Pension Sub-committee And Pension Board - 23/02/2005

At a MEETING of the SUPERANNUATION INVESTMENT SUB-COMMITTEE of the FINANCE COMMITTEE held at Dundee on 23rd February 2005.

Present:-

Bailies:-

C D P Farquhar

Neil I C Powrie

Councillors:-

George Regan

Willie Sawers

Nigel Don

In Attendance:-

Mr W Gowans, Tayside Full-Time Trade Union Officers Group

Councillor Regan, Convener, in the Chair.

The minute of meeting of this Sub-Committee of 17th November 2004 was noted.

Unless marked thus * all items stand delegated.

I PROPOSED TIMETABLE OF MEETINGS FOR 2005/06

There was submitted Report No 72-2005 by the Depute Chief Executive (Finance) suggesting a programme of meetings of the Superannuation Investment Sub-Committee to cover investment performance and issues arising during the year 2005/2006.

The Sub-Committee approved the following programme of meetings:-

All meetings to commence at 11.00 am.

II TAYSIDE SUPERANNUATION FUNDS BUSINESS PLAN 2005/2006

There was submitted Report No 73-2005 by the Depute Chief Executive (Finance) introducing the second annual business plan for the Tayside Superannuation Funds. Incorporated into the report was information on key measures and targets. In addition, it was noted that a full valuation of the Main Fund and the Transport Fund would be undertaken as at 31st March 2005.

The Sub-Committee noted that the information contained in the Report and approved the 2005/06 Business Plan which applied to the administration and management of the Tayside Superannuation Fund and the Tayside Transport Superannuation Fund.

The Depute Chief Executive (Finance) commented that there had been quite a few changes over the past year and a period of stability was now anticipated.

III STATEMENT OF INVESTMENT PRINCIPLES ANNUAL REVIEW

There was submitted Report No 74-2005 by the Depute Chief Executive (Finance) revising Statements of Investment Principles for the Tayside Superannuation Fund and the Tayside Transport Superannuation Fund. The Principal Treasury and Investment Officer pointed out that this statement was required on an annual basis providing details of how the Funds operated.

In response to Councillor Don, the Depute Chief Executive (Finance) advised that the performance targets were set to ensure a prudent and balanced investment exposure.

The Sub-Committee noted the information contained in the report and approved the revised Statements of Investment Principles for both the Tayside Superannuation Fund and the Tayside Transport Superannuation Fund.

IV INVESTMENT IN TOBACCO

There was submitted Report No 75-2005 by the Depute Chief Executive (Finance) reviewing the position regarding the investment in tobacco following this issue being raised at the Superannuation Sub-Committee meeting on 17th November 2004.

The Report pointed out that the Fund Managers had about 22 million held in tobacco stocks. However, investment consultants, Hymans Robertson, were of the opinion that any attempt to exclude tobacco stocks would only be possible if a legal opinion was obtained. They noted that tobacco stocks had out-performed in recent years.

The Convener noted the comments of Hymans Robertson and proposed that the matter be deferred to the next Sub-Committee meeting to enable legal opinion to be obtained. In response to Councillor Don, the Depute Chief Executive (Finance) stated that the legal opinion would be sought from senior counsel as they needed someone with sufficient knowledge of this very specialised field.

The Sub-Committee agreed to defer this item to the next meeting when legal opinion would be available.

The Sub-Committee resolved under Section 50(a)(4) of the Local (Scotland) Act 1973 that the public and press be excluded from the meeting during consideration of the undernoted items of business as they involved the likely disclosure of exempt information as defined in Paragraphs 4, 6 and 11 of Part I of Schedule 7A of the Act.

V TAYSIDE SUPERANNUATION FUNDS

(a) PERFORMANCE SUMMARIES

There was submitted Report No 76-2005 by the Depute Chief Executive (Finance) reviewing the investment performance of the Main Fund's four Fund Managers (excluding Property) for the quarter to 31st December 2004. The Report also considered the performance of the Transport Fund which shared two of the Managers. The Report compared investment performances of the Fund with the Funds' specific benchmarks which consisted of various marked indices.

The Sub-Committee noted that three Fund Managers had out-performed the benchmark for the quarter to 31st December 2004. The Transport Fund had also out-performed the benchmark for the same quarter. The Report also incorporated the Fund Managers' performance for the year and the three year period to 31st December 2004.

The Sub-Committee noted the information contained in the Report with regard to the performance of the Tayside Superannuation Fund and the Tayside Transport Superannuation Fund and their Fund Managers.

(b) PERFORMANCE SUMMARIES (PROPERTY PORTFOLIO)

There was submitted Report No 77-2005 by the Depute Chief Executive (Finance) reviewing investment performance of the Property Portfolio managed by Schroder Property Investment Management Limited for the quarter to 31st December 2004 and also for the twelve months and three year periods to the same date. The Report compared investment performances with an appropriate benchmark from April 2004.

The total portfolio had outperformed the benchmark for the quarter to 31st December 2004 and also for the twelve month and three year periods to 31st December 2004.

The Sub-Committee noted the information contained in the Report with regards to the Property Portfolio managed by Schroder Property Investment Management Limited.

(c) SUMMARIES OF INVESTMENTS AND TRANSACTIONS - 1ST OCTOBER-31ST DECEMBER 2004

There was submitted Report No 78-2005 by the Depute Chief Executive (Finance) summarising investments and transactions for the period from 1st October to 31st December 2004.

The Sub-Committee noted the information contained in the Report.

VI PRESENTATION

Jenny Buck of Schroder Property Investment Management Limited gave a presentation and apologised for the absence of Geoff Day who had been delayed at Edinburgh by bad weather. Jenny provided an economic overview and referred to recent management changes at Schroder Property which was now headed by William Hill, Head of Property. Consumer spending in the UK was beginning to slow down as were UK house prices. Expectations for the 2004 property market had been exceeded and rental growth was positive in all sectors by the end of the year. Returns were likely to reduce in 2005 whilst the recovery of prime property over secondary property would continue. It was the intention to further reduce exposure to SEPUT.

Jenny answered questions and was thanked by the Convener on behalf of the Sub-Committee.

George REGAN, Convener