GENERAL MILLS FOUNDATION. Financial Statements. May 31, 2014 and (With Independent Auditors Report Thereon)

Transcription

1 Financial Statements (With Independent Auditors Report Thereon)

2 Table of Contents Page Independent Auditors Report 1 Statements of Financial Position 3 Statements of Activities 4 Statements of Cash Flows 5 6

3 KPMG LLP 4200 Wells Fargo Center 90 South Seventh Street Minneapolis, MN Independent Auditors Report The Board of Trustees General Mills Foundation: We have audited the accompanying financial statements of the General Mills Foundation (the Foundation), which comprise the statements of financial position as of, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ( KPMG International ), a Swiss entity.

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material, respects the financial position of the General Mills Foundation as of, and the results of its operations and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles. Minneapolis, Minnesota August 29,

5 Statements of Financial Position Assets Cash and cash equivalents $ 2,987,144 3,264,830 Investments, at fair value (note 3): Fixed income investments 5,847 5,847 Private equity funds 20,459 42,922 Other investment funds 47,944,987 43,787,817 Common/collective trust 42,534,768 38,639,913 Total investments 90,506,061 82,476,499 Due from General Mills, Inc. and subsidiaries 100,000 25,100,000 Prepaid expenses 12,926 Purchased interest receivables Total assets $ 93,606, ,841,484 Liabilities and Net Assets Liabilities: Grants payable (note 4) $ 6,414,594 7,470,827 Accrued expenses 6,006 Total liabilities 6,414,594 7,476,833 Net assets: Unrestricted 87,191, ,364,651 Total liabilities and net assets $ 93,606, ,841,484 See accompanying notes to financial statements. 3

6 Statements of Activities Years ended Unrestricted Revenues and investment income: Contributions from General Mills, Inc. and subsidiaries $ 100,000 25,100,000 Contributions of operating costs from General Mills, Inc. and subsidiaries 360, ,690 Interest and dividend income 695, ,667 Net realized and unrealized gain on investments 11,366,923 13,821,319 Net revenues and investment income 12,523,194 39,783,676 Expenses: Grants approved and paid, including gift matching contributions of $2,059,646 and $2,108,664 in 2014 and 2013, respectively 21,683,430 26,367,387 Grants approved but unpaid 6,503,767 7,476,532 Operating costs 360, ,690 Other 148, ,979 Total expenses 28,696,127 34,322,588 Increase (decrease) in net assets (16,172,933) 5,461,088 Net assets at beginning of year 103,364,651 97,903,563 Net assets at end of year $ 87,191, ,364,651 See accompanying notes to financial statements. 4

7 Statements of Cash Flows Years ended Cash flows from operating activities: Increase (decrease) in net assets $ (16,172,933) 5,461,088 Adjustments to reconcile increase (decrease) in net assets to net cash used in operating activities: Net realized and unrealized gain on investments (11,366,923) (13,821,319) Changes in assets and liabilities: Purchased interest receivables (26) 107 Prepaid expenses (12,926) Due from General Mills, Inc. and subsidiaries 25,000,000 (5,000,000) Grants payable and other accrued expenses (1,062,239) 6,893,533 Net cash used in operating activities (3,615,047) (6,466,591) Cash flows from investing activities: Purchase of investments (681,614) (491,116) Proceeds from sale of investments 4,018,975 5,092,463 Net cash provided by investing activities 3,337,361 4,601,347 Net decrease in cash and cash equivalents (277,686) (1,865,244) Cash and cash equivalents at beginning of year 3,264,830 5,130,074 Cash and cash equivalents at end of year $ 2,987,144 3,264,830 Supplemental disclosure of cash flow information: Cash paid (refunded) during the period for taxes $ 60,000 (6,288) See accompanying notes to financial statements. 5

8 (1) Description of Organization The General Mills Foundation (the Foundation) focuses on grant making and gift matching. Generally, the Foundation grants are targeted in the areas of hunger and nutrition wellness, education, family services, and arts and culture. (2) Summary of Significant Accounting Policies (a) Basis of Presentation The accompanying financial statements have been prepared under the accrual basis method of accounting in accordance with U.S. generally accepted accounting principles (GAAP). Under the provisions of Accounting Standards Codification (ASC) 958, Not-for-Profit Entities, net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. As of and for the years ended, the Foundation had no temporarily or permanently restricted net assets. Accordingly, net assets of the Foundation and changes therein are classified as unrestricted. No restrictions are placed on investments other than a requirement for approval by the board of trustees. The Foundation s portfolio is principally managed by trustees who have discretion over investments. The investments in the accompanying financial statements are stated at fair value. Revenues are reported as increases in unrestricted net assets unless use of the related asset is limited by donor-imposed restrictions. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments are reported as increases or decreases in the unrestricted net assets unless their use is restricted by explicit donor stipulation or by law. (b) Adoption of New Accounting Standards In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No , Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (ASU ). The amended guidance of ASU enhances disclosures about financial instruments and derivative instruments that are either (i) offset in the statements of financial position or (ii) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in the statements of financial position. The requirements of ASU were effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The adoption of ASU did not have a material impact on the Foundation s financial statements. In October 2012, the FASB issued ASU , Technical Corrections and Improvements. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update were effective for fiscal periods beginning after December 15, The adoption of ASU did not have a material impact on the Foundation s financial statements. 6 (Continued)

9 (c) (d) (e) Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. Risks and Uncertainties The Foundation s assets are held in a variety of investments. Investments in general are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investments, it is reasonably possible that changes in the values of the investments will occur in the near term and that such changes could materially affect the amounts reported in the statements of financial position. Investments The Bank of New York Mellon is the trustee and custodian of the Foundation s investments. Investment managers each manage a portion of the investments and make investment decisions for the assets for which they are responsible within specific guidelines established by the Foundation s trustees. Transactions and assets of each of the investments are accounted for utilizing the following accounting policies: Investments are valued as follows: Fixed income investments are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service/vendor. These prices are based on observable market data for the same or similar securities, including quoted prices in markets that are not active, or matrix pricing or other similar techniques that use observable market inputs, such as benchmark yields, expected prepayment speeds and volumes, and issuer ratings. Common/collective trusts are valued at unit values provided by investment managers, which are based on the fair value of the underlying investments. They have a redemption frequency ranging from daily to quarterly and a redemption notice period ranging from daily to 60 days. There are no unfunded commitments to such funds at May 31, Private equity funds are valued at fair value, which is generally based on the net asset value or capital balance as reported by the partnership/joint venture subject to the review and approval of investment managers and their consultants. Distributions are classified according to descriptions provided by the partnership/joint ventures. As there is not a liquid market for some of the private equity investments, realization of the estimated fair value of such investments is dependent upon transaction between willing sellers and buyers. There are no unfunded commitments to such funds at May 31, (Continued)

10 Other investment funds consist of a commingled fund that is valued based on the net asset value or capital balance as reported by the investment manager and a mutual fund that is valued by the trustee at the unadjusted closing prices from a national exchange on the valuation date. Dividend income is recorded on the ex-dividend date. Interest income and administrative expenses are recorded on the accrual basis. Purchases and sales of securities are recorded on a trade-date basis. Realized gains and losses on disposition of investments are recorded on the basis of average cost. Deposits to and withdrawals from each investment are made at fair value determined as of the end of the business day preceding the transaction. (f) (g) (h) Contributions The Foundation receives contributions from General Mills, Inc. and subsidiaries based on its operating results. Contributions are typically approved prior to the Foundation s year-end but are paid subsequent to its year-end and, therefore, are recorded as a receivable at May 31, 2014 and Statements of Cash Flows For purposes of the statements of cash flows, the Foundation considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Federal Income Tax Status The Foundation is classified as a tax-exempt organization under Section 501(c)(3) and is a private foundation under Section 509(a) of the Internal Revenue Code. The Foundation is subject to a 2% federal excise tax on net investment income and unrelated business income tax associated with certain investments. Under the Tax Reform Act of 1969, the Foundation is required to make certain minimum distributions in accordance with a specified formula. At May 31, 2014, the Foundation was in compliance with those requirements. The Foundation has investments that potentially generate unrelated business income. The Foundation has recorded tax on this income, pursuant to Section 511 of the Internal Revenue Code, in the accompanying statements of activities as other and in the accompanying statements of financial position as prepaid expenses. GAAP requires Foundation management to evaluate tax positions taken by the Foundation and recognize a tax liability (or asset) if the Foundation has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The Foundation management has analyzed the tax positions taken by the Foundation, and has concluded that as of May 31, 2014, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Foundation is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax 8 (Continued)

11 periods in progress. The Foundation management believes it is no longer subject to tax examinations for years prior to (i) (j) Grant Appropriations Grants are recorded as expense when approved by the Foundation, except when the grants are conditional as defined by the requirements of ASC , Contributions Made. As of May 31, 2014 and 2013, the Foundation had no conditional grants. Cancellation of grants occurs principally when the grantees do not meet the grant terms. There were no cancellations during the years ended. Subsequent Events Subsequent events have been evaluated through August 29, 2014, the date the financial statements were available to be issued. (3) Investments Investments are carried at fair value and realized and unrealized gains and losses are reflected in the statements of activities. The investments fair value, cost, and net unrealized gain (loss) were as follows at May 31, 2014: Net unrealized Fair value Cost gain (loss) Investments: Fixed income investments $ 5,847 5,847 Private equity funds 20, ,494 (178,035) Other investment funds 47,944,987 35,606,443 12,338,544 Common/collective trust 42,534,768 25,075,728 17,459,040 Total $ 90,506,061 60,886,512 29,619,549 Following is a summary of changes in relationships between carrying values and cost of investment assets for fiscal year 2014: Fair value Cost Net gain End of year $ 90,506,061 60,886,512 29,619,549 Beginning of year 82,476,499 63,290,074 19,186,425 Unrealized net gain for the year 10,433,124 Realized net gain for the year 933,799 Net realized and unrealized gain on investments for the year $ 11,366,923 9 (Continued)

12 The investments fair value, cost, and net unrealized gain were as follows at May 31, 2013: Net unrealized Fair value Cost gain (loss) Investments: Fixed income investments $ 5,847 5,847 Private equity funds 42, ,531 (882,609) Other investment funds 43,787,817 34,924,829 8,862,988 Common/collective trust 38,639,913 27,433,867 11,206,046 Total $ 82,476,499 63,290,074 19,186,425 Following is a summary of changes in relationships between carrying values and cost of investment assets for fiscal year 2013: Fair value Cost Net gain End of year $ 82,476,499 63,290,074 19,186,425 Beginning of year 73,256,527 66,379,192 6,877,335 Unrealized net gain for the year 12,309,090 Realized net gain for the year 1,512,229 Net realized and unrealized gain on investments for the year $ 13,821,319 Accounting Standards Codification (ASC) 820, Fair Value Measurement, establishes and requires disclosure of a fair value hierarchy, separately for each major category of assets and liabilities, that segregates fair value measurements into levels (Levels 1, 2, and 3). Categorization of fair value measurements is determined by the nature of the inputs as follows: inputs using unadjusted quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). A financial instrument s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Valuation levels are not necessarily an indication of the risk associated with investing in those securities. 10 (Continued)

13 The following tables summarize the Foundation s investments that were accounted for at fair value within the fair value hierarchy of ASC 820 as of : 2014 Description Total Level 1 Level 2 Level 3 Fixed income investments $ 5,847 5,847 Private equity funds 20,459 20,459 Other investment funds 47,944,987 17,836,673 30,108,314 Common/collective trust 42,534,768 42,534,768 Total $ 90,506,061 17,836,673 72,648,929 20, Description Total Level 1 Level 2 Level 3 Fixed income investments $ 5,847 5,847 Private equity funds 42,922 42,922 Other investment funds 43,787,817 15,004,408 28,783,409 Common/collective trust 38,639,913 38,639,913 Total $ 82,476,499 15,004,408 67,429,169 42,922 The Foundation s objective is to utilize several types of investments in order to meet a desired benchmark. The investment managers generally utilize an investment strategy similar to the overall objective of the Foundation, which is to gain exposure to fixed income securities, private and partnership/joint venture investment markets, and the overall equity markets. The following table is a rollforward of the Level 3 investments during the year ended May 31, 2014: Total gains or losses June 1, (realized/ Transfers May 31, Description 2013 unrealized) Purchases Sales Transfers in out 2014 Private equity funds $ 42,922 (3,487) (18,976) 20,459 Total $ 42,922 (3,487) (18,976) 20,459 Net change in unrealized gains (losses) included in net change in statements of activities for the period relating to assets and liabilities held at May 31, 2014: Private equity funds $ (2,270) 11 (Continued)

14 The following table is a rollforward of the Level 3 investments during the year ended May 31, 2013: Total gains or losses June 1, (realized/ Transfers May 31, Description 2012 unrealized) Purchases Sales Transfers in out 2013 Private equity funds $ 152,293 (17,781) (91,590) 42,922 Total $ 152,293 (17,781) (91,590) 42,922 Net change in unrealized gains (losses) included in net change in statements of activities for the period relating to assets and liabilities held at May 31, 2013: Private equity funds $ (17,781) The Foundation recognizes transfers into and out of a respective level on the first day of the reporting period. There were no transfers between levels during the years ended. The Foundation had $72,663,541 and $67,466,244 of investments in investment funds at May 31, 2014 and 2013, respectively, which are reported at fair value. The Foundation has concluded that the net asset value reported by the underlying funds approximates the fair value of the investment. However, changes in market conditions and the economic environment may significantly impact the net asset value of the funds and, consequently, the fair value of the Foundation s interests in the funds. Of the amounts reported at net asset value, $72,643,082 and $67,423,322 of those investments at, respectively, were redeemable with the trust or fund at net asset value with a daily redemption frequency and a redemption notice period ranging from one to three days. Of the amounts reported at net asset value, the Foundation had $20,459 and $42,922 at, respectively, invested in alternative private equity funds that do not provide for liquidity in the form of discretionary withdrawals. These alternative funds are generally locked up for several years and the lock-up period can be extended at the discretion of the alternative fund. There were no unfunded commitments to these alternative funds at. Although a secondary market exists for these alternative funds, it is not active and individual transactions are typically not observable. When transactions do occur in this limited secondary market, they may occur at amounts other than the reported net asset value. It is, therefore, reasonably possible that if the Foundation were to sell these investments in the secondary market, a buyer may require an amount other than the reported net asset value. 12 (Continued)

15 (4) Grants Payable The Foundation has approved a total of $6,500,000 and $7,560,000 in grants for future payment to various organizations at, respectively Grants payable before unamortized discount $ 6,500,000 7,560,000 Less unamortized discount (at 0.911% and 0.657% at, respectively) (85,406) (89,173) Total grants payable $ 6,414,594 7,470,827 Amounts owed in: Less than one year $ 2,000,000 1,560,000 One to five years 4,500,000 6,000,000 Total $ 6,500,000 7,560,000 (5) Related Party Substantially all the facilities, personnel, and operating costs of the Foundation are provided by General Mills, Inc. to the Foundation and are shown as additional contributions and expenses on the accompanying statements of activities. 13