The Physiological Society

Annual Report and Accounts for the year ended 31 December 2006

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Message from the President andChairman of the Executive Committee

This year saw consolidation of the stable platform put in place by Giovanni Mann, as Chairman of the ExecutiveCommittee, and Alan North, as President, in the previous 2 years. This enabled us to modernize our governance and operation in line with the new UKframework for charities and the reality of modern physiology. The Council has been reduced in size tobecome an effective Council of Trustees and TheSociety’s committees have been restructured andreduced in size so that each Council member can play aspecific role.

The Executive Committee has a new look. In 2006 OlePetersen became President; Ian McGrath, Chairman;Clive Orchard, Vice-Chairman; and Prem Kumar,Meetings Secretary. Graham McGeown as Treasurer andDavid Eisner as International Secretary provided continuity.

This new Executive Committee, together with our newChief Executive, Mike Collis, revisited our priorities. Weemphasized scientific meetings and publications as ourcore activities, supported by educational activity aimedat outreach to the public and society, at inspiring the next generation to take up an interest in physiology andat recruiting new Members to The Society. To promotethe role of physiology in the academic and politicalspheres we resolved to support and work with theBiosciences Federation, where common interests can be most effectively represented, in addition to our ownspecific efforts where this is more appropriate. Theseaspects are detailed in the sections that follow.

We are confident that Mike and his excellent and enthusiastic team in the London and Cambridge officesare up to the task of implementing these policies andlook forward to a further period of consolidation andgrowth of The Society’s activities in the coming year.

Our mission and purposePhysiology is the science of how humans and other animals function in an integrated way and is the basisfor many biological and clinical sciences.

The Physiological Society was founded in 1876 and is alearned society with approximately 2,500 Members(including 14 Nobel Laureates) and Affiliates (youngerscientists) drawn from over 50 countries. The majorityof Members are engaged in research, in universities orindustry.

The Society's charitable objectives are to promote, for the benefit of the public, the advancementof physiology, and facilitate the intercourse of physiologists both at home and abroad, and therebycontribute to the progress and understanding of biomedical and related sciences and the detection, prevention and treatment of disease, disability and malfunction of physical processes in all forms of life.

Strategic objectives

The strategic objectives of The Society are listed below:

1 To support physiological research through publications and scientific meetings

• foster the highest quality science and research ethics within the discipline of physiology

• publish scientific journals that aim to be at the top oftheir peer group for scientific quality, ethics and impact, and which provide significant financial support to facilitate the other activities of The Society

• support scientific meetings of outstanding international quality and relevance for the broadest possible range of physiological disciplines, with very high standards of presentation and discussion. Theseshould provide ample opportunities for younginvestigators to present their findings to the most relevant experts in the field

• promote links with physiologists in other countries and to foster physiology internationally.

2 To support education in physiology

• encourage a high quality entry of school leavers into UK and Irish undergraduate courses which provide aproper training in physiology

• develop physiology as a central component of modern biology in the context of changes touniversity infrastructures and to promote its teaching in biological, physiological and applied physiological courses (such as medicine, dentistry and veterinary medicine)

• support and encourage physiologists at formative stages in their careers

• provide training opportunities in new techniques of value to physiologists.

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3 To communicate the importance of physiology (external relations)

• foster a clear medical, public and Government understanding of physiology, highlighting contributions to medicine, society and the economy.

4 To support our membership and maintain our operations

• actively increase and broaden the membership base of The Society

• work with other national and international learned societies in closely related scientific disciplines to share resources and organise joint initiatives, while still retaining a clear and prominent identity

• have a financial and investment strategy that generates sufficient income to achieve The Society’sobjectives, with contingency plans for a range of future scenarios

• build an efficient administrative and governance structure to support these aims. To develop an administrative group that is pro-active, adds expertise and value so that the Council of The Society can concentrate on strategic matters and the Executive Committee of Council can direct and monitor implementation.

Review of the yearThis has been a year of change and as such is a portentof the future. This year’s Annual Report reflects thischanging environment and has a different format fromprevious years, with the aim of increasing its value toMembers of The Society whilst complying with therequirements of Charity Law.

Publishing is a major activity, as a means to promotehigh quality physiological research, and nearly half ofThe Society’s staff support this. Our two journals (TheJournal of Physiology and Experimental Physiology) arethriving, with an impressive increase in impact factorfor Experimental Physiology. The technology for distributing scientific information is advancing rapidly,but there are also significant threats on the horizonwith open access publication being promoted by anincreasing number of research funding bodies. To helpus to respond to the opportunities and threats of thisnew era of publication, the Publications Committee wasformed this year to take a strategic overview of all ourpublishing activities.

We have run some excellent scientific meetings over the

year, both in the UK and abroad, and there are moredetails of these in this report. The way we organisemeetings has been reviewed and the various specialinterest groups combined into thematic areas. The differentiation between UK and overseas meetings hasbecome less distinct, and in response we have combined the committees dealing with these eventsinto one Meetings Committee, supported by anexpanded events group in the London Office.

A number of projects to update the image of TheSociety and the way it communicates with its Membershave been progressing this year. Rebranding, with anew logo and strap line, Advancing the science of life,was introduced and work has started on an updatedweb site. We are keen to increase our membership andplans for new membership categories have been developed.

Over the year, The Society has been increasingly activein responding to Government consultation papers and in interacting with external organisations. We have participated in numerous educational activities targeting both secondary and tertiary levels and havebeen partners in the production of a new DVD on theethics of animal experimentation.

The Society is fortunate to have a strong financial position and we have been prudent in ‘ring fencing’funds against future commitments, such as the IUPS meeting (in 2013), and in modelling future financial scenarios and reviewing our investment strategy. In2006 we have laid a firm foundation for continuedachievement in the coming year.

Aims in 20072007 promises to be an exciting year with the pace ofchange in The Society steadily increasing. We will beworking more closely with Blackwell, our publisher, toprepare for the rapidly changing technological andbusiness environment in scientific publishing. In orderto protect the financial position of The Society in anuncertain future, we will be seeking additional forms ofincome to that currently provided by our journals. Weplan to introduce new membership categories thatincrease and broaden the membership base. New workshops will be piloted for policy makers, media andthe general public that demonstrate how basic physiological research underpins advances in medicaltreatment and explore the position of physiological training in the medical curriculum.

Our new web site will go live in 2007 and will offer significant increases in functionality, becoming themain portal for our communication with the membership. New educational resources for school

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teachers and academic colleagues will be developedand delivered via the web. Our scientific meetings willbreak new ground as we hold our first joint annualmeeting with the British Pharmacological Society andthe Biochemical Society. Scientific advance crosses traditional discipline boundaries and our joint meetingwill mirror this and promises to be the most exciting scientific meeting this year in Europe.

GovernanceCouncil of TrusteesThe Trustees are legally responsible for the overall governance, management and policy of The Society,ensuring that the charitable objectives for which it hasbeen set up are met. The Trustees are also the Directorsof The Physiological Society. The Council of Trusteesmeets three times a year.

The Council of Trustees consists of:

• a President, elected by the Council• one member of the Editorial Board of The Journal of

Physiology; and• Members nominated by the membership or by the

Council and elected by the membership at the Annual General Meeting.

Elections to the Council take place each year at theAGM, and any Member of The Society is eligible tostand. Trustees are elected to serve for a period of 4 years. The current size of the Council is 23, but it hasbeen agreed that this will be reduced to 20 in 2007.Meetings of the Council are chaired by the President.

Trustees’ responsibilitiesCompany law requires the Council of Trustees to prepare financial statements for each financial yearwhich give a true and fair view of the state of affairs ofThe Society and of the income or expenditure for thatyear. In preparing those financial statements, theCouncil of Trustees has:

• selected suitable accounting policies and then applied them consistently

• made judgements and estimates that are reasonableand prudent

• followed applicable accounting standards and statements of recommended practice without any material departures

• prepared the financial statements on the going concern basis.

The Council of Trustees is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of The Society and which ensure that the financial

statements comply with the Companies Act 1985. Theyare also responsible for safeguarding the assets of TheSociety and hence for taking reasonable steps for theprevention and detection of fraud and other irregularities.

Information provided to auditorsWith regard to the preparation of this Annual Reportand Accounts, so far as each Trustee is aware there is norelevant audit information of which The Society’sauditors are unaware, and the Trustees have taken allthe steps that they ought to have taken as Trustees inorder to make themselves aware of any relevant auditinformation and to establish that The Society’s auditorsare aware of that information.

Trustee induction and trainingOn appointment each Trustee is sent a Trustee Handbook which includes Charity Commission leafletCC3 and Companies House leaflet GBA1. In 2006,Trustees received a Charity Law and Governance presentation from The Society’s solicitors. One Trusteeattended a training seminar on charitable investmentresponsibilities. Further enhancing of induction andtraining procedures will be introduced in 2007.

Executive CommitteeThe Executive Committee oversees the day-to-day operations of The Society and meets frequentlythroughout the year. Members of the ExecutiveCommittee are drawn from, and elected by, theCouncil. The Council can delegate any of its powers tothe Executive Committee as it sees fit.

There are seven officers of The Society who comprisethe Executive Committee: the President of The Society,a Chairman, a Vice-Chairman, a Treasurer, a MeetingsSecretary, an International Secretary and the memberelected by the Editorial Board of The Journal ofPhysiology. The normal term of office on the ExecutiveCommittee is 4 years.

The Nominations Committee, chaired by the Chairmanof the Executive Committee, oversees nominations forthe President and Officers of The Society, based on recommendations from Council, who may also canvasthe membership.

Committees and Working GroupsThe Council also has Committees and Working Groupsto which it delegates powers, and these groups reportback to the Council via the Executive Comittee.Membership of these Committees and Working Groupsis drawn from the Council but can also include otherinvited members. An improved and streamlined committee structure was introduced in 2006 which aligns committees with the various functional groups

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in the London and Cambridge offices. These include a combined Meetings and International Committee and a new Publications Committee. Membership of committees was also reviewed and modified in order to have the required spread of expertise.

Management and administrationThe Trustees have employed a Chief Executive who reports on the performance against the strategic andoperational plans approved by the Trustees. The Societyhas two offices. The Administration Office in London provides central direction for all aspects of policy andstrategy implementation. The Publications Office inCambridge supports the publishing activities of TheSociety, including The Journal of Physiology andExperimental Physiology.

Annual General MeetingThe Society’s Annual General Meeting, open to allOrdinary and Honorary Members, was held on 5 July2006 at University College London during the MainMeeting. Minutes of the meeting are available on TheSociety’s web site.

Risk managementThe Trustees continuously review potential risks to TheSociety. The Audit and Risk Committee reviews theeffectiveness of internal financial controls and risk management systems, the effectiveness of our internalaudit function and the clarity and completeness of disclosures in the financial statements of The Society.

Main areas of identified risk include health and safetyand security issues at Society events, loss of key members of staff, under-performance of externaladvisers, collapse of the publisher’s distribution system,and virus attack on The Society’s IT infrastructure. Forthese and other areas of identified risk, preventative measures have been agreed.

The greatest potential area of risk facing The Society inthe future is the loss of income due to ‘open access ’publishing of scientific information. We are workingwith Blackwell Publishing Ltd to assess the risk toincome so as to ensure that The Society has preventative measures in place.

The major activities we undertake to achieve our charitable objectives are:

• Publishing• Scientific meetings including international activities• Education• External relations• Membership services (including provision of grants)• Resources, administration and infrastructure

PublishingThe Society publishes original scientific literature onlineand in print in its two highly regarded journals, TheJournal of Physiology and Experimental Physiology, via ourpublishers Blackwell Publishing Ltd. It also publishes aMembers’ quarterly magazine, Physiology News, and isdeveloping its publishing outlets through thePublications Committee.

The Journal of Physiology (http://jp.physoc.org)The Journal continued to attract submissions and readers during 2006, by maintaining a competitive timeto first report and by publishing high quality relevantresearch papers in all areas of physiology and invitedarticles in new and exciting areas. Twenty four issues ineight volumes were published on schedule and to budget and contained Research Papers, Rapid Reports,Topical Reviews, Symposium Reports, Perspectives,Classical Perspectives, Letters to the Editor andEditorials. The impact factor declined slightly to 4.27,although the half life remained in the top three for related journals at 9.2 years. New table of contents sections were introduced to highlight areas attractingthe most high quality submissions. Two Journal ofPhysiology symposia were sponsored at internationalmeetings in Japan and the USA, and initiatives to establish specialist groups of Editors and improve publicity were introduced. The Editorial Board met inNew York in September and the Executive Committee,which handles the day-to-day running of The Journal,held three meetings in the UK and one in New York.

By maintaining the competitive speed and quality ofreview, The Journal hopes to continue to attract qualitysubmissions during 2007. Mini reviews from young scientists will be published in a new Journal Club section, the number of sponsored symposia will beincreased and it is hoped to improve the impact factorthrough rigorous review of manuscripts and rejection ofthose with low impact and citation potential.

Experimental Physiology (http://ep.physoc.org)Experimental Physiology strengthened its integrative remit, enforcing a more rigorous triage system toensure the publication of high quality research papers in all areas of physiology with an emphasis on translation and integration. The impact factor rose to2.054, a 12% increase, and new submissions remainedbuoyant with a competitive time to first report. Sixissues, containing two themed issues and two sets ofsymposium reports, were published on schedule andwithin budget. David Paterson replaced John Coote asChairman of the Editorial Board and four new US Editorswere appointed to raise the international profile of EP.Publicity was increased at scientific meetings, with a‘meet the Editor’ reception at EB 2006 in San Francisco.

During 2007 the frequency of publication will bereviewed. It is hoped to attract additional high qualitysubmissions by maintaining competitive speed andquality of review, and special issues will continue to bepublished. Viewpoint articles will be introduced tohighlight high impact papers within the issue. EP willbe promoted by targeted publicity at scientific meetings and plans to celebrate the centenary year in2008 will be formulated.

Physiology News(http://www.physoc.org/publications/pn)The Members’ quarterly magazine continued to promote physiology by publishing current news andviews articles prepared by Members of The Society andother physiologists, as well as providing information onSociety and other related activities.

Biomedical PublicationsOxford University Press continues to publish and marketThe Physiological Society Monographs and the latest inthe series, The motoneurone and its muscle fibres, waspublished in 2006.

Scientific meetings (including international activities)

Scientific meetings are one of the original activities ofThe Society and remain of the highest importance. Ourmeetings facilitate the dissemination and discussion ofthe latest scientific advances, supporting andpromoting physiology.

Last year we held our main meeting at UCL, which wasattended by over 1,000 physiologists from the UK andoverseas. This major meeting included 16 symposia,three workshops, plenary and prize lectures and over400 free communications, covering all areas of physiology. Four smaller specialist meetings were alsoheld in 2006, focusing on specific areas of physiologicalresearch. Two were based in the UK and two abroad.

As part of our continuing commitment to support physiology in less scientifically developed countries,international workshops were held in Venezuela, Kievand Prague, attracting participants and speakers frommore than 10 countries. The Society was well represented at the international meeting held by ourBrazilian counterparts in September.

We also honoured the contributions to physiology oftwo distinguished Members, Tim Bliss and Chris Bell, bysupporting two special symposia during the year. TheSociety contributed close to £12,000 in support of non-Society symposia covering a wide range of topics ofinterest to physiologists.

2007 will be a land-mark year as we combine our mainmeeting with the British Pharmacological Society andthe Biochemical Society in Life Sciences 2007, our firstfederation style event. We will hold four additional specialist meetings (in Edinburgh, Belfast, Manchesterand Bristol) and will support four special symposia tohonour distinguished contributions to physiology.International workshops will be held in Krakow andUkraine and a joint meeting with the Slovakian Societyand FEPS is planned in Bratislava in September. TheSociety will be moving to a more thematic approach tophysiology to ensure a greater coverage of subject areaon a more regular basis. Looking further ahead, plansare well underway for our 2008 annual meeting inCambridge and for the prestigious IUPS congress thatwe will host in the UK in 2013.

Proceedings of The Physiological SocietyMeeting abstracts now form a separate online publication and are no longer published as part of TheJournal of Physiology(http://www.physoc.org/publications/proceedings).

Plenary and Prize Lectures supported byThe SocietyAustralian/UK Visiting Lectureship SchemeM J Dunne

G L Brown Prize LectureC A R Boyd (University of Oxford, UK)Epithelial physiology: facts, fantasies and fun

The Physiological Society Public LectureDavid Attwell (University College London, UK)Brain/Power

The Biller Prize LectureMatthew Bailey (University of Edinburgh, UK)Mechanisms of hypertension in a mouse model ofapparent mineralocorticoid excess

The Sharpey-Schafer LectureNeville H McClenaghan (University of Ulster, UK)Physiological regulation of the pancreatic beta-cell:functional insights for understanding and therapy ofdiabetes

Hodgkin-Huxley-Katz Prize LectureThomas J Jentsch (University of Hamburg, Germany)Roles of vesicular CLC chloride transport: insights from disease, mouse models and biophysics

Joan Mott Prize LectureSusan Wray (University of Liverpool, UK)Insights into the uterus

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Wellcome Prize LectureHelen Kennedy (University of Bristol, UK)Detecting sounds: mechano-electrical transduction inthe mammalian cochlea

The Bayliss-Starling Prize LectureRod Flower (William Harvey Research Institute, London, UK) Annexin 1, glucocorticoids, stress and inflammation.

EducationThe Society plays an important role in supporting theteaching of physiology. Our strategy operates at a number of educational levels.

For schools, we aim to provide resources for teachers,and workshops that emphasize the central role of physiology in the biology curriculum. We also providecareers booklets, educational films for school pupils andopportunities for them to interact with local universitiesto learn more about the subject.

Our Affiliate Members are at an early stage in theirphysiological research careers and we provide themwith the opportunity to organise their own scientificmeetings specifically for young physiologists, as well as supporting them with a portfolio of training coursesand careers advice.

Our Members often work in academic institutions andwe plan to provide teaching resources and workshopsto assist them with their educational activities.Physiological research can involve the use of experi-mental animals and an important activity is provision of up to date materials to help people, particularly the general public, understand why this is necessary andthe high standards of welfare required in the UK.

Over the past year we have organised teachers’ workshops to gather information on the requirementsto produce new teaching materials for schools. Careeropportunities have been highlighted to school leaversand undergraduates at five careers conferences aroundthe UK.

We have hosted events for school students, focusing ontopics including stem cell research and how the heartworks, during the BA Advancement of Science NationalScience Week and the Festival of Science.

A particular focus this year has been activities involvingour Affiliates and younger Members. We held four successful Young Physiologists’ meetings in Munich,London, Brazil and Bristol, a communication skills workshop for students and Affiliates, and a number oftechniques workshops.

In the coming year we will continue to develop teachers’ resources and materials for schools on careersand the importance of physiology. We will start a newproject to develop educational resources for ourMembers in higher educational establishments andupgrade our delivery of educational resources via thenew web site.

External relationsThe Society aims to raise the external profile and promote the interests of physiology to a wide audience. This involves creating educational andpromotional materials for the general public, lobbyingGovernment and other organisations on issues of concern to physiologists, fostering relationships withlike-minded organisations, providing media skills training, and liaison with the media. In 2006, majorreviews were conducted into The Society’s sponsorshipof external organisations and into its overall strategy.

A new media and schools presentations communicationskills workshop was developed with Sense About Science.A pilot publicity project was run with The Journal ofPhysiology, and we are working with Blackwell to promote Journal content PR support was provided toThe Society’s main meeting with excellent media coverage obtained. The Society responded to manyrequests from journalists interested in health issues.

Animal research issues remain an important focus. TheAnimal Welfare and Legislation Working Party has beenvery active and has a very close working relationshipwith the Biosciences Federation’s Animal ScienceGroup (ASG). A new DVD for schools on the ethics ofanimal experimentation was developed in partnershipwith GlaxoSmithKline, the Coalition for MedicalProgress, and the Biomedical Research Education Trust.The DVD will be distributed to all schools across the UKin 2007 with an accompanying media campaign. Publicshowings will be arranged during the BA’s NationalScience Week.

The Society joined the European Coalition forBiomedical Research, a pan-European group formed tolobby on the proposed revisions of Directive 86/609/ECconcerning animal research.

The Working Party contributed to the DTI’s strategy totry to generate increased funding for training for in vivoskills at undergraduate and postgraduate levels in university departments, and continued to work withthe British Pharmacological Society to provide skillstraining through In Vivo Taught Course Workshops. TheSociety was also actively involved in responding to science policy consultations.

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Strong policy links were also forged with other societies, with the President chairing both the RoyalSociety (RS) working group responding to the DfES consultation on the reform of higher education researchassessment and funding and the RS Working Groupresponding to the RCUK consultation on the efficiencyand effectiveness of peer review. Ole Petersen was amember of the joint committee set up by the RS andthe Academy of Medical Sciences responding to theCooksey Report on the future of UK health researchfunding.

In the coming year, we plan to implement the recommendations of the strategy review, provide more emphasis on using press releases and other publicity to support our science policy and other activities, and lead on providing PR support toLifeSciences2007. The Society also intends to run thefirst in a series of workshops focusing on the contribution of physiology to translational research for policy makers, media and the general public, andcreate a new working party to explore the position ofphysiology training in the medical curriculum.

Membership servicesAs a membership organisation, one of The Society’s primary aims is to support the career development ofits Members and Affiliates through a variety of mechanisms.

We endeavour to maintain a high standard of service tosupport the membership and continually review thebenefits we offer, the way in which we utilise our funds,and our recruitment strategy to allow growth of TheSociety. To ensure our membership is kept up to datewith Society news, key advances in physiology andmembership news we produce the quarterly magazinePhysiology News and a monthly e-newsletter.

In 2006 the recorded membership of The Societydecreased from 2,724 to 2,546; this decrease is primarily due to a number of Members and Affiliateswho allowed their membership to lapse in 2005 and2006 and were removed from the database. However,during 2006 The Society gained 347 new Membersacross the four categories of membership (Honorary,Ordinary, Ordinary Retired and Affiliate) and the number of new Ordinary Members increased overthree-fold. In 2006 The Society awarded Honorarymembership to E M Wright and C R House.

This year has also seen the development of a number of strategies to engage new Members, including 1 yearfree trial membership for publishing authors, a pilotUndergraduate Associate scheme and a new Associatecategory for those with an interest in

physiology but who do not qualify for Ordinary orAffiliate membership. The Society has also looked at expanding the circulation of Physiology News, ntroducing new content and developing the magazineweb site.

Over the next year new membership categories will beintroduced and actively promoted. We intend to develop the Associate category of membership toinclude the needs of clinical physiologists who have anincreasing interest in The Society. A new membershippromotion strategy should result in an increase in bothmembership uptake and retention of current Members.This will include promotion through an improvedPhysiology News and increased presence of Society representatives during meetings. Implementation ofThe Society’s new web site will allow Members onlineaccess to grant applications, membership records and apayment facility.

Grant making policyThe Society awards grants to support the careers ofphysiologists in the UK and internationally. Assessmentcriteria for applications include the benefit of fundingan application to the applicant and to the furtheranceof physiology. Details of the policy and application procedures are available to Members and are listed onThe Society’s web site. The types of grants availableare:

• Member and Affiliate Travel Grants for attendance at meetings, workshops and laboratory visits

• Vacation Studentships to support undergraduate summer research projects

• Network Interaction Grants to facilitate the communication between research groups world-wide

• Centres of Excellence Support Scheme and Junior Fellowships to support physiologists in Eastern Europe and developing countries *

• Foreign Guests Scheme to allow physiologists from around the world, who are not Members, to travel to Society Meetings *

* International grants not available to physiologists based in the UK.

• Young Physiologist Bursary Scheme which allows young scientists, who are not Members of The Society, to attend Society Meetings.

In 2006 a total of 196 out of 273 applications for membership grants were funded to an overall value of£117,319. Over 50% of funds supported Member andAffiliate travel to scientific meetings. There was a 25%rise in the number of Vacation Studentship applicationsand we anticipate this number may significantlyincrease with the introduction of Undergraduate

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Associate membership.

Rationalisation of grants means that during 2007 a new application review process will be implemented. A single Grants Working Group will review all Societygrant applications, including those for internationalschemes. The Network Interaction Grant scheme will be reviewed due to its continually low uptake and islikely to be replaced from 2008 with a proposed Skillsand Network Development Grant. We will also reviewhow we can support our new Associate membershipcategories, in particular Undergraduate Associates.

Resources, administration and infrastructureIn 2006, following a review of The Society’s publications, literature, stationery and promotionalmaterial, Council approved a project to develop a newbrand. It was agreed that a new brand would increaseThe Society’s recognition factor and help to ensurephysiology is a recognised discipline in years to come. A brand covers all aspects of visual communication,ensuring that our presence is clear and easy to understand no matter where or how it is being used.The rebranding will be applied with clear guidelines forall users, saving time and money in the long-term.

35 Communications, selected as designers following atendering process, developed several concepts after consultation with a range of stakeholders. A finalset of designs and guidelines were then approved byCouncil and the new look of The Society will belaunched in spring 2007.

In 2006 a proposal to redevelop The Society’s web sitewas approved by Council. The new site was developedin conjunction with Fisher Technology, suppliers of ourmembership database, and will be launched in summer2007. The new web site will incorporate our rebrandedimage, resulting in a fresh modern look and improvednavigation. The web site will be fully integrated with ourexisting membership database, providing Memberswith the facility to apply and pay for membership,grants and events online, update their personal information, and preview subscription dues and forth-coming events. The site will also offer additional fea-tures including a searchable Members’ directory, bulletin boards and forums, online voting and questionnaires, personalised content, news and jobslistings, mailing list signup, and secure online paymentsby card or direct debit.

We are also expanding the content available online, andspecialised content management software will allowstaff to update and archive content more efficiently. Allthis will be provided in a secure and stable hosting environment, giving Members and the public the

confidence and level of service expected of modern web sites.

The Society governance documents have been reviewedand undergone an extensive re-write this year. Theupdate was approved at the AGM of The Society. TheSociety strategic objectives have also been reviewed byCouncil and updated and can be seen under Our mission and purpose (p. 6)

A new Chief Executive was appointed in May 2006 andsubsequently a new organisational structure in theLondon Office has been introduced to ensure that keyareas of activity are fully supported and better careerdevelopment opportunities are available.

Goals for 2007 will be to introduce the new web siteand ensure it serves our Members’ requirements andreview of our publishing activities. We are in theprocess of modelling future financial scenarios, including a loss of journal income, and preparing contingency plans.

History & Archives CommitteeThe History & Archives Committee actively promotesinterest in all aspects of the history of physiology.

The Committee oversees The Society’s various archivalcollections which are currently tended by professionalarchivists at the Wellcome Trust Library and the ScienceMuseum. The collections comprise mostly paperrecords of The Society’s activities, a photographic andfilm collection of individuals, laboratories and experiments, and a growing collection of oral historyinterviews with those who have contributed to physiology and to The Society.

The Committee publicises the need for identifying thelocation, collection and the maintenance of equipment associated with the history of physiology. Additionally it encourages individual physiologists to donate relevant personal and professional records to an appropriate repository.

The Committee also administers the Paton Fund for historical studies, which was set up in 1994 to help fundsmall projects on the historical aspects of physiology.

In 2006, the Committee’s oral history programmeincluded interviews with Roger Woledge, Tom Searsand John Gillespie. The Committee’s work to celebratefamous physiologists included commemorating the lifeand work of Sydney Ringer with the erection of amemorial plaque in Lastingham Church, his place ofburial, and the production of an accompanying biographical booklet containing a description ofRinger’s contribution to physiology.

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The major activities for 2007 will include:

• cataloguing the records of The Society that have accrued over the past 10 years, for which the Committee has secured funding for a temporary archivist

• further oral history interviews with a number of physiologists, including a group session of individuals who were associated with activities on The Society’s behalf dealing with the introduction ofthe Animals (Scientific Procedures) Act 1986, the Council of Europe Convention for the Protection of Animals used for Experimental Purposes, UFAW Guidelines, etc.

• digitising parts of the photographic collection• applying for a Blue Plaque to be placed on Sydney

Ringer’s London house.

Benevolent Fund of The PhysiologicalSocietyThe Benevolent Fund was established in 1976 ‘for thepurpose of assisting Members of The Society, staff andformer staff (who by the nature of their employmentcan be considered to have contributed to the advanceof physiology) employed at teaching, research andindustrial establishments who are in necessitous circumstances, and their dependants’.Income in 2006 was £3,855, of which £1,874 came

from charitable giving, £495 from raffles and theremainder from investment income and bank interest.In 2006 two grants totalling £3,000 were made and£200 of book tokens and vouchers were given to children of recent beneficiaries.

The Society is connected by virtue of common objectsand administration with the Benevolent Fund of ThePhysiological Society (Registered Charity No. 272800).

The connected charity may be contacted by writing tothe registered office of The Society at Peer House,Verulam Street, London, WC1X 8LZ. The Society supports the Benevolent Fund by the provision ofemployees' time and resources free of charge.

Biosciences FederationThe Society continues to support the BiosciencesFederation (BSF) as a powerful umbrella and lobbyingorganisation for the life sciences in the UK, and provides office accommodation and funding for the organisation.

The BSF is one of the channels for submitting TheSociety's responses to public consultations. The Societyis closely involved with the BSF Animal Sciences Groupthat is tackling difficult issues concerning legislationand the activities of animal rights activists.

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Financial review Basis of accounting The annual financial statements of The PhysiologicalSociety are attached to this report. These are fully SORPcompliant including a full analysis and allocation of sup-port costs across the charitable activities.

Review of the year Overall summary The Society’s income remained constant in 2006 at£3.3m (2005: £3.3m). However, expenditure increasedby £0.1m to £3.1m (2005: £3.0m) and, as a result, netincoming resources fell by £0.1m to £0.2m (2005:£0.3m). Thanks to the good performance of our investments in 2006, The Society’s reserves increasedduring the year by £1.2m.

Publications The Journal of Physiology Total income increased by a disappointing 1% to£2,492k (2005: £2,456k). The shift towards online onlysubscriptions continues with a 30% share of total institutional subscriptions in 2006 (2005: 19%).Consortia income, in which institutions subscribe to a large package of journals including The Journal ofPhysiology, increased by £25k (19%).

Experimental Physiology Subscription income increased slightly at £136k (2005:£129k). Increased consortia, rights and colour revenueincreased total income to £137k (2005: £131k). Publication costs also increased slightly to £1,471k(2005: £1,422k). Savings in production costs (£67k)were partly offset by an increase in the Publisher’s profit share (£39k). Staff costs, editorial support andother support costs all increased.

MeetingsMeetings income will always be a function of the regis-tration arrangements in place. Income fell by £74k in2006 and this was mostly due to the two affiliatedmeetings held in 2005 (2006: none), which accountedfor £51k of the income in that year.

Costs associated with Scientific Meetings increased by£23k (4%) to £562k (2005: £539k). The direct costs ofThe Society’s main meeting were £132k (2005: £148k).Grants totalling £26k were awarded in respect of theJoint International Brazilian Meeting and direct staffcosts increased by £22k with the expansion of theEvents Team.

International Resources expended on International activitiesremained stable at £186k (2005: £184k). ThreeInternational Workshops and three Centres ofExcellence were supported in 2006.

Membership services Membership subscriptions fell by £39k (23%) to £127k(2005: £166k). This reflects the impact of a majordebtor exercise in 2005, which increased income in thatyear, and the decision to discontinue subscriptioncharges for ordinary retired Members.

Costs associated with the provision of membershipservices, including grants to Members, increased by £3k(1%) to £336k (2005: £333k). Grants payable in 2006were £143k (2005: £146k). Other major items includepublication costs associated with Physiology News(£24k) and the Trustees’ Annual report (£6k).

Education Activities include workshops, careers events, YoungPhysiologists’ symposia and educational literature.Costs associated with these activities fell by £9k (6%) to£146k.

External relationsResources expended on activities associated with external relations and policy increased by £52k (50%) to £157k (2005: £105k). New items in the year included£27k in respect of a Schools’ DVD project and also £20kper annum support to the Biosciences Federation, tocontinue until 2008.

Governance Costs relating to the general running of The Society fellby 5% to £202k (2005: £213k).

Other incoming resourcesInvestment income showed a healthy increase, with anincrease of £51k (14%) over the previous year. This wasdue both to a greater bond weighting in the investmentfund allocation and receipt of £21k followingback¬dated rent reviews.

Balance sheet The balance sheet remains in good shape ensuring thatThe Society has the assets required to meet its charitable objects.

The value of The Society’s investment portfolio hasincreased in 2006. Growth in the value of the trackerfunds of £0.5m reflected the strength of the world markets whilst the valuation of investment propertyincreased by 22% to £2.9m (2005: £2.4m).

Debtors increased by £0.2m to £1.9m (2005: £1.7m).This was mostly due to a larger balancing royalty owedby Blackwell Publishing Limited at the year-end.

Cash balances increased by £0.6m to £1.5m (2005:0.9m). £0.6m of backdated royalty VAT was collectedfrom Blackwell in December 06 and paid over to HMRevenue & Customs in January 2007.

12

Also in January 2007, £0.4m of surplus cash balanceswere transferred to a one-year fixed term depositaccount, designated the IUPS Fund.

Creditor balances have increased by £0.6m to £2.4m(2005: £1.8m); again, this reflects the voluntary VATdisclosure paid over in January 2007.

Investment policy and performance Investment funds Since July 2005, The Society’s investment funds havebeen held with Legal & General InvestmentManagement (LGIM). The investment objectives are totrack the capital return of the relevant market indexwithin tight tolerances for each of the index funds inwhich the fund is invested. The value and distribution ofthe funds are set out in the table below.

The tracker funds have grown by 6.4% in total.Investment income, which is currently distributed, hasgrown by 25% to £242,594 (2005: £194, 840). The LGIMmanagement charges are reflected in the unit prices; in2005 the charges accruing to Newton InvestmentManagement Limited were £9,151.

Property The property portfolio did not change in 2006. At 31December 2006 the property portfolio was re-valuedupwards by £510,000 (2005: £480,000) following anindependent valuation. At 31December, the marketvalue of the portfolio stood at £2,870,000 (2005:£2,360,000). Total rental income during the year was£155,600 (2005: £143,600). The rental yield (based onthe opening market value) was 6.6% (2005: 7.6%).Property managers fees (5% of rental income) were£8,550 in 2006 (2005: £7,164).

The Trustees considered a draft Statement ofInvestment Principles (SIP) at a Council meeting held on23 November 2006. At this meeting it was agreed that,subsequent to an external review of the asset allocationand risk profile, all fund income would be reinvested inorder to maximise total return. In addition, Trustees will

consider whether an ethical and socially responsibleinvestment policy could be adopted in 2007.

Reserves policy The Trustees have adopted a reserves policy which theyconsider appropriate to ensure the continued ability ofThe Society to meet its charitable objects. During theyear the Trustees examined The Society’s requirementsfor free reserves in line with the guidance issued by theCharity Commission. The free reserves are defined asunrestricted funds less designated funds less fixedassets. The free reserves as at 31 December 2006 were£10,546,479 (2005: £10,330,124) and equate to 45.3months’ worth of expenditure (2005: 42.2 months).

Free reserves are needed to allow for the developmentof new initiatives, to meet the working capital require-ments of The Society and to compensate for a signifi-cant drop in publishing income. The Trustees consider itprudent that free reserves, which represent 99% of themarket value of investments, should be sufficient togenerate £550,000 of investment income, if required,to offset the possible loss of publishing income. Using anotional yield of 5%, the level of free reserves required is~£11 million. Free reserves are cur¬rently below thatrange by approximately £0.5 million; The Society will re-invest investment income and make periodic cashinjections to attain the target level.

In addition, the Trustees agreed to designate £1millionto underwrite potential commitments for the XXXVIIIUPS Congress in 2013. In February 2007, £400,000 wastransferred to a one-year fixed term deposit account forthis purpose. Periodic cash injections will be made tothis fund over time.

Treasurer’s statement I am pleased to be able to confirm the financial health of The Society, as reflected in this report, but would alsolike to draw attention to a number of important issues.

Although our 2006 income exceeded our expenditureby £200k, the underlying trends are worrying. Total

Index Trust 31 December2006

31 December2005

Investment Allocation

Benchmark £’000 % £’000 % %CAF UK Equitrack 3,712 48 3,289 45 45European 890 12 759 11 10US 420 5 417 6 5Japanese 417 5 454 6 5Pacific 431 6 395 5 5All Stocks Gilt 1,885 24 1,977 27 30Total £7,755 100 £7,291 100 100

Value and distribution of investment funds

13

income actually decreased relative to 2005 and journalincome, which was 81% of total income, increased byonly 1%. Core costs (salaries, rent, etc) are projected toincrease by at least 5% per year; probably more if inflation continues to grow. These trends suggest thatwe will soon have to call on our capital reserves, unlesswe adopt new models of operation. And this does nottake into account the possible impact of open accesspublishing, which some regard as the single largestthreat facing The Society. Several points for current andfuture action follow from this:

• Other sources of income need to be considered and aworking group has been set up to do this. The mostobvious source, however, would be Registration Fees forScientific Meetings. Even a relatively small fee couldprovide a major injection of funds. This could helpimprove current services and would also pave the wayfor meetings to be self-funding, should that becomenecessary. It is vital that we endorse this principle as aSociety.

• We need to maximise the performance of our nvestments. The Investment Strategy has beenreviewed, and we plan to adopt a more active fundmanagement approach in 2007. Related to this, theTrustees have decided that the adoption of positive ornegative ethical investment criteria is not appropriate,given the difficulty of defining such criteria based onthe charitable objectives of The Society, and the likelynegative financial impact of restricting the diversity ofinvestment on ethical grounds.

• Our reserves should be adequate to generateInvestment Income capable of replacing a substantialfraction of our current income. This is reflected in therelatively large target set out in our Reserves Policyabove.

On a positive note, I would also like to highlight the factthat the past year has seen considerable investment ofstaff time and money in equipping The Society for thefuture. The resulting improvements include:

• Upgrading of the internet hardware and software toprovide a more efficient, online service.

• Rebranding of The Society, as reflected in the web siteand this Report. The new look will help us promotephysiology, especially to a younger generation.

• Adoption of the new format for the Trustees’ Report,as required for charities by the Statement ofRecommended Practice 2005, has been both a majorand a worthwhile exercise. This required support coststo be allocated to the charitable activities we under-take, so we can make better informed judge¬ments as

to how closely expenditure is correlated to the effectiveness and importance of each activity funded.We hope you will agree that the result is more attractive and readable.

I just want to conclude by thanking The Society’s staff,and especially Casey Early, our Finance Manager, for thehighly professional and self-motivated approach theybring to their work on The Society’s behalf. This report was approved by the Trustees of ThePhysiological Society and signed on this 17th day ofMay 2007 on their behalf by:

J C Mcgrath Chairman of the Executive Committee

J G McGeown Honorary Treasurer

Independent Auditors' Report to Members ofThe Physiological SocietyWe have audited the financial statements of ThePhysiological Society for the year ended 31 December2006 which comprise the Statement of FinancialActivities, the Balance Sheet, the Cash Flow Statementand the related notes. These financial statements havebeen prepared under the accounting policies set outtherein.

This report is made solely to the charitable company ’smembers, as a body, in accordance with Section 235 ofthe Companies Act 1985. Our audit work has beenundertaken so that we might state to the charitablecompany’s Members those matters we are required tostate to them in an auditor’s report and for no otherpurpose. To the fullest extent permitted by law, we donot accept or assume responsibility to anyone otherthan the charitable company and the charitable company’s members as a body, for our audit work, forthis report, or for the opinions we have formed.

Respective responsibilities of Trustees and Auditors As described in the Statement of Trustees ’Responsibilities the charity’s Trustees are responsiblefor the preparation of the financial statements in accordance with applicable law and United KingdomAccounting Standards (United Kingdom GenerallyAccepted Accounting Practice). The Trustees are alsodirectors of The Physiological Society for the purposes

14

of company law.

Our responsibility is to audit the financial statements inaccordance with relevant legal and regulatoryrequire¬ments and International Standards on Auditing(UK and Ireland).

We report to you our opinion as to whether the finan-cial statements give a true and fair view and are proper-ly prepared in accordance with the Companies Act 1985and whether the information given in the Trustees ’Report is consistent with the financial state¬ments. Wealso report to you if, in our opinion the charitable com-pany has not kept proper accounting records, if we havenot received all the information and explanations werequire for our audit, or if information specified by lawregarding trustees’ remuneration and other transac-tions is not disclosed.

We read the Trustees’ Report and consider the implica-tions for our report if we become aware of any apparentmisstatements within it.

Basis of audit opinion We conducted our audit in accordance withInternational Standards on Auditing (UK and Ireland)issued by the Auditing Practices Board. An auditincludes examination, on a test basis, of evidence rele-vant to the amounts and disclosures in the financialstatements. It also includes an assessment of the signif-icant estimates and judgements made by the Trusteesin the preparation of the financial statements, and ofwhether the accounting policies are appropriate to thecharitable company’s circumstances, consistentlyapplied and adequately disclosed.

We planned and performed our audit so as to obtain allthe information and explanations which we considered

necessary in order to provide us with sufficient evidenceto give reasonable assurance that the financial state-ments are free from material misstatement, whethercaused by fraud or other irregularity or error. In formingour opinion we also evaluated the overall adequacy ofthe presentation of information in the financial statements.

Opinion In our opinion the financial statements:

• the financial statements give a true and fair view, inaccordance with United Kingdom Generally AcceptedAccounting Practice, of the state of the charitable com-pany’s affairs as at 31 December 2006 and of its incom-ing resources and application of resources in the yearthen ended, including its income and expenditure;

• the financial statements have been properly preparedin accordance with the Companies Act; and

• the information given in the Trustees report is consis-tent with the financial statements.

haysmacintyre Chartered Accountants Registered Auditors Fairfax House 15 Fulwood Place London WC1V 6AY

15

Statement of financial activities for the year ended 31 December 2006

All the above results are derived from continuing activities. All gains and losses in the year are included above;accordingly a statement of total realised gains and losses has not been prepared. The accounting policies on pages18 to 19 and the notes on pages 20 to 28 form part of these accounts.

Unrestricted Restricted 2006 2005Funds Funds Total Funds Total Funds

£ £ £ £Incoming ResourcesActivities to further the Charity's objects:

Journal sales and subscriptions 2,628,029 - 2,628,029 2,584,843Membership subscriptions 126,821 - 126,821 165,715Scientific meetings and education events income 50,481 - 50,481 124,421Other incoming resources 28,245 - 28,245 16,422

Activities for generating funds:Investment income 426,477 - 426,477 375,546

Total incoming resources 3,260,053 - 3,260,053 3,266,947

Resources ExpendedCost of generating funds:Investment management fees 12,554 - 12,554 19,795Charitable expenditure:Costs of activities to further the Charity’s objects:

Publications 1,470,982 - 1,470,982 1,422,695Scientific Meetings 559,781 2,683 562,464 539,289International 186,272 - 186,272 183,527Membership Services 336,036 - 336,036 332,759Education 145,771 - 145,771 154,851External Relations 156,508 - 156,508 105,392

Governance costs 201,889 - 201,889 212,9403,057,239 2,683 3,059,922 2,951,453

Total resources expended 3,069,793 2,683 3,072,476 2,971,248Net incoming/(outgoing) resources 190,260 (2,683) 187,577 295,699Realised gains on investments - - - 220,108Unrealised gains on investments 464,926 - 464,926 722,944Revaluation of investment property 510,000 - 510,000 480,000Net movement in funds 1,165,186 (2,683) 1,162,503 1,718,751Fund balances as at 1 January 2006 10,396,460 43,435 10,439,895 8,721,144Fund balances as at 31 December 2006 11,561,646£ 40,752£ 11,602,398£ 10,439,895£

16

Balance sheet as at 31 December 2006

The accounting policies on pages 18to 19 and the notes on pages 20 to 28 form part of these accounts. Approvedby the Trustees of The Physiological Society this 17th day of May 2007 and signed on their behalf by:

J C McGrath Chairman of the Executive Committee

JGMcGeown Honorary Treasurer

Note£ £ £ £

Fixed AssetsTangible assets 7 15,167 35,552Investments 8a,b 10,625,025 9,650,099

10,640,192 9,685,651Current AssetsDebtors 9 1,934,764 1,717,085Cash at bank and in hand 1,452,367 853,009

3,387,131 2,570,094

LiabilitiesCreditors: Amounts falling due within one year 10 (2,424,925) (1,813,711)

Net Current Assets 962,206 756,383

Creditors: Amounts falling due after one year 11 - (2,139)

Net Assets 13 £11,602,398 £10,439,895

Funds

Unrestricted Funds:General (including revaluation 10,561,646 10,365,676reserves of £2,516,792 (2005: £1,541,866))Designated 12 1,000,000 30,784

11,561,646 10,396,460

Restricted 12 40,752 43,435

Total Funds £11,602,398 £10,439,895

2006 2005

17

Cash flow statement for the year ended 31 December 2006

Note£ £ £ £

Net Cash Inflow from Operating Activities 16a 174,061 144,119

Returns on Investments and Servicing of Finance 1cIncome from listed investments received 242,594 194,840Interest received 28,283 37,106Rent received 155,600 143,600

426,477 375,546Capital Expenditure and Financial InvestmentPayments to acquire tangible fixed assets 7 (1,180) (11,836)Purchase of fixed asset investments 8a - (6,567,161)Disposal of fixed asset investments 8a - 5,841,852

(1,180) (737,145)Increase/(Decrease) in Cash in the Year 16c £599,358 £(217,480)

2006 2005

18

Accounting policies for the year ended 31December 2006

a) Basis of preparation of accounts The financial statements have been prepared under thehistoric cost convention, with the exception of invest-ment assets which are included at market value. Thefinancial statements have been prepared in accordancewith Statement of Recommended Practice (SORP),‘ Accounting and Reporting by Charities: Statement ofrecommended practice’, published in March 2005,applicable accounting standards and also theCompanies Act 1985.

b) Fund accounting Unrestricted funds are available for use at the discretionof the Trustees in furtherance of the general charitableobjects of The Physiological Society.

Designated funds are those funds transferred from theunrestricted fund for particular purposes for projects atthe discretion of the Trustees.

Restricted income funds are created when donationsare made for a particular area or purpose, the use ofwhich is restricted to that area or purpose. The purpose and use of restricted funds is set out in thenotes to the financial statements.

c) Incoming resources All income is accounted for as soon as The Society hasentitlement to the income and there is certainty ofreceipt and the amount is quantifiable.

Publication and membership income is accounted foron an accruals basis. Income received by The Society inthe current year that related to journals to be publishedafter the year end, and membership subscriptions tocommence after the year end, are treated as deferredincome.

Dividends and interest on securities are included in theStatement of Financial Activities on a receivable basis,at an amount which includes the tax credit recoverablefrom HM Revenue & Customs. Bank interest receivableis included in the Statement of Financial Activities on anaccruals basis.

d) Resources expended All expenditure is accounted for on an accruals basisand has been listed under headings that aggregate allthe costs related to that activity. Where the costs can-not be directly attributed they have been allocated toactivities on a basis consistent with the use ofresources.

Direct costs, including directly attributable salaries are

allocated on an actual basis to the key strategic areas ofactivity. Overheads and other salaries are allocatedbetween expenses headings on the basis of time spent.

Governance costs include the costs of governancearrangements which relate to the general running ofThe Society. These activities provide the governanceinfrastructure that allows The Society to operate andinclude the strategic planning processes that contributeto the future development of The Society.

e) Grants payable Grants payable have been accounted for on an accrualsbasis upon authorisation unless they are attached to aspecific future Society event or activity.

f) Pension contributions Contributions to The Society’s Occupational PensionScheme, which is a defined contribution scheme, arepaid annually in advance and are accounted for on anaccruals basis. Contributions to personal pensions arepaid annually in arrears and are also accounted for onan accruals basis. The Stakeholder Pension Schemecontinued for the remainder of staff during the year.This is paid on a monthly basis.

g) Fixed assets Assets with a cost in excess of £1,000 intended to bepart of ongoing use to The Society in carrying out itsactivities are capitalised as fixed assets. Depreciation ischarged on tangible fixed assets at 25% of cost perannum, so as to write them off over their expected use-ful lives.

h) Investments Investments are included at market value at the BalanceSheet date. Net gains and losses arising on revaluationsand disposals during the year are included in the state-ment of financial activities.

i) Stock No value has been placed on stocks of unsold copies ofthe journals published by The Society.

j) Academic support A number of Trustees and the Senior Editors of TheJournal of Physiology spend significant time on Societybusiness which takes them away from their normalduties. The Society makes ex gratia payments for specif-ic purposes to the host institution of some of these per-sons. It is emphasised that these payments are grants tobe used for specified purposes and not an expectationas of right by the institutions concerned. Trustees andSenior Editors are still expected to perform their func-tions for The Society, whether or not their host institu-tion is provided with such a grant. Therefore, there is nointention to create any legal obligation to make these

19

payments and consequently no contractual agreementsare entered into with the institutions in relation to thissupport.

k) Publication arrangements The Society has a publishing agreement with BlackwellPublishing Limited (Blackwell) to print, publish, marketand distribute The Journal of Physiology (JP) andExperimental Physiology (EP). The agreement, whichcommenced on 1 January 2004, shall continue for aninitial period of 5 years, plus a 2 year extension, whichmay be terminated subject to agreed notice. Any annualgross profit shall be apportioned to The Society in thefollowing proportions: 75% for JP and 50% for EP.

The Society maintains an office in Cambridge whereThe Society administers the peer review of manuscriptsand copy-edits accepted manuscripts. Word files are

then passed to Blackwell to typeset for print and onlinepublication. The annual financial transactions withBlackwell constitute, therefore, a substantial part of theannual turnover.

During 2006, Blackwell published JP and EP on behalf of The Society. Blackwell markets and collects the institutional subscriptions. The Publisher pays TheSociety 80% of The Society’s share of the budgetedgross profit in quarterly instalments. The balance of The Society’s share of the gross profit is paid on acceptance of the Annual Statement. Gross income and costs are identified in the statement of financialactivities.

2006 income received in advance has been treated as deferred income and has not been included in thestatement of financial activities.

20

Notes to the financial statements for the year ended 31 December 2006

1. INCOMING RESOURCES

a) Journal sales and subscriptions 2006 2005£ £

The Journal of Physiology 2,491,955 2,455,853Experimental Physiology 136,074 128,990

2,628,029£ 2,584,843£

b) Other incoming resources 2006 2005£ £

Royalties 1,216 982Donations 14,429 1,000Advertising 292 -Sponsorship 7,825 11,755Pfizer In vivo Fund - 2,000Sundry income 4,483 685

28,245£ 16,422£

c) Investment income 2006 2005£ £

Income from listed investments held in the UK 242,594 181,916Income from listed investments held abroad - 12,924Income from freehold investment property in the UK 155,600 143,600Interest on cash held by investment managers - 14,229Interest on cash held in bank 28,283 22,877

426,477£ 375,546£

21

2. RESOURCES EXPENDED

a) Analysis of total resources expendedGrant Activities Allocated

funding of undertaken Direct staff Direct support support Total Totalactivities directly costs costs costs 2006 2005

£ £ £ £ £ £ £Cost of generating funds:

Investment management fees - - - 8,550 4,004 12,554 19,795Charitable expenditure:Costs of activities to further the Charity’s objects:

Publications - 823,922 290,980 243,151 112,929 1,470,982 1,422,695Scientific Meetings 37,410 261,701 120,568 52,090 90,695 562,464 539,289International 27,100 59,846 40,369 30,939 28,018 186,272 183,527Membership Services 143,090 33,597 79,036 23,956 56,357 336,036 332,759Education - 43,982 57,958 7,615 36,216 145,771 154,851External Relations - 76,039 38,530 18,254 23,685 156,508 105,392

Governance: - - 82,179 70,762 48,948 201,889 212,940207,600£ 1,299,087£ 709,620£ 455,317£ 400,852£ 3,072,476£ 2,971,248£

b) Analysisof support costs

Communications Postage, printing Other FinancialPremises and IT andstationery staff costs costs Depreciation 2006 2005

£ £ £ £ £ £ £ £Cost of generating funds:

Investment management fees - - - - 4,004 - 4,004 19,795Charitable expenditure:Costs of activities to further the Charity’s objects:

Publications 50,174 32,822 3,812 5,367 12,675 8,079 112,929 314,550Scientific Meetings 24,969 32,799 2,671 7,290 20,107 2,859 90,695 129,248International 8,607 11,842 986 3,177 1,983 1,423 28,018 45,856Membership Services 16,197 19,538 1,521 3,442 13,655 2,004 56,357 75,548Education 11,210 15,625 1,308 3,858 2,577 1,638 36,216 48,163External Relations 6,614 9,280 779 4,128 1,519 1,365 23,685 37,130

Governance: 14,990 21,453 1,816 5,892 3,432 1,365 48,948 123,053132,761£ 143,359£ 12,893£ 33,154£ 59,952£ 18,733£ 400,852£ 793,343£

c) Analysis of governance costs2006 2005

£ £Legal and professional fees 15,183 15,025Audit fee 8,250 7,875Other auditors’ remuneration 1,735 1,400Trustee’s meetings 27,887 44,283Other governance costs 7,171 6,665Academic support 10,536 9,643Direct staff costs 82,179 89,887Apportionment of support costs 48,948 38,162Total governancecosts 201,889£ 212,940£

Costallocation includesan element of judgement and The Societyhashad to consider the cost benefit of detailed calculationsand record keeping. To ensure accurate acounting The Society adopts a policy ofallocating costs to the respectivecostheadings throughout the year. This allocation includes support costs where they are directly attributable.Thereforethe support costs shown are a best estimateof the costs thathave been so allocated. Support costs are allocated on the basis of staff time.

22

3. ANALYSIS OF GRANTS

a) Grants to institutionsNon-Society Centres of Departmental

Symposia Excellence SeminarEstablishment Grants Support Scheme Total

£ £ £ £United Kingdom and Republic of IrelandThe British Neuroscience Association 500 - - 500Dundalk Institute of Technology - - 488 488Glasgow Caledonian University - - 225 225Imperial College London - - 428 428The Institute of Neurology - - 100 100Medical Reseach Council 1,000 - - 1,000King’s College London - - 803 803Royal College of Surgeons - - 375 375Trinity College Dublin - - 2,100 2,100University of Aberdeen - - 525 525University College Cork - - 572 572University College Dublin - - (404) (404)University College London 420 - 765 1,185University of Bath 500 - - 500University of Brighton - - 100 100University of Bristol - - 1,630 1,630University of Cambridge 250 - 1,035 1,285University of Dundee 820 - 1,651 2,471University of Edinburgh 350 - 1,613 1,963University of Glasgow - - 1,875 1,875University of Leeds 750 - 1,800 2,550University of Leicester - - 465 465University of Liverpool 1,000 - 1,620 2,620University of Manchester 6,070 - 2,363 8,433University of Newcastle upon Tyne - - 1,193 1,193University of Nottingham - - 420 420University of Oxford - - 1,245 1,245University of St Andrews - - 338 338University of Sheffield - - 743 743University of Southampton - - 345 345University of Strathclyde - - 788 788University of Sussex - - 105 105University of Warwick - - 150 150University of York - - 315 315

11,660£ -£ 25,771£ 37,431£

Foreign GrantsInstitute of Biophysics and Cell Engineering, Minsk - 5,000 - 5,000Institute of Pharmacology and Toxicology, Kiev - 5,000 - 5,000University of Belgrade - 5,000 - 5,000University of Calgary 250 - - 250

250 15,000 - 15,250Grand total 11,910£ 15,000£ 25,771£ 52,681£

23

b) Grants to individuals2006 2005

Scientific Meetings and International £ £Junior Fellowship Grants to 4 individuals (4 in 2005) 12,100 30,400Travel Grants Grants to 42 individuals (33 in 2005) 25,500 37,240

Membership ServicesVacation Studentships Grants to 41 individuals (36 in 2005) 45,900 39,160Postgraduate Support Fund Grants to 0 individuals (3 in 2005) - 3,000Intercalated BSc Bursaries Grants to 0 individual (3 in 2005) - 6,000Member Grants Grants to 151 individuals (164 in 2005) 66,045 70,018Pfizer In vivo Grant Grants to 0 individuals (6 in 2005) - 2,945Network Interaction Grant Grant to 4 individuals (1 in 2005) 5,374 76

4. NET INCOMING RESOURCES

This is stated after charging: 2006 2005£ £

Depreciation 18,733 22,896Audit fee 8,250 7,875Other auditors’ remuneration 1,735 1,400

5. EMPLOYEE INFORMATION

Staff numbers 2006 2005Number Number

Administration office 9 8Publications office 9 8

18 16

Staff costs 2006 2005£ £

Gross salaries 575,066 547,78660,667 52,086

Pension costs 44,609 52,486Agency staff costs 14,373 21,344Copy-editor support costs 14,906 13,029

709,620£ 686,731£

3. ANALYSIS OF GRANTS, CONTINUED

There were no employees with emoluments above £60,000 (2005: one in the range of £90,000 to£99,999).

The average number of persons employed including part-time staff, calculated on a full-time equivalent basis analysed by office, was:

Employer's national insurance costs

24

6. RELATED PARTY TRANSACTIONS All Trustees are Members of The Physiological Society. The Trustees received no remuneration in respect of theirservices to The Society but certain host departments received academic support amounting to £75,000 (2005:£76,000) and Trustees (26 in total) were also reimbursed expenses totalling £31,217 (2005: 32,144).

Academic and miscellaneous support The following Trustees’ institutions received support payments during the year:

Payments to Trustees for non-Trustee duties During the year four Trustees received expenses as speakers at conferences outside of their Trustee duties totalling£1,617. A further two Trustees received travel grants awarded by The Society totalling £2,600 which were clearedby the Trustee Benefits Committee.

Editorial benefits The following Trustees received free basic membership (worth £90) and/or a hard copy of JP (+ £120) or EP (+ £75) in respect of their current or past status as an editor of one of The Society’s journals.

P Kumar (JP)P L Greenhaff (JP)J W Hanrahan (JP)D A Eisner (EP)W A Large (JP)

Other related party payments The spouse (S M Wray) of a Trustee (D A Eisner) incurred costs during the year for the following:

Trustee Institution Support Amount £G E Mann King's College London Academic 7,500J C McGrath University of Glasgow Academic 15,000J G McGeown Queen's University Belfast Academic 15,000D A Eisner The University of Manchester Academic 15,000P Kumar University of Birmingham Academic 7,500W A Large St George's University of London Academic 15,000 Miscellaneous 750B M Lumb University of Bristol Academic 7,500C H Orchard University of Bristol Academic 7,500

Description Amount £Joan Mott Prize Lecturer, The Society’s Main Meeting, UCL (honorarium and expenses) 733

Speaker at Venezuela Workshop (contribution towards travel expenses) 400

25

7. TANGIBLE FIXED ASSETS Fixtures,Fittings and

OfficeEquipment

£CostAt 1 January 2006 96,977Additions 1,180Disposals (15,198)At 31 December 2006 82,959Accumulated depreciationAt 1 January 2006 61,425Charge for the year 18,733Disposals (12,366)At 31 December 2006 67,792Net book value at 31 December 2006 £15,167Net book value at 31 December 2005 £35,552

8a) FIXED ASSET INVESTMENTS 2006 2005£ £

Listed investmentsMarket value as at 1 January 2006 7,290,099 5,621,739Purchases - 6,567,161Disposals in the year (proceeds £0 (2005: £5,841,852)) - (5,621,745)Unrealised gains 464,926 722,944Market value as at 31 December 2006 £7,755,025 £7,290,099

2006 2005£ £

Unit trusts 7,755,025 7,290,099Total listed investments 7,755,025 7,290,099Freehold investment property 2,870,000 2,360,000

£10,625,025 £9,650,099

8b) FREEHOLD INVESTMENT PROPERTY2006 2005

£ £Market value as at 1 January 2006 2,360,000 1,880,000Unrealised gain 510,000 480,000Market value as at 31 December 2006 £2,870,000 £2,360,000

The historical cost of the freehold investment property at 31 December 2006 was £1,480,000 (2005: £1,480,000).

The valuation was made at the open market value as of 31 December 2006. The valuation was prepared in accordance with theRoyal Institution of Chartered Surveyors Appraisal and Valuation Manual. The increase in valuation was incorporated in theBalance Sheet and has been reported in the Statement of Financial Activities.

The fixed assets include items held under finance lease: net book value £0 (2005: £2,487). Depreciation of £1,244 (2005: £1,244) was charged on the item held under finance lease during the year. All fixed assets are used for charitable purposes.

All investments (other than freehold investment properties) are quoted on a recognised UK Stock Exchange. These investmentsare managed by Legal & General Investment Management Ltd.

The valuation of freehold investment properties has been undertaken by Bidwells, Chartered Surveyors.

The historical cost of listed investments at 31 December 2006 was £6,628,233 (31 December 2005: £6,628,233).

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9. DEBTORS2006 2005

£ £Other debtors 1,796,153 1,616,375Prepayments and accrued income 138,611 100,710

1,934,764£ 1,717,085£

10. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR2006 2005

£ £Trade creditors 37,029 4,239Other creditors 626,237 20,068Obligations under finance leases - 950Accruals 151,405 200,757Deferred income 1,610,254 1,587,697

2,424,925£ 1,813,711£

11. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR2006 2005

£ £Obligations under finance leases - 3,089Included within less than one year - (950)Due in more than one year -£ 2,139£

The maturity of the above amount is as follows:Under 1 year - 950Within 1-2 years - 950Within 2-5 years - 1,189

-£ 3,089£

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A designated fund was established in 1999 to support International Meetings. In 2005, £22,832 was transferredfrom the General Reserve. This was to ring fence an under spend in the International Workshop budget againstfuture projects. The balance was fully utilised in 2006.

In November 2006, the Trustees agreed to set aside £1m to underwrite potential commitments for the XXXVII IUPSCongress in 2013.

The Sharpey-Schafer Legacy supports a triennial lecture to be given in London by, alternatively, an establishedphysiologist and a young physiologist. The 2006 Sharpey-Schafer Lecture was given by Dr Neville H McClenaghanat The Society’s Main Meeting in London.

The Historical Studies Fund promotes the study of history of scientific experiments and ideas by funding the PatonLecture. There was no Paton Lecture in 2006.

The Pfizer Prize is used to fund up to six annual awards to postgraduate students for Oral or PosterCommunications presented at The Society's Main Meeting. They may be awarded in any area of Physiology.

The Biller Award is a biennial award, in memory of Kathy Biller, a young physiologist. It is given to a worker under35, in the field of renal or epithelial physiology. The recipient presents a research review at a Society Meeting. The2006 Biller Prize Lecture was given by Dr Matthew Bailey at The Society’s Main Meeting in London.

The Michael de Burgh Daly Prize Lecture is given biennially in memory of the distinguished physiologist under theauspices of the Cardiovascular, Respiratory and Autonomic Control Special Interest Groups. There was no Michaelde Burgh Daly Prize Lecture given in 2006.

12. STATEMENT OF FUNDS

1 Jan Incoming Outgoing 31 Dec2006 resources resources Gains Transfers 2006

£ £ £ £ £ £General reserve 10,365,676 3,260,053 (3,039,009) 974,926 (1,000,000) 10,561,646Designated funds:International Meetings Fund 30,784 - (30,784) - - -IUPS Fund - - - - 1,000,000 1,000,000Total designated funds 30,784 - (30,784) - 1,000,000 1,000,000Total unrestricted funds 10,396,460 3,260,053 (3,069,793) 974,926 - 11,561,646

Restricted funds:Sharpey-Schafer Legacy 16,453 - (1,000) - - 15,453Historical Studies Fund 13,321 - - - - 13,321Pfizer Prize Fund 8,682 - (1,250) - - 7,432Biller Award Fund 500 - (433) - - 67M de Burgh Daly Prize Lecture Fund 4,479 - - - - 4,479Total restricted funds 43,435 - (2,683) - - 40,752Total funds £10,439,895 £3,260,053 (£3,072,476) £974,926 -£ £11,602,398

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Status The Society is a company limited by guarantee and is a registered charity. The liability to the Members is limited to£1 each. The number of Members (excluding Honorary Members) at 31 December 2006 stood at 1,817 (2005:1,845).

The Society is a registered charity and therefore its activities are exempt from taxation under section 505 of theIncome and Corporation Taxes Act 1988.

15. PENSION SCHEME The Society made payments during the year in respect of defined contribution pension schemes totalling £44,609(2005: £52,486).

At 31 December 2006, an amount of £7,466 (2005: £3,578) was included within creditors in respect ofcontribu¬tions due for the year.

General Designated RestrictedFunds Funds Funds Total

Analysis by type of asset and liability £ £ £ £Tangible fixed assets 15,167 - - 15,167Investments 10,625,025 - - 10,625,025Current assets 2,346,379 1,000,000 40,752 3,387,131Current liabilities (2,424,925) - - (2,424,925)

10,561,646£ 1,000,000£ 40,752£ 11,602,398£

At 31 December 2006, The Society had annual commitments under non-cancellable operating leases as follows:

Land and Land andBuilding Other Building Other

2006 2006 2005 2005£ £ £ £

Leases expiring within 1 year - - - -2–5 years 80,790 - 78,108 -Over 5 years - - - -

80,790£ -£ 78,108£ -£

13. ANALYSIS OF TOTAL FUNDS

14. FINANCIAL COMMITMENTS

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Standing informationThe Physiological Society is registered in England as a company limited by guarantee, No. 323575. RegisteredCharity No. 211585.

Administration Office and Registered Office Peer House, Verulam Street, London WC1X 8LZ, UK Tel: + 44 (0)20 7269 5710 Fax: + 44 (0) 20 7269 5720 Web site: http://www.physoc.org

Publications Office PO Box 502, Cambridge CB1 0AL, UK Tel: + 44 (0) 1223 400180Fax: + 44 (0) 1223 246858

Trustees in 2006 J F Ashmore D R Corfield D A Eisner V F Gladwell (from July 2006) P L Greenhaff S K Hall J W Hanrahan P T Harrison A E King W A Large J A Lee (to July 2006) S L Lightman B M Lumb (to July 2006) G E Mann (to July 2006) J G McGeown J C McGrath R A North (to July 2006) C H Orchard O Petersen L Poston (to July 2006) C J Schwiening S V Smirnov D Sugden A V Tepikin K D Thornbury J T Tiffert A Verkhratsky (to July 2006) D J A Wyllie (from July 2006)

Chief Executive Michael Collis

Company Secretary Casey Early

Auditors haysmacintyre, Fairfax House, 15 Fulwood Place, London WC1V 6AY, UK

Solicitors Russell-Cooke, 2 Putney Hill, Putney SW15 6AB, UK

Bankers Child & Co, 1 Fleet Street, London EC4Y 1BD, UK

Investment managers Legal & General Investment Management Ltd, 11 Queen Victoria Street, London EC4N 4TP, UK

Property consultants Bidwells, Trumpington Road, Cambridge CB2 2LD, UK

Pension advisors Punter Southall Financial Management Ltd, 126 Jermyn Street, London SW1Y 4UJ, UK

Acknowledgements Many members of staff contributed to this report. Special thanks go to Casey Early, Simon Kellas and Linda Rimmerfor compiling the document.