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ITEM PF3

PENSION FUND COMMITTEE – 26 NOVEMBER 2004

Minutes of the Meeting commencing at 10.00 am and finishing at 12.40 pm

Present:

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

61/04. DECLARATIONS OF INTEREST

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

62/04. MINUTES

The Minutes of the meeting of the Committee held on 27 August 2004 were approved and signed, subject to, for clarification, the addition in minute 43/04 (Overview of Past and Current Investment Position), first paragraph, line 4, after the word "Fund" of the words ", because the Oxfordshire and Berkshire Probation Service had become the Thames Valley Probation Service and the latter Service had chosen to transfer its pension scheme to the Berkshire Pension Fund.".

63/04. OVERVIEW OF PAST AND CURRENT INVESTMENT POSITION

(Agenda Item 5)

The Committee was advised that the Pension Fund's independent global custodian, ABN Amro Mellon, was the Fund's prime record keeper and from this quarter it had been decided that tables 1 to 7 would be compiled from the custodian's data. This would mean that there were minor differences between the tabled figures and those supplied by the managers. Any differences were primarily due to the custodian accruing for income within his figures but there might also be minor differences in market values due to the use of different pricing sources or applying a different pricing basis. Where the custodian had accrued for dividend then this was reflected within the cash figures.

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 2004. He added that the performance of the Fund had been good for the first year of the new structure.

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

64/04. EXEMPT ITEMS

RESOLVED: that the public be excluded during the consideration of items 6E-12E 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

65/04. 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) were supported by relevant tables of economic and market trends, where appropriate.

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

66/04. UBS GLOBAL ASSET MANAGEMENT

(Agenda Item 7E)

The representatives (Mr K Barker and Mr M Stemp) of the Fund Manager reported on the performance of the portfolio and strategy for the quarter that ended 30 September 2004 with reference to the presentation report which had been circulated separately with the papers for the agenda. They responded to questions.

RESOLVED: to receive UBS Global Asset Management’s quarterly valuation and presentation reports for the quarter ending 30 September 2004.

67/04. ALLIANCE BERNSTEIN

(Agenda Item 8E)

The Independent Financial Adviser reported orally on the performance and strategy of Alliance Bernstein. He explained that most of its good performance had come from stock picking which reflected its bottom up investment style. He also referred to its policy of hedging the weak US dollar back to sterling, which to date had been beneficial to the portfolio.

The representatives (Mr G Blunden and Mr P Rudden) of the Fund Manager reported on the performance of the portfolio and strategy for the quarter that ended 30 September 2004. They responded to questions.

RESOLVED: to receive Alliance Bernstein’s quarterly valuation report for the quarter ending 30 September 2004.

68/04. REPORT OF MAIN ISSUES ARISING FROM THE QUARTERLY VALUATION REPORTS BY FUND MANAGERS NOT REPRESENTED AT THIS MEETING

OXFORD TECHNOLOGY VENTURE CAPITAL TRUSTS*

(Agenda Item 9E and Addenda)

The Independent Financial Adviser reported on the main issues arising from the valuation reports from Baillie Gifford and Legal & General for the quarter that ended 30 September 2004.

The Committee considered an additional item, which the Chairman had agreed could be raised as urgent business, set out in the Addenda on the purchase of shares in the Oxford Technology Venture Capital Trusts.

RESOLVED: to

1. note the main issues arising from the valuation reports from Baillie Gifford and Legal & General for the quarter that ended 30 September 2004 and the Independent Financial Adviser’s comments;
2. authorise the Head of Finance & Procurement to buy shares for the Oxfordshire Pension Fund in the Oxford Technology Venture Capital Trusts, on the secondary market, at attractive discount rates to their net asset values.
   
   

69/04. 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 made earlier in the meeting.

70/04. ANNUAL REVIEW OF THE INDEPENDENT FINANCIAL ADVISER*

RESOLVED: to:

1. reappoint the Independent Financial Adviser for a further twelve months and to upgrade his fee in line with the retail price index to take effect from 1 December 2004;
2. recognise formally that the Independent Financial Adviser had carried out additional duties this year and that this be taken into account in future years if again he exceeded his contractual duties;
3. request the officers to include an item in the 2005/06 Pension Business Plan to review the Fund’s private equity management arrangements and to recommend how the private equity should be managed, following the retirement of the Independent Financial Adviser.

71/04. REVIEW OF THE PENSION FUND’S INVESTMENT PERFORMANCE MEASUREMENT ARRANGEMENTS*

(Agenda Item 12E)

The Committee considered a report (PF12E) on investment performance measurement services.

RESOLVED: to request the officers to transfer the Pension Fund’s investment performance measurement service from Russell Mellon to the WM Company, with effect from 1 April 2005.

ITEMS FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC

72/04. CIPFA LOCAL AUTHORITY PENSION FUND INVESTMENT STATISTICS

(Agenda Item 13)

The Committee considered a report (PF13) which compared the Oxfordshire Pension Fund's asset distribution with that of other local authority pension funds. It also compared the Fund's 3-, 5- and 10-year investment performance with those of other English County Councils.

RESOLVED: to receive the report.

73/04. FACING THE FUTURE – PROPOSITIONS AND PRINCIPLES FOR AN AFFORDABLE AND SUSTAINABLE LOCAL GOVERNMENT PENSION SCHEME – CONSULTATION DOCUMENT

(Agenda Item 14)

The Committee considered a report (PF14) which highlighted the key issues raised in the Green Paper, the Government's timetable for taking the matter forward, and the arrangements for developing an Oxfordshire response to the Green Paper.

RESOLVED: to note the content of the report, to endorse it as the basis of approach to all Fund employers to stimulate discussion and debate on the consultation document (with any further information that they would wish to see presented), and to endorse the next steps set out in paragraphs 19-22 of the report.

74/04. THE FUNDING STRATEGY STATEMENT AND THE 2004 VALUATION

(Agenda Item 15)

Mr Collins reported that he had received the provisional valuation report from the Actuary. It had not yet been broken down by individual employers. Although the Actuary was still checking the figures, the initial indication was that the position on employers’ contributions was better than had previously been forecast and 18-20% employer contributions were the most likely level of contributions which would be required. He reported that the improvement from the previous figures was a result of three factors. First, in respect of increasing life expectancy, the Actuary had added 1.8% into his initial calculations but this had resulted in double counting since the previous Actuary had also added a similar figure. Second, there would be a saving of 1.8% if phases 1 and 2 of the Government’s proposals (including the abolition of the 85 year rule) were implemented. Finally, there had also been a reduction in the number of ill-health retirements. The provisional valuation report would be reported to the Annual Pension Forum on 30 November 2004. He proposed to write to all employers in the week beginning 30 November 2004 with the results of the provisional valuation. He was not currently proposing changes to the draft Funding Strategy Statement. However, he would review the definition of "exceptional circumstances" before the submission of the final Funding Strategy Statement to the February meeting of the Committee. He anticipated that most employers would now be able to meet the increases over a 3-year or lesser period.

RESOLVED: to note Mr Collins’s oral report.

75/04. CORPORATE GOVERNANCE ISSUES - VOTING AUDIT REPORT

(Agenda Item 16)

The Committee considered a report (PF16) on an audit of the Pension Fund's UK company proxy voting which had been carried out for the quarter that ended 30 June 2004. The Custodian was responsible for exercising the Fund's proxy votes, acting on the fund managers' instructions, who, in turn, were instructed to comply with RREV voting guidelines. The audit had uncovered a number of instances where the proxy votes had not been exercised in accordance with the RREV voting guidelines. Most of the errors were attributable to the managers or their agents issuing the wrong voting instructions.

Mr Stemp apologised on behalf of UBS Global Asset Management for his company or its agents’ voting discrepancies which had occurred. He said that the relevant people had been reminded of the requirements on voting.

RESOLVED: to note the report and to instruct the officers to carry out a similar exercise over the next twelve months.

76/04. PRIVATE EQUITY

(Agenda Item 17)

The Committee was advised that the report (PF17) had had to be withdrawn as the officers had now been advised that new investors could not invest within the timescale set out in the report in the Fund proposed in the report.

RESOLVED: to note that the report had been withdrawn.

77/04. FUTURE PROGRAMME FOR INVESTMENT MANAGER MONITORING ARRANGEMENTS

(Agenda Item 18)

The Committee considered a report (PF18) which set out the timetable for Pension Fund Committee meetings and officer meetings with the managers until February 2006.

RESOLVED: to agree the programme for meetings of the Pension Fund Committee and of officer meetings with the investment managers for the remainder of this Council year and for the 2005/06 Council year.

78/04. MANAGEMENT AND INVESTMENT OF FUNDS (AMENDMENT) REGULATIONS 2005

(Agenda Item 19)

The Committee considered a report (PF19) which detailed proposed changes to the Local Government Pension Scheme (Management and Investment of Funds) Regulations 1998.

RESOLVED: to note the contents of the report and to ask the Head of Finance & Procurement to respond to the Office of the Deputy Prime Minister along the lines contained within the body of the report.

79/04. LOCAL GOVERNMENT PENSION SCHEME REGULATIONS – TRANSITIONAL REGULATION

(Agenda Item 20)

The Committee considered a report (PF20) which provided further information for the Committee to consider its discretions under the Transitional Regulation.

RESOLVED: to agree to extend the six-month period for the receipt of requests to repay contributions under Transitional Regulation 17 of the Local Government Pension Scheme Regulations.

80/04. LOCAL GOVERNMENT PENSION SCHEME REGULATIONS – PURCHASE OF ADDED YEARS

(Agenda Item 21)

The Committee considered a report (PF21) which reviewed the policy on medical requirements for the purchase of added years due to changes in disability discrimination legislation.

RESOLVED: to agree that, before the Council will accept elections to buy additional membership of the Pension Fund, the Administering Authority will require an individual medical report, at the member’s own expense, confirming that the member is in reasonable good health.

81/04. PENSION FUND AUDIT AND FORMAL ADOPTION OF ANNUAL REPORT AND ACCOUNTS FOR 2003/04

(Agenda Item 22)

A draft of the Annual Report and Accounts was approved at the Committee’s meeting on 27 August 2004. The Committee considered a report (PF22) which summarised the main points contained within an Audit Commission's report on the 2003/04 Pension Fund Accounts. It also reported on the inclusion in the accounts of two post balance sheet events.

RESOLVED: to:

1. note the Audit Commission’s report;
2. adopt formally the Pension Fund Annual Report and Accounts 2003/04.
   
   

82/04. ADMITTED BODIES

(Agenda Item 23)

The Committee was advised that the agreement with the West Oxfordshire Housing Association had been updated following the change of name to Cottsway Housing Association on Monday 18 October 2004.

RESOLVED: to note the report.

83/04. ANNUAL FORUM

in the Chair

Date of signing 2005

* 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.

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