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3.1
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to increase the capital value and, as far as
possible, the annual income of the fund in line with
inflation;
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3.2
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to obtain an annual income of £450,000
and as far as possible, an annual increase in accordance with the
rate of inflation."
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It was also resolved at that meeting :-
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" that the following powers be exercisable
only by a resolution of the Council acting
as Trustee carried by at least two thirds of its elected
members :-
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(a) (While the Council is the sole Trustee of
the Trust) the power to pay or apply the whole or any part or parts
of the capital of the Trust Fund comprised in the Trust in
promotion of its Charitable Purposes ;
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(b) (Where the Council is not the sole
Trustee of the Trust) the power to concur in any decision of the
Trustee to pay or apply the whole or any part of parts of the
capital of the Trust Fund comprised in the Trust in promotion of
its Charitable Purposes;
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(c) The power to amend or rescind all or any part
of parts of this Resolution."
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These two decisions restrict the extend to which the
Charitable Trust can spend its capital, almost as if it had a
permanent endowment. Even if the target of keeping up with
inflation were to be abandoned, it would still be necessary for
two-thirds of all Trust members to approve any release of
capital.
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It is important to note the distinction between the
long-term target and targets which may be adopted in the medium or
short-term. The aim of keeping up with inflation is a
long-term target, which should be viewed as an overall strategy.
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The Treasurer further reported that the benchmark was
agreed with the present investment managers on their appointment in
1997 as being an agreed way of achieving the Trust's long-term
target. At that time, a significant step was made in that the
Trust decided to invest part of the fund overseas for the first
time.
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In 2001 the Sub-Committee reviewed whether this particular
benchmark and approach to investment was still the most
appropriate. It was advised that the move to invest overseas
had indeed been beneficial and the Sub-Committee resolved not to
make any change to the asset allocation policy or related
benchmark.
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The benchmark agreed with the Managers is clearly
subordinate to the long-term objective. If the Trust were to
change its long-term objective to abandon capital growth
altogether, and instead maximise investment income, it would be
appropriate to switch investments mainly to fixed interest stocks
and to change the benchmark to reflect that. It should be
noted that the managers' performance can only be monitored by
reference to the benchmark.
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The Treasurer drew attention to the Charity Commission
guidance applicable to Trusts with a permanent endowment, which
fundamentally relates to the balance between present and future
beneficiaries. For a Trust whoes endowment is not permanent
there is still a choice to be made between the needs of present and
future beneficiaries , in this case no restriction.
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The adoption or amendment of a long-term target is a
policy decision for the Trust members to take, reflecting their
long-term vision for the Trust and its beneficiaries. in
considering this, it is appropriate to take account of any
applicable guidance.
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The Treasurer reported that the present long-term target
of matching inflation is an appropriate target for securing an
even-handed treatment of present and future beneficiaries.
When the Charitable Trust earlier decided, by the necessary
two-thirds majority, to release money from the capital, they were
advised of the need to balance the needs of present and future
beneficiaries. The Trust felt able to do so because
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Ÿ
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During the lifetime of Objective One funding there is a
one-off opportunity to draw in match-funding from this source.
That is, funding from the Charitable Trust is able to achieve
more during this period because it will attract other
funds.
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Ÿ
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Spending now on regeneration ought to have a lasting
benefit, which will assist future beneficiaries.
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At the time of these earlier decisions to release capital
(£0.2m in 1998 and £1.8m in 2001) the trust was, in
effect, taking a total return approach to investment. It had
sufficient capital growth in excess of the target to be able to
release the money from capital while still being above the
long-term target. Only one hurdle had to be crossed. At
the time the excess above the target was believed to be sufficient
to allow this to be done, unfortunately the unprecedented falls on
stock markets since then have undone it. The position now is
that both hurdles needs to be crossed if more money is to be
released from capital i.e. that the long-term target be lowered
together with the need of achieving the two-thirds
majority.
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Mr. H. Eifion Jones suggested that consideration should be
given to invest in high yield shares with a possibility of a higher
return on capital for the Charitable Trust.
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Following deliberations it was RESOLVED :-
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3.1
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to maintain the status quo and this would leave the
present long-term target unchanged. The balance of the
£1.8m could be released when market conditions
allow.
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3.2
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that the following matters should be further
discussed with the HSBC Investment Managers :-
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Ÿ
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how investment fees were charged in relation to the
HSBC pooled funds
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Ÿ
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possibility of investment in High Yield
Shares
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4
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REVIEW OF TRUST FUND VALUE
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Submitted - a report by the Treasurer in relation to the
above.
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The Treasurer reported that the Charitable Trust on 10
July, 2001 agreed by the necessary two-thirds majority to earmark
£1.8m from past capital growth towards regeneration schemes.
At that time, the value of the Trust fund was £4.2m
above the long-term target so it was possible to earmark the
£1.8m from past capital growth in excess of the target with a
significant sum left. Since then, the market values have
fallen. At the meeting on 26 February, 2003 the Trust
resolved to honour the commitment to £0.82m which had been
allocated towards specific projects but to 'freeze' the remaining
£0.98m until such time as market values recover.
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A graph was attached to the report which gives a projected
position of capital value at the end of March 2004. This is
based on recent market values assuming no change to the end of the
month, neutral assumptions as to the Trust's other assets and
liabilities and projected inflation. The graph shows
that there has been a recovery since the nadir of February 2003
such that the frozen portion of the graph is now partly above the
target line.
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The Treasurer reported that investing in gilts that mature
in 2007 would give a fairly certain total return of 4.5% annually
over that period. If a project inflation was considered at
2.5% per annum this would beat inflation. However, that is a
total return, including investment income and the Trust is
currently spending about 4% of its annual value (although it is
questionable how sustainable this is in the long run). This
guaranteed return would not be enough to meet current revenue
spending and meet the inflation target.
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In contrast, the present benchmark has a central projected
total return of 7.6% per annum - enough to meet 2.5% inflation and
revenue spending. However as noted in the Asset Managers
letter attached to this report, this approach invites risk of
underachievement and a possibility of overachievement. The
range of risk indicated is 12.3% or around £1.5 million in one
year. So if the Trust were to release £0.7m now it is
quite feasible (but not likely) that within a year it would be
below target.
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Based on the central projected return of 7.6%, inflation
at 2.5% and revenue spending equal to a 4% return, the benchmark
would add further capital growth above target of £0.3m by
2007.
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Against this background, there is no decision now that can
release money from the £0.7m (frozen but above target) without
risking falling below the long-term target once more. The key
decision for members of the Trust to take is whether they consider
it worth the risk to release part of the sum.
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The Treasurer further report that another possible means
of releasing funds is to look at a balance of funds released in
1998. When in 1998 the Trust received by the necessary
two-thirds majority to release £200,000 from the Trust's
capital a proportion was towards sport and leisure schemes.
Not all the amount was allocated towards specific projects
and the sum of £71,297.24 remains in a capital
reserve.
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Given that the original intention was in sport and leisure
it might be appropriate for this money to be looked at again in the
context of the suggestion that the Trust should make a contribution
towards the proposed staging of the Island Games. Since this
sum has already been through the two-thirds majority procedure its
diversion could be agreed by a simple majority of the
Trust.
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It was noted that the Sub-Committee were advised at the
last meeting of a one-off reimbursement of £70,000 arising
from a correction to the way management fees were calculated.
This is revenue income which needs to be taken into account
in projecting the Trust's budget for 2004/2005, but it may also be
possible to release some of this receipt towards specific
schemes.
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Following lengthy deliberations it was RESOLVED :-
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4.1
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that this Sub-Committee should meet with the Strategy
Review Panel to discuss potential regeneration schemes in
depth.
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4.2
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to recommend to the full Charitable Trust that
:-
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Ÿ
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that £350,000 of capital growth should be
released towards regeneration schemes.
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Ÿ
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to receommend to the Strategy Review Panel that the
£71,297.24 which remains in a capital reserve, which had been
allocated by the full Charitable Trust towards sports and leisure
schemes, should be made available to support a number of schemes
throught the Island.
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Ÿ
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to note that this Sub-Committee would support, a
decision in principle by the Trust, for financial assistance
towards the potential staging of the Island Games on Anglesey in
2009.
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Ÿ
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to note that a further sum may become available from
the £70,000 windfall once account has been taken of the
Trust's revenue account budget for 2004/2005.
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Submitted - a report by the Treasurer reporting that a
Company has contacted the trust recently to express their
continuing interest in the site at Rhosgoch.
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It was noted that a meeting was held with representatives
of the Company and the Chairman and Vice-Chairman of the Charitable
Trust, the Chairman and Vice-Chairman of this Sub-Committee, the
local member, the Secretary and Treasurer of the Trust and the
County Council's Corporate Director of Planning and
Environment.
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The Treasurer reported that following the meeting, he has
written to the Charity Commission to seek advice on the situation
where the Trust has previously dealt with this company and
previously received surveyors' advice on the same site. A
meeting with the Charity Commission needs to arranged with the
Treasurer, Solicitor and elected members of this Sub-Committee in
attendance.
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The Chairperson reported that any future meetings with
potential interested Companies in the Rhosgoch site should be
attended by all Members of this Sub-Committee.
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The Secretary highlighted that the Company had noted in
its correspondence that the £450,000 option fee payments
already paid to the Trust should be considered as part payment for
the site when negotiations were progressed.
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5.1
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to agree that the Chairperson and Vice-Chairperson of
this Sub-Committee, Mr. John Roberts, Treasurer and a Solicitor for
the Legal Services Unit should meet representatives from the
Charity Commission to seek advice on the situation where the Trust
has previously dealt with this Company.
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5.2
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to request the Secretary to write to the Company
indicating that the £450,000 previously paid as option fees
would not be considered as part payment for the site.
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