News in 2008

Return for the year: 5.9%

Despite the impact of the credit crisis on financial markets in the second half of the year, overall 2007 has been a reasonable investment year for the Dutch Shell Pension Fund. Total return was 5.9% [1], marginally outperforming the fund’s internal benchmark by 0.1%. As a result of the increase in long-term interest rates, the provision for pension liabilities (on a market value basis) declined from EUR 11.3 billion on 31st December 2006 to EUR 10.7 billion on 31st December 2007. On balance the funding ratio rose to 180% at the end of the year compared to 165% at end of 2006.

Equities delivered a return of 7.5%. Worldwide, the “small cap” and “value” equities in which the Pension Fund holds a strategic overweight position, were out of favour in 2007. This had an adverse effect on equity returns. The highest returns were achieved in Emerging Markets (36%) and in Asia excluding Japan (22%). Japan achieved the lowest return, minus 10%, among the large equity markets.

The increase in long-term interest rates, coupled with risk aversion triggered by the credit crisis, resulted in a negative return in the Fixed Income portfolio of minus 3%. Factored into this return are the negative results on interest swaps concluded to partially hedge the difference in interest rate sensitivity between the fund’s assets and liabilities. Within the Fixed Income portfolio, EU Candidates (15%) and Emerging Markets debt (6%) were the best performers. The Corporate Bond portfolio delivered a negative return of minus 3%.

The Alternative Investments portfolio achieved a return in excess of 34%. This portfolio, mainly consisting of Private Equity, has now grown to more than 7% of the Fund’s assets.

Finally, the Hedge Fund portfolio yielded a solid return of almost 7% in 2007. The Pension Fund invests in hedge funds that pursue ‘market neutral’ strategies, which typically have a lower risk profile.

Investment portfolio	Returns (annualized), in % *				Asset allocation 31/12/2007, risk basis
	2007	5 year	10 year	15 year	EUR bln	in %
Equities #	7.5 **	14.8	6.9	10.8	12.3	63.8
Fixed Income	-3.2 **	6.9	7.5	9.4	5.6	28.9
Alternative investments #	34.6 **				1.4	7.4
Hedge funds	6.9 **				1.4	7.4
Cash					-1,4	-7,5
Total	5.9 **	16.1 **	8.8 **	10.6 **	19.2	100.0

*    net returns, i.e. after internal and external management fees
**  currency hedged
#    until 2004, alternative investment returns were included under equities

The Pension Fund fully hedges the currency exposure to the main foreign currencies. The duration mismatch on the balance sheet (difference in sensitivity to interest changes between assets and liabilities) has been hedged to a limited extent.

Pensions in payment were increased by 1.6% with effect from 1st July 2007. Employee contributions in 2007 amounted to 2% of the pension contribution basis up to the limit of EUR 72,700 (until 1st July 2007: EUR 71,274), plus 8% of the pension contribution basis above that figure. As of 1st January 2008, the latter contribution has been reduced from 8% to 2%. The employer contribution amounted to 17% of salaries in 2007; as of 1st January 2008, that figure has been reduced to 5%. The reduction in contributions was decided upon based on  the Pension Fund’s financial position as reflected in the funding ratio.

In early June, all Pension Fund participants and pension beneficiaries will receive a copy of ‘Facts & Figures 2007’. Facts & Figures will also be published on this website.

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[1] The results stated in this publication are of a preliminary nature. The figures have not been verified by the external auditor.