KCHC Annual Report and Accounts 2024-25 Spreads - Flipbook - Page 34
2024/25 Financial Review
Investments
Reserves
The trustees maintain a long-term view on investment
returns, forming the basis for the investment strategy
with CCLA, the Charity’s investment advisers and
managers.
A) Unrestricted general funds
Investment strategy
Our objective is to generate a consistent and
sustainable return from our investment portfolio to
finance grants and running costs while maintaining
the purchasing power of the underlying investments
over the long term. The funds are invested in the COIF
Charities Ethical Investment Fund. The Finance, Audit,
Investment, and Remuneration Committee (FAIRC)
regularly reviews the portfolio to ensure alignment
with the Charity’s commitments and future funding
expectations.
The strategy is to balance return and volatility by
delivering CPI plus 5% over the long term and to pay a
sustainable distribution from the total return.
The Board annually reviews its unrestricted general
funds (free reserves) policy, ensuring alignment
with the Charity’s strategy. The objectives include
safeguarding financial sustainability, supporting
strategic grants, and complying with accounting
principles (FRS102 Charities SORP) and donor
requirements.
The target level for free reserves is reviewed each
year by evaluating potential risks from the Charity’s
risk register that could affect its long-term financial
outlook. These risks include:
1. Income Risks: Potential for a significant and
prolonged decrease in income over the next three
years.
2. Expenditure Risks: Possibility of unexpected
expenses that were not included in the budget.
3. Investment Risks: The risk of a decrease in
global investment values, which could impact the
Charity’s financial stability.
Investment performance
During the year, the Charity’s investments generated
income of £0.9 million (2023/24: £1.1 million) and there
was a £1.1 million reduction in the revaluation of the
investment portfolio (2023/24: gain of £1.5 million),
reflecting the uncertainty and falls in investment
markets following the announcement of Tariffs by the
US government.
Our policy mandates that we maintain free reserves
within a range of 25% above or below the target
amount. This target is reviewed annually. For the
current year, the target for free reserves is set at £4.6
million (compared to £4.7 million in 2023/24).
This target consists of two main components:
4. Operating Risk Component: £2.5 million (2024:
£2.7 million), which covers nine months of
budgeted expenses for the year 2025/26.
5. Investment Risk Component: £2.1 million (2024:
£2.0 million), calculated by applying the average
volatility of equity (12.0%) over the past three
years to the value of the Charity’s investments.
The actual value of the general reserve is £4.7 million
(2024: £5.1 million), which represents 102% of the
target (2024: 104%). This is within the acceptable range
set by our policy.
34
S U P P O R T K I N G S .O R G .U K
