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ITEM PF5

PENSION FUND COMMITTEE – 20 FEBRUARY 2004

Minutes of the Meeting commencing at 10.00 am and finishing at 1.10 pm

Present:

The Committee considered the matters, reports and recommendations contained or referred to in the agenda for the meeting, together with the following additional documents:

Agenda Item 5 - Revised Table 4

Agenda Item 9E - Report on the meeting with Baillie Gifford (information exempt)

and decided as set out below. Except insofar as otherwise specified, the reasons for the decisions are contained in the agenda, reports and additional documents, copies of which are attached to the signed Minutes.

1/04. NEW MEMBERS/RETIREMENT OF MR PHILLIPS

The Chairman welcomed Councillor Hook and Councillor Price, one of the Co-opted Members, as new members of the Committee. He also reported that Mr Phillips was retiring that day and that this meeting was his last meeting of the Committee.

Resolved: to welcome Councillors Hook and Price to the meeting and to thank Mr Phillips for his work for the Committee.

2/04. DECLARATIONS OF INTEREST

Councillors Moley and Price (Co-opted member) declared personal interests by virtue of being members of the Pension Scheme.

3/04. MINUTES

The Minutes of the meeting of the Committee held on 21 November 2003 and adjourned to 1 December 2003 were approved and signed, subject to, in minute 80/03, line 6, the word "Patrick" being amended to read "Patricia".

In response to a question on minute 80/03, bullet point 1, Tony Wheeler agreed to circulate the new corporate governance guidelines booklet to members.

4/04. ORDER OF BUSINESS

RESOLVED: that agenda item 15 should be considered after agenda item 10E so that the Committee could be advised, in exempt session, about the current position on the late payment of contributions by a current admitted body.

5/04. OVERVIEW OF PAST AND CURRENT INVESTMENT POSITION

(Agenda Item 5)

A revised table 4 was circulated (copy attached to the signed copy of the minutes) which corrected some of the figures for Legal and General’s Asset Allocation as follows: "Corporate Bonds – Actual Allocation" should read "38.2%" and "Index-Linked – Actual Allocation" should read "47.4%" and the correct over/under weight positions should be "3.2%" and "-1.6%" respectively.

In response to a question, it was pointed out that in Table 5, Alternative Investments, Sub-Total line, column 10 (Changes in Market Value, Alliance Bernstein) "£5,724,000" should read "£12,626,000" and column 12 (Changes in Market Value, Legal & General) "£0" should read "£1,011,000" and Grand Total, column 10 (Changes in Market Value, Alliance Bernstein) "£5,724,000" should read "£12,626,000" and column 12 (Changes in Market Value, Legal & General) "£0" should read "£1,011,000".

It was also reported that, due to an error by Russell Mellon CAPS, in Table 9, line 7 (Property), third column, "1.9" should read "2.8".

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 2003. The report was supported by appropriate charts of economic and market trends. Mr Bushell also reported that approximately £7m of the Fund needed to be transferred for Probation Service employees to the Berkshire Pension Fund.

RESOLVED:

1. to receive the tables, as amended, and to bear the information contained in them in mind, insofar as they related to items 7E to 9E on the agenda;
2. to note that the CAPS figures needed to be reconciled with the Fund Managers’ figures.
   
   

6/04. EXEMPT ITEMS

RESOLVED: that the public be excluded during the consideration of items 6E-10E and of item 15 insofar as this item related to the late payment of contributions by a current admitted body 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

7/04. 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), which is not exempt, were supported by relevant tables of economic and market trends, where appropriate.

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

8/04. UBS ASSET MANAGEMENT

(Agenda Item 7E)

Mr Matthew Stemp and Mr Kevin Barker reported on the performance and strategy of the UBS multi-asset portfolio for the quarter that ended on 31 December 2003 with reference to the presentation report which had been circulated with the agenda.

Messrs Stemp and Barker responded to members’ questions about the performance of the portfolio.

RESOLVED:

1. to receive the UBS Asset Management’s written report for the period ending 31 December 2003;
2. to agree to a presentation from UBS Wealth Management at either the November 2004 meeting or February 2005 meeting of the Committee.


9/04. ALLIANCE BERNSTEIN

(Agenda Item 8E)

Mr George Blundon and Mr Patrick Rudden reported on the performance and strategy of the Alliance Bernstein Global Diversified Value portfolio for the quarter that ended on 31 December 2003. With reference to the presentation report which had been circulated with the agenda, Mr Rudden reported that, on page 10 of the report, the benchmark for MSCI Emerging Markets should read "5.2%" instead of "2.5%" as stated in the report.

Members and the Independent Financial Adviser asked questions about specific investments (including investment in the company Parmalat) and about the underperformance of the equities except for emerging market units compared with the benchmark for the portfolio. Messrs Blundon and Rudden responded to the questions.

RESOLVED: to receive the Alliance Bernstein’s written report for the period ending 31 December 2003.

10/04. REPORT OF MAIN ISSUES ARISING FROM PRESENTATIONS AND REPORTS GIVEN BY FUND MANAGERS NOT REPRESENTED AT THIS MEETING

(Agenda Item 9E)

The Independent Financial Adviser and officers received a written report from Legal and General and a presentation from Baillie Gifford at County Hall for the quarter ended 31 December 2003. The Independent Financial Adviser circulated a report on the presentation from Baillie Gifford (copy appended to the signed copy of the minutes) and reported orally on the main issues arising from the written report from Legal and General in conjunction with information contained in the Tables (Agenda item 5) and the managers’ quarterly valuation reports.

Mr Leeding asked whether the presentation of voting information from the Fund Managers could be made more consistent.

RESOLVED: to note the main issues arising from the presentation and written report and to note that more consistent presentation of the tables was being sought through the independent custodian.

11/04. 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 already made earlier in the meeting.

RESOLVED: to note the position.

12/04. ADMISSION AGREEMENTS

ITEMS FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC

13/04. UPDATE ON THE PENSION FUND'S INVESTMENT IN HEDGE FUNDS

(Agenda Item 11)

The Head of Finance reported that, in August 2003, the Committee had resolved that 2% of the Pension Fund’s assets be invested in hedge funds in line with the customised benchmark. UBS Global Asset Management would manage these assets acting on the advice of UBS Wealth Management. During January 2004 the following investments had been made:

£4,800,000 UBS O’Connor Global Alpha Strategies Fund
£4,800,000 GAM Diversity 11 Fund
£1,100,000 UBS O’Connor Special Situations Fund.

He also reported that a further investment of approximately £1.3 million would be made in the Martello Fund in May 2004 bringing the Oxfordshire Pension Fund’s exposure to hedge funds to approximately 2%. UBS Global Asset Management would include a hedge fund valuation report page in its future quarterly reports. Officers and the Independent Financial Adviser would meet UBS Wealth Management later in 2004 to review the Hedge Fund Strategy and would report to the Committee.

RESOLVED: to note the report.

14/04. OXFORDSHIRE PENSION FUND BUSINESS PLAN

(Agenda Item 12)

The Committee considered a report (PF12) which set out a recommended business plan for 2004/05, an investment management and scheme administration budget for 2004/05 and details on member training courses.

RESOLVED:

1. subject to reviewing the position at the meeting in February 2005, to:

b. to agree to consider a report on the budget at the meeting in August 2004, comparing the estimated budget for 2003/04 with the actual budget for 2003/04.

15/04. STOCK LENDING

(Agenda Item 13)

The Committee considered a report (PF13) on stock lending. In November 2003 the Committee had received a report on stock lending, which had explored the stock lending capabilities of the Fund’s custodians, ABN AMRO Mellon, and had particularly focussed on how it had addressed the areas of risk associated with stock lending. Following the extensive changes to the composition of the Fund’s investments, it had been considered prudent to ask the custodian to produce a more up-to-date estimate on the level of income that might be generated for the Fund before deciding whether to proceed.

The new report reported an estimated annual revenue income of £40,000 for the Oxfordshire Pension Fund, though this could prove to be a little on the high side due to a tendency for custodians to provide overly optimistic projections. Notwithstanding this the Committee was recommended to request the custodian to lend stock on behalf of the Oxfordshire Pension Fund.

RESOLVED: to request the Pension Fund’s global custodian, ABN AMRO Mellon, to lend stock on behalf of the Oxfordshire Pension Fund.

16/04. SOCIALLY RESPONSIBLE INVESTMENT AND CORPORATE GOVERNANCE ISSUES

(Agenda Item 14)

The Head of Finance reported orally on issues arising from officers’ and Fund Managers’ involvement in matters of Socially Responsible Investment and Corporate Governance.

Councillor Hodgson referred to a letter (copy of which is attached to the signed copy of the minutes) that he had sent to all members of the Committee about investment in cigarette companies on behalf of the Fund.

Councillor Hodgson moved and Councillor Harris seconded that Baillie Gifford be asked to prepare a report for the next meeting of the Committee on the case for stopping all investment in cigarette companies on behalf of the Fund. The motion was lost by 4 votes to 2.

RESOLVED: to note the report and to agree to a short presentation by the Local Authority Pension Forum at the meeting of the Committee in May 2004.

17/04. OXFORDSHIRE PENSION FUND ADMINISTRATION - BEST VALUE REVIEW

1. consider a report on further progress in one year and thank the Pensions Team for their work;
2. confirm that there were no matters in the report which should be drawn to the attention of the Executive Member; and

18/04. ANNUAL FORUM

in the Chair

Date of signing 2004

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