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  1. 1. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 1 The assets of the City Parochial Foundation derive from the BRIEF philanthropy of the people of London. Around 1,400 separate HISTORY charitable gifts and bequests, some of them 400 years old, were held by the 112 parishes within the City of London, to be used for the benefit of the churches or, more often, the poor of those parishes. During the 19th century, the City grew to be a world financial centre and the income of these charities, many endowed with City properties, rose substantially. In contrast, the numbers of beneficiaries fell. Some parishes had no residents at all. On 10 August 1878, a Royal Commission was appointed to investigate the parochial charities of the City of London. Its report resulted in the City of London Parochial Charities Act, 1883. This Act provided that the five largest parishes should continue to manage their own charitable endowments, but that the bulk of the remainder should be administered by a new corporate body, to be known as the Trustees of the London Parochial Charities, with perpetual succession and a Common Seal. The Act further provided that the Charity Commissioners should prepare Schemes for the proper application of these funds. It defined the area of benefit as the City of London and the Metropolitan Police District of London, the largest boundary definition available for Greater London. The outcome was a Scheme promulgated on 23 February 1891 which brought all the endowments together into two funds, a City Church Fund and a Central Fund. Together these constituted the City Parochial Foundation, with the Trustees under the 1883 Act serving as the Foundation's Central Governing Body. In 1986 the Foundation became the Trustee of the Trust for London. At the outset the Trust was endowed with £10m derived from the sale of the Greater London Council’s assets. It targets small locally based community organisations which are independent of larger bodies. The Foundation is governed by the 1891 Central Scheme and various subsequent amending Schemes and orders. At 1 January 2002 a single Common Investment Fund was established to pool the investment assets of the Central and City Church Funds and manage the endowment in a more effective and efficient manner. The entitlement of the two participating funds in the Combined Fund at 1 January 2002 was 60% Central Fund and 40% City Church Fund, such proportions being settled by reference to the ten year historical average of distributable income of each fund prior to that date. The entitlement of the two funds may change over time. By an Order of the Charity Commissioners dated 10 November 2003, the Foundation was authorised to adopt a “Total Return” approach to the management of its investment portfolio. The Trustees made this important change to enable them to exercise more effectively their statutory duty to be even-handed with their treatment of both present and future beneficiaries of the Foundation and elected to initiate this approach with effect from 1 January 2003.
  2. 2. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 2 The Central Fund and the City Church Fund receive funds from the ORGANISATION Combined Fund into their income funds. Use of income from the OBJECTIVES Central Fund is restricted to the area of benefit. It cannot be used for the advancement of religion but may be spent on furthering any AND POLICIES charitable purpose which is directed to the assistance of poor inhabitants in the area of benefit. The income may also be applied to assist poor persons who are for the time being located within the area of benefit. In furtherance of these objects, the Trustees make grants to charitable organisations or projects that work, directly or indirectly, to benefit poor inhabitants of that area. In 1992 the charity applied funds to the conversion of a property to house the Resource Centre (London) Limited then known as the London Voluntary Sector Resource Centre Limited at 356 Holloway Road, London N7. This branch of the charity is itself a registered charity and is incorporated as a company limited by guarantee. The objective of the Resource Centre is to provide office accommodation, and meeting and conference facilities for London voluntary sector organisations. In 1997, the charity took direct control of Bellingham Recreation Project Limited. The Project operates playing fields owned by the Foundation in Lewisham, London SE6, for the benefit of the local community. Income from the City Church Fund, apart from a number of minor prepayments, is applied in the following proportions: one third is given to the City churches within the City of London and two thirds to the six Dioceses of the Church of England, in whole or in part within the area of benefit, in such proportions as are determined by the Church Commissioners. These proportions have always been according to population. The purposes to which the City Church Fund has to be applied are essentially religious including repairs to churches, the maintenance of services and the payment of stipends.
  3. 3. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 3 The 21 Trustees, who make up the Central Governing Body of the TRUSTEES, Foundation, also serve on six main Committees in order to ensure OFFICERS AND that the policies of the Foundation are implemented and that the work is properly managed. The Trustees are appointed by a variety ADVISERS of nominating bodies and only four Trustees are directly appointed by the Foundation itself. Unlike many other grant making trusts, it is guided neither by the spirit of a founder nor by family pride or ethos. It is more akin to a public body. The Trustees are always concerned to take a long-term view, particularly important in relation to property endowments, and to work to ensure that all its activities benefit the poor of London. The Trustee body has an appropriate balance of skills and experience in the field of estates and finance, as well as that of grant-making. A staff team, currently 14, works to the Trustees providing appropriate input into the policy debates, and the means of implementing all the decisions taken. In addition another 6 are employed by the Resource Centre and one at the Bellingham Recreation Project. Whilst the more visible part of the Foundation’s work relates to grant-making, the work of the financial and administrative staff is equally important; any ineffectiveness in that area has the direct consequence of reducing the money available to benefit the poor of London. Efforts continue within the Foundation to develop the staff team as a whole, emphasising the contribution that each and every one makes to the ultimate purpose of the Foundation. The advisers to the Foundation, namely the Solicitors, the Property Investment Managers and Surveyors, the Investment Managers and the Auditors, play a vital role in raising issues and working with the staff on preliminary policy papers. The close collaboration between staff and advisers is important in the light of the demands made upon the voluntary sector through the Charities Act 1993 and other accounting regulations including the Statement of Recommended Practice – Accounting and Reporting by Charities (SORP 2000), with which the financial statements comply. The more collaborative the relationship between the Foundation, Trust and advisers, the more effective the Foundation and Trust become.
  4. 4. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 4 The Trustees (as at 7 May 2004) The Foundation’s Trustees are appointed by the following bodies: Committees The Crown Ms Maggie Baxter (Vice-Chair until 30/01/04, Chair as from 30/01/04) A,E,F,G,I,S Professor Julian Franks A,E,I Mr Peter Williams A, G,I,S Ms Elahe Panahi E,G Mr Nigel Pantling (Vice Chairman as from 30/01/04) A,E,F,G,I,S Corporation of London Vacant Mr Charles Edward Lord G,S Mr Ian David Luder A,F,I Church Commissioners The Archdeacon of London Mr Peter Dale A,E,F,I Council of the University of London Mrs Gillian Roberts A,F,S University College London Professor Gerald Manners (Chairman until 30/01/04) A,E,I,S City and Guilds of London Institute Mr John Barnes G,E,S Bishopsgate Foundation Mr Miles Barber F,I King’s College London Mr John Muir A,F,G,S City Parochial Foundation Mrs Jyoti Munsiff I Mrs Lynda Stevens E,G Mr Albert Tucker F,G Ms Jane Wilmot F,G Association of London Government Cllr Raj Chandarana Greater London Authority Vacant All the Trustees are appointed on a six-year term by their nominating body. Their period of appointment commences on 4 April. Key to Committees A Asset Allocation Committee E Estate Committee G Grants Committee F Finance Committee I Investment Committee S Staffing & General Purposes Committee Principal Officers Clerk to the Trustees Mr Bharat Mehta Director of Grants & Programmes Mr Martin Jones Director of Finance and Administration Miss Carol Harrison Professional Advisers Solicitors Farrer & Co, 66 Lincoln’s Inn Fields, London WC2A 3LH Property Investment Managers and Surveyor CB Richard Ellis, 64 North Row, London W1K 6DA Property Valuers Cluttons, 26-28 Albion Place, Maidstone, Kent, ME14 5DZ Auditors KPMG LLP, 8 Salisbury Square, London EC4Y 8BB Bankers Lloyds TSB Bank plc, Public and Community Sector, 25 Gresham Street, London EC2V 7HN Investment Managers RCM (UK) Ltd, 155 Bishopsgate, London EC2M 3AD S G Asset Management UK Limited, 100 Ludgate Hill, London EC4M 7NL Veritas Asset Management (UK) Limited, Elizabeth House, 39 York Road, London SE1 7NQ Morley Fund Management, 1 Poultry, London EC2R 8EJ
  5. 5. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 5 The charity’s investment powers are governed by a Scheme sealed INVESTMENT on 16 September 1988. Under the Scheme the Trustees are not POWERS required to divide funds in the manner specified in the Trustees Investment Act 1961. The investment powers of the charity apply to both funds. All investments acquired by the Trustees have been acquired in accordance with these powers. TOTAL Over recent years, the Foundation has seen the value of its Endowment Fund grow much faster than the Retail Price Index, RETURN while the increase in its investment income has failed to keep pace. The impact on the Foundation’s beneficiaries has been to put those seeking grants at a disadvantage compared to future beneficiaries, contrary to the Trustees’ statutory duty to maintain an even-handed approach. The Trustees therefore determined to apply to the Charity Commission for permission to change to a “Total Return” approach to investment management. The Total Return approach enables the charity to supplement its investment income with a proportion of the capital gains that have accumulated. To do so, the Trustees are required to identify the “Unapplied Total Return", that is the proportion of its assets n excess of the endowment uplifted for the effects of inflation. The Trustees selected 31 December 1942, the earliest date on which all property owned by the Foundation was valued, as the basis for this calculation. As at 1 January 2003 the Unapplied Total Return represented £77 million of the £158 million in the Endowment Fund. The Trustees then considered the proportion of the Unapplied Total Return that should be retained to cover future possible reductions in the endowment fund. From the balance, they decided to allocate an additional £2 million for grant making for each of the four years beginning 1 January 2003 (adjusted for inflation), subject to annual confirmation. In addition a capital grant of £1.2 million paid during this year to the Bellingham Recreation Project, a wholly owned subsidiary of the Foundation, has been treated as a reduction in the Unapplied Total Return. At the year end, the Unapplied Total Return stood at £69.8m. In reaching these decisions the Trustees have sought professional advice from their investment and property managers. The Trustee body itself includes individuals with wide experience and skills in both investment and financial matters. The Trustees’ objective remains to keep the value of the endowment and the income available for grant giving constant in real terms using the Retail Price Index as the benchmark.
  6. 6. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 6 Incoming Resources REVIEW OF Income from investment properties represented 43% of the Foundation’s incoming resources. The total income from ACTIVITIES investment properties fell from £5,299,699 in 2002 to £4,958,923 in 2003. DURING THE YEAR Bank and other interest fell to £869,276 in 2003 from £1,006,987 in 2002. Income from listed investments rose from £1,636,245 in 2002 to £1,868,691 in 2003. The decrease in bank and other interest related to a decrease in cash holdings and lower interest rates. The equity income was partly offset by the tapering of tax relief. A commentary on the Resource Centre’s and the Bellingham Recreation Project’s activities is given below. Cost of generating income Expenditure on generating income was £704,130 (2002: £945,629). This includes property management costs of £333,994 (2002: £487,348) and investment management costs of £191,462 (2002: £250,029). The latter costs are based on the value of the investment portfolio. Of these management charges, £174,646 (2002: £223,443) has been charged against the endowment funds as relating to those funds. Grants payable Total grants payable in the year were £ 8,876,210 (2002: £7,235,324). Of this amount £ 5,092,005 (2002: £4,245,703) was payable from the Central Fund and £3,784,205 (2002: £2,989,621) was payable from the City Church Fund. Grants made from the Central Fund 2003 is the second year of the present quinquennium 2002-2006 during which the Trustees are allocating grants with the following priorities: • Organisations providing advice, information and individual advocacy; • Organisations developing, promoting and providing education, training and employment schemes; • Organisations that are attempting to develop initiatives that tackle violence and hate crimes against the target groups. The Trustees also appreciate the importance of back up or development work for the voluntary sector and fund the following: • Core Costs and Management Costs; • Policy Change; • Second Tier and Infrastructure Organisations; • Collaborative responses. • Alliance Funding
  7. 7. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 7 The Trustees also have a Small Grants programme and may provide continuation funding for work funded by the Foundation under the previous quinquennial policy. In addition to the grants made from the Central Fund, a capital grant was made of £1,200,000 to the Bellingham Recreation Project. An analysis of grants made from the Central Fund in 2003 other than that to Bellingham is shown in the chart below: The Analysis of Grants by Category Quinquennial Categories 2002 - 2006 Foundation's Advice, initiatives Information and 13% Individual Small Grants Advocacy 1% 33% Second Tier & Infrastructure 8% Policy Change 3% Core Costs Education, 9% Training Schemes to Reduce & Employment /Tackle Violence Schemes /Hate Crimes 24% 9% The policy of making mainly revenue grants was continued with 99% of the grants falling into this category. The boroughs receiving more than £100,000 of grant money were: Barnet, Brent, Ealing, Hackney, Hammersmith and Fulham, Haringey, Hounslow, Islington, Lambeth, Merton, Southwark, Tower Hamlets and Westminster. An analysis of grants made from the Central Fund is published in the Annual Grants Review which is available from the Clerk on request. A reconciliation of grants shown in that publication is given below: 2003 2002 £ £ Grants detailed in Grants Review 5,229,234 4,555,708 Grants written back (135,431) (263,125) Other (1,798) (46,880) Net Central Fund grants 5,092,005 4,245,703 No. of grants made 205 183 _____ _____
  8. 8. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 8 Grants made from the City Church Fund The Trustees divide the income from this fund between the Church Commissioners, the six Metropolitan Dioceses and the City Churches Grants Committee in accordance with the City Parochial Foundation’s governing instruments. One third of the income is allocated to the City churches and, after a contribution of £96,000 towards prior charges made by the Church Commissioners, two thirds of the income is payable to the six Dioceses in the proportions listed below: Diocese % London 44.37 Rochester 6.18 Chelmsford 15.30 Southwark 29.05 Guildford 2.27 St Albans 2.83 As given in note 6, the grants payable from the City Church Fund are:- 2003 2002 £ £ Church Commissioners and Dioceses 2,522,803 1,993,081 City Churches Grants Committee 1,230,262 965,400 Schedule VII payments to City Churches 31,140 31,140 £2,989,62 £3,784,205 1 Support Costs The Trustees allocate funds to the salaries and assisted costs of employing a team of field staff and their assistants. It is the Trustees’ view that proper assessment and monitoring of charitable priorities in London cannot be achieved without this work. In addition the Trustees employ consultants to help, support and make more effective the grants made from the Central Fund of the Foundation. The costs of such work and a representative proportion of overheads are charged to Support costs. Management and administration Expenditure on Management and Administration was £207,768 (2002: £243,722). Resources expended These costs have been split across the various headings under Resources expended. The Trustees have decided not to split realised and unrealised gains on listed investments, as allowed by the Charity Commission. THE RESOURCE The performance of the Resource Centre, a subsidiary of the Foundation, is shown within the Restricted Funds of the charity.
  9. 9. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 9 CENTRE Some 2,300 organisations used the Centre during the year and the conference facilities remain in high demand. The accounts of the Resource Centre show incoming resources of £929,684 (2002: £867,142) and resources expended of £846,613 (2002: £780,349) making net incoming resources £83,071 (2002: £86,793), after payment of £283,851 (2002: £220,698) to the Foundation as rent for the premises. The full statutory accounts of the Resource Centre are available from the Clerk to the Foundation at 6 Middle Street, London EC1. The Foundation owns property in Lewisham, London SE6. The BELLINGHAM Bellingham site comprises a 12 acre playing field. The playing fields are the direct responsibility of the Foundation through its RECREATION subsidiary, the Bellingham Recreation Project Limited, a registered charity. PROJECT LIMITED The Project had net incoming resources of £4,384,533 (2002: £140,145) after receipt of grants of £1,250,121 (2002: £51,653) from the Foundation. The Project has successfully completed and opened a new sports and healthy living centre on the site at Easter 2004. The principal funders are Sport England, the Foundation itself and Lewisham Borough Council. The Bellingham Recreation Project Management Company Limited, a wholly owned subsidiary of the Project, did not trade during the year (2002: winding up activities £125). The results of the Project are incorporated in these Financial Statements as a branch of the Foundation as defined by SORP Accounting and Reporting by Charities. INVESTMENT There are no restrictions on the Foundation’s power to invest. The investment strategy is set by the Trustees and takes account of POLICY demand for funds. The summary of the policy is given on pages 28 and 29. INVESTMENT The Trustees employ the services of property investment managers. PROPERTIES CB Richard Ellis Limited (formerly CB Hillier Parker Limited),
  10. 10. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 10 manage the property investments on a non-discretionary basis and have been set targets to reduce the size of the Foundation’s portfolio in absolute terms, as opportunities arise; to diversify the nature of the portfolio (which is currently heavily focused on City of London properties); and to increase the yield of the portfolio to a level that is more consistent with the Investment Property Databank norm. The investment property portfolio was valued at 31 December 2003 by Cluttons. This has been shown in the accounts at an open market value of £65,418,686 (2002: £76,229,183). Following a property disposal of a long leasehold in the year of £825,000 showing a realised loss of £16,000, the remaining portfolio showed an unrealised loss of £10 million. Trustees have established the IPD index as a basis for monitoring the portfolio’s performance. The results for the previous year saw a negative total return (-2.5%), which placed the Foundation’s performance 65th out of 67 in the chosen IPD sample. The results for this year also showed a negative total return (-6.0%), which compares to an estimated IPD Annual Index total return of 11%. This poor performance was almost entirely due to the concentration of the portfolio on a single sector, the City of London. So long as the Foundation maintains a preponderance of property in the City the performance of the portfolio will reflect the volatile economic performance of the financial companies located there. The Foundation’s progress in achieving its overall objectives is summarised in the table below: Position as at 31 December 2000 2001 2002 2003 Portfolio value £107.9m £86.5m £76.2m £65.4m % in Central London 91% 81% 78.5% 79% Annual income £5.3m £5.5m £5.3m £5.0m INVESTMENT The Foundation acquired further units in the Falcon Property Unit Trust at a cost of £1,398,950 bringing the total value at the year PROPERTY UNIT end to £3,466,714. The total return has been 13.4% (2002: 10%). TRUSTS INVESTMENTS The Foundation employs the services of investment managers.
  11. 11. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 11 RCM (UK) Ltd managed part of the assets of the Combined Fund through index tracking Common Investment Funds. The portfolio thus replicates the performance of relevant market indices for different asset classes and aims to match the performance of the WM Charity Fund Index for the portfolio as a whole. The total return for the year has been 17.5% (2002: -17.8%). SG Asset Management UK Limited managed listed investments of the Combined Fund and had an active mandate to out-perform the FTSE and other Global indices over rolling three year periods. The total return for the year has been 20.5% (2002: -22.2%). Veritas Asset Management (UK) Limited managed a smaller fund (originally £10 million) against the Global FT World Enquity Index on a slightly more ambitious target. The total return has been 10.3% (2002: -14.9%). The market value of the passive endowment held as listed investments including uninvested cash rose to £27,550,073 as at 31 December 2003 from £24,312,839 at 31 December 2002 in line with improved market conditions. The market value of the active listed investments including uninvested cash rose to £40,877,601 at 31 December 2003 from £35,611,273 at 31 December 2002. The Trustees also invest liquid funds in the money market. At the year end £18,196,554 of Combined funds were held in a cash portfolio which was managed by Morley Fund Management. The total return for the year has been 3.45% (2002: 4.02%). TRUST FOR The Trust for London is a charity connected to the Foundation but whose accounts are not consolidated with the Foundation. It was LONDON formed in 1986. It has an expendable endowment fund which at 31 December 2003 stood at £14,966,782. This fund produced an income of £630,969 in 2003 (2002: £628,584). Grants are applied to projects which target small locally based community organisations with charitable purposes and which are independent of larger bodies. There have been no material events since the year end. EVENTS SINCE THE YEAR END ACCOUNTING There were no changes in accounting policies. POLICIES
  12. 12. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 12 RESERVES It is the Trustees’ policy to distribute fully that amount adjudged by them to be the maximum under total return distributable. POLICY The Trustees intend to continue a measured diversification of their FUTURE assets out of investment properties into listed investments. They also intend to continue their existing policy of diversifying their DEVELOPMENTS property portfolio out of Central London office property and into other forms of property investment. They will monitor the income returns from different asset classes and have regard to the effect of asset allocation on the income available for grant making. The Trustees have undertaken a restructuring of the Foundation’s constitution with a view to seeking incorporation by registering as a charitable company limited by guarantee at the end of 2004. Law applicable to charities in England and Wales requires the GOVERNANCE Trustees to prepare financial statement for each financial year which give a true and fair view of the state of affairs of the charity AND INTERNAL and of the group at the end of the year and of its financial activities during the year. In preparing those financial statements Trustees CONTROLS are required to: • select suitable accounting policies and then apply them consistently; • make judgments and estimates that are reasonable and prudent; • state whether applicable accounting standards and statements of recommended practice have been followed, subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on the going concern basis. The Trustees have overall responsibility for ensuring that the charity has appropriate systems of control, financial and otherwise. They are responsible for keeping accounting records which disclose with reasonable accuracy at any time the financial position of the
  13. 13. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 13 charity and which enable them to ensure that the financial statements comply with the Charities Act 1993 and have been properly prepared in accordance with the Central Scheme approved by Her Majesty in Council on 23 February 1891 and subsequent amending Schemes and orders. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the charity and to prevent and detect fraud and other irregularities. The systems of control are designed to provide reasonable, but not absolute assurance against material misstatement or loss. They include: • an annual budget approved by the Trustees; • regular consideration by the Trustee of financial results, variance from budgets, non-financial performance indicators and bench marking reviews; • delegation of authority and segregation of duties; • identification and management of risks. The Trustees have, with advice from their auditors, introduced a formal risk management process to assess business risks and implement risk management strategies. This involved identifying the types of risks the Foundation faces, categorising them in terms of potential impact and likelihood of occurrence, and identifying means of mitigating the risks. As part of the process the Trustees have reviewed the adequacy of the Foundation’s internal controls. By order of the Trustees Ms Maggie Baxter 7 May 2004
  14. 14. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 14 REPORT OF We have audited the financial statements on pages 15 to 27. THE This report is made solely to the charity’s trustees, as a body, in accordance with section 43 of the Charities Act 1993 and regulations made under INDEPENDENT section 44 of that Act. Our audit work has been undertaken so that we might state to the charity’s trustees those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent AUDITORS TO permitted by law, we do not accept or assume responsibility to anyone other than the charity and the charity’s trustees as a body, for our audit work, for THE TRUSTEES this report, or for the opinions we have formed. OF THE Respective responsibilities of Trustees and Auditors You are responsible as the Trustees for preparing the trustees’ report and, as described on page 13, the financial statements in accordance with applicable CITY United Kingdom law and accounting standards. Our responsibilities, as independent auditors, are established in the United Kingdom by Statute, the PAROCHIAL Auditing Practices Board and by our profession’s ethical guidance. FOUNDATION We have been appointed as auditors under section 43 of the Charities Act 1993 and report in accordance with regulations made under section 44 of that Act. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Charities Act 1993. We also report to you if, in our opinion, the trustees’ report is not consistent with the financial statements, if the charity has not kept proper accounting records or if we have not received all the information and explanations we require for our audit. We read the other information accompanying the financial statements and consider whether it is consistent with those statements. We consider the implications for our report if we become aware of any apparent mis- statements or material inconsistencies with the financial statements. Basis of opinion We conducted our audit in accordance with Auditing Standards issued bv the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the Trustees in the preparation of the financial statements, and of whether the accounting policies are appropriate to the charity’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material mis-statement, whether caused by fraud or other irregularity or error. In forming our opinon we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements give a true and fair view of the charity and group’s state of affairs, as at 31 December 2003 and of their incoming resources and application of resources, in the year then ended and have been properly prepared in accordance with the Charities Act 1993. KPMG LLP Registered Auditors Chartered Accountants 8 Salisbury Square London EC4Y 8BB 7 May 2004
  15. 15. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 15
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  28. 28. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 28 Objective SUMMARY OF The Foundation’s permanent endowment requires Trustees to preserve the capital value of their investments in real terms whilst THE maximising the income available to their beneficiaries without taking undue risks. INVESTMENT The Foundation is authorised by the Charity Commission to pursue a POLICY total return approach to investment. This gives the Foundation greater flexibility in the allocation of investment returns between the trust for investment and the trust for application for the purposes of the charity. The Trustees seek to be even-handed as between present and future beneficiaries Investment Objectives Paying due regard to investment risks, the Investment and Estate Committees seek to manage the Foundation’s investment and property portfolio with a view to maximising its total return, that is, the income generated by, and the capital growth of, the Foundation’s portfolio. The Asset Allocation Committee considers and determines targets for the future allocation of the endowment between the various asset classes. Administration The Central Governing Body retains the Foundation’s overall power of investment but has delegated investment powers to its Asset Allocation, Investment and Estate Committees. The Asset Allocation Committee has delegated authority to make decisions regarding the medium and longer-term objectives of the Foundation’s investment policies, and the short and medium term objectives of the Investment and Estates Committees The Investment and Estate Committees in turn have delegated authority to appoint, monitor and, if necessary, dismiss the Foundations’ Investment Managers and/or Property Advisers. They review investment performance at regular intervals. These Committees are supported by staff of the Foundation. Asset allocation The policy is powerfully informed by the recognition that, in the past and over the longer term, equity investments have provided better total returns than other investment classes but acknowledges that there are constraints upon the speed at which the portfolio can be prudently diversified away from a base that was historically 100 per cent property. The current targets to be achieved by 31 December 2006 by asset class are: - • 35 to 45 per cent property including property unit trusts • 35 to 45 per cent equities • 10 to 20 per cent cash and gilts whilst maintaining a directly managed property portfolio of between £62 and £77 million at December 2002 values. Investment in any hedge instruments, derivatives, foreign currencies, warrants or other leveraged securities or investments would require the specific approval of the Investment Committee/Asset Allocation Committee.
  29. 29. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 29 Performance The Foundations’ performance targets are: • For investments - to outperform or match set benchmarks over rolling three year periods • For property - to diversify the portfolio away from City of London offices, raise the yield and move closer towards the total return of similar-sized portfolios as recorded by IPSD indices • For property unit trusts - to outperform the IPD All Monthly and Quarterly Valued Funds. The performance of the Foundation’s investments is reviewed half- yearly by the Investment and Estate Committees against these agreed targets. Investment Manager and Property Advisers There are currently two discretionary investment managers, one index-tracking investment manager and a cash manager. The objective of the larger of the two discretionary managers is to outperform the FTSE, S&P, Topix and Saloman Bros. indices over the given asset classes by one per cent (net of fees) on a rolling three year basis. It has been agreed that equities form 70 per cent to 90 per cent of the portfolio. The objective of the smaller discretionary manager is to outperform the FT World Equity index by two per cent (gross of fees) on a rolling three year basis. The objective of the index-tracker manager is to match the performance of the WM Charity Fund Index (ex property) on a rolling three year basis. The objective of the cash manager is to outperform the three month London Interbank Bid Rate (LIBID) by 0.75 per cent (net of fees). The maximum allowable portfolio duration is three years. The objectives of the property adviser are to reduce the portfolio in absolute terms, over time, and as attractive opportunities arise; to diversify the property mix in the portfolio away from City offices; and to raise the yield and move closer towards the total return of similar sized portfolios as recorded by IPD Indices. The suitability of the managers and advisers is reviewed every five years. Monitoring Half-yearly, the Asset Allocation Committee reviews the current asset mix of the Foundation’s portfolio in order to monitor the progress of the Investment and Estate Committees in moving towards the agreed asset allocation targets. At regular intervals, the Investment and Estate Committees: - • Review their portfolios • Review the current economic outlook and investment plans of the Investment Manager, Property Manager or Property Unit Trusts respectively • Receive and consider statistics on the investment performance of their portfolios
  30. 30. City Parochial Foundation Trustees’ Annual Report and Consolidated Financial Statements 2003 page 30

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