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ITEM PF3

PENSION FUND COMMITTEE – 23 MAY 2003

Minutes of the Meeting commencing at 10.00 am and finishing at 12.15 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.

32/03. MINUTES

The Minutes of the meeting of the Pension Fund Committee held on 21 February 2003 were approved and signed.

Mr Phillips reported that the decisions set down in Minute 12/03 has been actioned within the specified timescale.

With reference to Minute 22/03, Mr Phillips reported that the overpayment had been recovered.

With reference to Minute 28/03, Mr Phillips reported that the regulations on allowances and pensions for elected members had come into force from 1 May 2003. At the request of the Committee, he undertook to request the appropriate Executive member to determine the categories of Councillor eligibility for membership of the Local Government Pension Scheme, following advice from the Independent Remuneration Panel.

The Minutes of the Pension Fund Manager (Appointments) Sub-Committee held on 4, 10, 15, 16 and 17 April 2003 were received, subject to the addition of Geoff Singleton (Hymans Robertson) to those listed as present.

With regard to Minute 5/03(b), the officers undertook to invite Hermes Investment Management Ltd to the 29 August meeting to give a presentation on Corporate Governance and Activism.

33/03. ORDER OF BUSINESS

RESOLVED: to consider Agenda Item 8E prior to Item 7E.

34/03. OVERVIEW OF PAST AND CURRENT INVESTMENT POSITION

(Agenda Item 5)

The Financial Adviser reviewed the investment activity during the past quarter and presented an overview of the Fund’s position as at 31 March 2003. The report was supported by relevant charts of economic and market trends.

He drew the attention of the Committee in particular to Table 7 which indicated that both managers had under performed the CAPS median fund over a 1, 3 and 5 year period to 31 March 2003.

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 8E in the Agenda.

35/03. EXEMPT ITEMS

RESOLVED: that the public be excluded during the consideration of items 6E-9E 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

36/03. OVERVIEW AND OUTLOOK FOR INVESTMENT MARKETS

(Agenda Item 6E)

The 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.

37/03. SCHRODER INVESTMENT MANAGEMENT

(Agenda Item 8E)

Mr Bushell reported on Schroder Investment Management’s performance and strategy for the period ended 31 March 2003, the company having given their apologies for the non attendance of their Fund Managers. He commented that they had underperformed significantly from a strategic directional point of view. Moreover, the Fund Managers had bought growth stocks too late and had bought high and sold low.

RESOLVED: to receive the report on the performance of Schroder Investment Management (UK) Ltd for the period ended 31 March 2003.

38/03. DEUTSCHE ASSET MANAGEMENT LTD

(Agenda Item 7E)

Mr Peck commented that events in the middle east had caused considerable disquiet in the equities market but fixed markets had performed a little better. He added that index linked bonds had outperformed conventional gilts during the period.

Mr Westlake reported that the UK equity market had been down by 7% during this quarter, a similar situation having happened in 2002. He added that a positive contribution had been made, however, to the Fund by their not owning those stocks affected. Mr Westlake added that turnover had been deliberately kept low over the last few months in the light of the plans by Committee to change Fund Managers, as any changes would incur transaction costs.

Mr Peck and Mr Westlake 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 March 2003.

39/03. SUMMARY BY THE FINANCIAL ADVISER

(Agenda Item 9E)

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

40/03. TRANSITIONAL FUND MANAGEMENT ARRANGEMENTS

(Agenda Item 10E)

At the 21 February 2003 meeting, the officers had been instructed to appoint a transition manager to implement the new specialist investment structure.

The Committee had before them a report (PF10E) that gave details on the selection process for the new transition manager and the reasons for the final selection.

RESOLVED: to note the report.

ITEMS FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC

41/03. FUTURE INVESTMENT MANAGER MONITORING ARRANGEMENTS

(Agenda Item 11)

The Committee had before them a report (PF11) which sought their preference on appropriate investment manager monitoring arrangements that could be introduced in order to fulfil the administering authority’s responsibilities. Details of the new arrangements would then be drawn up for submission to the 29 August 2003 meeting in the light of this preference.

RESOLVED: to request the officers to draw up a further report for submission to the 29 August 2003 meeting to include the following preferences:

1. that all members of the Committee should be involved in the monitoring and review of investments made by all the Fund Managers for the four asset classes and thus, to invite the Fund Managers for two asset classes to each meeting, on a rotational basis, with the proviso that each should be informed that they will be required to attend the next scheduled meeting if there is a cause for concern or if there is a change in personnel; and
2. that all items of a non-investment nature should be scheduled in the agenda for discussion in the afternoon.

42/03. PROGRESS OF CUSTODIAN SERVICES AND ASSET ALLOCATION

(Agenda Item 12)

The Committee had before them a report (PF12) that gave details on the appointment of the Fund’s new global custodian ABN AMRO Mellon. It also described the successful completion of the phasing in process for the Fund’s new strategic asset allocation.

RESOLVED: to note the report.

43/03. WITHDRAWAL OF WATSON WYATT ACTUARIAL SERVICES

(Agenda Item 13)

Watson Wyatt had given notice of withdrawal of their actuarial services with effect from November 2003. The Committee had before them a report (PF13) that proposed a process for the appointment of a new actuary and which asked them to indicate their desired level of member involvement.

RESOLVED: to approve the process to select a new actuary as set out in the report PF13, subject to consultation with the Chairman and Deputy Chair when appropriate.

44/03. INVESTMENT - THE DUTIES AND RESPONSIBILITIES OF THE COMMITTEE

(Agenda Item 14)

In response to a request made by members of the Committee for an explanation on the extent to which elected members on the Pension Fund Committee should be regarded as ‘trustees’, the Committee had before them a legal briefing produced by the Head of Legal Services and Solicitor to the Council (PF14) on their roles and responsibilities.

RESOLVED: to note the report.

45/03. SOCIALLY RESPONSIBLE INVESTMENTS AND CORPORATE GOVERNANCE ISSUES

(Agenda Item 15)

Mr Wheeler gave an oral report on issues that had arisen during the quarter in respect of officers’ and the Fund Managers’ involvement in socially responsible investments and corporate governance issues. He advised the intention of the Department of Trade & Industry to investigate and make recommendations on whether future abstaining on proxy voting issues would be permitted. He added that a report on the outcome would be submitted to a future meeting.

Mr Westlake suggested that the Committee might like to ask the new managers to inform them of any impending discussions in advance of the voting, in order that they could make their views known.

RESOLVED: to note the issues contained within the oral report.

46/03. APPLICATIONS FOR ADMITTED BODY STATUS

(Agenda Item 16)

The Committee had before them a report (PF16) which asked them to consider an application from Oxford Night Shelter and from the National Organisation for the Counselling of Adoptees and Parents (NORCAP) respectively, seeking admission to the Local Government Pension Fund.

RESOLVED: to approve the applications from Oxford Night Shelter and NORCAP, subject to all parties agreeing to the terms of the Admission Agreements, and to this Committee being informed when agreements had been signed.

47/03. ANNUAL FORUM

in the Chair

Date of signing 2003