Appendix

Ms Margaret Dunleavy

Local Government Pensions Division

ODPM

123 Victoria Street

LONDON

SW1E 6DE

Dear Ms Dunleavy

1

The draft Local Government Pension Scheme and Management and Investment of Funds (Amendment) Regulations 2005

I refer to Bob Holloway's letter of 24 September 2004 and attached draft regulations, which were discussed by the Pension Fund Panel at its meeting on 23 November 2004.

We generally welcome the proposed changes set out in the new draft regulations.

In practice it is unlikely that the Hampshire Fund would need to take advantage of the option for an increased stocklending headroom limit. However, we appreciate that some authorities take a different view and any increase in local discretion is welcome.

We also support the proposal that Statements of Investment Principles should include details of funds' representation policies. The Hampshire Fund's current SIP already covers much of the ground, and the inclusion of more detail on the lines set out in the draft regulations will improve openness and accountability.

We also agree with the principle of a Communication Policy Statement. However, some of the areas specified to be covered are again already dealt with in a section of the Fund's SIP. An extended version of that section would meet the Government's requirements. We would argue that there is no reason why communication policy cannot be covered as part of the SIP, rather than as a separate statement. Would it not be better for all policies to be included in one document?

We are happy that the legal powers in place for the operation of corporate governance and voting policies are sufficient. Currently such decisions are delegated to the managers, who are asked to vote to ensure as far as possible that companies act in accordance with the Stock Exchange's combined code. The managers report quarterly on their voting activities on the Fund's behalf.

Yours sincerely

Jon Pittam