Administered by Middlesbrough Council
AGENDA ITEM 4
1 PURPOSE OF THE REPORT
1.1 To inform Members how the Investment Advisor’s recommendations are being implemented.
1.2 To provide information with regard to stock selection strategies, including a detailed report on transactions undertaken.
1.3 To present an independently produced valuation of the Fund’s assets.
2 RECOMMENDATION
2.1 That Members note the report.
3 FINANCIAL IMPLICATIONS
3.1 Decisions taken by Members, in light of information contained within this report, will have an impact on the performance of the Fund.
4 IMPLEMENTATION OF INVESTMENT ADVISOR’S ADVICE
4.1 The Investment Advisor spoke about the Government’s Quantitative Easing programme, the impact it had had on financial markets and the likely consequences when it was wound down. He believed that bond yields would rise but that equity markets would be more resilient.
The Advisor felt that the Fund’s current investment strategy, favouring growth assets over protection assets, was the appropriate one and should be maintained. He continued to favour equity markets in the Far East and UK with a more stock specific focus on US and Europe. He also continued to favour an increase in the Fund’s property portfolio as suitable opportunities arose.

4.2 Summary of Market Returns by Index in this Period:
Key Market Index Total Returns
UK Equity (FTSE All Share)
US Equity (S&P 500)
European Equity (Bloomberg 500)
Japanese Equity (Topix 500)
Hong Kong Equity (Hang Seng)
Australian Equity (ASX 200)
UK Gilts (FTSE All Gilt)
%Local
+5.5
+9.6
+5.1
+9.5
+1.9
+3.8
-1.3
%Sterling
+5.5
+7.2
+4.8
+0.2
-0.1
-2.8
-1.3
Source: Bloomberg LLP
4.3
Fund Manager’s Commentary
Markets moved higher over the quarter. Not quite the usual year end rally but a steady move upwards to the Christmas festivities.
The only blip in the slow and steady rise to the year end came in the middle of
December when the Federal Reserve reduced the amount of asset repurchases by
$10bn a month. This was, however, very short lived with markets finishing the year on a generally positive note.
5 TRANSACTION REPORT
5.1
It is a requirement that all transactions undertaken are reported to the Investment
Panel. Appendix A details transactions from the period 30th September 2013 to
31st December 2013.
5.2
There was net investment of approximately £6m in the period, this compares to net investment of £29m in the previous reporting period. Cash balances increased from £142m to £149m.
5.3
Our observations on an asset class basis are as follows:
(i) UK Bonds
In accordance with the Advisor’s recommendations we continue to steer clear of further sovereign debt exposure. A substantial proportion of the portfolio is currently being used as a proxy for interbank deposits.
We continue to review on a daily basis our exposure to corporate names.

(ii) Overseas Bonds
Activity remains focussed on adjusting the size of the portfolio to better reflect the new benchmark. This is being achieved as much as possible by stealth, as bonds mature. However, there was a conscious decision to reduce our Euro weighting.
(iii) UK Equity
The rising market was not generally the best for increasing our weightings in the UK. However opportunities did arise to add to our positions in banks, utilities and real estate
(iv) Overseas Equity
United States
Opportunities were few and far between in the US in the last quarter of the year. We did manage to add slightly to our positions after the Federal
Reserve reduced its repurchasing programme by $10 bn in the middle of
December.
Europe
We reduced our exposure to Europe over the period due to a maturity of a small cap fund.
Asia Pacific and Japan
In accordance with Investment Advice we continue to favour developing markets. We reduced our underweight position in South Korea.
6 FUND VALUATION
6.1
The Fund Valuation details all the investments of the Fund as at 31 st December 2013, and is prepared by the Fund's custodian, BNP. This is attached (Appendix B). The total value of all investments, including cash, is £3,016 million. This compares with the last reported valuation, as at 30th September 2013 of £2,926 million.
6.2
An analysis of the summary valuation shows the Fund’s percentage weightings in the various asset classes, compared with the Fund’s customised benchmark and the average of Local Authority funds (per WM 31 st December 2013).

Asset Allocation Summary
FUND BENCHMARK AVERAGE
11 18
40 35
42 35
5 10
2 2
100 100
CONTACT OFFICER: Andy Wilson
Acting Fund Manager
Tel (01642) 729022
For data sources and methodology of return calculations please call the contact officer
21
26
38
7
8
100