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ITEM PF4

PENSION FUND COMMITTEE – 8 APRIL 2002

PENSION FUND COMMITTEE – 22 FEBRUARY 2002

Minutes of the Meeting commencing at 10.00 am and finishing at 3.20 pm

Present:

The Committee considered the matters, reports and recommendations contained or referred to in the agenda for the meeting and decided as set out below. Except insofar as otherwise specified, the reasons for the decisions are contained in the agenda and reports, copies of which are attached to the signed Minutes.

1/02.APOLOGIES FOR ABSENCE AND TEMPORARY APPOINTMENTS

Apologies for absence and substitutions were received from:

Apology from	Temporary Appointments
Councillor McAndrews	Councillor Harris

2/02. MINUTES

The Minutes of the meeting of the Committee held on 31 December 2001 were approved and signed.

3/02. OVERVIEW OF PAST AND CURRENT INVESTMENT POSITION

(Agenda Item 5)

The Independent Financial Adviser reviewed the investment activity during the past quarter and gave an overview of the Fund’s position as at 31 December 2001. The report was supported by relevant charts of economic and market trends.

RESOLVED: to receive the charts and tables, and that the information contained in them be borne in mind insofar as they related to items 7E to 8E in the Agenda.

4/02. EXEMPT ITEMS

RESOLVED: that the public be excluded during the consideration of items 6E-10E in the Agenda since it was likely that if they were present during those items there would be a disclosure of "exempt" information as described in Part I of Schedule 12A to the Local Government Act, 1972 and specified below each item in the Agenda, i.e. information relating to the financial or business affairs of any particular person (other than the authority).

PROCEEDINGS FOLLOWING THE WITHDRAWAL OF PRESS AND PUBLIC

5/02. OVERVIEW AND OUTLOOK FOR INVESTMENT MARKETS*

(Agenda Item 6E)

The Independent Financial Adviser reported orally, giving an overview of the current and future investment scene and market developments across various regions and sectors. His report (PF6E) was supported by relevant charts of economic and market trends, where appropriate, and these were attached. He expressed the view that economic recovery would be slower than the market was currently indicating, but that there was a possibility of it beginning to rise later in the year. He commented that although Schroders had bought a significant number of equities during the last quarter, both Fund Managers were continuing to exercise a cautionary, passive stance.

The Committee AGREED to:-

1. receive the oral report and charts, and to bear the Financial Adviser’s conclusions in mind when considering the Fund Managers’ reports; and
2. agree the action taken or to be taken by the Fund Managers, as set down in paragraph 6 of report PF6E.
   
   

6/02. DEUTSCHE ASSET MANAGEMENT LTD*

(Agenda Item 7E)

Mr Burgess introduced Mr Peter Westlake who would, in the future, focus on fund management on a full time basis. He added that in the short term he would be seeking to improve the short and medium term performance portfolio for the County Council. He assured the Committee that he was overseeing 5 significant portfolios of which the County Council’s was one, and that it would be unlikely that he would be given any further ones.

Mr Burgess reported on the performance of the Deutsche Asset Management’s portfolio for the quarter which ended on 31 December 2001, with reference to the separate meeting report as circulated. He referred members to page 3 of the report which evaluated performance, commenting that equity performance had performed poorly during the last quarter, it being 2% below the CAPS median. He added, however, that the total performance since inception was still above median (by 0.6%). Mr Westlake then reported briefly on UK equities. His view was that during the fourth quarter, those stocks at the most risky end of the market performed very well, and those at the steadier end did less well. He explained his intention to look at the overall shape to ensure that the stock position was not overly exposed in an effort to reap the benefit, but so as not to be too costly. With regard to page 9, he reported that a proposal to re-elect Director, Mr McLaughlin was voted against, for the reason that the Director’s contract was greater than 2 years rolling. In conclusion Mr Westlake highlighted page 15 of the report which projected an improved economic outlook in 2002, that had already led to a stabilisation in corporate earnings expectations. In the light of the above, he therefore recommended that there be no change in Deutsche’s strategy or asset allocation.

Mr Burgess concluded that no guarantee could be given about which direction the markets were likely to go, though he believed the climate to be turning following 2 years of negative returns.

Messrs Westlake and Burgess responded to members’ questions concerning performance in the current quarter.

RESOLVED: to receive the Deutsche Asset Management Ltd written report for the period ended 31 December 2001.

7/02. SCHRODER INVESTMENT MANAGEMENT*

(Agenda Item 8E)

Mr Bolton introduced Mr Chris Wyllie who would in future manage the Oxfordshire Fund.

Mr Bolton explained that changes made by the new Chief Executive of Schroder’s PLC, Michael Dobson, to the organisation of the company had not affected the independence of the Asset Management Fund, nor the way the company carried out their investment. The company had adopted a broader structure in place of the former three strand structure, with the specific aim to improve investment performance.

Mr Bolton reported on the performance of Schroder Investment Management’s portfolio for the quarter which ended on 31 December 2002, with reference to the separate meeting report as circulated.

He referred members to the performance overview as set down in pages 2 and 3 pointing out the lag in UK equity performance compared to that of overseas equities. He added that the action taken to buy equities during the fourth quarter had been beneficial in that the company was more exposed to a recovery.

Mr Wyllie explained that he headed the strategy team which managed the UK equity funds, adding that it was his intention to continue the fundamental approach, driven by a significant amount of independent research done by analysts. He referred members to page 8 pointing out that there were signs of a recovery, in the light of a domestic consumer overweight and indications that interest rates and unemployment would begin to rise. He added, however, that the market remained cautious and there was still much concern about the global economy in light of the overvaluation in the US stock market.

Mr Bolton and Mr Wyllie responded to members’ questions concerning performance in the current quarter.

RESOLVED: to receive the Schroder Investment Management (UK) Ltd written report for the period ended 31 December 2007.

8/02. SUMMARY BY THE FINANCIAL ADVISER*

(Agenda Item 9E)

The Financial Adviser indicated that he had nothing to report.

9/02. VENTURE CAPITAL*

(Agenda Item 10E)

The Committee considered a joint report (PF10) by the Director of Business Support and the Independent Financial Adviser on a presentation made by a Venture Fund Investor and making recommendations concerning investment in the Oxford Technology 3 Venture Capital Trust PLC.

RESOLVED: that in spite of the illiquidity of the Trust compared with the Pension Fund’s other venture capital investments since 1993, up to £1 million be invested in the Trust, subject to the proviso that if the Trust raised less than the maximum of £10 million, the Pension Fund’s investment should form no more than 10% of the total.

ITEMS FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC

10/02. ACTUARIAL VALUATION REPORT

(Agenda Item 11)

Mr P. Stoaling of Watson Wyatt Partners (Actuaries & Consultants) presented a report on the outcomes of the Pension Fund Actuarial Valuation as at 31 March 2001.

RESOLVED: to:

1. receive the report by Watson Wyatt Partners on the outcomes of the 31 March 2001 Pension Fund Valuation; and
2. (by 4 votes to 0) agree the contributions payable by the participating Employers for the period 1 April 2002-31 March 2005 as set down in Annex G to the report PF11.
   
   

11/02. ASSET/LIABILITY STUDY REPORT

(Agenda Item 12)

Mr D. Atkins and Mr J. Wigley of Watson Wyatt Partners presented their Asset Allocation Strategy report to members of the Committee.

RESOLVED: to:

1. implement a fund specific benchmark based on the findings in the report;
2. set up a special meeting of the Pension Fund Committee to be held in the week commencing 8 April 2002;
3. ask the officers to consult with the Independent Financial Adviser and Watson Wyatt and to recommend a fund specific benchmark for approval at the special meeting; and
4. use the special meeting to consider whether any further changes should be made to fund investment management.

The Chair having retired through ill-heath, Councillor Farrell chaired the remainder of the meeting.

12/02. ORDER OF BUSINESS

RESOLVED: to take Agenda Item 14 at this juncture to enable Ms Tanner to present her report and to leave the meeting.

13/02. PREMATURE RETIREMENT COMPENSATION SCHEME FOR TEACHERS

(Agenda Item 14)

On 31 December 2001 Committee gave their approval to the renewal of the Premature Retirement Compensation Scheme for Teachers until 30 April 2002. The Committee now had before them a further report (PF14) which asked members to consider what scheme should be in place with effect from 1 May 2002.

RESOLVED: (by 3 votes to 2) to renew the Premature Retirement Compensation Scheme for Teachers, amended as shown in paragraph 8 of the report, until 31 December 2003.

14/02. CORPORATE GOVERNANCE VOTING ARRANGEMENTS

(Agenda Item 13)

In June 2001 the Pensions & Investments Sub-Committee had agreed to subscribe to the National Association of Pension Fund (NAPF) Socially Responsible Investment and Corporate Governance voting service, which provided detailed voting reports on the 350 UK quoted companies. Officers had recently carried out a detailed exercise which looked at the way the Oxfordshire Pension Fund Manager had voted with NAPF recommendations for the quarter ended 30 September 2001. This exercise had highlighted a number of shortcomings with the Oxfordshire voting guidelines.

RESOLVED: to:

1. instruct the Pension Fund Managers to vote in accordance with the NAPF Voting Issues Service unless there are exceptional circumstances, which in the managers’ judgement would not be in the best interests of Oxfordshire; and
2. where managers take a contrary view to the NAPF they must obtain permission from the officers to vote differently.
   
   

15/02. MANAGEMENT & ADMINISTRATION BUDGET 2002/03 REPORT

(Agenda Item 15)

The District Auditor in his review of the Pension Fund 1995/96 had recommended that members should agree an annual budget for management and administration charges to the Fund. The Committee had before them a report (PF15) that set out the budget for 2002/03 and which gave details of each element of the budget together with an explanation of how they had been calculated.

RESOLVED: to agree the Pension Fund Management and Administration Budget for 2002/03.

16/02. APPLICATIONS FOR ADMITTED BODY STATUS

(Agenda Item 16)

The Committee considered a report (PF16) that introduced an application from the Thames Valley Partnership for admission to the Local Government Pension Fund, in accordance with the criteria for categorising bodies which could be admitted to the Fund, as introduced by the Pensions & Investment Sub-Committee in November 2002.

RESOLVED:

1. approve the application of the Thames Valley Partnership, subject to all parties agreeing to the terms of the Admission Agreement, and this Committee being informed when the agreements have been signed; and
2. note also that the admission agreements with the St John’s Care Trust and Oxfordshire Care Partnership had been agreed and signed.
   
   

17/02. WIDOWERS’ PENSIONS

(Agenda Item 17)

The current regulations for the Local Government Pension Scheme came into force from 1 April 1998 and gave employees in the Fund the power to improve the widower’s pension, enabling it to be based on the member’s service from 1972, at no additional cost to the member. Using the discretionary power within these regulations the County Council as an employer within the Fund had resolved to improve this package at no additional cost to the member. The Committee now had before them a report (PF17) which set out the actions the County Council might take, and the implications thereon, to a series of informal suggestions made by the Department of Transport, Local Government & the Regions concerning additional provision.

RESOLVED: to approve option (d) as set down in paragraph 5 of the report, which was to take no further action; and to request the County Council to contact the women employed by the County Council to advise them of the decision and also to inform the other employers within the Oxfordshire Fund.

18/02. ANNUAL FORUM

in the Chair

Date of signing 2002

* The reports relating to the exempt items have not been made public and should be regarded as strictly private to those members and officers entitled to receive them. In the case of the Investment Managers’ reports 7E and 8E, these will remain private until after 22 May 2002.

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