Summary of Actions for: Finance & Investment Committee Meeting (at Cazenove)

Date:21st January 2016

Present: Michael Morley (MJM) – Chair; Martin Rutledge (MR); David Lyon (DL); Alan Higgins (AH)

In attendance: Ray Lock (RL) –CE and Secretary to the meeting;Kirsteen Waller – Research and Support

Manager

Item / Topic / Action
1 / Introduction by the Chairman / The Chairman welcomed everyone to the meeting.
2 / Declaration of Conflicts of Interest / No conflicts of interest were recorded.
3 / Record of Decisions from last meeting and actions arising / Item 0. For transparency of long-term performance, ‘Annualised returns since inception (%)’ had been introduced into the Investment Manager one page summary reports. On the FIC’s examination of these figures, Sarasin’s 7.8% return against benchmark 8.6%, and Cazenove’s 6.2% against benchmark 7.8% showed Cazenove to have performed less well, butnot to a concerning degree.
4 / Financial management, end of FY 2015, cash flow forecast for 2016 / Subject to the 3 points below, the FIC examined and were happy with the end of year accounts and 2016 cash flow forecast, noting in the latter the first planned drawdownsin July and September 2016 by each of the Investment Managers:
  • On the Financial Commentary under ‘Balance Sheet’, the note concerning the Fixed Asset Figure increase incorrectly stated that all other IT Equipment belongedto ABF. Action RL
  • The capitalization policy as set out in last year’s accounts was to only capitalize purchases £5k and above. Treatment of the laptop purchase would therefore be revised. Action RL
  • Under Income & Expenditure ‘Governance and Management Costs’,the ‘Hospitality/ Directors Expenses/Staff travel’item had doubled compared with 2014. The FIC requestedthat the Governance Committeeapply the“reasonableness test”, set against the new SORP 2015’s reporting requirements. Action RL
The FIC briefly discussed and agreed that Committee and Board decisions should not feel fettered by cash flow forecasts and stressed that the FIC is the servant of Strategy and not the master of it.
5 / Preparation of Annual Report and Audit / It was noted that:
  • The March Board would see a draft of the Annual Report (AR).
  • Judith Miller from Sayer Vincent would be present at the April FIC.
  • A one-off additional fee to Sayer Vincent had been agreed to prepare the AR template with reworked figures, in line with SORP 2015.

6 / Review of Financial Section of Risk Register (RR) / The FIC were content that the Financial Section of the Risk Register could go to the Governance Committee prior to the March Board.
7 / FIC considerations for Strategy Review
(3 February) / The FIC noted the focal areas of the Strategy Review day:
  • Theory of Change. A review of progress and direction of travel.
  • Grant Making Processes. Introduction of issues and discussion of options.
  • Influence. Discussion of who FiMT is seeking to influence and the main channels for doing so.
  • Resourcing and Priorities. Seeking Board agreement on these.
Following a brief discussion on how the FICwishes to contribute to the Review, it was agreed that the FIC would be in “listening mode” and would consider the impact on the investment approach following the Strategy Review,should there beany changes in the Trust’s ambition.
8 / Reminder dates for 2016 / The FICnoted remaining2016 meeting dates:
21st April – 1030 at Sarasin
21st July – 1000 at Coutts & Co
20th October – 1000 at Coutts & Co
9 / Any Other Business / The FIC noted the 2017 dates which the FIC Chairman had seen in advance:
19th January – 10.30am, Cazenove
20th April – 10.30am, Sarasin
20th July – 10am, Coutts
19th October – 10am, Coutts
10 / Date of Next Meeting / Date of Next Meeting – 21stApril–1030 at Sarasin(Juxon House, 100 St Paul’s Churchyard, London EC4M 8BU). Sarasin will present their Investment Report at the end of the main meeting, with a working lunch from 1200.
11 / Investment performance / The FIC discussed and was content with the one-page summaries.
Post Main Meeting
12 / Investment Report presentation by Cazenove / The Chairman extended a welcome Cazenove representatives, Alex Bailey and Nathalie Krekis, before inviting them to present their investment report.
Cazenove summarised key changes in the financial markets from 2015, relevant to the performance of FiMT’s investments, which arenoted below. In short, despite a wretched start to 2016, not much had changedand that which had was largely anticipated:
  • China. Slowing growth and a move towards a more service-based economy. Some currency devaluation.
  • US. Raised interest rates.
  • UK. Slowed growth but still growing at an adequate pace for the economy.
  • Corporates. Biggest changes felt in this sector which holds a pessimistic outlook on the world economy.
  • Oil prices. Falling prices have not been a good thing; it has affected consumer spending, hit jobs and contributed to continuing low inflation.
  • Sterling. Although Sterling is weak it is not hurting FiMT investments as all the Trust’s spend is in the UK.
  • Risk appetite has diminished.
Cazenove’s response has been to raise the cash portfolio to 7% to ensure the cash needed for FiMT’s activity in 2016-2017 is easily accessible to avoid having to sell investments at the wrong time. The FIC understood the drivers for this weight of cash, and speculated whether the UK could enter negative interest rate territory.
Following Cazenove’s summary, there followed a discussion on the implications of a possible Brexit. Cazenove confirmed that any Brexit would take at least two years to negotiate and that international investment would be the safest option in that case, and that currently Cazenove’s forecast did not need to be revised.
Prepared by
Ray Lock
CE / Released by
Michael Morley
Chairman FIC