The foundation's annual report, published last week, shows that grants totalled £3.05 million in 2002 compared with £3.47 million the previous year.
The prime reason for the decline in the money for charitable projects was the fall in stock market values. Income from Baring's investments fell from £2.15 million to £1.78 million.
The annual report says that despite switching some equity investments to property and hedge funds during 2002, the value of assets declined from £65.5 million to £52.2 million.
And in his chairman's statement, Nicholas Baring warns of a continuing gap of £1.6 million between income generated by investments and money to pay grants.
"While the council has over the past three years taken conscious decisions to maintain our level of distribution in the light of the ever-growing needs of our constituency of potential applicants, this can only be done during a prolonged period of depressed markets at the cost of eroding our capital base," he writes.
Baring told Third Sector that the foundation's trustee board would have an "interesting discussion" about whether to continue the level of support for existing beneficiaries or rein in grants to protect the foundation's capital in the budget for 2004.
But one foundation which increased its grant-giving during 2002 was the Lloyds TSB Foundation for England and Wales. It made 3,530 grants worth £25.1 million, according to its annual report, also published last week.
This compares with 2001 when the foundation's contribution to the sector was £24.3 million.
However, Lloyds TSB is unusual in that it does not have any investments and has been unaffected by the three-year decline in stock values since 1999.