 I. Financial Position
The economic developments were positive in the first half of 2007 with higher growth figures in all regions. The second half of the year was negatively influenced by the up coming mortgage and credit crisis in the United States. The dollar weakened again over the period and due to inflationary pressures the interest rates were volatile and increased a bit. For equities the year 2007 was a modest year. The real estate markets were very depressed. The Nedlloyd Pension Fund investment portfolio outperformed its own internal benchmark in 2007 resulting in a total return of only 0,3% (2006: 8,3%). The internal benchmark, the return that would have been achieved, had the portfolio been invested according to the strategic asset allocation and yielding an index return, resulted in a gain of 0,1% (in 2006: gain 4,4%). The average annual total return during the period 1998-2007 was 6,8% (1997-2006: 8,2%) and during the period 2003-2007: 8,3% (2002-2006: 6,9%). In both periods Nedlloyd Pension Fund outperformed its internal benchmark. Because of prevailing market conditions a.o. a rising interest rate, the funding ratio increased from 153% in 2006 to approximately 154% by the end of 2007.With this funding ratio the pension fund is meeting the solvency criteria of the Dutch Central Bank, the supervisory authority for pension funds.
II. Report of the boardOn the 1st of April 2007 the board decided a 3% (1st of April 2006: 2,5%) increase in pensions as compensation for inflation. Furthermore pensioners in 2007 received a Christmas bonus of € 250. The deferred pensioners received an extra bonus of 0,6% on their accrued pensions. The active participants received an extra bonus of 0,2% on their accrued pensions. The strategic asset mix remained as follows: 54% in fixed income securities, 25% in equities, 5% in alternative investments and 16% in property. The actual asset mix at the end of 2007 was fixed income 46,3% (2006: 43,6%), 31,4% equities (2006: 34,8%), 4,7% in alternative investments (2006: 3,3%) and 17,6% property (2006: 18,3%).
To manage the interest rate risk the board of the fund continued to match 50% of the pension obligations with a portfolio of fixed income with a comparable cash flow pattern. Also this year there were number of developments in respect of the (supervisory) legislation for pension funds. The New Pension Law, replacing the Pensions and Savings Act of 1952, including the Financial Assessment Framework (FTK) has become effective as of 1-1-2007. Because of this every document of the pension fund had to be amended. With the change of the by-laws of the fund its name was altered into ‘Stichting Nedlloyd Pensioenfonds’. Also two new bodies were introduced in the governance structure of the pension fund, namely a responsibility college (‘verantwoordingsorgaan’) consisting of representatives of the stakeholders of the fund and an internal supervisory committee (‘visitatiecommissie’), consisting of three external independent professionals.
III. Outlook
Although economic times are uncertain, it is the board's opinion that the pension fund is able to meet the challenges that lie ahead. This is based on the strong financial position of the fund.
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