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ITEM PF3

PENSION FUND COMMITTEE

MINUTES of the meeting held on 24 November 2006 commencing at 10.00 am and finishing at 12.41 pm

Present:

Voting Members:               

Councillor Rodney Rose - in the chair

Councillor Bill Bradshaw
Councillor Neville Harris
Councillor David Harvey
Councillor Jim Moley
Councillor Bill Service
Councillor David Wilmshurst

District Council Representatives:

Councillor Michael Howes

Officers:

Whole of meeting: Mr K Bell, Mrs S Fox and Mr T Wheeler (Resources); Ms M Holyman (Chief Executive's Office)

Part of Meeting: Mr P Clark (Head of Legal Services and County Solicitor)

By Invitation: Mr A Bushell (Independent /Financial Adviser), Mr K Barker (UBS Global Asset Management), Mr M Stemp (UBS Global Asset Management), Mr G Blunden (Alliance Bernstein), Mr P Rudden (Alliance Bernstein), Mr S Gibson (Beneficiaries Observer)

The Committee considered the matters, reports and recommendations contained or referred to in the agenda for the meeting, together with a schedule of addenda tabled at the meeting, a copy of a letter sent to the Department for Communities and Local Government on the ‘New Look’ local government pension scheme and an additional graph (Agenda Item 6E) and decided as set out below.  Except insofar as otherwise specified, the reasons for the decisions are contained in the agenda, reports and schedule/additional documents, copies of which are attached to the signed Minutes.

60/06         DECLARATIONS OF INTEREST

Councillors Bradshaw, Harvey, Moley, Rose and Service declared personal interests as members of the Pension Fund Scheme under the provisions of Section 18 of the Local Government and Housing Act 1989.

61/06         MINUTES

The Minutes of the meeting of the Committee held on 25 August 2006 were approved and signed, subject to the following amendments:

Minute 40/06 (Overview of Past and Current Investment Position)

Line 19 “On Table 8, he reported that, over the last quarter, UK, and overseas and private equities and hedge funds had all underperformed, private equities had outperformed”

Line 26 “the figure for Overseas equities the Tactical Allocation Fund”.

On Minute 50/06 (‘New Look’ 2008 Local Government Pension Scheme), the Head of Finance & Procurement circulated a letter sent to the Department for Communities and Local Government incorporating the views of the Committee on the consultation document.

62/06         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, he 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 which had been 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 September 2006.  On Table 1, he reported that the value of UK and overseas equities, bonds and alternative investments had risen.  Cash held had fallen to £32m, £6m of which had been used to rebalance the portfolio.  On Table 2, he said that UK and overseas equities were in line with the benchmark although within the latter category, North America was above the benchmark and Asia Pacific was below the benchmark.  He added that bonds were in line with the benchmark and property investment was below the benchmark.  On Table 3, he highlighted that overseas equities, in particular North America equities, were below the benchmark.  On Table 4, he reported that Legal & General was overweight in UK gilts and overseas bonds and underweight in corporate and index-linked bonds and that Baillie Gifford was virtually fully invested.  On Table 5, he said that there had been net purchases of £¾m of UK equities, net purchases of £7m of overseas equities, net sales of £100k of bonds and purchases of £8m in property, of nearly £2m in private equity and of £¼m in hedge funds.  Overall, the value of equities, bonds, property and private equity had risen and the value of hedge funds and the tactical asset allocation had fallen.  On Table 7, he reported that there had been £3.7m purchases of private equity and sales proceeds of £1m of Standard Life.  On Table 8, he said that the performance of the total fund was just below the benchmark return for the quarter ended 30 September 2006 with property and private equity outperforming their benchmarks.  On Table 9, he reported that overall UBS had outperformed its benchmark but bonds had underperformed the benchmark.  On Table 10, Alliance Bernstein’s performance had been strong, Baillie Gifford had underperformed and Legal & General had performed in line with the benchmark. 

Members asked questions on the performance of the fund.

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

63/06         EXEMPT ITEMS

RESOLVED:         that the public be excluded for the duration of items 6E-12E in the Agenda since it was likely that if they were present during those items there would be disclosure of exempt information as defined in Part I of Schedule 12A to the Local Government Act 1972 (as amended) and specified in relation to the respective items in the Agenda and since it was considered that, in all the circumstances of each case, the public interest in maintaining the exemption outweighed the public interest in disclosing the information.

64/06         OVERVIEW AND OUTLOOK FOR 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. A revised report (a copy of which is attached to the signed copy of the minutes) was tabled because it had been difficult to differentiate some of the lines in the graphs in the report and the lines had therefore been labelled for ease of use.  The Independent Financial Adviser reported orally and responded to members’ questions.  He apologised for the poor reproduction of the graphs.  He also circulated a graph showing trends in value and growth stocks since 1970.

RESOLVED:         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.

65/06         REPORT OF MAIN ISSUES ARISING FROM REPORTS OF THE FUND MANAGERS NOT REPRESENTED AT THIS MEETING*

(Agenda Item 7E)

The Independent Financial Adviser reported that officer meetings had been held with Baillie Gifford and Legal & General.  Baillie Gifford had performed below the benchmark but it had been a difficult market for growth managers.  He reminded members that they were growth managers and their style of investment complemented the value style of investment of Alliance Bernstein and UBS.  Legal & General had outperformed their benchmark for the quarter and over the last twelve months.

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

66/06         UBS GLOBAL ASSET MANAGEMENT*

(Agenda Item 8E)

The representatives (Mr K Barker and Mr M Stemp) 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 which ended on 30 September 2006.   Members asked questions.

RESOLVED:         to receive UBS’s quarterly and presentation reports for the quarter ending 30 September 2006 and to note the main issues arising from the presentation and to take any necessary action, if required.

67/06         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 which ended on 30 September 2006.  Mr Blunden reported that Alliance Bernstein had won further clients for its global equities products and if it considered that it could be detrimental to the existing investment mandate, it would close the products to other interested investors."

RESOLVED:         to receive Alliance Bernstein’s report for the quarter ending 30 September 2006 and to note the main issues arising from the presentation.

68/06         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.

69/06         ANNUAL REVIEW OF THE INDEPENDENT FINANCIAL ADVISER*

(Agenda Item 11E)

The Committee considered a report (PF11E) which reviewed the activities of the Independent Financial Adviser for the twelve-month period ending 30 November 2006 and recommended that he be reappointed for a further twelve months.

RESOLVED:         to re-appoint the Independent Financial Adviser for a further twelve months and to upgrade his fee by 2.95%, in line with the Local Authority Green Book Pay Award for 2006/07, to take effect from 1 December 2006.

70/06         ADDITIONAL VOLUNTARY CONTRIBUTIONS (AVC) - ANNUAL REVIEW*

(Agenda Item 12E)

The Committee considered a report (PF12E) on the quality of service provided by the Prudential, explored the range of investment funds available and recommended the discontinuation of a default option.  The Head of Finance & Procurement reported that in Annex 4, column 2, the “#” should be against the third listed fund and not the second listed fund.

RESOLVED:         to:

(a)         note the report and to confirm the continued use of the Prudential as the Council’s AVC provider;

(b)         continue with its current arrangement of having no default option for its AVC’s but to ensure that the Prudential annually notify AVC contributors of the potential risks of investing in higher risk funds as they approach retirement;

(c)         add the four funds set out in Annex 2, Table 2 to the Council’s range of available AVC funds.

ITEMS FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC

71/06         OXFORD CITY COUNCIL’S MOTION - INVESTMENT AND REPRESENTATION

(Agenda Item 13)

The Committee considered a report (PF13) which provided information on the issues raised by the Oxford City Council’s motion on investment of the pension fund for social good and seeking three member nominated representatives with full voting rights on the Committee. 

RESOLVED:

(a)          to continue to act within its agreed Statement of Investment Principles in the best interests of the Scheme;

(b)          in the light of the Government’s proposal to undertake statutory consultation on the local governance arrangements of the LGPS, to defer consideration of the City Council’s request about membership until the governance arrangements have been determined.

72/06         CHANGES TO THE LOCAL GOVERNMENT PENSION SCHEME (LGPS)

(Agenda Item 14)

The Head of Finance & Procurement reported that there had been no further developments on the 'New Look' 2008 LGPS.

RESOLVED:         to note the report.

73/06         FORMAL ADOPTION OF THE PENSION FUND ANNUAL REPORT AND ACCOUNTS FOR 2005/06

(Agenda Item 15)

The Committee considered the Annual Report and Accounts 2005/06 which were recommended for adoption. 

RESOLVED:         to adopt formally the Pension Fund Annual Report and Accounts 2005/06.

74/06         PENSION ADMINISTRATION TEAM STRUCTURE

(Agenda Item 16)

The Committee considered a report (PF16) which recommended the strengthening of the pension administration team in recognition of current workloads and the substantial changes anticipated in the national LGPS agenda.  The Committee was advised that the heading on the report should read “PF16”.

RESOLVED:         to:

(a)          approve the proposed new structure for the pension team at an additional cost of £12k in 2006/07 to be met from the Pension Fund;

(b)          note that the cost of £71k in 2007/08 will be incorporated into the pension administration budget proposals for next year to be presented for members’ approval in February 2007.

75/06         APPLICATION FOR ADMISSION AS A TRANSFEREE ADMISSION BODY

(Agenda Item 17)

The Committee considered a report (PF17) which set out an application from Barnardo's to become an admitted body as County Council staff working at St Nicholas House would be transferred to Barnardo’s.

RESOLVED:         to approve the application of Barnardo’s subject to it agreeing to the terms of the Admission Agreement, it putting a bond in place in accordance with actuarial advice, it being aware of the employer responsibilities of membership to the fund and this Committee being informed when the agreement is signed.

76/06         PAYMENT OF DEPENDENT’S PENSION BENEFIT

(Agenda Item 18)

The Committee considered a report (PF18) which informed the Committee that a decision had been made under the powers delegated to the Head of Finance & Procurement by the Committee at its meeting in November 2005 of whether a child’s pension could continue when a gap year had been taken.

RESOLVED:          to note the report.

77/06         PENSION ADMINISTRATION - MOVE TO SHARED SERVICES

(Agenda Item 19)

The Head of Finance & Procurement reported on changes within the Finance & Procurement Section from 1 December 2006.  The pension administration team would be moving to Shared Services and would be located at Unipart House (to be renamed Chiltern House) and Mr Collins would be their manager.  The pension fund investment team would remain within the Finance & Procurement Section and Ms Hydari would be their manager.  Mr Bell would transfer to other work within the Finance & Procurement Section.

RESOLVED:         to note the report and to thank Mr Bell for his work for the Committee.

78/06         FUTURE PROGRAMME AND TIMETABLE FOR INVESTMENT MANAGER MONITORING ARRANGEMENTS

(Agenda Item 20)

The Committee considered a report (PF20) which set out the proposed monitoring arrangements for the 2007/08 Council year.  A revised copy of the report (a copy of which is attached to the signed copy of the minutes) was tabled as the “√” had been omitted from the copy circulated.

RESOLVED:         to agree the programme of manager meetings as set out in the report.

79/06         ANNUAL PENSION FORUM

(Agenda Item 21)

The Head of Finance & Procurement circulated details (a copy of which is attached to the signed copy of the minutes) on the arrangements for the Annual Pension Forum to be held on 27 November 2006 at 9.30 am at County Hall.

RESOLVED:          to note the report.

80/06         CORPORATE GOVERNANCE AND SOCIALLY RESPONSIBLE INVESTMENT

(Agenda Item 22)

The Head of Finance & Procurement reported that there was nothing specific to report for this quarter but that it should be noted that all the managers had included pages within their valuation reports which provided details on their voting at company AGM’s, engagement with companies and their involvement with other socially responsible initiatives.

RESOLVED:         to note the report.

................................................................................... in the Chair

Date of signing.................................................................. 2007

*  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.