Pension Sub-committee And Pension Board - 20/06/2001

At a MEETING of the SUPERANNUATION INVESTMENT SUB-COMMITTEE of the FINANCE COMMITTEE held at Dundee on Wednesday, 20th June, 2001.

Present:-

Councillors

George Regan

Julia Sturrock

John Letford

John Corrigan

Willie Sawers

Bruce Mackie

Councillor Regan, Convener, in the Chair.

Unless marked thus * all items stand delegated.

The minute of meeting of this Sub-Committee of 21st February, 2001 was noted.

I SUPERANNUATION FORUM FOR PARTICIPATING BODIES AND MEMBERS

It was reported that the next meeting of the Superannuation Forum would take place today at 11.00 am. The Sub-Committee's instructions were sought regarding making this an annual event on the same day as the August meeting of the Sub-Committee from 2002. The Finance Committee had agreed on 12th February 1996 that this Forum should meet twice a year but this had been found to be too frequent to guarantee fresh topics and viable attendance levels.

The Sub-Committee agreed to make the Superannuation Forum an annual event in August each year.

II SEMINAR - THE 9TH LGC MEMBERS' ROLE IN PENSIONS SEMINAR, LONDON - 27 JUNE 2001

It was reported that LGC Events had arranged their 9th Members Role in Pensions Seminar for 27th June 2001 in London. These Seminars concentrated on highly relevant subjects and current issues and the Sub-Committee's instructions were sought regarding attendance at this year's Seminar. The cost was 282 per delegate, excluding travel and subsistence.

The Sub-Committee approved the attendance of the Corporate Finance Manager at this year's seminar.

The Sub-Committee resolved under Section 50(A)(4) of the Local Government (Scotland) Act 1973 that the public and press be excluded from the meeting in order that the undernoted items of business be considered in private on the grounds that they involved the likely disclosure of exempt information as defined in paragraphs 4, 6 and 11 of Part 1 of Schedule 7(A) of the Act.

III STATEMENT OF INVESTMENT PRINCIPLES ANNUAL REVIEW

There was submitted Report No 105-2001 by the Director of Finance reviewing Statements of Investments Principles for the Tayside Superannuation Fund and the Tayside Transport Superannuation Fund - this Report was originally submitted on 21st February 2001 but was now re-submitted with a copy of the current scheme attached.

The Local Government Pension Scheme (Management and Investment of Funds) (Scotland) Amendment Regulations 2000 had confirmed a requirement for administering authorities to prepare, maintain and publish a written Statement of Investment Principles (SIP).

The Director of Finance referred to item 10 on Socially Responsible Investment whereby the Fund recognises that some social, environmental and ethical concerns may, over time, have an impact on the value of the shares of those companies in which it invests. The Fund will work with its Investment Managers to develop processes whereby the Fund will engage with companies where its managers identify shortcomings of a social, environmental or ethical nature that might adversely affect the value of the companies shares in the UK with a view to improving company practice.

The Sub-Committee noted the information within the report and approved no change to the Statements of Investments Principles for both the Tayside Superannuation Fund and the Tayside Transport Superannuation Fund.

IV SUPERANNUATION INVESTMENTS - EXTERNAL AUDIT REPORT

A copy of the Interim Audit Report prepared by Henderson Loggie CA, External Auditors, had been circulated. The action points were summarised on pages 4 and 5 of the report. The Superannuation Investment Services report concluded that a review of the structure of the Fund should be carried out - Report No. 358-2000 submitted to and approved by the Sub-Committee on 24th May, 2000 had proposed that the Council's actuaries, Hymans Robertson, be appointed as consultants for this Review.

V WM PERFORMANCE MEASUREMENT - 2000 ANNUAL REVIEW

There was submitted Report No 383-2001 by the Director of Finance examining the detailed results, as calculated by the WM Company, achieved in 2000 by each of the balanced Fund Managers employed by the Council to manage the Tayside Superannuation Fund and the Tayside Transport Superannuation Fund.

Overall, the Main Fund had under performed the WM Index for the rolling three year period 1998/2000. Two of the three Fund Managers had outperformed the WM Index in 2000 whilst one Fund Manager had underperformed.

VI TAYSIDE TRANSPORT SUPERANNUATION FUND

(a) WM PERFORMANCE SUMMARIES

There was submitted Report No 378-2001 by the Director of Finance relating to WM Performance Summaries for both the quarter and year to 31st March 2001.

(b) SUMMARIES OF INVESTMENTS AND TRANSACTIONS

There was submitted Report No 332-2001 by the Director of Finance summarising investments and transactions during the period 1st January to 31st March 2001.

The Sub-Committee noted the information contained herein with regard to the performance of the Transport Fund managed by Schroders Investment Management Limited.

VII TAYSIDE SUPERANNUATION FUND

(a) WM PERFORMANCE SUMMARIES (BALANCED PORTFOLIOS)

There was submitted Report No 379-2001 by the Director of Finance relating to WM Performance Summaries for both the quarter and year to 31st March 2001.

(b) PERFORMANCE SUMMARY (PROPERTY PORTFOLIO)

There was submitted Report No 380-2001 by the Director of Finance relating to Schroder Property Investment Management Limited performance for both the quarter and year to 31st March 2001.

There was submitted Report No 331-2001 by the Director of Finance summarising investments and transactions during the period 1st January to 31st March 2001.

The Sub-Committee noted that the overall Fund return in the quarter to 31st March, 2001 had slightly under performed the WM Index with one Fund Manager left under performing substantially whilst the other two Fund Managers had out performed index.

Over the year to 31st March, 2001 the combined Fund returned had slightly under performed WM index with one Fund Manager out performing the index and two Fund Managers under performing the index.

The Sub-Committee noted the information contained in the above reports which included the investment performance of the property portfolio managed by Schroder Property Investment Management Limited for the quarter to 31st March, 2001 and for the twelve month period to the same date.

VIII CUSTODY ARRANGEMENTS

There was submitted Report No 381-2001 by the Director of Finance reviewing the possibility of appointing a global custodian as instructed by the Sub-Committee on 24th May, 2000.

The Sub-Committee noted that custodians are appointed to ensure the safekeeping of the Fund's assets.

The Sub-Committee approved the principle that the Fund should have a global custodian and remitted to the Director of Finance to take such steps as are necessary to identify and draw up a short-leet of prospective global custodians for interview by the Sub-Committee.

IX SOCIALLY RESPONSIBLE INVESTMENT - SIX MONTHLY REPORT

There was submitted Report No 382-2001 by the Director of Finance reviewing the implementation by the Fund Managers of the positive engagement strategy approved by the Sub-Committee on 23rd February, 2000.

The four action areas had been identified as Employee Care, Human Rights, Sustainability and the Environment.

The Sub-Committee noted the information contained within the report and agreed that such reviews should be reported every six months.

X PRESENTATION

Mr Jim Horsburgh and Mr Geoff Day of Schroders Investment Management Limited gave a presentation reviewing the year 2000 performance and the investment outlook. The performances for both 2000 and the rolling three year period of 1998-2000 were disappointing as was the first quarter of 2001. However there were signs of an improvement and it was anticipated that the world economy will recover later this year.

Both speakers answered questions - in particular members stressed the importance of Socially Responsible Investment reporting where Public Sector Pension Funds were taking the lead.

The Convener thanked both speakers on behalf of the Sub-Committee.

GEORGE REGAN, Convener.

APPENDIX II

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