
**The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�&�Accounts�for�the�Year�Ended�30�September�2022�** 

**Registered�Charity:�No�260059� Company�No�963832�** 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **The�Kennedy�Trust�for�Rheumatology�Research�** 

## **Annual�Report�&�Accounts�for�the�Year�Ended�30�September�2022�** 

## **Contents** 

Page:� INTRODUCTION�FROM�THE�CHAIR�........................................................................................................�3� TRUSTEES’�REPORT�...............................................................................................................................�4� GOVERNANCE�...................................................................................................................................�4� STRATEGIC�REPORT�...........................................................................................................................�7� IMPACT�REPORT�..............................................................................................................................�12� FINANCIAL�REPORT�.........................................................................................................................�14� REVIEW�OF�INVESTMENT�ACTIVITIES�..............................................................................................�16� CHARITY�INFORMATION�.....................................................................................................................�24� INDEPENDENT�AUDITOR’S�REPORT�TO�THE�MEMBERS�OF�THE�KENNEDY�TRUST�FOR� RHEUMATOLOGY�RESEARCH�..............................................................................................................�27� ACCOUNTS�..........................................................................................................................................�31� 

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The Kennedy Trust for Rheumatology Research Annual Report for the Year Ended 30September 2022 

## **INTRODUCTION FROM THE CHAIR** 

Major global challenges continue to simultaneously threaten the rate of progress of medical research in the UK on the one hand and stimulate researchers towards new avenues of innovation and ground�breaking science on the other.��To help meet both this year, the Kennedy Trust for Rheumatology Research has continued to strategically plan and prioritise its resources in ways that we believe best enable our ongoing sustainable support for world�class research while at the same time keeping our focus on encouraging translation of discovery science into practical benefits for patients with musculoskeletal and related diseases.��For example, under Professor Dame Fiona Powrie’s leadership as Director at the Kennedy Institute in Oxford, we have supported the growth in cutting�edge technology platforms and new senior leadership positions, including a new statutory chair, whose teams deliver science of the highest international quality and competitiveness. Equally, our crucial support for future research talent at Oxford and elsewhere in the UK is one of our hallmarks and includes the development of five unique funding hubs for MB PhD training in order to help grow clinical science as a rewarding career option in medicine. Despite setbacks to medical research resulting from the Covid�19 pandemic, we have continued to work with others over the year to help achieve our mission, maintaining strategic partnerships with UK funders and centres of research excellence in universities across the UK. 

On a more personal level, I would like to thank our amazingly committed Trustees for their invaluable time and energy in helping us make a difference.��We’ve seen a number of changes in the year���saying goodbye to long�serving Trustees and welcoming new members to our executive team and our committees.��I would like to thank our outgoing Trustees who retired from the Board, Professor Hill Gaston, Mr. David Paterson, and Mrs. Jennifer Johnson, for their years of service and the extraordinary difference they have made to the Trust’s work.��Also, the Trust’s outgoing Chief Executive, Mr. Pierre Espinasse who, over his 11�year tenure, has worked tirelessly with Trustees to help transform the Trust into the successful medical research charity it now has become.��Pierre was instrumental in helping with the move of the Kennedy Institute from London to Oxford and enabling us to realise the value of the royalties from anti�TNF drug patents, which we continue to re�invest in research. With Pierre’s departure, we are working with our new CEO Dr Stephen Simpson, who joined the Trust in the Spring. Stephen has had an amazing career in supporting science and joined us from our partner charity, Versus Arthritis where he was Director of Research..�� Finally, I would like to share my appreciation of our excellent fiduciary managers at JP Morgan and the other organisations who support the Trust in maintaining excellence in all its legal and governance activities. 

Research into rheumatological and related inflammatory disorders remains one of the most exciting, challenging and progressive areas of biomedical research of the day and I believe the Trust has the experience, and fortitude to ensure major advances in the coming years through the careful investment, management and deployment of its resources to make a difference.�� 

**ProfessorSir StephenHolgate, Chair 28th March 2023** 

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The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **TRUSTEES’�REPORT��** 

## **GOVERNANCE�** 

The�Trust�is�governed�by�a�Board�of�Trustees�(shown�on�page�5)�and�has�three�sub�committees,�as� laid�out�below.�Each�has�specific�responsibilities�(as�set�out�in�their�Terms�of�Reference)�and�each� report�to�the�Board�on�a�regular�basis.� 

New�Trustees�are�provided�with�an�induction�pack�which�includes�their�fiduciary�responsibilities,�as� well�as�relevant�information�about�the�Trust.�The�continuing�development�of�all�Trustees�is�met�by� an�annual�scientific�update�and�presentations�(often�by�invited�external�speakers)�on�various� relevant�issues,�along�with�governance�and�other�updates.� 

The�Trust�has�provided�indemnity�insurance�for�the�Trustees�during�the�year.� 

Trustees�are�recruited�by�the�Board�based�upon�their�experience,�professional�qualifications,� empathy�and�interest�in�the�Trust’s�objectives�and�ability�to�further�the�Trust’s�performance�and� achievements.��A�recruitment�committee�is�appointed�that�shortlists,�interviews�and�puts�forward� final�candidates�to�the�Board�of�Trustees.� 

In�preparing�this�report,�Trustees�have�referred�to�the�Charity�Commission’s�general�guidance�on� public�benefit�and�are�satisfied�that�the�activities�undertaken�by�the�Trust�meet�the�Commission’s� requirements.� 

## **Governing�Document��** 

The�Trust�is�a�charitable�company�limited�by�guarantee�incorporated�on�13�October�1969�and�is� governed�under�its�Articles�of�Association.�The�Charity�is�registered�with�the�Charity�Commission�of� England�and�Wales.� 

## **Charitable�Objectives��** 

To�provide�financial�and�other�support�for�basic�and�translational�research�into�rheumatic�and� related�musculoskeletal,�immunological,�and�inflammatory�diseases.�In�meeting�its�charitable� objectives,�the�Trust�supports�both�basic�and�translational�research�primarily�through�its�support�of� the�Kennedy�Institute�of�Rheumatology.�� 

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The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **The�Board�** 

- Professor�Sir�Stephen�Holgate�(Chair)� 

- Mr.�Edmund�Buckley� 

- Mr.�Christopher�Coombe�� 

- Professor�Andrew�Cope� 

- Mr.�Mark�Dighero�� 

- Mrs.�Margaret�Frost� 

- Professor�Hill�Gaston�(resigned�22�June�2022)� 

- Professor�Tracy�Hussell�(appointed�12�October�2021)� 

- Mrs.�Jennifer�Johnson�(resigned�22�June�2022)� 

- Mr.�David�Paterson�(resigned�12�October�2021)� 

- Professor�Michael�Patton�� 

- Mr.�Richard�Punt�� 

- Dr.�Paul�Satchell�� 

- Ms.�Victoria�White� 

## **Finance�and�Investment�Committee�(FIC)�** 

The�purpose�of�the�FIC�is�to�formulate�the�Trust’s�financial�and�investment�policies,�agree�these� with�the�Board�of�Trustees,�be�responsible�for�overseeing�the�implementation�of�the�agreed� policies,�and�implement�a�risk�management�strategy�for�finance�and�investment�matters.� 

The�composition�of�the�FIC�during�the�year�was�as�follows:� 

- Mrs.�Margaret�Frost�(Chair)� 

- Mr.�Edmund�Buckley� 

- Mr.�Christopher�Coombe� 

- Mr.�Mark�Dighero�� 

- Professor�Sir�Stephen�Holgate� 

- Dr.�Paul�Satchell� 

- Mr.�David�Paterson�(resigned�12�October�2021)� 

## **General�Purposes�Committee�(GPC)�** 

The�purpose�of�the�GPC�is�to�ensure�that�all�matters�relating�to�the�Trust�are�effectively�managed�by� the�appropriate�Committee�or�the�Board.�Its�responsibilities�include�the�structure,�governance,�and� reputation�of�the�Trust.�� 

The�composition�of�the�GPC�during�the�year�was�as�follows:� 

- Mr.�Mark�Dighero�(Chair�from�1�April�2022)� 

- Mrs.�Jennifer�Johnson�(Chair�until�1�April�2022,�resigned�22�June�2022)� 

- Professor�Sir�Stephen�Holgate� 

- Professor�Michael�Patton�� 

- Mr.�Richard�Punt�� 

- Ms.�Victoria�White�� 

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The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **Research�Committee�(RC)�** 

The�Research�Committee�has�responsibility�for�all�matters�requiring�scientific�expertise.� 

The�composition�of�the�RC�during�the�year�was�as�follows:� 

## Trustees:� 

- Professor�Andrew�Cope�(Chair)�� 

- Professor�Hill�Gaston�(resigned�22�June�2022)� 

- Professor�Tracy�Hussell�(appointed�as�Trustee�12�October�2021)� 

- Mr.�Richard�Punt�(appointed�20 September�2022�as�a�non�voting�member)� 

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

- Professor�Tracy�Hussell�(until�12�October�2021)�� 

- Professor�Carl�Goodyear�� 

- Professor�Paul�Lehner�� 

- Professor�Neil�Sebire�(resigned�16�May�2022)� 

- Professor�Gitta�Stockinger� 

## Ex�Officio:� 

- Professor�Sir�Stephen�Holgate�� 

## **Ex�Officio�** 

Mr.�Pierre�Espinasse�(until�30�June�2022),�Dr.�Stephen�Simpson�(CEO�Designate�1�April�to�30�June� 2022,�Chief�Executive�Officer�from�30�June�2022),�Mrs.�Susan�Johanson�(Secretary�until�28�March� 2023)�and�Mrs.�Hazel�Middleton�(Secretary�from�28�March�2023)�are�Ex�Officio�non�voting� members�of�all�the�Committees.� 

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The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **STRATEGIC�REPORT���** 

The�Trustees�are�pleased�to�present�their�annual�report�together�with�the�financial�statements�of� the�charity�for�the�year�ended�30�September�2022�which�are�also�prepared�to�meet�the� requirements�for�a�directors’�report�and�accounts�for�the�Companies�Act�purposes.�� 

The�financial�statements�comply�with�the�Charities�Act�2011,�the�Companies�Act�2006,�the� Memorandum�and�Articles�of�Association,�and�Accounting�and�Reporting�by�Charities:�Statement�of� Recommended�Practice�applicable�to�charities�preparing�their�accounts�in�accordance�with�the� Financial�Reporting�Standard�applicable�in�the�UK�and�Republic�of�Ireland�(FRS�102).�� 

## **KEY�ACHIEVEMENTS�** 

## **Trust�Strategy�and�Operations** 

## Strategic�development� 

In�meeting�its�charitable�objectives,�the�Kennedy�Trust�continues�to�support�basic�science,�as�well� as�an�increasing�focus�on�the�support�of�translational�and�clinical�research�to�help�accelerate� benefit�for�people�with�the�lived�experience�of�different�inflammatory�disorders.�� 

In�2021,�key�strategic�principles�were�agreed�by�the�Trustees�to�prioritise�support�for�the�Kennedy� Institute�of�Rheumatology�at�Oxford�(“the�Institute”)�and�to�continue�to�make�a�difference�with� ambitious�wider�funding,�with�a�strong�focus�on�excellence�and�crucial�support�for�younger�scientists.��� To�take�this�forward,�the�Research�Committee�held�a�series�of�strategic�discussions�this�year,�starting� with�a�brainstorming�session�in�the�Spring�to�consider�where�the�Trust�should�focus�its�funding� beyond�its�substantial�commitments�for�the�Institute.��Three�principal�concepts�emerged�for� consideration:�firstly,�smaller�scale�awards�that�would�provide�proof�of�concept�and�‘pump�prime’� larger�scale�funding,�secondly,�awards�with�a�focus�on�transitional�stages�of�research�careers�towards� independence�and�thirdly,�larger�scale�team�science�orientated�funding.��It�has�been�agreed�that�the� pump�priming�awards�will�have�the�greatest�immediate�impact�and�are�deliverable�in�the�shorter� term.��A�pilot�scheme�for�these�awards�is�currently�planned�to�be�rolled�out�in�2023�and�the�Trust’s� Research�Committee�will�continue�to�consider�the�other�areas�identified�and�will�make� recommendations�to�the�Board�to�launch�new�schemes�at�suitable�junctures�depending�on�resources� and�strategic�need.� 

## Operations 

Following�the�appointment�of�JP�Morgan�as�Fiduciary�Manager�for�the�Trust’s�investment�portfolio� in�2021�and�successful�completion�of�the�transition�of�the�Trust’s�investments�to�a�more�strategic� long�term�asset�allocation,�the�office�has�been�able�to�settle�to�‘business�as�usual’�with�a�strong�and� effective�working�relationship�between�the�executive,�the�Finance�and�Investment�Committee�and� the�JP�Morgan�team�(see�Review�of�Investment�Activities).��Similarly,�the�executive�continues�to� support�the�work�of�the�General�Purposes�Committee�and�the�Research�Committee�to�ensure� policies,�new�funding�and�research�activities�are�put�into�practice.��� 

The�transition�between�outgoing�and�incoming�Chief�Executive�Officer�was�completed�successfully� in�June�and�a�new�Financial�Controller�has�been�recruited�to�start�work�with�the�Trust�at�the�end�of� November�2022,�with�a�transition�planned�with�the�outgoing�Financial�Controller�until�the�Spring�of� 2023.��Otherwise,�the�team�has�remained�of�equivalent�size�and�has�continued�to�be�effective�in� delivering�on�the�wide�range�of�Trust�business.� 

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The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

The�Trust�continues�to�carefully�monitor�grant�performance�though�self�reporting�by�grant�holders� and�through�the�quarterly�report�to�the�Board�by�the�Institute�Director.� 

A�cycle�of�development�and�revision�of�key�policies�was�undertaken�by�the�Trust�and�managed�by�the� executive�team�supporting�review�by�the�GPC.�This�has�included,�for�example,�development�of�a�new� policy�for�Grant�Awarding.���� 

## Association�of�Medical�Research�Charities� 

This�was�our�second�year�as�member�of�the�Association�of�Medical�Research�Charities�(“AMRC”)� and�the�Trust�continues�to�benefit�from�the�work�that�the�AMRC�undertakes�as�part�of�its� representation�of�over�150�UK�medical�research�charities�and�the�research�they�support.��The�Trust� has�been�involved�in�various�areas�of�AMRC�work�and�continues�to�engage�wherever�there�is� relevance�and�value�to�the�Trust’s�mission.� 

## **Supporting�the�Kennedy�Institute�for�Rheumatology** 

## Institute�update� 

The�Institute�remains�the�Trust’s�primary�focus�of�support.��The�Institute�is�a�key�hub�within�the� growing�biomedical�campus�at�Oxford,�forging�new�strategic�links�with�other�Oxford�institutes,� including�the�Botnar�Research�Centre�and�the�newly�established�Institute�for�Development�&� Regenerative�Medicine,�with�which�it�has�a�formal�partnership�based�around�the�new�microscopy� and�imaging�technology�platform:�the�Zeiss�Centre�of�Excellence�for�advanced�imaging.���� 

The�Institute�has�continued�to�grow�its�research�base�and�recruit�excellent�scientists�and�trainees�at� all�levels.��At�the�end�of�September�2022,�the�Institute�had�a�total�of�215�staff�and�students� (excluding�visiting�academics),�comprising�155�staff�on�payroll�and�60�DPhil�students.��The�post� pandemic�period�has�continued�to�see�recovery�and�output�of�world�class�science,�although� recruitment�in�specialised�areas�such�as�bioinformatics�and�data�science�remain�challenging�and� something�the�Institute�is�placing�particular�emphasis�on�solving.� 

The�Institute’s�Director,�Professor�Fiona�Powrie�was�this�year�appointed�Dame�Commander�of�the� Most�Excellent�Order�of�the�British�Empire�(DBE),�for�services�to�Medical�Science.��Professor�Dame� Powrie�has�been�transformational�to�our�understanding�of�how�the�gut�bacteria�and�the�immune� system�interact.�She�continues�to�be�an�inspirational�role�model�for�young�scientists,�in�particular� for�the�many�young�women�beginning�careers�in�biomedical�science.��Professor�Dame�Powrie�was� appointed�deputy�chair�of�the�Board�of�Governors�of�the�Wellcome�Trust�this�year�and�was�able�to� attend�the�inauguration�ceremony�this�year�in�Washington�DC�to�recognise�her�election�as�an� International�Fellow�of�the�National�Academy�of�Sciences�in�2020.� 

As�at�the�end�of�September�2022,�the�total�grant�portfolio�of�the�Institute�exceeded�£80�million� with�over�one�third�coming�from�the�Trust�of�which�£4.1m�was�awarded�in�the�current�year.��This� represents�relative�growth�in�the�value�of�grants�supported�by�other�funders�and�demonstrates�the� significant�capacity�of�the�Institute�to�attract�competitive�new�funding�based�on�the�core�support�of� the�Trust,�including�a�significant�proportion�of�industry�based�investment.�� 

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The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

The�Institute�is�organised�around�five�key�technology�platforms�that�were�originally�set�out�in�the� Director’s�scientific�vision.��The�last�of�these�to�be�funded�is�the�Tissue�Biology�Platform,�which�is� jointly�funded�by�the�Kennedy�Trust�(£2.5m)�and�Versus�Arthritis�(£1m).��An�expert�panel�met�over� the�summer�of�2022�to�evaluate�the�proposed�funding�for�the�platform�and�included�independent� scientists�and�patient�partners.��The�platform�funding�was�recommended�based�on�the�increased� capability�it�gives�for�the�Institute�to�deliver�in�the�critical�area�of�cartilage�biology�and�the�unmet� need�of�osteoarthritis�and�its�effective�treatment. 

## Clinical�pathology�and�the�Arthritis�Therapy�Acceleration�Programme�(“A�TAP”)� 

This�pilot�programme�was�originally�funded�by�the�Trust�in�2017�to�help�enable�the�translation�of� basic�research�findings�into�innovative�new�approaches�to�treating�diseases.��A�direct�result�has�been� the�development�of�the�newly�established�Clinical�Pathology�platform,�which�aims�to�accelerate� delivery�of�new�medicines�through�harnessing�approaches�and�technologies�for�innovative�clinical� trials.��The�investment�in�A�TAP�has�stimulated�strong�interest�from�industry,�with�a�number�of� partner�companies�now�involved�in�the�initiative�and�represents�a�powerful�example�of�reinvestment� of�the�Trust’s�funds�derived�from�the�anti�TNF�royalties�towards�the�development�of�new�drugs�and� treatments.� 

## Major�appointments 

The�Institute’s�Deputy�Director,�Professor�Michael�Dustin�has�been�elected�to�the�position�of� Statutory�Chair�in�Molecular�Immunology.�The�Chair�is�a�jointly�funded�post�between�the�Trust�and� the�University�of�Oxford�through�an�award�originally�approved�in�2021�and�a�new�agreement�that� was�ratified�to�begin�in�November�2022.��This�new�statutory�chair�represents�a�major�element�of�the� Trust’s�relationship�with�the�University�that�will�help�further�strengthen�the�central�role�of�the� Institute�as�an�integral�part�of�the�Oxford�biomedical�campus.���Professor�Dustin�is�recognised�as�a� world�leader�in�immune�cell�imaging�and�will�anchor�this�important�area�of�science�within�the� Institute�and�Oxford.��His�recruitment�was�published�in�the�University�Gazette�in�September�and�an� inaugural�lecture�for�him�is�planned�for�2023.� 

Associate�Director�posts�in�Tissue�Biology�and�Data�Science�have�also�been�awarded�to�Professors� Tonia�Vincent�and�Irena�Udalova�respectively,�securing�important�positions�to�the�senior�team�and� recognising�their�leadership�in�these�two�pivotal�areas�of�science�at�the�Institute.��Growth�in�Data� Science�is�core�to�biomedical�research�and�the�Institute�has�further�maintained�its�strength�in�the� area�through�the�appointment�this�year�of�Dr�Yang�Luo,�a�Principal�Investigator�from�Harvard�Medical� School.��Her�lab�will�investigate�how�genetic�variations�contribute�to�diseases�of�the�immune�system.� 

Two�of�the�Institute�group�leaders,�Jelena�Bezbradica�and�Audrey�Gerard�were�made�Associate� Professors�during�the�year.� 

## Studentships�and�training� 

A�hallmark�of�the�Institute�is�its�excellent�training�programme�and�graduate�studies.�Each�year�the� Institute�applies�under�the�agreement�with�the�Trust�for�the�support�for�a�cohort�of�new�students�to� add�to�the�60�DPhil�students�already�training�at�the�Institute.��The�KTPSS�DPhil�programme�advertises� six�projects�annually�and�this�year�included��the�growing�area�of�computational/data�science..�� 

## Whole�Institute�retreat� 

The�Institute�has�a�focus�on�providing�a�supportive�and�interactive�environment�and�provides�many� ways�in�which�students,�scientific�staff�and�group�leaders�can�work�together,�share�ideas,�and�support� one�another.��This�was�exemplified�this�year�by�the�whole�Institute�retreat,�held�this�Autumn,�with�a� particular�emphasis�on�scientific�presentations�of�more�junior�scientists�and�students.� 

9� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## Independent�scientific�review�of�the�Institute� 

The�Trust�carries�out�a�full�independent�review�of�the�Institute�every�4�years,�with�a�Trust�Scientific� Review�Board�comprising�international�and�leading�UK�scientists.��A�review�took�place�on�14/15� November�running�concurrently�with�the�Institute’s�own�Scientific�Advisory�Board�review.���This�is�an� opportunity�for�the�Trust�to�understand�how�well�its�investment�is�being�utilised�and�where�any� concerns�or�challenges�exist.��We�look�forward�to�including�the�outputs�of�this�review�in�the�2022/23� Annual�Report�and�Accounts. 

## **Other�funding** 

## Senior�Research�Fellowships� 

Two�new�Senior�Research�Fellows�were�supported�this�year,�following�a�competitive�process�of� application,�peer�review�and�panel�interviews.��Dr�Elizabeth�Rosser�at�UCL�(awarded�£2.2m)�is� investigating�the�impact�of�gut�bacteria�on�the�immune�system�in�the�autoimmune�condition�Lupus� and�Dr�Sinisa�Savic�at�Leeds�(awarded�£2.4m)�is�exploring�how�mutations�in�a�particular�type�of� immune�cell�affect�the�development�of�inflammatory�disorders.��The�two�new�fellows�join�the�three� existing�fellows�and�will�be�important�in�realising�the�Trust’s�mission�to�support�younger�research� leaders�across�the�UK.� 

## MB�PhD�scheme� 

This�scheme�(Medical�Bachelor�MBChB,�combined�with�a�PhD�degree)�is�supported�by�the�Trust�and� designed�to�support�the�new�research�talent�with�clinical�training,�allowing�the�training�for�a�PhD�in� combination�with�the�completion�of�a�medical�degree.��These�types�of�scientists�are�vital�to�the� translation�of�discovery�to�effective�treatments.��The�scheme�is�in�its�second�year,�and�each�of�the� universities�running�the�programme�has�continued�to�recruit,�with�a�total�of�17�students�now�enrolled� since�the�start�of�the�scheme�across�the�sites.��� 

## Joint�funding�and�partnerships 

Following�a�joint�workshop�with�funders�and�researchers�in�2020�and�after�some�delay,�largely� because�of�the�pandemic,�the�Kennedy�Trust�and�Versus�Arthritis�launched�a�new�call�for�grants�this� year�with�a�focus�on�the�understanding�and�treatment�of�fatigue.��Severe�fatigue�is�a�central,�yet� poorly�understood�part�of�life�for�many�who�suffer�long�term�inflammatory�conditions�and�the�work� funded�under�this�call�will�help�better�understand�the�evidence�for�new�lines�of�investigation.��An� expert�panel�has�been�convened�and�will�meet�to�review�the�applications�early�in�2023.� 

The�Trust�has�continued�its�partnership�with�the�Daphne�Jackson�Trust,�which�does�important�work� to�support�the�re�entry�of�researchers�into�the�workplace�after�time�away�from�research.��Applicants� are�currently�being�evaluated�and�supported�in�their�applications,�and�final�interviews�and�decisions� will�happen�in�early�2023.��We�are�delighted�that�the�Medical�Research�Council�have�agreed�to� provide�co�funding�this�year�for�this�valuable�initiative.� 

10� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **Grant�Funding�during�the�Year�** 


**----- Start of picture text -----**<br>
Committed�Grants<br>Senior�Research�Fellowships Tissue�Biology Directors�Fund Staff�Appointments<br>**----- End of picture text -----**<br>


|SeniorResearchFellowships:Non�Institute<br>TissueBiology:TheInstitute<br>DirectorsFund:TheInstitute<br>StaffAppointments:TheInstitute|**£'000**<br>**%**<br>4,662<br>54%<br>3,499<br>40%<br>300<br>3%<br>266<br>3%<br>**8,727**<br>**100%**|**£'000**<br>**%**<br>4,662<br>54%<br>3,499<br>40%<br>300<br>3%<br>266<br>3%<br>**8,727**<br>**100%**|
|---|---|---|
|||**100%**|



Two�Senior�Research�Fellowships�totalling�£4,662,331�were�awarded�to�Dr�Sinisa�Savic�at�the� University�of�Leeds�(£2,428,817)�and�Dr�Elizabeth�Rosser�at�University�College�London�(£2,233,514).� 

During�the�year,�the�Trust�issued�four�grants�to�the�Kennedy�Institute�at�the�University�of�Oxford� totalling�£4,064,774�being:�� 

- Tissue�Biology�Platform�(£3,499,082)�co�funded�by�the�Kennedy�Trust�(£2,499,082)�and� Versus�Arthritis�(£1,000,000).� 

- Directors�Fund�(£300,000)�being�the�annual�Director�of�the�Institute’s�discretionary�spend� award.� 

- Two�staff�appointments�(£265,692)�representing�salary�support�for�Associate�Professors� Jelena�Bezbradica�(£132,684)�and�Audrey�Gerard�(£133,008).� 

11� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **Maini�Feldmann�Prize�** 

The�ongoing�development�of�the�Maini�Feldmann�Prize�is�intended�to�recognise�the�breakthrough� of�Professor�Sir�Ravinder�Maini�and�Professor�Sir�Marc�Feldmann�in�developing�treatments�for� people�suffering�rheumatoid�arthritis�and�other�chronic�inflammatory�disorders.��It�is�hoped�that� progress�will�be�made�towards�its�launch�in�2023/24.��� 

## **Wellcome�archiving�work** 

In�2021,�the�Trust�agreed�that�it�should�undertake�the�archiving�of�the�documents�and�papers� associated�with�the�discovery�of�anti�TNF�therapy�by�Professors�Sir�Marc�Feldmann�and�Sir�Ravinder� Maini.��This�is�based�on�the�importance�of�the�work�to�the�history�of�the�Trust�and�its�importance�to� global�health�of�millions�benefiting�from�this�form�of�therapeutic�treatment.��A�professional� archivist�has�been�secured�and�is�being�hosted�at�the�Wellcome�Trust�archiving�department�in� London.��The�work�is�now�well�underway�and�is�expected�to�be�completed�in�mid�2023.� 

## **Kennedy�Network** 

The�Kennedy�Network�was�established�in�2021�to�bring�together�past�and�present�fellows�and� students�supported�by�the�Trust,�for�networking,�sharing�technologies�and�science,�collaboration,� and�training.��This�has�become�especially�important�in�light�of�the�growth�of�non�Institute�training� and�independent�research�supported�by�the�Trust�across�the�UK.���The�network�steering�group�is� now�fully�established�and�planning�activities�for�2023/24,�including�a�network�conference�in�Spring� 2023.��Its�inaugural�newsletter�was�distributed�in�December�2022.��� 

## **IMPACT�REPORT�** 

## **Research�impact** 

The�Trust�carried�out�its�second�annual�Researchfish�reporting�period�between�March�and�April� 2022.�Data�was�submitted�by�grant�recipients�for�53�awards,�with�a�total�grant�value�of�£50.6m.�� 

There�were�a�number�of�notable�research�success�stories�over�the�year,�including:� 

- A�collaboration�between�the�Institute�and�Oxford�Population�Health’s�Health�Economics� Research�Centre�that�found�anti�TNF�treatment�(adalimumab)�is�likely�to�be�a�cost�effective� treatment�for�people�affected�by�early�stage�Dupuytren’s�disease,�which�affects�more�than� 5�million�people�in�the�UK�and�causes�the�fingers�to�irreversibly�curl�into�the�palm�due�to� nodules�of�tissue�forming�cords�under�the�skin,�impairing�hand�function�and�quality�of�life.��� 

- Advanced�microscopy�techniques�developed�by�the�laboratory�of�Professor�Dustin�have�been� used�to�uncover�a�new�mechanism�of�immune�based�attack�on�virally�infected�or�cancer�cells,� with�potential�to�also�understand�inflammatory�pathways.� 

- Work�arising�jointly�from�the�Osteoarthritis�Centre�of�Excellence�at�the�Institute�led�by� Professor�Tonia�Vincent,�has�described�a�mechanism�by�which�growth�factors�are�released� after�cartilage�mechanical�injury�to�initiate�regeneration�of�cartilage�and�why�this�fails�in� osteoarthritis.��This�is�a�potentially�important�new�step�in�understanding�the�mechanical� influences�on�the�development�of�osteoarthritis.� 

- The�success�of�the�growing�translational�research�at�the�Institute�has�been�exemplified�by� the�fact�that�several�molecules�identified�by�discovery�research�at�the�Institute�are�currently� being�investigated�as�targets�with�therapeutic�potential�in�clinical�trials.� 

12� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

A�number�of�key�highlights�arose�from�this�year’s�self�reporting�from�grants�at�the�Institute�and� elsewhere:�� 

364�unique�publications�were�produced�with�over�half�published�through�an�open�access�route:� 

- 88�examples�of�research�dissemination,�including�newspaper,�TV�and�radio�interviews,� podcast�appearances�and�workshops.��� 

- 5�research�prizes�were�received,�including�the�Iain�T�Boyle�Award�awarded�to�Dr�Anjali� Kusumbe�for�her�significant�progress�and�contribution�to�the�field�of�bone�and�calcified� tissue.� 

- 55%�of�awards�reported�at�least�one�collaboration�or�partnership�as�a�direct�result�of� Kennedy�Trust�funding,�illustrating�the�value�and�relevance�of�this�funded�research.� 

- Significant�leverage�of�Trust�investment�was�reported,�with�£59m�of�effective�funding�from� other�sources�based�on�the�Trust’s�awards.��This�included�£9.4m�from�the�Medical�Research� Council�(MRC)�and�£6.9m�from�the�European�Commission.� 

- Three�new�patents�were�published.� 

## **Intellectual�Property�** 

The�Trust�owned�a�broad�portfolio�of�patents,�which�included�the�key�US,�Canadian�and�European� anti�TNF�therapy�patents�which�were�licensed�out�and�which�together�were�responsible�for� generating�the�Trust’s�past�royalty�income.��The�Trust’s�remaining�Supplementary�Protection� Certificates�came�to�an�end�on�31�August�2022.��� 

At�the�point�of�completion�of�the�end�of�the�Trust’s�patents�this�year,�the�estimated�accumulated� royalties�returned�to�the�Trust�have�been�in�excess�of�£230m�over�almost�three�decades.��This�has� crucially�enabled�the�Trust�to�continue�to�make�major�investments�in�research�through�the� provision�of�substantial�support�for�ground�breaking�research�at�the�Institute,�as�well�as�an� extending�range�of�funding�across�the�UK.��It�has�further�brought�about�security�for�the�Trust’s� future�through�our�managed�investment�funds�(see�Financial�Report�section)�allowing�the�Trust�to� plan�sustainable�research�funding�with�relative�confidence.� 

## **Towards�the�future** 

Although�the�impact�of�the�Covid�pandemic�has�reduced�considerably�with�time,�its�residual�effects� along�with�significant�world�and�economic�events�this�year�have�presented�a�number�of�challenges.�� The�Trust�is�currently�developing�a�new�strategic�plan�under�which�it�will�seek�to�continue�to� carefully�build�a�sustainable�approach�in�supporting�its�research�investments.��Trustees�have� reaffirmed�the�priority�of�enabling�the�Institute�to�continue�on�its�successful�trajectory�as�a�world� class�centre�for�research�into�rheumatological�and�inflammatory�conditions.�A�priority�will�be�to� support�deepening�roots�in�Oxford�and�to�secure�funding�from�other�sources,�including�government� and�industry.� 

The�Trust�will�also�continue�to�develop�partnerships�and�relations�with�other�institutions�and� funders�in�the�UK�biomedical�ecosystem�relevant�to�its�mission�and�seek�innovative�and�sustainable� means�of�supporting�new�research�talent�and�stimulating�and�supporting�new�bold�research.��For� example,�Trustees�have�supported�plans�for�a�new�pilot�scheme�of�pump�priming�awards�in�2023�– the� _Research Ignition�Awards_ ��which�it�is�hoped�will�enable�researchers�to�undertake�higher�risk� research�and�build�new�programmes�in�areas�that�might�otherwise�be�more�difficult.��The�Trust�will� seek�to�continue�with�an�annual�round�of�Senior�Research�Fellowships�to�help�build�the�UK�talent� base�of�research�leaders�in�inflammatory�and�rheumatological�disease�science.��It�will�be�confirmed� 

13� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

in�2023�when�the�next�round�will�commence.��The�partnerships�with�the�Daphne�Jackson�Trust�and� Versus�Arthritis�are�important�examples�of�maximising�the�impact�of�the�Trust’s�investments.�The� Trust�looks�forward�to�seeing�the�outcomes�of�these�partnerships�and�towards�potential�future� endeavours�together.��� 

The�value�of�the�Kennedy�Network�is�already�demonstrating�itself�and�the�Trust�will�continue�to� support�this�initiative,�as�an�independent�network�of�world�class�scientists.� 

The�Trust�is�continuously�looking�for�ways�and�means�of�understanding�the�impact�of�its�investment� in�research.��In�addition�to�maximising�the�use�of�Researchfish,�the�Trust�plans�to�engage�specialists� in�the�field�of�impact�reporting�to�work�with�the�Trust�to�build�its�approach.� 

## **FINANCIAL�REPORT�** 

The�Trust�had�an�inaugural�full�year�of�management�under�JP�Morgan�following�their�appointment� in�place�of�the�Trust’s�previous�fiduciary�manager�SEI�in�July�2021�as�an�outcome�of�a�retendering� process�that�commenced�in�2020.�The�Trust�continues�to�work�towards�an�increased�private�market� allocation�as�part�of�its�long�term�strategic�asset�allocation.��Transition�of�the�residual�SEI�private� market�assets�was�largely�completed�during�the�year�with�a�minor�SEI�holding�of�£0.4m�remaining� at�the�year�end.� 

The�Trust’s�investments�valued�at�£313.8m�(2021:�£341.7m)�demonstrate�the�portfolio�is�resilient� despite�difficult�market�conditions�including�the�war�in�Ukraine�and�rising�inflation.��Whilst� challenging�economic�circumstances�adversely�affected�the�values�of�the�Trust’s�investments,�the� Finance�and�Investment�Committee�is�satisfied�that�its�diversified�investment�strategy�will�protect� the�Trust’s�portfolio,�and�that�there�are�adequate�levels�of�reserves�to�support�the�Trust’s�long�term� planned�spend.��The�Trust’s�investments�are�detailed�further�in�the�“Review�of�Investment� Activities”.��� 

Gross�royalty�income�received�during�the�year�was�£0.7m�(2021:�£0.7m).�With�the�revocation�of�a� European�patent�in�November�2019,�patent�income�has�diminished�in�line�with�expectations�until� expiration�of�the�remaining�Supplementary�Protection�Certificates�on�31�August�2022.� 

The�Trust�monetised�part�of�its�royalty�share�in�2012.�In�accordance�with�the�terms�of�the� monetisation�agreement,�it�received�50%�of�the�royalty�due.�These�payments�continued�for�the�life� of�the�patents�with�the�Trust’s�residual�Supplementary�Protection�Certificates�ending�on�31�August� 2022.� 

Royalty�income�was�received�in�US�dollars�and�transferred�to�pounds�sterling�on�or�shortly�after�the� date�the�funds�were�received.� 

Royalty�sharing�payments�of�£0.5m�(2021:�£0.5m)�were�made�to�Versus�Arthritis�and�the�inventors� in�respect�of�this�income.�These�payments�are�made�according�to�a�formula�for�sharing�royalties�in� line�with�current�UK�University�practice.� 

The�costs�incurred�in�prosecuting�the�Trust’s�patent�portfolio�were�£14k�(2021:�£36k).�The�current� year�decline�reflects�reduced�patent�protection�activity.�With�the�revocation�of�one�of�the�Trust’s� European�patents�in�November�2019,�royalties�have�subsequently�diminished.� 

Total�support�costs�during�the�year�amount�to�£554k�(2021:�£370k)�and�these�costs�are�allocated� over�Trust�activities�in�accordance�with�time�spent,�invoices�directly�allocated�or�another�fair� 

14� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

method�of�allocation.��Changes�in�key�management�personnel�have�driven�the�increase�in�support� costs.�The�Trust�completed�a�successful�transition�of�Chief�Executive�Officer�in�June�2022,�and�a� new�Financial�Controller�has�been�recruited�to�assume�the�role�in�2023�resulting�in�recruitment� costs�of�£51k�(2021:�nil).��The�three�month�overlap�of�Chief�Executive�Officer,�along�with�a� contractual�adjustment�for�the�Financial�Controller�from�an�0.6�to�0.8�full�time�equivalent�has� driven�the�increase�in�staff�costs�of�£46k.��Further�information�on�key�management�personnel�is� detailed�in�Note�8�to�the�Accounts.� 

Governance�costs�are�analysed�in�Note�7�to�the�Accounts.�These�totalled�£50k�in�2022�(2021:�£37k)� which�represents�less�than�1%�of�funds�expended.�The�Trust�has�returned�to�a�greater�proportion�of� in�person�meetings�in�line�with�government�Covid�19�guidance�resulting�in�increased�Trustee� meeting�and�travel�costs�of�£9k.��In�addition,�there�has�been�a�£5k�increase�in�audit�fees.�� 

The�committed�grants�in�2022�were�£8.7m�against�£27.3m�in�2021.�The�figure�shown�in�the� accounts�is�net�of�grant�write�backs�and�other�adjustments�of�£1.2m�(2021:�£4.0m)�comprising� agreed�cancellations�of�£0.8m�(2021:�£2.9m)�and�grant�write�backs�£0.4m�(2021:�£0.7m).�Two� Senior�Research�Fellowships�totalling�£4.6m�were�awarded�to�Dr�Sinisa�Savic�at�the�University�of� Leeds�(£2.4m)�and�Dr�Elizabeth�Rosser�at�University�College�London�(£2.2m).��Institute�Initiatives� totalling�£4.1m�were�awarded�including�a�£3.5m�Tissue�Biology�grant�co�funded�with�Versus� Arthritis,�with�the�Trust�contributing�£2.5m�and�Versus�Arthritis�£1m.��Grants�awarded�have� reduced�significantly�as�the�MB�PhD�Programme�(£8.2m)�and�several�large�Institute�initiatives� including�support�for�a�Statutory�Chair�in�Molecular�Immunology�(£2.4m)�were�made�in�2021.�� 

The�Trust�assessed�if�the�impact�of�discounting�multi�year�grant�liabilities�to�present�value�is� material,�and�due�to�the�level�of�grant�liabilities�and�rising�inflation,�for�the�second�consecutive� year,�the�impact�is�considered�material.�A�review�of�the�discount�rate�was�carried�out�during�the� year�in�conjunction�with�the�previous�adoption�of�CPI�plus�3%�as�representing�the�most�appropriate� rate�as�it�relates�to�the�Trust’s�opportunity�cost�of�money�reflecting�time�value�of�funds�to�the� Trust.�A�further�element�of�prudence�was�added�this�year,�in�response�to�the�significant�upward�rise� in�CPI�at�both�the�headline�(including�food�and�energy)�and�core�data�sets�which�was�to�adopt�core� CPI�as�the�inflation�reference�given�the�highly�volatile�nature�of�headline�CPI�following�the�spike�on� commodity�and�food�priced�after�the�Ukraine�invasion�and�subsequent�volatility�in�energy�prices�in� particular.�While�over�the�long�term�one�would�expect�this�divergence�to�narrow,�the�core�CPI� target�should�provide�a�more�stable�benchmark�for�discounting�multi�year�liabilities.� 

The�non�current�grant�liabilities�of�£33.4m�(2021:�£34.7m)�are�discounted.�Applying�a�discount�rate� of�UK�Core�CPI�+�3%�equating�to�9.5%�(2021:�6.1%)�results�in�a�grant�liabilities�discount�of�£6.8m� (2021:�£4.9m)�recognised�as�a�reduction�in�charitable�expenditure�with�a�current�year�impact�of� £1.8m�(2021:�£4.9m).� 

The�cash�spend�on�grants�by�the�Trust�during�the�year�reflects�grants�committed�in�earlier�years�so� does�not�move�in�proportion�to�the�grants�committed.�The�cash�spend�in�2022�was�£7.6m�(2021:� £8.0m).�� 

The�Trust�considers�salaries�paid�on�an�annual�basis�to�ensure�they�are�fair�and�appropriate�for�the� positions�and�reflect�any�changes�to�the�roles�during�the�year.�In�addition,�account�is�taken�of� changes�in�the�cost�of�living.� 

The�Finance�and�Investment�Committee,�with�approval�by�the�Board,�reviews�salaries�of�Key� Management�Personnel�(KMP)�on�an�annual�basis�as�outlined�above.�Maintaining�salaries�in�real� terms�is�considered�along�with�ensuring�salaries�are�commensurate�to�roles�and�responsibilities.�� 

15� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

The�Trust�appoints�external�recruitment�agents�to�advise�on�KMP�appointments.�The�Board�or�a� delegated�working�group�will�determine�the�pay�range�for�a�vacancy�prior�to�advertising,�ensuring� remuneration�is�in�line�with�industry�and�market.� 

The�Trust�does�not�fundraise�and�does�not�deal�with�the�public�directly.�A�minimal�amount�of� unsolicited�donations�of�£184�were�received�in�the�year�(2021:�£160),�therefore�the�Charity�does� not�need�to�follow�a�fundraising�standards�scheme.� 

The�Covid�19�outbreak,�and�the�resultant�global�lockdowns�initially�adversely�affected�the�values�of� the�Trust’s�investments,�however�since�the�earliest�impact�in�March�2020,�the�Trust�has�benefited� from�a�material�recovery.� 

## **REVIEW�OF�INVESTMENT�ACTIVITIES��** 

As�a�matter�of�good�governance,�the�Trust�retendered�its�fiduciary�manager�engagement�in�2020� with�JP�Morgan�appointed�in�place�of�SEI�in�July�2021.��The�Trust�continues�to�move�towards�a� greater�allocation�to�private�market�investments�in�the�longer�term,�and�an�increased�focus�on� Environmental,�Social�and�Governance�(ESG)�matters.��Whilst�the�transition�of�liquid�assets�to�JP� Morgan�was�completed�in�2021,�private�market�assets�continued�to�be�transitioned�during�the�year� due�to�their�illiquid�nature.� 

The�Trust�reviewed�its�Investment�Policy�during�the�year.��The�Trustees�concluded�the�Trust’s� principal�objective�for�the�long�term�portfolio�continues�to�be�a�total�return�on�invested�funds�of�UK� CPI+3%�pa�over�the�longer�term,�through�a�balanced�portfolio�with�sufficient�liquidity�to�meet�short� term�spending�commitments�and�hence�avoid�the�forced�sale�of�long�term�and�less�liquid�assets.� 

The�Trust�aims�for�the�portfolio�to�provide�sufficient�excess�returns�to�cover�its�grant�giving�and�to� preserve�the�real�value�of�the�Trust’s�assets�over�the�long�term.� 

As�income�from�patents�ended�on�31�August�2022,�the�Trust�has�evolved�to�rely�solely�on�portfolio� income�and�capital�for�grant�giving�for�the�foreseeable�future.�The�Trust�carries�out�no�fundraising� activities.� 

The�Trustees�consider�the�strategic�asset�allocation�determined�as�part�of�JP�Morgan’s�appointment�is� appropriate�being�multi�asset�and�well�diversified�with�global�exposure�across�a�variety�of�asset� classes�and�currencies.�� 

The�transition�of�private�market�assets�to�JP�Morgan�continued�with�proceeds�of�£31.5m�achieved� from�the�sale�of�SEI�illiquid�holdings�with�full�redemption�of�Global�Real�Assets�(£19.5m)�and�partial� sale�of�the�Structured�Credit�Fund�(£12.0m).��Proceeds�from�the�sales�were�invested�in�the�Trust’s� portfolio�by�JP�Morgan�and�resulted�in�realised�gains�on�investments�of�£1.4m.�As�part�of�the� 

transition,�JP�Morgan�managed�private�market�vehicles�HPS�Corporate�Lending�Funding�(£21.0m),� PGIM�Global�Select�Real�Estate�Securities�Fund�(£4.1m)�and�PEG�Global�Private�Equity�X�S.A�(£0.6m)� were�entered�during�the�year.�The�residual�illiquid�investment�held�with�SEI,�the�Structured�Credit� Fund�(£0.4m)�will�be�transitioned�to�JP�Morgan.� 

The�Trust’s�holdings�in�the�three�UK�property�funds:�The�Charities�Property�Fund�(Savills),�COIF� Charities�Property�Fund�(CCLA)�and�Property�Income�Trust�for�Charities�(Mayfair)�are�being�retained� for�an�interim�period�under�review,�being�considered�efficient�charity�specific�vehicles,�and�providing� appropriate�exposure�to�the�sector.�These�funds�represent�11.4%�(2021:�9.6%)�in�value�of�the� portfolio.� 

16� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

The�Trust’s�private�market�holdings,�Glouston�Private�Equity�Opportunities�of�£6.3m�(2021:�£7.5m)� and�Tennenbaum�Special�Situations�of�£4.4m�(2021:�£5.4m)�are�being�held�through�to�run�off.�� 

The�M&G�Charifund�holding�of�£1.4m�(2021:�£1.6m)�represents�the�Trust’s�permanent�endowment� and�is�being�retained�for�an�interim�period.� 

## **Return�on�Investments�** 

The�return�on�investments�for�the�year�to�30�September�2022�was��6.57%�(2021:�15%),�below�the� Trust’s�long�term�target�return�on�investments�being�a�total�return�in�excess�of�inflation,�defined�as� CPI�+�3%.��Whilst�difficult�market�conditions�including�the�war�in�Ukraine�and�rising�inflation�have� adversely�impacted�returns,�the�Trustees�believe�the�investment�strategy�of�a�well�diversified� balanced�portfolio�across�assets�classes�and�regions�will�deliver�the�longer�term�return�it�is�seeking.���� 

The�Finance�and�Investment�Committee�is�responsible,�in�consultation�with�its�investment�advisers,� for�the�development�of�the�investment�strategy�for�the�Trust�and�monitors�investment� performance�at�its�quarterly�meetings.�The�investment�managers�submit�quarterly�reports�to�the� Committee.��JP�Morgan�make�quarterly�presentations�to�the�Finance�and�Investment�Committee� and�an�annual�presentation�to�the�Board�covering�reviews�of�performance,�strategy,�and�future� plans�both�in�the�short�to�longer�term.�JP�Morgan,�a�substantial�global�investment�manager,�is� responsible�for�managing�84.7%�of�the�Trust’s�assets.� 

The�investments�overseen�by�JP�Morgan�are�in�collective�schemes.�These�funds�include�public� equities,�bonds,�alternatives,�and�private�markets.�The�portfolio�managed�by�JP�Morgan�is�moving� towards�a�higher�allocation�of�private�market�vehicles�including�private�credit,�infrastructure� (holding�entered�October�2022)�and�further�private�market�investments.�JP�Morgan�selects�a�wide� range�of�managers�within�the�funds,�to�diversify�manager�risk.� 

A�firm�of�independent�consultants,�Lane�Clark�&�Peacock�LLP�(LCP),�has�been�retained�to�provide� annual�updates�on�the�property�funds�and�in�the�prior�year,�advised�on�the�retendering�of�the� Trust’s�fiduciary�manager.�LCP�commenced�consulting�for�the�Trust�in�2017�when�the�Trust� commissioned�LCP�to�complete�a�review�of�its�investment�policy.� 

17� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **Environmental,�Social�and�Governance�** 

The�Trust’s�approach�to�responsible�investment�is�intended�to�be�consistent�with�its�duty�to�secure� satisfactory�long�term�returns�from�the�investment�of�its�charitable�funds.�The�Trustees�expect�their� fund�managers�to�consider�the�Environmental,�Social�and�Governance�(ESG)�policies�of�companies� alongside�other�factors�that�will�affect�their�long�term�investment�prospects.� 

ESG�factors�are�sources�of�risk�and�opportunities�to�the�Trust’s�investments,�some�of�which�could� be�financially�material,�over�both�the�short�and�longer�term.�These�include�risks�relating�to�systemic� factors,�such�as�climate�change�and�pandemics,�and�other�business�specific�factors�such�as�cyber� security,�pollution,�employee�welfare,�unsustainable�business�practices�and�more�generally� unsound�corporate�governance.�The�Trustees�seek�to�appoint�investment�managers�who�will� manage�these�risks�appropriately�on�their�behalf�and�from�time�to�time,�review�how�these�risks�are� being�managed�in�practice. 

Investment�managers�are�asked�to�make�regular�reports�on�the�application�of�their�ESG�policies.� These�are�reviewed�at�the�manager�meetings.�Given�the�Trust’s�objectives,�the�Trustees�have�a� particular�interest�in�and�concern�about�tobacco�investments�and�give�extra�focus�to�monitoring� these�as�part�of�its�ESG�activities.� 

18� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **Investment�Portfolio�Split�by�Manager�** 


**----- Start of picture text -----**<br>
%<br>JP�Morgan Savilles CCLA PITCH Glouston�&�Tennenbaum Charifund SEI<br>**----- End of picture text -----**<br>


## **����30�September�2022�** 

|JPMorgan<br>Savilles<br>CCLA<br>PITCH<br>Glouston&Tennenbaum<br>Charifund<br>SEI<br>**TOTAL**|**£'000**<br>**%**<br>265,304<br>84.7%<br>12,318<br>3.9%<br>12,036<br>3.8%<br>11,636<br>3.7%<br>10,680<br>3.4%<br>1,406<br>0.4%<br>379<br>0.1%<br>**313,759**<br>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 -----**<br>
%<br>US�Equity Global�Equity<br>Alternatives Global�Fixed�Income<br>Cash Property<br>US�Fixed�Income Foreign�currency�forward�contracts<br>**----- End of picture text -----**<br>


||**30September2022**|**30September2022**|
|---|---|---|
||**£'000**|**%**|
|USEquity|85,477|27.2%|
|GlobalEquity|54,857|17.5%|
|Alternatives|45,697|14.5%|
|GlobalFixedIncome|41,302|13.2%|
|Cash|37,680|12.0%|
|Property|35,990|11.5%|
|USFixedIncome|17,236|5.5%|
|Foreigncurrencyforwardcontracts|(4,480)|(1.4%)|
|**Total**|**313,759**|100.0%|



20� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **PRINCIPAL�RISKS�** 

A�formal�risk�register�is�maintained�and�reviewed�annually�at�Board�level.�The�purpose�of�the�review� is�to�look�at�key�risks�and�the�effectiveness�of�procedures�in�place�to�mitigate�them.� 

Risks�can�have�a�short�term�and/or�a�long�term�impact�on�the�Trust's�ability�to�meet�its�objectives.� Those�monitoring�each�risk�advise�the�Board�on�actions�that�should�be�taken�to�manage�risk,�and� report�periodically�on�the�effectiveness�of�their�oversight.� 

The�Trust�has�identified�the�following�principal�risks�and�steps�to�mitigate�the�risk.� 

_Reduction�in�expected�returns�from�investments�due�to�impact�of�financial�markets’�declines�_ –�the� Trust�has�engaged�an�external�fiduciary�manager�JP�Morgan,�and�pursues�an�asset�allocation�policy� to�diversify�risk�and�conserve�capital�in�real�terms.�There�are�regular�reviews�of�investment�strategy� and�policy�(in�light�of�the�Trust’s�financial�plans)�by�the�Finance�and�Investment�Committee�and�the� Trust’s�fiduciary�manager.�These�are�tabled�at�Board�meetings�for�discussion�and�approval.�The� Trust�considers�that�it�is�unlikely�to�be�impacted�by�short�term�market�volatility�given�the�portfolio� is�well�diversified�and�there�are�sufficient�liquid�assets�to�meet�its�spending�requirements.� 

_Failure�of�the�Trust�to�earn�an�appropriate�return�from�its�assets�_ –�the�Trust�has�engaged�a�fiduciary� manager�JP�Morgan,�who�provides�quarterly�update�presentations�to�the�Finance�and�Investment� Committee�along�with�quarterly�performance�reports�and�annual�presentations�to�the�Board.� Regular�reviews�of�long�term�expected�returns�compared�with�expected�spending�are�performed.� 

_Risk�of�loss�of�Chairman�and�other�Trustees_ �–�the�Trust�has�a�policy�of�reviewing�the�number,�skills� and�diversity�of�Trustees�and�seeks�new�ones�as�necessary.� 

_Risk�of�loss�of�key�management�personnel_ �–�Trustees�aim�to�keep�appraised�of�staff�plans.� 

_Risk�of�cybercrime�–�_ the�Trust�uses�cloud�based�secure�storage�and�maintains�protection�software.� The�Trust�employs�external�IT�consultants�to�ensure�data�security�and�prevention�of�data�loss.�This� is�regularly�reviewed�to�ensure�compliance�with�GDPR.�Cyber�Essentials�Certification�was�attained� in�2021�and�is�to�be�maintained�on�an�ongoing�basis.�Employees�and�Trustees�(from�April�2022)�are� offered�on�demand�online�training�in�cyber�security.� 

## **RESERVES�** 

The�Trust�has�only�a�small�endowment.�However,�it�has�used�the�royalty�income�received�to�build� up�reserves�so�that�it�is�able�to�fund�its�charitable�activities�as�royalties�ceased�in�August�2022.�The� Trustees�maintain�funds�with�the�objective�of�generating�a�sufficient�return�to�fund�current�and� future�charitable�activities.�The�Trust�wishes�to�have�adequate�sums�to�continue�to�support�the� Institute�for�the�foreseeable�future.� 

It�is�the�aim�of�the�Trustees�to�maintain�the�value�of�reserves�in�real�terms�over�a�reasonable�time� horizon,�fulfilling�the�charitable�objectives�of�the�Trust�by�using�both�income�and�capital�growth�to� meet�expenditure.� 

The�level�of�reserves�is�monitored�on�a�quarterly�basis�by�means�of�management�accounts�and�cash� flow�forecasts.� 

The�Trust�holds�unrestricted�reserves�in�the�form�of�designated�funds�that�are�earmarked�to�meet� the�funding�due�to�the�Institute�under�the�agreement�(the�Oxford�Research�Grant�Fund�2021)�and� fund�future�legal�expenses�(the�Legal�Expense�Fund):� 

21� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

- **Oxford�Research�Grant�Fund�2021** �– The�Trust�signed�an�agreement�with�the�University�of� Oxford�on�18�October�2018�in�anticipation�of�the�ending�of�the�initial�agreement,�under� which�it�restated�its�intention�to�support�the�Institute.��Under�the�agreement,�the�Trust�has� a�commitment�to�fund�£4m�a�year�(adjusted�for�inflation)�from�1�August�2021�through�to� 31�July�2026.�A�designated�fund�of�£22.1m�was�set�up�in�the�2019�financial�year�to�reflect� these�funding�requirements�and�£4.1m�of�the�grants�issued�to�Oxford�during�the�year� (2021:�£0.7m)�have�been�set�against�this�fund.�� 

Trustees�consider�that�it�is�more�correct�to�show�this�commitment�by�means�of�a� designated�fund�rather�than�as�a�grant�creditor�because�the�Trust�has�the�right�to�refuse� payment�if�no�suitable�projects�are�put�forward.� 

The�initial�funding�agreement�with�the�University�of�Oxford�covered�a�period�that�ended�on� 31�July�2021.��The�Trust�had�a�commitment�to�fund�the�Institute�at�a�level�of�at�least�£3m� per�annum�(adjusted�for�inflation).��The�first�Oxford�Research�Grant�designated�fund�was� closed�following�the�end�of�the�contract�in�the�previous�year�with�the�residual�balance�of� £2.958m�released�to�the�Unrestricted�General�Funds�in�2021.� 

- **Legal�Expense�Fund** �–�the�purpose�of�the�Legal�Expense�Fund�is�to�provide�the�means�to� enforce�and�protect�patent�rights�and�licence�terms,�by�arbitration�or�litigation,�and�to� meet�the�costs�of�current�and�future�disputes�concerning�either�the�validity�of�the�Trust’s� patents�or�royalties�payable�to�the�Trust.� 

A�decision�was�taken�during�2017�to�reduce�the�level�of�this�fund�by�£5m�and�in�April�2019� it�was�reduced�by�a�further�£5m.�This�reflects�the�fact�that�as�the�royalties�cease�the�risk�of� becoming�involved�in�litigation�diminishes.� 

The�balance�as�at�30�September�2022�was�£1.058m�(2021:�£1.067m).� 

As�at�30�September�2022�the�monies�held�in�designated�funds�amounted�to�£18.461m�(2021:� £22.503m)�distributed�across�the�following�funds:� 

||**£‘000**|
|---|---|
|LegalExpenseFund|1,058|
|OxfordResearchGrantFund2021|17,403|
||18,461|



When�the�Trustees�deem�it�appropriate,�the�Trust�will�draw�from�its�reserves,�as�well�as�income,�to� fund�its�activities.�Based�on�the�accounts�as�at�30�September�2022,�total�reserves�are�£279.118m� (2021:�£306.428m).�Excluding�restricted�funds�(£1.405m)�and�designated�funds�(£18.461m)�leaves� £259.252m�in�the�general�fund�that�could�be�utilised,�if�required.� 

Whilst�these�could�be�considered�‘free�reserves’,�the�Trustees�do�not�believe�that�this�is�an� appropriate�measure�for�the�Trust.�The�accumulation�of�reserves�in�general�funds,�arising�from� royalty�income�and�investment�returns�is�in�line�with�the�power�conferred�on�the�Trust�to�hold� income�in�reserve�and to be used to generate investment income to apply on charitable activities.� The�Trust’s�policy�had�been�discussed�with�the�Charity�Commission.�The�Trustees�consider�the� current�level�of�reserves�to�be�appropriate�in�light�of�its�ambition�to�provide�long�term�support�to� scientists�working�in�the�fields�of�fundamental�and�translational�research�into�musculoskeletal�and� related�diseases.� 

22� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

As�at�30�September�2022,�total�Trust�funds�stood�at�£279.118m�(2021:�£306.428m)�held�in�the� following��types�of�fund:� 

|followingtypesoffund:||
|---|---|
||**£‘000**|
|EndowmentFunds|1,405|
|GeneralFund|259,252|
|DesignatedFunds|18,461|
||279,118|



23� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **CHARITY�INFORMATION�** 

## **Registered�Office�** 

Boundary�House� 91�Charterhouse�Street�� London�EC1M�6HR�� 

Registered�Charity�No:�260059� Registered�Company�No:�963832� 

## **Business�Address�** 

One�Lyric�Square� London�W6�0NB� Telephone:�020�8049�8136� 

## **President�** 

Professor�Sir�Ravinder�Maini� 

## **Vice�Presidents*��** 

Dr.�Colin�Barnes�� Mrs.�Bella�Sunley� 

*Vice�Presidents�hold�an�honorary�position�and�are�not�trustees� 

## **Board�of�Trustees�** 

Professor�Sir�Stephen�Holgate�(Chair)� Mr.�Edmund�Buckley� Mr.�Christopher�Coombe�� Professor�Andrew�Cope� Mr.�Mark�Dighero�� Mrs.�Margaret�Frost� Professor�Hill�Gaston�(resigned�22�June�2022)� Professor�Tracy�Hussell�(appointed�12�October�2021)� Mrs.�Jennifer�Johnson�(resigned�22�June�2022)� Mr.�David�Paterson�(resigned�12�October�2021)� Professor�Michael�Patton�� Mr.�Richard�Punt�� Dr.�Paul�Satchell�� Ms.�Victoria�White� 

24� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **Officers�** 

Dr.�Stephen�Simpson�(appointed�CEO�Designate�1�April�to�30�June�2022,�Chief�Executive�Officer� from�30�June�2022)� 

Mr.�Pierre�Espinasse�(Chief�Executive�Officer�until�30�June�2022)� Mrs.�Susan�Johanson�(Secretary�until�28�March�2023)� Mrs.�Hazel�Middleton�(Secretary�from�28�March�2023)� 

## **Independent�Auditors��** 

MHA�MacIntyre�Hudson�� 6th�Floor� 2�London�Wall�Place� London�EC2Y�5AU� 

## **Bankers�** 

Lloyds�TSB�Bank�PLC�� 25�King�Street� Hammersmith�� London�W6�9HW� 

## **Investment�Advisers�** 

J.P.�Morgan�SE�(previously�J.P.�Morgan�Bank�Luxembourg�S.A.,�London�branch�until�22nd�January� 2022)�� 

60�Victoria�Embankment� London�EC4Y�0JP� 

## **Legal�Advisers��** 

Amster�Rothstein�&�Ebenstein�LLP� (previously�Cooper�&�Dunham�LLP)�� 845�Third�Avenue,�6th�Floor� New�York,�NY�10022� 

Stone�King�LLP� Boundary�House� 91�Charterhouse�Street�� London�EC1M�6HR� 

25� 



The Kennedy Trust for Rheumatology Research Annual Report for the Year Ended 30September 2022 

## **STATEMENT OF TRUSTEES’ RESPONSIBILITIES** 

The Trustees (who are also directors of the Trust for the purposes of company law) are responsible for preparing the Trustees’ Report and the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). 

Company law requires Trustees to prepare financial statements for each financial year which give a true and fair view of the state of the affairs of the charitable company and of the incoming resources and application of resources, including the income and expenditure, of the charitable company for that period. In preparing these financial statements, the Trustees are required to: 

- select suitable accounting policies and then apply them consistently; 

- observe the methods and principles in the Charities Statement of Recommended Practice; 

- make judgements and estimates that are reasonable and prudent; 

- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; 

- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the charitable company will continue in business. 

The Trustees are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the charitable company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the charitable company and hence for taking reasonable steps for the prevention and detection of fraud and other regularities. 

The Trustees are responsible for the maintenance and integrity of the corporate and financial information included on the charity’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 

In so far as the Trustees are aware: 

- there is no relevant audit information of which the charitable company’s auditor is unaware; and 

- the Trustees have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. 

- The Trustees’ Annual Report is approved by the Trustees of the charity. The Strategic Report, which forms part of the Annual Report, is approved by the Trustees in their capacity as directors in company law of the charity. 

## **Auditors** 

The auditors, MHA MacIntyre Hudson were appointed auditors during the year and are deemed to be reappointed under section 487(2) of the Companies Act 2006. 

By order of the Board of Trustees. 

**ProfessorSir StephenHolgate, Chair 28th March 2023** 

**Margaret Frost,** Chair of the FinanceandInvestmentCommittee 

26 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **INDEPENDENT�AUDITOR’S�REPORT�TO�THE�MEMBERS�OF�THE�KENNEDY�TRUST�FOR RHEUMATOLOGY�RESEARCH�** 

## **Opinion�** 

We�have�audited�the�financial�statements�of�The�Kennedy�Trust�for�Rheumatology�Research�(the� ‘charitable�company’)�for�the�year�ended�30�September�2022�which�comprise�the�Statement�of� Financial�Activities,�the�Balance�Sheet,�the�Statement�of�Cash�Flows�and�the�notes�to�the�financial� statements,�including�a�summary�of�significant�accounting�policies.��The�financial�reporting� framework�that�has�been�applied�in�their�preparation�is�applicable�law�and�United�Kingdom� Accounting�Standards,�including�Financial�Reporting�Standard�102�The�Financial�Reporting�Standard� applicable�in�the�UK�and�Republic�of�Ireland�(United�Kingdom�Generally�Accepted�Accounting� Practice).� 

In�our�opinion�the�financial�statements:� 

- give�a�true�and�fair�view�of�the�state�of�the�charitable�company’s�affairs�as�at�30�September 2022,�and�of�its�incoming�resources�and�application�of�resources,�including�its�income�and expenditure,�for�the�year�then�ended; 

- have�been�properly�prepared�in�accordance�with�United�Kingdom�Generally�Accepted Accounting�Practice;�and 

- have�been�prepared�in�accordance�with�the�requirements�of�the�Companies�Act�2006. 

## **Basis�for�opinion�** 

We�conducted�our�audit�in�accordance�with�International�Standards�on�Auditing�(UK)�(ISAs�(UK))� and�applicable�law.�Our�responsibilities�under�those�standards�are�further�described�in�the� Auditor’s�Responsibilities�for�the�audit�of�the�financial�statements�section�of�our�report.�� 

We�are�independent�of�the�charitable�company�in�accordance�with�the�ethical�requirements�that� are�relevant�to�our�audit�of�the�financial�statements�in�the�UK,�including�the�FRC’s�Ethical�Standard,� and�we�have�fulfilled�our�other�ethical�responsibilities�in�accordance�with�these�requirements.��We� believe�that�the�audit�evidence�we�have�obtained�is�sufficient�and�appropriate�to�provide�a�basis�for� our�opinion.� 

## **Conclusions�relating�to�going�concern�** 

In�auditing�the�financial�statements,�we�have�concluded�that�the�Trustees’�use�of�the�going�concern� basis�of�accounting�in�the�preparation�of�the�financial�statements�is�appropriate.�Our�evaluation�of� the�Trustees’�assessment�of�the�entity’s�ability�to�continue�to�adopt�the�going�concern�basis�of� accounting�included�critical�reviews�of�budgets�and�forecasts�provided.� 

Based�on�the�work�we�have�performed,�we�have�not�identified�any�material�uncertainties�relating� to�events�or�conditions�that,�individually�or�collectively,�may�cast�significant�doubt�on�the�charitable� company’s�ability�to�continue�as�a�going�concern�for�a�period�of�at�least�twelve�months�from�when� the�financial�statements�are�authorised�for�issue.� 

Our�responsibilities�and�the�responsibilities�of�the�Trustees�with�respect�to�going�concern�are� described�in�the�relevant�sections�of�this�report.� 

27� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **Other�information** 

The�Trustees�are�responsible�for�the�other�information.��The�other�information�comprises�the� information�included�in�the�annual�report,�other�than�the�financial�statements�and�our�auditor’s� report�thereon.��Our�opinion�on�the�financial�statements�does�not�cover�the�other�information�and,� except�to�the�extent�otherwise�explicitly�stated�in�our�report,�we�do�not�express�any�form�of� assurance�conclusion�thereon.� 

In�connection�with�our�audit�of�the�financial�statements,�our�responsibility�is�to�read�the�other� information�and,�in�doing�so,�consider�whether�the�other�information�is�materially�inconsistent�with� the�financial�statements�or�our�knowledge�obtained�in�the�audit�or�otherwise�appears�to�be� materially�misstated.�If�we�identify�such�material�inconsistencies�or�apparent�material� misstatements,�we�are�required�to�determine�whether�there�is�a�material�misstatement�in�the� financial�statements�or�a�material�misstatement�of�the�other�information.�If,�based�on�the�work�we� have�performed,�we�conclude�that�there�is�a�material�misstatement�of�this�other�information,�we� are�required�to�report�that�fact.� 

We�have�nothing�to�report�in�this�regard.� 

## **Opinions�on�other�matters�prescribed�by�the�Companies�Act�2006�** 

In�our�opinion,�based�on�the�work�undertaken�in�the�course�of�the�audit:� 

- the�information�given�in�the�Trustees’�report�(incorporating�the�Strategic�Report�and�the Directors’�report)�for�the�financial�year�for�which�the�financial�statements�are�prepared�is consistent�with�the�financial�statements;�and 

- the�Strategic�Report�and�the�Directors’�report�has�been�prepared�in�accordance�with�applicable legal�requirements. 

## **Matters�on�which�we�are�required�to�report�by�exception�** 

In�the�light�of�our�knowledge�and�understanding�of�the�charitable�company�and�its�environment� obtained�in�the�course�of�the�audit,�we�have�not�identified�material�misstatements�in�the�Strategic� Report�and�the�Directors’�report.� 

We�have�nothing�to�report�in�respect�of�the�following�matters�in�relation�to�which�the�Companies� Act�2006�requires�us�to�report�to�you�if,�in�our�opinion:� 

- adequate�accounting�records�have�not�been�kept,�or�returns�adequate�for�our�audit�have�not been�received�from�branches�not�visited�by�us;�or 

- the�financial�statements�are�not�in�agreement�with�the�accounting�records�and�returns;�or 

- certain�disclosures�of�Directors’�remuneration�specified�by�law�are�not�made;�or 

- we�have�not�received�all�the�information�and�explanations�we�require�for�our�audit. 

28� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **Responsibilities�of�Trustees** 

As�explained�more�fully�in�the�Trustees’�responsibilities�statement�set�out�on�page�26,�the�Trustees� (who�are�also�the�Directors�of�the�charitable�company�for�the�purposes�of�company�law)�are� responsible�for�the�preparation�of�the�financial�statements�and�for�being�satisfied�that�they�give�a� true�and�fair�view,�and�for�such�internal�control�as�the�Trustees�determine�is�necessary�to�enable� the�preparation�of�financial�statements�that�are�free�from�material�misstatement,�whether�due�to� fraud�or�error.� 

In�preparing�the�financial�statements,�the�Trustees�are�responsible�for�assessing�the�charitable� company’s�ability�to�continue�as�a�going�concern,�disclosing,�as�applicable,�matters�related�to�going� concern�and�using�the�going�concern�basis�of�accounting�unless�the�Trustees�either�intend�to� liquidate�the�charitable�company�or�to�cease�operations,�or�have�no�realistic�alternative�but�to�do� so.� 

## **Auditor’s�responsibilities�for�the�audit�of�the�financial�statements�** 

Our�objectives�are�to�obtain�reasonable�assurance�about�whether�the�financial�statements�as�a� whole�are�free�from�material�misstatement,�whether�due�to�fraud�or�error,�and�to�issue�an�auditor’s� report�that�includes�our�opinion.�Reasonable�assurance�is�a�high�level�of�assurance,�but�is�not�a� guarantee�that�an�audit�conducted�in�accordance�with�ISAs�(UK)�will�always�detect�a�material� misstatement�when�it�exists.�Misstatements�can�arise�from�fraud�or�error�and�are�considered� material�if,�individually�or�in�the�aggregate,�they�could�reasonably�be�expected�to�influence�the� economic�decisions�of�users�taken�on�the�basis�of�these�financial�statements. 

Irregularities,�including�fraud,�are�instances�of�non�compliance�with�laws�and�regulations.�We� design�procedures�in�line�with�our�responsibilities,�outlined�above,�to�detect�material� misstatements�in�respect�of�irregularities,�including�fraud.�The�specific�procedures�for�this� engagement�and�the�extent�to�which�these�are�capable�of�detecting�irregularities,�including�fraud�is� detailed�below:�� 

- Obtaining�an�understanding�of�the�legal�and�regulatory�frameworks�that�the�entity�operates�in, focusing�on�those�laws�and�regulations�that�had�a�direct�effect�on�the�financial�statements; 

- Enquiry�of�management�and�those�charged�with�governance�to�identify�any�instances�of�known or�suspected�instances�of�fraud; 

- Enquiry�of�management�and�those�charged�with�governance�around�actual�and�potential litigation�and�claims; 

- Enquiry�of�management�about�any�instances�of�non�compliance�with�laws�and�regulations; 

- Reviewing�the�control�systems�in�place�and�testing�the�effectiveness�of�the�controls; 

- Performing�audit�work�over�the�risk�of�management�override�of�controls,�including�testing�of journal�entries�and�other�adjustments�for�appropriateness; 

- Evaluating�the�business�rationale�of�significant�transactions�outside�the�normal�course�of business; 

- Reviewing�accounting�estimates�for�bias; 

- Reviewing�minutes�of�meetings�of�those�charged�with�governance;�and 

- Reviewing�financial�statement�disclosures�and�testing�to�supporting�documentation�to�assess compliance�with�applicable�laws�and�regulations. 

Because�of�the�inherent�limitations�of�an�audit,�there�is�a�risk�that�we�will�not�detect�all� irregularities,�including�those�leading�to�a�material�misstatement�in�the�financial�statements�or�non� 

29� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

compliance�with�regulation.��This�risk�increases�the�more�that�compliance�with�a�law�or�regulation�is� removed�from�the�events�and�transactions�reflected�in�the�financial�statements,�as�we�will�be�less� likely�to�become�aware�of�instances�of�non�compliance.�The�risk�is�also�greater�regarding� irregularities�occurring�due�to�fraud�rather�than�error,�as�fraud�involves�intentional�concealment,� forgery,�collusion,�omission�or�misrepresentation.� 

A�further�description�of�our�responsibilities�for�the�audit�of�the�financial�statements�is�located�on� the�Financial�Reporting�Council’s�website�at:�https://www.frc.org.uk/Our�Work/Audit/Audit�and� assurance/Standards�and�guidance/Standards�and�guidance�for�auditors/Auditors�responsibilities� for�audit/Description�of�auditors�responsibilities�for�audit.aspx.�This�description�forms�part�of�our� auditor’s�report. 

## **Use�of�this�report�** 

This�report�is�made�solely�to�the�charitable�company’s�members,�as�a�body,�in�accordance�with� Chapter�3�of�Part�16�of�the�Companies�Act�2006.�Our�audit�work�has�been�undertaken�so�that�we� might�state�to�the�charitable�company’s�members�those�matters�we�are�required�to�state�to�them� in�an�auditor’s�report�and�for�no�other�purpose.��To�the�fullest�extent�permitted�by�law,�we�do�not� accept�or�assume�responsibility�to�anyone�other�than�the�charitable�company�and�the�charitable� company’s�members�as�a�body,�for�our�audit�work,�for�this�report,�or�for�the�opinions�we�have� formed.� 


**Sudhir�Singh�FCA** �(Senior�Statutory�Auditor)� 

For�and�behalf�of�� 

## **MHA�MacIntyre�Hudson�** 

Statutory�Auditor� 

London,�United�Kingdom�� 

Date:� 4 April 2023 

30� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **ACCOUNTS�** 

## **Statement of�Financial�Activities�for�the�Year�Ended�30�September�2022� (incorporating�Income�and�Expenditure�Account)�** 

|**Note**<br> <br> <br>**Income from other Trading Activities**<br>- Royalty Income<br>- Reimbursement of Patent Costs<br>**Investment Income**<br>10b<br>**Other Income**<br>- Exchange gain|**Unrestricted**<br>**Endowment**<br>**Total**<br>**Funds**<br>**Funds**<br>**Funds**<br>**2022**<br>**2022**<br>**2022**<br>**£'000**<br>**£'000**<br>**£'000**<br>684<br>-<br>684<br>-<br>-<br>-<br>8,015<br>-<br>8,015<br>19<br>-<br>19<br>8,718<br>-<br>8,718<br>6,144<br>-<br>6,144<br>14<br>-<br>14<br>474<br>-<br>474<br>1,073<br>-<br>1,073<br>7,705<br>-<br>7,705<br>1,013<br>-<br>1,013<br>(11,646)<br>-<br>(11,646)<br>(16,507)<br>(170)<br>(16,677)<br>(28,153)<br>(170)<br>(28,323)<br>(27,140)<br>(170)<br>(27,310)<br>**304,853**<br>**1,575**<br>**306,428**<br>**277,713**<br>**1,405**<br>**279,118**|**Total**<br>**Funds**<br>**2021**<br>**£'000**<br>735<br>13<br>10,042<br>11|
|---|---|---|
|**Total Income**||10,801|
|**Expenditure on Charitable Activities**<br>- Research Funding<br>4<br>**Costs of Raising Funds**<br>- Intellectual Property Protection<br>4, 5<br>- Royalty Sharing Payments<br>4, 5<br>- Investment Advice<br>4, 5||18,680<br>36<br>514<br>1,579|
|**Total Expenditure**||20,809|
|**Net Income/(Loss) before**<br>**Investment Gains/(Losses)**<br>Net (Losses)/Gains on<br>Investments<br>Realised (Loss)/Gain<br>10a<br>Unrealised Investment<br>(Loss)/Gain<br>10a<br>**Net (Expenditure)/Income**||(10,008)<br>32,244<br>7,915|
|||40,159<br>30,151|
|Total Funds brought forward||**276,277**|
|**Total Funds carried forward**<br>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**<br>**30 September 2022**<br>**£'000**<br>**Fixed Assets**<br>Tangible Fixed Assets<br>16<br>4<br>Investments<br>10a<br>313,759<br>**313,763**<br>**Current Assets**<br>Debtors<br>11<br>579<br>Cash at Bank and in hand<br>1,797<br>**2,376**<br>**Creditors (amounts falling due**<br>**within one year):**<br>Sundry Creditors and Accruals<br>12<br>(194)<br>Grant Payments due within One Year<br>(10,161)<br>**(10,355)**<br>Net Current Assets<br>**(7,979)**<br>**Total Assets less Current Liabilities**<br>**305,784**<br>**Creditors (Amounts falling due**<br>**after more than One Year)**<br>13<br>**(26,666)**<br>**Net Assets**<br>14<br>**279,118**<br>**Funds**<br>Unrestricted - Designated<br>18,461<br>Unrestricted - General<br>259,252<br>Unrestricted - Total<br>277,713<br>Endowment<br>1,405<br>**Total Funds**<br>15<br>**279,118**|**30 September 2021**<br>**£'000**<br>-<br>341,670|
|---|---|
||**341,670**|
||667<br>3,095|
||**3,762**<br>(371)<br>(8,909)|
||**(9,280)**<br>**(5,518)**|
||**336,152**<br>**(29,724)**|
||**306,428**|
||22,503<br>282,350|
||304,853<br>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)<br>Cashflow from Investing Activities (Note b)<br>Change in cash and cash equivalents in the<br>year<br>Cash and Cash Equivalents at 1 October|**Year Ended**<br>**30 September 2022**<br>**£'000**<br>(8,072)<br>6,774<br>(1,298)<br>3,095<br>1,797<br>**2022**<br>**£'000**<br>(27,310)<br>(8,015)<br>28,323<br>824<br>1<br>(1,983)<br>88<br>(8,072)<br>**2022**<br>**£'000**<br>(144,667)<br>143,431<br>8,015<br>(5)<br>6,774<br>**Cash Flows**<br>**£'000**<br>(1,298)|**Year Ended**<br>**30 September 2021**<br>**£'000**<br>(9,387)<br>10,576|
|---|---|---|
|||1,189<br>1,906|
|**Cash and Cash Equivalents at 30 September**||3,095|
|**a. Net Cash used in Operating Activities**<br>Net (expenditure)/income for the year<br>Investment income<br>Losses/(gains) on investments<br>Add back investment management costs<br>Add back depreciation of tangible assets<br>(Increase)/decrease in creditors<br>Decrease in debtors||**2021**<br>**£'000**<br>30,151<br>(10,042)<br>(40,159)<br>248<br>-<br>10,279<br>136|
|**Net Cash Flow from Operating Activities**||(9,387)|
|**b. Cash Flow from Investing Activities (Note b)**<br>Payments to acquire investments<br>Receipts from sales of investments<br>Investment income<br>Purchase of tangible fixed assets||**2021**<br>**£'000**<br>(272,872)<br>273,406<br>10,042<br>-|
|**Net Cash Flow from Investing Activities**||10,576|
|<br>**c. Analysis of Changes in Cash and Cash Equivalents**<br>**30 September**<br>**2021**<br>**£'000**<br>Cash at Bank and in hand<br>3,095||**30 September**<br>**2022**<br>**£'000**<br>1,797|



As�the�Trust�does�not�have�any�debt,�an�analysis�of�net�debt�has�not�been�produced. 

33� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **Notes�to�the�Accounts�** 

## **1. Summary�of�Significant�Accounting�Policies�** 

## (A) GENERAL�INFORMATION�AND�BASIS�OF�PREPARATION� 

The�Kennedy�Trust�for�Rheumatology�Research�is�a�company�limited�by�guarantee�registered�in� England.�In�the�event�of�the�charity�being�wound�up,�the�liability�in�respect�of�the�guarantee�is� limited�to�£1�per�member�of�the�charity.�The�address�of�the�registered�office�is�given�in�the�charity� information�on�page�24�of�these�financial�statements.�� 

The�charity�constitutes�a�public�benefit�entity�as�defined�by�FRS�102.�The�financial�statements�have� been�prepared�in�accordance�with�Accounting�and�Reporting�by�Charities:�Statement�of� Recommended�Practice�applicable�to�charities�preparing�their�accounts�in�accordance�with�the� Financial�Reporting�Standard�applicable�in�the�UK�and�Republic�of�Ireland�(FRS�102),�the�Charities�Act� 2011�and�the�Companies�Act�2006.� 

The�financial�statements�are�prepared�on�a�going�concern�basis�under�the�historical�cost�convention,� modified�to�include�certain�items�at�fair�value.�The�financial�statements�are�presented�in�sterling� which�is�the�functional�currency�of�the�charity�and�rounded�to�the�nearest�£’000.� 

The�significant�accounting�policies�applied�in�the�preparation�of�these�financial�statements�are�set� out�below.�These�policies�have�been�consistently�applied�to�all�years�presented�unless�otherwise� stated.� 

## (B) FUNDS� 

Unrestricted�funds�are�available�for�use�at�the�discretion�of�the�Trustees�in�furtherance�of�the� general�objectives�of�the�charity�and�which�have�not�been�designated�for�other�purposes.� 

Designated�funds�comprise�unrestricted�funds�that�have�been�set�aside�by�the�Trustees�for�particular� purposes.�The�aim�and�use�of�each�designated�fund�is�set�out�in�the�notes�to�the�financial� statements.� 

Restricted�funds�are�funds�which�are�to�be�used�in�accordance�with�specific�restrictions�imposed�by� donors�or�which�have�been�raised�by�the�charity�for�particular�purposes.�The�cost�of�raising�and� administering�such�funds�are�charged�against�the�specific�fund.�The�aim�and�use�of�each�restricted� fund�is�set�out�in�the�notes�to�the�financial�statements.� 

Endowment�funds�represent�those�assets�which�must�be�held�permanently�by�the�charity,�principally� the�Maynard�Jenour�Fund�and�the�Kennedy�Endowment�Fund.�Income�arising�on�the�endowment� funds�can�be�used�in�accordance�with�the�objects�of�the�charity�and�is�included�as�unrestricted� income.�Any�capital�gains�or�losses�arising�on�the�investments�form�part�of�the�fund.�Investment� management�charges�and�legal�advice�relating�to�the�fund�are�charged�against�the�fund.� 

## (C) INCOME�RECOGNITION� 

All�incoming�resources�are�included�in�the�Statement�of�Financial�Activities�(SoFA)�when�the�charity� is�legally�entitled�to�the�income�after�any�performance�conditions�have�been�met,�the�amount�can� be�measured�reliably,�and�it�is�probable�that�the�income�will�be�received.� 

34� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

Donations�are�recognised�on�receipt.�If�there�are�conditions�attached�to�the�donation�and�this� requires�a�level�of�performance�before�entitlement�can�be�obtained,�then�income�is�deferred�until� those�conditions�are�fully�met�or�the�fulfilment�of�those�conditions�is�within�the�control�of�the� charity�and�it�is�probable�that�they�will�be�fulfilled.�� 

Investment�income�is�earned�through�holding�assets�for�investment�purposes�such�as�shares�and� property.�It�includes�dividends�and�interest.�Where�it�is�not�practicable�to�identify�investment� management�costs�incurred�within�a�scheme�with�reasonable�accuracy,�the�investment�income�is� reported�net�of�these�costs.�It�is�included�within�cost�of�raising�funds�when�the�amount�can�be� measured�reliably.�Interest�income�is�recognised�using�the�effective�interest�method�and�dividend� income�is�recognised�as�the�charity’s�right�to�receive�payment�is�established.� 

Income�from�royalty�and�licence�agreements�is�recognised�throughout�the�year�when�there�is� reasonable�assurance�of�receipt.�Royalty�and�licence�income�are�recognised�gross�of�the�related� revenue�share�obligations�to�the�inventors�and�other�parties�which�are�payable�on�recognition�of�the� royalty�income.�Licence�agreements�also�provide�for�the�reimbursement�of�patent�protection�costs� in�certain�cases.� 

## (D) EXPENDITURE�RECOGNITION� 

All�expenditure�is�accounted�for�on�an�accruals�basis�and�has�been�classified�under�headings�that� aggregate�all�costs�related�to�the�category.�Expenditure�is�recognised�where�there�is�a�legal�or� constructive�obligation�to�make�payments�to�third�parties,�it�is�probable�that�the�settlement�will�be� required,�and�the�amount�of�the�obligation�can�be�measured�reliably.�It�is�categorised�under�the� following�headings:� 

- Costs�of�raising�funds�includes�royalty�sharing�payments,�intellectual�property�protection�&� investment�advice;� 

- Expenditure�on�charitable�activities�includes�research�science�funding�and�research� infrastructure�funding.� 

The�Trust�was�registered�for�VAT�until�7�May�2019�at�which�time�it�deregistered.�Whilst�the�Trust� was�registered�for�VAT,�the�recoverable�aspect�of�VAT�was�removed�from�the�expense�and�against� the�activity�for�which�expenditure�arose.�Subsequent�to�deregistration,�VAT�is�recorded�against�the� expense�and�activity�for�which�expenditure�arose.� 

Grants�payable�to�the�Institute�and�to�other�third�parties�are�within�the�charitable�objectives.�Where� unconditional�grants�are�offered,�this�is�accrued�as�soon�as�the�recipient�is�notified�of�the�grant,�as� this�gives�rise�to�a�reasonable�expectation�that�the�recipient�will�receive�the�grants.�Where�grants� are�conditional�relating�to�performance�then�the�grant�is�only�accrued�when�any�unfulfilled� conditions�are�outside�of�the�control�of�the�charity.� 

The�provision�for�a�multi�year�grant�is�recognised�at�its�present�value�where�settlement�is�due�over� more�than�one�year�from�the�date�of�the�award,�there�are�no�unfulfilled�performance�conditions� under�the�control�of�the�Trust�that�would�permit�the�Trust�to�avoid�making�the�future�payment(s),� settlement�is�probable�and�the�effect�of�discounting�is�material.�A�review�of�the�discount�rate�was� carried�out�during�the�year�in�conjunction�with�the�previous�adoption�of�CPI�plus�3%�as�representing� the�most�appropriate�rate�as�it�relates�to�the�Trust’s�opportunity�cost�of�money�reflecting�time�value� of�funds�to�the�Trust�as�detailed�in�the�Financial�Report�on�page�15.�A�further�element�of�prudence� was�added�this�year,�in�response�to�the�significant�upward�rise�in�CPI�at�both�the�headline�(including� 

35� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

food�and�energy)�and�core�data�sets,�which�was�to�adopt�core�CPI�as�the�inflation�reference�given� the�highly�volatile�nature�of�headline�CPI�following�the�Ukraine�invasion�and�subsequent�volatility�in� energy�and�food�prices�in�particular.�The�effect�of�the�discount�rate�of�UK�Core�CPI�+�3%�applied�has� been�quantified�in�the�Financial�Report�on�page�15�and�notes�4�and�13.�� 

Royalty�sharing�payments�are�calculated�by�applying�a�formula�for�the�distribution�of�royalty�income� agreed�by�the�Trustees�and�Versus�Arthritis,�which�reflects�current�UK�university�practice.�Such� payments�are�accrued�in�line�with�the�corresponding�royalty�income.� 

Investment�advice�reflects�the�costs�incurred�by�the�Trust�in�managing�its�investment�portfolios.�The� cost�includes�both�internal�costs�and�external�consultancy�and�management�costs.�Cost�is�recognised� in�line�with�the�accruals�basis�above.� 

## (E) SUPPORT�COSTS�ALLOCATION� 

Support�costs�are�those�that�assist�the�work�of�the�charity�but�do�not�directly�represent�charitable� activities�and�include�office�costs,�governance�costs�and�administrative�payroll�costs.�They�are� incurred�directly�in�support�of�expenditure�on�the�objects�of�the�charity�and�include�grant� management�carried�out�by�the�Trust’s�employees.�Where�support�costs�cannot�be�directly� attributed�to�particular�headings�they�have�been�allocated�to�cost�of�raising�funds�and�expenditure� on�charitable�activities�on�a�basis�consistent�with�use�of�the�resources.�Premises�overheads�and� other�overheads�have�been�allocated�either�on�time�spent�or�on�another�basis�as�appropriate.� 

The�analysis�of�these�costs�is�included�in�note�6.� 

## (F) TANGIBLE�FIXED�ASSETS� 

Tangible�fixed�assets�are�stated�at�cost�(or�deemed�cost)�or�valuation�less�accumulated�depreciation� and�accumulated�impairment�losses.�Cost�includes�costs�directly�attributable�to�making�the�asset� capable�of�operating�as�intended.�The�agreed�capitalisation�limit�of�tangible�assets�has�been� increased�and�agreed�at�£1,000.� 

Depreciation�is�calculated�to�write�off�the�cost,�less�estimated�residual�value,�of�each�asset�on�a� straight�line�basis�over�its�expected�useful�life�as�follows:� 

Computer�equipment��� 3�years�� 

## (G) INVESTMENTS� 

Investments�are�recognised�initially�at�fair�value�which�is�normally�the�transaction�price�excluding� transaction�costs.�Subsequently,�they�are�measured�at�fair�value�with�changes�recognised�in�‘net� gains�/�(losses)�on�investments’�in�the�Statement�of�Financial�Activities�if�the�shares�are�publicly� traded�or�their�fair�value�can�otherwise�be�measured�reliably.�The�Trustees�have�deemed�that�the� fair�value�of�unlisted�open�ended�investment�companies�(OEIC’s)�and�illiquid�property�fund� investments,�equates�to�the�charity’s�share�of�the�Net�Asset�Value�(NAV)�of�the�assets�held,�based�on� the�market�prices�as�at�the�valuation�date.�Investment�gains�and�losses�are�shown�split�between� realised�and�unrealised.� 

36� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## (H) DEBTORS�AND�CREDITORS�RECEIVABLE�/�PAYABLE�WITHIN�ONE�YEAR� 

Debtors�and�creditors�with�no�stated�interest�rate�and�receivable�or�payable�within�one�year�are� recorded�at�transaction�price.�Any�losses�arising�from�impairment�are�recognised�in�expenditure.� 

## (I) PROVISIONS� 

Provisions�are�recognised�when�the�charity�has�an�obligation�at�the�balance�sheet�date�as�a�result�of� a�past�event,�it�is�probable�that�an�outflow�of�economic�benefits�will�be�required�in�settlement�and� the�amount�can�be�reliably�estimated.� 

## (J) LEASES� 

Rentals�payable�and�receivable�under�operating�leases�are�charged�to�the�Statement�of�Financial� Activities�on�a�straight�line�basis�over�the�period�of�the�lease.� 

## (K) FOREIGN�CURRENCY� 

Foreign�currency�transactions�are�initially�recognised�by�applying�to�the�foreign�currency�amount�the� best�available�exchange�rate�between�the�functional�currency�and�the�foreign�currency�at�the�date� of�the�transaction.�Monetary�assets�and�liabilities�denominated�in�a�foreign�currency�at�the�balance� sheet�date�are�translated�using�the�closing�rate.�Gains�and�losses�on�exchange�are�allocated�to�the� appropriate�resource.� 

Forward�exchange�contracts�are�used�solely�to�manage�the�exposure�to�foreign�exchange�rate�risks� in�respect�of�the�Trust’s�investment�portfolio.� 

## (L) EMPLOYEE�BENEFITS� 

When�employees�have�rendered�service�to�the�charity,�short�term�employee�benefits�to�which�the� employees�are�entitled�are�recognised�at�the�undiscounted�amount�expected�to�be�paid�in�exchange� for�that�service.� 

The�charity�contributes�to�the�personal�pension�schemes�of�the�employees�and�all�costs�are�charged� to�the�Statement�of�Financial�Activities�in�the�year�to�which�they�relate.� 

## (M) TAX� 

The�charity�is�considered�to�pass�the�tests�set�out�in�Paragraph�1�Schedule�6�Finance�Act�2010�and� therefore�it�meets�the�definition�of�a�charitable�company�for�UK�corporation�tax�purposes.�It� therefore�does�not�suffer�tax�on�income�or�gains�applied�for�charitable�purposes.� 

37� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## (N) GOING�CONCERN� 

The�financial�statements�have�been�prepared�on�a�going�concern�basis�as�the�Trustees�believe�that� no�material�uncertainties�exist.�The�Trustees�have�considered�the�level�of�funds�held�and�the� expected�level�of�income�and�expenditure�for�12�months�from�authorising�these�financial�statements� and�the�impact�of�Covid�19.�The�budgeted�income�and�expenditure�are�sufficient�with�the�level�of� reserves�for�the�charity�to�be�able�to�continue�as�a�going�concern.� 

In�arriving�at�this�conclusion,�the�Trust’s�investment�portfolio�has�been�stress�tested�with�the� assistance�of�its�fiduciary�manager�JP�Morgan.��The�Trustees�concluded�that�even�in�the�worst�case� scenarios,�funds�available�are�considered�to�be�comfortably�adequate�to�ensure�the�solvency,� resilience,�and�liquidity�of�the�Trust.� 

## (O) FINANCIAL�INSTRUMENTS� 

The�charity�holds�both�basic�and�complex�Financial�Instruments.�The�Trust�has�elected�to�apply�the� provisions�of�Section�11�and�Section�12�of�FRS�102�in�full�in�respect�of�financial�instruments.�The� financial�assets�and�financial�liabilities�of�the�Charity�are�as�follows:� 

**Debtors** �–�trade�and�other�debtors�(including�accrued�royalty�income)�are�basic�financial�instruments� measured�at�amortised�cost.�� 

**Cash�at�bank** �–�is�classified�as�a�basic�financial�instrument�and�is�measured�at�face�value.� 

**Liabilities** �–�trade�creditors,�accruals�and�other�creditors�will�be�classified�as�financial�instruments,� and�are�measured�at�amortised�cost�as�detailed�in�notes�12�and�13.�Taxation�and�social�security�are� not�included�in�the�financial�instruments�disclosure.�Deferred�income�is�not�deemed�to�be�a�financial� liability,�as�the�cash�settlement�has�already�taken�place�and�there�is�simply�an�obligation�to�deliver� charitable�services�rather�than�cash�or�another�financial�instrument.� 

**Investments** �–�a�number�of�investments�held�at�the�year�end�are�classified�as�complex�financial� instruments�as�they�are�unlisted�open�ended�investment�companies�(OEIC’s).�Under�Section�11.24�of� FRS�102�SORP�2019�the�subsequent�measurement�of�complex�financial�instruments�should�be�at�fair� value�and�all�changes�in�the�fair�value�should�be�recognised�in�the�Statements�of�Financial�Activities.� The�Trustees�have�deemed�that�the�fair�value�of�these�investments�equates�to�the�charity’s�share�of� the�Net�Asset�Value�(NAV)�of�the�assets�held,�based�on�the�market�prices�as�at�the�valuation�date.� The�Trust�deems�its�derivative�instruments�as�complex�financial�instruments�and�the�Trust’s�policy�is� explained�below.�All�other�investments�are�classified�as�basic�financial�instruments�and�held�at�their� market�value.� 

**Derivative�instruments** �–�The�Trust�uses�Forward�foreign�currency�contracts�to�reduce�exposure�to� foreign�exchange�rates�solely�in�respect�of�its�investment�portfolio.�Derivative�financial�instruments� are�initially�measured�at�fair�value�on�the�date�the�derivative�contract�is�entered�into�and�are� subsequently�re�measured�to�fair�value�at�each�reporting�date.�Fair�value�gains�and�losses�are� recognised�in�the�SoFA.�� 

38� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

- (P) JUDGEMENTS�AND�KEY�SOURCES�OF�ESTIMATION�UNCERTAINTY� 

The�following�judgements�(apart�from�those�involving�estimates)�have�been�made�in�the�process�of� applying�the�above�accounting�policies�that�have�had�the�most�significant�effect�on�amounts� recognised�in�the�financial�statements:� 

- Allocation�of�support�costs�are�made�in�line�with�the�use�of�the�resource� 

- Fund�allocation� 

- Discounting�of�the�provisions�for�multi�year�grants�liabilities�to�present�value.�Internal� estimation�is�required�in�calculating�the�appropriate�discount�rate�and�determining�when�the� liability�will�fall�due� 

- Fair�value�of�investments� 

- Foreign�currency�exchange�rates.� 

There�are�no�other�key�assumptions�concerning�the�future�or�key�sources�of�estimation�uncertainty�at� the�reporting�date�that�have�a�significant�risk�of�causing�a�material�adjustment�to�the�carrying�amounts� of�assets�and�liabilities�within�the�next�financial�year.� 

39� 



The�Kennedy�Trust�for�Rheumatology�Research� Annual�Report�for�the�Year�Ended�30 September�2022� 

## **2. Detailed�Comparatives�for�the�Statement�of�Financial�Activities�** 

|<br>**Incoming from Charitable Activities**<br>- Donations and Legacies<br>**Incoming from other trading activities**<br>- Royalty Income<br>- Reimbursement of Patent Costs<br>**Investment Income**<br>**Other Income**<br>- Exchange gain|**Unrestricted**<br>**Endowment**<br>**Total**<br>**Funds**<br>**Funds**<br>**Funds**<br>**2021**<br>**2021**<br>**2021**<br>**£'000**<br>**£'000**<br>**£'000**<br>-<br>-<br>-<br>735<br>-<br>735<br>13<br>-<br>13<br>10,042<br>-<br>10,042<br>11<br>-<br>11|
|---|---|
|**Total Income**|10,801<br>10,801|
|**Expenditure on Charitable Activities**<br>- Research Funding<br>**Costs of Raising Funds**<br>- Intellectual Property Protection<br>- Royalty Sharing Payments<br>- Investment Advice|18,680<br>-<br>18,680<br>36<br>-<br>36<br>514<br>-<br>514<br>1,579<br>-<br>1,579|
|**Total Expenditure**|20,809<br>-<br>20,809|
|**Net (Expenditure) before Investment**<br>**Gains/(Losses)**<br>Net Gains on Investments<br>Unrealised Investment Gain<br>Realised Gain<br>**Net Income**|(10,008)<br>-<br>(10,008)<br>32,244<br>-<br>32,244<br>7,573<br>342<br>7,915|
||39,817<br>342<br>40,159<br>29,809<br>342<br>30,151|
|Total Funds brought forward|**275,044**<br>**1,233**<br>**276,277**|
|**Total Funds carried forward**|**304,853**<br>**1,575**<br>**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**|
|<br>Auditors Remuneration (for audit services only)|32|27|
|Exchange Rate Gain|19|11|
|Lease expense|80|80|



## **4. Analysis�of�Expenditure�** 

|**Total**<br> <br>**Discounting**<br>**Year Ended**<br>**Direct**<br>**Support**<br>**of grant**<br>**30 Sept**<br>**Costs**<br>**Costs**<br>**liabilities**<br>**2022**<br>**£'000**<br>**£'000**<br>**£'000**<br>**£'000**<br> <br>Royalty Sharing Payments<br>432<br>42<br>-<br>474<br>Investment Advice<br>960<br>113<br>-<br>1,073<br>Intellectual Property Protection<br>1<br>13<br>-<br>14<br>Research Science Funding<br>7,570<br>386<br>(1,812)<br>6,144<br>Total Resources Expended<br>8,963<br>554<br>(1,812)<br>7,705|**Total**<br>**Year Ended**<br>**30 Sept**<br>**2021**<br>**£'000**<br>514<br>1,579<br>36<br>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<br>Office and General Costs<br>Governance Costs<br>Total|**Research**<br>**Intellectual**<br>**Royalties**<br>**Investment**<br>**2022**<br>**Property**<br>**Total**<br>**£'000**<br>**£'000**<br>**£'000**<br>**£'000**<br>**£'000**<br>156<br>9<br>16<br>63<br>244<br>190<br>4<br>21<br>45<br>260<br>40<br>0<br>5<br>5<br>50|
|---|---|
||386<br>13<br>42<br>113<br>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�** 

|<br> <br>Staff Costs<br>Office and General Costs<br>Governance Costs<br> <br>Total|**Research**<br>**Intellectual**<br>**Royalties**<br>**Investment**<br>**2021**<br>**Property**<br>**Total**<br>**£'000**<br>**£'000**<br>**£'000**<br>**£'000**<br>**£'000**<br>126<br>10<br>14<br>49<br>199<br>90<br>4<br>22                   18<br>134<br>25<br>1<br>8<br>3<br>37|
|---|---|
||241<br>15<br>44<br>70<br>370|



## **7. Analysis�of�Governance�Costs** 

|<br>Audit & Accountancy<br>Office Costs<br>Legal & Professional<br>Other|**Year Ended**<br>**30 Sept**<br>**2022**<br>**£'000**<br>32<br>6<br>-<br>12<br>**50**|**Year Ended**<br>**30 Sept**<br>**2021**<br>**£'000**<br>27<br>5<br>1<br>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<br>National Insurance<br>Employer contributions to pensions<br>**Total Staff Costs**|**Year Ended**<br>**30 September 2022**<br>**£'000**<br>204<br>20<br>20<br>**244**|**Year Ended**<br>**30 September 2021**<br>**£'000**<br>168<br>15<br>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<br>National Insurance<br>Employer contributions to pensions<br>**Total Staff Costs**|**Year Ended**<br>**30 September 2022**<br>**£'000**<br>185<br>19<br>18<br>**222**|**Year Ended**<br>**30 September 2021**<br>**£'000**<br>146<br>14<br>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**|
|---|---|---|
|<br>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**<br>**2022**<br>**£'000**<br>Movement on Investments:<br>Market Value brought forward<br>341,670<br>Net Additions at Cost<br>144,667<br>Disposals at Market Value<br>(143,431)<br>Investment Management Costs<br>(824)<br>Realised (Loss)/Gain<br>(11,646)<br>Unrealised Investment(Loss)/Gain<br>(16,677)<br>Market Value carried forward<br>313,759<br>Historic Costs of Investments<br>327,101<br>Cumulative Unrealised (Loss)/Gain<br>(13,342)<br>313,759|**30 September**<br>**2021**<br>**£'000**<br>302,293<br>272,872<br>(273,406)<br>(248)<br>32,244<br>7,915|
|---|---|
||341,670|
||335,703<br>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**<br> <br>**2022**<br> <br>**£'000**<br> <br>**Investments not designated to funds:**<br>Overseas Listed Securities<br>Dublin<br>176,592<br> Luxembourg<br>33,934<br> <br>Overseas Unlisted Securities<br>Delaware<br>20,977<br> Dublin<br>-<br> Other<br>11,660<br>UK Unlisted Securities<br>35,991<br> <br>Foreign currency forward contracts<br>(4,480)<br> <br>Cash<br>37,680<br> <br>**Assets representing the Maynard Jenour Fund:**<br>UK Authorised Unit Trusts<br>95<br> <br>**Assets representing the Kennedy Endowment Fund:**<br>UK Authorised Unit Trusts<br>1,310<br> <br>313,759|**30 September**<br>**2021**<br>**£'000**<br>222,919<br>42,768<br>-<br>18,371<br>25,064<br>32,713<br>(1,886)<br>146<br>106<br>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**<br>**2022**<br>**£’000**<br> <br>Listed and Unlisted Investments<br>8,015<br>Total Investment Income<br>8,015|**30 September**<br>**2021**<br>**£’000**<br>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**<br>**2022**<br>**£'000**<br> <br>Royalty Accrued Income<br>108<br>Other Accrued Income<br>453<br>SundryDebtors<br>18<br>Total Debtors<br>579|**30 September**<br>**2021**<br>**£'000**<br>239<br>345<br>83|
|---|---|
||667|



## **12. Sundry�Creditors�and�Accruals��** 

|**30 September**<br>**2022**<br>**£'000**<br> <br>Royalties Payable<br>67<br>Other Creditors and Accruals<br>121<br>Taxation and Social Security<br>6<br>Total Creditors<br>194|**30 September**<br>**2021**<br>**£'000**<br>225<br>140<br>6|
|---|---|
||371|



## **13. Creditors�falling�due�after�more�than�One�Year�** 

The�balance�of�grants�payable�is�as�follows:� 

|**30 September**<br>**2022**<br>**£’000**<br> <br>Grant Payments due between one and five years<br>30,022<br>Grant Payments due after five years<br>3,403<br>Discountingofgrant liabilities<br>(6,759)<br>Commitments and Provisions due after One Year<br>26,666|**30 September**<br>**2021**<br>**£’000**<br>30,128<br>4,542<br>(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�** 

|<br>Fixed Assets:<br>Tangible Fixed<br>Assets<br>Investments<br>Current Assets:<br>Debtors<br>Cash at Bank and<br>In Hand|**30 September 2022**<br>**Unrestricted**<br>**Endowment**<br>**Funds**<br>**Funds**<br>**Total**<br>**£'000**<br>**£'000**<br>**£'000**<br> <br>4<br>-<br>4<br>312,354<br>1,405<br>313,759<br> <br> <br>579<br>-<br>579<br>1,797<br>-<br>1,797<br>314,734<br>1,405<br>316,139<br>10,355<br>-<br>10,355<br>26,666<br>-<br>26,666<br>277,713<br>1,405<br>279,118|**30 September 2021**<br>**Unrestricted**<br>**Endowment**<br>**Funds**<br>**Funds**<br>**Total**<br>**£'000**<br>**£'000**<br>**£'000**<br>-<br>-<br>-<br>340,095<br>1,575<br>341,670<br>667<br>-<br>667<br>3,095<br>-<br>3,095|
|---|---|---|
|Current Liabilities<br>Long Term<br>Liabilities||343,857<br>1,575<br>345,432|
|||9,280<br>-<br>9,280<br>29,724<br>-<br>29,724|
|||304,853<br>1,575<br>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**|<br>**(Losses)**|**2022**|
||**£'000**|**£'000**|**£'000**|**£'000**|**£'000**|**£'000**|
|<br>**Endowment Funds**|||||||
|Maynard Jenour<br>Fund|105||||(10)|95|
|Kennedy<br>Endowment Fund|1,470||||(160)|1,310|
|**Total Endowment**<br>**Funds**|**1,575**|-|-|-|**(170)**|**1,405**|
|<br>**Unrestricted Funds**|||||||
|**General Fund**|**282,350**|**1,013**|**9**|**4,033**|**(28,153)**|**259,252**|
|<br>**Designated Funds**|||||||
|Legal Expense<br>Fund|1,067||(9)|||1,058|
|Oxford Research<br>Grant Fund 2021|21,436|||(4,033)||17,403|
|**Total Designated**<br>**Funds**|**22,503**|-|**(9)**|**(4,033)**|-|**18,461**|
|**Total Unrestricted**<br>**Funds**|**304,853**|**1,013**|-|-|<br>**(28,153)**|**277,713**|
|**Total Funds**|**306,428**|**1,013**|-|-|<br>**(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**|<br>**(Expenditure)**|<br>**Funds**|**Transfers**|**Profits**|**2021**|
||**£'000**|<br>**£'000**|**£'000**|**£'000**|**£'000**|**£'000**|
|<br>**Endowment Funds**|||||||
|Maynard Jenour<br>Fund|82||||23|105|
|Kennedy<br>Endowment Fund|1,151||||319|1,470|
|**Total Endowment**<br>**Funds**|**1,233**|-|-|-|**342**|**1,575**|
|<br>**Unrestricted Funds**|||||||
|**General Fund**|**245,847**|**(10,008)**|**18**|**6,676**|**39,817**|**282,350**|
|<br>**Designated Funds**|||||||
|Legal Expense<br>Fund|1,085||(18)|||1,067|
|Oxford Research<br>Grant Fund|6,009|||(6,009)||0|
|Oxford Research<br>Grant Fund 2021<br>|22,103|||(667)||21,436|
|**Total Designated**<br>**Funds**|29,197|-|<br>**(18)**|**(6,676)**|-|**22,503**|
|**Total Unrestricted**<br>**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**<br>Cost as at the beginning<br>of the year<br>Additions<br>Cost at the end of the<br>year<br>**Depreciation**<br>Accumulated<br>depreciation at the<br>beginning of the year<br>Depreciation<br>**Accumulated**<br>**depreciation at the end**<br>**of the year**<br>Netbookvalueat<br>beginningoftheyear<br>**Netbookvalueatendof**<br>**theyear**|**30 September 2022**<br>**30**<br>**September**<br>**2021**<br>**Computer**<br>**Equipment**<br>**Total**<br>**Total**<br>**£'000**<br>**£'000**<br>**£'000**<br>�<br>�<br>�<br>5<br>5<br>�|
|---|---|
||**5**<br>**5**<br>**-**|
||�<br>�<br>�<br>1<br>1<br>�|
||**1**<br>**1**<br>**�**|
||�<br>�<br>�<br>**4**<br>**4**<br>**�**|



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:� 

|<br> <br>Expire<br><1 year<br>2-5 years<br>>5 years<br>|**30 September**<br>**2022**<br>**£'000**<br>40<br>-<br>-<br>40|**30 September**<br>**2021**<br>**£'000**<br>17<br>-<br>-|
|---|---|---|
|||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� 

