London SW1V 1RB Tel: 0800 011 3797 Email: enquiries@pensionsadvisorvservice.org, uk www. pe nsionsadvisorvservice.org. u k Pension Tracing Service A pension tracing function is carried out by the Pension Tracing Service of the Department for Work and Pensions (DWP). The DWP's Pension Tracing Service can be contacted at: The Pension Service 9 Mail Handling Site A Wolverhampton WV981LU Tel:0800 731 0193 www. gov. u k/f ind-pensi o n-conta ct-deta i I s


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2Ol9 Pensions Ombudsman The Pensions Ombudsman investigates complaints of injustice caused by maladministration and disputes of fact or law with the Trustee, managers or employer. The Pensions Ombudsman can be contacted at: 10 South Colonnade Canary Wharf E1.4 4PU Tel:0800 917 4487 E mai I : e nq u i ries (d pe nsi o n s-o m b udsm a n. o rg. u k


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2019 Disputes Resolution Procedure Under the Pensions Act 1995 there is a requirement for the Scheme to set up its own formal procedures for resolving any dispute with the Trustee or administrators. lt is to be used when a member or potential beneficiary has a dispute which has not been satisfactorily resolved informally. At any stage of the dispute the individual can refer to MaPS for informal help. Once the disputes resolution procedure is complete, the matter can be pursued through the office of the Pensions Ombudsman or ultimately through the Courts. Halcrow Pension Scheme (No.2) Web information Publicly available HPS2 documents are accessible from https://harcrow.com The Trustee has a pension's site for Halcrow Pension Scheme (No.2) members. The Trustee stores copies of all member communications and Reports and Statements which are issued from time to time which you can review or download as you might require. You will need to register for the website to gain access to the private areas. Please visit: http://www.halcrow.com/pensions to register. Further lnformation Members are entitled to inspect copies of documents giving information about the Scheme. ln some circumstances, copies of documents can be provided but a charge may be made for copies of the trust documents (Deed and Rules) and of the Scheme Actuary's report. Personal Data The Trustee holds certain personal data about Scheme members, dependants and beneficiaries. The Trustee needs thls to be able to run the Scheme and to look after benefits and pay benefits. The Trustee has to comply with certain legal requirements relating to the personal data it holds, including the General Data Protection Regulation and the Data Protection Act 2018. The Trustee has a privacy notice that sets out the kind of personal data it holds, how that data is used and who the Trustee shares it with. The privacy notice also sets out individual rights relating to personal data and who to contact to exercise those rights, make a complaint, or if you have any questions. The Trustee's privacy notice can be found online at www.halcrow.com/pensions. Alternatively, if you prefer to receive a hard copy please contact the Pensions Manager. Enquiries or Complaints Any enquiries or complaints about the Scheme, including requests from individuals for information about their benefits, should be sent to the Pension Manager who can be contacted at: X Jacobs UK and lreland Pensions team, 1180 Eskdale Road, Winnersh, Reading, RG41 STU EEmail: pensionsteam@jacobs.com ETelephone:0ffi r ,'.':.r; .,;.f Signed for and on behalf of the Trustee: o,-_, , /; f ; i *r,gd**"; ' ,.t By: James Billinghurst Date: 27rh )uly 2o2o


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2Ol9 I Membership changes , I total membership as at 31't December 201g 2,g4g 1. Members with active benefits as at 3L't December 2018 0 Addltions: joiners 4*4 Reduced by: leavers with preserved benefits 4 (4) Note *Four employees were granted short service membership of the Scheme in December 2019. as at 31't December 20L9 0 2. Members with preserved benefits as at 31't December 2018 1.,455 Additions: leavers with preserved benefits 44 Reduced by: retirements (ss) deaths (1) transfers out (12) retired full commutation (2) (70) as at 3L't December 201-9 1,399 3. Pensioner members as at 3l-'t December 20i-8 t,484 Additions: from deferred 55 new dependant pensioner 9 64 Reduced by: deaths (23) child pensions ceased (1) (24) as at 31't December 201-9 1,,524 Total membership as at 3l't December 2019 2,923 10


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2Ot9 General The Trustee is responsible for appointing investment managers, after taking appropriate advice. The day-to- day management of the Scheme's assets, including full discretion for stock selection, is the responsibility of the Scheme's investment managers. This is subject to complying with the agreed strategy, which specifies the target proportions of the Scheme's assets which should be invested in the principal asset classes. The Scheme's principal investment managers are BlackRock lnvestment Management (UK) Ltd ("BlackRock',), UBS Global Asset Management (UK) Ltd ("UBs"), Baillie Gifford Life Limited ("Baillie Gifford,,), M&G lnvestments Limited ("M&G") and Newton lnvestment Management ("Newton"). The Scheme's investment managers are authorised under the Financial Services and Markets Act 2000 to carry out investment activities. The Trustee has a Statement of lnvestment Principles, as required by Section 35 of the pensions Act 199S, the Occupational Pension Schemes (lnvestment) Regulations 2005 (as amended)and the pension Regulator's guidance for defined benefit pension schemes (March 2017), which sets out the Scheme's policy on investment matters. This document is available to members on request. lnvestment strategy The Trustee's primary objective is to ensure that the Scheme should be able to meet benefit payments as they falldue. A secondary objective is that the Scheme should be fully funded (i.e. the asset value should be at least that of its liabilities). The Trustee is aware that there are various measures of funding, and have given due weight to those considered most relevant to the Scheme. The Trustee's investment objective is to maximise the return on the Scheme's assets whilst managing and maintaining investment risk at an appropriate level, and taking into account the primary objective. ln 2016, the Trustee set an investment strategy which targeted allocations to a lower-risk Matching portfolio and a higher-risk Growth Portfolio as follows: ' until3l- December2025,50%in the Matching portfolio and50% in the Growth portfolio; ' between 3l- December2025 and 3l December 2043, the target allocation is set based on linearly de- risking f rom 50% in each of the Matching and Growth portfolios to IOO% in the Matching portfolio; and . from 31 December 2043, L)O%in the Matching portfolio. The Trustee agreed a policy to de-risk ahead of the plan if the Scheme's funding position improves to certain pre-agreed levels. Further information is contained within the Scheme's lnvestment Policy lmplementation Document. As at 31 December 2019, the Scheme's investment strategy had been de-risked to broadly 70%in the Matching Portfolio and30% in the Growth Portfolio. The lower risk Matching portfolio consists of assets considered by the Trustee to be relatively low risk i.e. fixed interest and index linked government bonds, investment grade corporate bonds, interest rate and inflation swaps, gilt repurchase agreements. The Trustee invests in these assets as it considers appropriate to help manage the risk from changes in interest rate and inflation. This approach is commonly referred to as 'Liability Driven lnvestment'. 11


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2OL9 The higher risk Growth portfolio consists of assets such as UK and overseas equities, property, loans and diversified growth fund investments. The Trustee anticipates these growth assets will provide higher investment returns than the Matching portfolio over periods of 10 years or more, albeit with greater risk. Strategic asset allocation The table below shows the scheme's asset allocation as at 31't December 2019: Proportian af the Scheme ossets os or 69.4% L!.5./,, lO.8% 5.9% t5% Os% LOO.O% 3L December 2019 UK corporate bonds @ r**l .l Overseas bonds l--,,;l Ir*," Fixed interest gilts -^*- l'*l lndex linked gilts I ,"", 1 r;*-l Equities l-,*-t tl;;t G-*4 Diversified growth fund rl .l Property l*," Cash and other ba lances [;I r'*-l Re purchase ts a "-1 [;I Total LOO.o% 700.0% too.o% too.o% 700.0% roo.o% roo.o% 12


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2019 Performance objectives Below are the managers' mandates and performance objectives Manager Mandate Benchmark performance objective BlackRock Bonds Bespoke investable To hedge 80%of the inflation and interest Benchmark [1] rate risk and outperform the investable benchmark by 0.75% pa (gross of fees) over rolling three year periods. Baillie Gifford Global Equities Composite To outperform the benchmark by 2.0% pa to (active) Benchmark [2] 2.5% pa (gross of fees) over rolling four year periods. Baillie Gifford Diversified Bank of England To outperform the benchmark by 3.5% pa Growth Fund base rate (net of fees) over rolling five year periods. Newton Diversified One month LIBOR To outperform the bench markby 4% pa Growth Fund (gross of fees) over rolling five year periods. UBS Global Equities Composite To match the benchmark return apart from (passive) Benchmark [3] that part of the portfolio investing in Emerging Markets where the objective is to outperform the FTSE All World Emerging I ndex. M&G Property Retail Price lndex The Trustee has agreed that performance (RPl) [5] should be reported against inflation (Rpt) plus 5% p.a. l1) 50% iBoxx Sterling Non-Gilt lndex and 50% of bespoke cashflow benchmark that hedges 80% of Scheme's interest rate and inflation exposure on the Technical provisions basis [2]This mandate is in the process of transitioning from a benchmark of 45% FTSE All Share (UK equities) and 55% MSCI AC World lndex (Global equities) to 27% FTSE All Share (UK equities) and73% MSCI AC Wortd lndex (Global equities) [3] This mandate is in the process of transitioning from a benchmark of 50% FTSE All Share (UK equities), 15% FTSE USA, 15% Europe (ex UK) Developed, 10% FTSE Japan, 5% Asia Pacific (ex Japan) and 5% FTSE All World Emerging Markets lo30% FTSE All Share (UK equities), 2t%FTSEUSA,2l% Europe (ex UK) Developed, L4% FTSE Japan, 7% Asia Pacific (ex Japan) andT% FTSE Allworld Emerging Markets. [4] fhe M&G European Loans Fund does not have a benchmark index. For comparative purposes, we have shown M&G against a cash + 4% benchmark. [5] M&G anticipate returns of circa 3% above RPI which a new reporting objective is. Custody arrangements The Trustee has appointed Bank of New York to be responsible for the safekeeping of the Scheme's assets managed by BlackRock. The Trustee has also invested in unit-linked investments with UBS, M&G, Newton and Baillie Gifford. Custody for these assets is arranged within the unit-linked funds by the investment managers. 13


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2019 lnvestment Report continued: Scheme assets and performance The market value of Scheme's major asset holdings as at 31 December 2019 is shown in the table below: UBS Baillie Baillie BlackRock M&G Newton equities) Gifford Gifford (bonds) (property) (diversified TorAL (equities) (diversified growth growth fund) fund) Value (fm) 67.4 72.1. 37.1. 434.1 9.5 5.6 625.8 Value (%) 1.0.8% 1.1..5% 5.9% 69.4% 1..5% 0.9% 100.0% The performance of the Scheme's assets over a one year and three year period to 31't December 201-9 is set out in the table below. Performance is shown after the deduction of investment management fees, with the exception of BlackRock and UBS where performance is before the deduction of fees. lnvestment Scheme Benchmark Scheme Benchmark return return return return One year One year Three year Three year (p.a.) (p.a.) 3lackRock (fixed interest and LDI) tt,2% 8.2% 4.8% 4% JBS (passive equities) 21.4% 2L.2% 8.6% 8.5% Saillie Gifford (active equities) 26.0% 20.8% 1.2.2% 8.8% Saillie Gifford (diversified growth fund) 1.1.9% 4.3% 4.5% 4.r% \ewton (diversified growth fund) L2.1% 4.7% 4.7% 4.6% Vl&G (property)* 5.8% (t\7.2% 7.7% 8.0% (2) s.s% 7.6% l'otal 13.6% to.3% 6.3% 5.3% Source: LCP * The performance of the M&G (property) is shown relative to (1) its long term expected return of RPI plus 5% pa (agreed by the Trustees in August 201.2); and (2) the MSCI Long lncome Property Fund lndex ( market index requested by Company). The Scheme's invested assets returned L3.6% over 2019, outperforming the Scheme's composite strategic benchmark bV 3.3%. 14


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2Ot9 lnvestment activity to 31 December 2019 The value of the invested assets increased from €566.8 million to t625.8 million, this increase comprised of investment returns of f76.1million less disinvestments of €17.1million. over 2019, the Scheme's holding in M&G's European loans fund was fully disinvested. These disinvestments took place in May and August 2019. A further f6 million was disinvested from the Newton DGF to meet cashflow requirements in the first half of the year. ln November 2019, the Trustee decided to re-weight the Scheme's equity allocation more towards global equites with less in UK equities. The Scheme's equity allocation will be reweighted from 50% UK, SO% overseas to 30% UK,7O% overseas. This is to be implemented in several tranches, the first occurred in December 2019 and moved one-third of the way. lnvestment monitoring The Trustee receives monthly and quarterly reports from the investment managers and six monthly performance monitoring reports from Lane Clark & Peacock LLP, its investment adviser. Trustee's policies on financially material considerations and non-financial matters The Trustee has considered how environmental, social, governance ("ESG") and ethical factors should be taken into account in the selection, retention and realisation of investments, given the time horizon of the Scheme and its members. The Trustee expects its investment managers to take account of financially material considerations (including climate change and other ESG considerations) when making investment decisions. lt seeks to appoint managers that have appropriate skills and processes to do this and may consider investing in funds (where available) that demonstrate the incorporation of ESG factors, including climate-related factors, into the investment process. The Trustee will, from time to time review how its managers are taking account of these issues in practice, for example by meeting with managers at regular Trustee meetings. The Trustee has limited influence over managers'investment practices where assets are held in pooled funds. However, it encourages its managers to improve their practices where appropriate. The Trustee has considered the extent to which non-financial matters (ie matters relating to the ethical and other views of members and beneficiaries, rather than considerations of financial risk and return) should be taken into account in the selection, retention and realisation of investments. At present, the Trustee has decided not to allow for such non-financial matters. Stewardship The Trustee recognises its responsibilities as owners of capital, and believes that good stewardship practices, including monitoring and engaging with investee companies, and exercising voting rights attaching to investments, protect and enhance the long-term value of investments. '15


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2OL9 The Trustee has delegated to its investment managers the exercise of rights attaching to investments, including voting rights, and engagement with issuers of debt and equity and other relevant persons about relevant matters such as performance, strategy, risks and ESG considerations. The Trustee does not monitor or engage directly with issuers or other holders of debt or equity. The Trustee expects the investment managers to demonstrate good stewardship practices with regards exercising ownership rights and undertaking monitoring and engagement, taking into account the long-term financial interests of the beneficiaries. The Trustee will review how its managers are performing with regards to this, for example by reviewing managers' general policies on stewardship, as provided to the Trustee from time to time, and discussing this subject with managers at regular meetings. The Trustee seeks to appoint managers that have strong stewardship policies and processes, reflecting where relevant the recommendations of the UK Stewardship Code issued by the Financial Reporting Council, and from time to time the Trustee reviews how these are implemented in practice. lo


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    Halcrow Pension Scheme (No.2) For the year ended 31 December 2OL9 lnvestment Report continued: Market Commentary Economic overview over the year to 3l- December 20L9, globalgrowth prospects deteriorated, with both the IMF and the oECD revising downwards their expectations for growth in 2020. The uncertainty created by ongoing trade tensions (most notably between the US and China), along with geopolitical wrangling and weak manufacturing activity, have been key drivers of the downturn. ln response, many major central banks, including the US Federal Reserve, had bythe end of the year reverted to a more accommodative monetary stance. This included reducing interest rates and/or restarting Quantitative Easing in an attempt to sustain expansion and boost inflation. with the UK continuing to experience low but positive growth and wage inflation, the Bank of England held base rates steady but indicated its willingness to act should that be deemed necessary. whilst the Brexit withdrawal agreement and landslide election victory secured by the Conservative party curtailed the risk of a No-Deal scenario, much uncertainty still remains as the UK has just 11 months to agree a trade deal with the EU as the Brexit transition period ends at the end of 2020. Equities Equities performed strongly over 2019, reflecting investors'responses to easier monetary conditions and hopes for improvements in the trading and fiscal outlook. From a regional perspective, the US stock market marked a significant milestone in 201g, with the current bull market becoming the longest running in the country's history. Key indices such as the S&p 500 and Dow lones reached record highs. Eurozone equities were boosted in e4 2019 by renewed stimulus from the European Central Bank. Currency was a significant factor in returns for investors in overseas equities over 2019 as sterling strengthened relative to most major currencies. The Scheme takes a balanced approach to currency risk and hedges broadly half of its overseas equities. UK equities also ended the year up, but by less (in GBP terms) than their US and European counterparts, as Brexit uncertainty weighed on investment sentiment. The December general election result raised hopes that a resolution to Brexit could be found, which helped lift UK stocks over the last quarter of 2019. Over the period, the Scheme's passively managed equity investments with UBS returned 21.4%, and the Scheme's actively managed equity investments with Baillie Gifford returned 2G%. Bonds The scheme's government and corporate bond holdings performed strongly in 2019. The outlook for bonds was supportive, with the Bank of England maintaining the base rate at 0.75% and Brexit-relateduncertaintypushingbackthelikelytimingofanyfutureraterises. Thesefactors,coupledwith falling global growth expectations and continued high demand from nervy investors for safe haven assets, caused both nominal and inflation-linked gilt yields to fall and consequently prices to rise. However, yields recovered overthe final quarter of 2019 as optimism rose that an end to Brexit uncertainty may be in sight and global trade tensions appeared to ease slightly. 11


  • Page 20

    Halcrow Pension Scheme (No.2) Forthe year ended 31 December20tg lnvestment Report continued: sterling corporate bonds also performed strongly, helped by falling government bond yields and investment grade credit spreads over the period. The Scheme's bond holdings, managed by BlackRock, returned 1,1,.2%o over the l-2-month period to 31 December 2019. Property At the aggregate level, UK property posted modest gains over the year to 3L December 2019, with healthy rental income more than offsetting falling capital values in some sectors. performance dispersion was high. The retail sector struggled with shopping centre and high street valuations continuing to fall, while industrial property strengthened further with demand for warehousing remaining high. The scheme's property holdings, managed by M&G, returned 5.8% over the year to 31 December 2019. Other Against a generally favourable background for most major markets, the Scheme's diversified growth funds performed well. The scheme's diversified growth fund investments, managed by Baillie Gifford and Newton, returned 1L.9% and t2.L% respectively over the year to 31 Decembe r 201,9. '18


  • Page 21

    Halcrow Pension Scheme (No.2) For the year ended 31 December 2O1r9 DC Governance Statement from 1 January 2019 to 31 December 2019 1. lntroduction This statement has been prepared by the Trustee of the Halcrow Pension Scheme (No.2) (the "Scheme,') to descrlbe how the Trustee has met the governance standards in relation to the Defined Contribution (DC) benefits for former Crouch Hogg Waterman (CHW) Scheme members, and the Scheme's Additional Voluntary Contribution (AVC) arrangements. Although the Scheme members' benefits are predominantly defined benefit in nature, there is a small group of members who transferred in DC benefits from the CHW Scheme. For these members, their benefit is the greater of: r the benefit that can be provided from members' individual DC accounts; and . a0Y Guaranteed Minimum Pension ("GMP") accrued in respect of the period of the contributions. ln almost all cases, these members are expected to receive the Guaranteed Minimum Pension benefit, rather than the benefit based on the value of their individualDC account. As at L January 201-9, there were 5L former CHW Scheme members in the Scheme who had DC accounts. 4 of those members left the Scheme during the 2019 scheme year, leaving 47 of these members remaining in the Scheme with DC accounts as at 31 December 2019. Though there is no default option, all members assets are invested in the Aviva Life & Pension UK Limited (formerly Friends Life)Secure Growth Fund. The full list of the Scheme's DC and AVC policies is provided below: Provider Number of Approx. value as at 31 members December 2019 Aviva - former CHW Scheme - Main Section 47 f885k Aviva - former CHW Scheme - AVC 11. f78k Aviva- Halcrow Pension Scheme (No.2) 78 f814k )rudentia I 22 f122k )hoenix Life 1. f1,2k )hoenix Life (was NPI) 1 fzk Jtmost (was Equitable Life) 3 E29k lotal 163 ft,942k Governance requirements apply to the Scheme's DC and AVC accounts to help members achieve good outcomes from their pension savings. The Trustee is required to produce this yearly statement to describe how those governance requirements have been met in relation to: the investment options in which members can invest; the requirements for processing financial transactions; the charges and transaction costs borne by members; an illustration of the cumulative effect of these costs and charges; a 'value for members' assessment; and Trustee knowledge and understanding 19


  • Page 22

    Halcrow Pension Scheme (No.2) For the year ended 31 December 2Ot9 DC Governance statement from l January 2019 to 31 Decembe, zorg *r,ti*r"a The governance requirements relating to default investment arrangements do not apply to the DC section of the Scheme because the DC section is closed to new contributions and no contributions have been received since well before April 2015 when governance requirements were introduced. The Scheme is not used as a qualifying scheme for a uto-en rol ment purposes. 2. Requirements for processing core financial transactions The Jacobs pensions team (which is the in-house administrator for the scheme) carries out the processing of core financial transactions. For DC and AVC members these are mainly transfers and payments out of the scheme to members as no new contributions are being paid, and in the scheme year members have not switched between investments under the scheme, although AVC members are aware of their options to do so. The Jacobs pensions team ensures internal controls are operated so that core financial transactions relating to the scheme are processed promptry and accuratery. These incrude: o recording of all member payment or transfer requests on the workflow system; o issuing of authorised disinvestment instructions to DC/AVC providers; o recording and daily monitoring of DC and AVC monies on the Scheme cashbook; ' ensuring payments are made to, or in respect of, members within 10 working days of receipt of funds from DC/AVC providers; ' sending of payment confirmation letters within 10 working days of receipt of funds from DC/AVC providers; ' all member processing is reviewed by an authorise i.e. there is appropriate peer review. The scheme auditor also conducts a sample check on the accuracy of administration undertaken as part of its annual audit of the Trustee's Annual Report and Financial statements. The Jacobs Pensions team reports at each Trustee meeting (3 times year) a about the administration of the scheme and how internal controls have been met. No report has been made over the period covered by this Statement that has raised any concerns with the Trustee that there have been no material administration errors in relation to processing core financial transactions. on this basis the Trustee considers that all core financial transactions have been processed promptly and accurately during the scheme year in accordance with the procedures outlined above. 3. Member-borne charges and transaction costs The Trustee is required to set out the on-going charges incurred by members in this Statement, which are annual fund management charges plus any additional fund expenses, such as custody costs, but excluding transaction costs. This is also known as the total expense ratio ("TER"). The TER is paid by the members and is reflected in the unit price of the funds. The stated charges exclude administration costs since these are not met by the members. The Trustee is also required to separately disclose transaction cost figures. Despite requests for information the Trustee still has very limited disclosure on this from the providers. ln the context of this statement, the transaction costs shown are those incurred when the scheme's fund managers buy and sell assets within investment funds but are exclusive of any costs incurred when members invest in and switch between funds. The transaction costs are borne by members. 20


  • Page 23

    Halcrow Pension Scheme (No.2) For the year ended 31 Decembe r 2019 DC Governance statement from l January 2019 to 31 Decembe, zorg .onti^** The Trustee's investment advisers have sought to obtain a breakdown of the underlying transaction costs over the period covered by this Statement from the Scheme,s DC and AVC providers. Where available this has been provided in the table below. The Trustee is continuing to work with its providers through follow-up requests for information being made by its administrators, with the aim of providing complete transaction cost figures in future annual Statements. The information below has been supplied by the Scheme's DC and AVC providers. when preparing this section of the statement the Trustee has taken account of statutory guidance. Fund options Former CHW members - DC and AVCs Members'assets held in the DC section are invested in the Aviva Life & pension UK Limited (formerly Friends Llfe) secure Growth Fund' The annual management charge on this fund is 2.0% pa and the transaction costs over the period of this Statement were 0,064%. Members'AVCs assets are held in a range of unitised funds managed by Aviva (Managed, Balanced and UK equities funds). The annual management charge on these funds is 0,5% pa. The transaction costs over the period of this Statement were 0.21'3% for the Managed Fund and 0.085% for the UK equity fund. Transaction costs for the Balanced Fund were not provided. Halcrow Pension Scheme (No.2)members - AVCs For the Scheme's other AVC providers, the level of charges for each fund that members invested in over the period covered by this statement is set out in the following table: Provider - fund name Annual charge (per annum) Transaction costs \viva - US Equity PG20617 Policy - 0.875o/o; PY9j.183 policy - 0.8% Not provided \viva - Global Equity 15399!7 Policy 0.875%; PYs1183 policy - 0.8% Not provided Aviva - UK Equity PG206l7 Policy - 0.875%; PY91.183 policy - 0.8% Not provided Aviva - European Equity PG2O6T7 Policy - 0.875%; PYg1.183 poticy - 0.8% Not provided \viva - Pacific Equity PG20617 Po.licy - 0.875%; PY91L83 poticy - 0.8% Not provided \viva - Gilt PG2O617 Policy - 0.875%; Not prov ded \viva - GIobal Bond PG29617_Policy - 0.875%; PYg1183 poticy - 0.8% Not provided \viva - Property !919617 Policy - 0.875%; PY91183 poticy - 0.8% Not provided \viva - Mixed lnvest PG 20617 P-ol cy - 0.87 5%; PY91 j.83 policy i - 0.8% Not provided \viva - With-Profit Standard poticy LG2O6T7 Policy - 0,875%; PYg1183 - 0.8% Not provided \viva - lndex Linked Gilt Fund PYg1183 Policy - 0.8% Not provided \viva - Deposit PYg1183 Policy - 0.8% Not provided )rudential Deposit - Not applicable* 0.00% \viva - Deposit Administration 1.00% Not provided !Pl - PLAL NPL Capital Account 1..1% 0.1.0% quitable Life - With Profits 7.0% t.o4% * Annual interest awards are paid net offees 21


  • Page 24

    Halcrow Pension Scheme (No.2) For the year ended 31 December Z0L9 DC Governance statement from l January 2019 to 31 December. zorg.onti*r"* lllustration of charges and disclosure costs The following table sets out an illustration of the impact of charges and transaction costs on the projection of an example member's pension savings in four funds, selected to demonstrate the impact of investing in the fund with the hiShest charges, lowest charges, highest expected return and lowest expected return. The "before costs" figures represent the savings projection assuming an investment return with no deduction of member borne fees (i.e. the annual charge) or transaction costs. The,,after costs,, figures represent the savings projection using the same assumed investment return but after deducting member borne fees and an allowance for transaction costs. The transaction cost figures used in the illustration are those provided by the managers over the past year, subject to a floor of zero (so the illustration does not assume a negative cost over the long term). The illustration is shown for four funds: Aviva Secure Growth Fund - the highest member charge option Aviva UK Equity Fund - the highest return Aviva Managed Fund - the lowest member charge option Prudential Deposit Fund - the lowest return option 14,900 1 e E14,600 E1 5,400 el 5,300 814,400 814,400 f15,400 815,300 3 t1s,400 E14,400 e1 6,800 t1 6,500 E'13,800 tl 3,800 816,800 816,400 5 e 18,300 E15,800 €14,300 t1 8,300 E1 7,800 t 1 3,300 e 13,300 817 ,700 10 t17,100 t 1 3,900 822,800 t2 1 ,600 e 12,000 t 12,000 822,800 t21,300 15 818,400 e 13,500 t28,400 126,1 00 t 10,900 e 10,900 e28,400 t25.700 20 t1 9,800 81 3,1 00 835,400 e31,700 f9,800 e9,800 t35,400 t30,900 25 e21,300 e12,800 f44,200 e38,400 t8,900 t8,900 L44,200 E37,200 30 123,000 L12,400 855,000 t46,500 e8,000 e8,000 855,000 e44,800 824,700 e12,100 40 826,700 t68,600 e56,400 E7,200 E7,200 868,600 €54,000 e 11,700 185,500 t68,300 t6,600 E6,600 885,500 t65,000 Notes ' Values shown are estimates and are not guaranteed. The illustration does not indicate the likely variance and volatility in the possible outcomes from each fund. The numbers shown in the illustration are rounded to the nearest f 100 for simplicity. ' Projected pension pot values are shown in today's terms, and do not need to be reduced further for the effect of future inflation. . lnflation is assumed to be 2.s% each year. This assumption is set by law. ' The starting pot slze used is f1.4,700. This is the mean pension pot size for the Scheme,s arrangements. ' All arrangements are closed, so contributions are assumed to be nil and there is no need to make assumptions about salaries or salary growth. ' The projection is for 40 years, being the longest duration for a scheme member to reach the Scheme,s Normal Pension Age. ' The projected annual returns used are based on information provided bythe relevant provider. 22


  • Page 25

    Halcrow Pension Scheme (No.2) For the year ended 31 December 2019 DC Governance statement from 1 January 2019 to 3l December 2019 continued: The projected annual returns used are as follows: . Aviva Secure Growth Fund: 1.5% above inflation . Avlva UK Equity Fund:4.5% above inflation . Aviva Managed Fund:4.5% above inflation . Prudential Deposit Fund :2% below inflation No allowance for active management outperformance has been made. 4. Value for members assessment The Trustee is required to assess the extent to which member borne charges and transaction costs represent good value for members. There is no legal definition of 'good value'which means that determining this is subjective. However, the Trustee considers that it broadly means that the combination of costs and quality of what is provided is appropriate for the members as a whole. The general policy of the Trustee in relation to value for member considerations is set out below. The Trustee reviews all member-borne charges (including transaction costs where available) regularly, with the aim of ensuring that members are obtaining value for money given the circumstances of the Scheme. The DC and AVC arrangements were last reviewed at the Trustee meeting held in August 2019. The Trustee noted that value for money did not necessarily mean the lowest fee, and the overall quality of the service received was also considered in this assessment. As part of the review in August 2019, the Trustee's investment advisers confirmed that the fund charges were competitive for the types of fund available to members, with the exception of a portion of members' funds in the Aviva AVC policy with an annual management charge of 4.5% pa, where equivalent assets had an annual management charge of 0.5% pa. Following enquires with Aviva, those assets on the higher charges were switched to 0.5% pa fee share class, which the Trustee believes has improved value for these members. The Trustee's assessment included a review of the performance of the Scheme's investment funds (after all charges) in the context of their investment objectives. The returns on the investment funds available for members to choose from during the period covered by this statement were at the time of the review, and have continued to be, broadly consistent with their stated investment objectives. The Trustee also considered the other benefits members receive from the Scheme, which included consideration of: . the range of investment options and strategies; . the quality of communications delivered to members; and ' the quality and efficiency of administration processes and the extent to which the administrator met or exceeded its service level standards. As detailed in the earlier section covering processing of financial transactions, the Trustee is comfortable with the quality and efficiency of the administration processes. With respect to the investment options and strategies, the Trustees considered these provide an appropriate range given the circumstances of the Scheme. Communications with members are generally focussed on giving them specific statements of their entitlements and to remind them periodically of their options. The Trustee considers both the investment options and communications appropriate given the number of members invested and that no further contributions are being made. The Trustee gave careful consideration to the "value for members" on DC assets for the former CHW Scheme. These assets are held in the Secure Growth Fund, with charges of 2% pa. The Trustee believes that returns afterthe deduction of fees still represent reasonable value for money (both in absolute terms due to the fund's strong performance and due to the 'smoothed' nature of the with-profits fund). z3


  • Page 26

    Halcrow Pension Scheme (No.2) For the year ended 31 December 2019 Early disinvestments can be subject to a Market Value Reduction ("MVR") and members, benefits are also subject a GMP defined benefit underpin. Taking all these factors into account, it is therefore considered unlikely to be beneficialfor members to move these assets to another provider. overall, the Trustee believes that members of the scheme are receiving reasonable value for money for the charges and cost that they incur across the DC and AVC policies. Most (c. 65%l of the DC and AVC assets are invested in with-profit type investments which generally benefit from capital guarantees and/or terminal bonus at contractual events e.g. retirement. These may be lost if members left early, therefore this needs to be balanced against the higher charges made. The Trustee believes that the returns achieved by the unit- linked funds are commensurate with the objectives for each of the funds, and that the annual management charges for each of the funds are reasonable, especially given the recent fee reduction for the Aviva AVC policy. The Trustee believes the transaction costs, where known, provide value for members as the ability to transact forms an integral part of the investment approaches, and it expects this to lead to greater investment returns net of fees over time. 5. Trustee knowledge and understanding The Scheme's Trustee Directbrs are required to maintain appropriate levels of knowledge and understanding to run the Scheme effectively. The Trustee has measures in place to comply with the legal and regulatory requirements regarding knowledge and understanding of relevant matters, including investment principles, pension and trust law' Details of how the knowledge and understanding requirements have been met during the period covered by this Statement are set out below. An induction programme is in place for new Trustee Directors. This requires new Trustee Directors to complete the Pensions Regulator's Trustee Knowledge and Understanding Toolkit online training and also become familiar with the Scheme's governing documentation. lt is a requirement that the Trustee Directors are fully conversant in their role within six months of their appointment. All the Trustee Directors in place for the Scheme year have completed the Pensions Regulator's Trustee Knowledge and Understanding Toolkit online training and are familiar with, and have access to copies of, the Scheme governing documentation, including the Trust Deed & Rules (together with any amendments) and the Statement of lnvestment Principles (SlP) setting out the Trustee's policies on investment matters. ln particular, the Trustee refers to the Trust Deed and Rules with its legal advisers as part of considering its powers and duties when providing benefits under the Scheme, and the SIP is formally reviewed annually and as part of making any change to the Scheme's investments. Further, the Trustee Directors believe they have sufficient knowledge and understanding of the law relating to pensions and trusts and of the relevant principles relating to the funding and investment of occupational pension schemes to fulfil their duties based on the Toolkit, training atTrustee meetings and external training courses, and in the case of the professional independent trustee from continuing professional development and experience from other schemes. A training log is maintained for each Trustee Director in line with best practice and the training programme is reviewed annually to ensure it is up to date. The Trustee, with the help of its advisers, regularly considers training requirements to identify any knowledge gaps. ln particular, this is done in the context of issues arising atTrustee meetings. The Trustee,s investment advisers proactively raise any changes in governance requirements and other relevant matters as they become aware of them. 24


  • Page 27

    Halcrow Pension Scheme (No.2) For the year ended 31 December 2019 The Trustee's advisers would typically deliver training on such matters at Trustee meetings if they were material, and otherwise updates are included in Trustee meeting packs for review by the Trustee Directors ahead of meeting, which questions being raised with advisers in meetings. During the period covered by this Statement, the Trustee received an update on the pensions Regulator,s (TPR) investment guidance checklist and the following topics were raised by the Trustee,s investment advisers via quarterly update documents: . Collective Defined Contribution schemes; . The UK Statistics Authority's plans to cease the production of Rpl; . The CMA requirement for strategic objectives for investment consultants; and . The need for liquidity in DC investments Also, iames Billinghurst attended Lane Clark & Peacock LLP's Annual pensions Conference and Roger Hoad participated in a Global Alpha Forum run by Baillie Gifford and the Annual lnvestors' Forum run by Newton. ln addition, Chris Martin, representative of professional independent trustee ITS on the Trustee board, has extensive experience of working on stand-alone DC schemes and hybrid DB/DC schemes (including investment strategy and value for members), which the Trustee draws on in collective decision making in relation to the DC and AVC accounts in the Scheme. The Trustee carries out regular evaluations of the training undertaken and needed to maintain the effectiveness of the Trustee Board as a whole as measured against the objectives of the Scheme's business pla n. Taking into account the knowledge and experience of the Trustee Directors with the specialist advice (both in writing and whilst attending meetings) received from the appointed professional advisors (e.g. investment consultants, legal advisors), the Trustee believes it is well placed to exercise its functions as Trustee of the Scheme properly and effectively. The Trustee has published this Statement on a public website for viewing by members. The address for this website is: www.halcrow.com/pensions. Signed for and on behalf of the Trustee: "-/r- By: Leon Power Date: 31 July 2020 25


  • Page 28

    Halcrow Pension Scheme (No.2) For the year ended 31 December 20t9 Opinion We have audited the financial statements of the Halcrow Pension Scheme (No.2) for the year ended 31 December 201-9, which comprise the fund account, the statement of net assets and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting practice), including FRS 102 "The Financial Reporting standard applicable in the UK and Republic of lreland,,. ln our opinion the financial statements: show a true and fair view of the financial transactions of the Scheme during the year ended 31 December 2019, and of the amount and disposition atthat date of its assets and liabilities, other than liabilities to pay pensions and benefits after the end of the year; have been properly prepared In accordance with United Kingdom Generally Accepted Accounting Practice; and contain the information specified in Regulation 34 of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act 1995. Basis for opinion We conducted our audit in accordance with lnternational Standards on Auditing (UK) (lSAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor,s responsibilities for the audit of the financial statements section of our report. We are independent of the Scheme in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethicalstandard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the lSAs (UK) require us to report to you where: the Trustee's use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or the Trustee's have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Scheme's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. Other information The other information comprises the information included in the Annual Report, other than the financial statements and our Auditor's Report thereon. The Trustee is responsible for the other information. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.ln connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise zo


  • Page 29

    Halcrow Pension Scheme (No.2) For the year ended 31 December 2019 lndependent Auditor's Report to the Trustee of the Halcrow Pension Scheme (No.2) continued appears to be materially misstated. lf we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. lf, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Trustee As explained more fully in the Trustee's Responsibilities Statement on page 2, the Trustee is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Trustee determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. ln preparing the financial statements, the Trustee is responsible for assessing the Scheme's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Trustee either intends to liquidate the Scheme or to cease operations, or have no realistic alternative but to do so. Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor's Report that includes our opinion. Reasonable assurance is a high level of assLJrance, but is not a guarantee that an audit conducted in accordance with lSAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. The description forms part of our Auditor's Report. Use of our report This report is made solely to the Scheme's Trustee, as a body, in accordance with Regulation 3 of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act 1995. Our audit work has been undertaken so that we might state to the Scheme's Trustee those matters we are required to state to it in an Auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Scheme and the Scheme's Trustee as a body, for our audit work, for this report, or for the opinions we have-formed. j. . t t ll ,,{it-t i/55t1,'1, /(, ,(.y*lt/ Nortons Assurance Limited Statutory Auditor Highlands House Basingstoke Road Spencers Wood Reading, RG7 1NT Date: J u'n lCiC 27


  • Page 30

    Halcrow Pension Scheme (No.Z) Forthe year ended 3l December21tg lndependent Auditorrs statement about contributions to the T we have examined the summary of contributions payable to the Halcrow pension scheme (No.2) for the scheme year ended 31 Decembe r 2ot9 to which this statement is attached. ln our opinion, contributions for the scheme year ended 31 Decembe r 201.9, as reported in the summary of contributions and payable underthe schedule of contributions have in all materlal respects been paid at least in accordance with the schedule of contributions certified by the Scheme actuary on 6 July 20L7. Scope of work on Statement about Contributions our examination involves obtaining evidence sufficient to give reasonable assurance that contributions reported in the attached summary of contributions have in all material respects been paid at least in accordance with the schedule of contributions. This includes an examination, on a test basis, of evidence relevant to the amounts of contributions payable to the scheme and the timing of those payments under the schedule of contributions. Respective responsibitities of Trustee and the auditor As explained more fully in the Statement of Trustee's Responsibilities, the Scheme's Trustee is responsible for preparing, and from time to time reviewing and if necessary revising, a schedule of contributions and for monitoring whether contributions are made to the scheme by the employer in accordance with the schedule of contributions. It is our responsibility to provide a Statement about Contributions paid under the schedule of contributions and to report our opinion to you. Use of our report This report is made solely to the scheme's Trustee, as a body, in accordance with Regulation 4 of The occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996. our audit work has been undertaken so that we might state to the scheme,s Trustee those matters we are required to state to them in an auditor's statement about contributions and for no other purpose' To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the scheme and the scheme's Trustee as a body, for our audit work, for this statement, or for the opinions we have formed. w\ .fuij tlxr,,t, n /,,,t/r / Nortons Assurance Limited Statutory Auditor Highlands House Basingstoke Road Spencers Wood Read i ng RG7 1NT Date: J r]r,,nrrl lt iC J 28


  • Page 31

    Halcrow Pension Scheme (No.2) For the year ended 31 December 2Ot9 During the year ended 3L December 2O\9, the contributions payable to the Scheme by the employer as per the Schedule of Contributions dated 6 July 2077 were as below. TOTAL €000 Contributions paid: Deficit funding from employer 7,627 Contributions payable as per the Framework Agreement: 7,627 Total contributions reported in the financial statements 7,527 Signed for and on behalf of the Trustee of the Halcrow Pension Scheme (No. 2) /"A t -!; By {'o -Jarres {: t"-t.+,"a{,r*L,t' 13illinghrrrst I . ;. 27th Jtly 2rtV) Date 29


  • Page 32

    HALCROW PENSION SCHEME - (No. 2) FUND ACCOUNT FOR THE YEAR ENDED 31 OECEMBER 2019 Notes 31 DECEMBER 2019 31 DECEMBER 2018 f000 f000 Contributions and benefits Employer contributions 3 7,621 7,521 Transfers in & other income 4 26 2,526 7,653 10,15 3 Benefits paid or payable 5 23,005 22,61L Payments to and on account of leavers 6 2,722 7,767 25,728 30,372 Net withdrawals from dealings with members ( 18,07s) 120,2191 Returns on investments lnvestment income 7 74,344 7,134 Change in market value of investments 9 62,O73 (19,190) lnvestment management expenses 11 ( 1,430) 11,447], Net return on investments 74,987 (13,s03 ) Net increase in the fund during the period s6,9L2 (33,722]l Net assets of the Scheme at 1 January 573,235 606,957 Net assets of the Scheme at 31 December 630,147 573,235 The notes on pages 32to 42 form part of these financial statements 30


  • Page 33

    HAICROW PENSIoN SCHEME - (No. 2) STATEMENT OF NET ASSETS (AVATLABLE FOR BENEFTTS) AT 31 DECEMBER 2019 Notes 31 DECEMBER 2019 31 DECEMBER 2018 6 f000 f000 lnvestment assets Bonds 8/e 462,470 492,227 Pooled investment vehicles 8/e 254,225 777,O97 Derivatives 9 8,274 2,757 Cash 8/s (868) 2,122 Money Purchase lnvestments 8le 885 1,061 AVC investments 8le 1.,057 7,258 Other investment balances 8/s (e0,919) ( 104,679) 635,064 511.,837 lnvestment liabilities Derivatives 9 (7,161) (2,t331 Total net investments 9 627,903 559,104 Current assets t4 3,023 5,252 Current liabilities 74 (77e\ (1,121) Net assets of the Scheme at 31 December 630,741 573,235 Thefinancialstatementssummarisethetransactionsoftheschemeanddeal withthenetassetsatthedisposal oftheTrustee. Theydonot take account of obligations to pay pensions and benefits which fall due after the end of the Scheme year. The actuarial position of the Scheme, which does take into account obligations, is dealt with in the Report on Actuarial liabilities on pages 5 and 43 and these financial statements should be read in conjunction with them. Thenotesonpages32to42formpartof thesefinancialstatements. TheseaccountswereapprovedbytheTrusteeon Date : illlt.f.,ljy.?9?9 . Signe{ for anb on.behalf of the-kustee i. "t i "*., , i..i t i L*g,i*S l. ' Jarrcs [Srllirrglrur st 31


  • Page 34

    HAICROW PENSTON SCHEME - (No. 2) NOTES TO THE FINANCIAI- STATEMENTS . 31 OECEMSER 2019 1 Easis of preparation The financial statements have be€n prepared in accordance with the occupational pension schemes (Requirement io obtain Audited Accounts and Auditor) Regulations 1996, Financial Reporting Standard (FRs) 102 - a statement from the The Financial Reporting standard applicable in the uK end Republic of treland issued by ReportinB council ("FRs 102') and the Suidance set out in lhe Statement the Financial of Recommended practice, "Financiai Reports of pension schemes'(2018) (',the soRp,,). ldentification of the Financial Statements The scheme is registered as a trust under EnBlish law. The address for enquiries is included in the Trustee,s Report on page 9. 2 Accounting policies (a) lnvestments and cash deposits lnvestments are included in the statement of net assets at market value. This is determined as follows: lnvestments quoted on a recognised investment exchange are valued at bid price as at the close of business at the year end date. The value of overseas investments is translated into sterling at the rates of erchange ruling at the close of business at the year end date Unitised pooled investment vehicles have been valued at the latest available bid price or single price provided by the pooled investment manager. Shares in other pooled arrangements have been valued at the latest avaible net asset value (NAV), determined in accordance with fair value principles, provided by the pooled investment manager. cash deposits in overseas currencies are translated into sterling at the relevant rates ol exchange ruling at the year end date. []nlisted securities are stated at valuations provided by the investment managers. Annuiries are herd but these have not been fair varued as the varue is not considered significant. lnvestments in private equity holdings are valued al fair value. Maaagement have utilised a multiples-based market approach in determining a fair value of the private equity investment. lncome received in foreiSn c!rrency ls translated into sterling at the exchange rate ruling on the date of receipt. Assets and liabilities in foreiSn currencies are expressed in sterling at the rates of exchange ruling at the year end. surpluses and deficits arising on conversion or translation of investments are dealt with as part of realised investment gains and losses The Scheme holds over the counter loTc) swaps, exchange traded futures and forward exchange contracts within its BlackRock portfolio. over the counter (oTc) swaps are valued takint the current value of future cash flows arising from the swap determined uslng discounted cash flow models and market data at the period-end. The amounts included in the change in market value are the realised gains or losses on closed contracts and the unrealised gains or losses on open contracts. Net receipts or payments on swap coniracts are reported within investment income_ Exchange traded futures are valued at fair value using the daily mark-to-market, which is a calculated difference between the settlement prices at the year end and the inception date. Amounts due from the broker represent the amounts outstanding in respect of the iniiial margin (representing collateral on the contracts) and any variation margin which is due to or from the broker. The amounts included in the chanSe in market value are the reallsed gains or losses on closed contracts and the unrealised gains or losses on open contracts. The Scheme holds forward toreiSn exchanSe contracts. A forward foreign exchange contract is an agreement to buy or sell currency on ts future date at an agreed exchange rate, irrespective of the actual exchange rate on the future date concerned. Forward foreiSn exchan8e contracts outstanding at the year end are stated at fair velue which is determined as the gain or loss that would arise if the outstanding contract was matched at the year end with an equal and opposite contract. (b) lncome from investments lncome from bonds is accounted for on an accruals basis. income from pooled investment vehlcles is accounted for when deciared by the fund managers. (c) Payment to members Pensionsinpaymentareaccountedforintheperiodtowhichtheyrelate Benefitsareaccountedforonanaccrualbasisbasedonthedatetheoptionwasmade. (d) Contributions Deficit contributions are accounted for on an accrual basis. (e) Administrative expenses and insurance premiums on the 20 December 2019 the sponsorship (principal employer) of Halcrow Pension Scheme (No. 2) transferred from Hatcrow Group Ltd to Jacobs uK Ltd. a]| expenses were borne by the principal employer. (f) Transfer values lndividualtransfersoutarereco8nisedintheaccountswhenpaymenttothereceivingschemehasbeenmade. Grouptranslersarerecognisedattheeffectivedateofthe transfer. (gi Tax status The scheme is a re8istered pension scheme under chapter 2 of Pail 4 of the Finance Act 2oo4 and is therefore exempt from income tax and capital gains tax. (h) Functional and presentation currency The functional and presentation currency of the Scheme is sterling.


  • Page 35

    HAICROW PENSTON SCHEME - (No.2) NOTES TO THt FINANCtAt- STATEMENTS (continued) 3 Contributions 12 MONTHS ENDED 12 MONTHS ENDED 31 OECEMBER 2019 31 DECEMEER 2018 t000 f000 From employers Deficit fundin8 7,61'l 7,627 7.627 7.627 UndertheHP52scheduleofcontribUtions,itwa5a8reedwithHalcrowGroUpLtdthatdeficit.on;ffi;,u,,..,,,onffi]yablefrom1 lanuarY 2017 to 10 March 2017' f7 6 million per annum from 11 March 2017 to 31 December 2o2o and €8.7 million from o1 December 2019 the sponsorship of the Halcrow Pension January 2021 to 30 september 2024. As of 20 scheme (No. 2) transferred from Halcrow Group Limited to lacobs obliBation to meet these deficit fundinS payments switch to uK Limited. This chante of sponsor sees the lacobs UK Limited. Transters in and other income 12 MONTHS ENDED 12 MONTHS ENDED 31 DECEMEER 2019 31 DECEMEER 2018 f000 f000 Other lncome 26 27 AssiBnment of assets from the Halcrow pension Scheme 2,499 26 2,526 5 Benefitr paid or payable 12 MONTI-]s ENDED 12 MONTHS ENDED 31 DECEMEER 2019 31 DECEMEER 2018 t000 t000 Pensions 27,8r2 21,558 Commutations and lump sum retirement benefits - provided by the Scheme 832 839 - provided from AVCS 306 214 Death benefits - provided by the Scheme 55 6 Payments to and on aacount of leavers 12 MONTHS ENDED 12 MONTHS ENDED 31 DECEMEER 2019 31 OECEMBER 2018 f000 €000 lndividual transfers to other schemes 2,722 1,761 Investment income 12 MONTHS ENDED 12 MONTHS ENDED 31 DECEMEER 2019 31 DECEMEER 2018 f000 €000 lncome from bonds 10,422 5,837 lncome from pooled investment vehicles 4,331 1,226 Foreign Exchange Loss 11 14,344


  • Page 36

    HALCROW PENSTON SCHEME - (No. 2) NOTES TO THE FINANcIAL STATEMENTS (continued) 8 lnvestment assets M&G Secured Property Baillie Glfford Newton Total at 31 Total at 31 lncome UBS Globai Div Growth Div Market Values at 31 December 2019 December December Fund Asset Mpm't Bail|e Gif Fund Growth BlackRock Aviva AVCS 2079 2018 €000 t000 fooo €000 f000 f00o f000 €000 f000 f000 Eonds Fixed interest securities UK p!blic sector quoted 19,256 19,256 7 7,913 Overseas public sector quoted 4,698 4,698 3,s20 UK corporate quoted 118,356 118,356 101,520 Overseas corporate quoted 80,523 80,523 70,880 lndex linked securities UK public sector quoted 219,577 239,517 244,334 Pooled investment vehicles Property 9,462 9,462 8,955 Equity 67,403 72,102 139,505 112,594 Diversified Growth 37,132 5,647 42,779 44,015 Loans 10,589 Cash 52,479 62,479 838 Derivatives 1,113 1,113 24 AVC investments (see note lO) t,o57 1,057 1,258 Money Purchase lnvestments 885 "'l 1,061 Cash deposits Sterling (858) ,*r,l Other investment balances Accrued lnterest 3,024 ,,aral ,:,,'l Repurchase Agreements (93,943) (r3,%3)l (10?,764)l 2E____ 614j!- t]|t? 11,82 s,547 434,27s 88s 7,0s7 621,903 s69,104 The above investments (excluding AVc's ' see note 10) are managed by one of M&G lnvestments, ugs Global Asset Management, Baillie Gifford Life, glackrock lnvestment ManaEers, Newton lnvestment Managers and Aviva all of whom are registered in the united Kingdom. The money purchase assets are all allocated to members and they relate to the assets transferred into the scheme in prior years from the crouch Hogg waterman Sche me.


  • Page 37

    HATCROW PENSION SCHEME - (No. Z) NOTES TO THE tINANCIAL STATEMENTS (continued) 9 Reconciliation of net investments Purchases, sales and net change in market value Purchases at Market value and cost Sales proceeds at 31 Market value derivative and derivative Change in December at 1 Jan 2019 market value f000 t000 €000 f000 f000 Eonds 492,227 537,950 (598,644) 30,877 462,410 Pooled investment vehicles 1.77,097 189,393 1142,412) 30,213 254,225 Derivatives 24 116,747 (116,446) 184 1,113 AVC investments (note 10 below) (3s1) 150 1,O57 Money Purchase lnvestments 1,061 \221) 45 885 611,661 844,090 62,073 719,690 cash 2,722 (868) Other investment balances (104,679) (90,919) 569,104 627,903 Purchases and salesof AVc investments represent AVcs paid onwards by the Trustee to third party providers and AVc funds returned to the Trustee by providers to settle benefits due to members. Repurchase and reverse repurchase agreements At the year-end, within the other investment balances, amounts payable under reverse repurchase agreements amounted to f1sS,966k and amounts receivable under repurchase agreements amounted to t62,023k. At the yearend €99,461k of bonds reported in the Schemes assets are held by counterparties under repurchase agreements. The Scheme held f238,003k of collateral at the year-end re ating to reverse repurchase agreements. This collateral is not reported within the Scheme's net assets. Transaction costs over the 12 months to 31 December 2019, the Scheme incurred the following transa.tion costs from buying and selling investments: BlackRock est mated the transaction costs within the Scheme's segregated bond mandate to be cf341k, of which c.f119k and c.f222k were in respect of the LDI portfolio and corporate bond portfolio respectively.


  • Page 38

    HAICROW PENSION SCHEME - (No. 2) NOTES TO THE FINANCtAL STATEMENTS (continued) Pooled investment vehicles At the year end the Scheme had the foliowing pooled investment vehictes 31 OECEMBER 31 DECEMBER 20L9 2018 By tvpe €000 8000 Equity 139,505 1t2,594 Diversified Growth 42,179 44,Ots Loans 10,689 Property 9,462 8,955 Cash 52,479 838 254,225 777,O91 Derivatives At the year end the Scheme had the following derivatives 31 DECEMBER 2019 31 DECEMBER 2018 Assel L abilrtrec Total Asset Liabilities Total f000 €000 f000 f000 f000 €000 Futures 326 {s34) (208) 341 (37 1) (30) Swaps 7,364 (6,4s9) 905 2,405 12,34s) 55 Forward exchange contracts s84 (168) 416 11 ( 13) (2) 8,274 (7,161) t't11 12,733) 24 Further details of the Scheme's outstanding derivative contracts at the period-end aggregated by key characteristics are set out below and the followint page. ii) Swaos The scheme had derivative contracts outstandinB at the period end relating to its Blackrock investment portfolio. These contracts are traded over the counter (orc). rhe details are summarised below: N oti ona I Asset Liabilities am ou nts Expires value value f000 f000 €000 Credir default Swaps 216,326 1- 50 years 2,3s5 12,269]l lnflation linked Swaps 194,01 1 2 - 49 years 5,009 (4,190) Tota as at 31 December 2019 410,137 7,364 (6,4s91 As at 31 December 2019, €4,994k of coilaterar in the form of cash and girts was predged to counterparties (ii) Futures The Scheme had exchange traded overseas stock index futures outstanding at the period end relating to its Blackrock investment portfolio. These contracts are exchange traded. The details are summarised below: Economic Asset Liabilities Bond and Eilt futures exposure Expires value value f000 t000 f000 Bought 11,521 < 1 year - (s34) Sold (6,s60) < 1 year 326 Total as at 31 December 2019 5,061 325 {534)


  • Page 39

    HALCROW PENStoN ScHEME - (No. 2) NoTES TO THE FINANC|AL STATEMENTS (continued) (iii) Forward exchanee contracts The Scheme held the following forward exchange contracts as at 31 December 2019 Settlement Currency Currency Asset Liabilities Contract date bought sold vaiue value €000 f000 Forward FX 15 ianuary 2020 t293,831 AUD 540,0m 1 Forward FX 15 lanuary 2020 t741,140 AUD 270,OOO 4 Forward FX 15 lanuary 2020 f1t,s61 AUD 130,000 3 Forward FX lanuary 2020 15 f71,221 AUD 140,000 3 Forward FX 15 lanuary 2020 auD 1,080,000 f569,656 3 Forward FX 15 January 2020 cAD 70,000.00 f4o,641 Forward FX 15 lanuary 2020 f4,441,045 €4,990,000 217 Forward FX 15 lanuary 2020 f98,445 €110,000 5 Forward FX 15 lanuary 2020 4940,000 f812,955 ( 16) Forward FX 15 lanuary 2020 €52,082 €50,000 1 Forward FX 15 lanuary 2020 f536,844 €620,000 11 Forward tX 15 lanuary 2020 €575,801 €670,000 8 Forward FX 15 lanuary 2020 ft1,t92 €90,000 1 Forward FX 15 lanuary 2020 f60,062 €70,m0 1 Forward FX 15 January 2020 f291,615 a340,000 3 Forward FX 15.lanuary 2020 €180,000 87543A4 (2) Forward FX 15 lanuary 2020 €110,855 €130,000 1 Forward FX 15.lanuary 2020 €110,000 f94,010 (1) Forward FX 15 lanuary 2020 fl02,o07 €120,000 Forward FX 15 Jenuary 2020 f7,260,527 €1,490,000 (2) Forward FX 15 January 2020 f110 000 fq? q)? Forward FX 15 lanuary 2020 €630,m0 f537,875 (4) Forward FX 15 laouary 2020 f700 000 fqqT 1)1 (4) Forward FX 19 February 2020 fto,oa2 €78,578 3 Forwa.d FX 19 February 2020 f36,142 €4A,524 2 Forward FX 19 February 2020 f6o,624 €69,878 1 Forward FX 15 ianuary 2020 f859,603 51,070,000 Forward FX 15 lanuary 2020 f1,320,362 S1,7m,000 38 Forward FX 15 lanuary 2020 fl5,4o4 520,000 Forward FX 15 lanu.ry 2020 t23,102 s30,000 Forward FX 15 January 2020 s1,910,000 f1,480,942 Forward Forward FX FX 15 January 2020 15 lanuary 2020 f15,543 f1s,s07 520,000 520,000 I ''ol Forward FX 15 ianuary 2020 fr5,4a7 s20,000 : Forward Fx 15.lanuary 2020 s40,000 f3o,l4g Forward FX Forward FX 15 January 2020 f30,633 540,000 ''l 15 lanuary 2020 s20,000 f1s,141 Forward FX 15 January 2020 960,000 f4s,t36 Forward Forward FX FX 19 February 2020 s722,311 f98,888 .o) 19 February 2020 f1,137,313 S1,410,000 75 Forward FX 19 February 2020 f7,137,253 S1,410,000 75 Forward FX 19 February 2020 f1,139,843 S1,411,342 16 Forward FX 19 February 2020 s1,370,000 f1,063,353 - (31) Forward FX 19 February 2020 s1,370,000 f1,063,351 - (30) Forward FX 19 February 2020 5r,369,025 11,062,602 - (30) Total as at 31 December 2O19 sE4 (168) Forward exchange contract receipts and paYments represent the realised gains and losses on futures contracts. The scheme,s objective is to decrease risk in enterinB into futures positions to match assets that are already held in the portfo io by the portfolio without disturbing the underlying assets.


  • Page 40

    HATCROW PENSTON SCHEME - (No.2) NOTES TO THE FtNANCtAL STATEMENTS (continued) Concentration of investments The following individual investments exceed 5% of the value of the net assets of the Scheme 31 DECEMETR 31 DECEMBER 2019 2018 BlackRock Institutional Cash Series GBp Liquidity ABency €000 % f000 % DtS Baillie Gifford Global Alpha Growth Fund C Acc 62,479 9.9 838 0.1 Baillie Gifford Diversified pension Growth B2 Acc 45,338 7,2 32,062 5.6 31,132 59 33,133 5.8 AVC investments TheTrusteeholdsassetsinvestedseparatelyfromthemainfundintheformofinsurancepoliciessecuringadditionalbenefitsona who have transfered in benefits or who have elected or are electing moneypurchasebasisforthosemembers to pay additional voluntary contributions. Members participating in this arrangement annual statement made up to 31 December conf'rming the amounts each receive an held on their account and the movements in the year. The aggregate investments are as follows: amounts of money purchase or AVc 31 DECEMBER 31 DECEMBER 2019 2018 f000 €000 Aviva 892 1,019 Prudential 122 135 NPI 2 2 Phoenix Life 72 72 Clerical Medical 62 Equitable Life 29 28 1,057 1,2s8 11 lnvestment management expenses I2 MONTHS 12 MONTHS ENDED E NDtD 31 DECEMBER 31 OECEMBER 2019 2018 f000 f000 lnvestment management charges 1,430 L,447 The amount shown above for investment management charges was paid to uBs Global Asset Management Limrted, BlackRock lnvestment EaillieGiffordLife ltexcludesfeesandexpenseswherethesearechargedagainsttheincomeofunittrustswhichtheymanage. Management uK Limited and


  • Page 41

    HATCROW PENSTON SCHEME - (No. 2) NOTES TO THE FtNANCtAL STATEMENTS (continued) 12 Fair Value of investments The fair value of investments has been determined using the following hierarchy The unad.iusted quoted price in an active market for identical assets or riabirities that the entity can access at the measurement date. I Level 1 lnputs other than quoted prices included within Level 1 that are observable {ie developed using market data) for the asset or liability, either directly or indirectly I Level 2 lnputs are unobservable (ie for which market data is unavailable) for the asset or liability. I Level 3 Pooled investment vehicles which are traded regularly are generally included in level 1. Where the absence of regular trading or the unsuitability of recent transaction prices as a proxy for fair values applies, valuation techniques are adopted and the vehicles are included in level 3. The Scheme's investment assets have been included at fair value within these categories as follows: Total at 31 Level t2 3 December 2019 €000 €000 €000 f000 Bon ds - 462,41"0 462,470 Pooled investment vehicles - 2s4,225 254,225 Derivatives (208) 1,321 1,113 Cash (858) (868) Money purchase lnvestments 885 AVC investments 1,0s7 Other investment balances (e0,91 919) Total lnvestments (91,9ss) 7t8,84L 627,903 Analysis for the prior period is as follows Total at 31 Level 1 2 3 December 2018 €oo0 f000 f000 f000 Bonds 492,227 492,227 Pooled investment vehicles 177,097 777,O97 Derivatives 56 (32 ) 24 Cash 2,722 2,r22 Money purchase lnvestments 1,061 1,061 AVC rnvestments 7,2s8 1,2s8 Other investment balances 1e) Total lnvestments (102,s01) 670,347


  • Page 42

    HALCRoW PENStON SCHEME - (No.2) NoTES TO THE FtNANCtAL STATEMENTS (continued) 13 lnvestment risks Types of risk relating to investments FRS 102 requires the discrosure of information in reration to certain investment risks. credit riski this is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Market risk: this comprises currency risk, interest rate risk and other price risk. currency risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate because of changes in foreign exchange rates. lnterest rate risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate because of changes in market interest rates. other price risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors s ecific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Trustee determines its investment strategy after taking advice from a professional investment advjser. The scheme has exposure to these risks because of the investments it makes in following the investment strategy set out below. The Trustee manages investment risks, including credlt risk and market risk, within agreed risk llmits which are set taking into account the scheme,s strategic investment objectives These investment objectives and risk limits are implemented through the investment management agreements in place with the Scheme's investment managers and monitored by the Trustee by regular reviews of the investment portfolio. The following table summarises the extent to which the various classes of investments are affected by financial risks: Credit Market risk Total at 31 Total at 31 December December risk lhterest Other 2019 2018 Currency rate price Value Value €000 €000 Bonds - Fixed interest securities o o o o 222,8t3 247,892 Bonds - lndex linked securities o o a o 239,577 244,335 Pooled investment vehicles o O o a 254,225 t77,097 Derivatives o o o o 1,113 24 Cash o o o o (868) 2,L22 Money purchase lnvestments a o o a 885 1,061 AVC investments a o o a 1,057 1,258 Other investment balances a o a o (90,919) ( 104,679) 627,903 569,704 ln the above table, the risk noted affects the asset class as follows : . Significantly o partially o Hardly/ not at all Further information on the Trustee's approach to risk management, credit and market risk is set out below. lnvestment strategy The investment objective of the scheme is to maintain a portfolio of suitable assets of appropriate liquidity which will generate investment returns to meet, together with future contributions, the benefits payable under the trust deed and rules as they fall due. The Trustee sets the investment strategy by taking into account considerations such as the strength of the employer covenant, term liabilities and the funding agreed with the Employer. The lnvestment the long strategy is set out in its statement of Investment principles ("sr P'). 40


  • Page 43

    HALCROW PENSTON SCHEME - (No.2) NOTES TO THE FtNANCtAI STATEMENTS (continued) Credit risk The Scheme's investments are directly exposed to credit risk in relation to the solvency of the custodian of those funds. The scheme'sholdingsinpooledinvestmentvehiclesareunrated. Directcreditriskarisingfrompooledfundsismitigatedbythe underlying assets of the pooled funds being ring-fenced from the investment managers, the regulatory environments in which the pooled fund managers operate and diversification of the scheme's investments across a number of pooled funds. BlackRock's appointment is on a segregated mandate and the Trustee uses the custodian services offered by Bank of New York for this fund. The Trustee carries out due diligence checks prior to the appointment of any new investment manager or fund and on an ongoing basis monitors any changes to the operating environment of the funds. The scheme is subiect to direct credit risk within the BlackRock portfolio, where BlackRock invests in bonds or financial cash and derivatives. The scheme is indirectly exposed to credit risks arising from the underlylng investments held by the pooled funds, for example where they invest in bonds. The indirect exposure to credit risk arises from the scheme,s investments in diversified Srowthfundsandloanfunds TheamountinvestedineachofthesemandatesisshowninthestatementofNetAssets. The managers manage credit risk by having a diversified exposure to bond issuers, conducting thorough research on the probability of default of those issuers, and having only a limited exposure to bonds rated below investment grade. The magnitude of credit risk within each fund will vary over time, as the manager changes the underlying investments in line with its views on markets, asset classes and specific bonds Market risk: Currency risk As the scheme's liabilitles are denominated in sterling, any non-Sterling currency exposure within the assets presents additional currency risk, whilst the maiority of the currency exposure of the scheme's assets is to sterling, the scheme is subject to currency risk because some of the scheme's investments are held in overseas markets. The Trustee consjders the overseas currency exposure in the context of the overall investment strategy, and believes that the currency exposure that exists diversifies the strategy and is appropriate, Furthermore, the Trustee manages the amount of currency risk by investing in mandates that hedge some or all of its currency exposure. within the segregated BlackRock bond mandate, where it invests in non-sterling denominated securitaes these are hedged back to Sterling All of the scheme's pooled funds are accessed via a sterling share class. Therefore the scheme is not subject to djrect currency rlsk through the pooled investments. However, there is some indirect currency risk in relation to the Scheme's pooled investments, where they invest in overseas assets. The exposure to foreign currencies within the pooled funds will vary over time as the manager changes the underlying investments, but is not expected to be a material driver of returns over the longer term. Decisions about the exposure to foreign currencies within the pooled funds held are at the discretion of the appointed fund managers. Market risk: lnterest rate risk some of the Scheme's assets are subject to interest rate risk. However, the overall interest rate exposure of the scheme,s assets hedges part of the corresponding risks associated with the scheme's liabilities. The net effect will be to reduce the volatility of the funding level, and therefore the Trustee believes that it is appropriate to have exposure to interest rate risk in this manner. The BlackRock bond mandate has significant exposure to changes in Interest rates. The diversified growth funds may also have some sensitivity to changinB interest rates, but this sensitivity will vary over time as the underlying investments change, and it is not expected to be a significant driver of returns due to the investment approaches of these funds. Market risk: Other price risk The scheme's assets are exposed to risks of market prices other than currencies and interest rates, such as the equity pooled fund holdings being subject to movements in equity prices. The Trustee monitors this risk on a regular basis, Iooking at the performance of the scheme as a whole as well as each individual portfolio The Trustee believes that the scheme's assets are adequately diversified between different asset classes and within each asset class to manage this risk. The exposure to other price risk within the diversified growth funds and actively managed equrty pooled funds will vary over time depending on how the managers change the underlying asset allocation to reflect their market views.


  • Page 44

    HATCROW PENSTON SCHEME - (No. 2) NOTES TO THE FtNANCtAL STATEMENTS (continued) 14 Net current assets 31 DECEMBER 31 DECEMBER 2079 2078 €000 €000 Current assets cash 1,,364 3,583 Prepayments 1,561 1,488 Other debtors - interest receivable 9 6 - dividends receivable L75 3,023 5,252 Current liabilities lnvestment management charges payable 714 Unpaid benefits 65 179 t,121 15 Related party transactions The Princlpal employer provides certain administrative services to the Trustee and bears these costs. The costs borne by the principal Employer in relation to the scheme are not reflected in these accounts. All of the above transactions were made in accordance with the Scheme rules. At the year end three of the Directors of the Trustee company are in receipt of pensions from the scheme, which are included in the pensions payablefigure. TheiramountsarecalculatedinaccordancewiththeTrustDeedandRulesofthescheme. The employer pays all rrustee fees and expenses. For the year to 31 December 2019 this amounted to €51,4G6 (2018 : f5s,097). 16 Contingent tiabilities There were no contingent riabilities at the period end other than the riabirity to pay future benefits. l7 Employer Related lnvestments There were no Employer Related lnvestments at the year end. 18 Contingent Liabilities in respect of GMp equalisation As explained on page 3 of the Trustee's Report, followin8 a High court judgement the scheme is required to backdate benefit adjustments in relation to GMP equalisation and provide interest on the backdated amounts. The Trustee of the scheme is aware that the issue will affect the Scheme Based on an initial assessment of the likely backdated amounts and related interest the Trustee does not expect these to be material to the financial statements and therefore have not included a liability in respect of these matters in the financial statements. They will be accounted for in the year they are determined. 19 Scheme Sponsorship on the 20 December 2019 the sponsorship of the Halcrow Pension scheme (No. 2) transferred from Halcrow Group Limited to Jacobs uK Limited As of the 20 December transfer date, all assets, liabilities and future obligations pertaining to the scheme transfer to lacobs uK Limited As a result of the transfer, Halcrow Group Limited has been released from all of its obligations as the principal employer. The ultimate parent of Jacobs uK Limited is Jacobs Engineering Group lnc. a company incorporated in the united states of America. 20 Subsequent Events As disclosed in the Trustee Report on page 4, after the period covered by this report, the covlD-19 pandemic has developed. The pandemic has impacted on investment markets, with the Scheme's assets falling in value by around 5% over the three months to 31 March 2020. However' over the second quarter of 2020, the value of the scheme's assets has recovered. The scheme has continued to receive deficit recovery conditions in line with the agreed Schedule of contributions. while the pandemic has had a detrimental impact on the global economy, the Trustee remains comfortable with the Employer,s ongoing solvency.


  • Page 45

    Under Sectlon222 of lhe Pensions Act 2004, every scheme is subject to the Statutory Funding objective, which to have sufficient and appropriate assets to cover its technical provisions. The technical provisions is represent the present value of the benefits members are entitled to based on pensionable service to the valuation date. This is assessed using the assumptions agreed between the Trustees and the Employer and set out in the statement of Funding Principles which available to scheme members on request. The most recent full actuarial valuation of the Scheme was carried out as at 31 Decembe r 2OL6.This showed that on that date: The value for the Technical provision was f62O.l million The value for the assets as at that date was: f 562.g million The method and significant actuarial assumptions used to determine the technical provisions are as follows (all assumptions adopted are set out in the Appendix to the Statement of Funding principles): Method The actuarial method used in the calculation of the technical provisions is the projected Unit Method. Significant actuarial assumptions Discount interest rate : Linear de-risking, assuming the Trustee will invest in 50% return- seeking assets, 50% in bonds, moving progressively to 100% in bonds from 2025 to 2043. The initial discount rate is in line with gilt yields + L1.25% p.a. reducing to a discount rate in line with gilt yields + 0.25% p. a. Future Retail Price inflation: Latest available yield curves as at the valuation date for fixed interest and index-linked gilts as published by the Bank of England and extrapolated for later durations. Future Consumer Price inflation: RPlless L.0%p.a. Pension increases: Fixed - at the rate specified in the rules lnflation-linked - over each future year at a rate reflecting the provision of the rules, the assumption for cpl inflation in that year and the volatility of CPI inflatio n of 1.5% p.a. Mortality: Males - 90% of the 52NMA tables based on each member,s year of birth. Allowance for future improvements in mortality in line with the CMI 2015 core projections from 2007, subject to a long-term annual improvement rate of 1.5% p.a. Females - 1.0O% of the S2NFA tables based on each member,s year of birth. Allowance for future improvements in mortality in line with the CMI 2015 core projections from 2007, subject to a long-term annual improvement rate of 1S% p.a. 43


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    -! ffi ffi m ctntrrv rr"srsHr ffi @-w ffi' ffi B A|)vice 3e73783 Cafu m ry's cer$tesfron o/scft ed ute af Page 3 or4 C*nfrfbUftOnS Thie *erilficate la providcd for ths purpsso or sectloft ?27{s} sf the Fe*rlanr Act 2s04 and Re$ulatlon l0{6} af ih6 secupa{anal pen*ion schemss ($churne Funding) Regulatlons !S0$ Name of scherne Halcrow psnslon Scheme {No.i) Adequ*cy af rwtes cl contributions 1 Icertify that, kr rny opinion, the rates of contdbutiors shnwn h thi$ schedule of contributions are such that lie stetutory funding objective could hayo been expeclsd on 31 Decembsr 20,l6 to be met by the and of the period sp6dfi€d ln ihs recovsry plan daled 12 June ?0iI. I aleo certify tlrat ths rates of contrlbulions shown in lhls scheduls ar6 nol lowar lhan I wculd have provided hr hed I hed responsibllity for preparing or revising the schedule, lhs sisiement of funding principles rnd eny recovery plan. Adherqftce to statement of fundlng princlpl*a ? I har*y cerli$ lhat, in rny oplnion, this schedulo of caniributions is consistont wilh the Staternent ol Funding Principlar dated i 2 Jun6 201f . The ce#ficauon ol the adequacy of the rates of contrlbutions lor lhe purpose of aecuring lhat the *atutcry funding cb,iective cen be expected to ba mst k no? a rertificatiun af thuir adequacy tor the purycse nf sec*ring the ssheme's llebflitiss by lhe purchaso of annulties, if the scheme were to be wound up lr ( 3t'\ 1n t'l sisnature: I \.J- ... oare: .....j -.-. Homs: lRHScott Quslllication: FIA Addrore: 85 wgmore street Hame of amployer: Lana clark & peacuch LLp London wIu lDO LEeidtii4ptr&qtl!i'Y*6efif*n*lllr€,*rc,.i:;:r.:i:*-(..:ir:: \;|,^etffitrt4t:,i:t:u.ti1t.*lfitu9(x&Cfrsit?,ir.tiBdtq%zhr**lfrl


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