ICI SPECIALTY CHEMICALS PENSION...

ICI SPECIALTY CHEMICALS PENSION FUND

Registered with the Pensions Regulator

Registration Number 10232133

REPORT OF THE TRUSTEE AND

FINANCIAL STATEMENTS

31 March 2018


CONTENTS

1

HIGHLIGHTS OF THE YEAR

2

TRUSTEE, DIRECTORS, ADVISERS & SERVICE PROVIDERS

3

REPORT OF THE TRUSTEE

4

MEMBERSHIP REPORT

11

INVESTMENT REPORT

12

ACTUARIAL CERTIFICATE

15

FINANCIAL STATEMENTS - FUND ACCOUNT

16

FINANCIAL STATEMENTS – STATEMENT OF NET ASSETS (AVAILABLE FOR BENEFITS)

17

NOTES FORMING PART OF THE FINANCIAL STATEMENTS

18

AUDITOR’S REPORT TO THE TRUSTEE

29

AUDITOR’S STATEMENT ABOUT CONTRIBUTIONS

31

STATEMENT OF TRUSTEE’S RESPONSIBILITIES IN RESPECT OF CONTRIBUTIONS

32

REPORT ON ACTUARIAL LIABILITIES

33


HIGHLIGHTS OF THE YEAR ENDED 31 MARCH 2018

2

HIGHLIGHTS OF THE

Total £m

Fund’s assets at 1 April 2017 654.9

How the money came in - Income

£m Employer contributions 6.9 Investment income 15.1

Total income 22.0

How it was used - Expenditure £m Pensions -13.9 Commutation lump sums -0.7 Payments to and on account of leavers -11.0 Total expenditure -25.6

Change in the Fund £m

Balance of Income and Expenditure -3.6 Change in market value of investments -29.0 Total change in the Fund -32.6

Fund's Assets at 31 March 2018 £622.3 million The Fund provides for:

Contributing members 30 Pensioners 883 Deferred pensioners 874 Total number of members 1,787

ICI SPECIALTY CHEMICALS PENSION FUND TRUSTEE, DIRECTORS, ADVISERS & SERVICE PROVIDERS

AS AT 11 OCTOBER 2018

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Trustee: ICI Specialty Chemicals Pensions Trustee Limited Directors: A A Bate (Board Chairman) IC Member Nominated Director N R E Cribb (ARAC Chairman) IC, ARAC Other Director R Eden-Green AAC Member Nominated Director M C Harrow (IC Chairman) IC Member Nominated Director S Kenny AAC Other Director D J Taylor (AAC Chairman) AAC, ARAC Other Director The Law Debenture Pension Trust Corporation p.l.c. IC, AAC, ARAC Committee Roles: IC - Investment Committee AAC - Administration and Appeals Committee ARAC - Audit and Risk Assurance Committee Board Secretary: Pensions Secretariat Services Limited 5th Floor, 36-38 Botolph Lane, London EC3R 8DE Scheme Actuary: A Barnes FIA Towers Watson Limited Watson House, London Road, Reigate, Surrey RH2 9PQ

Auditor: KPMG LLP 15 Canada Square, London E14 5GL

Solicitors: Squire Patton Boggs (UK) LLP 7 Devonshire Square, Cutlers Gardens, London EC2M 4YH

Bank: HSBC plc 18 High Street, Reigate, Surrey RH2 9BB Investment Managers: BlackRock Advisors (UK) Limited 12 Throgmorton Avenue, London EC2N 2DL

M&G Investment Management Limited Laurence Pountney Hill, London EC4R 0HH Russell Investments Limited Rex House, 10 Regent Street, London SW1 4PE Investment Adviser: Lane Clark & Peacock LLP 95 Wigmore Street, London W1U 1DQ Custodian: JP Morgan Chase Bank NA 25 Bank Street, London E14 5JP Administrator: Towers Watson Limited Administration Offices, ICI Pensions Services PO Box 545, Redhill, Surrey RH1 1YX Email: [email protected] Covenant Advisers: Penfida Partners LLP 1 Carey Lane, London EC2V 8AE Communication Adviser: Lane Clark & Peacock LLP 95 Wigmore Street, London W1U 1DQ Insurance Broker: Lockton Companies LLP The St Botolph Building, 138 Houndsditch London EC3A 7AG

AVC Providers: Clerical Medical Investment Group Limited PO Box 174, Walton Street Aylesbury, Bucks. HP21 7YP The Equitable Life Assurance Society PO Box 177, Walton Street Aylesbury, Bucks. HP21 7YH Annuity Providers: The Prudential Assurance Company Limited Laurence Pountney Hill, London EC4R 0HH Pension Insurance Corporation plc 14 Cornhill, London, EC3V 3ND

mailto:[email protected]


REPORT OF THE TRUSTEE 31 MARCH 2018

4

The Trustee Board submits the Annual Report on the operations of the ICI Specialty Chemicals Pension Fund (the “Fund”), together with the Financial Statements of the Fund for the Fund year ended 31 March 2018. Principal Employer The Principal Employer of the Fund is Imperial Chemical Industries Ltd (formerly Imperial Chemical Industries p.l.c), The AkzoNobel Building, Wexham Road, Slough SL2 5DS ("ICI"). On 2 January 2008, ICI was acquired by Akzo Nobel N.V. ("AkzoNobel"), a company based in the Netherlands. Guarantor Under a deed executed on 29 February 2012, AkzoNobel guarantees all ICI obligations to make payments to the Fund arising under legislation and under the Trust Deed and Rules. The continuation of the guarantee is conditional on the maintenance of the Fund’s asset allocation within a range agreed between the Trustee and AkzoNobel. Trustee The Fund has a corporate trustee, ICI Specialty Chemicals Pensions Trustee Limited (the “Trustee”). This company is owned by The Law Debenture Pension Trust Corporation p.l.c. ("Law Debenture"), a professional trustee which is entirely independent from ICI. The Trustee Board currently comprises seven Directors, made up as follows:

• one Independent Director, Law Debenture • three Member Nominated Directors • three Other Directors appointed by Law Debenture.

As the holder of all the share capital in the Trustee, Law Debenture has the power under the articles of association to appoint and remove directors, subject to legislation. Status of the Fund The Fund was established with effect from 1 April 1998. It was set up to provide pension benefits to the employees of the Specialty Chemicals businesses acquired by ICI from Unilever (in what is now referred to as the "Main Section"). It is a defined benefit occupational pension scheme. In July 1998 a separate section was created to provide pension benefits to former members of the Williams Holdings Pension Plan. Since 1 October 2000, the Fund has been closed to new members, except for transfers from other ICI Group defined benefit pension schemes with the consent of the Principal Employer and the Trustee. Member Nominated Directors ("MNDs") Under the Pensions Act 2004, the Trustee is responsible for determining the procedure for nomination and selection of MNDs, subject to certain requirements set out in that Act. The Trustee also has regard to guidance issued by the Pensions Regulator. Under the current arrangements determined by the Trustee: • By law, MNDs must comprise a minimum of one third of all Directors but ICI has agreed that MNDs may comprise

up to half of all Directors, excluding Law Debenture. • The total number of Directors is seven, at least one third and no more than half of whom are to be MNDs. • Any Fund member may be nominated as an MND, except those who are dependant pensioners or only have

AVC benefits within the Fund. • After a shortlisting process conducted by the Administration and Appeals Committee, selection is undertaken by

a selection panel; and • MNDs may be drawn from any part of the membership (but so that, if possible, at least one of the MNDs should

come from the active membership of the Fund).

Directors The Directors held five Board meetings during the Fund year from 1 April 2017 to 31 March 2018. A list of the Directors and their committee responsibilities at the date of signing this report is given on page 3. During the Fund year and subsequently there have been the following changes to Director appointments. N R E Cribb was re-appointed (as an Other Director) from 30 April 2018, M C Harrow was re-appointed (as an MND) from 1 May 2018, A Atkinson’s term of office (as an Other Director) came to an end on 17 September 2018 without him offering himself for re-appointment.



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Secretary and Administrators Pensions Secretariat Services Limited (which is wholly-owned by the ICI Pension Fund) served as Secretary throughout the Fund year, providing strategic support services to the Fund. The administrator of the Fund is Towers Watson Limited (“Willis Towers Watson”). Committees of the Trustee Board The Board has an Investment Committee, an Administration and Appeals Committee, and an Audit and Risk Assurance Committee and until 22 March 2018 it also had a Strategic Risk Committee.

Administration and Appeals Committee The role of the Administration and Appeals Committee is to lead policy development in areas other than funding and investment, to supervise the work of the administrator and to hear individual member appeals under the Internal Dispute Resolution Procedure. The Administration and Appeals Committee had five meetings during the Fund year. Audit and Risk Assurance Committee The role of the Audit and Risk Assurance Committee is to make recommendations to the Board as to the appointment of external and internal auditors, to agree the scope of their audit work and to discuss with them any issues arising. The Committee also reviews the Fund’s annual financial statements and reviews the effectiveness of the Fund’s internal control and risk management systems. The Audit and Risk Assurance Committee had three meetings during the Fund year. Investment Committee The Investment Committee makes recommendations to the Board on investment strategy and risks; implements changes to strategy (within limits set by the Board); reviews and monitors investment managers and the custodian and determines their remits and terms of appointment. Further details are contained in the Investment Report on pages 12 to 14. The Investment Committee had seven meetings during the Fund year. Strategic Risk Committee The Strategic Risk Committee’s role was to represent the Fund’s interests in discussions with the Principal Employer about funding issues and the general security of the Fund and to investigate ways of mitigating the principal non-investment risks that may affect the Fund. The Strategic Risk Committee met six times during the Fund year but has been discontinued with effect from 22 March 2018 and its responsibilities transferred to the Board.

Trustee Training The Trustee believes that all Directors should receive appropriate training to enable them to undertake their duties and operates its own in-house training programme, utilising external contributors. Directors are also required to complete the Pensions Regulator’s Trustee Toolkit (an online training programme) within six months of appointment, to provide a common foundation training for all. Statement of Trustee Responsibilities The audited financial statements, which are to be prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, are the responsibility of the Trustee. Pension scheme regulations require the Trustee to make available to scheme members, beneficiaries and certain other parties, audited financial statements for each scheme year which:

(i) 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 the assets and liabilities, other than liabilities to pay pensions and benefits after the end of the scheme year; and

(ii) contain the information specified in the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, including a statement whether the accounts have been prepared in accordance with the Statement of Recommended Practice Financial Reports of Pension Schemes.

The Trustee has supervised the preparation of the financial statements and has agreed suitable accounting policies, to be applied consistently, making estimates and judgements on a reasonable and prudent basis. The Trustee is also responsible for:



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• assessing the Fund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern;

• using the going concern basis of accounting unless they either intend to wind up the Fund, or have no realistic alternative but to do so; and

• making available each year, commonly in the form of a trustee’s annual report, information about the Fund prescribed by pensions legislation, which they should ensure is consistent with the financial statements it accompanies.

The Trustee also has certain responsibilities in respect of contributions which are set out in the statement of trustee’s responsibilities accompanying the Trustee’s summary of contributions.

The Trustee is responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and 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. Financial Statements The Annual Financial Statements of the Fund have been prepared and audited in accordance with the requirements of Section 41 (1) and (6) of the Pensions Act 1995 and are shown on pages 16 to 28 of this report. It must be emphasised that the market value of investments is a snapshot at the date of the Financial Statements and that there can be sharp short-term fluctuations in market value. Given the long-term nature of pension funds, too much emphasis should not be given to short-term rises or falls in market value of the Fund's investments. Therefore it is advised that the Fund’s Financial Statements are read in conjunction with the Actuarial Certificate on page 15 and the Report on Actuarial Liabilities on page 33. The Trustee also issues a Summary Funding Statement to members as at 31 March each year, a copy of which is available on the Fund’s website, www.iciscpf.org.uk. Bulk Annuity Policies In August 2015, the Trustee entered into a significant transaction with the aim of reducing risk and increasing the security of members‘ benefits by purchasing a bulk annuity policy from Prudential Retirement Income Limited (“Prudential”)) at a cost of £224.3 million. The cost of the policy was funded by the transfer and sale of some of the assets of the Fund’s portfolio of matching assets. Further bulk annuity policies were purchased from Prudential at a cost of £16.4 million in November 2015 and from Pension Insurance Corporation plc (“PIC”) at a cost of £137.1 million in November 2016 and £16.1million in March 2018. The policies are held as part of the portfolio of matching assets. Prudential’s rights and obligations under its two bulk annuity policies were transferred to the Prudential Assurance Company Limited on 1 October 2016 pursuant to the Financial Services and Markets Act 2000. Custodian The Fund has a single independent custodian for its direct investments, JP Morgan Chase Bank NA. Pooled funds in which the Fund invests appoint independent custodians to hold the investments of those funds. Additional Voluntary Contributions AVC arrangements are no longer open to new contributions. However, members who wish to do so are able to continue to maintain existing AVC savings accounts. Responsibility for the various aspects of the AVC arrangements is delegated to the Administration and Appeals Committee. Benefit Statements Benefit Statements are sent to most active members during the summer of each year. Those members for whom statements cannot be produced automatically are able to request them individually. Pension Increases For most members, the Fund's Rules provide a guaranteed annual pension increase of the lower of 5% or the annual increase in the Retail Prices Index (RPI), calculated on pensions in payment after commutation. In relation to the year under review the RPI reference period for Main Section members was the year to 31 July 2017 in which RPI increased by 3.6% while, for former members of the Williams Pension Plan (“Section A”), it was the year to 31 August 2017 in which RPI increased by 3.9%. The rules for Section A members vary according to which employer (if any) they worked for prior to Williams ownership. Since inflation during the relevant reference periods did not exceed the cap, pension increases for each section of the Fund were as detailed on the following page:

http://www.iciscpf.org.uk/



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Section Reference period Increase Main Section members increase from 1 October 2017 3.6% Section A former Hunting members increase from 1 January 2018 for service up to 5 April 1993 3.9% for service between 6 April 1993 and 5 April 1997 3.0% for service from 6 April 1997 3.9% Section A former BJN members* increase from 1 January 2018 tested individually All other Section A members increase from 1 January 2018 for service up to 5 April 1997 3.0% for service from 6 April 1997 3.9% All of the above increases apply to the pension in excess of the Guaranteed Minimum Pension (“GMP”); statutory increases (if any) are given on the GMPs on 1 April each year in accordance with statutory requirements. * The majority of these members received an increase of 5.0% on their pension in excess of the GMP. However,

some members received the underpin guaranteed increase of 3.0% on their total pension (inclusive of the GMP) as this was greater.

Revaluation in Deferment Deferred pensions coming into payment during the Fund year under review were revalued in relation to the period of deferment on a basis that at least met legislative requirements. Except in the case of former members of the Williams Holdings Plan, the BJN Plan and the Hunting Pension Scheme, the non-GMP element was revalued in line with the increase in the Retail Prices Index (RPI) capped at 5% each year during the period of deferment if this resulted in greater than statutory revaluation. The result usually is greater, given that statutory revaluation (a) is by reference to the increase in the RPI up to September 2009 and the generally lower increase in the Consumer Prices Index thereafter and (b) is capped at 2.5% pa rather than 5% pa in relation to pensionable service after 5 April 2009. The above increases were not discretionary. Self Investment The Fund has no direct investments in ICI or any other companies within the AkzoNobel group. Indirect investment would arise only via pooled investment vehicles and would represent less than 0.1 % of Fund assets. Risk Controls Regulations require pension fund trustees to ensure adequate internal financial controls and policies for risk control. Trustee policies and procedures have been designed to comply with these regulations. Actuarial Valuation and Determination of Contributions The Scheme Actuary carried out a formal valuation of the Fund as at 31 March 2017. This was the fourth valuation of the Fund to be conducted under the scheme-specific funding regulations established by the Pensions Act 2004. Agreement between the Trustee and ICI on the level of deficit and a Recovery Plan and a new Schedule of Contributions was reached in March 2018. The deficit shown by this valuation was £25.2 million. In accordance with the Schedule of Contributions dated 30 April 2015, deficit repair contributions of £6.0 million were paid on 26 March 2018. Details of revised contribution rates are shown on pages 8 and 9. All payments due under the previous schedule were received by the respective due dates. A copy of the Scheme Actuary’s Certificate appears on page 15. Further information on the funding position of the Fund is contained in the Summary Funding Statement available on the Fund’s website,www.iciscpf.org.uk.

http://www.iciscpf.org.uk/



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Extracts from the Schedule of Contributions dated 28 March 2018 1. Employer contributions

The Principal Employer and other participating Employers shall contribute the amounts set out below by the dates shown

1.1 Future service contributions, including a premium for ill-health benefits based on prospective service

Until 30 April 2018:

In respect of Contributors who are not former members of the Williams Holdings Pension Plan:

42.3% of Contributors' total Pensionable Pay.

In respect of Contributors who are former members of the Williams Holdings Pension Plan

44.4 % of Contributors' total Pensionable Earnings.

Additional amounts in respect of salary sacrifice members:

The amount of any member contributions which are not required to be paid because the member concerned participates in a Salary Sacrifice Arrangement.

With effect from 1 May 2018:

In respect of Contributors who are not former members of the Williams Holdings Pension Plan:

31.9% of Contributors' total Pensionable Pay.

In respect of Contributors who are former members of the Williams Holdings Pension Plan

39.5 % of Contributors' total Pensionable Earnings.

Additional amounts in respect of salary sacrifice members:

The amount of any member contributions which are not required to be paid because the member concerned participates in a Salary Sacrifice Arrangement.

Employer future service contributions are due to be received by the Fund no later than the 19th day of the month following the calendar month to which they relate.

1.2 Additional contributions payable in accordance with the recovery plan

Additional contributions will be paid into the Fund by the Principal Employer as follows:

Amount Due by £6,000,000 31 March 2018 £3,000,000 31 January 2019 £3,000,000 31 January 2020 £3,000,000 31 January 2021 £3,000,000 31 January 2022



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1.3 The additional contribution due on or before 31 January 2021 will not be paid if before that date the following conditions are both met and the additional contribution due on or before 31 January 2022 will not be paid if before that date either of the following conditions is met:

a) the Trustee has confirmed in writing to the Principal Employer (such confirmation not to be unreasonably

withheld) that it has been clarified to the satisfaction of the Trustee (acting reasonably) that no increase in members’ benefits is required to equalise members’ benefits on account of the inequalities arising from Guaranteed Minimum Pensions (“GMP”),

b) a funding update with an effective date of 31 March immediately prior to the relevant contribution due date

to be produced by the Scheme Actuary by no later than 31 December immediately prior to the relevant contribution due date reveals that the Fund is fully funded. The basis used to carry out this assessment will be as per the Technical Provisions basis in force (with the GMP equalisation reserve excluded if it has been confirmed that this is not required) at that time, with the exception of the discount rate, which will be the ‘gilts curve’ with no investment return premium for all non-insured liabilities.

1.4 Expenses and Pension Protection Fund levies

The Employers will reimburse the Fund for all costs and expenses relating to the Fund (other than such costs and expenses directly related to investment as the Trustee determines) and Pension Protection Fund (PPF) levies that have been met out of the Fund’s assets. Reimbursement of such costs, expenses and levies will be due within three months of being demanded by the Trustee or such earlier date as may be agreed between the Trustee and the relevant Employer. Alternatively, the Employers may pay any costs, expenses and levies directly. Other Employer contributions The Employers will pay additional contributions in accordance with Clause 11 as may be determined from time to time by the Actuary to be necessary to meet the estimated cost of benefit augmentations granted under the Trust Deed and Rules. The Employers will also pay additional amounts as, from time to time, may be agreed between the Trustee and the Principal Employer. These additional contributions will be due within three months of being demanded by the Trustee or such earlier date as may be agreed between the Trustee and the relevant Employer.

2. Contributors’ contributions

Salary sacrifice members: Nil.

Other members: The rates set out in the Rules.

Members’ contributions are due to be received by the Fund no later than the 19th day of the month following the calendar month in which they were deducted from pay. Any AVCs made by the members are payable in addition to these rates.

Transfers All transfer values paid to other pension schemes during the year, were either calculated and verified by the Scheme Actuary, or calculated in accordance with instructions prepared by him, in accordance with statutory regulations. Discretionary benefits are not included in the calculation of transfer values. The Fund is closed to new members, except for transfers from other ICI Group defined benefit pension schemes. No transfers-out have been made at less than the cash equivalent value.



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Equal Treatment The Trustee believes that the Fund has equalised benefits between men and women as required by law except in relation to the differences between GMPs earned by men and women where, in common with most other schemes, the Trustee is awaiting further clarification of the law. Internal Dispute Resolution Procedure The Fund has instituted a procedure in accordance with the requirements of the Pensions Act 1995 and details can be obtained from the Fund’s administrator, whose address is shown on page 3. Contracting-out of State Second Pension Prior to 6 April 2016 contributing members of the Fund were contracted-out of the State Second Pension (“S2P”, formerly the State Earnings Related Pension Scheme or “SERPS”) and had been since the Fund was established in 1998. The basis for contracting-out of S2P for the Fund is the Reference Scheme Test. Since 6 April 2016 it has no longer been possible for pension schemes to be contracted out of the State Second Pension. Appointment of Advisers The advisers listed on page 3 have all been appointed by the Trustee or under the authority of the Trustee. Data Protection During the year under review and subsequently, the Trustee has worked with its legal advisers and the Fund administrators, actuary and other advisers and service providers with a view to meeting the new data protection requirements introduced by the General Data Protection Regulations and the Data Protection Act 2018 with effect from 25 May 2018. Tax Status The Fund is registered with HMRC in accordance with the Finance Act 2004 and the Directors know of no reason why this registration may be prejudiced or withdrawn. Enquiries Any enquiry concerning the Trustee's Report, the Financial Statements or any provisions of the Fund should be addressed to the administrator, whose contact details are shown on page 3. BY ORDER OF THE BOARD OF ICI SPECIALTY CHEMICALS PENSIONS TRUSTEE LIMITED R J Moody for and on behalf of Pensions Secretariat Services Limited Secretary 11 October 2018


MEMBERSHIP REPORT 31 MARCH 2018

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Contributing Deferred Pensioners TotalMembers Pensioners in Payment

At 1 April 2017 36 906 882 1,824Prior year adjustment -1 1 - -Additions - 2 24 26Cessations -5 -35 -23 -63

At 31 March 2018 30 874 883 1,787

Additions to Pensioners in PaymentContributing member at early retirement 3Deferred member at normal retirement 1Deferred member at early retirement 11Spouse on death of a pensioner/deferred member 9

24

Cessations of Contributing MembersPension at normal retirement - Pension at early retirement 3 Deferred pension 2

5

Cessations of Deferred PensionersPension at normal retirement 1 Pension at early retirement 11 Transfer out 22 Death 1

35

Cessations of Pensioners in PaymentDeath of a pensioner 21 Death of a spouse 2

23

Commutation of PensionsDuring the year 15 members were eligible to exercise their option to commute at retirement part of their pensions and 11(i.e 73.3%) decided to do so. The total initial value of pensions commuted during the period under review amounted to £27,552 per annum.

Dependants' and Spouses' PensionsOf the 883 pensions in payment at 31 March 2018, 113 were payable to dependants or spouses.

Additional Voluntary Contributions (AVC) SchemeAVCs are invested in individual accounts with Clerical Medical and/or Equitable Life. The membership statistics include the number of individuals with AVCs. AVCs have been closed to new contributionssince 6 April 2006.

Equitable Life Clerical Medical

AVC Members at 1 April 2017 47 54Add: Prior year adjustments -1 2

Less: Retirement -1 -Transfer out -3 -4

AVC Members at 31 March 2018 42 52


INVESTMENT REPORT 31 MARCH 2018

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Statement of Investment Principles In accordance with the Pensions Act 1995, the Trustee has produced a Statement of Investment Principles (“SIP”) after having consulted with ICI. Investment Management Structure The investments of the Fund are managed according to remits and control limits laid down by the Trustee after having consulted ICI. The Directors have established an Investment Committee to which a number of operational powers are delegated, but key decisions about long-term strategy and governance are taken by the Board. During the year under review the Trustee, directly or indirectly, delegated all day-to-day investment decisions to its investment managers:

BlackRock Advisors (UK) Limited ("BlackRock") M&G Investment Management Limited (“M&G”) Russell Investments Limited (“Russell”) Standard Life Investments Limited (“Standard Life”)

Each remit includes a benchmark against which performance is measured. BlackRock has two investment remits, one to manage bonds, swaps and cash so as to match a proportion of the Fund’s liabilities and the other an Absolute Return mandate. M&G has three remits, the first as a specialist Leveraged Loans manager, the second as a Long Lease Property manager and the third the M&G Illiquid Credit Opportunities Fund. During the year the Securis Reinsurance mandate was terminated in June 2017. Russell Investments were appointed as an Absolute Return manager following the termination of the Standard Life mandate in March 2018. Investment Strategy The Trustee maintained its investment strategy, originally adopted in 2010 (following consultation with ICI) of maintaining a large proportion of its assets in gilts, cash and swaps that closely match expected future cash outflows, in order to minimize volatility of assets relative to liabilities. The remainder of the assets are return-seeking assets which, over time, are expected to generate returns in excess of the increase in liabilities. In quarter 1 2018 the Fund extended the longevity hedge by executing a further buy-in insuring the Fund in relation to pensions that had come into payment since 30 April 2016. At the same time the Fund increased the strategic interest rate and inflation hedge ratios from 94% to 97% of liabilities, in line with the improved funding level, including the sponsor’s future deficit repair contributions. Further changes to the return-seeking portfolio were also made during quarter 1 2018, Standard Life were terminated, the BlackRock Absolute Return mandate was scaled back and the proceeds from these were invested in a Russell Investment Absolute Return mandate. As a result of the changes undertaken, the asset allocation by individual managers of the Fund as at 31 March 2018 was as shown on the following page:



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Black

Rock %

Pru

%

PIC

%

M&G

%

Russell

%

Total

% Matching Assets 9.6 40.8 23.7 74.1 Liabilty-Related cash 7.7 7.7 Absolute Return 4.9 5.1 10.0 Leveraged Loans 2.1 2.1 Illiquid Credit 2.8 2.8 Long Lease Property 2.6 2.6 Marginal liquidity cash 0.7 0.7 22.9 40.8 23.7 7.5 5.1 100.0

Subject to rounding differences. Investment Performance Since 1 April 2016 the Fund performance has been measured by the custodian bank, JP Morgan Chase Bank NA. The returns to 31 March 2018 for each manager who served throughout the relevant period and for the total Fund against benchmark were as shown in the following table. Since Q2 2010, the Fund has set a strategic benchmark which takes into account the Fund’s liability profile. The purpose of this strategic liability benchmark is to allow the Fund to compare the performance of its total investments against the change in value of its future liabilities. The benchmark shown in the table for the Total Fund Return for the one, three and five years to 31 March 2018 is the strategic liability benchmark. The returns reported for the BlackRock matching portfolio are as calculated by the manager taking into account returns not only on the assets it manages, but also on “notional assets”. These are included to adjust for the difference in size between the assets managed and the liabilities in the manager’s benchmark. This can lead to the reported returns being either higher or lower than the actual returns on the assets managed. This adjustment is necessary to give a fair view of the manager’s performance against its benchmark. However, the return on these assets which is included in Total Fund Returns is the actual return on the assets managed. As a result, the sum of the weighted returns in the table shown below may differ from the “Total Fund Return” figure.

n/a = not applicable as not invested for the whole period *Replaced with Russell Investments at the end of March 2018 **The Total Fund has marginally underperformed as this return reflects the actual return on assets. Whilst the LDI portfolio posted a positive return, three of the four quarters in the year were negative which, due to the leverage, has led to a negative return at the Total Fund level. Relative to their own benchmarks, for the year, the best performers were M&G Long Lease Property, M&G Illiquid Credit and BlackRock DDG while negative performers were Standard Life GARS and M&G Leveraged Loans. Compared to the liability benchmark, all return-seeking managers performed better than the liabilities primarily as yields only fell marginally over the year to 31 March 2018. For those investment managers where there is a longer-term performance history, M&G Long Lease Property performed above their benchmark over the five year period. Dramatic changes in investment markets, such as those occurring in recent years, emphasise the importance of judging performance of pension fund investments over long periods of time, taking account of the limited tolerance of the Trustee and of ICI for volatility in the level of funding/solvency of the Fund and the level of deficit contributions

Year to 31 March 2018

Last 3 years (Annualised)

Last 5 years (Annualised)

Actual %

Benchmark %

Actual %

Benchmark %

Actual %

Benchmark %

BlackRock – Matching assets 1.3 1.6 6.8 6.8 7.8 7.8 BlackRock – DDG 4.6 3.4 n/a n/a n/a n/a Standard Life GARS* 1.7 3.4 n/a n/a n/a n/a M&G Leveraged Loans 2.8 4.4 4.3 4.9 4.7 5.1 M&G Long Lease Property 9.2 0.8 7.5 4.9 8.7 5.1 M&G Illiquid Credit 6.4 5.4 5.5 3.6 n/a n/a Total Fund Return -0.8** 1.6 5.4 6.8 8.0 7.8



14

required from ICI. Over the last 3 years the Fund has underperformed its weighted benchmark by -1.3% p.a. and over the last 5 years it has outperformed by 0.2% p.a. Over the last 10 years, the Fund has delivered a positive return of 8.6% p.a., 0.7% p.a. above its weighted benchmark. Myners’ Report - Trustee Compliance Statement In 2008, the government published an updated version of its Myners’ Principles, a voluntary code of practice on the governance of pension fund investment processes. The Trustee supports the Myners’ Principles and believes that, in general, they coincide with the interests of the Fund. Social, Environmental and Ethical Issues The Trustee's policy is that the extent to which social, environmental or ethical considerations are taken into account in investment decisions is left to the discretion of its investment managers. However, the Trustee expects that the extent to which such issues may have a fundamental impact on the portfolios managed by them will be taken into account by the investment managers in the exercise of their delegated duties. Rights Attaching to Investments The Trustee’s policy is to delegate responsibility for the exercising of rights (including voting rights) attaching to investments to the investment managers. Voting Investment managers are encouraged, but not directed, to vote on all resolutions at annual and extraordinary meetings of companies. It is expected that voting power will be exercised by investment managers with the objective of preserving and enhancing long-term shareholder value in accordance with the Institutional Shareholder’s Committee Code where applicable. Corporate Governance The Trustee expects investment managers to report quarterly on an ‘exceptions’ basis on the exercise of corporate governance, and particularly on their voting record. The investment managers may also be requested from time to time to provide a report on the overall impact of social, environmental and ethical considerations on investment management, and to comment in particular on situations in which such considerations have been decisive to a transaction or shareholder action (including voting). Bulk Annuity Policies The Fund has four bulk annuity policies held in its name, two with The Prudential Assurance Company Limited and two with the Pension Insurance Corporation plc. The policies are for the benefit of the Fund as a whole and do not change the position of individual members who will see no change to how their pensions are provided. However, the policy receipts are dependent on the longevity of specific members. Regular monitoring of the insurance companies is undertaken by Penfida.


ACTUARIAL CERTIFICATE

15

Actuary’s certification of the schedule of contributions Name of scheme: ICI Specialty Chemicals Pension Fund

Adequacy of rates of contributions I certify that, in my opinion, the rates of the contributions shown in this schedule of contributions are such that the statutory funding objective could have been expected on 31 March 2017 to be met by the end of the period specified in the recovery plan dated 28 March 2018. Adherence to statement of funding principles I hereby certify that, in my opinion, this schedule of contributions is consistent with the Statement of Funding Principles dated 28 March 2018. The certification of the adequacy of the rates of contributions for the purpose of securing that the statutory funding objective can be expected to be met is not a certification of their adequacy for the purpose of securing the scheme’s liabilities by the purchase of annuities, if the scheme were to be wound up. A Barnes FIA Fellow of the Institute and Faculty of Actuaries 16 April 2018

Towers Watson Limited Watson House London Road Reigate Surrey RH2 9PQ


FUND ACCOUNT FOR THE YEAR ENDED 31 MARCH 2018

16

FUND ACCOUNT Year to Year to

31 Mar 18 31 Mar 17Note £m £m

Contributions and Benefits

Contributions receivable 3 6.9 6.9

6.9 6.9

Benefits payable 4 -14.6 -15.6Payments to and on account of leavers 5 -11.0 -6.1Other payments 6 - -0.3

-25.6 -22.0

Net withdrawals from dealings with members and employers -18.7 -15.1

Returns on investments

Investment income 7 15.1 11.2Change in market value of investments 8 -29.0 96.1

Net returns on investments -13.9 107.3

Net change to the Fund during the year -32.6 92.2

Net assets of the Fund at the start of the year 654.9 562.7

Net assets of the Fund at the end of the year 622.3 654.9


STATEMENT OF NET ASSETS (AVAILABLE FOR BENEFITS) AS AT 31 MARCH 2018

17

Year to Year to

Note 31 Mar 18 31 Mar 17£m £m

Investment assets 7

Pooled Investment vehicles 217.3 247.4Bulk annuity policies 393.1 411.3AVC investments 1.4 1.5Cash 28.0 0.9Other investment balances -16.9 -6.0

Total Investments 622.9 655.1

Current assets and liabilities 11 -0.6 -0.2

Net assets of the Fund at end of the year 622.3 654.9

The notes on pages 18-28 form part of the financial statements

The financial statements summarise the transactions of the Fund and deal with the net assets at the disposal of the Trustee. They do not take account of obligations to pay pensions and other benefits in the future. The actuarial position of the Fund, which does take account of such obligations, is dealt with in the Report onActuarial Liabilities on page 33 of the annual report and these financial statements should be read in conjunction with it and with the Summary Funding Statement which is available on the Fund's website www.iciscpf.org.uk.

These financial statements were approved by the board of the Trustee Company on 11 October 2018 and were signed on its behalf by:

A.A.Bate Director

R.J.Moodyfor and on behalf of Pensions Secretariat Services LimitedSecretary


NOTES FORMING PART OF THE FINANCIAL STATEMENTS 31 MARCH 2018

18

1. Basis of Preparation

The Financial Statements have been prepared in accordance with the Financial Reporting Standard 102 (FRS 102) – The Financial Reporting Standard applicable in the UK and Republic of Ireland issued by the Financial Reporting Council and with the guidance set out in the Statement of Recommended Practice (SORP) (revised November 2014). The Financial Statements have been prepared on a going concern basis.

2. Accounting Policies (a) Accruals Basis The Financial Statements have been prepared on an accruals basis, except where noted. (b) Additional Voluntary Contributions (AVCs) All investments and transactions in AVCs are included in these accounts under the relevant heading. (c) Contribution Income Ordinary contributions relating to wages and salaries earned in the financial year are calculated at rates

determined for the period by agreement between the Principal Employer and the Trustee as part of the actuarial valuation process and are accounted for in the month when the corresponding wages and salaries are paid. Additional contributions from the participating employers are accounted for when due in accordance with the agreed timetable. Deficit funding contributions are accounted for in accordance with the Schedule of Contributions under which they are due.

(d) Investment Income Investment income is accounted for on an accruals basis. (e) Benefits Payable Benefits payable represent all material valid benefit claims in respect of the Fund year. Where a

member has a choice in connection with his benefits (e.g. to commute part of the pension), the benefit choice is accounted for in the month of receipt by the Trustee of a notification from the member.

(f) Administration Expenses

All the Fund's administration expenses (including the administration element of investment management fees) are borne by Imperial Chemical Industries Limited. During the Fund year custody fees and the investment element of investment management fees, amounting to less than £0.1 million (2017: £0.1 million), were borne by the Fund and paid out of investment income (see note 7). This does not include investment management, custody and administration fees in relation to investments in pooled funds where the managers deduct the fees directly from those funds.

(g) Foreign Currency Conversion

All assets and liabilities stated in foreign currencies are converted at rates of exchange ruling at the year end date. Exchange adjustments arising are then incorporated in the Fund Account, being included in the change in market value of investments.



19

(h) Valuation of Investments The Fund's investments are reported in the Financial Statements on the basis of market values. Market values at the year-end are assessed as follows:

- Listed ordinary shares and government, fixed interest and index linked securities are valued at bid price or last traded price, depending on the convention of the stock exchange on which they are quoted. Government, fixed interest and index linked securities are valued on a clean basis, excluding accrued income. Any excluded income is accounted for in investment income.

- Pooled investment vehicles are valued at bid price for funds with a bid/offer spread or single price

where there are no bid/offer spreads provided by the investment manager.

(i) Bulk Annuity Policies The fair value of the bulk annuity policies is deemed to be the present value of the related pension obligations. This value has been determined to be calculated using the most recently agreed scheme funding valuation basis. The Scheme Actuary has calculated this value to be £393.1 million (2017 £411.3 million). Premia of £16.1 million were paid by means of transfers of assets in specie and cash in the year to 31 March 2018. Payments received under the policies during the year were treated as investment income (see note 6). Any difference between the opening value of the policies and the closing value is shown as a change in market value of the investment.



20

3. Employers' contributions receivable:

Year to Year to31 Mar 18 31 Mar 17

£m £m

Employer normal contributions 0.9 0.9Deficit funding 6.0 6.0

6.9 6.9

Deficit funding contributions remain payable until 31 January 2022, in accordance with the Schedule of Contributionsdated 28 March 2018. Employers' normal payroll related contributions include contributions made under salary sacrifice.arrangements. No member contributions were received in the year (2017: £2,692).

4. Benefits payable on or during retirement:


£m £m

Pensions 13.9 13.6Commutation and lump sum retirement benefits 0.7 2.0

14.6 15.6

5. Payments to and on account of leavers:


£m £m

Individual transfers to other schemes 11.0 6.1

11.0 6.1

6. Other payments:


£m £m

Tax on annual allowance charges - 0.3

- 0.3



21

7. Investment income: Year to Year to

31 Mar 18 31 Mar 17£m £m

Income from pooled investment vehicles 1.6 1.5Income from bulk annuity policies 13.5 10.1Gain or loss on foreign exchange transactions - -0.3Investment management fees - -0.1

15.1 11.2

In addition to the above, income is received from pooled investment vehicles which is re-invested and is reflected in the changein market value of those funds.

8. Investments:

(a) Reconciliation of investments held at the beginning and the end of the year

Market Purchases Sales Change in MarketValue at at cost proceeds market Value at

31 Mar 17 value 31 Mar 18

£m £m £m £m £m

Fixed interest securities - 5.6 -5.6 - -Pooled investment vehicles 247.4 96.2 -131.5 5.2 217.3Bulk annuity policies 411.3 16.1 - -34.3 393.1AVC investments 1.5 - -0.2 0.1 1.4

660.2 117.9 -137.3 -29.0 611.8

Cash deposits 0.9 87.2 -60.1 - 28.0

Other investment balances -6.0 5.9 -16.8 - -16.9

Total investments 655.1 211.0 -214.2 -29.0 622.9

The change in market value of investments during the year comprises all increases and decreases in the market value of investmentsheld at any time during the year, including profits and losses on sales of investments during the year. (b) Transaction costs In the reconciliation of investments table, transaction costs of bonds and pooled funds are included in the price charged by counterparties and so cannot be separately identified.



22

(c ) The Fund has the following investments which represent more than 5% of the assets of the Fund.

Market value % of31 Mar 18 total assets

£m

Prudential bulk annuity policies 246.9 39.7Pension Insurance Corporation bulk annuity policies 146.2 23.5BlackRock inflation-linked qualifying investment fund 99.7 16.0Russell Investments Multi Asset Growth Strategy Fund 33.1 5.3BlackRock Diversified Growth Fund 31.8 5.1

(d) Pooled Investment Vehicles (PIVs)

The Fund's holdings of PIVs are analysed below:

Market MarketValue at Value at

31 Mar 18 31 Mar 17£m £m

Inflation-linked qualifying investment fund * 99.7 136.6Absolute return 65.0 36.3Leveraged loans 13.3 13.3Illiquid credit 17.9 17.4Long lease property 16.4 15.7Reinsurance - 16.8Pooled cash 5.0 11.3

217.3 247.4* = Investment vehicle in which the Fund is the sole investorThe assets underlying the inflation-linked qualifying investment fund were:

Market MarketValue at Value at

31 Mar 18 31 Mar 17£m £m

Interest rate swaps 5.7 6.1Inflation swaps -1.2 -0.6UK fixed interest gilts 119.5 116.7UK fixed interest gilts repurchase agreements -103.6 -118.3UK index-linked gilts 124.8 143.9UK index-linked gilts repurchase agreements -84.1 -88.5Pooled cash funds ** 29.4 71.8Cash & receivables/payables 9.2 5.5

99.7 136.6

** The pooled cash funds are invested mainly in commercial paper, certificates of deposit and floating rate notes.Units held in these cash funds can be realised for use as collateral under the swap agreements.



23

8. Investment Fair Value Hierarchy.

The fair value of financial instruments has been determined using the following fair value hierarchy:

Level 1: The unadjusted quoted price in an active market for identical assets or liabilities that the Fund canaccess at the measurement date.Level 2: Inputs other than quoted prices included within Level 1 that are observable (i.e. developed usingmarket data) for the asset or liability, either directly or indirectly.Level 3: Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.

For the purposes of this analysis daily priced funds have been included under Level 1 and weekly pricedfunds under Level 2. The Qualifying Investment Fund has been classified as a single investment under Level 2.

Level 1 Level 2 Level 3 Total£m £m £m

At 31 March 2018

Pooled Investment vehicles - 169.7 47.6 217.3Bulk annuity policies - - 393.1 393.1AVC Investments - 1.4 - 1.4Cash 28.0 - - 28.0Other investment balances -16.9 - - -16.9

11.1 171.1 440.7 622.9

Level 1 Level 2 Level 3 Total£m £m £m

At 31 March 2017

Pooled Investment vehicles - 201.0 46.4 247.4Bulk annuity policies - - 411.3 411.3AVC Investments 1.5 - - 1.5Cash 0.9 - - 0.9Other investment balances -6.0 - - -6.0

-3.6 201.0 457.7 655.1



24

9. Investment risk disclosures a) Investment risks

FRS 102 requires the disclosure of information in relation to certain investment risks. These risks are set out in FRS 102 as follows: Credit risk: this is the risk that one party to a financial transaction will cause a financial loss for the other party by failing to discharge an obligation. Market risk: this comprises currency risk, interest rate risk, inflation risk and other price risk • Currency risk: the risk that the fair value of or future cash flows from a financial asset denominated in one

currency will fluctuate when measured in a different currency because of changes in foreign exchange rates. • Interest rate risk: the risk that the fair value of or future cash flows from a financial asset will fluctuate because

of changes in market interest rates. • Inflation risk: the risk that the fair value of or future cash flows from a financial asset will fluctuate because of

changes in market inflation rates. • Other price risk: the risk that the fair value of or the future cash flows from a financial asset will fluctuate

because of changes in market prices (other than the above) whether those changes reflect factors specific to the individual financial instrument or issuer or factors affecting all similar financial instruments traded in the market.

The Fund has exposure to these risks because of the investments it makes pursuing the investment strategy set out below to meet the liability payments. Further information on the Trustee’s approach to risk management and investment risk is set out below. This does not include AVC investments which are not considered to be significant in relation to the overall investments of the Fund. b) Investment strategy

The investment strategy of the Fund is set after taking advice from professional investment advisers and, taking into account considerations such as the strength of the employer covenant, the liabilities of the Fund and the funding agreed with the Principal Employer at the conclusion of the 31 March 2017 valuation. The Fund maintains a substantial proportion of its assets in bulk annuity policies, UK government bonds, cash and swaps which closely match expected future cash outflows, in order to minimise volatility of assets relative to liabilities (“the LDI portfolio”). To further reduce the risk from interest rates and inflation changes, the Trustee enters into hedging arrangements in the LDI portfolio, such that around 96% of the estimated liabilities of the Fund are hedged against changes in interest rates and inflation. Current pension outgoings are met from bulk annuity payments, income and maturities from bonds and deficit reduction contributions from the Principal Employer. At the year end the LDI portfolio represented 82% of the total investment portfolio, including the bulk annuity policies. As at 31 March 2018, the Fund had around 18% of its assets allocated to investments exhibiting higher risk but with correspondingly higher return expectations. Based on the actuarial assumptions used in the valuation, the excess return on these investments (compared to the increase in the liabilities) together with normal and deficit reduction contributions are intended to enable the Fund to eliminate the Fund’s deficit and meet the benefits payable to members as they fall due.



25

c) Credit risk

The Fund is exposed to credit risk through its holding of cash balances. In addition the Fund is indirectly exposed to credit risk through its investment in the BlackRock Qualifying Investment Fund, which invests in bonds, “over the counter” (OTC) derivatives, cash balances, repurchase agreements (Repo) etc and through its investments in other pooled vehicles. Credit risk in the LDI portfolio is minimised by reliance on UK government bonds where credit risk is considered to be minimal. The derivatives in the LDI portfolio in which the Fund invests are held through a sole investor pooled vehicle. These are OTC derivatives not guaranteed by any exchange and the Fund is therefore exposed to the risk of failure of any counterparty. The credit risk is significantly reduced by collateral arrangements and diversification across a number of counterparties. The Trustee does not permit stock lending in relation to its sole investor pooled vehicles. The Fund is also subject to credit risk due to holding four bulk annuity contracts which make payments to the Fund that closely match the pensions (and contingent pensions) being paid to pensioners who retired prior to 2 March 2018. These are held with insurance companies which, because of strict regulation, are considered to have a very low chance of default. The Trustee Board has been advised that, under current rules, the benefits provided by the bulk annuity contracts would be covered by the Financial Services Compensation Scheme in the event of failure of one of the insurance companies with which the policies are held. Analysis of credit risk – 31 March 2018

Asset class Investment Grade (£m)

Non-investment

Grade (£m)

Unrated (£m) Total (£m)

Bulk annuity contracts 393.1 393.1 Bonds 244.3 - - 244.3 OTC Derivatives 4.5 - - 4.5 Repo 187.7 - - 187.7 Other PIVs - - 112.6 112.6 Cash 55.2 - - 55.2 Total 884.8 - 112.6 997.4

Analysis of credit risk – 31 March 2017

Asset class Investment Grade (£m)

Non-investment

Grade (£m)

Unrated (£m) Total (£m)

Bulk annuity contracts 411.3 411.3 Bonds 260.6 - - 260.6 OTC Derivatives 5.5 - - 5.5 Repo 206.8 - - 206.8 Other PIVs - - 99.5 99.5 Cash 83.5 - - 83.5 Total 967.7 - 99.5 1,067.2



26

A summary of other pooled investment vehicles by type of arrangement is as follows:

Type of Vehicle 31 March 2018 (£m) 31 March 2017 (£m) Open Ended Investment Companies 31.2 30.7 Qualifying Investor Alternative Investment Fund 33.2 - Cayman Islands Exempted Investment Master Fund - 16.8 Jersey Expert Fund 31.8 18.5 Unregulated Collective Investment Scheme 16.4 15.7 Undertakings for Collective Investment in Transferable Securities

- 17.8

Total 112.6 99.5 The credit risk arising on other investments is managed by the appointment of managers whom the Trustee believes, having taken appropriate advice, to be skilled in managing such risks while delivering a return reflecting the level of risk. Direct credit risk from the pooled investment vehicles is mitigated by the underlying assets of the pooled arrangements being ring-fenced from those of the manager, the regulatory environments in which the managers operate and diversification amongst a number of pooled arrangements. Cash is held in a pooled vehicle operated by the LDI investment manager. The pooled fund has a 7-Day LIBID benchmark and a focus on maximising income with the preservation of principal and liquidity. The fund has a AAAm rating from Standard & Poor’s and a Aaa-mf rating from Moody’s, the highest ratings for liquidity funds. d) Currency risk

The Fund is subject to currency risk to the extent that its liabilities are all denominated in sterling, but some of its investments are held through pooled funds investing in overseas markets. The Fund has reduced its exposure to currency risk by investing in sterling denominated share classes of pooled funds investing in non-sterling developed market assets. This requires the investment managers to manage the currency exposure. e) Interest rate risk

The Fund is subject to interest rate risk because some of its investments are held in the form of bonds, interest rate swaps and cash. The Trustee has, as part of its investment strategy, set a target for the interest rate sensitivity across the Fund’s investments in bonds and swaps to match 94% of the sensitivity of the Fund’s liabilities to pay future benefits to interest rate changes. Under this strategy, if interest rates fall, the value of LDI investments will rise to help match the increase in actuarial liabilities arising from a fall in the discount rate. By the same mechanism, if rates rise, the LDI investments will fall in value, as will the actuarial liabilities. As at 31 March 2018 the ratio of matching was 96%. The interest rate exposure for the Fund on the investments held at the start and end of the last financial year was as follows:

Asset Class 31 March 2018 (£m) 31 March 2017 (£m) Gilts 244.3 260.6 Gilt Repo 187.7 206.8 Swap Mark to Market 4.5 5.5 Total 436.5 472.9

The figures provided for the swap exposure represent the mark to market of the swaps whereas the potential profit/loss from these holdings could be significantly larger. It should, however, be noted that any move in the swap value would be reflected in the liabilities.



27

f) Other price risk Other price risk arises in relation to other return seeking investments that are summarised in the table below. All of these are held through pooled investment vehicles. At the year end, the Fund’s exposure to investments subject to other price risk was as detailed below

Indirect 31 March 2018 (£m) 31 March 2017 (£m) Absolute Return 65.0 36.3 Leveraged Loans 13.3 13.3 Illiquid Credit 17.9 17.4 Long Lease Property 16.4 15.7 Reinsurance - 16.8 Total 112.6 99.5

10. Forward foreign exchange

In order to maintain diversification of investments within the portfolio and take advantage of overseas investment returns, a proportion of the underlying investment portfolios are invested overseas. To balance the risk of investing in foreign currencies whilst having an obligation to settle benefits in sterling the Fund has a policy of hedging the majority of the developed market economic currency exposure. Hedging will normally be done by investing in a sterling denominated share class and reporting performance against a sterling benchmark.

11. Current Assets and Liabilities

31 Mar 18 31 Mar 17 £m £m Unpaid Benefits -0.3 -0.2 Individual transfers to other schemes -0.3 - -0.6 -0.2

12. Related Party Transactions

The Fund has paid benefits to five directors of the Trustee company who are also beneficiaries of the Fund. All of the above transactions are in accordance with the rules of the Fund and on the same terms as other

members. The Law Debenture Pension Trust Corporation p.l.c (“Law Debenture”) owns and is also a director of the

corporate trustee of the Fund. The following directors earned fees during the year which were borne by the Principal Employer: Law

Debenture, A.Atkinson, A.A.Bate, N.R.E.Cribb, R.Eden-Green, M.C.Harrow, S.Kenny and D.J.Taylor. There were no individual transfers from the Fund to related parties in the year (2017 Nil). 13. Contingent Liabilities

Contingent liabilities existed at 31 March 2018 in relation to various indemnities and other contingencies arising in the ordinary course of managing the investment portfolio. No material loss is expected to occur as a result of any of these transactions.



28

14. Contingent Assets

Prior to 31 March 2018, the Fund held three Irrevocable Standby Letters of Credit for a total value of £136.7 million, one for £60.0 million given by Skandinaviska Enskilda Bank (“SEB”), one for £50.0 million given by BNP Paribas (“BNP”) and one of £26.7 million given by ING Bank NV (“ING”). With effect from 31 March 2018 two of these Letters of Credit have been extended although the total value has been reduced. This is in fulfilment of an agreement which is in place which requires ICI to arrange for these Letters of Credit to be replaced or extended annually at a level reflecting an annual estimate of the funding deficit calculated on a solvency basis. The Letters of Credit now total £107.6 million, being given by SEB £60.0 million and BNP, reduced to £47.6 million. The Letter of Credit given by ING has not been extended.

15. Employer Related Investment

The Trust Deed permits aggregate investment of up to 1% of the Fund in securities of the sponsoring employer. As at 31 March 2018 there were no direct investments in securities of Akzo Nobel N.V. or ICI Limited and indirect investments, via pooled investment vehicles were less than 0.1%.


AUDITOR’S REPORT

29

Independent Auditor’s Report to the Trustee of the ICI Specialty Chemicals Pension Fund Opinion We have audited the financial statements of the ICI Specialty Chemicals Pension Fund (“the Fund”) for the year ended 31 March 2018 which comprise the Fund Account and the Statement of Net Assets (available for benefits) and related notes, including the accounting policies in note 1. In our opinion the financial statements:

• show a true and fair view of the financial transactions of the Fund during the Fund year ended 31 March 2018 and of the amount and disposition at that date of its assets and liabilities, other than liabilities to pay pensions and benefits after the end of the Fund year;

• have been properly prepared in accordance with UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and

• contain the information specified in 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.

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Fund in accordance with, UK ethical requirements including the FRC Ethical Standard. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

Going concern We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least twelve months from the date of approval of the financial statements. We have nothing to report in these respects.

Other information The Trustee is responsible for the other information, which comprises the Trustee’s report (including the report on actuarial liabilities and the summary of contributions) and the actuarial certification of the schedule of contributions. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon in this report.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on this work we have not identified material misstatements in the other information.

Trustee’s responsibilities As explained more fully in its statement set out on pages 5 & 6, the Fund Trustee is responsible for: supervising the preparation of financial statements which show a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Fund’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 they either intend to wind up the Fund, or have no realistic alternative but to do so.

Auditor’s responsibilities 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 our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it


AUDITOR’S REPORT

30

exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities.

The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Fund Trustee, as a body, in accordance with the Pensions Act 1995 and Regulations made thereunder. Our audit work has been undertaken so that we might state to the Fund 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 Fund Trustee, as a body, for our audit work, for this report, or for the opinions we have formed.

Nadia Dabbagh-Hobrow (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 15 Canada Square London E14 5GL 11 October 2018

http://www.frc.org.uk/auditorsresponsibilities


AUDITOR’S STATEMENT ABOUT CONTRIBUTIONS

31

Independent Auditor’s Statement about Contributions to the Trustee of the ICI Specialty Chemicals Pension Fund Statement about contributions We have examined the summary of contributions payable under the Schedule of Contributions to the ICI Specialty Chemicals Pension Fund in respect of the Fund year ended 31 March 2018 which is set out on page 32.

In our opinion contributions for the Fund year ended 31 March 2018 as reported in the summary of contributions and payable under the Schedule of Contribution have in all material respects been paid at least in accordance with the Schedule of Contributions dated 30 April 2015.

Scope of work Our examination involves obtaining evidence sufficient to give reasonable assurance that contributions reported in the summary of contributions have in all material respects been paid at least in accordance with the payment schedule. This includes an examination, on a test basis, of evidence relevant to the amounts of contributions payable to the Fund and the timing of those payments under the payment schedule.

Respective responsibilities of Trustee and auditor As explained more fully in the Statement of Trustee’s Responsibilities set out on pages 5 & 6, the Fund’s Trustee is responsible for ensuring that there is prepared, maintained and from time to time revised a Schedule of Contributions showing the rates and due dates of certain contributions payable towards the Fund by or on behalf of the employer and the active members of the Fund. The Trustee is also responsible for keeping records in respect of contributions received in respect of active members of the Fund and for monitoring whether contributions are made to the Fund 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 to the Fund and to report our opinion to you.

The purpose of our work and to whom we owe our responsibilities

This statement is made solely to the Fund’s Trustee, as a body, in accordance with the Pensions Act 1995 and Regulations made thereunder. Our work has been undertaken so that we might state to the Fund’s Trustee those matters we are required to state to it 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 Fund’s Trustee, as a body, for our work, for this statement, or for the opinions we have formed.

Nadia Dabbagh-Hobrow (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 15 Canada Square London E14 5GL 11 October 2018


STATEMENT OF TRUSTEE'S RESPONSIBILITIES IN RESPECT OF CONTRIBUTIONS

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The Fund's Trustee is responsible under pensions legislation for ensuring that there is prepared, maintained and from time to time revised a schedule of contributions showing the rates of contributions payable towards the Fund by or on behalf of the employers and the active members of the Fund and the dates on or before which such contributions are to be paid. The Fund's Trustee is also responsible for keeping records of contributions received in respect of any active member of the Fund and for procuring that contributions are made to the Fund in accordance with the schedule. Trustee’s Summary of Contributions payable under the schedule in respect of the Fund year ended 31 March 2018 This Summary of Contributions has been prepared by, or on behalf of, and is the responsibility of, the Trustee. It sets out the employers’ and members’ contributions payable to the Fund under the schedule of contributions certified by the actuary on 30 April 2015 in respect of the Fund year ended 31 March 2018. The Fund auditor reports on contributions payable under this schedule in the Auditor’s Statement about Contributions. Contributions payable under the schedule in respect of the Fund year £m Employer: normal payroll based contributions 0.9 deficit funding contributions 6.0 Member: normal payroll based contributions - _________ Contributions payable under the schedule (as reported on by the 6.9 Fund auditor) ========= Reconciliation of contributions Reconciliation of contributions payable under the schedule of contributions reported on in the accounts in respect of the Fund year ended 31 March 2018. £m Contributions payable under the schedule (as above) 6.9 Contributions payable in addition to those due under the schedule (and not reported on by the Fund auditor): Nil Total contributions reported in the accounts 6.9 ========= Signed on behalf of the Trustee R.J.Moody for and on behalf of Pensions Secretariat Services Limited Secretary 11 October 2018


REPORT ON ACTUARIAL LIABILITIES

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Under section 222 of the Pensions Act 2004, occupational pension schemes with defined benefit liabilities are subject to the “Statutory Funding Objective”, which is to have sufficient and appropriate assets to cover their technical provisions. The technical provisions represent the present value of the benefits to which members are entitled based on pensionable service to the valuation date. This is assessed using the assumptions agreed between the Trustee and Imperial Chemical Industries Limited and set out in the Statement of Funding Principles, which is available to members upon request. A full actuarial valuation of the ICI Specialty Chemicals Pension Fund was carried out as at 31 March 2017. This showed that on that date: The value of the technical provisions was: £662.9 million The value of the assets was: £637.7 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: in line with the Willis Towers Watson fixed interest gilt curve, plus for liabilities not covered by bulk annuity policies, 0.25% per annum. Future retail price inflation (RPI): in line with the Willis Towers Watson gilt-implied inflation curve over the duration of the Fund’s expected benefit payments. Future consumer price inflation (CPI): in line with the RPI assumption, less a margin of 1% at all durations, set by reference to views on the expected long-term differential between RPI and CPI inflation. Pension increases: derived from the rates of future RPI and CPI allowing for the caps and floors on pension increases according to the provisions in the Fund’s rules. Pay increases: in line with the Principal Employer’s policy on pensionable salary increases, ie 2.0% in 2017, and 1.5% a year thereafter. Mortality: The following standard tables, scaling factors and assumed rates of improvement were used:

Base mortality rates

Scaling factor Relevant standard S2 SAPS (Amounts) table

Main Section (non-SERA) and Former Williams members

Males 87% Male All retirements

Female members 91% Female All retirements

Female dependants 95% Female Dependants

Main Section (SERA) members

Males 72% Male All retirements

Female dependants 95% Female Dependants

future improvements (to base rates): in line with the CMI 2016 core projection model from 2007 onwards with an assumed long-term mortality improvement trend of 1.5% per annum

Based upon the average scaling factor, the life expectancy at 31 March 2017 implied by the tables/improvements used was 23.5 years for a male aged 65, and 24.7 years for a female aged 65.

ICI SPECIALTY CHEMICALS PENSION...

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