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ITEM PF5

PENSION FUND COMMITTEE – 24 FEBRUARY 2006

Minutes of the Meeting commencing at 10.15 am and finishing at 12.55 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.

1/06. APOLOGIES FOR ABSENCE AND TEMPORARY APPOINTMENTS

Apologies for absence and temporary appointments were received as follows:

Apology from	Temporary Appointments
Councillor Bradshaw	Councillor Bryden
Councillor Hayward	Councillor Lamont

2/06. DECLARATIONS OF INTEREST

Councillors Harvey, Moley, Price (Co-opted Member) and Rose declared personal interests as members of the Pension Fund Scheme under the provisions of Section 18 of the Local Government and Housing Act 1989.

3/06. MINUTES

The Minutes of the meeting of the Committee held on 25 November 2005 were approved and signed.

On Minute 72/05, Councillor Harris said that he was disappointed that the Media & Communications Section had decided that it might be counter-productive for the Council to issue a press release on the recent good performance of the Oxfordshire Pension Fund.

RESOLVED: to note that the Chairman of the Committee would raise this issue with the Chief Executive.

4/06. 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 had 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 31 December 2005. He highlighted that UK equities were below the benchmark but pointed out that the customised benchmark would in future be reduced to 34% of the total value of the Fund. The value of the overseas equities had increased to £265m. There had also been an increase in bonds and this represented 16.6% of the total value of the Fund. Steps were being taken to increase the private equity portfolio. He added that cash had been released to the fund managers for investment. He referred to UBS's asset allocation and highlighted that European equities and corporate bonds were overweight and property was nearly in line with the benchmark. Alliance Bernstein was underweight in UK equities and these would probably reduce further now that the Fund had been switched into the Company’s Global Value Product. Overseas equities overall were overweight and, in particular, North American equities but this benchmark would in future be raised. Legal & General was underweight in corporate bonds but the other assets were in line with the benchmark. Baillie Gifford and the Tactical Asset Fund were both virtually fully invested. For the Fund as a whole, there had been net sales of UK equities of £17.6m, mainly as a result of Alliance Bernstein moving to the new Global Value platform, and net sales of private equity. There had been substantial movements in bonds including sales of overseas and index-linked bonds. The hedge funds had been brought up to the benchmark.

RESOLVED: to receive the tables, and that the information contained in them be borne in mind, insofar as they relate to items 7E, 8E and 9E on the agenda.

5/06. 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 THE PRESS AND PUBLIC

6/06. OVERVIEW AND OUTLOOK FOR THE INVESTMENT MARKETS*

(Agenda Item 6E)

The Committee considered a report (PF6E) which set out an overview of the current and future investment scene and market developments across various regions and sectors. The Independent Financial Adviser also reported orally and responded to members' questions.

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.

7/06. REPORT OF MAIN ISSUES ARISING FROM REPORTS OF THE FUND MANAGERS NOT REPRESENTED AT THIS MEETING*

(Agenda Item 7E)

The Independent Financial Adviser reported orally on the main issues arising from the reports from Baillie Gifford and Legal & General in conjunction with information contained in the Tables (Agenda item 5). He reported that Baillie Gifford's performance had improved this quarter and that Legal & General were slightly below the benchmark but it had been a difficult market.

RESOLVED: to note the main issues arising from the reports.

8/06. UBS GLOBAL ASSET MANAGEMENT*

(Agenda Item 8E)

The representatives (Mr K Barker and Mr S Foster) of the Fund Manager reported and reviewed the present investments of their part of the Fund and their strategy against the background of the current investment scene for the period ended 31 December 2005 with reference to the presentation report which had been circulated separately. They responded to questions.

RESOLVED: to receive UBS's quarterly and presentation reports for the quarter ending 31 December 2005.

9/06. ALLIANCE BERNSTEIN*

(Agenda Item 9E)

The representatives (Mr G Blunden and Mr P Rudden) of the Fund Manager reported and reviewed the present investments of their part of the Fund and their strategy against the background of the current investment scene for the period ending on 31 December 2005. They responded to questions.

RESOLVED: to receive Alliance Bernstein's quarterly report for the quarter ending 31 December 2005.

10/06. SUMMARY BY THE INDEPENDENT FINANCIAL ADVISER

(Agenda Item 10E)

The Independent Financial Adviser said that he had nothing further to add to the comments he had made earlier in the meeting.

ITEMS FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC

11/06. THE LOCAL GOVERNMENT PENSION SCHEME (AMENDMENT) (NO 3) REGULATIONS 2005: CONSULTATION DRAFT

(Agenda Item 11)

The Committee considered a report (PF11) which detailed draft Regulations published by the Office of the Deputy Prime Minister (ODPM) in December for consultation.

RESOLVED: to note the report and to agree the draft response set out in Annex 1 for submission to the ODPM, subject to amending the letter to include support for the Employers’ Organisation’s position and to request the ODPM to be mindful of the commutation rates currently in place in other public sector pension schemes before finalising the commutation rates to be applied in cases where members increase their lump sum payment in the local government pension scheme.

12/06. OXFORDSHIRE PENSION FUND BUSINESS PLAN

(Agenda Item 12)

The Committee considered a report (PF12) which set out a recommended business plan for both investments and administration for 2006/07. It also set out an investment management and scheme administration budget for 2006/07 and details on member training courses and events.

RESOLVED to:

(a) approve the Oxfordshire Pension Fund Business Plan, as set out in Annex 1, for 2006/07; and

(b) approve the Oxfordshire Pension Fund’s Investment Management and Scheme Administration Budget, as set out in Annex 2, for 2006/07.

13/06. CORPORATE GOVERNANCE AND SOCIALLY RESPONSIBLE INVESTMENT

(Agenda Item 13)

The Head of Finance & Procurement advised the Committee that there was nothing specific to report for this quarter. She also advised that all the managers had included pages within their valuation reports which provided details on their voting at company AGMs, engagement with companies and their involvement with other socially responsible initiatives.

RESOLVED: to note the report.

14/06. LOCAL GOVERNMENT PENSION SCHEME REGULATIONS (LGPS) APPLICATION FOR ADMISSION AS A COMMUNITY ADMISSION BODY

(Agenda Item 14)

The Committee considered a report (PF14) which detailed an application for admission.

RESOLVED: to approve the application of Oxford Inspires subject to Oxford Inspires agreeing to the terms of the Admission Agreements and this Committee being informed when the agreement had been signed.

15/06. LOCAL GOVERNMENT PENSION SCHEME (AMENDMENT) (NO 2) REGULATIONS 2005

(Agenda Item 15)

The Committee considered a report (PF15) which informed the Committee about new Regulations which required both governance and communication policies to be in place by 1 April 2006. Mr Leeding reported that he had served as the Beneficiaries' Observer since 1991 and gave notice that he proposed to resign from this position during 2006. He pointed out that, in relation to Appendix 1, paragraph 8, NALGO and NUPE had both represented local government employees in the past but now UNISON represented them.

RESOLVED: to:

(a) approve the draft Governance Policy Statement as set out in Appendix 1 subject to, in paragraph 8, line 4, "the appropriate trade union(s)" being replaced by "UNISON";

(b) approve the draft Communications Policy Statement as set out in Appendix 2;

(c) authorise officers to enter a negotiated arrangement with the Prudential Assurance Company Limited to produce the quarterly pensions newsletter at a subsidised cost to the Council.

16/06. INTERNAL DISPUTE RESOLUTION PROCEDURES

in the Chair

Date of signing 2006

* 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.