Appendix 2

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The Local Government Pensions Committee

Secretary: Mike Walker

CIRCULAR

Please pass on sufficient copies of this Circular to your Treasurer/Director of Finance and to your Personnel and Pensions Officer(s) as quickly as possible

No. 172 - MAY 2005

(1) LGPS TRUSTEES' CONFERENCE

(2) TRUSTEE TRAINING "FUNDAMENTALS 2005"

Purpose of this circular:

1. This Circular has been issued to advise authorities of:

a) a forthcoming LGPS Trustees' conference that has been organised by the Local Government Pensions Committee (LGPC), and

b) the 4th running of a series of "Fundamentals" regional training events for elected members and others who sit on Pension Committees and/or Panels.

2. Although primarily aimed at elected members, both the conference and training events announced in this Circular will be of interest to other persons who attend Pension Committees, Panels or sub-Committees etc. (e.g. employing authority, Trade Union and pensioner representatives).

Employers' Organisation for local government

Layden House, 76-86 Turnmill Street, London EC1M 5LG

Executive Director: Rob Pinkham

Registered in England No 2676611

Registered office: Local Government House, Smith Square, London SW1P 3HZ

(1) LGPS TRUSTEES' CONFERENCE

Background:

3. Responding to several requests from elected members, the LGPC staged an inaugural annual trustees' conference in York in September 2003. The conference was specifically aimed at elected members with responsibility for the Local Government Pension Scheme in their area, and a number of speakers addressed issues from a "trustee" perspective. Following the success of the inaugural event, the second annual trustees' conference was held in October 2004 with a "communications" theme.

4. Delegates have not been limited to elected members and the conference has been attended by many officers also who either support pension committees or who hold pension fund investment or administration responsibilities. The conference also acts as an annual update for those persons who have been through the LGPC's "Fundamentals" course, keeping them up-to-date with developments in the local government pension world.

2005 Conference Details:

5. The 2005 conference is to be held on 20^th and 21^st October 2005 at the prestigious Crowne Plaza Hotel, Wellington Street, Leeds commencing with a buffet lunch at 12:30 p.m. The first of the afternoon sessions will commence at 13:45. Following the afternoon programme there will be a drinks reception in the evening followed by a private conference dinner with an after-dinner speaker. Overnight accommodation and breakfast at the Crowne Plaza is included in the conference fee (see cost and booking details below). The second day consists of a full morning's programme concluding with a buffet lunch for delegates at 13:00 p.m. This format has been praised by previous delegates to the conference, allowing plenty of time for travel and avoiding unnecessary extra nights' accommodation expense.

6. The theme for the 2005 Conference is "The Future". At the time of preparing this circular there is much uncertainty as to the current and future form and design of the Local Government Pension Scheme. We are preparing a programme with a number of questions in mind:

a. With the proposed retrospective revocation of the April 2005 stocktake changes at hand, what impact does this have on the proposed "New Look" LGPS for 2008 and beyond?

b. All over the world, public sector schemes have already seen significant reforms in order to remain affordable and sustainable. How does the UK compare? With final salary schemes in sharp decline, what realistic alternatives are there, if any?

c. Climate change has formed a huge part of SRI activity among pension funds by lobbying to reduce environmental damage caused by companies. How big a part can we play?

d. With Local Authorities' funding levels as they now are, just what is the impact on asset allocation going forward?

e. Post Myners and the Pensions Act 2004, what is the future shape of training going to be for Councillors?

f. To meet the needs of ever-increasing efficiency savings, what can we do to increase scheme administration performance?

6. Once again, our event sponsors, Barclays Global Investors, Hymans Robertson LLP and Prudential, will be providing speakers and we have also lined up a speaker on behalf of the Office of the Deputy Prime Minister. In addition, we have several industry experts in the areas of climate change, investment strategies and computerised pension scheme administration.

7. A conference leaflet including details of the final programme of the above events will be issued with another circular in June, which will also include details of a half-day workshop on Currency Management scheduled for 27^th September 2005 in London. If you require additional copies of the leaflet and Circular please e-mail [email protected] with your requirements.

Cost and Booking

8. The venue for the 2005 conference is the Crowne Plaza Leeds, which has easy access to the M621, M1 and M62 motorways. It is 10 miles from Leeds/Bradford Airport and only a five-minute walk away from Leeds City Centre and its train station. All rooms are en-suite and air-conditioned. The conference fee in all-inclusive. All meals from arrival to departure, overnight accommodation at the Crowne Plaza, and all delegate materials are included in the conference fee of £375 plus VAT. Due to the strictly limited number of places available, early booking is highly recommended.

9. Booking for the conference is via the events on-line booking system which can be found on the Employers' Organisation website at www.lg-employers.gov.uk/events. When booking, you will need full delegate details, including the delegate's mailing address if this is different to that to which the invoice for payment is to be sent.

10. If you experience any difficulties in using the on-line booking system or do not have access to the internet, please contact Elaine English, LGPC Executive Officer, on 020 7296 6745.

(2) TRUSTEE TRAINING "FUNDAMENTALS 2005"

Background:

11. Fundamentals is an A-Z bespoke Local Government Pension Scheme training course for elected members, and has been attended by over 300 delegates in the past three years. The course was remodelled in 2004 and has been updated for 2005.

12. Despite these revisions, the aim of the LGPC remains unaltered; that is to deliver a single training course covering all aspects of the Scheme, including both "Benefits" and "Fund" administration so that elected members can demonstrate compliance with the first of the ten CIPFA principles, meet the objectives espoused in the Office of the Deputy Prime Minister's report on the stock-take of the Local Government Pension Scheme, and adhere to those principles set out in the Pensions Act 2004 that relate to the knowledge and understanding requirements that appertain to trustees of occupational pension schemes.

Details of Fundamentals 2005

14. The fundamentals course is run on an annual basis, and provides an insight into LGPS "trusteeship" for new Committee members whilst also serving as an update/refresher course for longer-serving members. The course is of three days duration, spread over a number of months.

15. Fundamentals 2005 is being delivered at four locations around the United Kingdom as follows:

Cardiff (Marriott) Day 1 13 October 2005

Day 2 10 November 2005

Day 3 1 December 2005

Edinburgh (Apex International) Day 1 25 October 2005

Day 2 15 November 2005

Day 3 6 December 2005

Leeds (Crowne Plaza) Day 1 27 October 2005

Day 2 17 November 2005

Day 3 8 December 2005

London (Layden House) Day 1 17 October 2005

Day 2 7 November 2005

Day 3 29 November 2005

17. The outline programme for the 3-day course is attached as Appendix A, although some flexibility on the course content is built in to include any major developments in the world of local government pensions between now and the time the courses run. Fundamentals 2005 is designed as a three-day course, with identical material being delivered at each location. It is therefore possible to attend the course by visiting different locations should delegates' diaries not allow attendance on all three days at a particular location. Any differences in scheme rules as they apply in England, Wales and Scotland will be highlighted at each venue.

Certificate of Attendance

18. Attendees at all three sessions will receive an attendance certificate signed on behalf of the Local Government Pensions Committee. It is believed that attendance at all three days of the course will satisfy at least the minimum of training required to satisfy the first of the ten CIPFA principles.

Cost and Booking Details:

19. The cost of attending each day is only £140 + VAT, making the cost of the three-day course £420 + VAT. The fee includes all refreshments, lunch and course materials.

Early booking is highly recommended as places at each venue are strictly limited. Booking for Fundamentals 2005 is via the events booking facility on the Employers' Organisation website at www.lg-employers.gov.uk/events. When booking, you will need full delegate details to hand including the address to which the invoice for payment is to be sent.

20. If you experience any difficulties in using the website booking facility or do not have access to the internet, please contact Elaine English, LGPC Executive Officer, on 020 7296 6745.

Further Training Opportunities

21. If you wish to comment or make suggestions for future training events please contact Tim Hazlewood, LGPC Training & Development Manager, by telephone on 01530 242777, by fax to 01530 244771, or by email to

[email protected] .

Tim Hazlewood

LGPC Training and Development Manager

6 May 2005

Appendix A

Fundamentals 2005 - Day 1

9.30 Registration and Coffee

9.50 Introduction to the Programme

10.00 The Benefits Framework "Past and Present"

· The changing LGPS 1922 - 1995; how the scheme developed over the years

· Interaction with State Provision; the impact of National Insurance, SERPS and S2P

· The 1997 Scheme - a core scheme plus discretions; a look at the comprehensive benefit structure of the scheme

· The Scheme in 2005 - how the scheme has altered in the past few years.

· Administering Authority and Employing Authority Discretions - how many are there and who is responsible for them

· Private Companies - how outsourced staff can retain access to the scheme

· Pensions for Councillors

11.15 Coffee Break

11.30 The Investment Framework

· The Local Government Pension Scheme (Management and Investment of Funds) Regulations 1998 - the statutory framework for investments

· CIPFA Principles - a look at the ten investment principles

· Statement of Investment Principles

· Interaction with the Funding Strategy Statement

12.00 Corporate Governance

· Approach to Corporate Governance

· Voting

· Activism and Engagement

· Institutional Shareholders Committee principles

· Socially Responsible Investment

12.30 Lunch

1.30 to 4:00 (Break at 2:45)

Fixed - Income and Equity Markets

· Why invest in Fixed Income and Equity Markets?

· Long Term Investment Performance of Equities and Fixed Income

Features of Bonds, Government and Corporate

· Bond Prices and Coupons

· Bond Yield to Maturity

· The Bond Market

· The Yield Curve

What is Equity?

· Features of Ordinary Shares

· Prices and Dividends

· Future Growth vs Current Earnings

· Sectors and Markets in the Equity Market

· Equity Indices

Brief description and characteristics of each of these assets

· Return characteristics

· Market and Credit Risk

· Liquidity

4.00 Close

Fundamentals 2005 - Day 2

9:30 Registration and Coffee

9:45 Valuations

· How are valuations done?

· What assumptions are used?

· What are the inputs and outputs?

· What things can affect the results?

· Inter-valuation monitoring

Funding Strategy Statements

· The requirements

· Funding targets

· Smoothing

· Amortization periods

· Stepping

· Dealing with multiple employers

· Constructing the Statement

· Monitoring the Statement

11:15 Break

11.30 Setting the Benchmark and Asset/Liability modelling

· What is the benchmark?

· Why does it matter?

· General principles of asset/liability modelling

· The assumptions

· Different approaches to setting the benchmark

12.30 Lunch

13.30 Communication Strategies

· Purpose and effect

· Vehicle for satisfying disclosure

· Costs of "selling" the scheme

· Managing early retirement

· A look at some good practice initiatives

o Scheme Member Communications

o Representation on Committee / Committee Structure

o Participating Employer Involvement

14:00 Derivatives, Hedge Funds and Private Equity

· What are Derivatives?

· Futures Contracts, what, how and why?

· Options Contracts, what, how and why?

· Triumphs and Disasters in the Derivatives' Market

What Are Hedge Funds?

· Hedge Fund Portfolio Strategies

· Fund of Funds concepts

· Measurement of Risk and Return

· Stock Picking vs `Stat Arb'

15:00 Break

15:15 Private Equity and Venture Capital

· What are these areas?

· How risky are they?

· How do they fit in a pension portfolio?

16:00 Close

Fundamentals 2005 - Day 3

9:30 Registration and Coffee

9:45 Duties and Responsibilities of Committee Members

· The Legal Background

· Duties and responsibilities

· What happens when things go wrong?

11:00 Break

11:15 The Future for the LGPS?

· Is the scheme affordable?

· Is it sustainable?

· Can and should it survive?

· What has ODPM got in store for the LGPS (England & Wales)?

· What has the SPPA got in store for the LGPS (Scotland)?

12.45 Lunch

13:45 (Break at 14:45)

Introduction to Portfolio Management

· Portfolios and Portfolio Construction

· Portfolio Concepts

· Risks and Diversification

· Optimal Portfolios

Portfolio Management

· Portfolios in the context of local authority pensions

· Manager Selection

· Managing Manager Relationships

· What to Ask for in a Manager

15:55 Course Review and Further Information

16:00 Close

Distribution sheet

Chief executives of local authorities (3 copies)

Pension managers of administering authorities

Pension managers (outsourced) and administering authority client managers

Officer advisory group

Local Government Pensions Committee

Trade unions

ODPM

COSLA

SPPA

Regional Directors

Private clients

Website

Visit the EO's website at:

www.lg-employers.gov.uk/pensions/index.html

Copyright

Employers' Organisation for Local Government (the EO). This Circular may be reproduced without the prior permission of the EO provided it is not used for commercial gain, the source is acknowledged and, if regulations are reproduced, the Crown Copyright Policy Guidance issued by HMSO is adhered to.

Disclaimer

The information contained in this Circular has been prepared by the LGPC Secretariat, a part of the Employers' Organisation. It represents the views of the Secretariat and should not be treated as a complete and authoritative statement of the law. Readers may wish, or will need, to take their own legal advice on the interpretation of any particular piece of legislation. No responsibility whatsoever will be assumed by the Employers' Organisation for any direct or consequential loss, financial or otherwise, damage or inconvenience, or any other obligation or liability incurred by readers relying on information contained in this Circular. Whilst every attempt is made to ensure the accuracy of the Circular, it would be helpful if readers could bring to the attention of the Secretariat any perceived errors or omissions. Please write to:

LGPC

Employers' Organisation for local government

Layden House

76 - 86 Turnmill Street

London, EC1M 5LG

or email:[email protected]

tel 020 7296 6744

fax 020 7296 6739