Trustees Report & Accounts 2002-2003

he Royal Society of Edinburgh is Scotlands national academy and premier learned society, founded by Royal Charter in 1783 for the advancement of learning and useful knowledge. Today, in continuing to represent all branches of learning, with over 1,200 Fellows and Honorary and Corresponding Fellows drawn from Science, Engineering & Medicine, Arts & Letters, the Professions, Technology, Industry and Commerce, the Society embodies the spirit of the Scottish Enlightenment which shaped its original Charter. In this it provides an important Scottish forum for broadly-based interdisciplinary, as well as more specialised, activities to promote scholarship. Each year the Society enhances its position in Scotland by electing men and women of accomplishment to its Fellowship. The Society is a wholly independent charitable body governed by a Council of Fellows elected annually by the Fellowship. It is funded in part by Government grant-in-aid through the Scottish Executive Enterprise and Lifelong Learning Department and by increasing levels of additional support from private and other charitable sources, which enable it to promote an expanded range of activities.

The Society undertakes a diverse range of activities and will continue to: Award Research Fellowships, Scholarships and Prizes to promote learning in Scotland Promote the dissemination of scientific knowledge by publishing learned journals Organise interdisciplinary meetings and specialist symposia Promote and support activities aimed at increasing the public understanding of science, engineering and technology Reinforce its links with industry and commerce in Scotland and work to encourage closer relationships between that sector and academia Develop a range of activities which will increase its links with young people Provide an independent forum in Scotland for the informed discussion and consideration of matters affecting the well-being of the nation Advise Government and other bodies on relevant policy issues affecting Scotland Develop new initiatives in line with its Charter, within Europe and elsewhere, as well as in Scotland

COUNCIL OF THE SOCIETY 1999-2000

The Trustees are the Council Members elected during the financial year
President Sir William STEWART Vice-Presidents Sir James ARMOUR CBE Professor R J DONOVAN The Rt Hon Lord ROSS PC General Secretary Professor P N WILSON CBE Treasurer Sir Laurence HUNTER CBE Curator Professor M D MCLEOD Fellowship Secretary Professor J D M H LAVER CBE Programme Convener Professor J S BECK Research Awards Convener Professor J R COGGINS International Committee Convener Principal A MILLER CBE Youth Programme Convener Dr L S D GLASSER MBE

SecretariestoMeetings
Mr I R GUILD CBE Professor A C WALKER Councillors Professor D J BREEZE Professor J C BROWN Dr C H DONALDSON Professor C P DOWNES Professor C M DUFFUS Professor A R FORRESTER OBE Professor R A KENNEDY Professor C A LODDER Professor R G L MCCRONE CB Professor M PEAKER Sir Lewis ROBERTSON CBE Executive Secretary Dr W DUNCAN The Society is registered in Scotland as Scottish Charity No. SCO00470 Inland Revenue Claim Board Reference CR 18102

Contents
Council of the Society 2002 03 ........................................................ 2 Trustees Report ................................................................................... 3

Auditors Report .................................................................................. 9

Accounts Balance Sheet ........................................................................ 10 Statement of Financial Activities (incorporating Income and Expenditure account)................ 11 Cash Flow Statement .............................................................. 12 Notes to the Financial Statements ..................................... 13 28

COUNCIL OF THE SOCIETY 2002 2003

The Trustees are the Council Members elected during the financial year
President Lord SUTHERLAND of HOUNDWOOD KT (from November 2002) Sir William STEWART (until October 2002) Vice-Presidents The Rt Hon Lord ROSS PC (until October 2002) Sir David CARTER Professor A C WALKER Professor R G L MCCRONE CB (from November 2002) General Secretary Professor A MILLER CBE Treasurer Sir Laurence HUNTER CBE Curator Professor M D MCLEOD (until October 2002) Dr B E MOON (from November 2002) Fellowship Secretary Professor J D M H LAVER, CBE (until October 2002) Professor C C BIRD CBE (from November 2002) Research Awards Convener Professor J R COGGINS (until October 2002) Professor D H SAXON (from November 2002) International Committee Convener Lord WILSON of TILLYORN KT GCMG (until October 2002) Professor R M MACKIE CBE (from November 2002) Programme Convener Professor J S BECK Young Peoples Programme Convener Dr L S D GLASSER MBE (until October 2002) Professor C A TICKLE (from November 2002) Secretaries to Meetings Professor C M DUFFUS Professor D J BREEZE Councillors Professor M PEAKER (until October 2002) Professor C KUO Professor J F MCCLELLAND CBE Mr E CUNNINGHAM CBE Professor E B LANE Professor R G M MORRIS Dr W S NIMMO Professor P F SHARP Professor I H STEVENSON Professor R G L MCCRONE, CB (until October 2002) Professor D H SAXON (until October 2002) Lord SUTHERLAND of HOUNDWOOD KT (until October 2002) Lord WILSON of TILLYORN KT GCMG (from November 2002) Sir Alan LANGLANDS (from November 2002) Dr I P SWORD CBE (from November 2002) Executive Secretary Dr W DUNCAN The Society is registered in Scotland as Scottish Charity No. SCO00470 Inland Revenue Claim Board Reference CR 18102

TRUSTEES REPORT
The Council of the Society as Trustees of the Society present their report for the financial year ended 31 March 2003. proportion of the targeted return for the year subject to no more than 2% of capital value being drawn out of capital. This has not yet been drawn down. The income targets for the year have been met and the total return values have outperformed the average charity index and the UK market. Representatives of the Investment Committee meet annually with the investment managers to discuss their compliance with the constraints set by the Committee and risk environment. In the year under review no compliance issues arose which required to be reported to the Committee.

Statement of Councils responsibilities

Under the Laws of the Society, the Council has the responsibility to manage all matters concerning the affairs of the Society. The Treasurer, a member of the Council, has a duty under the Laws of the Society to present to the Fellows at the Statutory Meeting the Accounts for the preceding financial year to 31 March. Under Charities legislation, the Council is required to prepare accounts for each financial year which give a true and fair view of the state of affairs of the Society at 31 March and of its financial activities during the year then ended. In preparing these accounts, the Council should select suitable accounting policies and apply them consistently make judgements and estimates that are reasonable and prudent ensure that the recommendations of the Statement of Recommended Practice (Accounting by Charities) have been followed prepare the accounts on a going concern basis unless it is inappropriate to assume the Society will continue its activities.

Operating policies - grant making

The RSE makes grants to individuals in higher education institutions in support of research activities in the categories of postdoctoral research Fellowships, support research Fellowships, post graduate studentships, undergraduate vacation scholarships and Enterprise fellowships. Each of these categories is specifically funded from various sources including the RSEs restricted funds. The basis of eligibility and selection varies according to the detailed scheme regulations, which are published on the RSEs Web site (www.royalsoced.org.uk). Grants are also made in support of research activities of Fellows of the RSE including support for travel connected with research or scholarship, small scale specialist meetings, to assist research visitors to Scotland to undertake collaborative research work with a Fellow, to assist a visiting lecturer to come to Scotland to assist research collaboration between two institutions in Scotland or between universities and industry and to assist in the publication of books written by Fellows. These grants are funded by the RSE designated Grants Fund. The Grants Committee is responsible for making awards in accordance with the detailed rules set out by the Council of the Society for the disbursement of the Grants Fund. Details of committee membership are to be found in the Societys annual directory and on its website.

The Council has a responsibility for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Society and which enable it to comply with the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 and the Charities Accounts (Scotland) Regulations 1992. It has general responsibility for taking such steps as are reasonably open to it to safeguard the assets of the charity and to prevent and detect fraud and other irregularities.

Investment powers and policy

The Council has power under the Laws to control the investment of the Funds of the Society. The management of the investments is carried out by Speirs & Jeffrey & Co on a discretionary basis. The objectives set by the Council of the RSE are first to stabilise a sufficient level of income to meet the target set annually by Council and thereafter to invest for capital growth potential. The Council has delegated the detailed monitoring of performance to the Investment Committee, which makes comparisons against a composite benchmark reflecting the mix of assets held and the WM Median index. As a consequence of the restriction being placed on the total return available from the portfolio by the high income requirement, the Council has agreed in principle to realise part of the overall capital gain to make up a

Reserves policy and funds

The Society holds a number of restricted funds resulting from bequests for particular purposes, details of which are set out in note 2c) to the financial statements. The Council has also created designated funds, where the Society has set aside sums from its unrestricted funds, the purposes of which are set out in note 2b) to the financial statements. The General Fund represents the balance of unrestricted funds arising from past operating results, which are not invested in fixed assets or designated for a specific purpose. The Council has examined the requirement for free reserves, and concluded that whilst the present level of

TRUSTEES REPORT
reserves gives adequate working capital for core costs that it would be desirable to have a General Fund reserve in the range of three to six months expenditure on central costs. They have also concluded that the Society should maintain a development fund to give flexibility to respond to new initiatives on a timely basis without the need for specific fundraising. agreements with China, Taiwan and Poland. Closer links were established with other leading European Academies, particularly in Scandinavia. The reports of the Inquiries into Infectious Salmon Anaemia, and Foot and Mouth Disease in Scotland, were well received by the communities affected by the issues involved, as well as by the media and representatives of Government and official organisations. The Council was saddened to learn of the death of its Patron for over 50 years Her Majesty, Queen Elizabeth The Queen Mother, and was represented by the General Secretary at her funeral in Westminster Abbey on 9 April 2002. Research Awards and Prizes The Society prides itself in supporting research across a broad range of disciplines, and recognises research excellence through its fellowships, prizes and prize lectureships. Research awards are funded by several donor organisations and the Society is immensely grateful for their generous support. We were delighted that, as part of the Societys fundraising campaign, The Gannochy Trust will provide funding of 500,000 for an innovation award to be presented annually over the next five years, with the winner receiving a 50,000 cash prize and gold medal. In 2002-2003, the Society awarded thirteen Enterprise Fellowships, one PPARC Enterprise Fellowship, one BP Fellowship, two Lloyds TSB Foundation for Scotland Personal Fellowships and four Studentships. With the additional funding from the Scottish Executive Enterprise and Lifelong Learning Department now in place, the Society was also able to award a larger number of Personal and Support Fellowships, awarding two Personal Fellowships and three Support Fellowships. The first of the new Teaching Fellowships were awarded. These Fellowships are for science, engineering, technology and careers teachers in Scottish secondary schools and provide the opportunity to spend up to three months away from teaching duties whilst in an industrial, research or business environment; funding for a replacement teacher is provided. The RSE awarded a number of Prizes during the year. The third round of Royal Medals for outstanding achievement were presented by HRH The Princess Royal, HonFRSE, at a Jubilee dinner in the Signet Library on 3 October 2002 to: Professor Sir Alfred Cuschieri FRSE, Professor John Mallard OBE FRSE and Professor Sir Alan Peacock DSC FBA FRSE. The James Scott Prize Lectureship, on the fundamental concepts of natural philosophy, was awarded to Professor Sir Michael Berry FRS; the BP Prize Lectureship in the humanities, to Dr Colin Kidd; the Makdougall-Brisbane Prize for distinction in the promotion of scientific research, to Dr Dario Alessi FRSE and the Neill Medal for an outstanding publication in natural history, to Professor Philip Corbet FRSE.

Risk management
The Treasurers Committee remit includes examining the major risks faced by the Society and formalising, and extending where necessary, existing systems established to monitor and control these risks to mitigate any impact that they may have on the Society. The Council believes that the existing systems and the structure of decision taking and reporting through Business Committee and Council continues to provide assurance that risks are carefully managed.

Review of the year

Overview Sir William Stewart handed over the Presidency of the Society to Lord Sutherland of Houndwood at the Annual Statutory Meeting in October 2002. He greatly increased the Societys public profile thanks to his championship of a more outward-looking, widely-disseminated newsletter - ReSourcE. The Societys reputation for promotion of excellence was much increased, with expansion of the Research Awards programme, which is supported by a wide range of donor organisations, that realise the Society can help deliver their objectives. The success of the Enterprise Fellowships scheme, developed with Scottish Enterprise, led to this being expanded considerably in scope, with 80 new Fellowships being created during the next five years. The highly successful fundraising campaign reached its target early in 2003. There were several strands to the campaign, including an Appeal to Fellows which will produce 400,000, and an award of 500,000 from The Gannochy Trust to fund a major new award for innovation in Scotland. The Scottish Science Advisory Committee was appointed by Council. It first met at the Societys rooms in May 2002 in the presence of the newly-appointed Minister for Science, Iain Gray, who was attending his first official engagement. This independent Committee will provide strategic advice to the Scottish Executive on science priorities, and is part of the implementation of the Science Strategy for Scotland. The Committee is housed in its own separate offices in the RSEs Rooms, and is chaired by Professor Wilson Sibbett CBE FRS FRSE. The international profile of the Society has developed considerably, with implementation of the exchange

TRUSTEES REPORT
On behalf of the Scottish Executive, the Society administered a Science in the Community Award for organisations which had provided science education to the public and schools and had been actively involved in encouraging the public understanding of science. This was presented at the Executives Science 20:20 Conference in March 2003 to a joint team from NESciE and SESEF (Natural Environmental Science Education and Scottish Earth Science Education Forum) for their work in communicating earth science to the public. The runner up was the Glasgow Science Centre for its project GSC in the Community. Events The Society has again organised a wide range of events, for both the specialist and general public, providing a forum for informed debate on issues of national and international importance. They have covered a variety of themes and have involved an extensive range of speakers from throughout the UK and around the world, including politicians, industrialists, academics and other key public figures. Attendance has been good, with the theatre frequently being filled to capacity. The quality of events remains extremely high, with positive general feedback from audiences. Examples of successful events held during the year are The Artful Use of Light - Bicentenary of the Birth of David Octavius Hill, a Joint Conference with the Scottish Society for the History of Photography; Science, Society and Government, by Professor Sir David King, Government Chief Scientific Advisor; and Memory: Psychological Processes and Clinical Implications, a joint international Conference with the Caledonian Research Foundation. Other notable events were A New Russian Revolution Partnership with NATO, a lecture by The Rt. Hon Lord Robertson of Port Ellen, Secretary General of NATO, as part of the annual Edinburgh Lectures series, and a commemorative lecture, organised jointly with the British Academy and held in London on precisely the 400th anniversary of the Union of the Crowns, and given by Dr Jenny Wormald, St Hildas College, Oxford, entitled Oh, Brave New World? The Union of England and Scotland in 1603. The Society has continued to strengthen the links between industry and academia. One particular highlight was a half-day Conference entitled Managing Intellectual Property in Scottish Higher Education at the RSE on 28 June 2002, supported by the RSE, Scottish Enterprise, SHEFC and Universities Scotland. Links with Young People Yet again it has been a busy year, with activities taking place all over Scotland, many of them so popular that they were oversubscribed. A Discussion Forum (supported by the Darwin Trust of Edinburgh) on the issues involved in Cloning was held at the University of Stirling in June 2002. Students from schools in Stirling, Falkirk, Clackmannanshire and Fife heard from experts, from the Roslin Institute and the University of Edinburgh, about the potential benefits and drawbacks of the technology, as well as the ethical aspects. The results of the forum were compiled into a report published by the Society, and sent to key decision-making bodies. A week-long, non-residential Summer Camp (supported by Shell Expro), held during the 2002 summer holidays at Satrosphere in Aberdeen, was very popular with students. The theme for the week was Waste and the Environment, with the highlight being a falconry display at the Shanks Landfill site where birds of prey are used to discourage seagulls, pigeons and other vermin. Schools Lectures, which aim to enthuse secondary school pupils about science, engineering and technology, were held throughout Scotland, at locations ranging from the Isle of Skye to Tranent. Startup Science Masterclasses at the Universities of Dundee, St Andrews, Glasgow, Heriot-Watt, and Aberdeen/ Satrosphere have continued to be a success despite some disruption to use of venues out of hours because of the firefighters dispute. The long-running Maths Masterclasses for primary school pupils, have expanded to include a new set at the University of Dundee and the Physics Masterclasses, run in conjunction with the University of Glasgow, have also become well-established. The Christmas Lectures were given by BBC broadcast meteorologist, Heather Reid, at Lochaber High School in Fort William. Her talks, to students from as far afield as Inverness, and to the general public, gave a fascinating insight into the science and technology behind weather forecasting. The public lecture attracted one of the largest audiences for many years. The RSE Roadshow (supported by the Institute of Electrical Engineers and Science 03) was held as part of the Science 03 festival at Wick and Thurso. There were interactive maths and earth sciences workshops for local primary schools, as well as the entertaining forensic science talk Death Drugs and Dynamite! for secondary students and the general public. Evidence and Advice In fulfilling its role as a provider of expert evidence and advice to Parliament and Government, the Society responded to 34 requests for comment in the year 20022003. Topics addressed included: The Scientific Response to Terrorism; A Draft Strategic Framework for Aquaculture; A Review of Research Assessment and Science; and The Regional Development Agencies. The Society also instigated independent proactive inquiries. In June 2002 a Working Party, chaired by Professor Sir Roderick MacSween FRSE, reported on The

TRUSTEES REPORT
Scientific Issues Surrounding the Control of Infectious Salmon Anaemia (ISA) in Scotland. This reviewed the science behind legislation governing the control of ISA. The report of the Foot and Mouth Working Party, Inquiry into Foot and Mouth Disease in Scotland, which was endorsed by Council, was published in July 2002. This Working Party, chaired by Professor Ian Cunningham CBE FRSE, was charged with investigating the outbreak, spread and control of Foot and Mouth Disease in Scotland during the 2001 epidemic, as well as its impact on the rural and tourism economies of Scotland. Finally, in February 2003, Council gave approval for an independent RSE Inquiry into the current crisis in the Scottish Fishing Industry. International Activities International activities have continued to expand significantly, stimulated by Devolution. A Society delegation, led by the then President, Sir William Stewart FRS FRSE and Sir David Carter FRSE, Vice-President, participated in a high-profile event in Sweden in October 2002 entitled Realising the Potential of Life-Sciences and Biotechnology, also attended by Enterprise Minister Iain Gray. In his speech, the Minister announced additional funding from the Scottish Executive for the Society, including, for the first time, funding for international activities. In October 2002, European Research Commissioner, Philippe Busquin, attended the Annual Statutory Meeting and addressed a capacity audience - in French about Research in Europe with particular emphasis on The EU Framework Programme and The European Research Area. During the year, Officers received a delegation from the Polish Academy of Sciences and signed a Memorandum of Understanding with them. The Taiwan Exchange Programme was launched in late 2002, following a visit in October by the Vice President of the National Science Council, Professor Ching-Jyh Shieh. In May, RSE International Officer Graeme Herbert represented the Society at a Co-operation Conference, held by the Chinese Academy of Sciences (CAS) in Beijing, that brought together CAS and its Western European partners. Representatives from the Royal Society and sister European academies and scientific institutions in Finland, France, Germany, Italy and the Netherlands also attended. The Society is now a member of ALLEA, the All European Academies Network. Publications Journals: six issues of Proceedings A and two of Transactions, one of which was a double issue were published during the year. A steady rate of submissions was maintained for both journals. Two new publications, the Annual Directory and the Review of the Session, were introduced in 2002 to replace the Yearbook. The Directory is published in November/ December and the Review in the spring. Separate arrangements for the publication of Fellows obituaries are in hand. In addition to the regular publications detailed above, reports of the 2003 RSE/RAE Joint Lecture, I, Cyborg, and the RSEs part in Scotland in Sweden in October 2002, and of the independent inquiries into Foot and Mouth and ISA were also published. ReSourcE was published twice, in Spring 2002 and Winter 2002. The response to this new, more appealing format has been very positive indeed. Fellowship In March 2003, the Society elected 55 Ordinary Fellows, two Corresponding Fellows and four Honorary Fellows. The average age at election of the Ordinary Fellows was 52.8 years. Ten of the Ordinary Fellows were female and four Ordinary Fellows were under 40 at election. Currently (June 2003) the Fellowship consists of 69 Honorary Fellows, 16 Corresponding Fellows and 1243 Ordinary Fellows. 34% of the Ordinary Fellowship cover disciplines in the Life Sciences, 38% in Physical, Engineering and Informatic Sciences, 19% in Arts and Humanities and 9% in Economics, Business and Administration. The majority (76.9%) of Ordinary Fellows are resident in Scotland, 17.4% in England, 5.1% overseas and 0.6% either in Wales, Northern Ireland or Eire. Staffing Matters The Scottish Science Advisory Committee began operating from the Societys Rooms in April 2002, with two new members of staff, Dr Avril Davidson, Head of Secretariat and Tracy Rickard, PA/Administrator. Duncan Welsh joined the staff in June 2002, originally on a temporary contract. He was appointed as Events Officer in March 2003. The growth of Research Fellowship activities led to the appointment of Jenny Liddell, as Research Awards Co-ordinator, in July 2002. Michael White started in August 2002 on secondment from the British Council to work with Graeme Herbert (on secondment from the Scottish Executive) running the rapidly expanding International Programme. Paulette Hughes receptionist - returned to Australia in December 2002 and was replaced in January 2003 by Cathy Crawford. Two temporary members of staff, Beth Owens, who supported the Foot and Mouth Inquiry, and Kirsty Black, who helped run an event on GM Gene Flow in January 2003, also provided invaluable support during the year.

TRUSTEES REPORT
David Murray, Accounts Administrator for 16 years, since leaving the Civil Service, left at the end of March 2003. Sadly, he was not to enjoy a long retirement as he died peacefully in July 2003. Stuart Armstrong, the Societys freelance Fundraising Consultant since January 2001, completed his contract at end of March 2003. is affected further by reducing tax credits. The share of investment income credited to the General Fund was increased by approximately 25,000 as a result of the earlier decision by Council to re-allocate the income from the Grants Fund for the time being. The total resources expended of 2.43 million increased by 17% over the previous year with the majority of the increase coming from increased expenditure on research awards and the full year expenditure of the Scottish Science Advisory Committee. The category, Cost of generating funds, includes both the direct fundraising costs and an allocation of general overhead in proportion to overall staff time spent in continuing the successful Appeal to Fellows and developing new initiatives and relationships with the corporate sector and charitable trusts. It is pleasing to note that the cost of generating these funds declined by 23% to 84,000, reflecting the up front costs normally associated with a fundraising campaign, and is less than 3.5% of incoming resources. Grants payable of 1.31 million (2002: 1.09m), which include the allocations made by the Grants Committee and the promotion of research by awards of Research Fellowships and studentships, have increased by over 19%. This reflects the full year impact of additional Fellowships awarded from increased funding by the Scottish Executive and additional Enterprise Fellowships funded by Scottish Enterprise. Expenditure is incurred for the first time from the new grant awarded in August 2001 by the Lloyds TSB Foundation for Scotland. Expenditure on Activities rose overall by 28% from 626,000 to 802,000. This increase reflects the full cost of the Scottish Science Advisory Committee at 150,000 per annum and increased levels of advice and comment including the major Foot & Mouth Disease Inquiry. Expenditure on International links rose significantly, indeed nearly a four-fold increase, partly through the initial stages of exchange research fellowships, and the cost of the symposium organised for the Scottish Executives Scotland in Sweden event held in Stockholm in November 2002. The Management and Administration costs, including building depreciation and non-routine expenditure on the buildings and central publicity expenditure, decreased from 241,000 to 229,000, representing approximately 9% (2002: 12%) of income. This decrease was largely due to one-off buildings expenditure charged in the previous year to the Buildings Maintenance Fund. Transfers from Designated Funds to the General Fund of a net 94,000 represent the release from the Capital Asset Reserve of a total of 101,000 to match the write down of buildings and the capital repayment of the loan to the Foundation, net of a transfer of 7,000 to the Staff Development fund.

Financial review
Result for the year The year just ended continued to reflect the adverse impact of the loss of rental in the Foundation, with the net incoming resources or revenue surplus of 14,000 in the Society being achieved without the benefit of interest due on its loan to the Foundation. Pleasingly, the General Fund operating deficit of 148,000 included in this result was both less than last year and rather better than the original budget projection. The Designated Funds showed a surplus of 167,000 due to the Appeal receipts in cash in the year of 183,000; the Restricted Funds had a deficit of 5,000 as a result of the effect of cyclical expenditure and increased investment management costs. However, this positive revenue result is overshadowed by the decline in capital value of the stock market investments, which resulted in an overall realised deficit for the year of 337,000 with a further unrealised loss on investments of 164,000. Although the decision to switch investment managers referred to below was taken on the basis of the cost of the service and not past performance, the opportunity was taken to realign the portfolio to be more risk averse. The year 2002/2003: Income and Expenditure Total incoming resources at 2.44 million have increased by 25% over the previous year. The new category Donations and grants at 919,000 shows an increase of 38% over last year, mainly as a result of Appeal receipts and an increased grant from Scottish Executive for the Scottish Science Advisory Committee. This category also includes the value to us of the greatly appreciated secondments of Graeme Herbert from the Scottish Executive and of Michael White from British Council Scotland. Income from Activities has increased by 19% to 1.41m, arising from the increase in support for research awards. The increase in international and meetings income was offset by decreased income in other categories. The category Investment income remained static as a result of the continuing waiver of interest due from the RSE Scotland Foundation, despite an increase in interest received due to higher cash balances. Dividend income from the investments managed for part of the year by Stewart Ivory and in the last quarter by Speirs & Jeffrey, held up well although this may not continue as the total

TRUSTEES REPORT
Balance Sheet The overall decline in net assets for the year amounts to 7%, almost all of which arises from the movements on investments. Investment values declined by 529,000 or 23% in the period, against a background of difficult stockmarket conditions. Much of this loss was realised in the final quarter of the year as the decision to move investment advisers was implemented. It was decided that the ongoing fee-based cost of a fund manager was not justified for a fairly stable defensively managed portfolio such as ours, in comparison to the costs of a stockbrokermanaged portfolio where costs are based on transactions. During the last quarter of the financial year this switch took place and Speirs & Jeffrey carried out some realignment of the portfolio, increasing the overall level of fixed interest stocks and reducing the risk by moving from corporate bonds to government stocks. The RSE Scotland Foundation continued to make the capital payment of 46,800 on its loan despite the waiver of interest and this amount was applied to the General Fund to maintain its (small) surplus. The waiver of interest was necessary to assist the Foundation recover from its deficit of net assets. The Foundation continued to suffer the loss of rental income for part of the year ended 31 March 2003, because although the new tenant, Lakeland Limited, took possession of the unit at the end of May 2002, the rental only became payable from October 2002. Net current assets showed an increase of 50% up from 258,000 to 390,000, arising from the improvement in net cash balances and money market deposits; these include both the Appeal receipts and grants received in advance held over as deferred income until the conditions for use are met. The 2001 Appeal Fund has been redesignated the Development Fund but will continue to receive the ongoing contributions from Fellows which are expected to bring the total to the target of 400,000. The receipts of 182,000 in the year are shown as designated fund receipts in the category of Donations and Grants in the Statement of Financial Activities. Fundraising The first phase of a fundraising campaign has been successfully completed. The next phase is intended to focus more on the corporate sector, which will require a different approach. A number of important steps have been taken to provide a sound basis for approaches to corporate organisations, but current economic and financial conditions suggest that this would not be a good time to launch a major initiative. Instead, a highly selective and carefully tailored strategy will be pursued as opportunities are identified. This remains an important element in the longer term outlook of the Society and its ability to sustain its expanded level of activities. Conclusion and future prospects As predicted last year, the out-turn for 2002-2003 inevitably continued to show the negative effects of the loss of rental income. To this has been added the losses on the capital account due to the continuing difficult financial situation at national and international level, and the re-positioning of the Societys investment portfolio, following the reported change in investment management. Despite this, the Society has maintained a high level of activity across the range of its programmes, aided by increased funding from a variety of sources. Somewhat against the odds, the General Fund remains just in surplus, and it will be an important objective in the next few years to rebuild this fund, which has been a very significant factor in providing reserves to offset a series of problems in recent years. The relation between the General Fund and the Designated Funds amounts set aside or earmarked by Council for specific purposes in the past will be reviewed by Council to ensure that their disposition remains relevant to the current programmes and policies of the Society. The forward budget for financial year 2003-2004 has benefited from continued refinement and formalisation of budget-setting procedures, and a balanced budget is planned, with an initial contribution to the rebuilding of the General fund. In overall terms, it is expected that 2003-2004 will see the Society turn the corner after a number of difficult years, but continuing review of the financial situation will be essential and careful management required to ensure that a balanced budget, and gradual restoration of reserves, are achievable in relation to the Societys aspirations to maintain an expanded programme of activities. This will continue to be a primary concern for the Treasurers Committee, which has proved to be extremely helpful over a critical period. My sincere thanks is due to this committee, and especially to Kate Ellis and William Duncan, for their support and advice in the past year. Signed on behalf of the Council

Laurence C Hunter Sir Laurence Hunter CBE Treasurer September 2003

Andrew Miller Professor Andrew Miller CBE General Secretary

INDEPENDENT AUDITORS REPORT TO THE COUNCIL OF THE SOCIETY

We have audited the financial statements on pages 10 to 28. This report is made solely to the Societys Trustees, as a body, in accordance with regulation 7 of The Charities Accounts (Scotland) Regulations 1992. Our audit work has been undertaken so that we might state to the Societys Trustees those matters we are required to state to them in an auditors 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 Society and the Societys Trustees as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Council and auditors The Council is responsible for preparing the Trustees Report and, as described above, the financial statements in accordance with the Laws of the Society, relevant United Kingdom legislation and accounting standards. Our responsibilities, as independent auditors, are established in the United Kingdom by statute, the Auditing Practices Board and by our professions ethical guidance. 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 Laws of the Society, the Law Reform (Miscellaneous Provisions)(Scotland) Act 1990 and the Charities Accounts (Scotland) Regulations 1992. We also report to you if, in our opinion, the Trustees Report is not consistent with the financial statements, if the Society has not kept proper accounting records, if we have not received all the information and explanations we require for our audit. Basis of audit opinion 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. It also includes an assessment of the significant estimates and judgments made by the Trustees in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Societys circumstances, 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. Opinion In our opinion the financial statements give a true and fair view of the state of the Societys affairs as at 31 March 2003 and of its incoming resources and application of resources including its income and expenditure for the year then ended and have been properly prepared in accordance with the Laws of the Society, The Law Reform (Miscellaneous Provisions) Scotland Act 1990 and the Charities Accounts (Scotland) Regulations 1992.

KPMG LLP Chartered Accountants Registered Auditor Edinburgh September 2003

BALANCE SHEET AT 31 MARCH 2003

Note No Fixed Assets Tangible fixed assets Fixed Asset Investment Investments at market value Historical Cost :1,816,974 (2002 - 2,143,957) Loan to RSE Scotland Foundation 13 14a 2,531,269 1,732,239 2,587,377 2,261,211 2003 2002

14b

2,078,368 6,341,876

2,125,176 6,973,764

Current Assets RSE Scotland Foundation current account Debtors Cash at bank and in hand Money Market and other term deposits

15

63,125) 73,000) 118,326) 501,130) 755,581)

56,063 78,862 178,019 117,295 430,239

Current Liabilities Creditors : Amounts falling due within one year Net Current Assets Net Assets Funds General Fund Designated Funds Restricted Funds 17 18 19 20 Approved by the Council on 1 September 2003 16 (365,681) 389,900 6,731,776 1,142 5,677,421 1,053,213 6,731,776 (171,399) 258,840 7,232,604 73,593 5,788,617 1,370,394 7,232,604

Laurence C Hunter Sir Laurence Hunter, CBE Treasurer

10

STATEMENT OF FINANCIAL ACTIVITIES (INCORPORATING THE INCOME AND EXPENDITURE ACCOUNT) YEAR ENDED 31 MARCH 2003
Note No General Fund Designated Funds Restricted Funds 2003 Total 2002 Total

Incoming resources Donations , grants and similar incoming resourcess Activities in furtherance of the Societys objectives Investment income Total incoming resources Resources Expended Cost of generating funds Charitable expenditure: Grants payable Activities in furtherance of the Societys objectives Buildings, management and administration Total resources expended Net incoming resources before Transfers Gains/(losses) on investment assets Realised gains Realised losses

4 5 6

530,091 206,393 29,115 765,599

182,877 23,383 206,260

206,446 1,202,183 60,060 1,468,689

919,414

665,946

1,408,576 1,185,228 112,558 107,374 2,440,548 1,958,548

7 8 9 10

79,699 8,649 600,173 224,814 913,335 (147,736)

4,558 24,391 5,675 4,590 39,214 167,046

1,277,896 195,755 1,473,651 (4,962)

84,257

108,948

1,310,936 1,096,843 801,603 229,404 626,416 241,090

2,426,200 2,073,297 14,348 (114,749)

1,073 (13,935) (12,862)

10,473 (135,964) (125,491) 41,555 (94,153) (58,598) (111,196) 5,788,617 5,677,421

17,762 (230,597) (212,835) (217,797) (99,384) (317,181) 1,370,394 1,053,213

29,308 (380,496) (351,188)

9,329 (16,507) (7,178)

Realised Surplus/(deficit) for the year Transfers between funds 18 Unrealised losses Net Movement in Funds Balance brought forward at 1 April 2002 Balance carried forward at 31 March 2003

(160,598) 94,153 (6,006) (72,451) 73,593 1,142

(336,840) (121,927) (163,988) (4,499) (500,828) (126,426) 7,232,604 7,359,030 6,731,776 7,232,604

11

CASH FLOW STATEMENT YEAR ENDED 31 MARCH 2003

2003 Reconciliation of net movement in funds to net cash outflow from operating activities Net incoming/(outgoing) resources before Transfers Appeal receipts Dividends receivable Interest receivable Interest payable Depreciation Decrease in debtors (Increase)/ decrease in RSE Scotland Foundation current account Increase in creditors Net cash outflow from operating activities Cash flow statement Net cash outflow from operating activities Appeal receipts Returns on investments and servicing of finance: Interest received Interest paid Dividends received Capital expenditure and financial investment: Purchase of tangible fixed assets: Proceeds from sale of tangible fixed assets Proceeds from sale of investments: Purchases of investments Loan to RSE Scotland Foundation Increase in cash Reconciliation of net cash flow to movement in net funds (note 25) Increase in cash in the year Net funds at beginning of year Net funds at end of year 2002

14,348 (182,877) (94,783) (13,455) 56,529 9,184 (7,062) 194,281 (23,835)

(114,749) (91,073) (92,244) (9,022) 89,505 21,591 20,752 5,335 (169,905)

(23,835) 182,877 13,794 91,123 (421) 1,101,180 (1,087,384) 46,808 324,142

(169,905) 91,073 9,582 103,419 (11,555) 80,373 (73,882) 46,808 75,913

324,142 295,314 619,456

75,913 219,401 295,314

12

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

1 Accounting basis The accounts have been drawn up to comply with the provisions of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990, the Charity Accounts (Scotland) Regulations 1992 and follow the recommendations of the revised Statement of Recommended Practice for charities (SORP) approved by the Accounting Standards Board in October 2000. The accounts have been prepared under the historical cost accounting rules as modified to include the revaluation of investments. The accounts comprise three primary financial statements:, the Statement of Financial Activities, which incorporates the Income and Expenditure Account, the Balance Sheet and the Cash Flow Statement. 2 Funds The Societys funds are classified in accordance with the definitions in the SORP into Restricted funds, where there are restrictions placed by a donor as to the use of income or capital, Designated funds, where the Council of the Society has set aside sums from its unrestricted funds for a particular purpose, and the General (unrestricted) Fund. The classifications made are as follows: a) General Fund a discretionary Fund available to Council to meet the ordinary activities of the Society. b) Designated Funds Staff restructuring fund In July 2000 Council resolved to create a Staff restructuring fund, to be used at its discretion to provide flexibility in staffing arrangements and in developing future operations. Development Appeal Fund an appeal to provide development finance to implement the Societys Corporate plan Capital Asset Reserve Fund representing the book cost of the rooms at 22-24 George Street, and 26 George Street and an allocation in respect of funding of the refurbishment of 26 George Street. Building Maintenance Fund a reserve to support the future maintenance of the fabric of the Rooms. Dr James Heggie Fund income from this fund supports the Societys activities with young people. Grants Fund a fund created by contributions and legacies from Fellows and used to provide grants to support research activities of Fellows. C H Kemball Fund income from this fund is used to provide hospitality for distinguished visitors from other learned societies and academies. c) Restricted Funds Robert Cormack Bequest to promote astronomical knowledge and research in Scotland Lessells Trust to fund scholarships abroad for engineers Auber Bequest to fund research in Scotland and England by naturalised British Citizens over 60 years of age Prizes Fund to fund various prizes Dryerre Fund to fund postgraduate research in medical or veterinary physiology Piazzi Smyth Legacy Fund to fund high altitude astronomical research CASS Fund to fund academic/industrial liaison Retailing Seminar Fund to fund a programme of seminars on retailing

13

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

3 Accounting Policies Incoming resources a) Donations grants and similar incoming resources Subscriptions are accounted for on the basis of the subscription year to October 2003 and include income tax recoverable on subscriptions paid under Gift Aid. Revenue grants are credited to income in the period in which the Society becomes entitled to the resources. Donations of a recurring nature from other charitable foundations and one-off gifts and legacies included in other income are taken to revenue in the period to which they relate. b) Incoming resources for charitable activities Incoming resources for activities are accounted for on an accruals basis. Publication income receivable in foreign currencies is converted into sterling at rates of exchange ruling at the date of receipt. c) Investment income Interest and dividends are accounted for gross in the year in which they are receivable, tax deducted being recovered or recoverable from the Inland Revenue. Resources expended d) Expenditure and support costs All resources expended are included on an accruals basis and where directly attributable allocated to the relevant functional category. Central costs, which include support costs, are allocated to categories of resource expended in proportion to staff salaries e) Depreciation and repairs The Societys principal assets are its buildings in George Street, Edinburgh. Under FRS 15 the Society depreciates the buildings assuming a 50 year life. It is the policy of the Council to maintain the buildings to a high standard and a provision is made for upkeep of the buildings through a designation from General Fund. Any permanent diminutions in value are reflected in the Statement of Financial Activities. Costs of repairs and maintenance are charged against revenue. Minor equipment is written off to Income & Expenditure Account in the year of purchase. Computer and audio-visual equipment is depreciated on a straight-line basis over four years. f) Investments Investments are stated at their market value at the balance sheet date. Unrealised surpluses on revaluation are credited to funds in accordance with their proportionate share of the investment portfolio. g) Pensions The Society participates in defined benefit pension schemes which are externally funded. The cost of providing pensions is allocated over employees working lives with the Society and the Foundation and is included in staff costs.

14

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

2003 4a Donations, grants and similar incoming resources Fellows subscriptions Scottish Executive Grant Scottish Executive Grant re Scottish Science Advisory Committee Release of deferred income Other grants and donations Gifts in kind - (value of secondment of staff) Appeal receipts 4b 133,422 328,000 150,000 75,240 49,875 182,877 919,414 4b Subscriptions Contributions from Fellows Admission Fees Annual Subscriptions Income tax recoverable under gift aid 2002 105,121 328,000 55,519 6,413 43,070 36,750 91,073 665,946

24a 4c

13,200 103,158 17,064 133,422

5,400 89,314 10,407 105,121

4c

Other grants and donations Fleck additional receipt Lessells Trust additional receipt Legacy Donations for Foot & Mouth Disease Inquiry Sales of ties (net) Sales of sundry publications Other income

3,207 12,291 13,563 44,155 285 584 1,155 75,240

2,420 12,939 20,800 4,995 153 538 1,225 43,070

In addition to the donations set out above the Society receives donations made specifically in support of meetings which are included in meetings income (see note 24c) 5a Activities in furtherance of charitable objects incoming resources Promotion of research Meetings Educational activities Academic / Industry links International activities 5b 2003 1,202,183 133,230 41,700 31,463 1,408,576 5b Promotion of research receipts Scottish Executive grant Research fellowships Teaching fellowships British Petroleum Research Fellowships Trust Caledonian Research Foundation Scottish Enterprise PPARC Enterprise Fellowships Lloyds TSB Foundation for Scotland 2002 1,002,782 113,166 27,527 33,252 8,501 1,185,228

476,086 24,059 148,497 27,863 312,830 25,840 187,008 1,202,183

379,228 6,500 168,543 14,082 216,714 83,586 134,129 1,002,782

15

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

2003 6 Investment income Dividends (Net) Income tax recoverable on dividend income Interest arising on deposits (Gross) Interest receivable from RSE Scotland Foundation (note 23) 94,783 4,319 13,456 112,558 2002 92,245 6,107 9,022 107,374

Cost of generating funds Fundraising costs Proportion of central costs (note 11)

51,078 33,179 84,257

70,348 38,600 108,948

Grants payable Promotion of Research Prizes and Grants

8b

1,273,657 37,279 1,310,936

1,060,125 36,718 1,096,843

8b

Promotion of Research Direct Costs : Restricted Funds SEELLD Research Fellowships - Support SEELLD Research Fellowships - Personal SEELLD Teaching Fellowships BP Research Fellowships CRF European Fellowships Enterprise Fellowships (Scottish Enterprise) Enterprise Fellowships (PPARC) Lloyds TSB Foundation for Scotland Fellowships Robert Cormack Bequest John Moyes Lessells Scholarship Auber Bequest Awards Henry Dryerre Scholarship D S McLagan Travel Grant Direct costs : General Funds Library Proportion of central costs (note 11)

77,629 344,920 18,144 440,693 137,172 22,297 285,059 20,090 170,733 6,804 32,249 3,100 1,517 1,119,714 454 1,120,168 153,489 1,273,657

61,292 276,350 730 338,373 154,985 10,422 200,422 75,308 119,129 5,025 24,224 11,076 588 939,552 475 940,027 120,098 1,060,125

9a

Charitable activities Publications Meetings Educational activities Academic / Industry links Fellowships Office International activities Evidence Advice and Comment Scottish Science Advisory Committee

9b

22,152 282,243 78,815 9,796 45,386 119,103 94,108 150,000 801,603

38,209 225,360 56,793 49,219 50,204 50,425 96,869 59,337 626,416

16

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

2003 9b Publications Editorial & management costs of journals Support of journals published by RSE Scotland Foundation Other publications Proportion of central costs (note 11) 19,290 249 44 19,583 2,569 22,152 2002 11,700 16,930 2,431 31,061 7,148 38,209

The RSE Scotland Foundation became publisher of the Societys journals and Year Book with effect from the 1997 volumes. The Society retains copyright and incurs editorial costs in respect of these publications. The Society has made a donation to the RSE Scotland Foundation equivalent to the Foundations net deficit on publications. 10 Buildings, Management and administration Buildings and Maintenance 22-24 George Street - depreciation 26 George Street - depreciation 22-24 George Street - expenditure from designated funds Management and secretariat Publicity 2003 9,238 22,061 32,949 4,457 68,705 79,780 80,919 229,404 2002 5,568 22,061 32,949 24,046 84,624 76,105 80,361 241,090

11 Central Costs Total Payroll: Less paid by Scottish Science Advisory Committee Less paid by RSE Scotland Foundation Salaries (note 12) Value of secondments Staff training, agency and recruitment costs Total staff costs Other Costs: Establishment expenses (22-24 George St) Establishment expenses (26 George St) Computer and equipment costs Communication, stationery and printing costs Travel and subsistence, hospitality Miscellaneous Professional fees Audit fee Depreciation Total Central Costs

619,061 (59,347) (90,529) 469,185 49,875 25,610 544,670

487,539 (82,708) 404,831 36,750 37,982 479,563

23,930 105,545 4,432 55,906 21,683 2,066 18,562 7,344 1,519 240,987 785,657

30,951 109,811 4,970 44,797 23,185 2,118 11,710 8,519 34,495 270,556 750,119

17

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

11 Central Costs (Continued) In addition to direct costs incurred, central costs have been apportioned to expenditure on functional activities, as follows: General Fund Cost of generating funds Fundraising 33,179 Support costs - charitable activities Publications 2,569 Meetings 167,864 Educational Activities 43,583 Academic/Industry links 9,384 Fellowships Office 45,386 International links 92,062 Evidence, advice & comment 66,220 Scottish Science Advisory Committee Promotion of Research Prizes and Grants 2,358 Management and administration Buildings and Maintenance 4,546 Management and Secretariat 63,246 Publicity 79,780 610,177 Designated Funds Restricted Funds 2003 Total 33,179 2,569 167,864 48,113 9,384 45,386 92,062 66,220 153,489 15,127 9,238 63,246 79,780 785,657 2002 Total 38,600 7,149 145,257 49,537 39,033 50,204 41,923 92,330 16,591 120,098 11,500 5,568 76,105 56,224 750,119

4,530

153,489 12,769 4,692

21,991

153,489

Total 2003 12 Employees Wages and salaries Social Security Costs Other pension costs (note 21) 526,306 33,480 59,275 619,061

Paid by SSAC 2003 50,622 3,963 4,762 59,347

Paid by Foundation 2003 76,938 4,774 8,817 90,529

Paid by Society 2003 398,746 24,743 45,696 469,185

Paid by Society 2002 343,175 21,356 40,300 404,831

The average number of employees of the Society including those employed under joint contracts with the RSE Scotland Foundation during the year was 25(2002 20). Of these two were employed in respect of the Scottish Science Advisory Committee.

18

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

22-24 George St. 13 Tangible Fixed Assets Cost At 1 April 2002 Additions Disposals At 31 March 2003 Depreciation At 1 April 2002 Charge for the year At 31 March 2003 Net Book Value At 31 March 2003 At 31 March 2002 Value at 1 April 2002 14a Fixed Asset Investments Managed Funds 184,602 Fixed interest 645,124 UK equities 1,169,893 Overseas equities (managed funds) 204,934 Cash deposits 56,658 2,261,211 26 George St. Equipment Computer Total

1,103,038 1,103,038

1,647,468 1,647,468

67,927 421 68,348

40,036 40,036

2,858,469 421 2,858,890

66,183 22,061 88,244 1,014,794 1,036,855 Investments made at cost

98,847 32,949 131,796 1,515,672 1,548,621 Proceeds on sale of Investments

67,631 359 67,990 358 296 Gain/(loss) on sale

38,431 1,160 39,591 445 1,605 Revaluation

271,092 56,529 327,621 2,531,269 2,587,377 Market value at 31 March 2003

230,357 480,466 433,219 (1,141,190) 2,852

(78,660) (403,617) (501,159) (117,744) 1,084,532 (16,648)

(32,542) (24,428) (235,253) (58,965) (351,188)

(9,835) (27,451) (123,601) (3,101) (163,988)

293,922 670,094 743,099 25,124 1,732,239

The deficit on sale of investments measured against their historical cost was 313,187 (2002 deficit 81,747). The investment management fee of 16,648 (2002 6,490) has been deducted from the proceeds of sale of investments. 2003 14b Loan to RSE Scotland Foundation Due within one year Due after one year 46,808 2,031,560 2,078,368 2002 46,808 2,078,368 2,125,176

The Loan initially bears interest at 4% per annum, capped at the amount of rent received by the Foundation, and is repayable over the period to 30 June 2047, the expiration of the lease of 26 George Street. On 1 July 2002 Council agreed to waive the interest payment due for the year ended 31 March 2002 as no rental was received by the Foundation in that period from the ground and basement floor unit. The capital repayment for the year of 46,808 was paid at the end of the financial year as normal.

19

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

2003 15 Debtors General debtors Stock of ties Prepayments and accrued income Income Tax Recoverable 64,262 3,492 5,246 73,000 2002 40,158 3,582 1,095 34,027 78,862

16 Creditors: Amounts falling due within one year General creditors Accruals and deferred income University of Glasgow (note 19) Symposia income deferred

102,398 220,991 16,632 25,660 365,681

76,266 73,987 15,266 5,880 171,399

17 General Fund At 1 April 2002 Net movements in funds for the year from Statement of Financial Activities At 31 March 2003

73,593 (72,451) 1,142

212,683 (139,090) 73,593

20

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

Capital Asset Reserve Building Staff Development C H Kemball Grants Maintenance Restructuring Appeal Fund Fund Fund Fund Fund Dr James Heggie Fund Total

18 Designated Funds At 1 April 2002 4,710,652) Investment income -) Other income Less Direct expenditure Investment Management Fees RSE admin and staff costs Surplus/(deficit) for the year Transfers between funds building depreciation (55,010) loan repayment (46,808) from General Fund (101,818) -) -) -)

154,901) 5,422) -)

24,725 865 -

90,336 7,168 182,877

18,088) 793) -)

581,489) 208,426))5,788,617) -) 9,135)) 23,383) -) -)) 182,877)

(4,457)

-)

(11,622)

(1,145)

(17,224)

(133) (4,558) 965) 865 185,487) -) 660)

(4,281) (8,488) (24,391)

(1,535) (2,995)

(5,949) (16,041)

3,460) 167,046)

7,665 7,665 -) -) -)

(55,010) (46,808) 7,665) (94,153)

Net gains on investment assets Realised -) Unrealised -) At 31 March 2003 4,608,834)

-) 155,866)

-)

(2,809) (1,312) 14,627)

(90,311) (32,371) (125,491) (42,171) (15,115) (58,598) 424,616) 164,400)5,677,421)

33,255 275,823)

As described in note 2, the Development Appeal Fund comprises the receipts from the Appeal launched in 2001 to raise funds to finance developments in implementing the Societys Corporate Plan. In approving the budget for the year ended 31 March 2003, Council resolved that as the balance of the Grants fund was sufficient to meet current needs, the income of approximately 25,000 from the investments held by the Grants Fund should be allocated to the General Fund.

21

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

Robert Cormack Bequest 19 Restricted Funds At 1 April 2002 Investment income Other income Less Direct Expenditure Investment Management RSE Admin and staff Surplus/(deficit) for year Lessells Trust Auber Bequest Prizes Fund Dryerre Fund Others Total

112,701) 4,939)

392,818) 317,738) 17,216) 13,925) 12,291) (32,249) (2,892) (5,181) (10,815) -) (2,339) (4,191) 7,395)

75,343) 3,302)

437,531) 19,176)

34,263)1,370,394) 1,502) 60,060) 12,291) (1,600) (252) (452) (802) (49,148) (10,089) (18,076) (4,962)

(6,805) (830) (1,487) (4,183)

(5,394) (555) (994) (3,641)

(3,100) (3,221) (5,771) 7,084)

Net gain on investment assets Realised (17,504) Unrealised (8,173) At 31 March 2003 82,841)

(61,008) (49,348) (28,488) (23,043) 292,507) 252,742)

(11,701) (5,464) 54,537)

(67,953) (31,731) 344,931)

(5,321) (212,835) (2,485) (99,384) 25,655)1,053,213)

Prizes Fund comprises The Keith Fund, The Neill Fund, The Makdougall-Brisbane Fund, The GunningVictoria Fund, The James Scott Prize Fund, The Bruce-Preller Lecture Fund, The W.S. Bruce Memorial Fund, The Dr D.A. Berry Fund, The Henry Duncan Prize Lecture Fund and The BP Prize Lecture in the Humanities Fund. Others comprise the Piazzi-Smyth Legacy Fund, the Retailing Seminar Fund and the CASS Fund. The Retailing Seminars Fund arises from the donation of the surplus from an earlier series of meetings that publicised research in the retailing sector. The fund is to be used to support meetings in this area. Under the terms of the Lessells Trust the University of Glasgow is entitled to 10% of additional amounts received by the Society from the Trust. The balance included in Creditors at 31 March 2002 represents the total sum apportioned but not yet paid over to the University (note 16). Unrestricted Funds 20 Analysis of Assets between Funds Fund balances at 31 March 2003 are represented by : Tangible fixed assets 803) Investments 75,384) Loan to RSE Scotland Foundation -) Current assets 35,113) RSE Scotland Foundation current account 63,125) Deposits 36,185) Bank overdraft less cash (138,294) Current liabilities (71,174) 1,142) Designated Funds Restricted Funds 2003 Total 2002 Total

2,530,466 603,642 2,078,368

-) 1,053,213) -) 37,887) -) -) 256,620) (294,507) 1,053,213)

2,531,269) 1,732,239) 2,078,368) 73,000) 63,125) 501,130) 118,326) (365,681) 6,731,776)

2,587,377) 2,261,211) 2,125,176) 78,862) 56,063) 117,295) 178,019) (171,399) 7,232,604)

464,945 5,677,421

22

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

21 Pension Costs a) USS The Society participates in the Universities Superannuation Scheme, a defined benefit pension scheme which is externally funded and contracted out of the State Earnings-Related Pension Scheme. The assets of the Scheme are held in a separate trustee-administered fund. The fund is valued every three years by a professionally qualified independent actuary using the projected unit method, the rates of contribution payable being determined by the trustee on the advice of the actuaries. In the intervening years the actuaries review the progress of the scheme. It is not possible to identify each institutions share of the underlying assets and liabilities of the scheme and hence contributions to the scheme are accounted for as if it were a defined contribution scheme. The cost recognised within the deficit for the year is equal to the contributions payable to the scheme for the year. The latest actuarial valuation of the scheme was at 31 March 2002. The most significant assumptions, those relating to the rate of return on investments and the rates of increase in salary and pensions, are as follows: Past Service Liabilities 5% 3.7% 2.7% Future Service Liabilities 6% 3.7% 2.7%

Investment return Salary Increase Pension Increase

At the valuation date the market value of the schemes assets was 19,938 million and the value of past service liabilities was 19,776 million leaving a surplus of assets of 162 million. The value of the assets represented 101% of the benefits that had accrued to members, after allowing for expected future increases in earnings. The contribution rate payable by the Society was 14.0% of pensionable salaries. The actuary has confirmed it is appropriate to take the pension charge to be equal to the actual contribution paid in the year. b) Lothian Pension Fund The Society also participates in the Lothian Pension Fund, a defined benefit pension scheme established under local government pension fund regulations. This scheme has determined that it is possible at a cost to ascertain the share of assets and liabilities relating to individual admitted bodies. The assets of the Scheme are held in a separate trustee-administered fund. The fund is valued every three years by a professionally qualified independent actuary using the projected unit method, the rates of contribution payable being determined by the trustee on the advice of the actuaries. In the intervening years the actuaries review the progress of the scheme. The latest actuarial valuation of the scheme was at 31 March 2002. The major assumptions used by the actuary were that, over the long term, the return on the schemes assets would be 6.2% per annum, salary increases would average 4.1% per annum and present and future pensions would increase at a rate of 2.6% per annum. At the valuation date the market value of the schemes assets was 1,792 million and the value of past service liabilities was 1,866 million. The value of the assets represented 96% of the benefits that had accrued to members, after allowing for expected future increases in earnings. The contribution rate payable by the Society was 245% of employees contributions of 6% of pensionable salaries, amounting to 14.7%. The actuary has confirmed that it is appropriate to take the pension charge to be equal to the actual contribution paid during the year. Whilst the Society continues to account for pension costs in accordance with Statement of Standard Accounting Practice 24 Accounting for Pension costs, under FRS 17 Retirement benefits the following transitional disclosures are required: The valuation at 31 March 2002 has been updated by the actuary on an FRS 17 basis at 31 March 2003; the major assumptions used in this valuation were: 2003 2002 Rate of increase in salaries 4.0% 4.3% Rate of increase of pensions in payment 2.5% 2.8% Discount rate 5.4% 5.9% Inflation assumption 2.5% 2.8% The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice. 23

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

21 Pension Costs b) Lothian Pension Fund (Continued) Scheme assets The fair value of the scheme assets, which are not intended to be realised in the short term and may be subject to significant change before they are realised, and the present value of the schemes liabilities, which are derived from cash flow projections over long periods and thus inherently uncertain, were: Expected return Equities Bonds Other- Property Cash Whole scheme assets 8.0% 4.8% 6.0% 4.0% Value at 31 March 2003 000 1,029,900 125,000 153,100 37,100 1,345,100 000 199 (308) (109) Expected return 7.5% 5.5% 6.0% 4.0% Value at 31 March 2002 000 1,365,554 155,502 145,187 117,548 1,783,791 000 140 (133) 7

Of which RSE share Present value of scheme liabilities Surplus/(deficit) in the scheme Net pension (liability)/ asset

The amount of this pension deficit would have a consequential effect on reserves. The movement in the net pension asset/ liability during the year comprised: 000 Surplus at 1April 2002 7 Current service cost (39) Employer contributions 40 Net return on assets Expected return on employer assets 10 Interest on pension scheme liabilities (8) 2 Actuarial gains/ (losses) (119) Deficit at 31 March 2003 (109) If FRS 17 had been fully adopted the movements would have been recognised in arriving at net incoming resources other than the actuarial loss which would have been included in unrealised losses. c) Pension Charge The total pension charge for the year was 45,696 (2002 38,375) 22 Transactions with Council members No member of Council received any payments other than reimbursement of expenditure on travel and subsistence costs actually and necessarily incurred in carrying out their duties as Councillors and Officers. The aggregate of such reimbursement amounted to 5,893 (2002 6,401). 23 RSE Scotland Foundation RSE Scotland Foundation is a charitable trust, recognised in Scotland as Scottish charity number SCO24636. It was created in March 1996 with the object of advancing the education of the public in Scotland in science and engineering and in so doing to conserve the scientific and cultural heritage of Scotland. The President, General Secretary, Treasurer, Curator and a Vice President of the Society are ex officiis Trustees of the Foundation, which draws on the resources of the Society in carrying out its objects. The Foundation also has five nominated Trustees. The Foundation became publisher of the Societys journals under a Publications Rights Licence effective from 1 January 1997. The Foundation has also carried out work in support of the Societys involvement in the Scottish Science Trust and the implementation of the Technology Ventures Strategy. On 1 July 1997 the Society granted to the Foundation a 50 year lease over 26 George Street carrying an obligation to refurbish the building within a three year period. The Council of the Society agreed to make funding of up to 2.3 million available to the Foundation in support of the refurbishment. The agreed terms of the loan are as described in note 14 b. A waiver of interest was agreed for the years ending 2002 and 2003 to assist the Foundation in extinguishing its deficit of net assets. 24

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

23 RSE Scotland Foundation (Continued) At 31 March 2003 the financial position of the RSE Scotland Foundation was as follows: 2003 Net Liabilities Fixed assets Current assets Current liabilities RSE Current Account Loan from Royal Society of Edinburgh Other Creditors over one year:-Loan from Royal Society of Edinburgh Represented by Income and Expenditure Account 2,061,700) 58,624) (63,125) (46,808) (130,298) (2,031,560) 2002 2,060,752) 78,174) (56,063) (46,808) (127,230) (2,078,368)

(151,467)

(169,543)

The Statement of Financial Activities for the year ended 31 March 2003 was as follows: Incoming resources Donations, grants and similar incoming resources Charitable activities Publications Academic/Industry Links Licence fees Conference Facilities letting ( net ) Activities for generating funds Rental and service charges receivable Fundraising event Investment income - bank interest 2003 249) 98,470) -) 100,417) 74,343) 118,140) 33,146) 479) 425,244) 2002 16,930) 114,086) 75) 89,093) 55,814) 46,423) -) 976) 323,397)

Cost of generating funds Building management Fundraising and publicity

145,888) -) 145,888)

120,496) 350) 120,846)

Net incoming resources available for charitable application Charitable expenditure Conference facilities hire Publications Donation to RSE Development Appeal fund Management and secretariat Depreciation on leasehold improvements Interest payable Total resources expended Net incoming/(outgoing) resources and movement in funds for the year Balance brought forward Balance carried forward

279,356) 46,477) 98,718) 33,146) 38,493) 44,446) -) 261,280) 18,076) (169,543) (151,467)

202,551) 42,629) 131,017) -) 37,859) 42,742) -) 254,247) (51,696) (117,847) (169,543)

The Council of the Society has confirmed to the Trustees of the Foundation that they will continue to support the Foundation and will not call for the repayment of the current account balance in the foreseeable future. 25

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

24 Supplementary Information ; grants, donations, receipts a) Scottish Executive Grants Income Enterprise and Lifelong Learning Department Promotion of Research Scottish Science Advisory Committee Activities grant Public policy Seminars Foresight seminars International activities Other departments support for meetings GM Gene Flow Oral Health Scotland in Sweden 2003 2002

500,145 150,000 328,000 14,467 2,000 18,096 1,012,708

395,728 55,519 328,000 15,018 7,583 2,000 803,848

Allocated to Functional Activities Scottish Science Advisory Committee Meetings office Educational activities Publications office Promotion of research Evidence advice and comment International activities Management and secretariat Buildings - Establishment expenses - Maintenance

Direct Costs 150,000 20,096 249 440,693 14,467 23,930 649,435

Staff and other costs 89,874 40,335 18,374 59,452 66,220 79,780 9,238 363,273

2003 Total 150,000 109,970 40,335 18,623 500,145 66,220 14,467 79,780 23,930 9,238 1,012,708

2002 Total 55,519 69,646 40,497 37,504 395,728 92,330 76,105 30,951 5,568 803,848

The Scottish Executive provides grant-in-aid under the powers of S.23 National Heritage (Scotland) Act 1985 to meet the costs of SEELLD Research Fellows, and costs of activities including the cost of maintaining the Societys premises and a share of the Societys staff and other costs. In addition to the cash grants set out above, the Society benefited from a staff secondment from the Scottish Executive, which has been included in the accounts at its value to the Society of 36,750. Expenditure in relation to the Scottish Science Advisory Committee comprised: 2003 Total 92,225 19,689 10,536 8,174 6,214 5,243 7,919 150,000 2002 Total 16,404 28,615 500 10,000 55,519

Chairmans fee, salaries and other staff costs Establishment Office costs Travel and subsistence Committee and working groups Professional services Balance carried forward

This includes amounts paid to the Society for use of office space and services.

26

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

BP Research Fellowship Trust 24 b) Donations Income Promotion of research receipts Transferred to deferred income Meetings Income Caledonian Research Foundation Scottish Lloyds TSB Wellcome Enterprise Foundation for Trust Scotland

148,497 148,497

27,862 27,862

312,830 6,055 318,885

335,700) (148,692) -) 187,008)

12,081 12,081

Costs Promotion of research Conference Workshops RSE administration and staff costs

137,172 11,325 148,497

22,297 5,565 27,862

285,059 6,055 27,771 318,885

170,733) -) -) 16,275) 187,008)

10,109 1,972 12,081

The BP Research Fellowship Trust supports postdoctoral fellowships in Scottish HEIs. The Trustees of the Trust are the President, General Secretary and Treasurer of the Royal Society of Edinburgh. The Caledonian Research Foundation supports postdoctoral fellowships in biomedical sciences and European visiting fellowships, a prize lecture and an international conference. The Wellcome Trust sponsors a series of research workshops. The Lloyds TSB Foundation for Scotland supports postdoctoral Fellowships, postgraduate studentships and lectures and conferences to fund and disseminate research aimed at improving the quality of life for an ageing population. c) Donations in Support of Meetings The Society gratefully acknowledges all those who make donations in support of meetings. The companies, trusts and other bodies that made donations of 1,000 or more in the year ended 31 March 2003 are as follows: A & M Hearing Ltd Archibald Campbell & Harley WS Carpet Foundation Darwin Trust of Edinburgh GlaxoSmithKline Lloyds TSB Scotland NHS Education for Scotland Oticon (William Demant) Foundation, Denmark Scottish Enterprise Scottish Dental Practice-Based Research Network Scottish Society for the History of Photography Shell Expro University of Durham

25 Analysis of net funds

At 31 March 2003 118,326 501,130 619,456

Cash flows (59,693) 383,835) 324,142)

At 1 April 2002 178,019 117,295 295,314

Cash at bank Deposits

27

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2003

26 Main Activities Meetings and Education Lectures Symposia/Conferences/Seminars Exhibitions Policy Seminars Debates Workshops Technology Ventures and Foresight Seminars Young Peoples events Science Masterclasses Maths Masterclasses Schools Lectures Christmas Lectures Discussion Forum RSE Roadshow Physics Masterclasses Science Summer Camp Publications (issues) Proceedings A Transactions Directory & Review Resource (/RSE News) RSE Fellows Number of Fellows Candidates for Fellowship Research Fellowships and Scholarships Postdoctoral Research Fellows in post Support Research Fellows European Visiting Research Fellows Enterprise Fellows in post Applications for Research Fellowships Studentships appointed Prizes and Grants Royal Medals Prizes awarded Grants awarded Central Administration Submissions to Government and public agencies External events held at RSE 22 George Street 22-26 George Street 27 9 2 5 36 8 7 2 1 1 4 1 6 4 2 2 1333 249 16 3 6 10 117 4 3 4 19 34 175 17 8 2 1 3 6 35 8 10 2 1 1 4 1 6 6 1 4 1311 256 15 4 6 7 84 3 4 28 41 113 2002/03 Number 2001/02 Number

28

Professional Advisers Architects Hurd Rolland Partnership, 13 Manor Place, Edinburgh Auditors KPMG LLP Saltire Court, 20 Castle Terrace, Edinburgh Bankers Bank of Scotland plc, 38 St Andrew Square, Edinburgh Stockbrokers/Investment Advisers Speirs & Jeffery, Glasgow Solicitors Shepherd & Wedderburn, WS, Saltire Court, 20 Castle Terrace, Edinburgh

Further information about the activities of the Royal Society of Edinburgh and additional copies of this Trustees Report may be obtained from: Dr W. Duncan Executive Secretary The Royal Society of Edinburgh 22-26 George Street Edinburgh EH2 2PQ Tel: 0131-240 5000 Fax: 0131-240 5024 e-mail: rse@royalsoced.org.uk http://www.royalsoced.org.uk

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The Royal Society of Edinburgh 2003

The Royal Society of Edinburgh 22-26 George Street Edinburgh EH2 2PQ