Meeting documents

1

DECLARATION OF INTEREST

No declaration of interest was received by any Member or Officer in respect of any item on the Agenda.

2

MINUTES

The minutes of the meeting held on 27 June, 2008 were confirmed and signed.

3

INVESTMENT MANAGEMENT

The Chairman welcomed the representatives of HSBC Global Asset Management (UK) Limited to the meeting and especially to Mr. Gareth Watts, Client Director who had taken over the role of Ms. Jenine Langrish.  Ms. Langrish had attended the Investment and Contracts Committee for many years on behalf of HSBC.  Members of the Committee wished to note their appreciation to Ms. Langrish for her work.

Submitted - the HSBC Global Asset Management (UK) Limited Quarterly Report for the period up to 30 September, 2008.  A presentation document was presented to the meeting.  Mr. J.V. Owen stated that he would appreciate if an index for the abbreviations used in the presentation document could be made available at future meetings.  

The Investment Management reported that the portfolio showed a return from June to October, 2008 of -28.0%, benchmark of -28.1%.  The closing value of the fund on 30 September, 2008 was £11,726,035.  The value of the fund at present was £10.4m. The fund underperformed its benchmark this quarter, with both asset allocation and stock selection negative for performance but there were indications that relative performance has improved since the quarter end.

Global equity markets deteriorated sharply in September following the collapse of Lehman Brothers and the emergency US government financing for insurance giant AIG.  It was another negative quarter for global equity markets.  The poorest performers were Asia ex Japan and Emerging Markets, both declining over 15%.  Basic materials were the worst performing sector followed by oil and gas.  There were also broad weakness across commodities with concerns about global economic growth.  The third quarter was also difficult period for global bonds.  The bail-out of Fannie Mae, Freddic Mac and AIG: the failure of Lehman Brothers and Washington Mutual in the US were accompanied by rescues of HBOS and Bradford & Bingley in the UK.  Action to ward off the excess of the market declines continue to be taken by governments around the world as numerous banks are taken into public ownership.  The Investment Management continue to believe that equity markets are cheap, and that opportunities may arise to invest on further weakness in these markets.

It was noted that performance was helped by the overweight in the utilities sector but offset by the underweight in consumer goods and overweight in oil and gas.  National Grid performed well as did HSBC, helped by its relatively strong position within the UK banking sector.  Against the current economic backdrop, the portfolio is defensively positioned with a focus on high quality companies with solid balance sheets, strong market positions and supportive valuations.  Opportunities are also arising to invest in companies where valuations are pricing in a collapse in earnings and assumptions of no long term growth.  

The Treasurer asked whether the Investment and Contracts Committee would prefer to revert to quarterly meetings due to the volatile financial markets at present.

Mr. H. Eifion Jones questioned if the Investment Management have considered investing in Corporate Bonds.  The Client Director responded that Corporate Bonds have not performed as well as Bonds but not as poor as equities.  Mr. Jones responded that the Charitable Trust must sustain an annual return from capital of £450k and consideration should be given to investigate the possibilities of investment in corporate bonds.

Mr. J.V. Owen stated that he was unhappy to see the Trust fund decreasing and suggested that some of the capital return should be invested to take advantage of the volatile markets.

Following further discussions it was RESOLVED :-

3.1

to accept the report and to thank the representatives from HSBC Global Asset Management (UK) Limited for their presentation.

3.2

that the Investment and Contracts Committee should meet on a quarterly basis during the uncertainties in the financial markets.

4

EFFECT OF THE ‘CREDIT CRUNCH’ ON THE CHARITABLE TRUST

Submitted - report by the Treasurer in relation to the above.

The Treasurer reported although the market of value of the portfolio has fallen by a quarter, the annual investment income has not fallen to the same degree.  Currently, 17% of the portfolio is invested in fixed interest stocks where it would not be expect a reduction in income.  While some companies may reduce dividends payable in 2009 as a result of the economic downturn, this is not expected to be proportionate to the fall in market value.

The current projected investment income is around £450k.  This compares favourable to the projection of £400k used in the Trust’s revenue budget for the current financial year.  The surplus can be carried forward to offset shortfalls in future years.  It is this investment income which funds the Charitable Trust’s annual grants programme (including the annual grant to Oriel Ynys Môn).  The Treasurer  noted that the outlook for investment income poses no immediate threat to the Charitable Trust’s annual grants programme.  This will need to be reviewed again before adopting a budget for 2009/2010.

In December 2006 the full Charitable Trust requested advise regarding the release of a further £2 million from the capital of the trust in support of regeneration schemes.  The Treasurer advised on the release of £0.32 million, which together with the sum unspent from previous allocations would allow a total of £0.5 million to be allocated to projects.  This sum, like previous regeneration allocations, was to be released from the capital value on the grounds that the value was well above the Trust’s long-term target.  At the time that the £0.32 million was released by the necessary two-thirds majority in December 2007, the value was reported to be around £2 million above target.

Since then the Regeneration Committee has considered criteria to be applied in considering allocations of this money, with a view to advertising in the autumn of 2008.  However, the recent dramatic falls in the value of the investment portfolio now means that it is below the long-term target, and would be lower still once the £0.32m were spent.  The last time this happened, the Charitable Trust decided to freeze the spending from the regeneration fund until the markets recovered.  That precedent would suggest that the present intention to advertise for applications should be suspended, and the allocation again frozen until markets recover.

This comes at a very unfortunate time for regeneration.  European funding for convergence and rural development is about to become available, and it had been the intention that the Charitable Trust funds would be used to match-fund that.  The rationale for doing so is as strong as ever.  The effect of the credit crunch and the global economic downturn might be said to increase the need to spend on regeneration.  Logically, the Charitable Trust cannot continue to spend this money while maintaining its long-term target.  Any decision to spend the money is tantamount to abandoning the target.

The Treasurer further noted that a further complication concerns the Rural Development Plan (RDP) funding.  A total of £300k was awarded to Menter Môn in November 2006, to match-fund European funding, and is conditional on that match-funding being obtained.  This was awarded from the earlier regeneration block and is regarded as committed when calculating the allocation from these funds.

It takes some time for match-funding packages to be put together, and delays are not unusual in dealing with European funds.  However, in July 2008 the Treasurer was able to advise the Regeneration Committee that Menter Môn had won partial approval for their RDP project proposals, which could now go ahead.  Discussions were continuing about the remaining part of the package with a view to seeing what needed to be done to win approval of these.  The Treasurer noted that he has been advised that approval of the remaining funding is forthcoming, subject to some changes of the original proposals.  That makes the proposals different to those originally approved by the Isle of Anglesey Charitable Trust, so they require fresh approval.  It is intended to report back to the next Regeneration Committee (which has approved the original application) on these.

If the Regeneration Committee takes the view that the changes are simply fine-tuning, and that the application still meets the Trust’s original objectives, then the full amount of £300k is still committed to the project.  However, if the Regeneration Committee is not supportive of the changes, it opens up the prospect that the original funding promise would be de-committed in part.  That would add to the unspent allocation of regeneration funds, either to be frozen or to be spent on other schemes if the long-term target were to be abandoned.

The decision in respect of the regeneration funds are fundamental enough to require a decision of the full membership of the Charitable Trust.  The regeneration funds available (totalling £0.5m) have already been released from the endowment by the requisite two-thirds majority of the membership.  A decision to freeze or unfreeze these funds, to abandon the long-term target or otherwise, requires only a simple majority of the Trust membership.  

The Treasurer noted that despite the major setbacks of the credit crunch, there are no immediate setbacks to current allocations.  He expected that all pre-existing approvals to be honoured and next year’s annual grants programme should continue unaffected.  

Mr. H. Eifion Jones stated that the status-quo should remain and that the annual grants allocations together with the committed regeneration funding should be honoured.  He further stated that any new regeneration projects should be suspended until the investment portfolio has recovered.

Mr. Elwyn Schofield stated that he was satisfied that the Charitable Trust will be able to attract the agreed investment income of around £450k, this will allow the annual overall requirements for allocation of funding to Oriel Ynys Môn, Village Halls, Community Facilities, Small Works and Minor Grants.   He noted that the capital of the Trust fund should be secured in line with the agreed benchmark of the full Charitable Trust.

Following deliberations it was RESOLVED to recommend to the full Charitable Trust as follows :-

4.1

that the committed annual grants allocation shall continue;

4.2

that the committed £300k to Menter Môn for regeneration projects should still be set aside;

4.3

not to advertise for new regeneration schemes until the investment portfolio has recovered.

ITEMS TAKEN IN PRIVATE

5

LAND AT RHOSGOCH - UPDATE

Submitted - update report by the Treasurer in relation to the land at Rhosgoch.

The Treasurer reported that there have been several attempts to sell the land at Rhosgoch over many years, which has resulted in the receipt of option fees to the Trust’s benefit, but the land remains in the Charitable Trust’s ownership.  Any disposal of land has to comply with the requirements of the Charities (Qualified Surveyor’s Reports) Regulations 1992.  The main provision is that the surveyor must advise that disposal is for the best consideration available.  

Discussions with potential purchasers continued during 2006 and 2007.  The Charitable Trust had appointed Mr. Ian Carruthers of the Valuation Agency as its qualified surveyor.  Of those parties which had formally expressed an interest, the Trust was left with a single bidder for the land.  Other parties had expressed interests of various kinds at later stages.   At the end of 2007, the Charitable Trust agreed to release up to £20,000 towards a contamination study of the land in the expectation that the Welsh Assembly Government had been prepared to match-fund this and commission the study.  However this has not proceeded since.  No communication has been from the single bidder, either to confirm their interest or otherwise in the land.  The impact of the economic downturn may well be responsible for the lessening of interest and there is little doubt that development prospects have receded, and land values followed them.  

The Treasurer further noted that the trespass on the land by ‘travellers’ in 2007 required court action to move them on.  Barriers were placed at the main entrances after that to deter access and the grazing rights were not let in 2007 because the Trust were deterring access generally.  If the Trust is unable or unwilling to sell the site in the short term, there is a continuing risk of unauthorised access, occupiers liability and the prospect that the site will generate very little income to the Trust.

The site is designated as employment land in the pre-deposit Local Development Plan.  This is consistent with the Charitable Trust’s notion that it has potential for a variety of industrial, energy or tourism uses, each of which could generate employment.  He noted that members of the public have recently put forward the idea that the land should become some sort of amenity land - presumably as a green space rather as employment land.  

The original use of the site by Shell involved some surrounding landscaping, if this tree planting could be extended that might provide some ‘green’ outputs without prejudice to the use of the site for employment purposes.  A well landscaped site might be more attractive to some users.

Following deliberations it was RESOLVED to authorise the Treasurer :-

5.1

to discuss with the Economic Development Unit in relation to the present economic outlook for the area.

5.2

to discuss with the Planning Section in respect of the benefits of landscaping of the site.

6

LAND AT AMLWCH PORT : UPDATE

Submitted - report by the Treasurer in relation to the above.

The Treasurer reported that the Isle of Anglesey Charitable Trust owns land on the western side of the harbour at Amlwch Port, including the historic Mona Mill.  The work on the Dwr Cymru/Welsh Water waste water treatment works has been proceeding during 2008.  As a result of the agreement entered into in 2003 concerning landscaping, an interpretation board, height restriction barrier and other improvements will be made to the Charitable Trust’s land.

As a result of an agreement concerning property rights, the Charitable Trust will have received a fee in return for giving up pre-emption rights and allowing a private right of way over its land, while securing the continuation of the Charitable Trust’s own private right of way through what will now be the site of the waste waster treatment works.   The Charitable Trust’s valuation and legal fees in relation to this matter are also to be reimbursed.

The Treasurer further noted that he has, on behalf of the Charitable Trust, taken interest in the discussions involving the potential regeneration of Amlwch Port.  There is potential, albeit limited, for some proposals for regeneration of the port to affect the Charitable Trust land.  In this context, one possible project has been put forward on the Charitable Trust land which would involve the renovation of Mona Mill for electricity generation.  The Treasurer suggested that the Members of the Committee may wish to visit the site.

RESOLVED to note the report and that the site be visited in due course.

MR. ALED MORRIS JONES

CHAIRMAN