Meeting documents

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To Members of the Pension Fund Committee

Notice of Meeting

Derek Bishop
Head of Democratic Services

17 August 2005

Membership

Chairman – Councillor Rodney Rose

Councillors:

Co-opted Members:

AGENDA

Addenda

1. Apologies for Absence and Temporary Appointments
   
   
2. Declarations of Interest – see guidance note
   
   
3. Minutes

To approve the minutes of the meeting held on 27 May 2005 (PF3) and to receive for information any matters arising from them.

4. Petitions and Public Address
5. Overview of Past and Current Investment Position

10:05 Tables 1 to 7 are compiled from the custodian's records. The custodian is the Pension Fund's prime record keeper. He accrues for dividends and recoverable overseas tax within his valuation figures and may also use different exchange rates and pricing sources compared with the fund managers. The custodian also treats dividend scrip issues as purchases which the fund mangers may not do. This may mean that there are minor differences between the tabled figures and those supplied by the managers.

The Independent Financial Adviser will review the investment activity during the past quarter and present an overview of the Fund’s position as at 30 June 2005 using the following tables:

Table 1 - provides a consolidated valuation of the Pension Fund at 30 June 2005;

Tables 2 to 4 - provide details of the individual managers’ asset allocations and compare these against their benchmark allocations;

Table 5 - shows net investment/disinvestments during the quarter;

Tables 6 to 7 - provide details on the Pension Fund’s Private Equity;

Tables 8 to 10 - provide investment performance for the consolidated Pension Fund and for the four Managers for the quarter ended 30 June 2005.

(PF5 - Tables - download as .xls file)


The Committee is RECOMMENDED 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.

6. Asset Allocation
   
   (See also Addenda)
   

1. approve the new strategic asset allocation in Column C in Annex 3 and to rebalance the existing portfolios to reflect this;
2. approve that the portfolio managed by Alliance Bernstein should be moved, phased if necessary, from their Global Diversified Value platform to their Global Value platform;
3. approve 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.

EXEMPT ITEMS

The Committee will be invited to resolve to exclude the public for the consideration of the following exempt items (marked E) by passing a resolution in relation to each such item in the following terms:

"that the public be excluded during the consideration of the following items in the Agenda since it is 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."

Note: In the case of items 8E, 9E and 10E, there are no reports circulated with the Agenda. Any exempt information will be reported orally.

The quarterly reports from the Fund Managers relating to the Exempt Items at 8E, 9E and 10E and any information to be reported orally have not been made public and should be regarded as strictly private to members and officers entitled to receive them until after 25 November 2005 subject to the provisions of the Freedom of Information Act.

7. Overview and Outlook for the Investment Markets

11:00 Report of the Independent Financial Adviser (PF7E) (download as .doc file).

The report sets out an overview of the current and future investment scene and market developments across various regions and sectors. The report itself does not contain exempt information and is available to the public. The Independent Financial Adviser will also report orally and any information reported orally will be exempt information.

(Information Exempt in that it relates to the financial or business affairs of any particular person (other than the authority).)

The Committee is RECOMMENDED to receive the report and tables, to receive the oral report, to consider any further action arising on them and to bear the Independent Financial Adviser’s conclusions in mind when considering the Fund Managers’ reports.

8. Report of Main Issues arising from Reports of the

Fund Managers not represented at this meeting

11:10 The Independent Financial Adviser will report orally on the main issues arising from the quarterly valuation reports from Baillie Gifford and Legal & General in conjunction with information contained in the Tables (Agenda item 5).

(Information Exempt in that it relates to the financial or business affairs of any particular person (other than the authority).)

The Committee is RECOMMENDED to note the main issues arising from the presentations and to take any necessary action, if required.

9. UBS Global Asset Management

11:15 (1) The Independent Financial Adviser will report orally on the performance and strategy of UBS Global Asset Management drawing on the tables at items 5 and 7E.

(2) The representatives (Mr K Barker and Mr A McGiven) of the Fund Manager will:

(a) report and review the present investments of their part of the Fund and their strategy against the background of the current investment scene for the period ended 30 June 2005;

(b) report on whether or not voting rights have been exercised and if so details of the rights exercised;

(c) give their views on the future investment scene.

At the end of the presentation, members are invited to question and comment and the Fund Managers to respond.

(Information Exempt in that it relates to the financial or business affairs of any particular person (other than the authority).)

The Committee is RECOMMENDED to note the main issues arising from the presentation and to take any necessary action, if required.

10. Alliance Bernstein

11:45 (1) The Independent Financial Adviser will report orally on the performance and strategy of Alliance Bernstein drawing on the tables at items 5 and 7E.

(2) The representatives (Mr G Blunden and Mr P Rudden) of the Fund Manager will:

(a) report and review 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 30 June 2005;

(b) report on whether or not voting rights have been exercised and if so details of the rights exercised;

(c) give their views on the future investment scene.

In support of the above is their valuation report for the period to 30 June 2005.

At the end of the presentation, members are invited to question and comment and the Fund Managers to respond.

(Information Exempt in that it relates to the financial or business affairs of any particular person (other than the authority).)

The Committee is RECOMMENDED to note the main issues arising from the presentation and to take any necessary action, if required.

11. WM Company Presentation on the Pension Fund's Investment Performance for the Twelve Months ended 31 March 2005

ITEMS FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC

12. Socially Responsible Investment and Corporate Governance Issues

14:15 (a) Corporate Governance - Voting Audit Report

Report by the Head of Finance & Procurement (PF12).

The report sets 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 reviews the existing arrangements for voting on the Fund's overseas holdings.

The Committee is RECOMMENDED to note this report and to ask officers to keep them informed of any changes to the existing arrangements.

(b) Socially Responsible Investment

The Head of Finance & Procurement to report orally

13. Draft Annual Report and Accounts for 2004/05

14:25 The Draft Annual Report and Accounts for 2004/05 (PF13) (download as .doc file) shows the final accounts for the Pension Fund for the year ended 31 March 2005 and provides details on how the Fund operates, including sections on membership and investments. It also incorporates the Statement of Investment Principles, which has been updated in the light of changes that have taken place during the year.

The Committee is RECOMMENDED to receive the draft report and accounts for 2004/05 and to agree the Statement of Investment Principles.

14. Pension Fund Investment and Administration Expenses Outturn Figures for the year ended 31 March 2005

14:35 Report by the Head of Finance & Procurement (PF14).

The report compares actual with budgeted cost for both Investment and Administration expenses for the year ended 31 March 2005.

The Committee is RECOMMENDED to receive the report and note the out-turn position.

15. Revocation of the 2004 Regulations

14:45 Report by the Head of Finance & Procurement (PF15).

At the last meeting, the Committee resolved to respond to the Government consultation and to oppose the revocation of the 2004 Regulations on the grounds of cost, and the long term affordability and sustainability of the Local Government Pension Scheme. This response mirrored the response by the major employers organisations, and the majority of individual employers.

On 13 July 2005, the Government laid before Parliament new Regulations, which have the impact of revoking the key parts of the 2004 regulations. These latest regulations came into force on 3 August 2005, with retrospective effect from 1 April 2005. Once again, the earliest age a pension is payable (other than in cases of ill-health) is 50 (from 55), and the 85 year rule is re-instated.

As part of these latest regulations, the Government has 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 must be published by 30 September 2005, and will become effective from 1 April 2006.

This report examines 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 will be no additional call on employer contributions.

The Committee is RECOMMENDED:

(a) not to request a formal interim valuation from the Actuary and therefore not to issue a revised rates and adjustment certificate;

(b) to agree to proceed as set out in paragraph 13 of the report.

16. LGPS – Compliance with Inland Revenue Tax Regime from April 2006

14:55 Report by the Head of Finance & Procurement (PF16).

The ODPM has issued a consultation paper detailing the proposed changes to the scheme to bring it into line with changes introduced by the Finance Act 2004. The report details changes and seeks members’ views on the draft reply.

The Committee is RECOMMENDED to consider this report, and authorise the Head of Finance and Procurement to respond to the ODPM by 16 September 2005, in line with the report, as amended during the course of debate.

17. Payment of Death Benefit

15:05 Report by the Head of Finance & Procurement (PF17).

The Committee is RECOMMENDED to:

1. decide how the contested payment should be administered / paid;
2. endorse current procedures.

12. Annual Forum

15:15 The Head of Finance & Procurement will report orally on any issues arising from the last Annual Forum or relevant to the next Forum due to be held on 29 November 2005 at 10.00 am.

13. Dates of Meetings