Contact: Bevis Ingram, ext 7508

1 Summary

1.1 The following decisions are sought:

· to approve the accounts of the Trusts for 2001/02 as set out in appendix to the attached report.

· to authorise the County Treasurer to switch funds from the Dresdner Accumulating Fund to the Dresdner UK Equity Income Fund.

2 Reason

2.1 Annual approval of Trust accounts required by charity law.

3 Other options considered and rejected

3.1 Not applicable.

4 Conflicts of interest declared by the decision maker or a member or officer consulted

4.1 Not applicable.

5 Dispensation granted by the Standards Committee

5.1 Not applicable.

6 Reason (s) for the matter being dealt with if urgent

6.1 Not applicable.

Approved by: Date:

...............................

Councillor J Waddington

Contact: Bevis Ingram, 01962 847508

7 Introduction

7.1 The Executive Member for Recreation and Heritage acts as Trustee for the following:

· the Allen and Curtis Museum Foundation

· the Red House Foundation

· the Flora Twort Trust

· the Tasker Trust.

7.2 In addition Mr Mark Breedon is a Trustee for the Allen and Curtis Museum Foundation. He has been sent a copy of this report.

7.3 By law, the Trustees are required to approve the annual accounts of the Trusts, which must then be sent to the Charity Commissioners. The accounts for the year 2001/02 are attached at Appendix 1. These include the value of each Trust's investments at book cost. The recent market value of investments is shown, for information, in Appendix 2.

7.4 The various Trusts hold investments in a variety of managed funds, all geared to long term investment. These managed funds should spread risks, while giving access to professional investment management. The funds invested in have not been changed for a number of years as the transaction costs of selling units and reinvesting in other funds, added to the uncertainty of not finding a "better" performing fund, all militate against change. Paragraph 2, below, indicates that the performance of the equity-based funds in 2001/02 was disappointing in some cases, but this largely reflects the poor returns on the UK stockmarket in the year which continue to affect many charities. The trustees should continue to bear in mind the long-term nature of equity investment. Now would not be an appropriate time to sell these investments. Many fund managers are forecasting a rebound in markets once the situation in Iraq becomes clearer.

8 Management of the Investments

The Allen and Curtis Museum Foundation

8.1 The Foundation holds units in Charibond and Charifund.

8.2 Overall, The Allen and Curtis Foundation's income rose by £2, or just under 0.1%, as the increase in income from Charifund almost matched the reduction in Charibond's distribution and the interest on cash balances.

8.3 Charibond is a fixed interest based fund, investing in UK Government bonds (gilts) and corporate bonds. It should provide a higher income than funds such as Charifund which is invested in equities and convertible stocks. As an equity-based fund, Charifund should provide capital growth and rising income over the longer term.

8.4 Charibond's income distribution fell by 1.3%, from 7.7p per share in 2000/01 to 7.6p in 2001/02. As a result of gilt yields falling further in 2001/02 the income distribution was cut for the third year running. The capital value per Charibond share fell during 2001/02, by 2.5%, from 129.7p per share in 2000/01 to 126.4p. This was better than the fall of 4.7% in Charibond's benchmark, the FTSE British Government All Stocks Index. However, the capital value has risen since then by 3.7% to 131.1p at 31 December 2002.

8.5 Charifund increased its income distribution from equities by 2.1%, from 53.2p per share in 2000/01 to 54.3p per share in 2001/02. The capital value of each Charifund share rose by 3.2% over the year, compared with a fall of 3.2% in the FTSE All Share Index. Charifund's portfolio is heavily weighted towards shares that provide a high income yield. These shares performed much better than shares generally in 2001/02. However, since March 2002 the Charifund holding has dropped in value by 20.1%.

8.6 The lower income from interest on cash balances reflects the fall in average base rates between 2000/01 and 2001/02.

The Red House Foundation

8.7 The Red House Foundation's total income in 2001/02 fell by £53, or 1.5%, compared with 2000/01. The main sources of income are Charibond, Charinco and the Dresdner Exempt Trust. The fall in income from Charibond has been explained in the section on the Allen and Curtis Foundation.

8.8 Charinco is another fixed interest fund. The distribution remained unchanged from 2000/01 at 11.0p per share. The capital value of each Charinco share fell by 3.7%, slightly below the 4.7% fall in the FTSE British Government All Stocks Index. However, since March the value of the Charinco holding has risen by 4.9%, so its value has fully recovered.

8.9 The Dresdner Exempt Trust aims to provide healthy capital growth over the very long term. In 2001/02 the income distributed fell by 7.8% and the capital value per share fell by 5.3%. This fall in value was greater than the fall of 3.2% in the FTSE All Share Index. This reflects Dresdner's growth-based investment style, which they believe will outperform over the long term. During the year the Dresdner Exempt Trust converted to Dresdner UK Equity Fund Accumulation shares. As a result of this, income is now being added to the value of the holding, rather than paid over as cash income to the Trust. The investment policy, however, remains unchanged. The aim is to invest in a broad-based portfolio of mainly UK companies. The trustees should bear in mind that the conversion to an accumulation share will reduce the Trust's income. In order to replenish this income, the County Treasurer would advise switching to another managed fund where income is distributed. In this case we advise the Dresdner UK Equity Income Fund.

8.10 The Red House Foundation also holds smaller investments in three equity-based Abtrust funds. The Abtrust North American Unit Trust dropped in capital value by 7.4%, the Abtrust UK Growth Fund by 8.9% and the Abtrust Equity Income units fell by 4.7%.

Flora Twort Trust

8.11 The Trust's investments are held in Charibond and Charinco. As explained in the previous sections, income from Charibond fell by 1.3% in 2001/02 whilst the income distribution from Charinco remained unchanged. This resulted in the Trust's income for 2001/02 falling by 1.2%. The market value of the Trust's investments fell, by an overall figure of 3.1% during 2001/02 but has risen 4.3% in the nine months to 31 December 2002.

Recommendation

1 That the Trustees approve the accounts as set out in Appendix 1.

2 That the Trustees agree to replace the Dresdner Accumulating Fund with the new Dresdner UK Equity Income Fund and that authority be given to the County Treasurer to set this up.

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