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ITEM PF3(a)

PENSION FUND COMMITTEE – 30 AUGUST 2002

Minutes of the Meeting commencing at 10.00 am and finishing at 1.13 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.

41/02. APOLOGIES FOR ABSENCE AND TEMPORARY APPOINTMENTS

Apologies for absence and temporary appointments were received as follows:

Apology from	Temporary Appointments
Councillor Farrell	Councillor Roaf
District Councillor Mary Neale	-
Councillor Witcher	-

42/02. MINUTES

The Minutes of the meeting of the Committee held on 24 May 2002 were approved and signed.

With reference to Minute 36/02 – Mr Wheeler reported that a member training programme would be drawn up, to include some courses for delivery on an ‘in-house’ basis.

With reference to Minute 37/02 – Mr Phillips reported that the meeting with Unison had not yet taken place due to current events with regard to the national pay claim and other more urgent business.

43/02. OVERVIEW OF PAST AND CURRENT INVESTMENT POSITION

(Agenda Item 5)

The Financial Adviser reviewed the investment activity during the past quarter and gave an overview of the Fund’s position as at 30 June 2002. This 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 relate to items 7E and 8E in the Agenda.

44/02. PERFORMANCE OF PENSION FUND

(Agenda Item 6)

Mr J. Wigley, presented a general report on the performance of the Oxfordshire County Council Superannuation Fund to 31 March 2002.

RESOLVED: to receive the report.

45/02. EXEMPT ITEMS

RESOLVED: that the public be excluded during the consideration of items 7E-13E 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

46/02.CAPS REPORTS FOR EACH FUND MANAGER

(Agenda Item 7E)

Mr Wigley, presented a report which gave a detailed analysis of the investment performance for 2001/02 of the Schroder and Deutsche portfolios of the Superannuation Fund.

The Independent Financial Adviser was invited to give his observations on the report. He commented that the level of active risk had risen marginally to 1%. This allowed an outperformance of only 0.3%, which was well below the target. He added that if the fund managers kept to their current practice of ‘closet indexing’ against the CAPS average they would be unlikely to achieve the outperformance level that was asked of them.

RESOLVED: to receive the report.

47/02. OVERVIEW AND OUTLOOK FOR INVESTMENT MARKETS

(Agenda Item 8E)

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 oral report and the report PF6E , which was not exempt, was supported by relevant charts of economic and market trends, where appropriate, and these were attached.

RESOLVED: to receive the oral report and charts and to bear the Financial Adviser's conclusions in mind when considering the Fund Managers' reports.

48/02. SCHRODER INVESTMENT MANAGEMENT

(Agenda Item 10E)

Mr Bolton conveyed apologies for absence from Mr Nick Purves, and Mr Andrew Sykes, both of whom had been unable to alter their diary commitments following the late decision to hold the meeting in Oxford and not at the Schroders’ office in London.

Mr Bolton reported on the performance of Schroder Investment Management’s portfolio for the quarter which ended on 30 June 2002, with reference to the separate meeting report as circulated. He expressed his dissatisfaction with current performance and explained action being taken to remedy this.

He explained that global equity markets had fallen significantly, citing a series of events which had contributed to this, such as September 11, the Enron scandal and the WorldCom fraud; and predicting that markets would not recover strongly until there was clearer evidence of an sustained upturn in profits. However, UK profits had been recovering from Autumn 2001 and valuations were looking more attractive. Schroder’s thus deemed it prudent to keep Europe overweight in stocks. He added that Schroder’s were tilting their portfolio performance slightly towards those companies who were economically more sensitive to the market’s ebbs and flows and were looking for those companies that were able to grow their top line revenues. In the light of the above, he therefore recommended that there be no change in Schroder’s strategy of asset allocation.

Mr Bolton responded to Members’ questions concerning performance in the current quarter.

In response to a request from the Committee, Mr Bolton undertook to prepare an attribution analysis on over and underperforming stocks; and also to provide a summary of where the fund managers for the Oxfordshire Pension Fund were in relation to the performance of other fund managers within Schroder’s who were managing other portfolios.

RESOLVED: to receive the Schroder Investment Management (UK) Ltd written report for the period ended 30 June 2002.

49/02. DEUTSCHE ASSET MANAGEMENT LTD

(Agenda Item 9E)

Mark Burgess and Peter Westlake reported on the performance of the Deutsche Asset Management’s portfolio for the quarter that ended on 30 June 2002, with reference to the separate meeting report as circulated. They commented that a combination of accounting concerns and worsening geopolitics had created pressure on stock valuations and raised the equity risk premium as markets had digested the long-term implications. However, an economic and profit recovery supported the stockmarket, and improving valuations had resulted in Deutsche continuing to be overweight in equities as against bonds. In the longer term, they declared their optimism for equity returns as more muted, believing that they would, in the future, revert closer to the long-term average.

Messrs Burgess and Westlake reported the introduction of two new Sterling Funds, for Equity Asset Allocation and Balanced Asset Allocation, to be implemented fully during 2002 and at no added cost, to make implementation of asset allocation decisions more cost effective and timely and to target an outperformance of 6-8% per annum.

They responded to Members’ questions concerning performance during the current quarter.

At the request of the Committee, Messrs Burgess and Westlake agreed to provide a summary of where the fund managers for the Oxfordshire Pension Fund were in relation to the performance of other fund managers within Deutsche who were managing other portfolios.

RESOLVED: to receive the Deutsche Asset Management Ltd written report for the period ended 30 June 2002.

50/02. SUMMARY BY THE FINANCIAL ADVISER

(Agenda Item 11E)

The Financial Adviser indicated that he did not wish to make a report.

51/02. INVESTMENT MANAGEMENT ARRANGEMENTS

(Agenda Item 12E)

At the meeting of the Committee on 24 May 2002, Hymans Robertson were appointed to advise on the investment management structure of the Pension Fund. They submitted their report in July and a meeting (comprising the Chair, Deputy Chair, officers and the Independent Financial Adviser) was held on 5 August.

A range of options were considered at this meeting but a conclusion was not reached concerning what recommendations should be made to this Committee. The Committee had before them a report (PF12E) giving details of the discussion at the meeting.

RESOLVED: to receive the report and to agree that a special meeting be held on 7 October 2002 at 2.00 pm to consider a future investment management structure for the Pension Fund.

52/02. PAYMENT OF CHILDREN’S PENSION AFTER A BREAK FROM FULL-TIME EDUCATION

(Agenda Item 13E)

The Local Government Pension Scheme Regulations 1997 (as Amended) provide for the payment of pensions to eligible children following the death of a scheme member. Both eligibility and child are defined within the pension regulations. There is, however, one area in which the Administering Authority has a discretion; it may treat education or training as continuous despite a break.

The Committee considered a report (PF13E) recommending that this discretion be exercised to enable payment of a child’s pension to start again with effect from September 2002.

Following further advice sought by the Committee, it was reported that, according to the regulations, a person only counted as a child if h/she was aged under 17 or if, since becoming 17, h/she had been engaged in full-time education or training.

Mr Phillips withdrew recommendation 8(b) on the ground that cases of this nature did not occur frequently enough to warrant discretion on the part of officers.

RESOLVED: (unanimously) to agree that:-

1. the break in full time education of the child named in the report be disregarded and the pension payment start again from September 2002, for a three year period, whilst the child undertakes a course in Architecture at Oxford Brookes University; and
2. in future, all such cases be handled by Committee on an individual basis and that the situation be reviewed in due course, should this be deemed necessary.

 

ITEMS FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC

53/02. BENCHMARK – ASSET ALLOCATION AND INDICES

(Agenda Item 14)

During the quarter, officers and the Independent Financial Adviser met with the two investment managers to agree the implementation of the new asset allocation phasing arrangements, new benchmark indices and new investment ranges. The Committee had before them a report (PF14) explaining the revised arrangements and recommending changes to the existing investment ranges.

RESOLVED: (nem con) to:

1. agree the benchmark for total assets during the transition period set out in paragraph 2 (a) of the report PF14;
2. agree the asset allocation for overseas equities set out in paragraph 2 (b); and
3. agree the target asset allocations, permitted ranges and benchmarks set out in paragraph 2 (c).
   
   

54/02. DRAFT ANNUAL REPORT AND ACCOUNTS 2001/02

(Agenda Item 15)

The Committee had before them the draft Annual Report and accounts 2001/02 for comment (PF15).

RESOLVED: that the draft Annual Report and Accounts be received for final adoption at the 15 November meeting, and for circulation at the Annual Forum scheduled for the afternoon, subject to the incorporation of a revised set of ‘Statement of Investment Principles’ following their adoption at the special meeting on 7 October, together with the suggested amendments made at this meeting. .

55/02. SOCIALLY RESPONSIBLE INVESTMENT AND CORPORATE GOVERNANCE ISSUES

(Agenda Item 16)

Mr Phillips reported that no issues had arisen this quarter. He undertook, however, to ensure that the Fund Managers’ reports on whether or not voting rights had been exercised were complementary with each other.

RESOLVED: to note the report.

56/02. ANNUAL FORUM

in the Chair

Date of signing 2002

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