Iod Report And Accounts 2007

The Institute of Directors Annual Report and Accounts 2007

F I V E Y E A R S U M M A RY

2003

2004

2005

2006

2007

No. of members at Year End

53,473

53,268

52,780

52,790

52,427

647

1,350

1,824

2,147

2,159

30,145

31,755

33,268

34,402

35,617

1,817

2,194

3,605

5,834

7,714

Surplus/Deficit before Tax (£k) Gross Income (£k) Net Assets (£k) Fixed Asset Investment (£k)

1,236

1,822

2,155

1,669

1,495

Investments & Cash Balances (£k)

8,201

9,285

10,173

11,762

14,225

Net Assets as % of Gross Income

6.0%

6.9%

10.8%

17.0%

21.7%

4.1%

5.7%

6.5%

4.9%

4.2%

27.2%

29.2%

30.6%

34.2%

39.9%

Fixed Asset Investment as % of Gross Income Investments & Cash Balances as % of Gross Income

CHAIRMAN’S REVIEW

I am delighted about the progress that we have made in 2007. The Director General’s report goes into the detail, but for me the highlights are:

Dr Neville Bain CHAIRMAN

A year of financial success and security with an increased cash balance at the year end; A healthy membership level overall, and a focus on relevant benefits that has been appreciated by the membership. These initiatives have been strong at both regional and national levels; Further improvement of our profile in the media and of our influencing activity with Government, with the Opposition and in Europe; Continued emphasis on professional development as a core activity and further growth of the Chartered Director membership; Widening of our international presence in a cost-effective way building, for example, strong links with Russia through the Independent Directors Association. In our annual strategic review in October 2007 we reiterated the importance of the big themes that we had identified. These are: 1. To expand our professional development activities, with special reference to the flagship Chartered Director programme. Recognising the opportunity of being the leader in corporate governance both at home and abroad, we have a number of programmes and activities to help us deliver this objective; 2. To grow our international activities to

support our members with knowledge and access to developing countries such as China, India and Russia. This will include expanding our network and supporting our members with knowledge and information in key markets; 3. To extend our reputation, influence and representation, ensuring that our members have a strong voice with which to lobby the Government, the Opposition and in Europe; 4. To utilise electronic communication and the full benefits of the internet more effectively in providing service to our members; 5. To grow our membership by widening our appeal to include greater representation from the not-for-profit sector; 6. To maintain and add some modest capacity to our regional hubs so that we can serve our members in all parts of the UK. As a membership organisation, we must put our members first in all we do. If we can achieve these milestones we will increase our membership over the term of our Three Year Plan. I believe that 2007 has seen progress towards these objectives. I was delighted to receive further support from the investing community about the importance of our Chartered Director programme. I have just received a copy of a letter from three large

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CHAIRMAN’S REVIEW

US institutions to the companies they invest in, highlighting the importance of professional leadership at board level. The letter says: “This is seen as a primary contributor to the performance and prospects of any business. We actively support the value of the Chartered Director development programmes and especially the Chartered Director qualification provided by the Institute of Directors”. For me the biggest disappointment of the year has been the lack of a significant reduction in onerous regulation and timewasting red tape. We have tried hard, provided much evidence, and made proposals, but we remain stuck in the treacle of over-regulation. Action is now needed, rather than more review bodies! The IoD pays particular attention to the governance of the Institute. We do this by actively considering the balance on the board, by ensuring appropriate terms of office for directors, and through the committees of the board. The board has an annual effectiveness review, individual assessment sessions with all directors, a separate meeting of the chairman and nonexecutive directors and feedback to the chairman conducted by the vice chairman. We pay particular attention to the risk assessment and control exercise which highlights the high level risks for the board, and the audit and risk committee has a rigorous programme to consider and review the control environment. I am also grateful to the Council members who are able to review the development of the Institute and to provide wise counsel to the board and key office holders. In my view the governance structure is comprehensive and works well in giving assurance to our membership.

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I am extremely conscious of the substantial

input of so many people who give their time for the benefit of the membership. There are many dedicated people at branch, regional and central level who contribute to our success. This is matched by the commitment of our staff under the guidance of the Director General. It is with great regret that we record the death of Gregory Hyland, Director of Regions and Branches, in this Annual Report. Gregory was a member of the Board from 24 February, 2004 until his death on 2 June, 2007. He first joined the IoD staff in 2000 as Regional Director for IoD South West. Gregory was a highly respected and universally popular figure throughout the IoD and he made a major contribution to the Institute's success in recent years. He will be greatly missed. As the board changes I would like to thank two retiring members for their contribution over many years. Lady Judge stood down in July 2007, and Michael Large, Vice Chairman, stood down in December 2007 after 20 years serving both regionally and centrally in many ways. Both of them remain strong supporters of the IoD. We have welcomed as new members Nicholas Brookes, Emma Harrison, and Sir Robin Young, all of whom are contributing significantly. The year ahead will bring challenges, including the worsening economic climate. It will also bring new opportunities. I am certain that we are well placed to meet all of these events and that we will continue to have further success in 2008.

D I R E C T O R G E N E R A L’ S R E P O R T

I am pleased to be able to report another very successful year for the IoD. Our finances are in even better shape, both in terms of annual surplus and reserves, and we have continued to build our external reputation.

Miles Templeman DIRECTOR GENERAL

The total number of members remains at a robust level, but 2007 saw a very slight decline to 52,427. Despite great efforts, we are still losing members as fast as we gain them. Our new customer relationship management system will help target members more directly and through this and other methods we need to understand and meet their needs better, so that we can retain more members in the longer term. However, the profile of new members shows more diversity, with 19% of new applicants being female, and there is a greater proportion of younger, entrepreneurial directors coming through. This has helped support our Young Directors Forum, which is now established in most parts of the country. We need to further strengthen our offering to women and to diverse ethnic groups, and our Women as Leaders Conference is a good example of the kind of focused activity we must pursue. Our membership services have improved, with even broader international offerings from the Information and Advisory Service and a general improvement in facilities through our Business Centre and all the services in Pall Mall. Our hospitality offering remains first class and I get consistently positive feedback on our performance from members.

Our regional presence is strong, both in the provision of local events and the influencing of regional and local authorities. Our affinity partners and various sponsors continue to provide much support and add to our membership offering, although, as many members tell me, the result of all this activity is too much direct mail. We are dealing with this, and most importantly, we are taking some major steps to improve our online activities. These should become more apparent in 2008 and beyond. Our website, iod.com, has been enhanced and it will continue to develop. Our intranet is also much improved and I have also started a policy blog – more to come. Events in 2007 ranged from major international seminars on India and China, to many large and small gatherings covering a whole list of policy areas, and some very enjoyable Sporting Lunches. We had another very successful Annual Convention, with Jacqueline Gold and Sir Ranulph Fiennes stealing the show, while José Manuel Barroso surprised many Euro-sceptic members with his openness and appreciation of the needs of business. The EU appears to have taken on board the Regulation message, though we’ve yet to feel any real impact. The Annual Dinner, with outstanding speeches by Sir Martin

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D I R E C T O R G E N E R A L’ S R E P O R T

Sorrell and Bill Bryson, also illustrated that our longstanding events are as popular as ever. Professional Development remains at the heart of our activities, with further expansion of our courses and particularly Chartered Director, where the number qualifying has now reached over 600 and is growing steadily. We will move to build this in the future, and give more support and focus to our alumni. Additionally, we are developing an International Training Plan that is an important aspect of our Three Year Plan for 2008–2010. The focus will be on the developing world and establishing directors’ courses in various centres, with particular emphasis on corporate governance. Media activity has been greater than ever, with all members of the Policy Unit appearing in the press and on TV and radio. Many members have appreciated our increased profile and understand the value of this visibility in trying to influence the Government on a whole range of topics, with tax, skills, transport and climate change/energy being the most significant. We continue to lobby for an improvement in the regulatory environment, and one day I hope to be able to report some success. We had some recent impact on tax changes, but the real art is getting the Government to involve us more fully before making illthought through announcements and then having publicly to backtrack. In addition to our engagement with the Government, we have further strengthened our connection with the Conservative Party – the team and I regularly meet with the Conservative front

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bench – and also with the Liberal Democrats. The IoD remains steadfastly independent of any political party and we held fringe meetings at all the party conferences, which were well attended. In the EU, our Corporate Governance lobbying organisation, ecoDa, had a good year, with new members joining from Croatia, Slovenia, Poland and the Czech Republic, bringing its membership to 10 EU country members. It is gaining strength and we regularly meet with the Commission to discuss EU policies. Our main objective is to keep increases in corporate governance to a minimum and not to be influenced by the US approach. Internally, we have had a lot of positive management changes with several key players taking on new responsibilities in IT, Marketing, Director Publications and Professional Development. We continue to focus on management development activities to strengthen the overall skills level of our leading executives and to drive good management practice through the organisation. Overall, 2007 has been another very enjoyable and successful year, not least in the IoD Regions and Branches, and I thank all our volunteer chairmen and committee members, as well as our staff, around the country. The economy in the short term looks tough, but our ongoing improvements and the energy of our team will, I am sure, enable us to progress, even in a difficult UK environment.

FINANCIAL REVIEW

Overall Results During 2007 the Institute made a record operating surplus before tax for the fourth consecutive year, £2,159k - £12k ahead of 2006. At 31 December 2007 the Accumulated Fund stood at £7,714k compared with £5,834k a year earlier, an increase of £1,880k, which reflects the continuing growth of the Institute’s Membership and Revenue Earning Activities and control of expenditure. Net funds increased by £2,463k to £14,225k at the end of 2007, as shown in the Consolidated Cash Flow Statement, page 17.

INCOME Membership Income Membership income increased by £581k to £14,572k in 2007 (up 4.2%). This reflects an increase of £629k in membership subscriptions (up 4.9%), and a decrease of £48k in election fee income (down 4.2%). The number of members was 52,427 at the end of 2007, representing a net loss of 363 in membership in the year. Membership contribution increased by £557k to £12,522k in 2007 (up 4.7%), as shown in Analysis of Operating Surplus by Activities, page 18.

Revenue Earning Activities Income from revenue earning activities decreased by £166k (down 0.9%) to £17,416k, reflecting harsh economic conditions and reductions in income for

Director Publications, Director Development, and Director Events. Catering and functions increased its income by £199k to £5,069k (up 4.1%), resulting from organic growth, 2006 prices being held. Income generated in the Restaurant and Brasserie remained static, although the second floor function rooms at 116 Pall Mall achieved an 8% increase in income year on year. The Wine Bar reflected the experience of equivalent operations with a 6% decrease in income, mainly alcohol revenue, following on from the smoking ban taking effect in July 2007. Overall contribution increased by £74k to £1,187k (up 6.6%). An increasingly competitive advertising market continued to have an adverse effect on Director Publications’ income, which decreased by £246k in the year to £2,386k (down 9.3%). Direct costs and overheads were closely monitored with the result that costs were reduced by 8.7% compared with 2006. Although Director Development income decreased by 1.6% in 2007, due in part to a depleted Board Development sales team, contribution increased by £81k to £2,118k (up 4.0%) resulting from the newly structured course programme being embedded in the year. Since re-organisation and refurbishment, income growth in the Business Centre was further consolidated by an increase of £57k to £2,370k (up 2.5%). Contribution increased by £8k to £1,721k (up 0.5%). Maximum occupancy at prime times has nearly been reached. Director Events income decreased by

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FINANCIAL REVIEW

£210k to £1,515k (down 12.2%) mainly due to tough competitive conditions which adversely affected ticket sales, and the fact that certain planned events had to be cancelled. Product Marketing income increased by £115k to £1,029k (up 12.6%) reflecting continued growth in affinity products providing preferential travel and financial services benefits for members. Overall contribution from revenue earning activities decreased by £78k to £5,649k (down 1.4%), as shown in Analysis of Operating Surplus by Activities, page 18.

passenger lifts, and the floor strengthening in the Waterloo Room - one of the Institute’s premier members’ function areas. Significant capital investment was incurred in refurbishing the main kitchen and the installation of new air conditioning equipment. New boilers were installed at 123 Pall Mall, and the telephone system was upgraded for all IoD premises. Further amounts were invested in IT, including a new HR system, server enhancements, and software development for iod.com. Additionally the IoD’s staff intranet was upgraded and relaunched in the year.

EXPENDITURE Total expenditure of £33,458k is analysed across Membership, Revenue Earning Activities, Member Services, Operating and Overhead Costs and Representation and Directorate, as shown in Analysis of Operating Surplus by Activities, page 18.

Employment Costs Employment costs increased by £374k to £14,516k, reflecting bonuses and commissions paid to staff based upon a record operating surplus and progress against objectives. Overall the basic salary increase was restricted to 3.6% in 2007. The average number of employees increased to 318 (2006: 295), although the average number of monthly paid staff decreased by one in the year to 265.

Capital Expenditure Major projects undertaken at 116 Pall Mall included the refurbishment of the

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Creditor Payment Policy The Institute supports the work of the Better Payment Practice Group and has signed up to their Code of Conduct. For all trade creditors, it is the Institute’s policy to agree terms of payment with suppliers, at the start of business, and to ensure that they are paid in accordance with the agreed contractual and other legal obligations. Trade creditors for the year ended 31 December 2007 averaged 17 days, based on the ratio of the Institute’s trade creditors to the amounts invoiced during the year.

Donations The total amount given for charitable purposes during the year was £13,000 (2006: £16,000). As a membership organisation we do not consider it appropriate to use members’ subscriptions for charitable giving unless it arises directly from the Institute’s

FINANCIAL REVIEW

educational work.

Going Concern

No political donations were made during the year (2006: nil).

The Board considers that the Institute has adequate resources to continue in operational existence for the foreseeable future. For this reason, the going concern basis continues to be adopted in preparing the financial statements.

Cash Reserves The Audit and Risk Committee has recommended and the Board has agreed that we build up our cash reserves, net of deferred membership income, to a level that matches our annual fixed costs, comprising property and staff overheads, in order to provide protection against a prolonged economic downturn. The relevant figures are: 2007

2006

Cash reserves at 31 December – see Consolidated Cash Flow

£14.2m £11.8m

Less deferred membership income – see notes 12&13

(£8.0m)

(£8.1m)

£6.2m

£3.7m

Net cash reserves at 31 December Target cash reserves / annual fixed costs Net cash reserves as percentage of target

£14.1m £13.8m 44.0%

26.8%

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GOVERNANCE OF THE INSTITUTE

1. Aims and Objects of the IoD The IoD’s Charter states that its objects are: (a) to promote for the public benefit high levels of skill, knowledge, professional competence and integrity on the part of directors, and equivalent office holders however described, of companies and other organisations; (b) to promote the study, research and development of the law and practice of corporate governance, and to publish, disseminate or otherwise make available the useful results of such study or research; (c) to represent the interests of members and of the business community to government and in the public arena, and to encourage and foster a climate favourable to entrepreneurial activity and wealth creation; and (d) to advance the interests of members of the Institute, and to provide facilities, services and benefits for them.

2. Activities of the IoD Professional Development – the Institute provides training and professional development both in the UK and, to a lesser degree, elsewhere. This takes the form of courses, conferences and seminars, as well as its Diploma in Company Direction and the prestigious Chartered Director qualification. Business Representation – through the Director General and the Policy Unit, the Institute represents the interests of members and the business as a whole to Government (both in the UK and the EU) and to opposition parties and influential representative bodies. Government consults the Institute both publicly and privately. The Policy Unit publishes widely respected policy and research documents.

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Members’ Benefits and Services – the Institute provides premises in London and in the regions for the use of members. Members also are given access to information and advisory services, as well as information via the website, newsletters and two regular magazines. Products and services such as a gold credit card, discounted insurance, car hire and health service are offered to members, as well as a variety of events, including the Annual Convention at the Royal Albert Hall and the Annual Dinner. More details are available on www.iod.com.

3. Principal Goals The Board has a major Strategy Awayday meeting each October, which is reviewed six months later, and it tackles various strategy issues at regular Board meetings. The Principal Goals emerging for the next three years are: Expanding Professional Development, both Nationally and Internationally. In the International context, it should spread the IoD brand, influence and reputation, particularly in the field of Corporate Governance, as the UK is considered the world leader on this topic. In addition to Corporate Governance, training will also focus on financial and strategic management thereby enabling directors and their boards to be fully aware of their responsibilities and to improve their performance. Following on from the expansion of the Chartered Director programme in 2007, there is a significant challenge to ensure continuing assessment and validation of the entire process remains robust. Ethics have been embedded throughout the syllabus, and if properly promoted, will add value, trust, and loyalty.

GOVERNANCE OF THE INSTITUTE

Expanding Membership both Nationally and Internationally. We should continue to grow and we have been tasked with expanding in the ‘Third Sector’, which includes the Public Sector, Senior Civil Servants, Quangos and Government type Institutions, Trusts, Charities, the National Health Service, Influential and Representative Bodies, Policy Groups, Heads of Secondary Schools, the Armed Forces, Pension Fund Trustees and one or two other associated bodies. We shall establish the views of the membership as a whole from online surveys. Member programmes and benefits will be changed or modified accordingly. With a view to promoting diversity, we shall encourage the aspirations of ethnic minorities, entrepreneurs, women and younger directors. Provision of Regional Premises – is seen as very important going forward. We believe that the future will bring significantly more virtual corporations, and that employers will increasingly encourage their staff to work remotely or at home to save time, cost and travel. Directors will require meeting facilities in key locations. The IoD has recognised this need and will investigate the expansion of its regional network. Advances in IT and the Internet – have been so significant that exploiting what it facilitates goes way above enablement and it is our strategy to seek expert views on what it will be doing ten years hence and to adapt the working of every department to take advantage of these facilities. This will include regular staff training and encouragement of staff to keep abreast of developments and the incredible rate of change and to adapt quickly rather than react. Communications will feature significantly. This is also a risk mitigating approach.

The IoD is currently engaged in upgrading its website, www.iod.com, which will incorporate the latest internet developments and ecommerce functionality. Additionally our back office systems will be consolidated onto one IT platform which will link directly with the website. The upgraded software and development work is planned to be completed by the end of 2008, which will result in more effective electronic communication with members, as well as encouraging members to engage with the IoD online on a regular basis. Security arrangements will be built into the new systems to ensure there is protection against unauthorised access of data. Reputation – we aim to extend our reputation, influence and representation to ensure that our members have a very strong voice to lobby government, Whitehall and other influential and representative bodies and Europe for the benefit of our membership.

4. Governance and Control of the Institute The Institute is a corporation established under Royal Charter. The IoD’s Constitution, comprising Charter, By-Laws and Regulations, may be found on the IoD’s website, www.iod.com. The Institute’s principal office is at 116 Pall Mall, London SW1Y 5ED. The Institute is committed to a high standard of governance and has adopted, wherever appropriate, the provisions of the Combined Code, which sets out Principles of Best Corporate Governance for listed companies. The Institute has selected only the provisions of the Code that are applicable given the size and nature of its operations and with due regard to its operation as a membership

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GOVERNANCE OF THE INSTITUTE

Corporation established under Royal Charter. The government and control of the Institute are vested in the Board and the Council of the Institute. Members of these bodies are listed on page 25, indicating relevant dates for those who joined or departed during the year. Council – The Council is primarily the body that is the guardian of the Constitution and of the aims and nature of the Institute. It appoints and may remove members of the Board and it reviews the overall performance of the Board. It also appoints the Nomination Committee. The Nomination Committee considers the balance of skills needed by the Board and considers candidates, including any nominations put forward by the membership, and makes recommendations to the Council in respect of appointments to the Board. Such nominations are put as a courtesy to the Board in advance. An induction programme is in place for new members of the Council and the Board. The full rules regarding Council and Board are set out under By-laws and Regulations Clauses D & E respectively. Council Members also provide a pool of expertise, which the Chairman and DG may consult on a range of policy issues and for contacts. The Council, chaired by the Chairman of the Board usually meets with all members of the Board in attendance by invitation, but they may at any time require that some or all members of the Board should not to be present. The Council met three times during the year. The Chairman is the only member of both the Council and the Board. Board – The affairs of the Institute are managed by the Board who may exercise all the powers of the Institute, including the power to propose changes to the Laws of the Institute. The Board meets at least six times per annum and also holds a Strategy Awayday meeting during October.

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In accordance with its Constitution, the Chairman and the DG have a clear division of responsibilities and the Board comprises a majority of Non-Executive Directors. The effectiveness of the Board is assessed annually. Periodically an external assessment will be commissioned, the last having taken place in 2004. Training for all or for individual Board members is considered annually following the Annual Effectiveness Assessments of the Board and of individual directors. NEDs and the DG are individually assessed by the Chairman and the Chairman is assessed by the Vice Chairman. Executive Directors are assessed by the DG or the COO. At least once per annum the Chairman holds a meeting with the NEDs without the executives present. The Institute Secretary is charged with ensuring that Board procedures are complied with. All Board members are required to disclose to the Institute Secretary any interests they may have in other commercial and policy entities and in public bodies. Committees during 2007 Membership of the IoD’s Committees is set out on page 25. Three Committees dealt specifically with governance issues: The Nomination Committee, appointed by the Council and chaired by the Chairman, recommended any nominations for elected members of the Council, and any appointments to the Board and it met as necessary. All members of the Committee, except the DG, are independent members of the Council or the Board. The Audit and Risk Committee, (‘A&RC’) appointed by the Board and chaired by Mr Simon Brooker, FCA, covered matters relating to the financial statements, audit and risk management, and it met three times during the year.

GOVERNANCE OF THE INSTITUTE

The A&RC undertakes an annual internal review of its effectiveness under the direction of the Committee Chairman. The A&RC considers annually whether there is a need for an internal audit function and the view remains that the size of the Institute does not warrant it at this stage. It is the Institute’s policy to separate the provision of audit and non-audit services, but the Board may waive this policy, in specific cases, if it considers such waiver to be in the best interests of the Institute. The Remuneration Committee, appointed by the Board and chaired by the Chairman, in accordance with the Institute’s Constitution, advised on the remuneration of senior members of staff and it met as necessary. In addition the activities of the Institute were greatly assisted by three advisory committees, which each met twice per annum or more regularly as appropriate and they included outside experts: The Professional Accreditation Committee, chaired by Mr Peter Hammonds, advised on Chartered Director, professional standards, and the award of the Diploma and Certificate in Company Direction.

The IoD demands a very high standard of ethical behaviour in all of its internal and external dealings, and has a strong belief in the value of diversity throughout the organisation, clearly reflecting the spectrum of British Society and the Business Community as a whole. The IoD should be seen as a model example to other companies in both of these areas, as in its standards of Corporate Governance. The Institute has a policy of equal opportunities in employment and continued to promote diversity and inclusion throughout the year. Diversity awareness training sessions were run for all new staff in 2007 to ensure understanding and compliance. Our approach as a good citizen to corporate responsibility and to the community, is embedded in our employment contracts and a range of Standard Guidance Notes, available to all staff on our intranet. Within reason Department Heads will allow staff time off to undertake appropriate work in the community. We aim to behave in an exemplary manner with all our stakeholders, the principal one being our members. 5b Employees

The Taxation Committee, chaired by Mr Graham Wheeler, advised on taxation. The Membership Committee, chaired by Mr Ian Dormer, advised on membership diversity and services provided by the Institute. The IoD’s Committees comprise a large number of people who voluntarily give their time and effort on behalf of the Institute and their contribution is significantly valued.

5. Practices 5a IoD Ethics, Corporate Responsibility, the Community and Diversity Policy Statement

The calibre, values and conduct of our people are central to building excellent relationships with our members, customers, suppliers and other stakeholders. Consultation with employees or their representatives has continued at all levels. The annual opinion survey measures the attitudes and opinions of IoD employees on a range of issues. In 2007 the overall results were more positive in nearly all areas under review compared with 2006, and demonstrate the continued commitment and satisfaction of our staff. Action is being taken to address issues raised.

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GOVERNANCE OF THE INSTITUTE

Communication with employees has continued via quarterly all staff meetings on business progress, Departmental staff briefings, the Institute’s intranet, IoD News, and the distribution of the Annual Report and the Three Year Plan. Every employee has an individual responsibility to work together as a team to further the purposes and ideals of the IoD. The aim is to ensure employees’ views are taken into account when decisions are made that are likely to affect their interests, and that they are aware of the financial and economic performance of their Departments and of the Institute as a whole. The Institute is accredited with the quality benchmark “Hospitality Assured”. 5c Open Disclosure Policy The Institute has an ‘Open Disclosure Policy’ (sometimes known as a ‘Whistle-Blowing Policy’), made available to all staff on the Intranet under SGN 2.25. Any matter reported under this heading has received proportionate and independent investigation and the Senior Management Team has ensured appropriate follow-up action. 5d Values The IoD continued to embed its five new values into its culture during the year. Values related questions and measurement criteria have been incorporated into the recruitment process. The Institute also measured the degree to which its values were embedded into the organisation via mechanisms such as the staff opinion survey and appraisals, and has identified a number of resulting actions. The Institute has a policy of equal opportunities in employment. It also endeavours to make reasonable adjustments to the workplace to enable staff to work, or continue working at the Institute. We work

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closely with our managers and employees to promote diversity and inclusion. 5e Training and Development The Institute continued to invest in the recruitment and training of employees, providing a range of training and development interventions geared towards individual needs and organisational priorities. A significant management development programme, designed in consultation with the Management Team, has been rolled out to all middle and senior Managers in 2007. 5f Health & Safety The IoD has a H&S Committee and the HR department strives to ensure that all employees are provided with a safe and appropriate environment in which to work. It complies with H&S legislation and Regulations. 5g Environmental Policy In respect of its ‘Member premises’ and its ‘workplace’, and its effect on the environment (locally and in general), the IoD is committed to implementing best practice and to providing a safe and sound environment. The Board will implement, as appropriate, all current environmental legislation including various European Union Directives and will take account of the views of the IoD’s Health and Safety Committee on relevant matters. It will endeavour to use sustainable and renewable materials, to minimise energy wastage and to follow sound practice for all waste product disposals.

6. Internal Control during 2007 The Board was responsible for the Institute's systems of internal control. The key features of the internal control system that operated throughout the period

GOVERNANCE OF THE INSTITUTE

covered by the financial statements were: A clear organisation structure for monitoring the conduct and operation of the Institute with defined reporting lines, levels of responsibility and delegation of authority. Communication of ethical values and a controls awareness through written codes of conduct, formal standards of discipline and employee performance appraisal. Regular consideration by the Board of management accounts. Three meetings of the A&RC, including a review of the Institute's risk management and discussions with the external auditors with regard to the scope of the audits and the contents of their reports to management. Schedules of ‘Matters Reserved to the Board’ and of ‘Levels of Authority and Authorisation Procedures’, approved by the Board, the latter comprising the detailed management rules, remain in place.

7. Risk Management In accordance with the guidance of the Turnbull Committee on internal control, there is an ongoing process in place for identifying, evaluating and managing risks faced by the Institute. There is a Risk Register, which is regularly reviewed and which sets out key risks, the likelihood of those risks occurring and the associated potential impact. It also notes mitigation steps and considers whether residual risk is satisfactory. The A&RC review a report on risk from Management twice per annum. This report includes financial, commercial, reputation, health and safety, staff wellbeing risks and potential risks arising from advances in IT and the Internet.

The Board reviews the risk report submitted by the A&RC twice per annum and debates specific risk aspects as and when they arise. In preparation for the consequence of a disaster, there is in place an ‘Immediate Action Plan’ and a longer term ‘Disaster Recovery Plan’. These plans are regularly reviewed and revised. The Institute annually reviews its insurance portfolio and considers risks not covered with due regard to cover taken by similar organisations. We believe that we have adequate and broad cover. Insurance premiums are kept at a sensible level by ensuring cover levels are adequate for a big hit, but balancing this against a ‘retained risk’ amount, so that claims are only made if substantial. We have also managed to arrange a capped premium for Business continuity for three years. The A&RC has reviewed the operation and effectiveness of this framework. The Committee acknowledges there are inherent limitations in any system of risk control and internal financial control and accordingly even the most effective system can provide only reasonable and not absolute assurance with respect to risk mitigation, the preparation of financial information and the safeguarding of reputation and assets.

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INDEPENDENT AUDITORS’ REPORT to the members of the Institute of Directors (the “Institute”) We have audited the consolidated financial statements of the Institute of Directors for the year ended 31 December 2007 which comprise the consolidated revenue account, consolidated balance sheet, consolidated cash flow statement, the consolidated statement of total recognised gains and losses and the related notes. These financial statements have been prepared under the accounting policies set therein.

Respective responsibilities of directors and auditors The Board’s responsibilities for preparing the annual report and the financial statements in accordance with the By-Laws and applicable accounting standards in the United Kingdom are set out in the statement of Board’s responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). This report, including the opinion, has been prepared for and only for the Institute’s members as a body and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. We report to you our opinion as to whether the financial statements give a true and fair view. We also report to you, if in our opinion, the Institute has not kept proper accounting records or if we have not received all the information and explanations we require for our audit. We read other information contained in the annual report, and consider whether it is consistent with the audited financial statements. This other information comprises only the Chairman’s Review, the Director General’s Report, Financial Review and Statement on Governance of the Institute. We

14

consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) 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 Board in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Institute’s 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 consolidated affairs of the Institute at 31 December 2007 and of the consolidated revenue surplus and consolidated cash flows of the Institute for the year then ended. PricewaterhouseCoopers LLP Chartered Accountants and Registered Auditors London 31 March 2008

CONSOLIDATED REVENUE ACCOUNT for the year ended 31 December 2007 NOTES

2007 £’000

2006 £’000

Membership income

14,572

13,991

Revenue earning activities

17,416

17,582

2,890

2,303

INCOME 1

Other trading income Interest receivable and similar income

739

526

_________

_________

35,617

34,402

_________

_________

14,516

14,142

Direct costs

7,839

7,269

Indirect costs

5,743

5,602

Property expenditure

4,094

3,991

Depreciation

1,266

1,251

_________

_________

EXPENDITURE 2

3

Employment costs

33,458

32,255

_________

_________

2,159

2,147

(234)

(156)

_________

_________

1,925 ____

1,991 ____

1,925

1,991

Surplus on ordinary activities before taxation 4

Taxation

Surplus on ordinary activities after taxation All operations in the year and in the comparative year were continuing.

Statement of total recognised gains and losses

Surplus on ordinary activities after taxation Closed defined benefit scheme: Actuarial (loss)/gain

(45)

238

_________

_________

1,880 ____

2,229 ____

Total recognised gains and losses relating to the financial year

15

CONSOLIDATED BALANCE SHEET at 31 December 2007 NOTES

2007 £’000

2006 £’000

FIXED ASSETS

Intangible fixed assets 5 6

Publication rights of Director magazine Tangible fixed assets Investments

2

2

5,476

5,378

20 _________ 5,498 _________

20

_________

5,400

_________

CURRENT ASSETS 7 8 9 10 10

Stock Debtors Short term investments Short term bank deposit Cash at bank and in hand

168 3,014 13,712 10 503 _________ 17,407 _________

104 2,815 11,749 500 –

_________

15,168

_________

CURRENT LIABILITIES 11 12 10

Creditors – amounts falling due within one year Deferred membership income Bank overdraft

Net current assets Total assets less current liabilities 13

(7,018) – _________ (14,177) _________ 3,230 _________

(6,118) (7,175) (487)

_________

(13,780)

_________

1,388

_________

6,788

8,728 _________

_________

(969) _________

_________

7,759

5,834

Pension liability

(45) _________

_________

Net assets including pension liability

7,714 ____

5,834 ____

5,834

3,605 1,991 238

CREDITORS

Amounts falling due after more than one year Net assets excluding pension liability 15

(7,159)

(954)

–

Represented by: 14

ACCUMULATED FUND

Accumulated fund at 1 January Surplus on ordinary activities after taxation Actuarial (loss)/gain

1,925 (45) _________

_________

____

5,834 ____

7,714

The financial statements on pages 15 to 24 were approved by the Board on 31 March 2008 and were signed on its behalf by:

16

Miles Templeman

Director General

Simon Brooker FCA Richard Turner FCA

Director Finance Director

C O N S O L I D A T E D C A S H F L OW S TA T E M E N T for the year ended 31 December 2007 2007 £’000

2006 £’000

3,375

2,845

Returns on investments and servicing of finance Interest received

426

514

Taxation UK Corporation tax paid

(156)

(113)

Net cash inflow from operating activities (see reconciliation below)

Capital expenditure Payments to acquire tangible fixed assets Cash inflow before use of liquid resources Management of liquid resources Purchase of short-term investments Decrease / (increase) in short-term deposits with bank Increase / (decrease) in bank current account in the year Reconciliation of surplus on ordinary activities to net cash flow from operating activities Surplus on ordinary activities before taxation Depreciation on tangible fixed assets Loss on disposal of fixed assets

Interest receivable and similar income

(Increase) / decrease in trade debtors (Increase) in other stock, other debtors and prepayments Increase / (decrease) in trade creditors (Decrease) / increase in other creditors and accruals Increase / (decrease) in multiple years’ advance membership over one year (Decrease) / increase in deferred membership income Increase / (decrease) in other deferred income Difference between pension charge and cash contributions Net cash inflow from operating activities Reconciliation of net cash flow to change in net funds (Decrease) / increase in cash in the year Increase in liquid resources (see note below) Cash flows Net change in market value of short-term investments over cost Change in net funds Net funds at 1 January Net funds at 31 December

Note: Liquid resources comprise short-term deposits and investments that mature within twelve months from date of inception.

(1,495)

(1,669)

_________

_________

2,150

1,577

(1,650) 490

(1,800) (214)

_________

_________

990 ____

(437) ____

2,159 1,266 131

2,147 1,251 92

_________

_________

3,556

3,490

(739)

(526)

_________

_________

2,817

2,964

(229) (34) 451 (172) 15 (157) 684 –

233 (129) (110) 520 (114) 245 (264) (500)

_________

_________

3,375 ____

2,845 ____

990 1,160

(437) 2,014

_________

_________

2,150 313

1,577 12

_________

_________

2,463

1,589

11,762

10,173

_________

_________

14,225 ____

11,762 ____

17

A N A LY S I S O F O PE R AT I N G S U R P LU S B Y AC T I V I T I E S for the year ended 31 December 2007 2007 Income £’000

2007 Expenditure £’000

2007 Net £’000

2006 Net £’000

13,360

–

13,360

12,769

1,088

–

1,088

1,136

124 _________

– _________

124 _________

86 _________

14,572

–

14,572

13,991

12 _________

(2,062) _________

(2,050) _________

(2,026) _________

14,584

(2,062)

12,522

11,965

Catering and functions

5,069

(3,882)

1,187

1,113

Director publications

2,386

(2,270)

116

146

Director development

5,047

(2,929)

2,118

2,037

Business centre

2,370

(649)

1,721

1,713

Director events

1,515

(1,582)

(67)

254

1,029 _________

(455) _________

574 _________

464 _________

17,416

(11,767)

5,649

5,727

2,296

(4,578)

(2,282)

(2,348)

275 _________

(1,210) _________

(935) _________

(1,003) _________

2,571

(5,788)

(3,217)

(3,351)

MEMBERSHIP INCOME Membership subscriptions Election fees Overseas capitations

MEMBERSHIP EXPENSES Marketing and membership

REVENUE EARNING ACTIVITIES

Product marketing

MEMBER SERVICES Regional services Member information and advice

OPERATING AND OVERHEAD COSTS Property costs

–

(4,136)

(4,136)

(3,877)

Depreciation

–

(1,223)

(1,223)

(1,212)

IT and iod.com

–

(2,499)

(2,499)

(2,123)

– _________

(3,298) _________

(3,298) _________

(3,192) _________

–

(11,156)

(11,156)

(10,404)

307

(2,552)

(2,245)

(2,093)

– _________

(133) _________

(133) _________

(223) _________

307 _________

(2,685) _________

(2,378) _________

(2,316) _________

739 _________

– _________

739 _________

526 _________

35,617 _________

(33,458) _________ _________

_________

2,159 ____

2,147 ____

Central administration

REPRESENTATION AND DIRECTORATE Policy and directorate Communications

Interest receivable

Surplus on ordinary activities before taxation

18

NOTES TO THE ACCOUNTS for the year ended 31 December 2007 1 ACCOUNTING POLICIES The Institute of Directors is not subject to the Companies Act 1985. However, these financial statements have been prepared in accordance with applicable Accounting Standards in the United Kingdom and incorporate the disclosures required by the Companies Act 1985 in respect of directors' emoluments for a private limited company. A summary of the more important policies, which have been consistently applied with the prior year, unless otherwise disclosed, is set out below: (a) Basis of accounting and consolidation These financial statements have been prepared under the historical cost convention and comprise the consolidated accounts of the Institute, its wholly owned subsidiaries, The Director Publications Limited, IoD Management Limited and iod.com limited. (b) Membership income Annual membership subscriptions are included in the Consolidated Revenue Account on an accruals basis applicable to the membership period, and the part of the subscription applicable to the following year is carried forward as deferred income. In the case of multiple year membership subscriptions, an annual allocation is included within the Consolidated Revenue Account, the unutilised income being carried forward to future years. Election fees are accounted for on a receipts basis.

of the building at 116 Pall Mall, which is held under a lease expiring in 2043, are maintained to a standard which is consistent with their revenue earning potential. (f) Pension scheme During 2007 the Institute operated both a noncontributory defined contribution pension scheme for benefits accruing from 1 January 1997 and a closed defined benefit pension scheme. The assets for both schemes are held separately from those of the Institute and are administered by trustees. (g) Overseas currencies Assets and liabilities denominated in foreign currencies have been translated into sterling at the rate of exchange current at the year end, and profits and losses are taken through the Consolidated Revenue Account. (h)

Short term investments

Sterling fixed and floating rate securities held as short term investments are included in current assets at market value. Variations in their year end value are accounted for through the Consolidated Revenue Account. (i) Stock Stock is valued at the lower of cost and net realisable value. 2007

2006

318 _________

295 _________

£’000

£’000

2 EMPLOYMENT COSTS (c) Tangible fixed assets Tangible fixed assets are recorded at historic cost, together with any incidental costs of acquisition. Depreciation is calculated on a straight line basis over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are: Leasehold improvements

10%

Furniture, fittings and other equipment

20 – 25%

Computing equipment

33 1⁄3%

(d) Operating leases Costs in respect of operating leases are charged on a straight line basis over the lease term. (e) Property maintenance Under the terms of the various leases held by the Institute there is an obligation to keep the relevant properties in a proper state of repair. These costs together with the rentals are charged as incurred. In addition the Institute ensures that the public areas

(a) The average number of employees during the year was:

(b) Salaries Social security Pension costs – see note 15 Other employment costs

10,640 10,355 1,111 1,058 1,092 1,075 1,673 1,654 _________ _________ 14,516 14,142

____ ____

(c) The Chairman received £15,000 for his services during the year (2006: £10,000). Other than the Chairman, non executive directors received no emoluments for services provided (2006: £ nil).

19

NOTES TO THE ACCOUNTS for the year ended 31 December 2007 2007 £’000

2006 £’000

(d) Emoluments paid to the Director General amounted to: Salary

271

263

Performance bonus

57

55

Pension contributions

39

38

28 _________

32 _______

395 _________

388 _______

Benefits-in-kind

Pension contributions are paid into a money purchase scheme.

4 TAXATION Current tax: UK Corporation tax

(e) Executive directors’ emoluments excluding pension contributions Director General - 2(d) above

356 _________

350 _______

Salary

486

536

Bonus

148

155

26 _________

26 _______

660 _________

717 _______

1,016 _________

1,067 _______

6 other directors (2006: 6 directors)

Benefits

Aggregate emoluments Aggregate value of pension contributions paid in respect of money purchase benefits

3,203 1,369 772 344

3,136 1,460 701 252

48 7 _________ 5,743 _________

43 10 _______ 5,602 _______

Corporation tax is payable only on the Institute's externally derived sources of income and on activities undertaken by The Director Publications Limited – the Institute's wholly owned subsidiary. The Institute's membership activities are outside the charge to corporation tax. No provision for deferred taxation is required. There is a potential tax asset of £19,000 relating primarily to capital allowances, which would only be recoverable in the future if capital expenditure was significantly below current planned level. 5 TANGIBLE FIXED ASSETS Leasehold Furniture Improvements & Fittings

£’000

Motor Vehicles

Total

£’000

£’000

Cost 39

38

6 other directors (2006: 6 directors)

97

101

_________ 136 _________

_______ 139 _______

At 1 Jan 2007 Additions Disposals

7,677 1,001 (349) ________ 8,329 ________

8,324 42 16,043 494 – 1,495 (56) – (405) ________ ________ ________ 8,762 42 17,133 ________ ________ ________

At 1 Jan 2007 3,603 Charge for the year 639 Disposals (228) ________ At 31 Dec 2007 4,014 ________ Net book value 2007 4,315

7,041 21 10,665 617 10 1,266 (46) – (274) ________ ________ ________ 7,612 31 11,657 ________ ________ ________

At 31 Dec 2007 Depreciation

Retirement benefits are accruing to 6 directors (2006: 6 directors) under a money purchase scheme. (f) Highest paid director

Value of pension contributions paid in respect of money purchase benefits

£’000

(234) (156) ____ ____

£’000

Director General – 2(d) above

Total amount of emoluments

3 INDIRECT COSTS General Administration Marketing and Promotion Professional fees Financial charges Fees in respect of services provided by the auditors: Statutory audit Tax advisory services

£’000

356 _________

350 _______

1,150 11 5,476 ____ ____ ____ ____

39 _________

38 _______

Net book value 2006

4,074 1,283 21 5,378 ____ ____ ____ ____

The Institute does not hold any assets under finance leases (2006: £ nil).

20

NOTES TO THE ACCOUNTS for the year ended 31 December 2007 6 FIXED ASSET INVESTMENTS Investments represent the cost of a 1% shareholding in Stonemartin plc, being 1,019,345 ordinary shares of 20p. The market value of the shares at 31 December 2007 was £52,000 (2006: £78,000).

7 STOCK Food, wines, liquor Books and stationery Other stock

8 DEBTORS Trade debtors Other debtors and prepayments

2007 £’000

2006 £’000

120 47 1 _________ 168 ____

82 20 2 _________ 104 ____

2007 £’000

2006 £’000

10 CASH AT BANK AND IN HAND Cash at bank and in hand includes £266,000 (2006: £238,000) held in overseas branches. The analysis of the movement in the balance is as follows: at 31 Dec 2006

Cash Flows

at 31 Dec 2007

£’000

£’000

£’000

500 (487) _________ 13

(490) 990 _________ 500

10 503 _________ 513

2007 £’000

2006 £’000

Short term bank deposit Cash at bank and in hand

____ ____ ____

11 CREDITORS Amounts falling due within one year:

1,782 1,232 _________ 3,014

1,553 1,262 _________ 2,815

____ ____

Trade creditors

1,284

833

Deferred non membership income

2,363

1,679

Other creditors and accruals

3,278

3,450

234 _________ 7,159

156 _________ 6,118

2007 £’000

2006 £’000

6,436

6,380

582 _________ 7,018 ____

795 _________ 7,175 ____

2007 £’000

2006 £’000

Taxation 9 SHORT TERM INVESTMENTS Market Value 2007 £’000

i) Fixed and floating interest securities

Cost 2007 £’000

Market Value 2006 £’000

____ ____ Cost 2006 £’000

12 DEFERRED MEMBERSHIP INCOME 1,401 1,350 11,749 11,700 _____ _____ _____ _____

ii) Clydesdale Bank 6,154 iii) Bank of Scotland

6,000

–

–

Membership subscriptions received in advance Multiple years’ membership subscriptions applicable to the following year

6,157 6,000 _____ _____ _____– _____–

_____ _____ _____ _____

13,712

13,350

11,749 11,700

i) The investment is held in a short term sterling liquidity fund, with a "triple A" Moody's investor service rating, managed by Barclays Global Investors Limited. The securities held are akin to cash invested in an interest bearing bank deposit account, the monies being realised by the giving of 24 hours' notice.

13 CREDITORS Amounts falling due after more than one year: Multiple years’ membership subscriptions received in advance

969 ____ 954 ____

ii) The investments are held in short term interest bearing sterling deposit accounts operated by banks with a “double A” Moody's investor service rating, the monies being realised by the giving of 7 days notice. The difference between cost and market value represents interest accrued to the year end.

21

NOTES TO THE ACCOUNTS for the year ended 31 December 2007 14 LEASE COMMITMENTS The Institute has annual commitments under non-cancellable operating leases as follows:

2007 Property

2007 Motor Vehicles

2006 Property

2006 Motor Vehicles

£’000

£’000

£’000

£’000

–

11

–

18

Operating leases which expire: Within one year In the second to fifth years inclusive In over five years

2006 £’000

992

1,075

Closed scheme

100 _________

600 ________

Total cost

1,092 1,675 ____ ____

1997 defined contribution scheme 185

6

108

6

1,236 _____ 1,421 ____

– _____ 17 ____

1,243 _____ 1,351 ____

– _____ 24 ____

Rental costs charged to the Consolidated Revenue Account in the year were:

Motor Vehicles

2007 £’000

Pension contributions paid were:

The property leases are subject to rent reviews.

Property

date. The principal financial assumptions adopted for that actuarial valuation were: investment return at 4.8% per annum and price inflation at 2.9% per annum. Future pension increases were assumed at the rates specified in the closed scheme rules.

2007 £’000

2006 £’000

1,442

1,309

42 ____

49 ____

Financial Reporting Standard no. 17 disclosure (FRS 17) relating to the closed scheme A subsequent valuation of the closed scheme in accordance with the requirements of FRS 17 has been prepared by a qualified actuary on the basis of membership data current at 31 December 2007 but taking into account increases to pensions in payment effective from 1 January 2008.

15 PENSION COSTS During 2007 the Institute operated both a noncontributory defined contribution pension scheme for benefits accruing from 1 January 1997 and a closed defined benefit pension scheme (the “closed scheme”). The assets for both schemes are held separately from those of the Institute and are administered by trustees, and both schemes are registered with HM Revenue and Customs.

22

The most recent formal actuarial valuation of the closed scheme was undertaken as at 1 January 2006 using the defined accrued benefit method and market related funding assumptions. The market value of the scheme’s assets was £6,142,000 which on the method and the assumptions adopted, represented 87% of the value of the liabilities at the valuation

at 31 Dec 2006 £’000

(5,966)

(6,665)

6,971

6,885

Employee benefit obligations

Amounts recognised in the Balance Sheet are: Defined benefit obligations - see analysis below

Fair value of plan assets - see analysis below

With effect from 1 January 1997 (the “closure date”), the defined benefit scheme became closed to new entrants and ceased to provide any further benefit accrual to the then active members who became entitled to deferred pensions, subject to statutory revaluation as from that date. Members of this scheme were contracted out of the state earnings related pension scheme for service periods up to the closure date.

at 31 Dec 2007 £’000

Surplus before allowing for deferred taxation

1,005

220

Irrecoverable surplus

(1,005)

(220)

– –

– –

Recognised pension asset Related deferred tax liability Net pension asset

____– ____–

Amounts recognised in the Consolidated Revenue Account are: Service cost

(100)

(100)

Interest on obligations

(341)

(323)

Expected return on plan assets

385

324

Total

(56)

(99) ____ ____

NOTES TO THE ACCOUNTS for the year ended 31 December 2007 Major categories of plan assets as a percentage of total plan assets are:

at 31 Dec 2007 £’000

at 31 Dec 2006 £’000

(6,665)

(6,850)

Service cost

(100)

(100)

Interest on obligations

(341)

(323)

Principal actuarial assumptions at the Balance Sheet date:

Actuarial gains/(losses)

796

267

Discount rate

5.9% pa

5.2% pa

Benefits paid

344

341

Expected return on plan assets

5.7% pa

5.7% pa

Price inflation

3.3% pa

3.1% pa

Change in defined benefit obligations are: Obligations at 1 January

Obligations at 31 December - noted above

(5,966) (6,665) ____ ____

Change in fair value of plan assets are: Assets at 1 January

6,885

6,112

Expected return

385

324

Investment (losses) / gains

(56)

190

Employer contributions

100

600

Benefits paid

(343)

(341)

at 31 Dec 2007

at 31 Dec 2006

UK equities

54%

54%

UK bonds

44%

45%

Pension increases: Post 1988 guaranteed minimum pension

2.8% pa

2.6% pa

Discretionary awards

no allowance

no allowance

Mortality: Pensioner life expectancy – by year of birth Proportion married Age difference

Assets at 31 December - noted above

6,971 6,885 ____ ____

Age at retirement Commutation

As the pension surplus is irrecoverable, the annual increase of £785,000 has been treated as an actuarial loss in the Statement of total recognised gains and losses. at 31 Dec 2007

at 31 Dec 2006

Actual return less expected return on pension scheme assets

(56)

190

Experience gain/(loss) arising on scheme liabilities

234

(65)

Changes in financial assumptions underlying the scheme liabilities

562

333

Increase in irrecoverable surplus Actuarial (loss)/gain disclosed in Statement of total recognised gains and losses

The expected future rate of return at year end has been derived as the average, weighted by the year end portfolio allocation of the following returns for each separate asset class: cash, 5.5% pa; bonds, 4.6% pa and equities, 6.6% pa. The actual return on scheme assets over 2007 amounted to £329,000 compared with an expected return of £385,000.

90% husbands 3 years older than wives normal pension age no allowance

Sensitivity to changes in assumptions: The assumptions as to discount rate and price inflation have a significant effect on the value placed on the defined benefit obligations. As at 31 December 2007, a 1% change in these assumptions would have had the following effect on the closing defined benefit obligations: 1% PA increase £’000

1% PA decrease £’000

Discount rate

£742k

(£951k)

Price inflation

(£215k)

£298k

(785) (220) _________ _________ (45) 238 ____ ____

pxa92 mortality tables

23

NOTES TO THE ACCOUNTS for the year ended 31 December 2007 2007 £’000

2006 £’000

2005 £’000

2004 £’000

2003 £’000

Five year historic record at 31 December: Defined benefit obligations

(5,996)

(6,665)

(6,850)

(6,187)

(6,066)

Plan assets

6,971

6,885

6,112

5,335

5,100

Surplus/(deficit)

1,005

220

(738)

(852)

(966)

Experience adjustments on plan liabilities

234

(66)

4

(48)

(76)

Experience adjustments on plan assets

(56)

190

554

225

315

16 CAPITAL COMMITMENTS

Contracted capital expenditure

24

2007 £’000

2006 £’000

67 ____

–

COUNCIL, BOARD AND COMMITTEES as at 31 December 2007 COUNCIL

BOARD

Chairman

Non-Executives

Taxation & Economic

Dr Neville Bain

Dr Neville Bain (Chairman)

Graham Wheeler (Chairman)

Ian Dormer (Vice Chairman)

Adrian Baird

Michael Large (Vice Chairman)

Damian Bradley

Simon Brooker

Roger Coates

Nicholas Brookes (joined 11.04.07)

Malcolm Gammie CBE QC

Philippa Foster Back OBE

Brian Jackson

Emma Harrison (joined 11.04.07)

Robert Langston

Peter Holland

Andrew Lis

Lady Judge (departed 31.07.07)

Peter Mason

Sir Hugh Sykes

Michael Templeman

Graham Wheeler

Tim Voak

Elected members Richard Boot (departed 25.07.07) Ald Sir David Brewer CMG Nicholas Brookes (departed 11.04.07) Nicholas Cook (joined 11.04.07) Michael Foote Alex Galloway (joined 11.04.07) Peter Hammonds Professor F R Hartley Alan Jenkins (joined 25.07.07)

Sir Robin Young KCB (joined 11.04.07)

Patrick Lawless

Professional Accreditation

Dr Ann Limb

Executives

Peter Hammonds (Chairman)

The Rt Hon Lord Newton of Braintree OBE

Miles Templeman (Director General)

Philippa Foster Back OBE (Vice Chairman)

The Rt Hon Lord MacGregor of Pulham Market OBE

Bill Adams

(departed 25.07.07)

Andrew Main Wilson (COO) Vernon George (joined 21.05.07)

Dr Mary Redmond

Gregory Hyland (see page 2)

Gerald Russell (joined 25.07.07)

Alan Morkel

Derek Wilson

Richard Turner

Philip Arnold Tim Boucher Professor Colin Coulson-Thomas Alex Galloway Professor Bob Garratt Denis Lester

Sir Robin Young KCB

Colin Melvin

(departed 11.04.07)

COMMITTEES

Regional Members

Audit & Risk

Sally Muggeridge

Frank Bryan

Simon Brooker (Chairman)

Ken Rushton

Jerry Golland

Richard Boot

Beverley Salt

John James (departed 02.04.07)

Robert Oxley

John Williams

Ann Jordan

Rosco Paterson

Paul Keith (joined 28.11.07)

Dr Michael Young

Rosco Paterson (joined 11.04.07) Derrick Sequiera (departed 11.04.07) Andrew Sturgess Nimble Thompson

Nomination Dr Neville Bain (Chairman)

Bill McGawley Robert Oxley (joined 11.04.07)

Roger Mills-Hicks

Membership

Miles Templeman (Director General)

Ian Dormer (Chairman)

Ald Sir David Brewer CMG

Alyson Howard

Ian Dormer

Michael Large

Michael Foote

Clive Thomas

Peter Hammonds Michael Large

Stuart Turner (departed 11.04.07)

Remuneration

Richard Wallace

Dr Neville Bain (Chairman)

John White

Miles Templeman (Director General)

Gareth Williams

Simon Brooker Nicholas Brookes Peter Holland

Sir Hugh Sykes

For Council and Board Members, we have indicated the dates for those members who joined or departed during the 2007 calendar year.

25

S TA T E M E N T O F B O A R D ’ S R E S P O N S I B I L I T I E S

As a corporation established by Royal Charter, the Institute is obliged to comply with its Constitution (comprising Charter, By-Laws and Regulations).

suitable accounting policies have been used and applied consistently, subject to any material departures disclosed and explained in the financial statements

The Constitution requires that the Board lays before the Institute financial statements for each financial year which give a true and fair view of the state of affairs of the Institute and of the surplus or deficit of the Institute for that period.

The Board also confirms that reasonable and prudent judgements and estimates have been made in the preparation of the financial statements for the year ended 31 December 2007, and that applicable accounting standards have been followed and that the financial statements have been prepared on the going concern basis.

The Board is responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Institute. Additionally the Board is responsible for safeguarding the financial welfare and assets of the Institute and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Board confirms that it has complied with the above requirements in preparing the financial statements and that

26

The Annual Report and Accounts are published on the Institute's website on www.iod.com/annualreport. The Board is responsible for the maintenance and integrity of the website.

REGIONS, BRANCHES, CENTRES AND AFFILIATED BODIES as at 31 December 2007 REGIONS East Midlands Chairman: Peter Fothergill East of England Chairman: Jerry Golland North East Chairman: Bill McGawley North West Chairman: Ann Jordan South Chairman: Robert Oxley South West Chairman: Paul Keith West Midlands Chairman: Richard Boot Yorkshire Chairman: Nimble Thompson

DIVISIONS Northern Ireland Chairman: Frank Bryan Scotland Chairman: Andrew Sturgess Wales Chairman: Gareth Williams

Cumbria Chairman: Roger Collinge

North Wales Chairman: Steve Donnelly

Germany Chairman: Frank S Laske

Devon and Cornwall Chairman: Richard Ayres

North Yorkshire Chairman: Chris Harrington

Netherlands Chairman: Karel D Waagenaar

Cambridgeshire Chairman: Chris Parkhouse

Nottinghamshire & Derbyshire Chairman: Murray Macnab

France Chairman: Philippe Cizeau

East Yorkshire Chairman: Richard Tuplin

Oxfordshire Chairman: Bruce Hunt

OVERSEAS CENTRES

Edinburgh Chairman: Rebecca Cuthbert

Somerset Chairman: Guy Bottard

Essex Chairman: Paul Rolison

South Wales Chairman: Robin Morrison

Dundee Chairman: Dr Nigel Kerby

South Yorkshire Chairman: Richard Wagstaff

Fife Chairman: Shona Mitchell

Suffolk Chairman: Tim Ryan

Glasgow Chairman: Neville Washington

Surrey Downs Chairman: Tony Cherrett

Gloucester Chairman: Benita Sutton-Cegarra

Sussex Chairman: Leonard Stall

AFFILIATED BODIES

Hampshire and The Isle of Wight Chairman: Avril Owton

Wessex Chairman: Jonathan Clark

The Hong Kong Institute of Directors CEO: Carlye Tsui

Hereford & Worcester Chairman: Michael Greensmith Hertfordshire Chairman: John Stevens

West Surrey Chairman: Michael Price West Thames Chairman: Peter Firth West Yorkshire Chairman: David Winterburn

UK BRANCHES

Highlands & Islands Chairman: Paul Houlden

Aberdeen Chairman: Ken McEwan

Kent Chairman: Frazer Thompson

Berkshire Chairman: Chris Dodson

Lancashire Chairman: Nina Lockwood

OFFSHORE BRANCHES

Black Country Chairman: John Rider

Leicestershire Chairman: Rachel Hargrave

Bailiwick of Guernsey Chairman: Shelagh Mason

Bristol Chairman: Nick Sturge

Lincolnshire Chairman: James Pinchbeck

Isle of Man Chairman: Geoff Hunt

Buckinghamshire Chairman: David Pritchard

Liverpool Chairman: Ian Spink

Jersey Chairman: Simon Radford

Central London Chairman: Jim Kelly

Manchester Chairman: Bill Docherty

Cheshire Chairman: Nick Robinson

Milton Keynes Chairman: Philip Smith

EUROPEAN CENTRES (Excluding the UK)

City of London Chairman: David Brewer

Norfolk Chairman: Nick Farrow

Continental European Branch Chairman: David Demetrius

Coventry & Warwickshire Chairman: Philip Cornwall

Northamptonshire Chairman: Martin Strauss

Belgium Chairman: Frank Laske

Wiltshire Chairman: Jon Lamonte

Bermuda Chairman: Reg Rawlins Cyprus Chairman: Evdokimos Xenophontos Malta Chairman: James Satariano Monaco Chairman: William Easun

Institute of Directors, Republic of Ireland President: Laura Magahy CEO: Eoin O’Shea Institute of Directors, Nigeria President: Olusola Dada The Institute of Directors in Southern Africa Chairman: Shepherd Shonhiwa Executive Director: Tony Dixon Institute of Directors, Zimbabwe Chairman: David Mutambara

ASSOCIATED BODIES The Australian Institute of Company Directors CEO: Ralph Evans Canada Institute of Corporate Directors President/CEO: Beverley Topping The Institute of Directors in New Zealand CEO: Dr Nicki Crauford

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PREMISES

116 Pall Mall London SW1Y 5ED also at: 120 Pall Mall 123 Pall Mall 1 Pall Mall East IoD hub City of London New Broad Street House 35 New Broad Street London EC2M 1NH IoD Belfast Ulster Reform Club 4 Royal Avenue Belfast BT1 1DA IoD hub Birmingham One Victoria Square Birmingham B1 1BD IoD Brussels Le Plaza Hotel Boulevard Adolphe Max Laan 118-126 1000 Brussels BELGIUM

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IoD Edinburgh The Royal Scots Club 29 Abercromby Place Edinburgh EH3 6QE IoD hub Manchester Peter House Oxford Street Manchester M1 5AN IoD Nottingham Trent Bridge Nottingham NG2 6AG IoD Paris France-Amériques 9/11 avenue Franklin D. Roosevelt 75008 Paris FRANCE

IoD hub Reading Davidson House Forbury Square Reading RG1 3EU

F I V E Y E A R S U M M A RY

2003

2004

2005

2006

2007

No. of members at Year End

53,473

53,268

52,780

52,790

52,427

647

1,350

1,824

2,147

2,159

30,145

31,755

33,268

34,402

35,617

1,817

2,194

3,605

5,834

7,714

Surplus/Deficit before Tax (£k) Gross Income (£k) Net Assets (£k) Fixed Asset Investment (£k)

1,236

1,822

2,155

1,669

1,495

Investments & Cash Balances (£k)

8,201

9,285

10,173

11,762

14,225

Net Assets as % of Gross Income

6.0%

6.9%

10.8%

17.0%

21.7%

4.1%

5.7%

6.5%

4.9%

4.2%

27.2%

29.2%

30.6%

34.2%

39.9%

Fixed Asset Investment as % of Gross Income Investments & Cash Balances as % of Gross Income

The Institute of Directors Annual Report and Accounts 2007