The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�&�Accounts�for�the�Year�Ended�30�September�2022�
Registered�Charity:�No�260059� Company�No�963832�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
The�Kennedy�Trust�for�Rheumatology�Research�
Annual�Report�&�Accounts�for�the�Year�Ended�30�September�2022�
Contents
Page:� INTRODUCTION�FROM�THE�CHAIR�........................................................................................................�3� TRUSTEES’�REPORT�...............................................................................................................................�4� GOVERNANCE�...................................................................................................................................�4� STRATEGIC�REPORT�...........................................................................................................................�7� IMPACT�REPORT�..............................................................................................................................�12� FINANCIAL�REPORT�.........................................................................................................................�14� REVIEW�OF�INVESTMENT�ACTIVITIES�..............................................................................................�16� CHARITY�INFORMATION�.....................................................................................................................�24� INDEPENDENT�AUDITOR’S�REPORT�TO�THE�MEMBERS�OF�THE�KENNEDY�TRUST�FOR� RHEUMATOLOGY�RESEARCH�..............................................................................................................�27� ACCOUNTS�..........................................................................................................................................�31�
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The Kennedy Trust for Rheumatology Research Annual Report for the Year Ended 30September 2022
INTRODUCTION FROM THE CHAIR
Major global challenges continue to simultaneously threaten the rate of progress of medical research in the UK on the one hand and stimulate researchers towards new avenues of innovation and ground�breaking science on the other.��To help meet both this year, the Kennedy Trust for Rheumatology Research has continued to strategically plan and prioritise its resources in ways that we believe best enable our ongoing sustainable support for world�class research while at the same time keeping our focus on encouraging translation of discovery science into practical benefits for patients with musculoskeletal and related diseases.��For example, under Professor Dame Fiona Powrie’s leadership as Director at the Kennedy Institute in Oxford, we have supported the growth in cutting�edge technology platforms and new senior leadership positions, including a new statutory chair, whose teams deliver science of the highest international quality and competitiveness. Equally, our crucial support for future research talent at Oxford and elsewhere in the UK is one of our hallmarks and includes the development of five unique funding hubs for MB PhD training in order to help grow clinical science as a rewarding career option in medicine. Despite setbacks to medical research resulting from the Covid�19 pandemic, we have continued to work with others over the year to help achieve our mission, maintaining strategic partnerships with UK funders and centres of research excellence in universities across the UK.
On a more personal level, I would like to thank our amazingly committed Trustees for their invaluable time and energy in helping us make a difference.��We’ve seen a number of changes in the year���saying goodbye to long�serving Trustees and welcoming new members to our executive team and our committees.��I would like to thank our outgoing Trustees who retired from the Board, Professor Hill Gaston, Mr. David Paterson, and Mrs. Jennifer Johnson, for their years of service and the extraordinary difference they have made to the Trust’s work.��Also, the Trust’s outgoing Chief Executive, Mr. Pierre Espinasse who, over his 11�year tenure, has worked tirelessly with Trustees to help transform the Trust into the successful medical research charity it now has become.��Pierre was instrumental in helping with the move of the Kennedy Institute from London to Oxford and enabling us to realise the value of the royalties from anti�TNF drug patents, which we continue to re�invest in research. With Pierre’s departure, we are working with our new CEO Dr Stephen Simpson, who joined the Trust in the Spring. Stephen has had an amazing career in supporting science and joined us from our partner charity, Versus Arthritis where he was Director of Research..�� Finally, I would like to share my appreciation of our excellent fiduciary managers at JP Morgan and the other organisations who support the Trust in maintaining excellence in all its legal and governance activities.
Research into rheumatological and related inflammatory disorders remains one of the most exciting, challenging and progressive areas of biomedical research of the day and I believe the Trust has the experience, and fortitude to ensure major advances in the coming years through the careful investment, management and deployment of its resources to make a difference.��
ProfessorSir StephenHolgate, Chair 28th March 2023
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The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
TRUSTEES’�REPORT��
GOVERNANCE�
The�Trust�is�governed�by�a�Board�of�Trustees�(shown�on�page�5)�and�has�three�sub�committees,�as� laid�out�below.�Each�has�specific�responsibilities�(as�set�out�in�their�Terms�of�Reference)�and�each� report�to�the�Board�on�a�regular�basis.�
New�Trustees�are�provided�with�an�induction�pack�which�includes�their�fiduciary�responsibilities,�as� well�as�relevant�information�about�the�Trust.�The�continuing�development�of�all�Trustees�is�met�by� an�annual�scientific�update�and�presentations�(often�by�invited�external�speakers)�on�various� relevant�issues,�along�with�governance�and�other�updates.�
The�Trust�has�provided�indemnity�insurance�for�the�Trustees�during�the�year.�
Trustees�are�recruited�by�the�Board�based�upon�their�experience,�professional�qualifications,� empathy�and�interest�in�the�Trust’s�objectives�and�ability�to�further�the�Trust’s�performance�and� achievements.��A�recruitment�committee�is�appointed�that�shortlists,�interviews�and�puts�forward� final�candidates�to�the�Board�of�Trustees.�
In�preparing�this�report,�Trustees�have�referred�to�the�Charity�Commission’s�general�guidance�on� public�benefit�and�are�satisfied�that�the�activities�undertaken�by�the�Trust�meet�the�Commission’s� requirements.�
Governing�Document��
The�Trust�is�a�charitable�company�limited�by�guarantee�incorporated�on�13�October�1969�and�is� governed�under�its�Articles�of�Association.�The�Charity�is�registered�with�the�Charity�Commission�of� England�and�Wales.�
Charitable�Objectives��
To�provide�financial�and�other�support�for�basic�and�translational�research�into�rheumatic�and� related�musculoskeletal,�immunological,�and�inflammatory�diseases.�In�meeting�its�charitable� objectives,�the�Trust�supports�both�basic�and�translational�research�primarily�through�its�support�of� the�Kennedy�Institute�of�Rheumatology.��
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The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
The�Board�
-
Professor�Sir�Stephen�Holgate�(Chair)�
-
Mr.�Edmund�Buckley�
-
Mr.�Christopher�Coombe��
-
Professor�Andrew�Cope�
-
Mr.�Mark�Dighero��
-
Mrs.�Margaret�Frost�
-
Professor�Hill�Gaston�(resigned�22�June�2022)�
-
Professor�Tracy�Hussell�(appointed�12�October�2021)�
-
Mrs.�Jennifer�Johnson�(resigned�22�June�2022)�
-
Mr.�David�Paterson�(resigned�12�October�2021)�
-
Professor�Michael�Patton��
-
Mr.�Richard�Punt��
-
Dr.�Paul�Satchell��
-
Ms.�Victoria�White�
Finance�and�Investment�Committee�(FIC)�
The�purpose�of�the�FIC�is�to�formulate�the�Trust’s�financial�and�investment�policies,�agree�these� with�the�Board�of�Trustees,�be�responsible�for�overseeing�the�implementation�of�the�agreed� policies,�and�implement�a�risk�management�strategy�for�finance�and�investment�matters.�
The�composition�of�the�FIC�during�the�year�was�as�follows:�
-
Mrs.�Margaret�Frost�(Chair)�
-
Mr.�Edmund�Buckley�
-
Mr.�Christopher�Coombe�
-
Mr.�Mark�Dighero��
-
Professor�Sir�Stephen�Holgate�
-
Dr.�Paul�Satchell�
-
Mr.�David�Paterson�(resigned�12�October�2021)�
General�Purposes�Committee�(GPC)�
The�purpose�of�the�GPC�is�to�ensure�that�all�matters�relating�to�the�Trust�are�effectively�managed�by� the�appropriate�Committee�or�the�Board.�Its�responsibilities�include�the�structure,�governance,�and� reputation�of�the�Trust.��
The�composition�of�the�GPC�during�the�year�was�as�follows:�
-
Mr.�Mark�Dighero�(Chair�from�1�April�2022)�
-
Mrs.�Jennifer�Johnson�(Chair�until�1�April�2022,�resigned�22�June�2022)�
-
Professor�Sir�Stephen�Holgate�
-
Professor�Michael�Patton��
-
Mr.�Richard�Punt��
-
Ms.�Victoria�White��
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The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
Research�Committee�(RC)�
The�Research�Committee�has�responsibility�for�all�matters�requiring�scientific�expertise.�
The�composition�of�the�RC�during�the�year�was�as�follows:�
Trustees:�
-
Professor�Andrew�Cope�(Chair)��
-
Professor�Hill�Gaston�(resigned�22�June�2022)�
-
Professor�Tracy�Hussell�(appointed�as�Trustee�12�October�2021)�
-
Mr.�Richard�Punt�(appointed�20 September�2022�as�a�non�voting�member)�
Non�trustees�(appointed�to�the�RC�for�a�three�year�period):�
-
Professor�Tracy�Hussell�(until�12�October�2021)��
-
Professor�Carl�Goodyear��
-
Professor�Paul�Lehner��
-
Professor�Neil�Sebire�(resigned�16�May�2022)�
-
Professor�Gitta�Stockinger�
Ex�Officio:�
- Professor�Sir�Stephen�Holgate��
Ex�Officio�
Mr.�Pierre�Espinasse�(until�30�June�2022),�Dr.�Stephen�Simpson�(CEO�Designate�1�April�to�30�June� 2022,�Chief�Executive�Officer�from�30�June�2022),�Mrs.�Susan�Johanson�(Secretary�until�28�March� 2023)�and�Mrs.�Hazel�Middleton�(Secretary�from�28�March�2023)�are�Ex�Officio�non�voting� members�of�all�the�Committees.�
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The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
STRATEGIC�REPORT���
The�Trustees�are�pleased�to�present�their�annual�report�together�with�the�financial�statements�of� the�charity�for�the�year�ended�30�September�2022�which�are�also�prepared�to�meet�the� requirements�for�a�directors’�report�and�accounts�for�the�Companies�Act�purposes.��
The�financial�statements�comply�with�the�Charities�Act�2011,�the�Companies�Act�2006,�the� Memorandum�and�Articles�of�Association,�and�Accounting�and�Reporting�by�Charities:�Statement�of� Recommended�Practice�applicable�to�charities�preparing�their�accounts�in�accordance�with�the� Financial�Reporting�Standard�applicable�in�the�UK�and�Republic�of�Ireland�(FRS�102).��
KEY�ACHIEVEMENTS�
Trust�Strategy�and�Operations
Strategic�development�
In�meeting�its�charitable�objectives,�the�Kennedy�Trust�continues�to�support�basic�science,�as�well� as�an�increasing�focus�on�the�support�of�translational�and�clinical�research�to�help�accelerate� benefit�for�people�with�the�lived�experience�of�different�inflammatory�disorders.��
In�2021,�key�strategic�principles�were�agreed�by�the�Trustees�to�prioritise�support�for�the�Kennedy� Institute�of�Rheumatology�at�Oxford�(“the�Institute”)�and�to�continue�to�make�a�difference�with� ambitious�wider�funding,�with�a�strong�focus�on�excellence�and�crucial�support�for�younger�scientists.��� To�take�this�forward,�the�Research�Committee�held�a�series�of�strategic�discussions�this�year,�starting� with�a�brainstorming�session�in�the�Spring�to�consider�where�the�Trust�should�focus�its�funding� beyond�its�substantial�commitments�for�the�Institute.��Three�principal�concepts�emerged�for� consideration:�firstly,�smaller�scale�awards�that�would�provide�proof�of�concept�and�‘pump�prime’� larger�scale�funding,�secondly,�awards�with�a�focus�on�transitional�stages�of�research�careers�towards� independence�and�thirdly,�larger�scale�team�science�orientated�funding.��It�has�been�agreed�that�the� pump�priming�awards�will�have�the�greatest�immediate�impact�and�are�deliverable�in�the�shorter� term.��A�pilot�scheme�for�these�awards�is�currently�planned�to�be�rolled�out�in�2023�and�the�Trust’s� Research�Committee�will�continue�to�consider�the�other�areas�identified�and�will�make� recommendations�to�the�Board�to�launch�new�schemes�at�suitable�junctures�depending�on�resources� and�strategic�need.�
Operations
Following�the�appointment�of�JP�Morgan�as�Fiduciary�Manager�for�the�Trust’s�investment�portfolio� in�2021�and�successful�completion�of�the�transition�of�the�Trust’s�investments�to�a�more�strategic� long�term�asset�allocation,�the�office�has�been�able�to�settle�to�‘business�as�usual’�with�a�strong�and� effective�working�relationship�between�the�executive,�the�Finance�and�Investment�Committee�and� the�JP�Morgan�team�(see�Review�of�Investment�Activities).��Similarly,�the�executive�continues�to� support�the�work�of�the�General�Purposes�Committee�and�the�Research�Committee�to�ensure� policies,�new�funding�and�research�activities�are�put�into�practice.���
The�transition�between�outgoing�and�incoming�Chief�Executive�Officer�was�completed�successfully� in�June�and�a�new�Financial�Controller�has�been�recruited�to�start�work�with�the�Trust�at�the�end�of� November�2022,�with�a�transition�planned�with�the�outgoing�Financial�Controller�until�the�Spring�of� 2023.��Otherwise,�the�team�has�remained�of�equivalent�size�and�has�continued�to�be�effective�in� delivering�on�the�wide�range�of�Trust�business.�
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The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
The�Trust�continues�to�carefully�monitor�grant�performance�though�self�reporting�by�grant�holders� and�through�the�quarterly�report�to�the�Board�by�the�Institute�Director.�
A�cycle�of�development�and�revision�of�key�policies�was�undertaken�by�the�Trust�and�managed�by�the� executive�team�supporting�review�by�the�GPC.�This�has�included,�for�example,�development�of�a�new� policy�for�Grant�Awarding.����
Association�of�Medical�Research�Charities�
This�was�our�second�year�as�member�of�the�Association�of�Medical�Research�Charities�(“AMRC”)� and�the�Trust�continues�to�benefit�from�the�work�that�the�AMRC�undertakes�as�part�of�its� representation�of�over�150�UK�medical�research�charities�and�the�research�they�support.��The�Trust� has�been�involved�in�various�areas�of�AMRC�work�and�continues�to�engage�wherever�there�is� relevance�and�value�to�the�Trust’s�mission.�
Supporting�the�Kennedy�Institute�for�Rheumatology
Institute�update�
The�Institute�remains�the�Trust’s�primary�focus�of�support.��The�Institute�is�a�key�hub�within�the� growing�biomedical�campus�at�Oxford,�forging�new�strategic�links�with�other�Oxford�institutes,� including�the�Botnar�Research�Centre�and�the�newly�established�Institute�for�Development�&� Regenerative�Medicine,�with�which�it�has�a�formal�partnership�based�around�the�new�microscopy� and�imaging�technology�platform:�the�Zeiss�Centre�of�Excellence�for�advanced�imaging.����
The�Institute�has�continued�to�grow�its�research�base�and�recruit�excellent�scientists�and�trainees�at� all�levels.��At�the�end�of�September�2022,�the�Institute�had�a�total�of�215�staff�and�students� (excluding�visiting�academics),�comprising�155�staff�on�payroll�and�60�DPhil�students.��The�post� pandemic�period�has�continued�to�see�recovery�and�output�of�world�class�science,�although� recruitment�in�specialised�areas�such�as�bioinformatics�and�data�science�remain�challenging�and� something�the�Institute�is�placing�particular�emphasis�on�solving.�
The�Institute’s�Director,�Professor�Fiona�Powrie�was�this�year�appointed�Dame�Commander�of�the� Most�Excellent�Order�of�the�British�Empire�(DBE),�for�services�to�Medical�Science.��Professor�Dame� Powrie�has�been�transformational�to�our�understanding�of�how�the�gut�bacteria�and�the�immune� system�interact.�She�continues�to�be�an�inspirational�role�model�for�young�scientists,�in�particular� for�the�many�young�women�beginning�careers�in�biomedical�science.��Professor�Dame�Powrie�was� appointed�deputy�chair�of�the�Board�of�Governors�of�the�Wellcome�Trust�this�year�and�was�able�to� attend�the�inauguration�ceremony�this�year�in�Washington�DC�to�recognise�her�election�as�an� International�Fellow�of�the�National�Academy�of�Sciences�in�2020.�
As�at�the�end�of�September�2022,�the�total�grant�portfolio�of�the�Institute�exceeded�£80�million� with�over�one�third�coming�from�the�Trust�of�which�£4.1m�was�awarded�in�the�current�year.��This� represents�relative�growth�in�the�value�of�grants�supported�by�other�funders�and�demonstrates�the� significant�capacity�of�the�Institute�to�attract�competitive�new�funding�based�on�the�core�support�of� the�Trust,�including�a�significant�proportion�of�industry�based�investment.��
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The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
The�Institute�is�organised�around�five�key�technology�platforms�that�were�originally�set�out�in�the� Director’s�scientific�vision.��The�last�of�these�to�be�funded�is�the�Tissue�Biology�Platform,�which�is� jointly�funded�by�the�Kennedy�Trust�(£2.5m)�and�Versus�Arthritis�(£1m).��An�expert�panel�met�over� the�summer�of�2022�to�evaluate�the�proposed�funding�for�the�platform�and�included�independent� scientists�and�patient�partners.��The�platform�funding�was�recommended�based�on�the�increased� capability�it�gives�for�the�Institute�to�deliver�in�the�critical�area�of�cartilage�biology�and�the�unmet� need�of�osteoarthritis�and�its�effective�treatment.
Clinical�pathology�and�the�Arthritis�Therapy�Acceleration�Programme�(“A�TAP”)�
This�pilot�programme�was�originally�funded�by�the�Trust�in�2017�to�help�enable�the�translation�of� basic�research�findings�into�innovative�new�approaches�to�treating�diseases.��A�direct�result�has�been� the�development�of�the�newly�established�Clinical�Pathology�platform,�which�aims�to�accelerate� delivery�of�new�medicines�through�harnessing�approaches�and�technologies�for�innovative�clinical� trials.��The�investment�in�A�TAP�has�stimulated�strong�interest�from�industry,�with�a�number�of� partner�companies�now�involved�in�the�initiative�and�represents�a�powerful�example�of�reinvestment� of�the�Trust’s�funds�derived�from�the�anti�TNF�royalties�towards�the�development�of�new�drugs�and� treatments.�
Major�appointments
The�Institute’s�Deputy�Director,�Professor�Michael�Dustin�has�been�elected�to�the�position�of� Statutory�Chair�in�Molecular�Immunology.�The�Chair�is�a�jointly�funded�post�between�the�Trust�and� the�University�of�Oxford�through�an�award�originally�approved�in�2021�and�a�new�agreement�that� was�ratified�to�begin�in�November�2022.��This�new�statutory�chair�represents�a�major�element�of�the� Trust’s�relationship�with�the�University�that�will�help�further�strengthen�the�central�role�of�the� Institute�as�an�integral�part�of�the�Oxford�biomedical�campus.���Professor�Dustin�is�recognised�as�a� world�leader�in�immune�cell�imaging�and�will�anchor�this�important�area�of�science�within�the� Institute�and�Oxford.��His�recruitment�was�published�in�the�University�Gazette�in�September�and�an� inaugural�lecture�for�him�is�planned�for�2023.�
Associate�Director�posts�in�Tissue�Biology�and�Data�Science�have�also�been�awarded�to�Professors� Tonia�Vincent�and�Irena�Udalova�respectively,�securing�important�positions�to�the�senior�team�and� recognising�their�leadership�in�these�two�pivotal�areas�of�science�at�the�Institute.��Growth�in�Data� Science�is�core�to�biomedical�research�and�the�Institute�has�further�maintained�its�strength�in�the� area�through�the�appointment�this�year�of�Dr�Yang�Luo,�a�Principal�Investigator�from�Harvard�Medical� School.��Her�lab�will�investigate�how�genetic�variations�contribute�to�diseases�of�the�immune�system.�
Two�of�the�Institute�group�leaders,�Jelena�Bezbradica�and�Audrey�Gerard�were�made�Associate� Professors�during�the�year.�
Studentships�and�training�
A�hallmark�of�the�Institute�is�its�excellent�training�programme�and�graduate�studies.�Each�year�the� Institute�applies�under�the�agreement�with�the�Trust�for�the�support�for�a�cohort�of�new�students�to� add�to�the�60�DPhil�students�already�training�at�the�Institute.��The�KTPSS�DPhil�programme�advertises� six�projects�annually�and�this�year�included��the�growing�area�of�computational/data�science..��
Whole�Institute�retreat�
The�Institute�has�a�focus�on�providing�a�supportive�and�interactive�environment�and�provides�many� ways�in�which�students,�scientific�staff�and�group�leaders�can�work�together,�share�ideas,�and�support� one�another.��This�was�exemplified�this�year�by�the�whole�Institute�retreat,�held�this�Autumn,�with�a� particular�emphasis�on�scientific�presentations�of�more�junior�scientists�and�students.�
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The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
Independent�scientific�review�of�the�Institute�
The�Trust�carries�out�a�full�independent�review�of�the�Institute�every�4�years,�with�a�Trust�Scientific� Review�Board�comprising�international�and�leading�UK�scientists.��A�review�took�place�on�14/15� November�running�concurrently�with�the�Institute’s�own�Scientific�Advisory�Board�review.���This�is�an� opportunity�for�the�Trust�to�understand�how�well�its�investment�is�being�utilised�and�where�any� concerns�or�challenges�exist.��We�look�forward�to�including�the�outputs�of�this�review�in�the�2022/23� Annual�Report�and�Accounts.
Other�funding
Senior�Research�Fellowships�
Two�new�Senior�Research�Fellows�were�supported�this�year,�following�a�competitive�process�of� application,�peer�review�and�panel�interviews.��Dr�Elizabeth�Rosser�at�UCL�(awarded�£2.2m)�is� investigating�the�impact�of�gut�bacteria�on�the�immune�system�in�the�autoimmune�condition�Lupus� and�Dr�Sinisa�Savic�at�Leeds�(awarded�£2.4m)�is�exploring�how�mutations�in�a�particular�type�of� immune�cell�affect�the�development�of�inflammatory�disorders.��The�two�new�fellows�join�the�three� existing�fellows�and�will�be�important�in�realising�the�Trust’s�mission�to�support�younger�research� leaders�across�the�UK.�
MB�PhD�scheme�
This�scheme�(Medical�Bachelor�MBChB,�combined�with�a�PhD�degree)�is�supported�by�the�Trust�and� designed�to�support�the�new�research�talent�with�clinical�training,�allowing�the�training�for�a�PhD�in� combination�with�the�completion�of�a�medical�degree.��These�types�of�scientists�are�vital�to�the� translation�of�discovery�to�effective�treatments.��The�scheme�is�in�its�second�year,�and�each�of�the� universities�running�the�programme�has�continued�to�recruit,�with�a�total�of�17�students�now�enrolled� since�the�start�of�the�scheme�across�the�sites.���
Joint�funding�and�partnerships
Following�a�joint�workshop�with�funders�and�researchers�in�2020�and�after�some�delay,�largely� because�of�the�pandemic,�the�Kennedy�Trust�and�Versus�Arthritis�launched�a�new�call�for�grants�this� year�with�a�focus�on�the�understanding�and�treatment�of�fatigue.��Severe�fatigue�is�a�central,�yet� poorly�understood�part�of�life�for�many�who�suffer�long�term�inflammatory�conditions�and�the�work� funded�under�this�call�will�help�better�understand�the�evidence�for�new�lines�of�investigation.��An� expert�panel�has�been�convened�and�will�meet�to�review�the�applications�early�in�2023.�
The�Trust�has�continued�its�partnership�with�the�Daphne�Jackson�Trust,�which�does�important�work� to�support�the�re�entry�of�researchers�into�the�workplace�after�time�away�from�research.��Applicants� are�currently�being�evaluated�and�supported�in�their�applications,�and�final�interviews�and�decisions� will�happen�in�early�2023.��We�are�delighted�that�the�Medical�Research�Council�have�agreed�to� provide�co�funding�this�year�for�this�valuable�initiative.�
10�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
Grant�Funding�during�the�Year�
----- Start of picture text -----
Committed�Grants
Senior�Research�Fellowships Tissue�Biology Directors�Fund Staff�Appointments
----- End of picture text -----
| SeniorResearchFellowships:Non�Institute TissueBiology:TheInstitute DirectorsFund:TheInstitute StaffAppointments:TheInstitute |
£'000 % 4,662 54% 3,499 40% 300 3% 266 3% 8,727 100% |
£'000 % 4,662 54% 3,499 40% 300 3% 266 3% 8,727 100% |
|---|---|---|
| 100% |
Two�Senior�Research�Fellowships�totalling�£4,662,331�were�awarded�to�Dr�Sinisa�Savic�at�the� University�of�Leeds�(£2,428,817)�and�Dr�Elizabeth�Rosser�at�University�College�London�(£2,233,514).�
During�the�year,�the�Trust�issued�four�grants�to�the�Kennedy�Institute�at�the�University�of�Oxford� totalling�£4,064,774�being:��
-
Tissue�Biology�Platform�(£3,499,082)�co�funded�by�the�Kennedy�Trust�(£2,499,082)�and� Versus�Arthritis�(£1,000,000).�
-
Directors�Fund�(£300,000)�being�the�annual�Director�of�the�Institute’s�discretionary�spend� award.�
-
Two�staff�appointments�(£265,692)�representing�salary�support�for�Associate�Professors� Jelena�Bezbradica�(£132,684)�and�Audrey�Gerard�(£133,008).�
11�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
Maini�Feldmann�Prize�
The�ongoing�development�of�the�Maini�Feldmann�Prize�is�intended�to�recognise�the�breakthrough� of�Professor�Sir�Ravinder�Maini�and�Professor�Sir�Marc�Feldmann�in�developing�treatments�for� people�suffering�rheumatoid�arthritis�and�other�chronic�inflammatory�disorders.��It�is�hoped�that� progress�will�be�made�towards�its�launch�in�2023/24.���
Wellcome�archiving�work
In�2021,�the�Trust�agreed�that�it�should�undertake�the�archiving�of�the�documents�and�papers� associated�with�the�discovery�of�anti�TNF�therapy�by�Professors�Sir�Marc�Feldmann�and�Sir�Ravinder� Maini.��This�is�based�on�the�importance�of�the�work�to�the�history�of�the�Trust�and�its�importance�to� global�health�of�millions�benefiting�from�this�form�of�therapeutic�treatment.��A�professional� archivist�has�been�secured�and�is�being�hosted�at�the�Wellcome�Trust�archiving�department�in� London.��The�work�is�now�well�underway�and�is�expected�to�be�completed�in�mid�2023.�
Kennedy�Network
The�Kennedy�Network�was�established�in�2021�to�bring�together�past�and�present�fellows�and� students�supported�by�the�Trust,�for�networking,�sharing�technologies�and�science,�collaboration,� and�training.��This�has�become�especially�important�in�light�of�the�growth�of�non�Institute�training� and�independent�research�supported�by�the�Trust�across�the�UK.���The�network�steering�group�is� now�fully�established�and�planning�activities�for�2023/24,�including�a�network�conference�in�Spring� 2023.��Its�inaugural�newsletter�was�distributed�in�December�2022.���
IMPACT�REPORT�
Research�impact
The�Trust�carried�out�its�second�annual�Researchfish�reporting�period�between�March�and�April� 2022.�Data�was�submitted�by�grant�recipients�for�53�awards,�with�a�total�grant�value�of�£50.6m.��
There�were�a�number�of�notable�research�success�stories�over�the�year,�including:�
-
A�collaboration�between�the�Institute�and�Oxford�Population�Health’s�Health�Economics� Research�Centre�that�found�anti�TNF�treatment�(adalimumab)�is�likely�to�be�a�cost�effective� treatment�for�people�affected�by�early�stage�Dupuytren’s�disease,�which�affects�more�than� 5�million�people�in�the�UK�and�causes�the�fingers�to�irreversibly�curl�into�the�palm�due�to� nodules�of�tissue�forming�cords�under�the�skin,�impairing�hand�function�and�quality�of�life.���
-
Advanced�microscopy�techniques�developed�by�the�laboratory�of�Professor�Dustin�have�been� used�to�uncover�a�new�mechanism�of�immune�based�attack�on�virally�infected�or�cancer�cells,� with�potential�to�also�understand�inflammatory�pathways.�
-
Work�arising�jointly�from�the�Osteoarthritis�Centre�of�Excellence�at�the�Institute�led�by� Professor�Tonia�Vincent,�has�described�a�mechanism�by�which�growth�factors�are�released� after�cartilage�mechanical�injury�to�initiate�regeneration�of�cartilage�and�why�this�fails�in� osteoarthritis.��This�is�a�potentially�important�new�step�in�understanding�the�mechanical� influences�on�the�development�of�osteoarthritis.�
-
The�success�of�the�growing�translational�research�at�the�Institute�has�been�exemplified�by� the�fact�that�several�molecules�identified�by�discovery�research�at�the�Institute�are�currently� being�investigated�as�targets�with�therapeutic�potential�in�clinical�trials.�
12�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
A�number�of�key�highlights�arose�from�this�year’s�self�reporting�from�grants�at�the�Institute�and� elsewhere:��
364�unique�publications�were�produced�with�over�half�published�through�an�open�access�route:�
-
88�examples�of�research�dissemination,�including�newspaper,�TV�and�radio�interviews,� podcast�appearances�and�workshops.���
-
5�research�prizes�were�received,�including�the�Iain�T�Boyle�Award�awarded�to�Dr�Anjali� Kusumbe�for�her�significant�progress�and�contribution�to�the�field�of�bone�and�calcified� tissue.�
-
55%�of�awards�reported�at�least�one�collaboration�or�partnership�as�a�direct�result�of� Kennedy�Trust�funding,�illustrating�the�value�and�relevance�of�this�funded�research.�
-
Significant�leverage�of�Trust�investment�was�reported,�with�£59m�of�effective�funding�from� other�sources�based�on�the�Trust’s�awards.��This�included�£9.4m�from�the�Medical�Research� Council�(MRC)�and�£6.9m�from�the�European�Commission.�
-
Three�new�patents�were�published.�
Intellectual�Property�
The�Trust�owned�a�broad�portfolio�of�patents,�which�included�the�key�US,�Canadian�and�European� anti�TNF�therapy�patents�which�were�licensed�out�and�which�together�were�responsible�for� generating�the�Trust’s�past�royalty�income.��The�Trust’s�remaining�Supplementary�Protection� Certificates�came�to�an�end�on�31�August�2022.���
At�the�point�of�completion�of�the�end�of�the�Trust’s�patents�this�year,�the�estimated�accumulated� royalties�returned�to�the�Trust�have�been�in�excess�of�£230m�over�almost�three�decades.��This�has� crucially�enabled�the�Trust�to�continue�to�make�major�investments�in�research�through�the� provision�of�substantial�support�for�ground�breaking�research�at�the�Institute,�as�well�as�an� extending�range�of�funding�across�the�UK.��It�has�further�brought�about�security�for�the�Trust’s� future�through�our�managed�investment�funds�(see�Financial�Report�section)�allowing�the�Trust�to� plan�sustainable�research�funding�with�relative�confidence.�
Towards�the�future
Although�the�impact�of�the�Covid�pandemic�has�reduced�considerably�with�time,�its�residual�effects� along�with�significant�world�and�economic�events�this�year�have�presented�a�number�of�challenges.�� The�Trust�is�currently�developing�a�new�strategic�plan�under�which�it�will�seek�to�continue�to� carefully�build�a�sustainable�approach�in�supporting�its�research�investments.��Trustees�have� reaffirmed�the�priority�of�enabling�the�Institute�to�continue�on�its�successful�trajectory�as�a�world� class�centre�for�research�into�rheumatological�and�inflammatory�conditions.�A�priority�will�be�to� support�deepening�roots�in�Oxford�and�to�secure�funding�from�other�sources,�including�government� and�industry.�
The�Trust�will�also�continue�to�develop�partnerships�and�relations�with�other�institutions�and� funders�in�the�UK�biomedical�ecosystem�relevant�to�its�mission�and�seek�innovative�and�sustainable� means�of�supporting�new�research�talent�and�stimulating�and�supporting�new�bold�research.��For� example,�Trustees�have�supported�plans�for�a�new�pilot�scheme�of�pump�priming�awards�in�2023�– the� Research Ignition�Awards ��which�it�is�hoped�will�enable�researchers�to�undertake�higher�risk� research�and�build�new�programmes�in�areas�that�might�otherwise�be�more�difficult.��The�Trust�will� seek�to�continue�with�an�annual�round�of�Senior�Research�Fellowships�to�help�build�the�UK�talent� base�of�research�leaders�in�inflammatory�and�rheumatological�disease�science.��It�will�be�confirmed�
13�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
in�2023�when�the�next�round�will�commence.��The�partnerships�with�the�Daphne�Jackson�Trust�and� Versus�Arthritis�are�important�examples�of�maximising�the�impact�of�the�Trust’s�investments.�The� Trust�looks�forward�to�seeing�the�outcomes�of�these�partnerships�and�towards�potential�future� endeavours�together.���
The�value�of�the�Kennedy�Network�is�already�demonstrating�itself�and�the�Trust�will�continue�to� support�this�initiative,�as�an�independent�network�of�world�class�scientists.�
The�Trust�is�continuously�looking�for�ways�and�means�of�understanding�the�impact�of�its�investment� in�research.��In�addition�to�maximising�the�use�of�Researchfish,�the�Trust�plans�to�engage�specialists� in�the�field�of�impact�reporting�to�work�with�the�Trust�to�build�its�approach.�
FINANCIAL�REPORT�
The�Trust�had�an�inaugural�full�year�of�management�under�JP�Morgan�following�their�appointment� in�place�of�the�Trust’s�previous�fiduciary�manager�SEI�in�July�2021�as�an�outcome�of�a�retendering� process�that�commenced�in�2020.�The�Trust�continues�to�work�towards�an�increased�private�market� allocation�as�part�of�its�long�term�strategic�asset�allocation.��Transition�of�the�residual�SEI�private� market�assets�was�largely�completed�during�the�year�with�a�minor�SEI�holding�of�£0.4m�remaining� at�the�year�end.�
The�Trust’s�investments�valued�at�£313.8m�(2021:�£341.7m)�demonstrate�the�portfolio�is�resilient� despite�difficult�market�conditions�including�the�war�in�Ukraine�and�rising�inflation.��Whilst� challenging�economic�circumstances�adversely�affected�the�values�of�the�Trust’s�investments,�the� Finance�and�Investment�Committee�is�satisfied�that�its�diversified�investment�strategy�will�protect� the�Trust’s�portfolio,�and�that�there�are�adequate�levels�of�reserves�to�support�the�Trust’s�long�term� planned�spend.��The�Trust’s�investments�are�detailed�further�in�the�“Review�of�Investment� Activities”.���
Gross�royalty�income�received�during�the�year�was�£0.7m�(2021:�£0.7m).�With�the�revocation�of�a� European�patent�in�November�2019,�patent�income�has�diminished�in�line�with�expectations�until� expiration�of�the�remaining�Supplementary�Protection�Certificates�on�31�August�2022.�
The�Trust�monetised�part�of�its�royalty�share�in�2012.�In�accordance�with�the�terms�of�the� monetisation�agreement,�it�received�50%�of�the�royalty�due.�These�payments�continued�for�the�life� of�the�patents�with�the�Trust’s�residual�Supplementary�Protection�Certificates�ending�on�31�August� 2022.�
Royalty�income�was�received�in�US�dollars�and�transferred�to�pounds�sterling�on�or�shortly�after�the� date�the�funds�were�received.�
Royalty�sharing�payments�of�£0.5m�(2021:�£0.5m)�were�made�to�Versus�Arthritis�and�the�inventors� in�respect�of�this�income.�These�payments�are�made�according�to�a�formula�for�sharing�royalties�in� line�with�current�UK�University�practice.�
The�costs�incurred�in�prosecuting�the�Trust’s�patent�portfolio�were�£14k�(2021:�£36k).�The�current� year�decline�reflects�reduced�patent�protection�activity.�With�the�revocation�of�one�of�the�Trust’s� European�patents�in�November�2019,�royalties�have�subsequently�diminished.�
Total�support�costs�during�the�year�amount�to�£554k�(2021:�£370k)�and�these�costs�are�allocated� over�Trust�activities�in�accordance�with�time�spent,�invoices�directly�allocated�or�another�fair�
14�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
method�of�allocation.��Changes�in�key�management�personnel�have�driven�the�increase�in�support� costs.�The�Trust�completed�a�successful�transition�of�Chief�Executive�Officer�in�June�2022,�and�a� new�Financial�Controller�has�been�recruited�to�assume�the�role�in�2023�resulting�in�recruitment� costs�of�£51k�(2021:�nil).��The�three�month�overlap�of�Chief�Executive�Officer,�along�with�a� contractual�adjustment�for�the�Financial�Controller�from�an�0.6�to�0.8�full�time�equivalent�has� driven�the�increase�in�staff�costs�of�£46k.��Further�information�on�key�management�personnel�is� detailed�in�Note�8�to�the�Accounts.�
Governance�costs�are�analysed�in�Note�7�to�the�Accounts.�These�totalled�£50k�in�2022�(2021:�£37k)� which�represents�less�than�1%�of�funds�expended.�The�Trust�has�returned�to�a�greater�proportion�of� in�person�meetings�in�line�with�government�Covid�19�guidance�resulting�in�increased�Trustee� meeting�and�travel�costs�of�£9k.��In�addition,�there�has�been�a�£5k�increase�in�audit�fees.��
The�committed�grants�in�2022�were�£8.7m�against�£27.3m�in�2021.�The�figure�shown�in�the� accounts�is�net�of�grant�write�backs�and�other�adjustments�of�£1.2m�(2021:�£4.0m)�comprising� agreed�cancellations�of�£0.8m�(2021:�£2.9m)�and�grant�write�backs�£0.4m�(2021:�£0.7m).�Two� Senior�Research�Fellowships�totalling�£4.6m�were�awarded�to�Dr�Sinisa�Savic�at�the�University�of� Leeds�(£2.4m)�and�Dr�Elizabeth�Rosser�at�University�College�London�(£2.2m).��Institute�Initiatives� totalling�£4.1m�were�awarded�including�a�£3.5m�Tissue�Biology�grant�co�funded�with�Versus� Arthritis,�with�the�Trust�contributing�£2.5m�and�Versus�Arthritis�£1m.��Grants�awarded�have� reduced�significantly�as�the�MB�PhD�Programme�(£8.2m)�and�several�large�Institute�initiatives� including�support�for�a�Statutory�Chair�in�Molecular�Immunology�(£2.4m)�were�made�in�2021.��
The�Trust�assessed�if�the�impact�of�discounting�multi�year�grant�liabilities�to�present�value�is� material,�and�due�to�the�level�of�grant�liabilities�and�rising�inflation,�for�the�second�consecutive� year,�the�impact�is�considered�material.�A�review�of�the�discount�rate�was�carried�out�during�the� year�in�conjunction�with�the�previous�adoption�of�CPI�plus�3%�as�representing�the�most�appropriate� rate�as�it�relates�to�the�Trust’s�opportunity�cost�of�money�reflecting�time�value�of�funds�to�the� Trust.�A�further�element�of�prudence�was�added�this�year,�in�response�to�the�significant�upward�rise� in�CPI�at�both�the�headline�(including�food�and�energy)�and�core�data�sets�which�was�to�adopt�core� CPI�as�the�inflation�reference�given�the�highly�volatile�nature�of�headline�CPI�following�the�spike�on� commodity�and�food�priced�after�the�Ukraine�invasion�and�subsequent�volatility�in�energy�prices�in� particular.�While�over�the�long�term�one�would�expect�this�divergence�to�narrow,�the�core�CPI� target�should�provide�a�more�stable�benchmark�for�discounting�multi�year�liabilities.�
The�non�current�grant�liabilities�of�£33.4m�(2021:�£34.7m)�are�discounted.�Applying�a�discount�rate� of�UK�Core�CPI�+�3%�equating�to�9.5%�(2021:�6.1%)�results�in�a�grant�liabilities�discount�of�£6.8m� (2021:�£4.9m)�recognised�as�a�reduction�in�charitable�expenditure�with�a�current�year�impact�of� £1.8m�(2021:�£4.9m).�
The�cash�spend�on�grants�by�the�Trust�during�the�year�reflects�grants�committed�in�earlier�years�so� does�not�move�in�proportion�to�the�grants�committed.�The�cash�spend�in�2022�was�£7.6m�(2021:� £8.0m).��
The�Trust�considers�salaries�paid�on�an�annual�basis�to�ensure�they�are�fair�and�appropriate�for�the� positions�and�reflect�any�changes�to�the�roles�during�the�year.�In�addition,�account�is�taken�of� changes�in�the�cost�of�living.�
The�Finance�and�Investment�Committee,�with�approval�by�the�Board,�reviews�salaries�of�Key� Management�Personnel�(KMP)�on�an�annual�basis�as�outlined�above.�Maintaining�salaries�in�real� terms�is�considered�along�with�ensuring�salaries�are�commensurate�to�roles�and�responsibilities.��
15�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
The�Trust�appoints�external�recruitment�agents�to�advise�on�KMP�appointments.�The�Board�or�a� delegated�working�group�will�determine�the�pay�range�for�a�vacancy�prior�to�advertising,�ensuring� remuneration�is�in�line�with�industry�and�market.�
The�Trust�does�not�fundraise�and�does�not�deal�with�the�public�directly.�A�minimal�amount�of� unsolicited�donations�of�£184�were�received�in�the�year�(2021:�£160),�therefore�the�Charity�does� not�need�to�follow�a�fundraising�standards�scheme.�
The�Covid�19�outbreak,�and�the�resultant�global�lockdowns�initially�adversely�affected�the�values�of� the�Trust’s�investments,�however�since�the�earliest�impact�in�March�2020,�the�Trust�has�benefited� from�a�material�recovery.�
REVIEW�OF�INVESTMENT�ACTIVITIES��
As�a�matter�of�good�governance,�the�Trust�retendered�its�fiduciary�manager�engagement�in�2020� with�JP�Morgan�appointed�in�place�of�SEI�in�July�2021.��The�Trust�continues�to�move�towards�a� greater�allocation�to�private�market�investments�in�the�longer�term,�and�an�increased�focus�on� Environmental,�Social�and�Governance�(ESG)�matters.��Whilst�the�transition�of�liquid�assets�to�JP� Morgan�was�completed�in�2021,�private�market�assets�continued�to�be�transitioned�during�the�year� due�to�their�illiquid�nature.�
The�Trust�reviewed�its�Investment�Policy�during�the�year.��The�Trustees�concluded�the�Trust’s� principal�objective�for�the�long�term�portfolio�continues�to�be�a�total�return�on�invested�funds�of�UK� CPI+3%�pa�over�the�longer�term,�through�a�balanced�portfolio�with�sufficient�liquidity�to�meet�short� term�spending�commitments�and�hence�avoid�the�forced�sale�of�long�term�and�less�liquid�assets.�
The�Trust�aims�for�the�portfolio�to�provide�sufficient�excess�returns�to�cover�its�grant�giving�and�to� preserve�the�real�value�of�the�Trust’s�assets�over�the�long�term.�
As�income�from�patents�ended�on�31�August�2022,�the�Trust�has�evolved�to�rely�solely�on�portfolio� income�and�capital�for�grant�giving�for�the�foreseeable�future.�The�Trust�carries�out�no�fundraising� activities.�
The�Trustees�consider�the�strategic�asset�allocation�determined�as�part�of�JP�Morgan’s�appointment�is� appropriate�being�multi�asset�and�well�diversified�with�global�exposure�across�a�variety�of�asset� classes�and�currencies.��
The�transition�of�private�market�assets�to�JP�Morgan�continued�with�proceeds�of�£31.5m�achieved� from�the�sale�of�SEI�illiquid�holdings�with�full�redemption�of�Global�Real�Assets�(£19.5m)�and�partial� sale�of�the�Structured�Credit�Fund�(£12.0m).��Proceeds�from�the�sales�were�invested�in�the�Trust’s� portfolio�by�JP�Morgan�and�resulted�in�realised�gains�on�investments�of�£1.4m.�As�part�of�the�
transition,�JP�Morgan�managed�private�market�vehicles�HPS�Corporate�Lending�Funding�(£21.0m),� PGIM�Global�Select�Real�Estate�Securities�Fund�(£4.1m)�and�PEG�Global�Private�Equity�X�S.A�(£0.6m)� were�entered�during�the�year.�The�residual�illiquid�investment�held�with�SEI,�the�Structured�Credit� Fund�(£0.4m)�will�be�transitioned�to�JP�Morgan.�
The�Trust’s�holdings�in�the�three�UK�property�funds:�The�Charities�Property�Fund�(Savills),�COIF� Charities�Property�Fund�(CCLA)�and�Property�Income�Trust�for�Charities�(Mayfair)�are�being�retained� for�an�interim�period�under�review,�being�considered�efficient�charity�specific�vehicles,�and�providing� appropriate�exposure�to�the�sector.�These�funds�represent�11.4%�(2021:�9.6%)�in�value�of�the� portfolio.�
16�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
The�Trust’s�private�market�holdings,�Glouston�Private�Equity�Opportunities�of�£6.3m�(2021:�£7.5m)� and�Tennenbaum�Special�Situations�of�£4.4m�(2021:�£5.4m)�are�being�held�through�to�run�off.��
The�M&G�Charifund�holding�of�£1.4m�(2021:�£1.6m)�represents�the�Trust’s�permanent�endowment� and�is�being�retained�for�an�interim�period.�
Return�on�Investments�
The�return�on�investments�for�the�year�to�30�September�2022�was��6.57%�(2021:�15%),�below�the� Trust’s�long�term�target�return�on�investments�being�a�total�return�in�excess�of�inflation,�defined�as� CPI�+�3%.��Whilst�difficult�market�conditions�including�the�war�in�Ukraine�and�rising�inflation�have� adversely�impacted�returns,�the�Trustees�believe�the�investment�strategy�of�a�well�diversified� balanced�portfolio�across�assets�classes�and�regions�will�deliver�the�longer�term�return�it�is�seeking.����
The�Finance�and�Investment�Committee�is�responsible,�in�consultation�with�its�investment�advisers,� for�the�development�of�the�investment�strategy�for�the�Trust�and�monitors�investment� performance�at�its�quarterly�meetings.�The�investment�managers�submit�quarterly�reports�to�the� Committee.��JP�Morgan�make�quarterly�presentations�to�the�Finance�and�Investment�Committee� and�an�annual�presentation�to�the�Board�covering�reviews�of�performance,�strategy,�and�future� plans�both�in�the�short�to�longer�term.�JP�Morgan,�a�substantial�global�investment�manager,�is� responsible�for�managing�84.7%�of�the�Trust’s�assets.�
The�investments�overseen�by�JP�Morgan�are�in�collective�schemes.�These�funds�include�public� equities,�bonds,�alternatives,�and�private�markets.�The�portfolio�managed�by�JP�Morgan�is�moving� towards�a�higher�allocation�of�private�market�vehicles�including�private�credit,�infrastructure� (holding�entered�October�2022)�and�further�private�market�investments.�JP�Morgan�selects�a�wide� range�of�managers�within�the�funds,�to�diversify�manager�risk.�
A�firm�of�independent�consultants,�Lane�Clark�&�Peacock�LLP�(LCP),�has�been�retained�to�provide� annual�updates�on�the�property�funds�and�in�the�prior�year,�advised�on�the�retendering�of�the� Trust’s�fiduciary�manager.�LCP�commenced�consulting�for�the�Trust�in�2017�when�the�Trust� commissioned�LCP�to�complete�a�review�of�its�investment�policy.�
17�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
Environmental,�Social�and�Governance�
The�Trust’s�approach�to�responsible�investment�is�intended�to�be�consistent�with�its�duty�to�secure� satisfactory�long�term�returns�from�the�investment�of�its�charitable�funds.�The�Trustees�expect�their� fund�managers�to�consider�the�Environmental,�Social�and�Governance�(ESG)�policies�of�companies� alongside�other�factors�that�will�affect�their�long�term�investment�prospects.�
ESG�factors�are�sources�of�risk�and�opportunities�to�the�Trust’s�investments,�some�of�which�could� be�financially�material,�over�both�the�short�and�longer�term.�These�include�risks�relating�to�systemic� factors,�such�as�climate�change�and�pandemics,�and�other�business�specific�factors�such�as�cyber� security,�pollution,�employee�welfare,�unsustainable�business�practices�and�more�generally� unsound�corporate�governance.�The�Trustees�seek�to�appoint�investment�managers�who�will� manage�these�risks�appropriately�on�their�behalf�and�from�time�to�time,�review�how�these�risks�are� being�managed�in�practice.
Investment�managers�are�asked�to�make�regular�reports�on�the�application�of�their�ESG�policies.� These�are�reviewed�at�the�manager�meetings.�Given�the�Trust’s�objectives,�the�Trustees�have�a� particular�interest�in�and�concern�about�tobacco�investments�and�give�extra�focus�to�monitoring� these�as�part�of�its�ESG�activities.�
18�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
Investment�Portfolio�Split�by�Manager�
----- Start of picture text -----
%
JP�Morgan Savilles CCLA PITCH Glouston�&�Tennenbaum Charifund SEI
----- End of picture text -----
����30�September�2022�
| JPMorgan Savilles CCLA PITCH Glouston&Tennenbaum Charifund SEI TOTAL |
£'000 % 265,304 84.7% 12,318 3.9% 12,036 3.8% 11,636 3.7% 10,680 3.4% 1,406 0.4% 379 0.1% 313,759 100.0% |
|---|---|
JP�Morgan�holdings�comprise�liquid�investments�of�£243.7m�along�with�£21.6m�of�private�market� investments�being�private�credit�(£21.0m)�and�an�initial�holding�in�JPM�Private�Equity�Group� (£0.6m).�
Glouston�Private�Equity�Opportunities�of�£6.3m�(2021:�£7.5m)�and�Tennenbaum�Special�Situations�of� £4.4m�(2021:�£5.4m),�a�private�credit�vehicle,�both�entered�during�the�previous�SEI�management�are� being�held�through�to�run�off.�
The�residual�SEI�investment�(£0.4m)�represents�the�Trust’s�holding�in�the�Structured�Credit�Fund� which�will�be�transitioned�to�JP�Morgan.��
19�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
Investment�Portfolio�Split�by�Type�
----- Start of picture text -----
%
US�Equity Global�Equity
Alternatives Global�Fixed�Income
Cash Property
US�Fixed�Income Foreign�currency�forward�contracts
----- End of picture text -----
| 30September2022 | 30September2022 | |
|---|---|---|
| £'000 | % | |
| USEquity | 85,477 | 27.2% |
| GlobalEquity | 54,857 | 17.5% |
| Alternatives | 45,697 | 14.5% |
| GlobalFixedIncome | 41,302 | 13.2% |
| Cash | 37,680 | 12.0% |
| Property | 35,990 | 11.5% |
| USFixedIncome | 17,236 | 5.5% |
| Foreigncurrencyforwardcontracts | (4,480) | (1.4%) |
| Total | 313,759 | 100.0% |
20�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
PRINCIPAL�RISKS�
A�formal�risk�register�is�maintained�and�reviewed�annually�at�Board�level.�The�purpose�of�the�review� is�to�look�at�key�risks�and�the�effectiveness�of�procedures�in�place�to�mitigate�them.�
Risks�can�have�a�short�term�and/or�a�long�term�impact�on�the�Trust's�ability�to�meet�its�objectives.� Those�monitoring�each�risk�advise�the�Board�on�actions�that�should�be�taken�to�manage�risk,�and� report�periodically�on�the�effectiveness�of�their�oversight.�
The�Trust�has�identified�the�following�principal�risks�and�steps�to�mitigate�the�risk.�
Reduction�in�expected�returns�from�investments�due�to�impact�of�financial�markets’�declines� –�the� Trust�has�engaged�an�external�fiduciary�manager�JP�Morgan,�and�pursues�an�asset�allocation�policy� to�diversify�risk�and�conserve�capital�in�real�terms.�There�are�regular�reviews�of�investment�strategy� and�policy�(in�light�of�the�Trust’s�financial�plans)�by�the�Finance�and�Investment�Committee�and�the� Trust’s�fiduciary�manager.�These�are�tabled�at�Board�meetings�for�discussion�and�approval.�The� Trust�considers�that�it�is�unlikely�to�be�impacted�by�short�term�market�volatility�given�the�portfolio� is�well�diversified�and�there�are�sufficient�liquid�assets�to�meet�its�spending�requirements.�
Failure�of�the�Trust�to�earn�an�appropriate�return�from�its�assets� –�the�Trust�has�engaged�a�fiduciary� manager�JP�Morgan,�who�provides�quarterly�update�presentations�to�the�Finance�and�Investment� Committee�along�with�quarterly�performance�reports�and�annual�presentations�to�the�Board.� Regular�reviews�of�long�term�expected�returns�compared�with�expected�spending�are�performed.�
Risk�of�loss�of�Chairman�and�other�Trustees �–�the�Trust�has�a�policy�of�reviewing�the�number,�skills� and�diversity�of�Trustees�and�seeks�new�ones�as�necessary.�
Risk�of�loss�of�key�management�personnel �–�Trustees�aim�to�keep�appraised�of�staff�plans.�
Risk�of�cybercrime�–� the�Trust�uses�cloud�based�secure�storage�and�maintains�protection�software.� The�Trust�employs�external�IT�consultants�to�ensure�data�security�and�prevention�of�data�loss.�This� is�regularly�reviewed�to�ensure�compliance�with�GDPR.�Cyber�Essentials�Certification�was�attained� in�2021�and�is�to�be�maintained�on�an�ongoing�basis.�Employees�and�Trustees�(from�April�2022)�are� offered�on�demand�online�training�in�cyber�security.�
RESERVES�
The�Trust�has�only�a�small�endowment.�However,�it�has�used�the�royalty�income�received�to�build� up�reserves�so�that�it�is�able�to�fund�its�charitable�activities�as�royalties�ceased�in�August�2022.�The� Trustees�maintain�funds�with�the�objective�of�generating�a�sufficient�return�to�fund�current�and� future�charitable�activities.�The�Trust�wishes�to�have�adequate�sums�to�continue�to�support�the� Institute�for�the�foreseeable�future.�
It�is�the�aim�of�the�Trustees�to�maintain�the�value�of�reserves�in�real�terms�over�a�reasonable�time� horizon,�fulfilling�the�charitable�objectives�of�the�Trust�by�using�both�income�and�capital�growth�to� meet�expenditure.�
The�level�of�reserves�is�monitored�on�a�quarterly�basis�by�means�of�management�accounts�and�cash� flow�forecasts.�
The�Trust�holds�unrestricted�reserves�in�the�form�of�designated�funds�that�are�earmarked�to�meet� the�funding�due�to�the�Institute�under�the�agreement�(the�Oxford�Research�Grant�Fund�2021)�and� fund�future�legal�expenses�(the�Legal�Expense�Fund):�
21�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
- Oxford�Research�Grant�Fund�2021 �– The�Trust�signed�an�agreement�with�the�University�of� Oxford�on�18�October�2018�in�anticipation�of�the�ending�of�the�initial�agreement,�under� which�it�restated�its�intention�to�support�the�Institute.��Under�the�agreement,�the�Trust�has� a�commitment�to�fund�£4m�a�year�(adjusted�for�inflation)�from�1�August�2021�through�to� 31�July�2026.�A�designated�fund�of�£22.1m�was�set�up�in�the�2019�financial�year�to�reflect� these�funding�requirements�and�£4.1m�of�the�grants�issued�to�Oxford�during�the�year� (2021:�£0.7m)�have�been�set�against�this�fund.��
Trustees�consider�that�it�is�more�correct�to�show�this�commitment�by�means�of�a� designated�fund�rather�than�as�a�grant�creditor�because�the�Trust�has�the�right�to�refuse� payment�if�no�suitable�projects�are�put�forward.�
The�initial�funding�agreement�with�the�University�of�Oxford�covered�a�period�that�ended�on� 31�July�2021.��The�Trust�had�a�commitment�to�fund�the�Institute�at�a�level�of�at�least�£3m� per�annum�(adjusted�for�inflation).��The�first�Oxford�Research�Grant�designated�fund�was� closed�following�the�end�of�the�contract�in�the�previous�year�with�the�residual�balance�of� £2.958m�released�to�the�Unrestricted�General�Funds�in�2021.�
- Legal�Expense�Fund �–�the�purpose�of�the�Legal�Expense�Fund�is�to�provide�the�means�to� enforce�and�protect�patent�rights�and�licence�terms,�by�arbitration�or�litigation,�and�to� meet�the�costs�of�current�and�future�disputes�concerning�either�the�validity�of�the�Trust’s� patents�or�royalties�payable�to�the�Trust.�
A�decision�was�taken�during�2017�to�reduce�the�level�of�this�fund�by�£5m�and�in�April�2019� it�was�reduced�by�a�further�£5m.�This�reflects�the�fact�that�as�the�royalties�cease�the�risk�of� becoming�involved�in�litigation�diminishes.�
The�balance�as�at�30�September�2022�was�£1.058m�(2021:�£1.067m).�
As�at�30�September�2022�the�monies�held�in�designated�funds�amounted�to�£18.461m�(2021:� £22.503m)�distributed�across�the�following�funds:�
| £‘000 | |
|---|---|
| LegalExpenseFund | 1,058 |
| OxfordResearchGrantFund2021 | 17,403 |
| 18,461 |
When�the�Trustees�deem�it�appropriate,�the�Trust�will�draw�from�its�reserves,�as�well�as�income,�to� fund�its�activities.�Based�on�the�accounts�as�at�30�September�2022,�total�reserves�are�£279.118m� (2021:�£306.428m).�Excluding�restricted�funds�(£1.405m)�and�designated�funds�(£18.461m)�leaves� £259.252m�in�the�general�fund�that�could�be�utilised,�if�required.�
Whilst�these�could�be�considered�‘free�reserves’,�the�Trustees�do�not�believe�that�this�is�an� appropriate�measure�for�the�Trust.�The�accumulation�of�reserves�in�general�funds,�arising�from� royalty�income�and�investment�returns�is�in�line�with�the�power�conferred�on�the�Trust�to�hold� income�in�reserve�and to be used to generate investment income to apply on charitable activities.� The�Trust’s�policy�had�been�discussed�with�the�Charity�Commission.�The�Trustees�consider�the� current�level�of�reserves�to�be�appropriate�in�light�of�its�ambition�to�provide�long�term�support�to� scientists�working�in�the�fields�of�fundamental�and�translational�research�into�musculoskeletal�and� related�diseases.�
22�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
As�at�30�September�2022,�total�Trust�funds�stood�at�£279.118m�(2021:�£306.428m)�held�in�the� following��types�of�fund:�
| followingtypesoffund: | |
|---|---|
| £‘000 | |
| EndowmentFunds | 1,405 |
| GeneralFund | 259,252 |
| DesignatedFunds | 18,461 |
| 279,118 |
23�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
CHARITY�INFORMATION�
Registered�Office�
Boundary�House� 91�Charterhouse�Street�� London�EC1M�6HR��
Registered�Charity�No:�260059� Registered�Company�No:�963832�
Business�Address�
One�Lyric�Square� London�W6�0NB� Telephone:�020�8049�8136�
President�
Professor�Sir�Ravinder�Maini�
Vice�Presidents*��
Dr.�Colin�Barnes�� Mrs.�Bella�Sunley�
*Vice�Presidents�hold�an�honorary�position�and�are�not�trustees�
Board�of�Trustees�
Professor�Sir�Stephen�Holgate�(Chair)� Mr.�Edmund�Buckley� Mr.�Christopher�Coombe�� Professor�Andrew�Cope� Mr.�Mark�Dighero�� Mrs.�Margaret�Frost� Professor�Hill�Gaston�(resigned�22�June�2022)� Professor�Tracy�Hussell�(appointed�12�October�2021)� Mrs.�Jennifer�Johnson�(resigned�22�June�2022)� Mr.�David�Paterson�(resigned�12�October�2021)� Professor�Michael�Patton�� Mr.�Richard�Punt�� Dr.�Paul�Satchell�� Ms.�Victoria�White�
24�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
Officers�
Dr.�Stephen�Simpson�(appointed�CEO�Designate�1�April�to�30�June�2022,�Chief�Executive�Officer� from�30�June�2022)�
Mr.�Pierre�Espinasse�(Chief�Executive�Officer�until�30�June�2022)� Mrs.�Susan�Johanson�(Secretary�until�28�March�2023)� Mrs.�Hazel�Middleton�(Secretary�from�28�March�2023)�
Independent�Auditors��
MHA�MacIntyre�Hudson�� 6th�Floor� 2�London�Wall�Place� London�EC2Y�5AU�
Bankers�
Lloyds�TSB�Bank�PLC�� 25�King�Street� Hammersmith�� London�W6�9HW�
Investment�Advisers�
J.P.�Morgan�SE�(previously�J.P.�Morgan�Bank�Luxembourg�S.A.,�London�branch�until�22nd�January� 2022)��
60�Victoria�Embankment� London�EC4Y�0JP�
Legal�Advisers��
Amster�Rothstein�&�Ebenstein�LLP� (previously�Cooper�&�Dunham�LLP)�� 845�Third�Avenue,�6th�Floor� New�York,�NY�10022�
Stone�King�LLP� Boundary�House� 91�Charterhouse�Street�� London�EC1M�6HR�
25�
The Kennedy Trust for Rheumatology Research Annual Report for the Year Ended 30September 2022
STATEMENT OF TRUSTEES’ RESPONSIBILITIES
The Trustees (who are also directors of the Trust for the purposes of company law) are responsible for preparing the Trustees’ Report and the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Company law requires Trustees to prepare financial statements for each financial year which give a true and fair view of the state of the affairs of the charitable company and of the incoming resources and application of resources, including the income and expenditure, of the charitable company for that period. In preparing these financial statements, the Trustees are required to:
-
select suitable accounting policies and then apply them consistently;
-
observe the methods and principles in the Charities Statement of Recommended Practice;
-
make judgements and estimates that are reasonable and prudent;
-
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
-
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the charitable company will continue in business.
The Trustees are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the charitable company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the charitable company and hence for taking reasonable steps for the prevention and detection of fraud and other regularities.
The Trustees are responsible for the maintenance and integrity of the corporate and financial information included on the charity’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
In so far as the Trustees are aware:
-
there is no relevant audit information of which the charitable company’s auditor is unaware; and
-
the Trustees have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.
-
The Trustees’ Annual Report is approved by the Trustees of the charity. The Strategic Report, which forms part of the Annual Report, is approved by the Trustees in their capacity as directors in company law of the charity.
Auditors
The auditors, MHA MacIntyre Hudson were appointed auditors during the year and are deemed to be reappointed under section 487(2) of the Companies Act 2006.
By order of the Board of Trustees.
ProfessorSir StephenHolgate, Chair 28th March 2023
Margaret Frost, Chair of the FinanceandInvestmentCommittee
26
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
INDEPENDENT�AUDITOR’S�REPORT�TO�THE�MEMBERS�OF�THE�KENNEDY�TRUST�FOR RHEUMATOLOGY�RESEARCH�
Opinion�
We�have�audited�the�financial�statements�of�The�Kennedy�Trust�for�Rheumatology�Research�(the� ‘charitable�company’)�for�the�year�ended�30�September�2022�which�comprise�the�Statement�of� Financial�Activities,�the�Balance�Sheet,�the�Statement�of�Cash�Flows�and�the�notes�to�the�financial� statements,�including�a�summary�of�significant�accounting�policies.��The�financial�reporting� framework�that�has�been�applied�in�their�preparation�is�applicable�law�and�United�Kingdom� Accounting�Standards,�including�Financial�Reporting�Standard�102�The�Financial�Reporting�Standard� applicable�in�the�UK�and�Republic�of�Ireland�(United�Kingdom�Generally�Accepted�Accounting� Practice).�
In�our�opinion�the�financial�statements:�
-
give�a�true�and�fair�view�of�the�state�of�the�charitable�company’s�affairs�as�at�30�September 2022,�and�of�its�incoming�resources�and�application�of�resources,�including�its�income�and expenditure,�for�the�year�then�ended;
-
have�been�properly�prepared�in�accordance�with�United�Kingdom�Generally�Accepted Accounting�Practice;�and
-
have�been�prepared�in�accordance�with�the�requirements�of�the�Companies�Act�2006.
Basis�for�opinion�
We�conducted�our�audit�in�accordance�with�International�Standards�on�Auditing�(UK)�(ISAs�(UK))� and�applicable�law.�Our�responsibilities�under�those�standards�are�further�described�in�the� Auditor’s�Responsibilities�for�the�audit�of�the�financial�statements�section�of�our�report.��
We�are�independent�of�the�charitable�company�in�accordance�with�the�ethical�requirements�that� are�relevant�to�our�audit�of�the�financial�statements�in�the�UK,�including�the�FRC’s�Ethical�Standard,� and�we�have�fulfilled�our�other�ethical�responsibilities�in�accordance�with�these�requirements.��We� believe�that�the�audit�evidence�we�have�obtained�is�sufficient�and�appropriate�to�provide�a�basis�for� our�opinion.�
Conclusions�relating�to�going�concern�
In�auditing�the�financial�statements,�we�have�concluded�that�the�Trustees’�use�of�the�going�concern� basis�of�accounting�in�the�preparation�of�the�financial�statements�is�appropriate.�Our�evaluation�of� the�Trustees’�assessment�of�the�entity’s�ability�to�continue�to�adopt�the�going�concern�basis�of� accounting�included�critical�reviews�of�budgets�and�forecasts�provided.�
Based�on�the�work�we�have�performed,�we�have�not�identified�any�material�uncertainties�relating� to�events�or�conditions�that,�individually�or�collectively,�may�cast�significant�doubt�on�the�charitable� company’s�ability�to�continue�as�a�going�concern�for�a�period�of�at�least�twelve�months�from�when� the�financial�statements�are�authorised�for�issue.�
Our�responsibilities�and�the�responsibilities�of�the�Trustees�with�respect�to�going�concern�are� described�in�the�relevant�sections�of�this�report.�
27�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
Other�information
The�Trustees�are�responsible�for�the�other�information.��The�other�information�comprises�the� information�included�in�the�annual�report,�other�than�the�financial�statements�and�our�auditor’s� report�thereon.��Our�opinion�on�the�financial�statements�does�not�cover�the�other�information�and,� except�to�the�extent�otherwise�explicitly�stated�in�our�report,�we�do�not�express�any�form�of� assurance�conclusion�thereon.�
In�connection�with�our�audit�of�the�financial�statements,�our�responsibility�is�to�read�the�other� information�and,�in�doing�so,�consider�whether�the�other�information�is�materially�inconsistent�with� the�financial�statements�or�our�knowledge�obtained�in�the�audit�or�otherwise�appears�to�be� materially�misstated.�If�we�identify�such�material�inconsistencies�or�apparent�material� misstatements,�we�are�required�to�determine�whether�there�is�a�material�misstatement�in�the� financial�statements�or�a�material�misstatement�of�the�other�information.�If,�based�on�the�work�we� have�performed,�we�conclude�that�there�is�a�material�misstatement�of�this�other�information,�we� are�required�to�report�that�fact.�
We�have�nothing�to�report�in�this�regard.�
Opinions�on�other�matters�prescribed�by�the�Companies�Act�2006�
In�our�opinion,�based�on�the�work�undertaken�in�the�course�of�the�audit:�
-
the�information�given�in�the�Trustees’�report�(incorporating�the�Strategic�Report�and�the Directors’�report)�for�the�financial�year�for�which�the�financial�statements�are�prepared�is consistent�with�the�financial�statements;�and
-
the�Strategic�Report�and�the�Directors’�report�has�been�prepared�in�accordance�with�applicable legal�requirements.
Matters�on�which�we�are�required�to�report�by�exception�
In�the�light�of�our�knowledge�and�understanding�of�the�charitable�company�and�its�environment� obtained�in�the�course�of�the�audit,�we�have�not�identified�material�misstatements�in�the�Strategic� Report�and�the�Directors’�report.�
We�have�nothing�to�report�in�respect�of�the�following�matters�in�relation�to�which�the�Companies� Act�2006�requires�us�to�report�to�you�if,�in�our�opinion:�
-
adequate�accounting�records�have�not�been�kept,�or�returns�adequate�for�our�audit�have�not been�received�from�branches�not�visited�by�us;�or
-
the�financial�statements�are�not�in�agreement�with�the�accounting�records�and�returns;�or
-
certain�disclosures�of�Directors’�remuneration�specified�by�law�are�not�made;�or
-
we�have�not�received�all�the�information�and�explanations�we�require�for�our�audit.
28�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
Responsibilities�of�Trustees
As�explained�more�fully�in�the�Trustees’�responsibilities�statement�set�out�on�page�26,�the�Trustees� (who�are�also�the�Directors�of�the�charitable�company�for�the�purposes�of�company�law)�are� responsible�for�the�preparation�of�the�financial�statements�and�for�being�satisfied�that�they�give�a� true�and�fair�view,�and�for�such�internal�control�as�the�Trustees�determine�is�necessary�to�enable� the�preparation�of�financial�statements�that�are�free�from�material�misstatement,�whether�due�to� fraud�or�error.�
In�preparing�the�financial�statements,�the�Trustees�are�responsible�for�assessing�the�charitable� company’s�ability�to�continue�as�a�going�concern,�disclosing,�as�applicable,�matters�related�to�going� concern�and�using�the�going�concern�basis�of�accounting�unless�the�Trustees�either�intend�to� liquidate�the�charitable�company�or�to�cease�operations,�or�have�no�realistic�alternative�but�to�do� so.�
Auditor’s�responsibilities�for�the�audit�of�the�financial�statements�
Our�objectives�are�to�obtain�reasonable�assurance�about�whether�the�financial�statements�as�a� whole�are�free�from�material�misstatement,�whether�due�to�fraud�or�error,�and�to�issue�an�auditor’s� report�that�includes�our�opinion.�Reasonable�assurance�is�a�high�level�of�assurance,�but�is�not�a� guarantee�that�an�audit�conducted�in�accordance�with�ISAs�(UK)�will�always�detect�a�material� misstatement�when�it�exists.�Misstatements�can�arise�from�fraud�or�error�and�are�considered� material�if,�individually�or�in�the�aggregate,�they�could�reasonably�be�expected�to�influence�the� economic�decisions�of�users�taken�on�the�basis�of�these�financial�statements.
Irregularities,�including�fraud,�are�instances�of�non�compliance�with�laws�and�regulations.�We� design�procedures�in�line�with�our�responsibilities,�outlined�above,�to�detect�material� misstatements�in�respect�of�irregularities,�including�fraud.�The�specific�procedures�for�this� engagement�and�the�extent�to�which�these�are�capable�of�detecting�irregularities,�including�fraud�is� detailed�below:��
-
Obtaining�an�understanding�of�the�legal�and�regulatory�frameworks�that�the�entity�operates�in, focusing�on�those�laws�and�regulations�that�had�a�direct�effect�on�the�financial�statements;
-
Enquiry�of�management�and�those�charged�with�governance�to�identify�any�instances�of�known or�suspected�instances�of�fraud;
-
Enquiry�of�management�and�those�charged�with�governance�around�actual�and�potential litigation�and�claims;
-
Enquiry�of�management�about�any�instances�of�non�compliance�with�laws�and�regulations;
-
Reviewing�the�control�systems�in�place�and�testing�the�effectiveness�of�the�controls;
-
Performing�audit�work�over�the�risk�of�management�override�of�controls,�including�testing�of journal�entries�and�other�adjustments�for�appropriateness;
-
Evaluating�the�business�rationale�of�significant�transactions�outside�the�normal�course�of business;
-
Reviewing�accounting�estimates�for�bias;
-
Reviewing�minutes�of�meetings�of�those�charged�with�governance;�and
-
Reviewing�financial�statement�disclosures�and�testing�to�supporting�documentation�to�assess compliance�with�applicable�laws�and�regulations.
Because�of�the�inherent�limitations�of�an�audit,�there�is�a�risk�that�we�will�not�detect�all� irregularities,�including�those�leading�to�a�material�misstatement�in�the�financial�statements�or�non�
29�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
compliance�with�regulation.��This�risk�increases�the�more�that�compliance�with�a�law�or�regulation�is� removed�from�the�events�and�transactions�reflected�in�the�financial�statements,�as�we�will�be�less� likely�to�become�aware�of�instances�of�non�compliance.�The�risk�is�also�greater�regarding� irregularities�occurring�due�to�fraud�rather�than�error,�as�fraud�involves�intentional�concealment,� forgery,�collusion,�omission�or�misrepresentation.�
A�further�description�of�our�responsibilities�for�the�audit�of�the�financial�statements�is�located�on� the�Financial�Reporting�Council’s�website�at:�https://www.frc.org.uk/Our�Work/Audit/Audit�and� assurance/Standards�and�guidance/Standards�and�guidance�for�auditors/Auditors�responsibilities� for�audit/Description�of�auditors�responsibilities�for�audit.aspx.�This�description�forms�part�of�our� auditor’s�report.
Use�of�this�report�
This�report�is�made�solely�to�the�charitable�company’s�members,�as�a�body,�in�accordance�with� Chapter�3�of�Part�16�of�the�Companies�Act�2006.�Our�audit�work�has�been�undertaken�so�that�we� might�state�to�the�charitable�company’s�members�those�matters�we�are�required�to�state�to�them� in�an�auditor’s�report�and�for�no�other�purpose.��To�the�fullest�extent�permitted�by�law,�we�do�not� accept�or�assume�responsibility�to�anyone�other�than�the�charitable�company�and�the�charitable� company’s�members�as�a�body,�for�our�audit�work,�for�this�report,�or�for�the�opinions�we�have� formed.�
Sudhir�Singh�FCA �(Senior�Statutory�Auditor)�
For�and�behalf�of��
MHA�MacIntyre�Hudson�
Statutory�Auditor�
London,�United�Kingdom��
Date:� 4 April 2023
30�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
ACCOUNTS�
Statement of�Financial�Activities�for�the�Year�Ended�30�September�2022� (incorporating�Income�and�Expenditure�Account)�
| Note Income from other Trading Activities - Royalty Income - Reimbursement of Patent Costs Investment Income 10b Other Income - Exchange gain |
Unrestricted Endowment Total Funds Funds Funds 2022 2022 2022 £'000 £'000 £'000 684 - 684 - - - 8,015 - 8,015 19 - 19 8,718 - 8,718 6,144 - 6,144 14 - 14 474 - 474 1,073 - 1,073 7,705 - 7,705 1,013 - 1,013 (11,646) - (11,646) (16,507) (170) (16,677) (28,153) (170) (28,323) (27,140) (170) (27,310) 304,853 1,575 306,428 277,713 1,405 279,118 |
Total Funds 2021 £'000 735 13 10,042 11 |
|---|---|---|
| Total Income | 10,801 | |
| Expenditure on Charitable Activities - Research Funding 4 Costs of Raising Funds - Intellectual Property Protection 4, 5 - Royalty Sharing Payments 4, 5 - Investment Advice 4, 5 |
18,680 36 514 1,579 |
|
| Total Expenditure | 20,809 | |
| Net Income/(Loss) before Investment Gains/(Losses) Net (Losses)/Gains on Investments Realised (Loss)/Gain 10a Unrealised Investment (Loss)/Gain 10a Net (Expenditure)/Income |
(10,008) 32,244 7,915 |
|
| 40,159 30,151 |
||
| Total Funds brought forward | 276,277 | |
| Total Funds carried forward 15 |
306,428 |
The�detailed�2021�comparative�Statement�of�Financial�Activities�is�reported�in�note�2.��
The�notes�on�pages�34�to�55�form�part�of�these�financial�statements.�
31�
The Kennedy Trust for Rheumatology Research Annual Report for the Year Ended 30September 2022
Balance Sheet as at 30 September 2022
| Note 30 September 2022 £'000 Fixed Assets Tangible Fixed Assets 16 4 Investments 10a 313,759 313,763 Current Assets Debtors 11 579 Cash at Bank and in hand 1,797 2,376 Creditors (amounts falling due within one year): Sundry Creditors and Accruals 12 (194) Grant Payments due within One Year (10,161) (10,355) Net Current Assets (7,979) Total Assets less Current Liabilities 305,784 Creditors (Amounts falling due after more than One Year) 13 (26,666) Net Assets 14 279,118 Funds Unrestricted - Designated 18,461 Unrestricted - General 259,252 Unrestricted - Total 277,713 Endowment 1,405 Total Funds 15 279,118 |
30 September 2021 £'000 - 341,670 |
|---|---|
| 341,670 | |
| 667 3,095 |
|
| 3,762 (371) (8,909) |
|
| (9,280) (5,518) |
|
| 336,152 (29,724) |
|
| 306,428 | |
| 22,503 282,350 |
|
| 304,853 1,575 |
|
| 306,428 |
Company Registration Number: 963832
These Accounts were approved by the Trustees and authorised for issue on 28th March 2023.
Professor Sir Stephen Holgate Chairman of the Board of Trustees
Margaret Frost Chair of the Finance and Investment Committee
The notes on pages 34 to 55 form part of these financial statements.
32
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
Statement�of�Cash�Flows�for�the�Year�Ended�30�September�2022�
| Net Cash used in Operating Activities (Note a) Cashflow from Investing Activities (Note b) Change in cash and cash equivalents in the year Cash and Cash Equivalents at 1 October |
Year Ended 30 September 2022 £'000 (8,072) 6,774 (1,298) 3,095 1,797 2022 £'000 (27,310) (8,015) 28,323 824 1 (1,983) 88 (8,072) 2022 £'000 (144,667) 143,431 8,015 (5) 6,774 Cash Flows £'000 (1,298) |
Year Ended 30 September 2021 £'000 (9,387) 10,576 |
|---|---|---|
| 1,189 1,906 |
||
| Cash and Cash Equivalents at 30 September | 3,095 | |
| a. Net Cash used in Operating Activities Net (expenditure)/income for the year Investment income Losses/(gains) on investments Add back investment management costs Add back depreciation of tangible assets (Increase)/decrease in creditors Decrease in debtors |
2021 £'000 30,151 (10,042) (40,159) 248 - 10,279 136 |
|
| Net Cash Flow from Operating Activities | (9,387) | |
| b. Cash Flow from Investing Activities (Note b) Payments to acquire investments Receipts from sales of investments Investment income Purchase of tangible fixed assets |
2021 £'000 (272,872) 273,406 10,042 - |
|
| Net Cash Flow from Investing Activities | 10,576 | |
c. Analysis of Changes in Cash and Cash Equivalents 30 September 2021 £'000 Cash at Bank and in hand 3,095 |
30 September 2022 £'000 1,797 |
As�the�Trust�does�not�have�any�debt,�an�analysis�of�net�debt�has�not�been�produced.
33�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
Notes�to�the�Accounts�
1. Summary�of�Significant�Accounting�Policies�
(A) GENERAL�INFORMATION�AND�BASIS�OF�PREPARATION�
The�Kennedy�Trust�for�Rheumatology�Research�is�a�company�limited�by�guarantee�registered�in� England.�In�the�event�of�the�charity�being�wound�up,�the�liability�in�respect�of�the�guarantee�is� limited�to�£1�per�member�of�the�charity.�The�address�of�the�registered�office�is�given�in�the�charity� information�on�page�24�of�these�financial�statements.��
The�charity�constitutes�a�public�benefit�entity�as�defined�by�FRS�102.�The�financial�statements�have� been�prepared�in�accordance�with�Accounting�and�Reporting�by�Charities:�Statement�of� Recommended�Practice�applicable�to�charities�preparing�their�accounts�in�accordance�with�the� Financial�Reporting�Standard�applicable�in�the�UK�and�Republic�of�Ireland�(FRS�102),�the�Charities�Act� 2011�and�the�Companies�Act�2006.�
The�financial�statements�are�prepared�on�a�going�concern�basis�under�the�historical�cost�convention,� modified�to�include�certain�items�at�fair�value.�The�financial�statements�are�presented�in�sterling� which�is�the�functional�currency�of�the�charity�and�rounded�to�the�nearest�£’000.�
The�significant�accounting�policies�applied�in�the�preparation�of�these�financial�statements�are�set� out�below.�These�policies�have�been�consistently�applied�to�all�years�presented�unless�otherwise� stated.�
(B) FUNDS�
Unrestricted�funds�are�available�for�use�at�the�discretion�of�the�Trustees�in�furtherance�of�the� general�objectives�of�the�charity�and�which�have�not�been�designated�for�other�purposes.�
Designated�funds�comprise�unrestricted�funds�that�have�been�set�aside�by�the�Trustees�for�particular� purposes.�The�aim�and�use�of�each�designated�fund�is�set�out�in�the�notes�to�the�financial� statements.�
Restricted�funds�are�funds�which�are�to�be�used�in�accordance�with�specific�restrictions�imposed�by� donors�or�which�have�been�raised�by�the�charity�for�particular�purposes.�The�cost�of�raising�and� administering�such�funds�are�charged�against�the�specific�fund.�The�aim�and�use�of�each�restricted� fund�is�set�out�in�the�notes�to�the�financial�statements.�
Endowment�funds�represent�those�assets�which�must�be�held�permanently�by�the�charity,�principally� the�Maynard�Jenour�Fund�and�the�Kennedy�Endowment�Fund.�Income�arising�on�the�endowment� funds�can�be�used�in�accordance�with�the�objects�of�the�charity�and�is�included�as�unrestricted� income.�Any�capital�gains�or�losses�arising�on�the�investments�form�part�of�the�fund.�Investment� management�charges�and�legal�advice�relating�to�the�fund�are�charged�against�the�fund.�
(C) INCOME�RECOGNITION�
All�incoming�resources�are�included�in�the�Statement�of�Financial�Activities�(SoFA)�when�the�charity� is�legally�entitled�to�the�income�after�any�performance�conditions�have�been�met,�the�amount�can� be�measured�reliably,�and�it�is�probable�that�the�income�will�be�received.�
34�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
Donations�are�recognised�on�receipt.�If�there�are�conditions�attached�to�the�donation�and�this� requires�a�level�of�performance�before�entitlement�can�be�obtained,�then�income�is�deferred�until� those�conditions�are�fully�met�or�the�fulfilment�of�those�conditions�is�within�the�control�of�the� charity�and�it�is�probable�that�they�will�be�fulfilled.��
Investment�income�is�earned�through�holding�assets�for�investment�purposes�such�as�shares�and� property.�It�includes�dividends�and�interest.�Where�it�is�not�practicable�to�identify�investment� management�costs�incurred�within�a�scheme�with�reasonable�accuracy,�the�investment�income�is� reported�net�of�these�costs.�It�is�included�within�cost�of�raising�funds�when�the�amount�can�be� measured�reliably.�Interest�income�is�recognised�using�the�effective�interest�method�and�dividend� income�is�recognised�as�the�charity’s�right�to�receive�payment�is�established.�
Income�from�royalty�and�licence�agreements�is�recognised�throughout�the�year�when�there�is� reasonable�assurance�of�receipt.�Royalty�and�licence�income�are�recognised�gross�of�the�related� revenue�share�obligations�to�the�inventors�and�other�parties�which�are�payable�on�recognition�of�the� royalty�income.�Licence�agreements�also�provide�for�the�reimbursement�of�patent�protection�costs� in�certain�cases.�
(D) EXPENDITURE�RECOGNITION�
All�expenditure�is�accounted�for�on�an�accruals�basis�and�has�been�classified�under�headings�that� aggregate�all�costs�related�to�the�category.�Expenditure�is�recognised�where�there�is�a�legal�or� constructive�obligation�to�make�payments�to�third�parties,�it�is�probable�that�the�settlement�will�be� required,�and�the�amount�of�the�obligation�can�be�measured�reliably.�It�is�categorised�under�the� following�headings:�
-
Costs�of�raising�funds�includes�royalty�sharing�payments,�intellectual�property�protection�&� investment�advice;�
-
Expenditure�on�charitable�activities�includes�research�science�funding�and�research� infrastructure�funding.�
The�Trust�was�registered�for�VAT�until�7�May�2019�at�which�time�it�deregistered.�Whilst�the�Trust� was�registered�for�VAT,�the�recoverable�aspect�of�VAT�was�removed�from�the�expense�and�against� the�activity�for�which�expenditure�arose.�Subsequent�to�deregistration,�VAT�is�recorded�against�the� expense�and�activity�for�which�expenditure�arose.�
Grants�payable�to�the�Institute�and�to�other�third�parties�are�within�the�charitable�objectives.�Where� unconditional�grants�are�offered,�this�is�accrued�as�soon�as�the�recipient�is�notified�of�the�grant,�as� this�gives�rise�to�a�reasonable�expectation�that�the�recipient�will�receive�the�grants.�Where�grants� are�conditional�relating�to�performance�then�the�grant�is�only�accrued�when�any�unfulfilled� conditions�are�outside�of�the�control�of�the�charity.�
The�provision�for�a�multi�year�grant�is�recognised�at�its�present�value�where�settlement�is�due�over� more�than�one�year�from�the�date�of�the�award,�there�are�no�unfulfilled�performance�conditions� under�the�control�of�the�Trust�that�would�permit�the�Trust�to�avoid�making�the�future�payment(s),� settlement�is�probable�and�the�effect�of�discounting�is�material.�A�review�of�the�discount�rate�was� carried�out�during�the�year�in�conjunction�with�the�previous�adoption�of�CPI�plus�3%�as�representing� the�most�appropriate�rate�as�it�relates�to�the�Trust’s�opportunity�cost�of�money�reflecting�time�value� of�funds�to�the�Trust�as�detailed�in�the�Financial�Report�on�page�15.�A�further�element�of�prudence� was�added�this�year,�in�response�to�the�significant�upward�rise�in�CPI�at�both�the�headline�(including�
35�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
food�and�energy)�and�core�data�sets,�which�was�to�adopt�core�CPI�as�the�inflation�reference�given� the�highly�volatile�nature�of�headline�CPI�following�the�Ukraine�invasion�and�subsequent�volatility�in� energy�and�food�prices�in�particular.�The�effect�of�the�discount�rate�of�UK�Core�CPI�+�3%�applied�has� been�quantified�in�the�Financial�Report�on�page�15�and�notes�4�and�13.��
Royalty�sharing�payments�are�calculated�by�applying�a�formula�for�the�distribution�of�royalty�income� agreed�by�the�Trustees�and�Versus�Arthritis,�which�reflects�current�UK�university�practice.�Such� payments�are�accrued�in�line�with�the�corresponding�royalty�income.�
Investment�advice�reflects�the�costs�incurred�by�the�Trust�in�managing�its�investment�portfolios.�The� cost�includes�both�internal�costs�and�external�consultancy�and�management�costs.�Cost�is�recognised� in�line�with�the�accruals�basis�above.�
(E) SUPPORT�COSTS�ALLOCATION�
Support�costs�are�those�that�assist�the�work�of�the�charity�but�do�not�directly�represent�charitable� activities�and�include�office�costs,�governance�costs�and�administrative�payroll�costs.�They�are� incurred�directly�in�support�of�expenditure�on�the�objects�of�the�charity�and�include�grant� management�carried�out�by�the�Trust’s�employees.�Where�support�costs�cannot�be�directly� attributed�to�particular�headings�they�have�been�allocated�to�cost�of�raising�funds�and�expenditure� on�charitable�activities�on�a�basis�consistent�with�use�of�the�resources.�Premises�overheads�and� other�overheads�have�been�allocated�either�on�time�spent�or�on�another�basis�as�appropriate.�
The�analysis�of�these�costs�is�included�in�note�6.�
(F) TANGIBLE�FIXED�ASSETS�
Tangible�fixed�assets�are�stated�at�cost�(or�deemed�cost)�or�valuation�less�accumulated�depreciation� and�accumulated�impairment�losses.�Cost�includes�costs�directly�attributable�to�making�the�asset� capable�of�operating�as�intended.�The�agreed�capitalisation�limit�of�tangible�assets�has�been� increased�and�agreed�at�£1,000.�
Depreciation�is�calculated�to�write�off�the�cost,�less�estimated�residual�value,�of�each�asset�on�a� straight�line�basis�over�its�expected�useful�life�as�follows:�
Computer�equipment��� 3�years��
(G) INVESTMENTS�
Investments�are�recognised�initially�at�fair�value�which�is�normally�the�transaction�price�excluding� transaction�costs.�Subsequently,�they�are�measured�at�fair�value�with�changes�recognised�in�‘net� gains�/�(losses)�on�investments’�in�the�Statement�of�Financial�Activities�if�the�shares�are�publicly� traded�or�their�fair�value�can�otherwise�be�measured�reliably.�The�Trustees�have�deemed�that�the� fair�value�of�unlisted�open�ended�investment�companies�(OEIC’s)�and�illiquid�property�fund� investments,�equates�to�the�charity’s�share�of�the�Net�Asset�Value�(NAV)�of�the�assets�held,�based�on� the�market�prices�as�at�the�valuation�date.�Investment�gains�and�losses�are�shown�split�between� realised�and�unrealised.�
36�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
(H) DEBTORS�AND�CREDITORS�RECEIVABLE�/�PAYABLE�WITHIN�ONE�YEAR�
Debtors�and�creditors�with�no�stated�interest�rate�and�receivable�or�payable�within�one�year�are� recorded�at�transaction�price.�Any�losses�arising�from�impairment�are�recognised�in�expenditure.�
(I) PROVISIONS�
Provisions�are�recognised�when�the�charity�has�an�obligation�at�the�balance�sheet�date�as�a�result�of� a�past�event,�it�is�probable�that�an�outflow�of�economic�benefits�will�be�required�in�settlement�and� the�amount�can�be�reliably�estimated.�
(J) LEASES�
Rentals�payable�and�receivable�under�operating�leases�are�charged�to�the�Statement�of�Financial� Activities�on�a�straight�line�basis�over�the�period�of�the�lease.�
(K) FOREIGN�CURRENCY�
Foreign�currency�transactions�are�initially�recognised�by�applying�to�the�foreign�currency�amount�the� best�available�exchange�rate�between�the�functional�currency�and�the�foreign�currency�at�the�date� of�the�transaction.�Monetary�assets�and�liabilities�denominated�in�a�foreign�currency�at�the�balance� sheet�date�are�translated�using�the�closing�rate.�Gains�and�losses�on�exchange�are�allocated�to�the� appropriate�resource.�
Forward�exchange�contracts�are�used�solely�to�manage�the�exposure�to�foreign�exchange�rate�risks� in�respect�of�the�Trust’s�investment�portfolio.�
(L) EMPLOYEE�BENEFITS�
When�employees�have�rendered�service�to�the�charity,�short�term�employee�benefits�to�which�the� employees�are�entitled�are�recognised�at�the�undiscounted�amount�expected�to�be�paid�in�exchange� for�that�service.�
The�charity�contributes�to�the�personal�pension�schemes�of�the�employees�and�all�costs�are�charged� to�the�Statement�of�Financial�Activities�in�the�year�to�which�they�relate.�
(M) TAX�
The�charity�is�considered�to�pass�the�tests�set�out�in�Paragraph�1�Schedule�6�Finance�Act�2010�and� therefore�it�meets�the�definition�of�a�charitable�company�for�UK�corporation�tax�purposes.�It� therefore�does�not�suffer�tax�on�income�or�gains�applied�for�charitable�purposes.�
37�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
(N) GOING�CONCERN�
The�financial�statements�have�been�prepared�on�a�going�concern�basis�as�the�Trustees�believe�that� no�material�uncertainties�exist.�The�Trustees�have�considered�the�level�of�funds�held�and�the� expected�level�of�income�and�expenditure�for�12�months�from�authorising�these�financial�statements� and�the�impact�of�Covid�19.�The�budgeted�income�and�expenditure�are�sufficient�with�the�level�of� reserves�for�the�charity�to�be�able�to�continue�as�a�going�concern.�
In�arriving�at�this�conclusion,�the�Trust’s�investment�portfolio�has�been�stress�tested�with�the� assistance�of�its�fiduciary�manager�JP�Morgan.��The�Trustees�concluded�that�even�in�the�worst�case� scenarios,�funds�available�are�considered�to�be�comfortably�adequate�to�ensure�the�solvency,� resilience,�and�liquidity�of�the�Trust.�
(O) FINANCIAL�INSTRUMENTS�
The�charity�holds�both�basic�and�complex�Financial�Instruments.�The�Trust�has�elected�to�apply�the� provisions�of�Section�11�and�Section�12�of�FRS�102�in�full�in�respect�of�financial�instruments.�The� financial�assets�and�financial�liabilities�of�the�Charity�are�as�follows:�
Debtors �–�trade�and�other�debtors�(including�accrued�royalty�income)�are�basic�financial�instruments� measured�at�amortised�cost.��
Cash�at�bank �–�is�classified�as�a�basic�financial�instrument�and�is�measured�at�face�value.�
Liabilities �–�trade�creditors,�accruals�and�other�creditors�will�be�classified�as�financial�instruments,� and�are�measured�at�amortised�cost�as�detailed�in�notes�12�and�13.�Taxation�and�social�security�are� not�included�in�the�financial�instruments�disclosure.�Deferred�income�is�not�deemed�to�be�a�financial� liability,�as�the�cash�settlement�has�already�taken�place�and�there�is�simply�an�obligation�to�deliver� charitable�services�rather�than�cash�or�another�financial�instrument.�
Investments �–�a�number�of�investments�held�at�the�year�end�are�classified�as�complex�financial� instruments�as�they�are�unlisted�open�ended�investment�companies�(OEIC’s).�Under�Section�11.24�of� FRS�102�SORP�2019�the�subsequent�measurement�of�complex�financial�instruments�should�be�at�fair� value�and�all�changes�in�the�fair�value�should�be�recognised�in�the�Statements�of�Financial�Activities.� The�Trustees�have�deemed�that�the�fair�value�of�these�investments�equates�to�the�charity’s�share�of� the�Net�Asset�Value�(NAV)�of�the�assets�held,�based�on�the�market�prices�as�at�the�valuation�date.� The�Trust�deems�its�derivative�instruments�as�complex�financial�instruments�and�the�Trust’s�policy�is� explained�below.�All�other�investments�are�classified�as�basic�financial�instruments�and�held�at�their� market�value.�
Derivative�instruments �–�The�Trust�uses�Forward�foreign�currency�contracts�to�reduce�exposure�to� foreign�exchange�rates�solely�in�respect�of�its�investment�portfolio.�Derivative�financial�instruments� are�initially�measured�at�fair�value�on�the�date�the�derivative�contract�is�entered�into�and�are� subsequently�re�measured�to�fair�value�at�each�reporting�date.�Fair�value�gains�and�losses�are� recognised�in�the�SoFA.��
38�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
- (P) JUDGEMENTS�AND�KEY�SOURCES�OF�ESTIMATION�UNCERTAINTY�
The�following�judgements�(apart�from�those�involving�estimates)�have�been�made�in�the�process�of� applying�the�above�accounting�policies�that�have�had�the�most�significant�effect�on�amounts� recognised�in�the�financial�statements:�
-
Allocation�of�support�costs�are�made�in�line�with�the�use�of�the�resource�
-
Fund�allocation�
-
Discounting�of�the�provisions�for�multi�year�grants�liabilities�to�present�value.�Internal� estimation�is�required�in�calculating�the�appropriate�discount�rate�and�determining�when�the� liability�will�fall�due�
-
Fair�value�of�investments�
-
Foreign�currency�exchange�rates.�
There�are�no�other�key�assumptions�concerning�the�future�or�key�sources�of�estimation�uncertainty�at� the�reporting�date�that�have�a�significant�risk�of�causing�a�material�adjustment�to�the�carrying�amounts� of�assets�and�liabilities�within�the�next�financial�year.�
39�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
2. Detailed�Comparatives�for�the�Statement�of�Financial�Activities�
Incoming from Charitable Activities - Donations and Legacies Incoming from other trading activities - Royalty Income - Reimbursement of Patent Costs Investment Income Other Income - Exchange gain |
Unrestricted Endowment Total Funds Funds Funds 2021 2021 2021 £'000 £'000 £'000 - - - 735 - 735 13 - 13 10,042 - 10,042 11 - 11 |
|---|---|
| Total Income | 10,801 10,801 |
| Expenditure on Charitable Activities - Research Funding Costs of Raising Funds - Intellectual Property Protection - Royalty Sharing Payments - Investment Advice |
18,680 - 18,680 36 - 36 514 - 514 1,579 - 1,579 |
| Total Expenditure | 20,809 - 20,809 |
| Net (Expenditure) before Investment Gains/(Losses) Net Gains on Investments Unrealised Investment Gain Realised Gain Net Income |
(10,008) - (10,008) 32,244 - 32,244 7,573 342 7,915 |
| 39,817 342 40,159 29,809 342 30,151 |
|
| Total Funds brought forward | 275,044 1,233 276,277 |
| Total Funds carried forward | 304,853 1,575 306,428 |
40�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
3. Net�Income�for�the�Year�
Net�income�for�the�year�is�arrived�at�after�charging�the�following:�
| Year Ended | Year Ended | |
|---|---|---|
| 30 September | 30 September | |
| 2022 | 2021 | |
| £'000 | £'000 | |
Auditors Remuneration (for audit services only) |
32 | 27 |
| Exchange Rate Gain | 19 | 11 |
| Lease expense | 80 | 80 |
4. Analysis�of�Expenditure�
| Total Discounting Year Ended Direct Support of grant 30 Sept Costs Costs liabilities 2022 £'000 £'000 £'000 £'000 Royalty Sharing Payments 432 42 - 474 Investment Advice 960 113 - 1,073 Intellectual Property Protection 1 13 - 14 Research Science Funding 7,570 386 (1,812) 6,144 Total Resources Expended 8,963 554 (1,812) 7,705 |
Total Year Ended 30 Sept 2021 £'000 514 1,579 36 18,680 |
|---|---|
| 20,809 |
The�total�awards�granted�was�£8.727m�(2021:�£27.337m).�
The�£7.570m�Research�Science�Funding�shown�above�(2021:�£23.385m)�is�net�of�grant�write�backs� and�other�adjustments�of�£1.157m�(2021:�£3.952m)�including�agreed�cancellations�£0.750m� (£2.948m)�and�grant�write�backs�£0.407m�(£0.673m).�
The�Trust�monitors�the�effect�of�discounting�of�multi�year�grant�liabilities�to�present�value�and�it� considers�the�current�year�movement�of�£1.812m�(2021:�£4.946m)�to�be�material.�A�review�of�the� discount�rate�was�carried�out�during�the�year�in�conjunction�with�the�previous�adoption�of�CPI�plus� 3%�as�detailed�in�the�Financial�Report�on�page�15.�A�further�element�of�prudence�was�added�this� year,�in�response�to�the�significant�upward�rise�in�CPI�at�both�the�headline�(including�food�and� energy)�and�core�data�sets,�which�was�to�adopt�core�CPI�as�the�inflation�reference�given�the�highly� volatile�nature�of�headline�CPI�in�2022.�The�discount�rate�applied�of�UK�Core�CPI�+�3%�is�taken�to�be�a� total�rate�of�9.5%�(2021:�6.1%).�
Details�of�grants�awarded�during�the�year�are�shown�on�page�11�in�the�Trustees’�Report.�
41�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
4. Analysis�of�Expenditure�–�continued��
Investment�Advice�of�£0.960m�includes�JP�Morgan�management�fees�of�£0.642m�being�fees� deducted�from�cash�holdings�in�the�investment�portfolio�of�£0.685m�net�of�a�reduction�in�accruals�of� £0.043m,�SEI�fees�on�residual�private�market�holdings�of�£0.171m�and�£0.139m�of�JP�Morgan� forward�contract�premiums�deducted�from�cash�holdings�in�the�investment�portfolio.��Fees�have� reduced�on�previous�years�as�£0.233m�of�anti�dilution�levies�were�incurred�upon�sale�of�SEI�and� Newton�holdings�as�part�of�the�2021�fiduciary�manager�transition�to�JP�Morgan.�
2021�Comparatives�
| 2021Comparatives | ||||
|---|---|---|---|---|
| Total | ||||
| Discounting | Year Ended | |||
| Direct | Support | of grant | 30 Sept | |
| Costs | Costs | liabilities | 2021 | |
| £'000 | £'000 | £'000 | £'000 | |
| Royalty Sharing Payments | 470 | 44 | - | 514 |
| Investment Advice | 1,509 | 70 | - | 1,579 |
| Intellectual Property Protection | 21 | 15 | - | 36 |
| Research Science Funding | 23,385 | 241 | (4,946) | 18,680 |
| Total Resources Expended | 25,385 | 370 | (4,946) | 20,809 |
5. Support�Costs�
The�total�support�costs�incurred�by�the�Trust�amount�to�£0.554m�(2021:�£0.370m).�An�analysis�of�the� main�categories�of�expenditure�included�within�support�costs�and�the�apportionment�of�these�costs� to�the�key�activities�undertaken�by�the�Trust�is�set�out�in�the�table�following.�
42�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
6. Analysis�of�Support�Costs�
| Staff Costs Office and General Costs Governance Costs Total |
Research Intellectual Royalties Investment 2022 Property Total £'000 £'000 £'000 £'000 £'000 156 9 16 63 244 190 4 21 45 260 40 0 5 5 50 |
|---|---|
| 386 13 42 113 554 |
Staff�costs�are�apportioned�according�to�time�spent�on�various�activities.�Where�support�costs� cannot�be�directly�attributed�to�particular�headings,�they�have�been�allocated�on�a�basis�consistent� with�use�of�the�resources.��
2021�Comparatives�
Staff Costs Office and General Costs Governance Costs Total |
Research Intellectual Royalties Investment 2021 Property Total £'000 £'000 £'000 £'000 £'000 126 10 14 49 199 90 4 22 18 134 25 1 8 3 37 |
|---|---|
| 241 15 44 70 370 |
7. Analysis�of�Governance�Costs
Audit & Accountancy Office Costs Legal & Professional Other |
Year Ended 30 Sept 2022 £'000 32 6 - 12 50 |
Year Ended 30 Sept 2021 £'000 27 5 1 4 |
|---|---|---|
| 37 |
Other�Costs�of�£12k�(2021:��£4k)�includes�Trustee�meeting�costs�and�travel�expenses.�
43�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
8. Payments�to�Trustees�and�Staff�Costs�
The�members�of�the�Board�of�Trustees�receive�no�emoluments�for�their�service�in�that�capacity.��
Expenses�in�respect�of�travel,�subsistence,�and�sundries�incurred�by�12�Trustees�in�the�course�of�their� duties�amounted�to�£3,154�(2021:�nil)�of�which�all�was�paid�directly�by�the�Trust.��
During�the�year,�4�Trustees�(2021:�1)�have�been�reimbursed�for�travel�and�subsistence�expenses� directly�incurred�in�carrying�out�their�activities�as�Trustees�at�a�cost�of�£2,760�(2021:�£102).��
Trustee�expenses�increased�during�the�year�given�the�Trust�returned�to�an�increased�proportion�of�in� person�meetings�as�the�impact�of�the�COVID�19�pandemic�subsided.�
Total�staff�costs�are�set�out�in�the�table�below.�
Staff�and�Consultancy�Costs
| Staff Salaries National Insurance Employer contributions to pensions Total Staff Costs |
Year Ended 30 September 2022 £'000 204 20 20 244 |
Year Ended 30 September 2021 £'000 168 15 16 |
|---|---|---|
| 199 |
Average�staff�numbers�during�the�year�comprise�3�part�time�(2.2�full�time�equivalent)�members�of� staff�(2021:�3�part�time���2�full�time�equivalent).��
The�Chief�Executive�Officer�and�the�Secretary�to�the�Board�form�the�Trust's�Key�Management� Personnel.�The�Trust�completed�a�successful�transition�of�Chief�Executive�Officer�in�June�2022�with�a� three�month�cross�over�driving�the�increase�in�staff�costs.���
Total�remuneration�paid�to�key�management�personnel:�
| Staff Salaries National Insurance Employer contributions to pensions Total Staff Costs |
Year Ended 30 September 2022 £'000 185 19 18 222 |
Year Ended 30 September 2021 £'000 146 14 15 |
|---|---|---|
| 175 |
44�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
The�table�below�summarises�the�number�of�employees�who�received�£60,000�or�more�in�the�year:�
| 2022 | 2021 | |
|---|---|---|
Employees paid between £80,000 and £90,000 |
1 | - |
| Employees paid between £90,000 and £100,000 | - | - |
| Employees paid between £100,000 and £110,000 | - | 1 |
9. Related�Party�Transactions�
Royalty�income�from�Janssen�has�been�included�in�incoming�resources.�Following�Charity� Commission�approval,�the�Trustees�have�apportioned�part�of�the�royalty�payments�to�the�inventors� and�Versus�Arthritis,�according�to�a�formula�in�line�with�current�UK�university�practice.�
Professor�Sir�Ravinder�Maini�was�an�employee�of�the�Institute,�responsible�with�Professor�Sir�Marc� Feldmann�for�the�invention�which�subsequently�led�to�the�generation�of�royalty�income.�Under� a�royalty�distribution�arrangement�agreed�with�Versus�Arthritis,�and�in�line�with�current�UK� university�practice,�he�and�Professor�Feldmann�are�entitled�to�an�equal�share�of�royalty�income.�
Following�Professor�Maini's�appointment�as�a�Trustee�of�the�Trust,�Charity�Commission�approval�was� obtained�for�the�continuing�payment�of�his�share�of�the�royalty�income.��
In�2022,�£115,046�(2021:�£125,058)�was�receivable�by�Professor�Maini.�The�balance�outstanding�at� the�year�end�was�£17,824�(2021:�£59,745).�Professor�Maini�ceased�to�be�a�Trustee�on�11�December� 2018,�but�remains�the�Trust's�President.�
45�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
10. Investments�
(a) Investments�held�with�Investment�Managers�
| 30 September 2022 £'000 Movement on Investments: Market Value brought forward 341,670 Net Additions at Cost 144,667 Disposals at Market Value (143,431) Investment Management Costs (824) Realised (Loss)/Gain (11,646) Unrealised Investment(Loss)/Gain (16,677) Market Value carried forward 313,759 Historic Costs of Investments 327,101 Cumulative Unrealised (Loss)/Gain (13,342) 313,759 |
30 September 2021 £'000 302,293 272,872 (273,406) (248) 32,244 7,915 |
|---|---|
| 341,670 | |
| 335,703 5,967 |
|
| 341,670 |
During�the�year,�the�Trust�continued�to�transition�residual�illiquid�holdings�in�SEI�managed�vehicles� with�the�net�proceeds�of�£31.526m�invested�by�the�Trust's�fiduciary�manager�JP�Morgan.���
The�Statement�of�Financial�Activities�included�net�losses�on�investments�of�£28,323m�(2021:�gains�of� £40.159m)�which�includes�unrealised�losses�of�£16.677m�(2021:�gains�of�£7.915m)�driven�by�the� challenging�market�conditions.�
The�Investment�Management�Costs�of�£0.824m�(2021:�£0.248m)�are�JP�Morgan�fees�with�£0.685m� (2021:�£15k)�being�management�fees�deducted�from�cash�holdings�in�the�investment�portfolio,�and� £0.139m�of�forward�contract�premiums.��The�2021�costs�of�£0.248m�include�£0.233m�of�anti�dilution� levies�were�incurred�upon�sale�of�SEI�and�Newton�holdings�as�part�of�the�fiduciary�manager� transition�to�JP�Morgan.��
As�in�previous�years�private�market�distributions�are�allocated�to�Investment�Income.�
46�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
10. Investments�
(a) Investments�held�with�Investment�Managers�–�continued�
Investments�held�with�Investment�Managers�represented�by:�
| 30 September 2022 £'000 Investments not designated to funds: Overseas Listed Securities Dublin 176,592 Luxembourg 33,934 Overseas Unlisted Securities Delaware 20,977 Dublin - Other 11,660 UK Unlisted Securities 35,991 Foreign currency forward contracts (4,480) Cash 37,680 Assets representing the Maynard Jenour Fund: UK Authorised Unit Trusts 95 Assets representing the Kennedy Endowment Fund: UK Authorised Unit Trusts 1,310 313,759 |
30 September 2021 £'000 222,919 42,768 - 18,371 25,064 32,713 (1,886) 146 106 1,469 |
|---|---|
| 341,670 |
Overseas�Listed�Securities�
Overseas�Listed�Securities�include�Société�d’Investissement�à�Capital�Variable�(SICAV),�or�investment� company�with�variable�capital�(also�known�as�an�‘open�ended�investment�company’)�and�which� issues�shares.�With�SICAVs,�the�fund�itself�is�a�stock�corporation�and�thus�a�legal�entity.�The� company’s�capital�depends�on�the�amounts�paid�in�by�investors.�Shares�in�a�SICAV�are�bought�and� sold�on�the�basis�of�the�value�of�the�fund’s�assets,�or�net�asset�value.�In�accordance�with�applicable� law�and�regulations,�a�SICAV�can�either�appoint�a�separate�management�company�or�can�be�self� managed.�SICAVs�are�structured�much�like�a�mutual�fund�in�the�US�and�are�very�common�investment� vehicles�in�Luxembourg.�
Open�end�investment�company�(OEIC)�or�investment�company�with�variable�capital�(ICVC)�are�types� of�open�end�collective�investments�formed�as�corporations�in�Ireland�or�the�UK.�The�terms�are�used� interchangeably�and�most�funds�in�Ireland�establish�a�formal�legal�structure�of�“open�end� investment�company�with�variable�capital”,�as�listed�in�their�Prospectus.�These�funds�are�typically�set� up�under�the�UCITS�regulation�and�are�similar�to�umbrella�mutual�funds.�The�investment�company� will�have�segregated�liability�between�its�underlying�sub�funds.�Similar�to�SICAVs,�since�the�
47�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
investment�company�is�open�ended,�investors�buy�and�sell�shares�based�on�the�net�asset�value�of�a� fund’s�assets.�
iShares�Physical�Gold�–�this�is�an�exchange�traded�commodity�that�is�incorporated�as�a�public� company�with�limited�liability�under�the�laws�of�Ireland.�The�ETC�seeks�to�track�the�day�to�day� movement�of�the�price�of�gold�by�holding�gold�bullion.�The�gold�bullion�backs�the�securities�issued� and�is�valued�daily�at�the�London�PM�fix�price.�The�gold�bullion�is�held�as�allocated�gold�bars�with�the� custodian.�
Overseas�Unlisted�Securities�
The�Dublin�based�Overseas�Unlisted�Securities�are�made�up�of�Dublin�domiciled�open�ended� investment�companies�under�the�UCITS�directive.�In�addition,�it�includes�a�property�fund�which�is�an� Irish�domiciled�Common�Contractual�Fund�supervised�by�the�Irish�Central�Bank.��
The�underlying�holdings�in�these�funds�are�to�a�very�large�extent�made�up�of�shares�in�companies� listed�on�recognised�stock�exchanges�worldwide.�
Overseas�Unlisted�Securities�are�closed�end�investment�partnerships�and�a�segregated�portfolio� company�based�in�the�Cayman�Islands.�
The�Delaware�statutory�trust�(DST)�is�a�legally�recognised�trust�that�is�set�up�for�the�purpose�of� business,�but�not�necessarily�in�the�U.S.�state�of�Delaware.�It�may�also�be�referred�to�as�an� Unincorporated�Business�Trust�or�UBO.�DSTs�have�been�increasingly�used�as�a�form�of�tax�deferral� and�asset�protection�for�real�estate,�securitisation,�mezzanine�financing,�real�estate�investment� trusts�and�mutual�funds.�In�this�regard,�the�trust�is�a�closed�end�management�investment�company� that�is�regulated�as�a�business�development�company.�
(b) Investment�Income
| 30 September 2022 £’000 Listed and Unlisted Investments 8,015 Total Investment Income 8,015 |
30 September 2021 £’000 10,042 |
|---|---|
| 10,042 |
All�income�generated�from�investments�held�within�endowments�are�recognised�in�the�Statement�of� Financial�Activities�as�unrestricted�investment�income.�
As�in�previous�years,�private�market�distributions�are�allocated�to�Investment�Income.��
48�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
11. Debtors�
| 30 September 2022 £'000 Royalty Accrued Income 108 Other Accrued Income 453 SundryDebtors 18 Total Debtors 579 |
30 September 2021 £'000 239 345 83 |
|---|---|
| 667 |
12. Sundry�Creditors�and�Accruals��
| 30 September 2022 £'000 Royalties Payable 67 Other Creditors and Accruals 121 Taxation and Social Security 6 Total Creditors 194 |
30 September 2021 £'000 225 140 6 |
|---|---|
| 371 |
13. Creditors�falling�due�after�more�than�One�Year�
The�balance�of�grants�payable�is�as�follows:�
| 30 September 2022 £’000 Grant Payments due between one and five years 30,022 Grant Payments due after five years 3,403 Discountingofgrant liabilities (6,759) Commitments and Provisions due after One Year 26,666 |
30 September 2021 £’000 30,128 4,542 (4,946) |
|---|---|
| 29,724 |
The�Trust�monitors�the�effect�of�discounting�multi�year�grant�liabilities�to�present�value,�and�it� considers�the�current�year�reserve�at�£6.759m�(2021:�£4.946m)�with�an�increase�to�the�provision�of� £1.812m�(2021:�£4.946m),�to�be�material.�A�review�of�the�discount�rate�was�carried�out�during�the� year�in�conjunction�with�the�previous�adoption�of�CPI�plus�3%�as�detailed�in�the�Financial�Report�on� page�15.�A�further�element�of�prudence�was�added�this�year,�in�response�to�the�significant�upward� rise�in�CPI�at�both�the�headline�(including�food�and�energy)�and�core�data�sets,�which�was�to�adopt� core�CPI�as�the�inflation�reference�given�the�highly�volatile�nature�of�headline�CPI�in�2022.�Applying�a� discount�rate�of�UK�Core�CPI�+3%,�considered�to�be�a�total�rate�of�9.5%�(2021:�6.1%),�the�total�value� of�the�grant�liabilities�discount�for�the�year�ended�30�September�2022�is�£6.759m�(2021:�£4.946m).�
The�current�year�impact�of�£1.812m�(2021:�£4.946m)�is�recorded�as�a�reduction�in�charitable� expenditure.�
49�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
14. Analysis�of�Net�Assets�as�at�
Fixed Assets: Tangible Fixed Assets Investments Current Assets: Debtors Cash at Bank and In Hand |
30 September 2022 Unrestricted Endowment Funds Funds Total £'000 £'000 £'000 4 - 4 312,354 1,405 313,759 579 - 579 1,797 - 1,797 314,734 1,405 316,139 10,355 - 10,355 26,666 - 26,666 277,713 1,405 279,118 |
30 September 2021 Unrestricted Endowment Funds Funds Total £'000 £'000 £'000 - - - 340,095 1,575 341,670 667 - 667 3,095 - 3,095 |
|---|---|---|
| Current Liabilities Long Term Liabilities |
343,857 1,575 345,432 |
|
| 9,280 - 9,280 29,724 - 29,724 |
||
| 304,853 1,575 306,428 |
50�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
15. Funds�
| 15. Funds | ||||||
|---|---|---|---|---|---|---|
| Expenditure | ||||||
| 30 | from | 30 | ||||
| September | Income/ | Designated | Investment | September | ||
| 2021 | (Expenditure) | Funds | Transfers | (Losses) |
2022 | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Endowment Funds |
||||||
| Maynard Jenour Fund |
105 | (10) | 95 | |||
| Kennedy Endowment Fund |
1,470 | (160) | 1,310 | |||
| Total Endowment Funds |
1,575 | - | - | - | (170) | 1,405 |
Unrestricted Funds |
||||||
| General Fund | 282,350 | 1,013 | 9 | 4,033 | (28,153) | 259,252 |
Designated Funds |
||||||
| Legal Expense Fund |
1,067 | (9) | 1,058 | |||
| Oxford Research Grant Fund 2021 |
21,436 | (4,033) | 17,403 | |||
| Total Designated Funds |
22,503 | - | (9) | (4,033) | - | 18,461 |
| Total Unrestricted Funds |
304,853 | 1,013 | - | - | (28,153) |
277,713 |
| Total Funds | 306,428 | 1,013 | - | - | (28,323) |
279,118 |
The�income�from�the�Maynard�Jenour�and�Kennedy�Endowment�Funds�is�unrestricted�and�is�applied� to�fund�grants�to�support�clinical�research.�These�funds�represent�permanent�endowments�held�by� the�Trust.�
The�designated�funds�represent�unrestricted�amounts�which�the�Trustees�have�allocated�for�specific� purposes.�The�Trustees�can�reallocate�these�funds�as�required.�
The�Oxford�Research�Grant�Fund�2021�represents�the�intention�of�the�Trust�to�the�funding�of�the� Institute�since�the�ending�of�the�initial�Oxford�Research�Grant�fund�on�31�July�2021.�This�second� agreement�with�the�University�of�Oxford�was�signed�in�October�2018.�The�designated�fund� represents�funding�of�£4m�per�annum�(adjusted�for�inflation)�over�the�period�incurred�from�1� August�2021�until�31�July�2026�in�line�with�the�period�of�the�contract.�£4.033m�(2021:�£0.667m)�was� released�from�the�Oxford�Research�Grant�Fund�2021�to�General�Funds�constituting�funding�of�this� obligation�for�the�year.�No�grant�creditor�has�been�shown�as�the�Trust�has�the�right�to�refuse� payment�if�no�suitable�projects�are�put�forward.�
51�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
The�initial�funding�agreement�with�the�University�of�Oxford�covered�a�ten�year�period�that�ended�on� 31�July�2021.��The�Trust�had�a�commitment�to�fund�the�Institute�at�a�level�of�at�least�£3m�pa� (adjusted�for�inflation).��The�Oxford�Research�Grant�Fund�was�closed�following�the�end�of�the� contract�in�the�previous�year�with�the�residual�balance�of�£2.958m�released�to�the�Unrestricted� General�Funds�in�2021.�
In�previous�years�the�Trustees�set�aside�a�significant�amount�of�royalty�income�in�a�Legal�Expense� Fund�(10%�of�gross�royalty�income),�which�is�utilised�to�ensure�compliance�with�licence�agreements� and�in�the�event�of�possible�litigation�to�defend�the�Trust’s�patent�rights�world�wide.�
A�decision�was�taken�in�2011�that�the�Legal�Expense�Fund�had�reached�an�adequate�level�so� payments�into�the�fund�are�currently�suspended.�
Any�balance�remaining�on�the�Legal�Expense�Fund�at�the�end�of�the�relevant�patent�period�will�be� distributed�pro�rata�to�the�beneficiaries’�percentage�of�royalty�income.�
During�2017�the�decision�was�taken�to�release�£5m�of�the�Legal�Expense�Fund�and�a�further�£5m�was� released�in�2019.�Of�this�£2.35m�was�paid�to�the�inventors�and�Versus�Arthritis.�The�remaining� £2.65m�due�to�the�Trust�was�released�to�unrestricted�reserves.�
52�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
15. Funds�–�continued��
2021�Comparatives�
| Expenditure | ||||||
|---|---|---|---|---|---|---|
| 30 | from | 30 | ||||
| September | Income/ | Designated | Investment | September | ||
| 2020 | (Expenditure) |
Funds |
Transfers | Profits | 2021 | |
| £'000 | £'000 |
£'000 | £'000 | £'000 | £'000 | |
Endowment Funds |
||||||
| Maynard Jenour Fund |
82 | 23 | 105 | |||
| Kennedy Endowment Fund |
1,151 | 319 | 1,470 | |||
| Total Endowment Funds |
1,233 | - | - | - | 342 | 1,575 |
Unrestricted Funds |
||||||
| General Fund | 245,847 | (10,008) | 18 | 6,676 | 39,817 | 282,350 |
Designated Funds |
||||||
| Legal Expense Fund |
1,085 | (18) | 1,067 | |||
| Oxford Research Grant Fund |
6,009 | (6,009) | 0 | |||
| Oxford Research Grant Fund 2021 |
22,103 | (667) | 21,436 | |||
| Total Designated Funds |
29,197 | - | (18) |
(6,676) | - | 22,503 |
| Total Unrestricted Funds |
275,044 | (10,008) | - | - | 39,817 | 304,853 |
| Total Funds | 276,277 | (10,008) | - | - | 40,159 | 306,428 |
53�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
16. Tangible�Fixed�Assets�
| Cost Cost as at the beginning of the year Additions Cost at the end of the year Depreciation Accumulated depreciation at the beginning of the year Depreciation Accumulated depreciation at the end of the year Netbookvalueat beginningoftheyear Netbookvalueatendof theyear |
30 September 2022 30 September 2021 Computer Equipment Total Total £'000 £'000 £'000 � � � 5 5 � |
|---|---|
| 5 5 - |
|
| � � � 1 1 � |
|
| 1 1 � |
|
| � � � 4 4 � |
54�
The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022�
17. Financial�Commitments�and�Contingent�Liabilities�
The�Trustees�are�committed�to�funding,�at�least�in�part,�the�Kennedy�Institute�of�Rheumatology�at� Oxford.�
Resources�are�being�set�aside�in�designated�funds.�Refer�to�note�15�for�details�of�designated�funds.�
As�explained�in�the�Designated�Funds�note�any�balance�outstanding�on�the�Legal�Expense�Fund�at� the�end�of�the�relevant�patent�period�will�be�distributed�pro�rata�to�the�beneficiaries’�percentage�of� royalty�income.�This�potential�liability�(should�it�crystallise)�will�not�exceed�£0.498m�as�at������������������ 30�September�2022�(2021:�£0.502m).�
The�Trust's�local�currency�is�pounds�sterling,�but�it�holds�some�US�Dollar�investments�and�a�US�Dollar� bank�account.�
The�Trust�has�a�lease�on�its�current�offices�which�can�be�terminated�at�three�months’�notice�from�the� end�of�the�minimum�contract�term�on�31�March�2023.�
These�non�cancellable�lease�commitments�and�their�period�of�expiry�are:�
Expire <1 year 2-5 years >5 years |
30 September 2022 £'000 40 - - 40 |
30 September 2021 £'000 17 - - |
|---|---|---|
| 17 |
18. Financial�derivatives�
Following�the�appointment�of�JP�Morgan�in�July�2021,�forward�exchange�contracts�are�used�to�solely� manage�exposure�to�currency�exchange�risk�in�the�investment�portfolio.�
Forward�contracts�with�contracted�values�of�US$279.68m�and�EUR51m,�were�entered�into�during� the�year�(2021:��US$74.4m�and�EUR14.4m).��Forward�contracts�totalling�US$294.4m�and�EUR53.4� matured�during�the�year�(2021:�nil).��As�at�30�September�2022�there�were�open�forward�contracts� totalling�US$59.680m�and�EUR12m�which�matured�in�October�2022.��Marking�the�open�contracts�to� fair�value�at�30�September�2022�resulted�in�a�loss�of�£4.480m�(2021:�loss�of�£1.886m).��
55�