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ITEM PF3

PENSION FUND COMMITTEE – 26 AUGUST 2005

Minutes of the Meeting commencing at 10.00 am and finishing at 3.41 pm

Present:

The Committee considered the matters, reports and recommendations contained or referred to in the agenda for the meeting, together with a schedule of addenda and report of the WM Company on the Fund’s performance (exempt report) tabled at the meeting, and decided as set out below. Except insofar as otherwise specified, the reasons for the decisions are contained in the agenda, reports and schedule, copies of which are attached to the signed Minutes.

40/05. APOLOGIES FOR ABSENCE AND TEMPORARY APPOINTMENTS

Apologies for absence and temporary appointments were received as follows:

Apology from	Temporary Appointments
Councillor Jim Moley
Councillor Dermot Roaf	Councillor Bill Bradshaw
Councillor Bob Price (co-opted member)

41/05. DECLARATIONS OF INTEREST

Councillors Bradshaw, Harvey, Hayward and Rose declared personal interests by virtue of being members of the Pension Scheme.

42/05. MINUTES

The Minutes of the meeting of the Committee held on 27 May 2005 (PF3) were approved and signed.

43/05. OVERVIEW OF PAST AND CURRENT INVESTMENT POSITION

(Agenda Item 5)

The Committee was advised that Tables 1 to 7 had been compiled from the custodian’s records (the Pension Fund’s prime record keeper). In his records, the custodian accrued for dividends and recoverable overseas tax within his valuation figures and might also have used different exchange rates and pricing sources compared with the fund managers. In addition, the Committee was advised that the custodian had treated dividend scrip issues as purchases which the fund managers might not have done. This might mean that there were minor differences between the tabled figures and those supplied by the managers.

The Independent Financial Adviser reviewed the investment activity during the past quarter and presented an overview of the Fund’s position as at 30 June 2005. He highlighted that the Fund was overweight in Japanese and Emerging Markets equities and underweight in Pacific Basin equities. He added that the Fund was underweight in bonds (in particular UK Gilts and Index-Linked), being 4.6% lower than the benchmark. Private Equity was now in line with the benchmark. There had been a 21% increase in cash and the Fund was cash positive.

RESOLVED: to receive the tables, and that the information contained in them be borne in mind, insofar as they relate to items 8E, 9E and 10E on the agenda.

44/05. ASSET ALLOCATION

(Agenda Item 6)

The Committee had before it a report (PF6) which reviewed the Pension Fund's strategic asset allocation in the light of recent changes in its liability profile and other market developments. The review concluded that the Fund should take advantage that it was able to take a twenty-five year view, being the recovery period for its deficit. Several changes were recommended to the asset allocation, with the main emphasis being a reduction in bonds and an increase in alternative investments. The review also recommended a more even split between UK and overseas equities, in order to improve diversification, and explained that this could be smoothly achieved by switching from the Alliance Bernstein global diversified value portfolio into its global value product. Finally the report argued that the Fund should have a tactical asset overlay strategy and recommended that would best be achieved by investing around 3% of the total Fund in the UBS tactical asset allocation fund. Mr McGiven gave a presentation on tactical asset allocation.

RESOLVED: to approve:

(a) the new strategic asset allocation as shown below, to rebalance the existing portfolios to reflect this and thereafter to rebalance back to the strategic benchmark annually or more frequently if necessary:

(b)



Asset Allocation

Proposed Asset Allocation

	%	%
Equities	67
UK		(33)
Overseas		(34)
Bonds	16
Gilts		4
Corporates		6
Index Linked		6
Overseas Bonds		0
Alternative Assets	17
Property		8
Private Equity		6
Hedge Funds		3
Commodities	0	0
Cash	0	0

100




(c) that the portfolio managed by Alliance Bernstein should be moved, phased if necessary, from their Global Diversified Value platform to their Global Value platform;

(d) that UBS be appointed to manage the tactical asset allocation strategy and that officers negotiate with UBS the exact percentage (around 3%) of the total Pension Fund assets to be contributed to the tactical asset allocation fund.



PROCEEDINGS FOLLOWING THE WITHDRAWAL OF THE PRESS AND PUBLIC

45/05. EXEMPT ITEMS

RESOLVED: that the public be excluded during the consideration of items 7E-11E 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).

46/05. OVERVIEW AND OUTLOOK FOR THE INVESTMENT MARKETS*

(Agenda Item 7E)

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) were supported by relevant tables of economic and market trends, where appropriate.

RESOLVED: to receive the Independent Financial Adviser’s written and oral reports and to bear the Independent Financial Adviser’s conclusions in mind when considering the Fund Managers’ reports.

47/05. REPORT OF MAIN ISSUES ARISING FROM REPORTS OF THE FUND MANAGERS NOT REPRESENTED AT THIS MEETING*

(Agenda Item 8E)

The Independent Financial Adviser reported orally on the main issues arising from the reports from Baillie Gifford and Legal & General for the quarter that ended 30 June 2005, highlighting that both companies had performed reasonably for the quarter.

RESOLVED: to note the main issues arising from the Baillie Gifford and Legal & General’s quarterly reports for the quarter that ended 30 June 2005 and the Independent Financial Adviser’s comments.

48/05. UBS GLOBAL ASSET MANAGEMENT*

(Agenda Item 9E)

The representatives (Mr K Barker and Mr A McGiven) of the Fund Manager reported on the performance of the portfolio and strategy for the quarter that ended 30 June 2005 with reference to the presentation report which had been circulated separately with the papers for the agenda. They responded to questions.

RESOLVED: to receive UBS’s quarterly and presentation reports for the quarter ending 30 June 2005.

49/05. ALLIANCE BERNSTEIN*

(Agenda Item 10E)

The representatives (Mr G Blunden and Mr P Rudden) of the Fund Manager reported on the performance of the portfolio and strategy for the quarter that ended 30 June 2005 with reference to the quarterly report which had been circulated separately with the papers for the agenda. They responded to questions.

RESOLVED: to receive Alliance Bernstein’s quarterly report for the quarter ending 30 June 2005.

50/05. WM PERFORMANCE SERVICES PRESENTATION ON THE PENSION FUND'S INVESTMENT PERFORMANCE FOR THE TWELVE MONTHS ENDED 31 MARCH 2005*

(Agenda Item 11E)

The Committee had before it copies of the booklet WM Annual Review UK Local Authority 2004/05 and of the booklet on the Oxfordshire Pension Fund’s Total Combined Performance Review. Ms K Thrumble of WM Performance Services reviewed the Oxfordshire Pension Fund's investment performance for the twelve months ended 31 March 2005, compared Oxfordshire's performance against its own customised benchmark and against the WM Local Authority Pension Fund Universe and reported that Oxfordshire’s investment return was the highest amongst the 90 funds for which the WM Company collected data. She also reported that the portfolio returns were "14.7" for the 12 months ending 31 March 2005 and "17.5" for the period commencing 30 September 2003 to 31 March 2005, producing relative returns of –0.9 and +0.1 for the respective periods.

RESOLVED: to receive the report.

ITEMS FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC

51/05. SOCIALLY RESPONSIBLE INVESTMENT AND CORPORATE GOVERNANCE ISSUES

(Agenda Item 12)

(a) Corporate Governance - Voting Audit Report

The Committee considered a report (PF12) which set out the findings of a voting audit undertaken on the Fund's UK Equity holdings for the six months ended 30 June 2005. The report also reviewed the existing arrangements for voting on the Fund's overseas holdings. Mr Blunden (Alliance Bernstein) apologised, on behalf of Alliance Bernstein, for the voting discrepancies. He added that he and Mr Rudden were reviewing internal procedures.

RESOLVED: to note the report and to ask officers to keep the Committee informed of any changes to the existing arrangements.

(b) Socially Responsible Investment

The Head of Finance & Procurement said that there was nothing to report.

52/05. DRAFT ANNUAL REPORT AND ACCOUNTS FOR 2004/05

(Agenda Item 13)

The Committee considered the Draft Annual Report and Accounts for 2004/05 (PF13) which showed the final accounts for the Pension Fund for the year ended 31 March 2005 and provided details on the operation of the Fund, including sections on membership and investments. It also incorporated the Statement of Investment Principles, which had been updated in the light of changes that had taken place during the year. A copy of page 8 was recirculated showing the full text (copy attached to the signed copy of the minutes) as the copy of the page circulated with the agenda had had part of the text missing.

RESOLVED: to

1. receive the draft annual report and accounts for 2004/05 and to agree the Statement of Investment Principles;
2. to ask the Head of Finance & Procurement to report to the next meeting on progress on the preparation of the communication strategy.
   
   

53/05. PENSION FUND INVESTMENT AND ADMINISTRATION EXPENSES OUTTURN FIGURES FOR THE YEAR ENDED 31 MARCH 2005

(Agenda Item 14)

The Committee considered the report (PF14) which compared actual with budgeted cost for both Investment and Administration expenses for the year ended 31 March 2005.

RESOLVED: to receive the report and to note the out-turn position.

54/05. REVOCATION OF THE 2004 REGULATIONS

(Agenda Item 15)

The Committee considered the report by the Head of Finance & Procurement (PF15) on the revocation of the 2004 regulations. The Committee was advised that, on 13 July 2005, the Government had laid before Parliament new regulations which had the impact of revoking the key parts of the 2004 regulations. The latest regulations came into force on 3 August 2005, with retrospective effect from 1 April 2005. The Committee was advised that, in these regulations, the earliest age a pension could be payable (other than in cases of ill-health) was 50 (from 55) and the 85 year rule had been re-instated.

The Committee was also advised that, as part of the latest regulations, the Government had given Administering Authorities the power to carry out an interim valuation, and to issue revised rates and adjustment certificates (detailing the employer contribution rates for all employers). Any revised certificate would have to be published by 30 September 2005 and would become effective from 1 April 2006.

The report examined the merits of issuing a revised rates and adjustment certificate in light of discussions with other employers, the external auditor, and the Actuary, and the Government’s commitment that there would be no additional call on employer contributions.

RESOLVED:

1. not to request a formal interim valuation from the Actuary and therefore not to issue a revised rates and adjustment certificate;
2. to agree to proceed as set out in paragraph 13 of the report, unless the Government notified Administering Authorities before 30 September 2005 that it required them to act differently and, in the latter case, to authorise the Head of Finance & Procurement to agree any changes to approach subject to consultation with the Chairman, Vice-Chairman and Opposition Group Spokesperson.
   
   

55/05. LOCAL GOVERNMENT PENSION SCHEME – COMPLIANCE WITH INLAND REVENUE TAX REGIME FROM APRIL 2006

(Agenda Item 16)

The Committee considered the report by the Head of Finance & Procurement (PF16) on the consultation paper from the ODPM detailing the proposed changes to the scheme to bring it into line with changes introduced by the Finance Act 2004.

RESOLVED: to authorise the Head of Finance & Procurement to respond to the ODPM by 16 September 2005, in line with the report.

56/05. PAYMENT OF DEATH BENEFIT

(Agenda Item 17)

The Committee considered a report by the Head of Finance & Procurement (PF17) which set out a case where the member's nomination was being challenged.

RESOLVED: to:

1. pay the death grant (£551) to the member’s daughter in accordance with the expression of wish form completed by the member;
2. endorse current procedures.

(Mr Leeding left the room for this item in case the member had been known to him.)

57/05. ANNUAL FORUM

(Agenda Item 18)

The Head of Finance & Procurement said that there was nothing to report arising from the last Annual Forum or relevant to the next Forum due to be held in November 2005.

58/05. DATES OF MEETINGS

in the Chair

Date of signing 2005

* 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.

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