Contact: Bevis Ingram, ext 7508

1. Summary

1.1 The following decision is sought:

· That the accounts of the Museums Trusts for 2002/03, as set out in Appendix 1 of the attached report, are approved.

2. Reason (s)

2.1 Annual approval of the accounts of the Trusts is required and 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 (no financial transactions).

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

2.3 The Museums Trusts support the work of individual Museums within the Museums Service. In doing so they support Hampshire County Council's corporate strategy insofar as the Museums Service's work supports the corporate strategy.

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 None.

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: (signature) Date: (date of decision)

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

Councillor J Waddington

Contact: Bevis Ingram, 01962 847508

1. Introduction

1.1 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.

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

1.3 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 2002/03 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.

1.4 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, with the exception of the Dresdner UK Equity Fund, 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 2002/03 was very disappointing, but this reflects the very 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.

2. Management of the Investments

The Allen and Curtis Museum Foundation

2.1 The Foundation holds units in Charibond and Charifund.

2.2 Overall, the Allen and Curtis Foundation's income rose by £17, or just over 0.5%, as the increase in income from Charifund outweighed the reduction in interest on cash balances.

2.3 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.

2.4 Charibond's income distribution remained unchanged from 2001/02 at 7.6p per share. The capital value per Charibond share rose during 2002/03, by 3.4%, from 126.4p per share in 2001/02 to 130.7p. This was slightly below the increase of 4.5% in Charibond's benchmark, the FTSE British Government All Stocks Index. However, the capital value has dropped since then by 3.8% to 125.7p at 30 November 2003.

2.5 Charifund increased its income distribution from equities by 1.4%, from 54.3p per share in 2001/02 to 55.1p per share in 2002/03. The capital value of each Charifund share fell by 24.2% over the year, compared with a fall of 29.8% in the FTSE All Share Index. Charifund's portfolio is heavily weighted towards shares that provide a high income yield. These shares were less badly hit than shares generally in 2002/03. Since March 2003 the Charifund holding has risen in value by 18.5%.

2.6 The lower income from interest on cash balances reflects the fall in average base rates between 2001/02 and 2002/03.

The Red House Foundation

2.7 The Red House Foundation's total income in 2002/03 fell by £679, or 19.6%, compared with 2001/02. The main sources of income are Charibond and Charinco. The fall in income follows the conversion of the Dresdner Exempt Trust into Dresdner Equity Fund Accumulation units. As a result of this, income was added to the value of the holding rather than paid over as cash.

2.8 Charinco is another fixed interest fund. The distribution fell by 2.3% from 11p in 2001/02 to 10.75p per share in 2002/03. The capital value of each Charinco share rose by 4.9%, slightly above the 4.5% rise in the FTSE British Government All Stocks Index. However, since March the value of the Charinco holding has fallen by 4.7%.

2.9 The Dresdner UK Equity Fund aims to provide healthy capital growth over the very long term. In 2002/03 the capital value per share fell by 28.3%. This fall in value was slightly less than the fall of 29.8% in the FTSE All Share Index. However, it performed less well than the Charifund holding held by the Allen Curtis Trust. Dresdner pursue a more adventurous growth-based investment style, which they believe will outperform over the long term. In October 2003 the Dresdner UK Equity Fund Accumulation shares were switched to the Dresdner UK Equity Income Fund following approval by the Trustees last year. The investment policy, however, remains unchanged. The aim is to invest in a broad-based portfolio of mainly UK companies.

2.10 The Red House Foundation also holds smaller investments in three equity-based Aberdeen funds. The Aberdeen North American Unit Trust dropped in capital value by 32.3%, the Aberdeen UK Growth Fund by 34.1% and the Aberdeen Equity Income units fell by 24.3%.

Flora Twort

2.11 The Trust's investments are held in Charibond and Charinco. As explained in the previous sections, income from Charibond remained unchanged in 2002/03 whilst the income distribution from Charinco fell by 2.3% in 2002/03. This resulted in the Trust's income for 2002/03 falling by 1.4%. The market value of the Trust's investments rose, by an overall figure of 4.1% during 2002/03 but has fallen 4.3% in the eight months to 30 November 2003.

Recommendation

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