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ITEM PF3(a)

PENSION FUND COMMITTEE – 21 FEBRUARY 2003

Minutes of the Meeting commencing at 10.00 am and finishing at 1.30 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.

8/03. APOLOGIES FOR ABSENCE AND TEMPORARY APPOINTMENTS

Apologies for absence and temporary appointments were received as follows:

Apology from	Temporary Appointments
Councillor Farrell	Councillor Legge

9/03. DECLARATIONS OF INTEREST

Councillor Legge declared a personal interest in Agenda Item 16 by virtue of her membership of the Teachers’ Pension Scheme.

10/03. ORDER OF BUSINESS

It was agreed to consider Agenda Item 18 after Item 4 to enable Councillor Margaret Godden to attend; and Agenda Item 12 after item 9E, in order that Councillor Roaf could be present for this item.

11/03. MINUTES

The Minutes of the meeting of the Committee held on 15 November 2002 were approved and signed.

With regard to Minute 66/02, Mr Phillips reported that the Head of Legal Services & Solicitor to the Council would be in a position to report to the 23 May meeting on the role and responsibilities of the members of the committee.

With regard to Minute 70/02, Mr Simon Peck, Fund Manager for Deutsche Asset Management Ltd, circulated a report on the action his company were taking to recover money lost by Oxfordshire County Council as a result of Deutsche Asset Management Ltd’s sale of shares in Enron.

12/03. WIDOWERS’ PENSIONS

(Agenda Item 18)

The current regulations for the Local Government Pension Scheme had come into force from 1 April 1998 and had given employees in the Fund the power to improve the widower’s pension, enabling it to be based on the member’s service from 1972, at no additional cost to the member. Using the discretionary power within these regulations, the County Council, as an employer within the Fund, had resolved to improve this package at no additional cost to the member. At the February 2002 meeting, the Committee had considered a report that set out the actions the County Council might take, and the implications thereon, to a series of informal suggestions made by the Department of Transport, Local Government & the Regions concerning additional provision. They had decided to take no action; to request the County Council to contact the women employed by the County Council to advise them of the decision; and also to inform the other employers within the Oxfordshire Fund.

Following a request made by a contributor to the Chairman of this Committee, members were asked to reconsider the available options put to the February 2002 meeting. These were set out in the report PF18.

Prior to consideration of the report PF18, Councillor Margaret Godden spoke to the Committee. She in her capacity as Executive Member with responsibility for employment and equity issues also spoke on behalf of Councillor Anne Purse, local member to the contributor who had made representations to the Committee Chairman. She made reference to an omission by the officer to inform those women employees concerned of the decision made by the Committee on 22 February 2002 and to two letters sent by two contributors to the Chair and to officers which had been circulated to members as background information prior to the meeting.

Mr Leeding commented that he had some sympathy with the concerns of the contributors that they had paid additional contributions for a period of five and a half years and, in effect, had nothing to show for this investment. He added also his concern that it had not been helpful that a letter explaining the Committee’s decision had not been sent following the 22 February 2002 meeting.

In response to an enquiry from a member of the Committee with regard to the legality of refunding those contributors who had been affected, Mr Phillips advised that the regulations did not provide for such an action, neither could ex gratia payments be made. He added that under options A and B, the only time discretion could be exercised under the regulations was when those female employees who were affected reached retirement age.

RESOLVED: on a motion by Councillor Dawes, seconded by Councillor Law and carried by 7 votes to 0) to:

1. adopt option (d) as set down in the report PF18 and to request the officers to write to those women concerned by 7 March 2003, to advise them of the decision, to offer the Committee’s apologies for the way in which the matter had been handled, and to advise them of the various avenues of appeal open to them; and
2. ask the officers to inform the other employers within the Oxfordshire Fund of the decision.
   
   

13/03. 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 December 2002. The report was supported by relevant charts of economic and market trends.

He drew the attention of the Committee, in particular, to chart 9, which indicated that both managers had under performed against the CAPS median and the target.

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.

14/03. 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

15/03. 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 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.

16/03. SCHRODER INVESTMENT MANAGEMENT

(Agenda Item 7E)

Mr Bolton expressed his Company’s frustration that the ‘fruits of change’ made to improve performance had not manifested themselves in an improved performance. He added that some stocks had rallied whilst others had fallen further.

Mr Purves also expressed his disappointment that performance in UK Equities had not rallied in the six months in which he had managed the portfolio. He added that although he had personally achieved considerable value for clients during the eight years in which he had managed the company’s Equity portfolio, there had been periods of underperformance. However, value had been added by following a consistent strategy and by holding nerve.

Mr Bolton and Mr Purves responded to Members’ questions concerning performance in the current quarter.

RESOLVED: to receive the Schroder Investment Management (UK) Ltd written report for the period ended 31 December 2002.

17/03. DEUTSCHE ASSET MANAGEMENT LTD

(Agenda item 8E)

Mr Peck introduced Mr Michael Crawford, Fund Manager for the UK Equity Portfolio, who would manage the Oxfordshire Fund in the future.

Both Mr Peck and Mr Crawford expressed their frustration at presenting their ‘disappointing’ figures. Mr Crawford explained that a key change in the way the management were approaching their investments strategy was to focus on the actual operators of the company concerned, with a view to improving efficiency returns in capital. This would, in turn, promote an investments rise.

Mr Peck and Mr Crawford 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 December 2002.

18/03. SUMMARY BY THE FINANCIAL ADVISER

(Agenda Item 9E)

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

ITEM FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC

19/03. IMPLEMENTATION OF BEST VALUE REVIEW OXFORDSHIRE PENSION FUND ADMINISTRATION

(Agenda Item 12)

Best Value Committee at its meeting on 15 January 2003 had considered a report which provided information on progress against the Action Plan of the Review. The Committee had noted the progress made by the review team; requested a further report on implementation in January 2004; and referred the report to this Committee. This was attached at PF12.

Ms Sally Fox attended the meeting in order to explain her role as Pension Services Manager since her appointment in October 2002 and her work in relation to the Best Value Review. Councillor Dermot Roaf, Chair of Best Value Committee was also present in order to respond to members’ questions with regard to the review.

RESOLVED: to note the progress made by the Review Team.

20/03. EXEMPT ITEMS

RESOLVED: that the public be excluded during the consideration of items 10E and 11E 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

21/03. PAYMENT OF A CHILD’S PENSION FOLLOWING A BREAK FROM FULL-TIME EDUCATION

(Agenda Item 10E)

The Local Government Pension Scheme Regulations allow discretion to enable the Administering Authority to disregard a break from full-time education or from training for a trade or profession, to continue payment of a child’s pension. The Committee considered a report (PF10E) which asked the Committee to exercise this discretion for an individual case.

RESOLVED: to agree that the break in full-time education or training of the child named in the report be disregarded and the pension payment start again from August 2002 until July 2004 or earlier if the child ceased to be eligible.

22/03. OVERPAYMENT OF A PENSION

(Agenda Item 11E)

The Committee considered a report (PF11E) which asked the Committee to consider the circumstances arising from a pension overpayment and decide whether the Council should seek to recover the overpayment.

Mr Phillips reported that the issue had been raised at the pre-meeting briefing as to whether the Council could recover the money from CSL. Further enquiries since then had indicated that it was possible to make application to do this, provided reasonable steps had been taken to recover the debt. He added, however, that the contract with Liberata was due to end at the end of March 2003.

RESOLVED: (on a motion by Councillor Dawes, seconded by Councillor Law and carried by 4 votes to 0) to request the officers to endeavour to recover the overpayment from the estate of the deceased person named in the report.

ITEMS FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC

23/03. UPDATE ON THE APPOINTMENT OF A GLOBAL CUSTODIAN

(Agenda Item 13)

At the special meeting held on 6 November 2002, the Committee requested the officers to invite suitably qualified consultants to assist in the tendering for, and appointment of a global custodian.

The Pension Fund currently used the custodial arms of its incumbent managers - Schroder Nominees Ltd for Schroders and Deutsche Bank AG for Deutsche Asset Management. Larger Investment Houses had traditionally provided joint management and custody arrangements for balanced fund mandates, and charged an all-inclusive fee for both services. However, there have recently been changes to this arrangement, including the sale by Deutsche Bank of its custody operations.

The Myners Report had recommended that for larger institutional pension funds, the appointment of a single global custodian was desirable. Accordingly, the officers had prepared a report that was before the Committee (PF13) that explained why there was a need for a single custodian and which gave information on the appointment of PSolve as consultants. An update of the tendering process and outstanding issues was also presented.

RESOLVED: (on a motion by Councillor Moley, seconded by Councillor Law and carried nem con) to authorise the Director for Business Support & County Treasurer, to be advised by the Independent Financial Adviser, to agree the appointment of a Global Custodian, for a period of three years, commencing from 1 April 2003.

24/03. SOCIALLY RESPONSIBLE INVESTMENTS AND CORPORATE GOVERNANCE ISSUES

(Agenda Item 14)

During the quarter a number of issues had arisen in respect of the officers’ and Fund Managers’ involvement in matters of Socially Responsible Investment and Corporate Governance. These were summarised in the report PF14 which was before the Committee for consideration.

Councillor Hodgson asked the Committee to consider waiving the benefits on maximum financial gain with regard to investment in tobacco companies.

Mr Phillips advised the Committee that it would be prudent to await the report by the Head of Legal Services & Solicitor to the Council on the role and responsibilities of the members of the Committee before deciding whether to consider this issue.

RESOLVED: to note the issues contained within the report.

25/03. UPDATE ON THE APPOINTMENT OF INVESTMENT MANAGERS

(Agenda Item 15)

The Committee had before them a report (PF15) which provided an update on progress made with the tendering process to appoint the new specialist managers. It set out a recommended process and timetable for the short listing and interviewing of prospective fund managers.

RESOLVED: to:

1. note the appointment progress as outlined in the report;
2. set up an Appointments Sub-Committee to interview and appoint Fund Managers for the investment mandates.
3. appoint Councillors Dawes, Farrell, Gatehouse and District Councillor Fooks to the Sub-Committee; and
4. request the officers to circulate the shortlist of candidates, together with any supplementary information, to all members of the Sub-Committee for comment prior to making the appointments.
   
   

26/03. OXFORDSHIRE PENSION FUND BUSINESS PLAN

(Agenda Item 16)

At the 24 May 2002 meeting, the Committee requested the officers to draw up an annual business plan, to contain financial estimates for the investment and administration of the Pension Fund and appropriate provision for member training.

The Committee had before them (PF16) a recommended Oxfordshire Pension Fund business plan for 2003/04. and an investment management and scheme administration budget for 2003/04. A detailed account of all elected member training courses was also given, specific provision for which was now contained within the Budget.

RESOLVED: to:

1. ask the officers to appoint a transition manager so as to minimise the costs and manage the risks during the Pension Fund’s restructuring exercise;
2. approve the Oxfordshire Pension Fund Business Plan, as set out at Annex 1, for 2003/04; and
3. approve the Oxfordshire Pension Fund’s Investment Management and Scheme Administration Budget, as set out at Annex 2, for 2003/04.
   
   

27/03. STOCK TAKE EXERCISE ON THE LOCAL GOVERNMENT PENSION SCHEME, GREEN PAPER ON PENSION PROVISION AND OTHER PENSION CONSULTATION PAPERS

(Agenda Item 17)

The Committee considered a report (PF17) which gave information on the next stages of the Office of the Deputy Prime Minister (ODPM) ‘stock take’ of pension provision for employees eligible to join the Local Government Pension Scheme; on a green paper on Pension Provision; and other pension consultation papers. Members were asked to decide on arrangements to be made for comments on a draft composite response which had been prepared by officers, to enable the Council to respond to the ODPM and the Treasury within the due deadlines.

Councillor Harris was invited to participate in the discussion, in his capacity as the Council’s representative on South East Employers. He urged the members of the Committee to ensure that they made their views known to the Government on a number of very important issues that were contained within the discussion paper.

RESOLVED to note the report and that each member (or political group) would submit any comment(s) on the officers’ draft composite response so that the Council could respond to the ODPM and the Treasury within the due deadlines.

28/03. PENSIONS FOR ELECTED MEMBERS

in the Chair

Date of signing 2003

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