TH E IN STITUTION OF ELECTRICA L EN GIN EERS Tru ste e s Re p o rt a n d Fin a n cia l Sta te m e n ts Ye a r e n de d: 3 1 D e ce m be r 2 0 0 2 Ch a rity n o : 2 1 1 0 1 4 T H E IEE T RU STEES R EPO RT & F IN A N CIAL S TATEM ENTS 1 Co n te n ts Pa ge Legal and Administrative Information 2 Report of the Trustees 3 Report of the Auditors 11 Consolidated Statement of Financial Activities 12 Consolidated and IEE Balance Sheets 13 Consolidated Cashflow Statement 14 Notes forming part of the Financial Statements 15 T H E IEE T RU STEES R EPO RT & F IN A N CIAL S TATEM ENTS 2 LEGA L & A DM IN ISTRA TIVE IN FO RM A TION The Board of Trustees are the charity trustees of the Institution of Electrical Engineers. The Board comprises the President, the Honorary Treasurer, two Deputy Presidents, six Vice Presidents and four Ordinary Members. The Deputy Presidents, Vice Presidents and ... more. less.
Ordinary Members are elected directly by the membership as a whole.<br><br> The President and Honarary Treasurer are appointed by the Board of Trustees. Trustees are required to retire by rotation after a maximum of 4 years in post. Tru ste e s The following Trustees have served on the Board of Trustees from the 1 st January 2002 to the date of this report except where indicated: Sir David Brown Dr N J Burton Mrs J E Cannon Dr N F Chin Sir John Chisholm (from 1 October 2002) Professor B S Collins Mr C M Earnshaw Dr W S Jones Professor C L B Lee (retired 30 September 2002) Mr J N Loughhead (from 1 October 2002) Professor R F B MacLaren Professor B Mellitt (retired 30 September 2002) Professor J J O 9Reilly Professor P A Payne (retired 30 September 2002) Professor M J H Sterling, President Dr M D Street Mr A J Watts (from 1 October 2002) Ch ie f Execu tive Dr A Roberts Fin a n ce D irecto r Mr S Riding Prin cip al Offi ce Savoy Place, London WC2R OBL A u d i to rs Horwath Clark Whitehill, 25 New Street Square, London, EC4A 3LN Ba n k e rs Barclays Bank Plc, 50 Pall Mall, London SW1A 1QB So licito rs Bristows, 3 Lincoln 9s Inn Fields, London WC2A 3AA In ve stm e n t M a n a gers State Street Global Advisors Limited, 21 St.<br><br> James 9s Square London SW1Y 4SS Fidelity Institutional Asset Management, 25 Cannon Street, London EC4M 5TA In ve stm e n t Pe rfo rm a n ce M o n ito rin g The WM Company, World Markets House, Crew Toll, Edinburgh EH4 2PY A ctu arie s Hymans Robertson, Finsbury Tower, 103-105 Bunhill Row, London EC1Y 8LZ T H E IEE T RU STEES R EPO RT & F IN A N CIAL S TATEM ENTS 3 REPORT O F TH E TRUSTEES The Institution of Electrical Engineers ( cthe IEE d) was founded in 1871 and incorporated by Royal Charter in 1921. It is registered with the Charity Commission under charity number 211014 and is governed by its Royal Charter and Bye-laws. The last amendment to these documents was made on 6 th June 2002.<br><br> The Trustees present their report along with the financial statements of the charity for the year ended 31 December 2002. Ch a rita ble Ob jects The objects of the IEE are to promote the general advancement of electrical science and engineering and their applications, and to facilitate the exchange of information and ideas on these subjects amongst the members of the IEE and others. The IEE 9s Mission therefore is that by& & facilitatin g th e gen er ation an d dissem in ation of k n owledge an d advan cem en t of scien ce, en gin eer in g an d tech n ology th r ou gh pu blish in g, edu cation an d ou r n etwor k s - we h elp r ealise per son al am bition s an d positively ben efit m an k in d.<br><br> To these ends the IEE is active in seeking to promote engineering & science to able young people, encouraging high standards in teaching, the achievement of relevant qualifications and life-long learning. The IEE also seeks to increase the generation of new knowledge by encouraging relevant research, cross-disciplinary and international collaboration, and promoting the benefits of innovation, research and development to industry. Finally the IEE seeks to provide opportunities to share information and disseminate knowledge through its publications, events and Professional Networks.<br><br> O rga n isa tio n a l Stru ctu re As part of the IEE 9s corporate governance approach described on pages 9 and 10, the Trustees have established a structure of Boards and Committees to monitor and control key areas of the IEE. Authority has also been delegated to the staff of the IEE in accordance with formal Delegations of Authority. The following Boards and Committees report directly to the Board of Trustees within specific terms of reference summarised below: The Audit Committee ensures a sound system of internal controls, risk management and accounting policies are maintained in accordance with corporate governance requirements, and liases directly with the external auditors.<br><br> The Investment Committee ensures the investments of the IEE are managed in accordance with the agreed policy and that the policy is consistent with legislation and good practice. It also monitors the performance of both investment portfolios and advisors. The Nominations Committee has responsibility for recommending those appointments to the Board of Trustees and reporting Boards not provided for by other mechanisms, and making additional recommendations for the appointment of Ordinary Members to the Board of Trustees as required.<br><br> The Remuneration Committee approves total staff salary budgets, employment policy and the specific contracts and remuneration of the CEO and key staff. It is also responsible for approving any remuneration paid to Trustees for services to the IEE (see note 10, page 19). Four Boards have also been established to keep under review and guide the operational activities of the IEE in accordance with our charitable objectives.<br><br> These are the Knowledge Services Board, the Qualifications Board, the Publications Board and the Members Services Board. The IEE owns three active incorporated subsidiaries undertaking publishing, information, event management and other non-charter activities. The IEE 9s main public facilities are in central London, with regional engineering centres in Glasgow and Birmingham as well as a number of offices outside the UK.<br><br> During the year, many staff posts were relocated from central London to purpose-built administrative offices in Stevenage, Hertfordshire. The relocation has brought the great majority of staff together to T H E IEE T RU STEES R EPO RT & F IN A N CIAL S TATEM ENTS 4 increase internal efficiency, communications and service innovation for the IEE. A refurbishment programme was also completed for the administrative building prior to the relocation to provide a modern working environment for staff.<br><br> The IEE co-operates wherever possible with other organisations and individuals whose aims are consistent with our own. Re vie w o f A ctivitie s: Ed u catio n The IEE has actively supported education in the 5-19 age category, providing support directly to teachers and integrating our volunteer activity with the governments 9 wider Science, Technology, Engineering and Mathematics initiative through SETnet. The first phase of a Creative ICT project in partnership with Channel 4 has been implemented, including the launch of the Ideas Factory career website for creative young people.<br><br> A pilot project in Kent has also been initiated to enhance teaching skills and provide teaching resources based on the exploitation of web technology. The IEE has responded to a range of consultations on education issues, including the 8Enquiry into Science Education for 14-19 year olds 9, the 8Review of the Research Assessment Exercise 9 and responded to the Scottish Executive on 8The Scottish Higher Education Review 9. The annual Faraday lecture on the topic of 8Smart Living @ home with technology 9 in association with the Electrical Contractors Association and the University of Sussex attracted physical audiences of some 30,000, including students from 392 schools in the UK.<br><br> The lecture was seen by many more via live satellite broadcasts in Europe, North America and Hong Kong. Within Higher Education, the Degree Accreditation service has continued to enhance its efficiency and implemented a protocol for joint accreditation with the Institution of Mechanical Engineers (IMechE) and British Computer Society (BCS). In accordance with the IEE 9s desire to better serve the ICT and new technology sectors, the number of degrees accredited in this area has now increased to 100.<br><br> The IEE has also contributed to a Problem-Based Learning initiative to enhance the quality of learning on relevant degree courses, the initiative is partly funded by a HEFCE grant of £252,000. Q u alifica tio n s a n d Pro fe ssio n a l D e ve lop m e n t With the overwhelming support of those members who voted, the IEE has taken the bold step in the year of separating IEE membership from the Chartered Engineer (CEng) qualification. This is intended to provide a platform to broaden the appeal of membership within the wider engineering and technology professions, and internationally.<br><br> At the same time, it will allow a greater focus on promoting the value of professional qualification to those for whom it is relevant. A large number of CEng applications were received in response to a December 2001 deadline under SARTOR 2. Some 2,136 individuals were assessed for CEng or FIEE in 2002 and a total of 1,698 members achieved the CEng qualification in the year (2001: 1,471).<br><br> Work has continued through publications, workshops and training of both staff and volunteers to provide information about the revised requirements for CEng under SARTOR 3 and encourage individuals to maintain appropriate professional development records. Our first awards of CEng under SARTOR 3 have been made during 2002. 2002 has seen the emergence of the Engineering and Technology Board, ETB, and the new regulatory body EC(UK) and the start of a major review of standards for engineering and technology qualifications in the UK.<br><br> With our sister institutions IEE is playing an active part in ensuring that engineering standards and ethical behaviour are not only maintained but developed to meet the needs of 21 st century industry. The provision of a mentoring service, aimed at sharing knowledge, and encouraging life-long learning and qualification has now been rolled-out, with the majority of the UK Branches now actively involved and a matching service established centrally. A CD-ROM for training mentors is being tested, and will be more widely available once initial user feedback has been incorporated.<br><br> A new full-day course on Mentoring was launched in 2001 which received a good response at three out of the four venues. T H E IEE T RU STEES R EPO RT & F IN A N CIAL S TATEM ENTS 5 Pro fe ssio n a l N e tw o rk s & Eve n ts Against a backdrop of the increasingly rapid advances in technology and dynamic, information- intensive nature of the professional engineers role, the Professional Networks (PNs) now provide web- based access to wide-ranging, relevant and high-quality information to support the professional engineer. A total of 36 PNs have now been established, with 21,056 individual registrants (2001: 9,799) generating 74,754 registrations at the year-end (2001: 30,950).<br><br> While the level of participation is not yet as high as had been hoped, the PNs now provide a valuable mechanism to deliver our charitable objectives through closer engagement with the professional community and the provision of greater opportunities to network, share information and generate new knowledge. The suite of services available is constantly under review and increasing with many innovative ideas being developed by the Executive Teams. This will help ensure that the PN offering continues to develop to meet new requirements.<br><br> A further change to help encourage this dynamism is the integration with the Publishing Department who now provide daily news feeds and editorial content to each PN website. This service will allow the PN staff to focus on delivering additional services and work more closely with volunteers and the communities we serve. A wide range of events and courses on a range of topics are supported by the IEE, including many organised by our network of volunteers around the world.<br><br> 80 technical seminars, lectures, conferences and residential courses were organised directly by IEE staff during 2002 generating a total attendance of 10,500 in addition to many more courses, professional development and networking events (2001: 78 events, attended by 10,600). Events in the area of the future of energy were of particular interest and several events were webcast live, providing an opportunity for those outside the UK to participate. For other events, an edited version has been available after the event on the web.<br><br> The first international conference on Power Electronics Machines and Drives was held in April, attracting 214 delegates. A joint event with the Radio Communications Agency on Getting the Most from the Radio Spectrum attracted just under 200 delegates and other joint events were held with Ofgem. Courses associated with BS 7671 (the Wiring Regulations) and Portable Appliance Testing have again been well supported, while more customised presentations including some overseas training has increased.<br><br> In the Professional Development area there have been good attendances, particularly for Technical Report Writing Courses. Lifeskills Courses and Managing Engineering Projects continues to maintain high registrants with improvements for numbers at Effective Management and Contract Law courses. W o rk in g w ith In d us try The IEE has sought to extend its contact with employers at a local level through the Business Partners scheme and Regional Executives throughout the UK.<br><br> The scheme was officially launched in November at the National Motorcycle Museum in Birmingham and is designed to promote the mutual interests of employers and the IEE in raising the profile of the profession and the quality of professional development. By the year-end some 438 companies had signed-up to the scheme (2001: 370). Alongside the development of the relationship with existing Business Partners, the IEE continues to engage the ICT sector and worked with major technology employers, including ARM and Cisco to identify ways in which the IEE and industry can work more effectively together.<br><br> The IEE continues to accredit a significant number of company professional development schemes (123), and has increased the number of endorsed learning providers to 18 (2001: 9). In tern a tio n a l N e tw o rk D e ve lop m e n t The IEE supports Branch activity in 99 locations around the globe, with 23% of its membership being based outside of the UK (2001: 25%). There have been a number of successful events with branches taking a pro-active approach to providing new initiatives for members and widening their appeal to local engineering communities.<br><br> Manchester Branch hosted a very successful multi-institutional event with the guest of honour being Sir Peter Williams, the first Chairman of the newly formed Engineering and Technology Board, and Oxford Branch were involved in 8Venturefest 9, a particularly successful exhibition. T H E IEE T RU STEES R EPO RT & F IN A N CIAL S TATEM ENTS 6 During the year the President visited Australia, China, Malaysia, Singapore, Hong Kong, New Zealand, Korea, Taiwan, USA, Canada and Sri Lanka. Together with the Institution of Mechanical Engineers, Institution of Civil Engineers, and Trade Partners (UK) a pilot project in Egypt to promote engineering in the region was established.<br><br> An email service aimed at active members and volunteers, Information Matters , has been launched to provide sign posting and updates on current developments and improve communications with this important group. 2002 saw the first, highly successful, combined honorary officers Younger Members Conference, with attendance reflecting the global reach of the IEE including Sri Lanka, Hong Kong and Australia. As part of efforts to enhance the quality and relevance of what the IEE provides to students and younger members a new community website called Circuit was launched in October 2002 and has already established a weekly web page hit rate of around 8,000.<br><br> A student magazine is also being planned for 2003. Se rvin g So cie ty During 2002 the IEE continued its role in synthesising views on major issues of relevance to the profession and facilitating interactions with external decision-makers in industry, academe, research councils and governments. To enhance the quality of this work, six Sector Panels have been formed to draw together influential leaders in our areas of interest.<br><br> These Sector Panels have been active in authoring and developing a number of submissions to UK Government departments, Select Committees and other national and international agencies. The panels offer a source of expertise for strategy development, and enable the IEE to engage more proactively with Government. A pilot Strategy Panel was launched in Northern Ireland in autumn 2002 and includes a cross-section of high profile opinion leaders expected to make an impact on public affairs locally.<br><br> Some 27 submissions were made in the year (2001: 35), with a greater emphasis on the selection of issues for consideration. These ranged from the future of Microprocessing to Offshore Wind Farms. The submission to the House of Lords sub-committee enquiry into Innovations in Micro-processing was identified for particular praise by the Lords.<br><br> Following the launch of the Energy Review in April 2002, energy supply and its environmental impact was the focus of a number of Government consultations, and the Energy Sector Panel provided a well- received submission to DTI on the future of the UK 9s energy requirements. The Manufacturing Sector Panel has also become a co-sponsor of the cFuture of Manufacturing in the UK d study being undertaken by the Institute of Public Policy Research. During the year the IEE 9s Biological Effects Policy Advisory Group assessed over 1,600 research papers concerning electromagnetic fields and health issues, as a basis for its May 2002 position paper 8The Possible Harmful Biological Effects of Low Level Electromagnetic Fields of Frequencies up to 300 GHz 9.<br><br> This paper, with its associated explanatory guide 8Electromagnetic Fields and Health 9, received a substantial surge of interest on the IEE 9s website commensurate with increasing public interest in the topic. Recognising this interest, the IEE provided speakers on the topic, both nationally and internationally. FactFiles and Factsheets covering environmental topics such as 8Renewable Energy in the UK 9, are now downloadable free of charge from the website, together with a comprehensive range of Health and Safety Briefings.<br><br> A UK Computer Research Committee has also been formed jointly with the British Computer Society to give access to the best computer scientists in the UK and a greater capability to contribute to submissions in the ICT sector, which already account for 20% of the IEE 9s submissions to government. The IEE also undertook important work, with the Home Office and EURIM, to address the issues facing ICT professionals responsible for implementing the Regulation of Investigatory Powers Act. Meetings were held with key Civil Servants and there was greater co-operation with bodies such as the Royal Society, Foundation for Science and Technology and EURIM.<br><br> The IEE now has a micro-site within the ePolitix website, which receives over 5 million hits per month and is used by the civil service, politicians, researchers and parliamentary journalists. T H E IEE T RU STEES R EPO RT & F IN A N CIAL S TATEM ENTS 7 Lib rary The Library has concentrated efforts on developing and enhancing remote access to its services and resources. Loan requests placed through the online Library catalogue on the IEE website now represent some 20% of all loans made, and loans to members based outside of the UK 15% of the total.<br><br> The Library Web pages receive on average 10,000 hits a month. Almost 150 electronic journals can be accessed through the Library's web pages and work is also progressing to provide remote access to electronic books. Many members still visit the Library in person and make use of its excellent information resources and IT facilities.<br><br> Some 10,000 visits were made to the Reading Room in 2002. Pu b lishin g A ctivity The IEE 9s Research Journals remain one of the key publishing activities and approaching half of subscriptions to the journals are now for material in electronic form, whether through digital library packages or our own online journal service. In a new development, IEE journals are now available to university libraries in the world 9s 50 poorest countries at very low cost, through a multi-publisher collaboration (INASP).<br><br> In a survey of quantum dot physics/ electronics, the Institute for Scientific Information reported in 2002 that Electronics Letters was the world 9s most cited journal in this field, reinforcing the pivotal role it plays in rapid publication throughout electronics and optics. 2003 will see the launch of a new (13th) title in the IEE Proceedings portfolio, on Nanobiotechnology, positioned at the convergence of two of the most active new disciplines, with particular emphasis on the emerging biological/ biotechnological applications. 20 new book titles were published in 2002, including 5 new titles in communications technology.<br><br> In addition to the technical titles for which the IEE has an international reputation, two of our best-selling titles during the year were T roubled IT projects by John Smith of IBM, and Radioman: the remarkable rise and fall of CO Stanley by Mark Frankland. The INSPEC database reached the seven and a half million mark in December 2002 as the level of scientific and engineering literature available and selected again dramatically increased over prior years. A new search aids CD-ROM, containing the Thesaurus, Classification and List of Journals was launched in December as were two new sub-set products; INSPEC Photonics and INSPEC Biomedical Technologies.<br><br> In addition three new digital current awareness products were launched; INSPEC Alerts, INSPEC Custom Alerts and INSPEC Subject Updates. These innovative new products are based on weekly email services and offer for the first time thin, dynamic and tailored 8slices 9 of the INSPEC database for individual subscribers and members. Pu b lic Relatio n s As part of its continued programme of public awareness the IEE took part in the Imagineering Fair at the Town & Country Show at Stoneleigh over August Bank Holiday weekend.<br><br> This attracted some 40,000 visitors - mainly family groups. The stand was put on in partnership with the Campaign to Promote Engineering (CPE) and the Royal Academy of Engineering and featured the latest music technology being developed by the University of York Electronics Department. A new venture during 2002 was taking part in the British International Motor Show at the NEC.<br><br> This was again a partnership between the IEE, CPE and the Royal Academy with the support of Jaguar Cars. It was an opportunity to unveil the IEE 9s new schools 9 resource package featuring a cartoon character called Blink. The stand attracted a great deal of attention including a visit from the Secretary of State for Trade and Industry, Patricia Hewitt, and formed the cornerstone of the Society of Motor Manufacturers and Traders Careers Day.<br><br> Both shows represent the determination of the IEE to promote public awareness of science, engineering and technology through more popular events. At the same time it continues to support a variety of initiatives such as the Campaign to Promote Engineering, the Today 9s Engineers painting competition and Engineering in Health Week, which this year covered London, Birmingham, Glasgow and Swansea. T H E IEE T RU STEES R EPO RT & F IN A N CIAL S TATEM ENTS 8 Gra n ts, A w ards & Prize s A number of bequests have been made to the IEE for undergraduate and postgraduate scholarships.<br><br> The administration of these scholarships and other funds has been placed in the hands of the IEE which has drawn up the general conditions of the awards in accordance with the wishes of the founders. Each year the IEE awards a significant number of scholarships to encourage young people into the profession, to reward outstanding achievements and to assist students with postgraduate study and research. Additionally a number of grants, travel awards and bursaries are also available.<br><br> Total disbursements in the year amounted to £259,000 (2001: £167,000). Tra din g A ctivitie s The net contribution to the IEE of trading activity increased by 13% to £2.4m (2001: £2.1m) despite a reduction in the recruitment services activity reflecting economic conditions. There was a significant increase in the income from the rental of surplus IEE accommodation, notably in Savoy Place, and IEE Conventions Ltd benefited from the release of a provision for Dutch VAT in the accounts of the International Broadcasting Convention Partnership, in which IEE has a 34% share.<br><br> Fin a n cia l Re vie w £40.2m of income was generated during the year, the majority from the area of publishing and information services. The reduced income levels compared to 2001 (£41.5m) reflect some reduction in event activity, including the timing of major conferences organised by the IEE. Since a large number of the IEE 9s customers for INSPEC pay in US$, the IEE has also been affected by the weakness of the US$ during the year and since the year-end.<br><br> This shortfall of sterling income has however been offset to a degree by strong sales of the IEE Wiring Regulations and associated guidance, including record sales of the new blue IEE On Site Guide. Reduced income has been offset by a reduction in expenditure, including the reduced event activity. Costs in relation to Building Refurbishment, IT & IT Infrastructure (£0.7m) are substantially lower than in 2001 (£4.6m), reflecting the substantial completion of significant programmes to enhance IEE facilities initiated in 2001.<br><br> In addition, 8Other 9 costs related to the relocation of staff provided for in 2001 have not recurred in 2002. Despite expectations that the economic slow-down will continue to impact elements of IEE income, notably within publishing, the forthcoming year will see further investment in the development of Professional Networks, their associated events, and a range of initiatives to introduce new products and services of greater relevance to the electrical engineering community. Reserve s Po licy It is the policy of the IEE to establish designated funds for specific purposes as appropriate, including the replacement and maintenance of the IEE 9s buildings & facilities, developing existing activities, and fund identified new initiatives.<br><br> Unrestricted funds totaling £25m include a general reserve of £19m to provide against financial set- backs. This was established at the equivalent of six months 9 expenditure and is considered adequate to re-organise or curtail activities in a reasonable manner. Both designated and unrestricted funds include a Revaluation Reserve, normally held at 10% of relevant funds, the purpose of which is to protect the designated funds and General Reserve against investment value fluctuations over the medium term.<br><br> Falls in underlying investment values have therefore been reflected in the Revaluation Reserve of the unrestricted funds, preserving reserve protection of the designated funds and availability of funds for new initiatives. It is intended to replenish the Revaluation Reserve for unrestricted funds through allocation of the investment income stream over the coming years. The balance of unrestricted funds represents the Uncommitted New Initiatives Reserve of £6.1m (2001: £6.4m).<br><br> These funds are designated at the approval of the trustees to fund further projects in support of the IEE 9s charitable objectives. With the exception of the Tangible Fixed Asset Reserve, all the reserves are fully invested (see Investment Policy below). T H E IEE T RU STEES R EPO RT & F IN A N CIAL S TATEM ENTS 9 The total reserves of the IEE at the year-end stood at £78m, compared to a balance of £87m at the prior year-end (see notes 13 & 14).<br><br> In ve stm e n t Po licy IEE investment policy is for the funds under management to achieve above average total returns over rolling 3 and 5 year periods as measured against the WM 2000 Universe, while taking no more than normal commercial risk. The return requirement is achieved by agreeing with the professional managers involved a target which would place the portfolio above the average level of the WM 2000 Universe. This investment return is an overall total return with no restrictions of any kind including any of an income or ethical nature but with the over-riding requirement of complying with charity and tax legislation.<br><br> The risk requirement is managed at an overall level by diversifying the investment portfolios between two managers, each with different investment styles. The risk is managed further at the individual manager level by agreeing the asset allocation each quarter, maximum ranges within any quarter for these allocations to vary without prior agreement and monitoring the controls imposed by the investment house to manage its business risk exposure. The performances of these managers are then checked independently by the WM Company each quarter.<br><br> In ve stm e n t Pe rfo rm a n ce A ga in st Po licy The performance of the IEE 9s investment managers is reviewed by the Investment Committee in May each year. This is the earliest time that data on the performance of other professional investment managers 9 results are available for comparison purposes. In May 2002 the Investment Committee noted the investment portfolio was ranked by the WM Company at the 48 th percentile of the WM 2000 Universe of professional investment managers returns over the three-year period to 31 December 2001 and 73 rd over the corresponding five-year period to that date.<br><br> The manager retained by the IEE for passive management was ranked 87 th over both three and five-year periods as index returns were on average exceeded by active managers over this timescale. The active manager was placed in the 10 th percentile over the three years to 31 December 2001. This manager was appointed in 1998 to replace the previous active manager who had not met its agreed target over rolling five years.<br><br> The five-year figures are not therefore relevant for the actively managed portion of the portfolio. The Investment Committee is satisfied, following the changes made in 1998, that the existing structure is now soundly based and delivering stable performance in line with agreed investment policy. Co rp orate Go ve rn a n ce & Risk M a n a gem e n t The Trustees have considered the guidance for directors of public listed companies contained within the Combined Code and have adopted these guidelines as best practice for the IEE as a public interest body.<br><br> An annual business planning cycle is in place resulting in the production of a rolling five year plan. The Trustees will monitor progress on a monthly basis against strategic objectives set out in the Corporate Plan. As part of this process the Trustees have also implemented a risk management strategy which comprises: " Continuous review of the strategic risks facing the IEE " Establishment of systems and procedures to mitigate those risks identified " Implementation of procedures designed to minimize any potential impact on the IEE should any of those risks materialize " Communication of ethical values and a control of awareness through written codes of conduct, standards of discipline and employee performance appraisal The Trustees have approved and put in place formal delegations of authority which are accessible to all staff within the IEE.<br><br> The Royal Charter and Bye-Laws require certain decisions to be taken by the IEE in General Meeting or Special General Meeting. Within these constraints it is the policy of the Board of Trustees that authority shall be delegated to the greatest extent compatible with the Trustees 9 overall T H E IEE T RU STEES R EPO RT & F IN A N CIAL S TATEM ENTS 10 direction and control of the IEE and to the point in the IEE where it can be exercised most effectively. The Trustees retain responsibility for all acts taken under these delegated responsibilities.<br><br> Finance Department staff carry out checks on internal controls and procedures. The Audit Committee also consults with the external auditors during the planning of the annual audit. Areas of concern identified by the Trustees are discussed with the external auditors and inform the audit plans.<br><br> The Audit Committee also appoints external consultants to undertake specific reviews of financial controls and procedures in addition to the routine audit work carried out by the external auditor. Other independent external auditors perform audits of certain high income generating activities, such as on- line royalty income and joint ventures such as the IBC Partnership. Through the risk management processes established for the IEE, the Trustees are satisfied that the major risks identified have been adequately mitigated, where necessary.<br><br> It is recognized that systems can only provide reasonable, but not absolute assurance that major risks have been adequately managed. The Trustees have also reviewed the need for a full time internal audit function during the year and have agreed in principle that this should be positively considered following completion of systems implementation relating to a new financial system expected in 2003. Statem e n t o f Tru ste e s Re sp o n sibilitie s Charity law requires the Trustees to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the charity at the year end and of its incoming resources and expenditure during that year.<br><br> In preparing those financial statements, the Trustees are required to; " select suitable accounting policies and apply them consistently " make judgements and estimates that are reasonable & prudent " ensure applicable accounting standards and statements of recommended practice have been followed, subject to any departures disclosed and explained in the financial statements; and " prepare the financial statements on the going concern basis unless it is inappropriate to presume that the charity will continue in business. The Trustees are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the IEE and enable them to ensure that the financial statements comply with the Charities Act 1993. They are also responsible for safeguarding the assets of the charity and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.<br><br> Approved by the Trustees on 5 March 2003 and signed on their behalf by: ........................................................................ M J H Sterling, President T H E IEE T RU STEES R EPO RT & F IN A N CIAL S TATEM ENTS 11 In de p e n de n t A ud ito rs 9 Rep o rt to the Tru ste e s o f the In stitu tio n o f Electrical En gin e e rs We have audited the financial statements of the Institution of Electrical Engineers for the year ended 31 December 2002 which comprise the Consolidated Statement of Financial Activities, the Consolidated and IEE Balance Sheets, the Consolidated Cash Flow Statement and the related Notes numbered 1 to 18.These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the charity trustees, as a body, in accordance with Regulation 6 (2) of the Charities (Accounts and Reports) Regulations 1995 (SI 1995/ 2724) as amended by Regulation 4 (a) of the Charities (Accounts and Reports) Regulations 2000 (SI 2000/ 2868).<br><br> Our audit work has been undertaken so that we might state to the charity trustees those matters we are required to state to them in an auditor 9s 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 charity trustees, as a body, for our audit work, for this report, or for the opinion we have formed. Resp ective re sp on sibilitie s o f Tru ste e s a n d a udito rs The Trustees 9 responsibilities for preparing the Trustees 9 Report and the financial statements in accordance with applicable law and United Kingdom Accounting Standards are set out in the Statement of Trustees 9 Responsibilities.<br><br> Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and United Kingdom Auditing Standards. We have been appointed as auditors under section 43 of the Charities Act 1993 and report in accordance with regulations made under section 44 of that Act. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Charities Act 1993.We also report to you if, in our opinion, the Trustees 9 Report is not consistent with the financial statements, if the Institution has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding trustees 9 remuneration and transactions with the Institution is not disclosed.<br><br> We read the Trustees 9 Report and consider the implications for our report if we become aware of any apparent misstatements therein. Ba sis o f op in io n We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements.<br><br> It also includes an assessment of the significant estimates and judgements made by the Trustees in the preparation of the financial statements and of whether the accounting policies are appropriate to the circumstances of the Institution, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.<br><br> O p in io n In our opinion the financial statements give a true and fair view of the state of affairs of the IEE and the Group as at 31 December 2002 and of the Group 9s incoming resources and application of resources for the year then ended and have been properly prepared in accordance with the Charities Act 1993. HORWATH CLARK WHITEHILL Chartered Accountants and Registered Auditors LONDON March 2003 T H E IEE T RU STEES R EPO RT & F IN A N CIAL S TATEM ENTS 12 Co n so lida te d Sta te m e n t o f Fin a n cia l A ctivitie s fo r th e ye a r e n de d 3 1 D e ce m b e r 2 0 0 2 Unrestricted Designated Restricted Total Total Funds Funds Funds 2002 2001 Notes £000 £000 £000 £000 £000 IN COM IN G RE SO U RCES Ch ar itable activities Membership Subscriptions 6,466 - - 6,466 6,393 Publishing and Information Services 22,593 - - 22,593 22,271 Meetings and Exhibitions 3,377 - - 3,377 4,514 Members Support 285 - - 285 218 Other Income 611 - - 611 749 Oth er Activities to Gen er ate Fu n ds Trading Income 2 5,093 - - 5,093 5,306 In vestm en t In com e 1,640 82 72 1,794 2,031 Don ation s an d Gifts - - 50 50 11 Total in com in g r esou r ces 40,065 82 122 40,269 41,493 RE SO U RCES EXPE NDE D 3 Costs of gen er atin g fu n ds Trading Activities 2 2,703 - - 2,703 3,191 Investment Management 132 7 3 142 221 2,835 7 3 2,845 3,412 Net in com in g r esou r ces available for ch ar itable application 37,230 75 119 37,424 38,081 Ch ar itable expen ditu r e Publishing and Information Services 15,202 337 - 15,539 15,923 Meetings and Exhibitions 8,370 - - 8,370 8,926 Members' Support 4,677 - - 4,677 4,280 Building Refurbishment - 364 - 364 3,152 IT & IT Infrastructure - 366 - 366 1,457 Other 2,115 123 - 2,238 3,741 Grants, Awards and Prizes - - 259 259 167 Management and Administration 1(f) 829 - - 829 645 31,193 1,190 259 32,642 38,291 Total Resou r ces Expen ded 34,028 1,197 262 35,487 41,703 Net Incoming/ (Outgoing) Resources before Transfers 6,037 (1,115) (140) 4,782 (210) Transfers between Funds 14 2,694 (2,666) (28) - - Net In com in g/ (Ou tgoin g) Resou r ces after Tr an sfer s 8,731 (3,781) (168) 4,782 (210) Investment Losses 11,14 (11,801) (589) (574) (12,964) (9,040) NET M O VEM EN T IN FU N D S (3,070) (4,370) (742) (8,182) (9,250) Fund Balances at 1 January 2002 28,397 53,996 4,200 86,593 95,843 Fu n d Balan ces at 31 Decem ber 2002 13,14 25,327 49,626 3,458 78,411 86,593 T H E IEE T RU STEES R EPO RT & F IN A N CIAL S TATEM ENTS 13 Co n so lida te d a n d IEE Ba la n ce Sh e e ts a s a t 3 1 D e ce m b e r 2 0 0 2 GROUP IEE N otes 2002 £000 2001 £000 2002 £000 2001 £000 FIXED ASSETS Tangible Assets 5 16,565 16,817 16,535 16,772 Investments 11 56,599 69,249 56,600 69,250 73,164 86,066 73,135 86,022 CURRENT ASSETS Stocks 6 621 591 528 467 Debtors 7 5,547 5,902 3,791 3,941 Payments in advance 1,220 1,272 1,108 1,140 Cash at bank and in hand 13,598 13,877 12,624 12,853 20,986 21,642 18,051 18,401 CURRENT LIABILITIES Creditors 8 6,291 10,928 5,853 10,322 Amounts received in advance 9,448 10,187 7,118 7,689 15,739 21,115 12,971 18,011 NET CURRENT ASSETS 5,247 527 5,080 390 TOTAL ASSETS LESS CURRENT LIABILITIES 78,411 86,593 78,215 86,412 RESTRICTED FUNDS 13,14 3,458 4,200 3,458 4,200 DESIGNATED FUNDS 13,14 49,626 53,996 49,626 53,996 UNRESTRICTED FUNDS 13,14 25,327 28,397 25,131 28,216 TOTAL FUNDS 78,411 86,593 78,215 86,412 The notes on pages 15 to 25 form part of these financial statements. Approved by the Trustees on 5 March 2003 and signed on their behalf by: ........................................................................&M J H Sterling, President .........................................................................&W S Jones, Honorary Treasurer Co n so lida te d Ca sh Flo w Statem e n t fo r the year e n de d 31 D e ce m be r 2 0 0 2 Notes 2002 £000 2001 £000 Net cash (ou tflow)/ in flow fr om oper atin g activities 16 (1,867) 2,532 Retu r n s on in vestm en ts an d ser vicin g of fin an ce Interest received 582 667 Dividends received 1,794 2,031 Investment management fees (142) (221) Rent received 228 234 2,462 2,711 Capital expen ditu r e Purchase of tangible fixed assets (628) (671) Sale of equipment 68 66 (560) (605) Man agem en t of liqu id r esou r ces Purchase of investments (10,678) (27,839) Sale of investments 11,152 26,904 (Increase)/ Decrease in investment cash (788) 366 Decrease/ (Increase) in cash on term deposits 703 (3,875) 389 (4,444) In cr ease in cash 17 424 194 * Included as liquid resources are portfolios of investments held and managed on behalf of the Institution by its Investment Advisers and term cash deposits of less than one year.<br><br> 15 N o tes o n the a ccou n ts fo r the year e n de d 3 1 D e cem be r 2 0 0 2 1 ACCOUNTIN G POL ICIES a) Accou n tin g Basis These financial statements have been prepared under the historical cost convention, as modified by the revaluation of investments and in accordance with applicable accounting standards including cAccounting and Reporting by Charities d : Statement of Recommended Practice (SORP 2000) published in October 2000. b) Basis of Con solidation The Group accounts incorporate the financial statements of IEE and it subsidiary companies for the year ended 31 December 2002 together with the results of the joint venture International Broadcasting Convention Partnership, in which the Group has a 34% interest. The accounts include the financial statements of International and UK Branches for the year-ended 30 September 2002.<br><br> c) Depr eciation Depreciation is provided on fixed assets so as to write them off over their estimated useful lives as follows: Category Method Rate/ Life Furniture, fittings and equipment Reducing balance 20% Motor vehicles & computer equipment Straight-line 4 years London Crown leases Straight-line 125 years Michael Faraday House (Stevenage) Straight-line 50 years Scottish Engineering Centre (Glasgow) Straight-line 50 years Midlands Engineering Centre (Birmingham) Straight-line 144 years Depreciation of the Leasehold property held in the joint venture is also on a straight-line basis over the term of the lease. Computer equipment and fixtures & fittings are depreciated at a rate of 33% and 20% per annum respectively. The Institution does not capitalise its collection of publications in the Library or archive material as a valuation is not readily available and there is no intention for resale.<br><br> d) Stock s & wor k -in -pr ogr ess Stocks and work in progress are valued at the lower of cost and net realisable value, including a proportion of attributable overhead expenses where appropriate. e) In com in g Resou r ces Income resources are accounted for on an accruals basis, except in the case of membership subscriptions and subscriptions for journals and electronic services which are dealt with on a cash received basis for the current year, with any receipt in respect of future years being shown as received in advance. Royalties are also dealt with on a cash received basis, with accrual made for income not yet received, based on information provided by the licensees.<br><br> f) Resou r ces Expen ded The IEE has classified audit fees and administration costs as management and administrative expenses. Charitable Expenditure includes direct costs and support costs. Administration and accommodation support costs have generally been allocated on a departmental staff cost and area occupied basis.<br><br> 16 g) In vestm en ts Investments are included in the balance sheet at their mid-market values at 31 December 2002 as notified by the Investment Managers. Investment income is accounted for on an accrual basis, with account taken of the tax credit at the time of receipt of the net income. h ) Reser ves The IEE 9s Funds, with the exception of the Tangible Fixed Assets Reserve, are fully invested and all income and profits (less losses) on sales from those investments are appropriated to the Reserves.<br><br> The Tangible Fixed Assets Reserve provides for the financial operating requirements of the IEE. The IEE 9s policy is explained in more detail in note 14. i) Restr icted Fu n ds Income given for specific purposes has been included in the Consolidated Statement of Financial Activities as restricted funds.<br><br> j) For eign Cu r r en cy tr an saction s Foreign currency transactions are converted at the rate ruling on the date of the transaction. Outstanding balances are translated into sterling at the rates ruling at the balance sheet date. Any exchange differences arising are taken to the revenue account.<br><br> k ) Pen sion s Pension schemes are operated by the IEE covering most of its employees. Contributions are charged to the income and expenditure account on a basis that spreads the expected future cost of providing pensions over the employees 9 future working lives with the IEE in accordance with SSAP 24. The transitional provisions of FRS 17 have been complied with and the relevant disclosures are made in note 15.<br><br> 2 TRADI NG ACTIVIT IES The Group 9s financial statements incorporate those of IEE 9s wholly owned subsidiary companies, Peter Peregrinus Limited, IEE Conventions Ltd, INSPEC Inc. and IEE Inc. All the companies are wholly-owned subsidiaries of the IEE.<br><br> Peter Peregrinus Limited (PPL) is incorporated in the United Kingdom. It provides contract publishing, information, computer, conference and recruitment services, and rent of surplus IEE accommodation and related services such as catering. The net profits from all these services are passed to IEE by means of a Deed of Covenant.<br><br> Additional services to members through the sale of Christmas cards, members 9 scarves and ties, and other memorabilia provided by the Company, are passed by means of a Deed of Covenant to IEE 9s Incorporated Benevolent Fund. The principal activity of IEE Conventions Limited (IEECL) is the provision of conference and exhibition services. The accounts include the Company 9s 34% share of its joint venture in the International Broadcasting Convention Partnership.<br><br> The IEE 9s charitable activities in the USA are conducted through US-registered subsidiary companies; INSPEC Inc and IEE Inc. Total expenditure of INSPEC Inc. included in the accounts was £581,000 (2001: £553,000) and of IEE Inc.<br><br> £nil (2001: £nil). The profit and loss account of both PPL and IEECL are set out below, and summary balance sheets in note 12. 17 PPL IEECL In ter Gr ou p Tr adin g Total Total 2002 £000 2002 £000 2002 £000 2002 £000 2001 £000 Tu r n over 2,560 2,533 - 5,093 5,306 Cost of Sales 1,457 1,313 (820) 1,950 2,110 Gr oss Pr ofit 1,103 1,220 820 3,143 3,196 Distribution Costs 42 - - 42 71 Administration expenses 48 663 - 711 1,010 Net Oper atin g Pr ofit 1,013 557 820 2,390 2,115 Less Deeds of Covenant: IEE 1,013 542 - 1,555 1,431 Incorporated Benevolent Fund of the IEE - - - - 7 Pr ofit on Or din ar y Activities befor e Tax - 15 820 835 677 Tax on ordinary activities - - - - - Fu n ds Retain ed/ (Released) by Su bsidiar y - 15 - 15 (43) Fu n ds Retain ed by Ch ar ity - - 820 820 720 None of the Directors of PPL or IEECL receives any remuneration for their services.<br><br> 3 RESOURCES USED IN TH E YEAR Resources have been expended in the year as follows: 2002 2001 £000 £000 Employment Costs (Note 4) 13,754 13,139 Accommodation Costs 2,375 2,894 Printing and Paper 4,087 4,496 Postage and Telephone 2,338 2,563 Hire, Maintenance and Depreciation of Equipment 1,716 1,729 Travelling and Subsistence 3 Committees and Officers 1,857 1,751 Bought in Services 3,565 10,147 Share of resources expended in Joint Venture 1,973 2,357 Other Costs 3,822 2,627 35,487 41,703 Bought in Services includes Audit fees for the Group of £29,750 (2001: £34,350) 18 4 EM PLOYEES The average number of staff employed by the Group in the year was 407, (2001: 434), and by the IEE was 404 (2001: 429). No staff were employed by Peter Peregrinus Ltd or IEE Conventions Ltd during the year. Total employment costs of the Group and IEE staff in the year were: 2002 2001 £000 £000 Payroll costs: Salaries and overtime 11,474 10,861 Social Security 902 856 Pension and other benefits 1,378 1,422 Total Group Employment Costs 13,754 13,139 Less : Cost of staff work on subsidiary company's contracts (279) (293) Employment Costs of the Institution 13,475 12,846 The numbers of employees whose emoluments, excluding pension costs, exceeded £50,000 were within the following bands: 2002 Nu m ber 2001 Number £50,000 - £59,999 5 4 £60,000 - £69,999 6 7 £70,000 - £79,999 1 2 £80,000 - £89,999 3 1 £100,000 - £109,999 1 1 £110,000-£119,999 - 1 £130,000-£139,999 1 - £150,000-£159,999 - 1 £190,000-£199,999 1 - 5 FIXED A SSETS - The Grou p a n d the IEE IEE and IEECL Buildings and Crown Leases Michael Faraday House Furniture and Equipment Regional Centres Total £000 £000 £000 £000 £000 Cost: At 1 January 2002 5,958 6,474 10,450 5,096 27,978 Additions - - 628 - 628 Disposals - - (182) - (182) At 31 December 2002 5,958 6,474 10,896 5,096 28,424 Accu m u lated Depr eciation : At 1 January 2002 664 1,394 8,794 309 11,161 Depreciation for the year 49 109 639 62 859 Disposals - - (161) - (161) At 31 December 2002 713 1,503 9,272 371 11,859 Net book valu e: At 31 Decem ber 2002 5,245 4,971 1,624 4,725 16,565 At 1 J an u ar y 2002 5,273 5,080 1,632 4,787 16,817 In 2002 the IEE incurred £93,000 rent under property leases (2001: £50,500).<br><br> 19 6 STOCK S GROUP IEE 2002 2001 2002 2001 £000 £000 £000 £000 Publications and work in progress 345 195 345 195 Paper, Stationery and postage 176 268 176 268 Other Stocks 100 128 7 4 621 591 528 467 7 D EBTORS GROUP IEE 2002 2001 2002 2001 £000 £000 £000 £000 Trade debtors 4,991 5,035 2,663 2,423 Other debtors 556 867 539 849 Amounts due from subsidiaries - - 589 669 5,547 5,902 3,791 3,941 8 CREDITORS: Am o un ts fa llin g d u e w ithin o ne year GROUP IEE 2002 2001 2002 2001 £000 £000 £000 £000 Trade creditors 5,383 9,985 4,969 9,423 Taxation and NI costs 362 333 362 333 Other creditors 546 610 522 566 6,291 10,928 5,853 10,322 9 COM M ITM ENTS Annual commitments for equipment under non-cancelable operating leases of the Group and IEE are as follows: 2002 2001 £000 £000 Expiry date: -within one year 128 50 -between two and five years 223 80 351 130 10 REL ATED PA RTY TRANSACTION S During the year, claims for travelling and subsistence expenses totaling £95,166 incurred by 13 Trustees on behalf of IEE were reimbursed (2001: £68,346 by 56 Trustees). 2 of the Trustees received remuneration for services to the IEE unrelated to their office of Trustee totalling £2,940 in the year (2001: £2,800). None of the Trustees, or persons connected with them, received remuneration for services to the IEE related to their office of Trustee.<br><br> 20 11 IN VESTM EN TS Group IEE £000 £000 Mar k et Valu e at 1 J an u ar y 2002 69,249 69,250 Acquisitions at Cost 10,678 10,678 Proceeds from Sale of Investments (11,152) (11,152) Increase in Investment Cash 788 788 Net Investment Losses (12,964) (12,964) Mar k et Valu e at 31 Decem ber 2002 56,599 56,600 Historical Cost at 31 December 2002 67,198 67,198 Unrealised Losses (10,599) (10,598) Realised Gains based on Historic Cost 748 748 An alysis of In vestm en ts Gr ou p IEE N ote 2002 2001 2002 2001 £000 £000 £000 £000 Subsidiary undertakings - 1 Listed 38,553 45,153 38,553 45,153 Trusts 15,526 21,312 15,526 21,312 Cash 2,520 2,784 2,520 2,784 56,599 69,249 56,600 69,250 1 2 SUBSID I ARY UN DERTAKI NGS At 31 December 2002, the IEE owned the entire issued share capital of Peter Peregrinus Limited (PPL) and IEE Conventions Limited (IEECL). The trading results of these companies are shown in note 2 and summary balance sheets presented below: PPL 2002 £000 PPL 2001 £000 IEECL 2002 £000 IEECL 2001 £000 Fixed Assets - - 30 45 Cu r r en t Assets Stocks 93 124 - - Debtors 637 708 1,819 2,056 Cash at bank and in hand 30 1 943 1,022 Cu r r en t Liabilities (674) (747) (2,682) (3,028) Net Assets 86 86 110 95 Represented by: Called-up share capital 1 1 - - Profit & loss account 85 85 110 95 86 86 110 95 21 13 A NA LYSIS O F GROUP N ET A SSETS BETW EEN FUN D S Fund balances at 31 December 2002 are represented by: Unrestricted Funds Restricted Funds Total Funds £000 £000 £000 Tangible fixed assets 15,347 1,218 16,565 Investments 53,965 2,634 56,599 Current assets 20,986 - 20,986 Current liabilities (15,345) (394) (15,739) Total net assets 74,953 3,458 78,411 1 4 RESERVES AND RESTRICTED FUN D S Balance at 1 January 2002 Net Investment Losses Net (Outgoing)/ Incoming Resources before Valuations Reserve funded capital expenditure and reserve transfers Balan ce at 31 Decem ber 2002 £000 £000 £000 £000 £000 Design ated Fu n ds :- London Lease Redemption Reserve 287 (54) 7 44 284 Invested Building Redemption Reserve 2,850 (535) 68 62 2,445 Building Reserve 2,500 - (364) 769 2,905 Development Reserve 7,882 - (337) 400 7,945 Committed New Initiatives Reserve 16,542 - (489) (1,504) 14,549 Tangible Fixed Assets Reserve 18,536 - - (2,001) 16,535 Designated Revaluation Reserve 5,399 - - (436) 4,963 Total Gr ou p Design ated Fu n ds 53,996 (589) (1,115) (2,666) 49,626 Un design ated Fu n ds :- Uncommitted New Initiatives Reserve 6,394 (11,801) 6,022 5,516 6,131 Operations Reserve 19,000 - - - 19,000 Unrestricted Revaluation Reserve 2,822 - - (2,822) - Total IEE Un design ated Fu n ds 28,216 (11,801) 6,022 2,694 25,131 IEECL Accumulated Fund 95 - 15 - 110 PPL Accumulated Fund 86 - - - 86 Total Gr ou p Un r estr icted Fu n ds 28,397 (11,801) 6,037 2,694 25,327 IEE Restricted Fund 1,246 - - (28) 1,218 Trust Funds Common Investment Pool 1 2,428 (484) (81) - 1,863 Trust Funds Common Investment Pool 2 526 (90) (59) - 377 Total IEE Restr icted Fu n ds 4,200 (574) (140) (28) 3,458 Total Gr ou p Fu n ds 86,593 (12,964) 4,782 - 78,411 Total IEE Fu n ds 86,41 (12,964) 4,767 - 78,215 The IEE 9s policy is to externally invest the funds, with the exception of the Tangible Fixed Assets Reserve and the Institution Restricted Funds. The value of the Funds and Investments, where applicable, was as follows: 22 Funds £000 Investments £000 Accumulated Reserves 58,222 53,965 Trust Funds 2,240 2,634 Tangible Fixed Assets Reserves 16,535 - Restricted Fund 1,218 - 78,215 56,599 Design ated Fu n ds (i) Transfers between the Tangible Fixed Assets Reserve and Building Redemption Reserve represent amortisation and depreciation of the buildings referred to in note 1(c).<br><br> Net transfers have also been made to the New Initiatives Reserve representing the depreciation charges on reserve funded capital expenditure. (ii) The Building Redemption Reserve provides the future funds required to rebuild or replace Michael Faraday House and Regional Centres and to provide a sum of money at the expiry of the London leases to allow for continuing or alternative accommodation as necessary. (iii) The Building Reserve is to fund the major building renovations identified and planned to be undertaken at the London and Hertfordshire premises during 2003 to 2007 and for the acquisition of warehouse facilities.<br><br> (iv) The Development Reserve is to underwrite new revenue-generating activities to supplement the income from existing activities. (v) The Committed New Initiatives Reserve has been established to fund those projects which have been approved to be undertaken. Sums have been spent this year from this reserve on ICT and Marketing projects.<br><br> Un r estr icted Fu n ds (vi) The Operations Reserve allows operations to continue in the event of financial setbacks. (vii) The Uncommitted New Initiatives Reserve provides funding for expenditure on new projects. Revalu ation Reser ves (viii) The balance on the Revaluation Reserve is normally set at 10% of the value of the IEE 9s Reserves.<br><br> For the purposes of the SORP this has been analysed between designated and unrestricted funds. At December 2002, the Revaluation Reserves relating to Unrestricted Funds has been further diminished to reflect medium term movements in global equity markets present during 2002. It is intended to replenish the Revaluation Reserve to normal levels through investment income and subsequent revaluations.<br><br> (ix) Subsequent revaluations or shortfalls on realisations of the Institution 9s investments will be reflected in this Reserve over the medium term during which the Institution 9s reserves are intended to be utilised. Restr icted Fu n ds (x) Government grants offered to support the costs of development of Regional Engineering Centres have been shown as restricted funds and are reduced by the depreciation charges relating to that proportion of the assets acquired by the grants. There currently exists a potential liability to repay grants received should certain conditions of the offer not be met.<br><br> Non-compliance with these conditions is not anticipated and therefore no provision has been made in the accounts for the cost of such liability occurring. (xi) The IEE Benefactors 9 Trust Funds represented by Common Investment Pools 1 and 2 have been established to receive donations and bequests from members and others in a tax efficient way and are included in the Institution 9s accounts as restricted funds. An analysis of these Trust Funds is shown in note 18.<br><br> 23 15 LIABILITY FO R FUTURE PEN SION S Defin ed Ben efit Sch em e The IEE operates a funded defined benefit occupational scheme to which both the IEE and employees make contributions. The scheme is administered through a trust, which is independent of the IEE, by Trustees who are appointed by IEE and member-nominated Trustees. The figures below exclude the pension expenses or employees of the IEE Benevolent Fund, a separate charity organisation that also participates in the defined benefit scheme.<br><br> The pension cost relating to this scheme is normally assessed every three years in accordance with the advice of qualified consulting actuaries. A full actuarial valuation was carried out as at 31 March 1999 by a qualified independent actuary. The main assumptions used by the actuary were (in nominal terms) as follows: Rate of increase in pensionable salaries 4.75% Pension increases 2.75% Discount rate 5.75% Inflation assumptions 2.75% In accordance with the requirements of Financial Reporting Standard 17 the full actuarial valuation at 31 March 1999 was updated by Hymans Robertson,Consulting Actuaries as at 31 December 2002.<br><br> The major assumptions they used for the purpose of calculating the actuarial surplus were: 2002 2001 % % Discount rate 5.50 5.75 Inflation rate 2.50 2.75 Rate of increase in salaries 4.50 4.75 Rate of increase in pensions in payment 2.50 2.75 The assets of the scheme are held with State Street Global Advisers and ISIS Managed Pension Funds Limited. The managed funds are invested in a diversified portfolio of investments comprising 80% equities and 20% bonds. The assets and liabilities of the Scheme at 31 December 2002, along with the expected rates of return on Scheme assets are as follows: 2002 2001 £000 £000 Equities 35,830 42,210 Bonds 8,958 14,070 Total market value of scheme assets 44,788 56,280 Present value of scheme liabilities (62,841) (57,203) Net pension scheme liabilities (18,053) (923) An alysis of th e am ou n t ch ar ged to oth er in com e 2002 £000 Expected return on pension scheme assets 4,211 Interest on pension scheme liabilities (3,310) Net return 901 24 An alysis of m ovem en t in deficit in th e Sch em e du r in g th e per iod £000 Deficit in the Scheme at 1 January 2002 (923) Contributions Paid 1,088 Current service cost (1,949) Past service cost - Settlement cost - Curtailment cost - Other finance income (charge) 901 Other outgoings (124) Actuarial loss (17,046) Deficit in the Scheme at 31 December 2002 (18,053) Defin ed Con tr ibu tion Sch em e During 2001, the IEE established a defined contribution stakeholder pension arrangement.<br><br> Both the IEE and employees make contributions towards the scheme. At 31 December 2002, 21 employees were members of the scheme . The total employer contributions paid to this scheme during the year amounted to £13,588 (2001: nil).<br><br> The pension charge for the year to 31 December 2002 for both schemes was £1,096,500 (2001: £1,156,000). 16 RECONCILIATION OF N ET IN COM I NG RESOURCES TO N ET CA SH OUTFLOW FROM OPERATIN G ACTIVITIES 2002 £000 2001 £000 Net in com in g/ (ou tgoin g) r esou r ces 4,782 (210) Depreciation and amortisation 859 938 Gain on sale of fixed assets (47) (20) (Increase)/ Decrease in stocks (30) (58) Decrease/ (Increase) in debtors 355 239 (Decrease)/ Increase in creditors (4,637) 2,608 (Decrease)/ Increase in amounts received in advance (739) 2,120 Decrease/ (Increase) in payments in advance 52 (374) Interest received (582) (667) Rent received (228) (234) Dividends received (1,794) (2,031) Investment management fees 142 221 Net cash (ou tflow)/ in flow fr om oper atin g activities (1,867) 2,532 17 ANALYSIS O F TH E BAL ANCES O F CA SH A S SH OW N IN TH E BAL ANCE SHEET At 1 J an u ar y 2002 Cash flow