and Explanation

NUFFIELD FINANCES

….. This article provides an update and explanation of our latest Finances – and some parts are retained from previous versions to provide an ongoing reference. We are very fortunate that our finances continue to be strong and enable Trustees to fund new initiatives to take forward the work of the Trust despite the current volatile financial situation. What is more, the support of our loyal sponsors has continued and Nuffield Farming continues to attract new supporters. Long may this situation continue…..

AN HISTORICAL PERSPECTIVE…

Since 1947, when our scholarships were first awarded and funded by the Nuffield Foundation, the Nuffield Farming Scholarships Trust has assumed, firstly responsibility for scholarships costs (in 1956) and later all finances (in 1968). The organisation became a registered charity and company limited by guarantee in 2003 and since then has been run under the legally binding rules and regulations of these bodies. The Trustees are responsible for setting strategic objectives, ensuring that the Trust complies with its formal obligations and authorising the annual budget for the Director to implement. Currently, Nuffield Farming is fortunate to receive sponsorship for all scholarships awarded. Indeed, more organisations have promised support than the number of scholarships available – notwithstanding the geographical and specialist restrictions of some. In general terms, annual donations are used to fund a proportion of overheads (currently approximately 30%) with the balance being made up by general sponsorship along with investment income, donations and a small amount of scholar sponsorship funds. In recent years, until 2018-19, this has provided a small operating surplus (after deduction of major donations) in the order of 5% of normal income. However, again this year, additional costs have meant that an operating deficit approximately equivalent to 10% of normal income was incurred – although, slightly smaller than last year. More general sponsorship would be welcomed! Nevertheless, it is emphasised that the statutory accounts continue to show a healthy surplus of approximately £130k in 2021-22 – although, this is less than last year. In addition, over the years the Trust has built up a portfolio of investments that provides reserves for the short and long term. Despite the ongoing volatility in global finances, these have continued to provide for a continued overall surplus during this 2021-22 financial year.

HEADLINES FROM RECENT YEARS 2013 – 2022

2012-13 2021-22 Trend

Total Net Assets: Investment Holdings: Expenditure less Scholarships: Cost of Administration & Overheads: £835,100 £3,332,966 <Quadrupled £735,300 £3,406,817 >Quadrupled £164,500 £264,386 +61% £114,000 £165,463 +45%

Note: ‘!’ indicates significant reduction from last year, due, in the main, to the impact of covid restrictions.

FINANCIAL OBJECTIVES, RESERVES ALLOCATIONS AND INVESTMENT STRATEGY

(From the Policy updated by Trustees in December 2021) The strategic management of Trust’s finances are run according to the policy setting out the overarching Financial Objectives, Reserves Allocations and Investment Strategy for the Nuffield Farming Scholarships Trust. The Financial Objectives of the Trust are now to: maximise the return on investments, both in capital growth and income, within the agreed level of risk; provide stable and consistent levels of investment income for the Charity to pursue its charitable objectives and always maintain cash fund equivalent to two years’ expenditure in reserve. The Reserves Policy divides the Charitable funds into three reserves: Long Term Reserve. This reserve will be invested with the objective to accrue capital growth and provide income. Donations of capital in lump sums, such as legacies, will be invested in this fund which will comprise of unrestricted and restricted funds where the intention is to hold a lump sum for the long term with income used to provide scholarships. Liquidity Reserve. A cash fund on deposit equivalent to two years’ expenditure or some other sum endorsed by Trustee Board. The Board has authorised the minimum sum of £400,000 be held on deposit with sums in excess of this minimum transferred to the Long Term Reserve.

Operating Bank Account. This account receives investment income and is the operating bank account managed by the Director. This account is expected to operate between £nil and £200,000 in credit and also includes an operating deposit account. The Board of Trustees want to see capital growth which is in excess of inflation over the long term and reliable and consistent investment income. The detailed management of investments will be the responsibility of the appointed professional managers, but representatives of the Finance Committee will meet the fund managers annually to review performance and plans which take account of: Risk. The investment risks of volatility in capital values and reliable investment income are managed by the investment managers. However, the risk has been mitigated by holding cash on deposit to smooth the charity past difficult investment conditions and allow adjustment for unfavourable market circumstances. Ethical investment. Both investment managers have ethical investment policies approved by the finance committee members. These policies do develop and change and are discussed during the annual meeting. The Finance Committee reports to the Board if it is felt that there is a disparity between the ethical strategy of the managers and the joint view of the committee. Benchmark. The two managers use their own benchmarks and the Finance Committee makes its own comparison between the investment companies to assess their relative performance.

RECENT PERFORMANCE

2021-22 2020-21 2019-20 2018-19 2017-18

Operating Surplus:

-£71k -£90k -£60k £18k £32k Unrealised Investment Gains: £239k £433k -£133k £79k £7k Donations Restricted/Unrestricted Funds: £6k £55k £522k £1,156k £91k Net Movement in Funds: £131k £343k £229k £1,175k £122k Net Assets/Balance Carried Forward: £3,333k £3,202k £2,858k £2,630k £1,455k Investments: £3,407k £3,068k £2,618k £2,865k £1,520k

NOTES ON RECENT PERFORMANCE FIGURES:

• Operating Surplus. In recent years, until 2018-19, Trustees have set a budget with an operating surplus in the order of £25,000 – including investment income. This has not been sustained as explained above. • Unrealised Investment Gains/Losses. This is sometimes referred to as ‘investment growth’ (or decline) and for which there are no fixed targets. Rather the movement in funds reflects changes in the stock market with a negative figure indicating a reduction in value. The growth of investments in 2017-18 was less than we had become used to but returned to ‘normal’ in 2018-19. In 2019-20, however, we suffered a decline of -£133k, only for this to ‘bounce back’ in 2020-21. This year gains are less, although, still sufficient to maintain a positive ‘Net Movement in Funds’. • Donations to Restricted/Unrestricted Funds. The Trust continues to benefit by the generosity of charitable and private donors to establish ‘restricted funds’ to be used specifically for their scholarships. In the 2017-18 financial year major legacies were received totalling £91k. In 2018-19 financial year donations were received for a John Oldacre Restricted Fund of £1,100k as well as a further legacy from the Jill Willows Estate of £162k. In 2019-20 major donations totalling £522k were received or formally promised, but, in 2020-21 the amount was £55k and this year significantly less at £6k. • Net Movement in Funds. This figure shows the final, overall, increase or decrease in funds. • Balance Carried Forward. This is the Net Worth of the Trust and reflects that of the previous year plus or minus the net movement in funds. Readers will appreciate that, whatever else has occurred, the effective doubling of the Trust’s worth over 3 years (2017 – 2020) and the continued steady growth since must be considered good news!

SUMMARY

The Nuffield Farming finances continue to be reassuringly strong. The overall annual increase in the value of the Trust is satisfactory and reflects the generous support of our sponsors and benefactors without which free reserves would have to be used to fund our activities. Even though the continued operating deficit is disappointing and may well be repeated again next year the overall, final result as set out in the Statutory Accounts is still satisfactory. The amount of free reserves, along with the security of major legacies, enables Trustees to confidently allocate monies towards new initiatives as these occur - whilst being sure that funds will still be available to carry the Trust over any downturn in its fortunes. It is reiterated again this year, that whilst Trustees continue to bear down on administrative costs, they also recognise that increased levels of operational performance may need additional funding. Going forwards, it must be recognised that new initiatives are likely to need increased expenditure. This will only be possible if new sources of funds are identified or some funds from the free reserves are realised …..

Mike Vacher