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2022-09-30-accounts

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�

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:�

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:�

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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:�

Non�trustees�(appointed�to�the�RC�for�a�three�year�period):�

Ex�Officio:�

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.�

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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:��

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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:�

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:�

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�

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.�

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:

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:

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:�

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:�

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:�

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:��

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:�

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�

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:�

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�