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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.
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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.
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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.
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The Treasurer asked whether the Investment and Contracts
Committee would prefer to revert to quarterly meetings due to the
volatile financial markets at present.
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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.
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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.
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Following further discussions it was RESOLVED :-
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3.1
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to accept the report and to thank the representatives
from HSBC Global Asset Management (UK) Limited for their
presentation.
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3.2
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that the Investment and Contracts Committee should
meet on a quarterly basis during the uncertainties in the financial
markets.
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4
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EFFECT OF THE ‘CREDIT CRUNCH’ ON THE
CHARITABLE TRUST
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Submitted - report by the Treasurer in relation to the
above.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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Following deliberations it was RESOLVED to recommend to the full Charitable Trust as
follows :-
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4.1
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that the committed annual grants allocation shall
continue;
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4.2
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that the committed £300k to Menter Môn
for regeneration projects should still be set aside;
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4.3
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not to advertise for new regeneration schemes until
the investment portfolio has recovered.
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5
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LAND AT RHOSGOCH - UPDATE
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Submitted - update report by the Treasurer in relation to
the land at Rhosgoch.
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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.
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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.
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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.
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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.
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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.
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Following deliberations it was RESOLVED to authorise the Treasurer :-
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5.1
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to discuss with the Economic Development Unit in
relation to the present economic outlook for the area.
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5.2
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to discuss with the Planning Section in respect of
the benefits of landscaping of the site.
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6
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LAND AT AMLWCH PORT : UPDATE
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Submitted - report by the Treasurer in relation to the
above.
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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.
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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.
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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.
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RESOLVED to note the report and that the site be
visited in due course.
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