Annual General Meeting Chris Tambini Assistant Director, Ian Howe Pensions Manager, Colin Pratt Investment Manager

 The career average revalued earnings (CARE) scheme implemented from 1 April 2014  On-line system implemented  New pension administration system implemented

 New 2014 career average revalued earnings “CARE” scheme implemented – aggregation rules still outstanding  Members feedback – satisfaction score of 96% who rated service as good or excellent  Benchmarking  LCC cost £18.24 per member  Local Authority average £26.62 per member

 Auto enrolment completed for the larger fund employers and well underway for the smaller employers  Employer numbers continue to rise (now over 200 employers with active contributors)  New on line service fully implemented with our partner Hymans delivering savings in printing and postage

 On line service is instrumental in scheme communications to scheme members  Members are able to see personalised impact of different variables under the new scheme e.g. retirement age, bigger lump sum and their annual benefit statement at March 2014  New pension administration system implemented  Benefits are now more complex, final salary link to pre April 2014 benefits and CARE benefits from April 2014

 Communication exercise with employers has started and will continue  Additional requirements introduced by new scheme  Co-operation is needed with monthly and year end reporting

 Consultation launched in June 2013  Public Sector Pensions Act 2013 (which covers all Public Sector Schemes, not just LGPS) includes greater emphasis on governance arrangements  Local Pension Board to be in place from April 2015 (to assist the Scheme Manager)  Pension Board to include 50% staff representation  Members have to have a certain levels of knowledge and competence

 Regulations not yet finalised, although consultation exercises mean that their content is clear  Consultation and draft regulations have been issued incredibly late, given the immovable date of 1 st April 2015 to have a Local Pension Board in place  Leicestershire Board will have three member representatives and three employer representatives  Elections of member representatives will take place at today’s meeting

 One currency mandate terminated during year, but one remains in place  Asset allocation mandate terminated during year  January 2014 Annual Strategy Meeting agreed to ask Investment Subcommittee to consider the merits of investing in direct lending and emerging market debt  Portfolios for these assets implemented during 2014/15 and currently partially funded

 Fund’s sources of return are relatively well diversified, but equities remain the dominant asset class  Underperformance of benchmark by 1.5% in 2013/14 (3.9% vs. 5.4%), due to the underperformance of a number of individual managers  So far, returns (relative to benchmark) have been much better in 2014/15. Some of last year’s underperformers have produced very good returns this year  Annual returns over 5 years are in-line with benchmark and well above long-term assumptions

 Aspect Capital have produced a return of c.40% in the nine months  Millennium have earned £15m from currency management  Differentiation within markets – UK equities +2%, NA equities +18%, European equities – 3%, Emerging Market equities – 2%  Currency does matter – US$ + 7%, Euro – 6%, Yen – 8% (all relative to sterling). Fund has hedged euro and yen exposure, but remains fully exposed to US$.  Despite recent wobbles, Fund size up c.£150m in 9 months, despite £50m payment out in respect of Probation

 Launched in late June 2013, responses required by late September  Initial response from the Government is to encourage collaboration between funds, rather than go ahead with forced mergers  Possibility of the formation of Collective Investment Vehicles into which individual funds could invest. Particular prominence given to encouragement of more use of the passive (indexed) management for listed assets

 Leicestershire’s response was anti-forced merger but in favour of greater levels of collaboration between Funds, which is capable of producing savings  Current Government thinking appears muddled and there are a number of practical issues that might make Collective Investment Vehicles unworkable, or at least less-than-optimal  Mergers are NOT off the agenda, but appear to have slipped down the list of priorities for Central Government

 Aggregation rules to be clarified  Future governance structure has to be in place by April 2015 to satisfy Public Sector Pensions Act  Member training ahead of new governance structure will be a priority  Investment management arrangements will be kept under review, with the Investment Subcommittee remaining pro-active  Expectation that investment markets will be volatile

Any Questions?