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ITEM PF3

PENSION FUND COMMITTEE – 15 NOVEMBER 2002

Minutes of the Meeting commencing at 10.00 am and finishing at 12.45 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.

65/02. APOLOGIES FOR ABSENCE AND TEMPORARY APPOINTMENTS

Apologies for absence and temporary appointments were received as follows:

Apology from	Temporary Appointments
District Councillor Mary Neale	-

66/02. MINUTES

The Minutes of the meeting of the Committee held on 30 August 2002, 7 October 2002 and 6 November 2002 were approved and signed.

With reference to Minute 60/02, 7 October 2002 – Mr Phillips reported that a report would be made to the next meeting on the role of the Pension Fund Committee member as trustee.

67/02. 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 30 September 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 to 9E in the Agenda.

68/02. 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 1 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

69/02. 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 oral report and the report (PF6E(a)) 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.

70/02. DEUTSCHE ASSET MANAGEMENT LTD

(Agenda Item 7E)

Mr Simon Peck and Mr Peter Westlake reported on the performance of the Deutsche Asset Management’s portfolio of the quarter that ended on 30 September 2002, with reference to the separate meeting report as circulated. Mr Peck had replaced Mr Mark Burgess who had left the employ of Deutsche. He reported that he had worked for Deutsche for 16 years and had worked closely on the Fund’s portfolio.

With reference to page 5 of their meeting report, Mr Peck pointed out that market returns for the third quarter had proved very poor for European Equities whilst bond returns had been very good. This had been within a climate of accounting concerns, concerns about terrorism in the Middle East, and concern about the US economy which had signalled bad news for equity markets. He also referred to Deutsche’s disappointing record over the last 12 months in relation to the benchmark, pointing out that they were looking to outperform, particularly in respect of UK equities.

Mr Westlake commented that the third quarter had given rise to a very bad outcome for the equity market generally. Moreover, stocks that were perceived to have economic sensitivity had performed badly. He referred, however, to the estimated UK equity attribute on page 7 of the report which demonstrated that stable companies had performed very well. He added that the market had risen by a little in the fourth quarter but, disappointingly, this had not been taken advantage of on an aggregate level. He explained that, to address this, UK Deutsche were endeavouring to narrow the range of portfolios run ‘in house’ in order to give a narrow divergence of returns. Mr Westlake concluded that it was not the intention to make wholesale changes to their methodology as this would not sit easily with the aggregate performance, but to try to alter the situation gradually. This gradual change also included an increase in the level of risk, as indicated on page 9 of the report.

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

At the request of the Committee, Mr Peck undertook to report back on the efforts Deutsche were making to try to recover the Fund’s assets following the Enron collapse.

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

71/02. SCHRODER INVESTMENT MANAGEMENT

• the market had typified very high levels of volatility and had seen the worst returns from the stock market since 1987;
• investors were concerned regarding the level of corporate profitability;
• there had been a high degree of risk aversion within the market and investors were looking to sell their shares following this uncertainty. However history had dictated that a climate of extreme nervousness created opportunity for the investor to invest in sound businesses that offered profit growth. His task was to look for these opportunities;
• the differential between the consumer/manufacturing parts of the economy were wider that they had ever been;
• there was concern that the level of equity withdrawal from properties was unsustainable;
• the consumer was not the significant driver for the economy going forward, adding however, that there was an expectation that consumers would cease spending and start saving, which would have an effect on demand.

72/02. SUMMARY BY THE FINANCIAL ADVISER

(Agenda Item 9E)

The Independent Financial Manager pointed out that overall, the active risk taken in the portfolio had risen significantly during the third quarter. He added that taking on more risk would normally translate into a better performance, but this had not taken place.

RESOLVED: to note the comments made by the Independent Financial Adviser.

73/02. OXFORDSHIRE COUNTY COUNCIL PENSION FUND ANNUAL REVIEW OF THE INDEPENDENT FINANCIAL ADVISER

(Agenda Item 10E)

The Committee considered a report (PF10E) which reviewed the activities of the Independent Financial Adviser over the last year and, in particular, highlighted those issues of a strategic nature, to which he had devoted additional time. In recognition of this, the report recommended an appropriate ex-gratia payment. It also proposed that he be reappointed for a further year and, in recognition of his wish to retire next year, to request the officers to seek a suitable successor for recommendation to the Committee.

1. reappoint the Independent Financial Adviser for a further twelve months and that his fee be upgraded in line with the retail price index, to take effect from 1 December 2002;
2. formally recognise the extra duties the Independent Financial Adviser had carried out over the past twelve months and, in the light that this situation is expected to continue over the next twelve month period, to pay him an ex gratia sum, to be later determined, in November 2003; and
3. instruct the officers, with the assistance of the Independent Financial Adviser, to find and recommend a suitable replacement to succeed him on his retirement.

ITEMS FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC

74/02. OXFORDSHIRE COUNTY COUNCIL PENSION FUND – CIPFA LOCAL AUTHORITY PENSION FUND INVESTMENT STATISTICS

(Agenda Item 11)

The Committee had before them a report (PF11) which compared the Oxfordshire Pension Fund’s investment performance with that of other County Councils over 3, 5 and 10 year periods. It also compared the Oxfordshire Fund’s asset allocation with the median local authority fund.

RESOLVED: to receive the report.

75/02. PERFORMANCE OF ADDITIONAL VOLUNTARY CONTRIBUTIONS (AVC) PROVIDER

1. receive the report; and
2. ask the officers to take a more fundamental look at AVCs and report to the Committee at the earliest opportunity.

76/02. PENSION FUND ANNUAL REPORT AND ACCOUNTS FOR 2001/02

(Agenda Item 13)

A draft of the 2001/02 report and Accounts had been submitted to the 30 August 2002 meeting for comment and was now before the Committee for formal adoption.

RESOLVED: to approve the Oxfordshire Pension Fund Annual Report & Accounts 2001/2002.

77/02. SOCIALLY RESPONSIBLE INVESTMENT AND CORPORATE GOVERNANCE ISSUES

(Agenda Item 14)

Mr Phillips reported that due to staff shortages, he was unable to make a report.

In response to a request made by the Committee, Mr Sykes undertook to look into whether representations had been made to Nestlé regarding child labour in chocolate production and to report back to Mr Phillips.

RESOLVED: to note the report.

78/02. RENEWAL OF ADMISSION AGREEMENTS

(Agenda Item 15)

The County Council had been advised of the change of name of two contributing employer bodies. The Committee were asked to approve the renewal of the admission agreements in respect of these bodies, in order to accommodate their change of name.

RESOLVED: to approve the renewal of the admission agreements to be effective from the date of change of name for:

1. Elmore Committee to Elmore Community Services; and
2. Witney and District Citizens Advice Bureau to West Oxfordshire and District Citizens Advice Bureau.
   
   

79/02. CONSULTATION ON THE ‘STOCK TAKE’ OF THE LOCAL GOVERNMENT PENSION SCHEME

in the Chair

Date of signing 2003

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