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2021-09-30-accounts

Company Number: 615259 Charity Number: 206504

THE INTERNATIONAL INSTITUTE FOR STRATEGIC STUDIES

ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 SEPTEMBER 2021

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30[th] September 2021

CONTENTS

Annual Report and Financial Statements

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30[th] September 2021

STRATEGIC REPORT AND THE REPORT OF THE TRUSTEES

The Trustees present their report for the year ended 30[th] September 2021. This incorporates the Directors’ report, which has been prepared in accordance with the Companies Act 2006 and FRS102, and the Strategic Report. The accounts comply with current statutory requirements, the Memorandum and Articles of Association and the Statement of Recommended Practice ‘Accounting and Reporting by Charities’ (SORP).

The primary role of the International Institute for Strategic Studies (referred to as ‘IISS’ or ‘the Institute’) is to enhance public understanding of questions of international security, help to provide policy makers with facts and analysis to inform and advise their decision-making, and contribute to improved defence diplomacy and conflict resolution.

Strategy

The Institute’s medium- to long-term strategy comprises four elements as follows:

  1. to provide facts and analysis on the sources of conflict, however caused, which may provoke the use of organised military force, and to examine the changing nature and use of organised force in international affairs;

  2. to provide facts and analysis on the nature of political, geopolitical and geo-economic risk and advise governments and the private sector on measures that can be taken to mitigate that risk;

  3. to provide an independent platform for intergovernmental consultations on geopolitical and geoeconomic issues in private and public settings, supported by the facts and analyses developed by the Institute; and

  4. to sustain a network of experts in these matters on the permanent staff, on a part-time consulting basis and also generally among an engaged cohort of the individual membership.

The Institute measures the success of this strategy in the following ways:

During the year ended 30 September 2021, Institute activities continued to be impacted by the COVID-19 pandemic, with restrictions forcing IISS office closures and the postponement or cancellation of in-person events. The Institute has minimised disruption to productivity by improving its virtual capabilities and providing staff with necessary equipment to ensure they could successfully deliver their roles from home during lockdowns. COVID-19 safety measures introduced across all offices have ensured a safe working environment for those staff who needed to attend the office. Where possible, and in close consultation with funders, conferences and workshops have been converted into online webinars or hybrid events to ensure the Institute is able to retain its convening power. Where virtual events were not feasible, alternative activities were agreed with funders to meet project deliverables. As a result, there has been minimal impact on revenue, and the IISS took no COVID-related UK government support, furloughed no staff, and made no COVID-related redundancies. The Trustees have expressed gratitude for the way in which the COVID-19 restrictions have been handled by IISS management to reduce disruption to Institute activities, ensure staff safety and minimise any financial loss.

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The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30[th] September 2021

Despite these challenges, the Institute achieved the main objectives set by the Trustees for the year, which included the expansion of its research output, convening activity and dissemination of its publications, enhanced digital content, and widening the Institute’s international network and global coverage. More details can be found in the Achievements and Performance section on pages 3 to 8.

Research, Dissemination and Digital Content

The IISS continues to update and expand its digital channels. The podcast episodes of both Sounds Strategic and the new Japan Memo were downloaded over 78,000 times during the past year by audiences across its top territories of the US, the UK, Australia, Germany and Japan. The Institute’s website audience continues to grow, with over 1.6 million users, and increasing engagement with IISS webinars, blogs and research reports, as well as flagship publications and events.

Over the past year, IISS social media activities generated over 25 million impressions and 500,000 engagements across our channel portfolio. The Institute’s overall audience reach grew by 19% to 316,000. The strongest growth was seen on the LinkedIn channel, with 104,000 followers, representing a 40% increase. Twitter continues to be a key channel growing by 10% to 150,000 followers. YouTube is a strategic channel for IISS online activities where recorded and livestreamed events generated 280,000 views, a growth of 33% year-on-year. The IISS YouTube channel also gained over 4,500 new subscribers.

The trend over the last few years has been for media coverage to peak around the IISS Manama and Shangri-La Dialogues. This trend changed in 2020 and continued into 2021, mostly due to Covid-19 restrictions which required IISS to convert the 2020 Manama Dialogue into a hybrid event and cancel the 2021 Shangri-La Dialogue. This dip, however, was supplemented with an expansion of the breadth of coverage throughout the year. Following the launch of The Military Balance in 2021, the sub-brand received over 800 unique mentions in news media articles across 50 countries.

Survival is the Institute’s most-read publication with 375,387 downloads in 2020 and is steadily gaining readership. As of September, downloads of Survival articles for 2021 were 40,465 higher than they were at the same point in 2020. Sales of print copies had also risen as of September 2021 with 330 sales versus 218 for same period last year.

The Cyber Capabilities report, launched in June 2021, was a particular success this year. The report generated over 300 pieces of unique coverage across broadcast and digital media in 20 languages.

Reactive highlights in this reporting period included the AUKUS announcement, regular commentary on the Belarus elections, and the Afghanistan military withdrawal, all of which allowed the Institute to take many opportunities to share wider IISS data and expertise with the media.

Convening power

The Institute continued to extend its platforms for intergovernmental consultation and dialogue, in both private and public settings, to improve defence diplomacy and conflict resolution. In all cases, the Institute was able to create informed debate, develop new networks of contacts and engage governments, the private sector, the international expert and opinion-forming community, and IISS members in both open debates and confidential discussions to improve mutual understanding of differing positions and promote new policy approaches.

During the year, the Institute convened 110 events in 5 countries with 8,912 attendees from over 100 countries.

The Institute also continued to deploy its convening power and analytical excellence informally via meetings between senior research staff and leading government figures and policy makers from a range of countries. At these meetings the Institute is able to leverage its global reach and data-based approach to analysis to provide information on which strategically important policy decisions can be made at the highest level.

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Annual Report and Financial Statements for the year ended 30[th] September 2021

Global coverage and international strategic network

Investment in analytical expertise and in enhancing the role of its four international offices has been a core focus of the Institute in recent years in order to bring a powerful global perspective to all of its work, as well as engendering the widest possible engagement on issues of international security.

Details about the activities of the international offices can be found on pages 14-15.

OBJECTIVES AND PRINCIPAL ACTIVITIES

The Institute’s declared objects are ‘ to promote on a non-party basis the study and discussion of and the exchange of information upon any major international security issues including without limitation those of a political, strategic, economic, social or ecological nature, and to promote conflict resolution by facilitating discussion and dialogue and publishing analysis on major international security issues to assist and promote the resolution of conflicts between or within nations’ .

The Institute aims to achieve these objects by providing to IISS members, governments, international organisations and the wider public the best possible objective information on military and political developments relevant to the prospects, course and consequences of conflict having an important military dimension. In furtherance of its objectives, the Institute:

The Institute’s achievements against its objectives are discussed under the heading ‘ Achievements and Performance’ below.

The Institute’s ‘statement of values’ and ‘policy on financial transparency confidentiality and effectiveness,’ published on the IISS website, reaffirm the IISS’s commitment to full independence and excellence in all activities, along with the Trustees’ determination that fundraising is maintained with the twin aims of guaranteeing the Institute’s independence of thought and analysis, as well as maintaining the Institute’s effectiveness as a strategic actor in a complex international environment.

The charity had no fundraising activities requiring disclosure under provisions of section 13 of the Charities (Protection and Social Investment) Act 2016.

ACHIEVEMENTS AND PERFORMANCE

Research Programmes

As an independent, non-partisan and international policy institute, the IISS is committed to advancing wider understanding of the critical security issues of the 21[st] century and their potential trends or resolution. A comprehensive research programme covers these challenges and responds to them both thematically and regionally. The 30-member IISS Advisory Council, composed of distinguished members from around the world, assists the Institute on the intellectual direction of its activities. The programme has been defined under the broad categories of War, Power and Rules covering five thematic and seven regional concentrations:

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Annual Report and Financial Statements for the year ended 30[th] September 2021

IISS research programmes actively contribute to a range of government and corporate briefings, convening external and IISS member events, delivering podcasts, and producing research and analysis for the wide range of IISS publications. More recently, the Institute has paid increasing attention to facilitating dialogue and conflict-resolution. This is achieved by bringing together parties under dispute in ‘track-two’ meetings, to discuss differences and consider how common interests can be advanced.

In the period under review, IISS research and research-related activities achieved notable impact on a number of fronts. The following is a list of key examples.

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Annual Report and Financial Statements for the year ended 30[th] September 2021

Publications

While this year saw uncertainty over how lockdowns across the globe would affect events and launches, the IISS continued to publish a strong roster of publications.

Strategic Comments covered a range of international security and political-military topics in 2021. With both paid offerings through Taylor and Francis, and certain editions offered for free via the IISS website, topics published included the relationship between Canada and China, the Islamist insurgency in Mozambique, European demographic decline, the Nord Stream 2 pipeline, and the protest movement in Belarus.

Strategic Survey 2020: The Annual Assessment of Geopolitics was published in November 2020, providing a comprehensive annual review of world affairs. As well as in-depth essays covering issues relating to world regions, this edition included thematic essays about contemporary issues including the politics of pandemic, climate change, key international legal gaps, US–China relations, Russia:

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Annual Report and Financial Statements for the year ended 30[th] September 2021

the road to 2024, and the US–Taliban deal. Each regional section included drivers of strategic change, a collection of graphics depicting comparable data on state power and the forces underlying geopolitical change over 20 years.

In February 2021, the IISS launched the 62nd edition of The Military Balance , providing data and capability assessments for the armed forces of 171 countries. This edition charted the further erosion of the technological advantage enjoyed by Western states in the face of China’s military modernisation and the introduction of new equipment into Russia’s armed forces. Essays included reflections on the future of maritime competition; battle management systems; China’s civil-military integration; and fractures in the arms control environment. The wallchart provided an assessment of the global distribution of submarines and sub-surface warfare capabilities in national inventories.

The Military Balance Plus database combines multiple years of data and qualitative assessments from The Military Balance with advanced search and graphical capability. During 2021, data holdings in the database expanded further and the IISS added additional countries to its defence spending forecast tool. The 10-year spending projections included in The Military Balance Plus now cover more than 85% of global defence spending. The database represents a step change in defence analysis for the Institute and its core audiences in government, the military and the private sector.

The Institute’s journal, Survival: Global Politics and Strategy , published six times per year, provides a platform for many of the leading thinkers in the field of international affairs to analyse and debate strategic questions. It included a piece by a distinguished American strategist on Europe’s capacity to defend itself without the United States that stimulated vigorous debate, frank commentary on the 6 January insurrection in Washington, a widely read and authoritative article on Russia’s ‘SolarWinds’ hack, a testily constructive exchange between liberal internationalists and ‘restraint’ realists, and candid views of the United States’ withdrawal from Afghanistan. Also appearing were assessments of the ‘global war on terror’ 20 years after 9/11, a forum on the UN at 75, a piece on the Sino-American strategic rivalry’s effect on transatlantic relations, an article on the future of US–Israel relations, and an analysis of UN operations in South Sudan.

The annual Armed Conflict Survey launched in September, featured analysis of 34 active armed conflicts, including the humanitarian, social and economic impacts. Covering January 2020 to February 2021, this year included the Armed Conflict Global Relevance Indicator (ACGRI), which is an IISS proprietary indicator assessing the global salience of armed conflict. There were also essays on interventions in armed conflicts and the waning of Western dominance; economic migration, forced displacement and armed conflict in a COVID-19 world; and the long aftermath of armed conflicts. The 2021 Chart of Armed Conflict provided a rich visual overview of factors such as conflict start dates, international interventions, 2020 UN Security Council resolutions, and other highly relevant data.

The Adelphi book series is the Institute’s principal contribution to policy-relevant, original academic research. Two books were published this year. June saw the publication of The Responsibility to Defend: Rethinking Germany’s Strategic Culture , by Bastian Giegerich, IISS Director of DMAP, and Maximillian Terhalle, which received high praise from members of the Germany’s political community, staff within NATO and other think-tanks. The second Adelphi of the year, Asia’s New Geopolitics: Military Power and Regional Order was launched at the end of September. Authored by five regional experts, this title looked at Asia in the context of three broad strategic trends: declining US willingness to underwrite Asia’s security order, rising US–China tensions, and weakening Asian multilateralism.

The IISS published its annual assessment of regional security and strategy issues in the Asia Pacific region with the Asia Pacific Regional Security Assessment 2021 . Twelve chapters covered a range of issues including urban security challenges, Japan’s security policy and China, South Korea’s security beyond the Peninsula and emerging technologies and future conflict in the Asia–Pacific.

As well as the regular publications, the IISS continued to release publications in various formats that are disseminated to governments, businesses, think tanks and important thought leaders. In addition to the well-received report Cyber Capabilities and National Power: A Net Assessment , the IISS published reports on Iran’s missile capabilities and proliferation, the various impacts China is having

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on its region and around the world, and Emerging Challenges for European Security and Defence produced following a meeting of the High-Level Study Group on the Future Defence of Europe, in conjunction with the Hanns Seidel Foundation.

Dialogues, Lecture Series and Conferences

The Institute’s international dialogues bring government officials together in a combination of formats, and to address subjects, that they might not be able to coordinate themselves. Under the international auspices of the Institute, it is often easier to arrange for discreet contacts to take place between government officials who wish to meet, but to do so unofficially and away from the public eye. In addition, the Institute organises lecture series and specialist conferences around the globe.

1. The Shangri-La Dialogue

Initiated in 2002, the Annual Asia Security Summit (IISS Shangri-La Dialogue) is the most important regular gathering of defence professionals in the region. Governments, the expert community and the media have increasingly viewed the substance and tone of exchanges at the Dialogue as important indicators of the state of the region’s security. The Shangri-La Dialogue provides a platform, which participant countries’ defence ministers and other principals use to elaborate and clarify their countries’ positions on the most important regional security topics of the day. The Dialogue has also been a venue for proposing and advancing defence initiatives and for multiple government bilateral and multilateral meetings which are held around the Dialogue.

As a result of the ongoing global COVID-19 pandemic situation the Shangri-La Dialogue, scheduled for 4-5 June 2021, was cancelled after close consultation with Singapore’s Ministry of Defence. The Institute plans to convene an exceptionally strong IISS Shangri-La Dialogue in 2022, to be held on 1012 June. The Shangri-La Dialogue will be staged in Singapore with the government’s support until at least 2024.

2. The Manama Dialogue

Since its inception in 2004, the IISS Manama Dialogue has become a central element in the Middle East’s security architecture, where national leaders and ministers from the Middle East, North America, Europe, Asia and Africa make major policy statements. Moreover, supported by senior officials, they are offered a bespoke occasion to consult bilaterally and multilaterally on the most pressing security and foreign-policy challenges.

Owing to the special circumstances necessitated by the COVID-19 pandemic, the 16th IISS Manama Dialogue was conducted as a hybrid event, with participants attending in person and online. The strict health and safety measures implemented by the government of Bahrain and the IISS ensured a safe environment for those who attended the proceedings in Manama.

The Dialogue was the only significant foreign-policy, defence and security conference held at the height of the pandemic in 2020 and succeeded in attracting an attendance comparable to previous years, while maintaining the standards of previous IISS summits. Participating officials were delighted to resume face-to-face diplomacy after months of social distancing and virtual interaction. Nearly 200 attendees, comprising 98 governmental and non-governmental delegates, and 92 government officials, from more than 20 countries participated in person, while several hundred delegates joined through a bespoke IISS online platform. Despite travel limitations, ten senior journalists representing major regional and global outlets attended, providing important coverage and scrutiny.

Notably, the 2020 Manama Dialogue hosted Israel’s Minister of Foreign Affairs for the first time. Lieutenant General (Retd) Gabi Ashkenazi’s attendance was testament to the remarkable diplomatic breakthrough achieved by Bahrain and Israel’s signing of the Abraham Accords in September 2020.

The 2020 Manama Dialogue Young Leaders’ Programme (MDYLP) again brought some of the Middle East’s brightest young strategic thinkers and leaders to the IISS Manama Dialogue to involve them in high-level debate about the current strategic and security challenges facing the region.

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Annual Report and Financial Statements for the year ended 30[th] September 2021

3. Lecture Series

The Fullerton Lecture Series brings together major figures in Asia-Pacific and international affairs to speak in Singapore. Due to COVID-19 pandemic restrictions, the IISS was only able to hold one lecture in the last financial year. In July 2021, Lloyd J. Austin III, United States Secretary of Defense, made the case for the US’ role as a reliable partner in helping nations in the Indo-Pacific make their own choices and ‘build back better’ after COVID-19 in his lecture on ‘The imperative of partnership’.

Membership

The IISS retains a strong global membership base which comprises a broad spectrum of leading analysts, academics and military and government officials, and international companies. Members are actively connected to international and strategic affairs through the Institute’s research programmes and have access to its opinion-shaping analysis through publications, events, member briefings and international conferences. Individual members are part of a unique global network supporting the work of the IISS and extending the Institute’s reach in the world of international affairs, whilst IISS Corporate Membership is designed to enable corporations and institutions to stay on top of world events by giving them a thorough understanding of international affairs, security issues and geopolitical and military conflicts, and to aid their strategic decision-making. The Institute invites its membership to participate in events held in its offices as well as annual international conferences.

The Institute holds many discussion meetings each year at its London headquarters and overseas offices in Washington DC, Manama, Singapore and Berlin, featuring IISS and guest speakers. With the ongoing COVID-19 restrictions, the Institute continued to deliver a high number of webinars which have expanded its global audience. Events that attracted notable interest over the past year included:

The IISS officially opened its Berlin office in September with guests from governments, the private sector and expert community. Germany's Federal Minister of Defence Annegret Kamp-Karrenbauer shared her thoughts during the reception and members of the German Parliament Nils Schmid (SPD), Alexander Graf Lambsdorff (FDP) and Omid Nouripour (Alliance 90/ The Greens) discussed current challenges and opportunities for Germany's international security and defence strategy.

Hosted virtually in May by the IISS in association with the UK Naval Staff, the First Sea Lord’s Sea Power Conference is the Royal Navy’s flagship conference. The conference discussed the strategic challenges and opportunities in a rapidly transforming global maritime domain, and the maritime contribution to the UK’s overall defence, security, foreign and development policy ambitions as the country reshapes its global role. These challenges and opportunities were addressed in light of the UK government’s Integrated Review of Security, Defence, Development and Foreign Policy, the Defence Command Paper, and the Defence and Security Industrial Strategy. The UK Secretary of State for Defence, the Rt Hon Ben Wallace MP, delivered a keynote address.

On 30 March, UK Chief of the Defence Staff General Sir Nick Carter launched the Defence Innovation Talks , a new webinar series featuring military, government and business leaders who are driving innovation in defence. General Carter set out his views on UK military reform and defence innovation, explaining how a programme of experimentation will be the foundation upon which transformative future capabilities will be built.

In a January webinar ‘The great decoupling: China, America and the struggle for technological supremacy ’, Nigel Inkster, Senior Adviser for Cyber Security and China at the IISS and Commissioner on the Global Commission for the Stability of Cyberspace, explored how this situation has arisen and what are likely to be its geopolitical implications.

In December 2020, the IISS virtually hosted a discussion with Ambassador Kay Bailey Hutchison, Permanent Representative of the United States to the North Atlantic Treaty Organization (NATO), on NATO’s evolving relationship with China . Ambassador Hutchison explored how NATO, as the world’s longest standing security alliance, is uniquely placed to bring together like-minded countries to address the security challenges posed by China.

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Annual Report and Financial Statements for the year ended 30[th] September 2021

FINANCIAL REVIEW AND RESULTS FOR THE YEAR

For the year ended 30[th] September 2021, total incoming resources were £18,396,000 (2020: £17,016,000). The primary reason for the higher income reported in 2021 was an increase in Dialogue income with the late cancellation of the Shangri-La Dialogue. Funded research events continued to be disrupted by COVID-19 pandemic restrictions and have either been converted into alternative project deliverables or rescheduled until next financial year.

Total resources expended for the year were £17,583,000, compared to £16,609,000 in 2020, which reflected the increased conference costs arising from the late cancellation of the Shangri-La Dialogue.

After accounting for net gains on investment assets of £1,196,000 (2020: £53,000 losses); foreign exchange losses of £70,000 (2020: £34,000); and actuarial gains on the defined benefit pension scheme of £149,000 (2020: £56,000 losses); the net movement in funds for the year was a surplus of £2,088,000 (2020: £264,000).

As at 30[th] September 2021, there was a liability on the defined benefit pension scheme of £556,000 (2020: £741,000). The IISS remains committed to reducing the pension liability through deficit funding plan payments of £48,000 per year.

Net cash inflow totalled £66,000 for the year (2020: £1,207,000 outflow), leaving total cash balances, including portfolio cash, of £6,213,000 at the year-end (2020: £6,147,000).

The group reported an improved net current asset position of £1,130,000 (2020: £748,000). Total net assets as at 30[th] September 2021 increased to £26,062,000 (2020: £23,974,000).

Reserves

‘Free reserves’ are defined as unrestricted funds excluding designated funds and funds represented by tangible fixed assets, other than those financed by external loans.

The Institute’s reserves policy has been determined by the Trustees after considering current and projected income streams and the Institute’s expenditure profile. To ensure that the Institute is able to successfully meet its objects, the Trustees aim to hold free reserves equivalent to between 3 and 6 months operating expenditure. This target level of reserves will mitigate the risk of income fluctuations causing delays or cancellations to any expenditure commitments and ensure that planned activities can be completed. Furthermore, in the event of a significant drop in income levels there will be sufficient reserves in place to implement any necessary organisational changes.

As at 30[th] September 2021, the Institute held free reserves of £6,218,000 (2020: £5,305,000) which equated to approximately 5.5 months (2020: 2 months) of operating expenditure associated with unrestricted funds. Free reserves comprise IISS unrestricted general funds of £19,716,000, less tangible and intangible fixed assets of £14,054,000 and excluding the pension liability of £556,000. At 30[th] September 2021, IISS restricted funds totalled £202,000 (2020: £71,000) and endowment funds totalled £6,144,000 (2020: £5,691,000). The Trustees continue to review the reserves policy in line with the Institute’s financial resources.

Investment Policy and Performance

Cazenove Capital Management Ltd. manages the Institute’s two investment portfolios. As at 30[th] September 2021, the market value of the main portfolio was £5,300,000 (2020: £4,629,000) and the asset allocation was: UK equity funds, 13% (2020: 13%); UK fixed-interest funds, 5% (2020: 7%); International fixed-interest funds, 6% (2020: 5%); International equity funds, 54% (2020: 46%); Portfolio funds 21% (2020: 28%) and Cash 1% (2020: 1%). Investment income for the year to 30[th] September 2021 from this portfolio amounted to £74,000 (2020: £84,000).

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Annual Report and Financial Statements for the year ended 30[th] September 2021

The overall investment objective of the main portfolio is to maximise its total return by achieving several percentage points above inflation, in line with constraints over risk. Portfolio performance and asset allocation are closely monitored by the Investment Committee in conjunction with the portfolio managers. The Institute considers this portfolio to be a long-term investment fund and operational cash flow demands are met through operational surpluses. The Investment Committee has adopted a diversified asset allocation strategy in keeping with its appetite for moderate risk. At 30[th] September 2021, portfolio returns over the previous year, three years, and five years as compared to benchmark, which was recently agreed as 100% UK CPI +4%, and the FTSE All Share were as follows:

Total Returns 1 year % 3 years p.a. % 5 years p.a. %
Portfolio 14.5 5.9 6.2
Benchmark 7.1 5.9 6.3
FTSE All Share 27.8 3.0 5.3

The Institute’s second portfolio is an expendable endowment fund, invested in a Charity Multi-Asset Fund (CMAF). The CMAF generates an annual pay-out of 4% and enables the Institute to drawdown the approved funds required to meet all costs associated with the Japan Chair research position. As at 30[th] September 2021, the market value of the Japan Endowment Fund was £6,134,000 (2020: £5,691,000) and the asset allocation was Charity Multi-Asset Fund (CMAF) 100% (2020: 100%), of which 71% was equities (2020: 68%).

The IISS and the Economic Climate

The Institute’s Dialogue activities and publications are protected by multi-year agreements that provide guaranteed levels of income. As referenced above, the Institute has received expendable endowment funding in support of a Japan Chair providing guaranteed financial support for a senior research post.

The Institute’s commercial trading subsidiary, Arundel House Enterprises Limited (AHEL), experienced difficult commercial trading conditions due to ongoing COVID-19 restrictions but minimised any losses on its catering and event activities with a low fixed cost base.

Despite the continued financial and currency market instability arising from the COVID-19 pandemic and political events such as Brexit, the IISS investment portfolio benefited from a strong rebound in equity market performance during 2021. The Investment Committee continues to monitor closely its diverse portfolio of investment funds that includes non-sterling denominated exposure in equities and bonds.

The Institute naturally hedges its foreign currency transactions, minimising conversion as far as possible to avoid exchange rate losses. The IISS continues to benefit from consistently low interest rates which determine the cost of borrowing for the Institute’s short-term money market funding.

Financial health

As outlined in the Financial Review, the Trustees consider the Institute’s financial health to be sound. As at 30[th] September 2021, the Institute held investment assets totalling £11.4 million and cash on the balance sheet of £6.2m with no loan liabilities, compared to investment assets of £5.5 million, £1.5m of cash and a building loan liability of £5.5 million in 2011, demonstrating a clear strengthening in the Institute’s financial position over the past 10 years.

As a result of the income security provided by the diverse revenue sources and multi-year funding arrangements outlined above, and in considering budgets and forecasts covering the period to 30[th] September 2024, the Trustees are confident that the Institute can be considered a going concern for the foreseeable future. Accordingly, there are no material uncertainties surrounding the preparation of the financial statements on a going concern basis. The global nature of IISS operations and funding sources has also contributed towards further income diversity that has helped to mitigate risk during this time of continued economic uncertainty.

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Annual Report and Financial Statements for the year ended 30[th] September 2021

PRINCIPAL RISKS AND UNCERTAINTIES

The Trustees have assessed the major risks to which the charity is exposed, in particular those related to the operations and finances of the Institute and are satisfied that systems are in place to manage exposure to the major risks. The measures to mitigate against the continued impact of the COVID-19 pandemic on IISS activities and finances are detailed below. The Trustees are satisfied that, as a result of the Institute’s response to the pandemic, there has not been any material financial loss arising from COVID-19 and the risk of such a loss in 2022 is low.

The most significant potential risks, as identified by the Institute’s Risk Register, are actively managed in the following manner:

Damage to the
Institute’s
reputation		 As reiterated in the Institute’s ‘Statement of Values’ and ‘Policy on financial
transparency confidentiality and effectiveness’, the IISS firmly states and
demonstrates its commitment to independence and excellence when conducting
all activities, with staff training in place to ensure awareness and understanding
of the Institute’s policy. Trustees have oversight over potential donors and
funding sources. Despite ongoing COVID-19 restrictions, IISS has continued to
meet contractual obligations and funder expectations by successfully converting
activities into hybrid and virtual events or agreeing alternative deliverables.
A material
weakening in the
Institute’s
financial position
and funding
levels		 Continued efforts to diversify revenue streams to ensure no over-reliance on one
source of income. Multi-year agreements are in place for key funders. Liquidity
and foreign exchange positions are monitored regularly through weekly cash
flow forecasts and external currency specialists. A well-diversified investment
portfolio mitigates risk in the event of poor performance of any one asset class.
A three-year forecasting and response-planning model is updated regularly and
monitored by the Trustees. As above, adaptation of activities to ensure
contractual and funder obligations are met.
A major failure of
the Institute’s IT
systems caused
by internal or
external factors		 Principal systems, architecture and software (including cloud servers, fail-over,
disaster recovery, and protective programmes) have been designed drawing on
external professional advice to provide best practice stability and security. In
recognition of the increasing cyber threat, additional security measures have
been introduced to detect and counter attacks.
Failure to
maintain the
existing high level
of Institute staff
expertise		 Retention measures in place include competitive pay, benefits and working
conditions. The competency framework ensures well-structured performance
and development reviews. Consulting Fellows and membership base are drawn
on when in-house expertise is not available. Adapted working practices enable
staff to work from home and COVID-19 safety measures across all offices.

In addition to the review of the risk register by senior management, the Audit Committee and the Trustees, financial performance is evaluated at the Trustee meetings held four times each year. The Institute’s investments and financial resources are monitored by the Investment Committee, which meets four times a year. Ongoing internal controls over these risks, as well as measures to mitigate exposures and financial loss, are exercised on a daily basis by the Institute’s Directing staff.

FUTURE PLANS

Looking ahead, the IISS remains focused on its mission to shape and enable strategic discussion and inter-governmental dialogue, and to provide impartial analysis on major international security issues as a means of informing the public debate and assisting conflict resolution and prevention. The Institute will continue to fulfil this mission through its primary activities of research, dialogues, conferences, lectures, publications, online databases and outreach to governments, the private sector

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and the expert and opinion-forming communities. The main objectives for the forthcoming year ending 30th September 2022 are:

STRUCTURE, GOVERNANCE AND MANAGEMENT

The Institute is governed by Articles of Association lodged with the Registrar of Companies and the Charity Commission for England and Wales.

The Institute’s Articles of Association reflect current best practices and the requirements of the Companies Act 2006 and recognise the fiduciary responsibilities carried by the Institute’s Trustees. Revised Articles of Association were formally lodged with the Charity Commission on 2[nd] May 2019.

The Trustees constitute Directors for the purposes of the Companies Act, and act as Trustees for the purposes of the Charities Act. As required by the Articles of Association, all are Members of the Institute. They receive no remuneration for their services. Upon appointment new Trustees are provided with an induction pack, which includes copies of the Institute’s governing documents as well as information about the Institute’s activities and finances. Training is available for all Trustees at any time as required.

In accordance with the Articles of Association, a Trustee can be elected by ordinary resolution or by a decision of the Trustees. A new Trustee may be proposed and considered for election by the existing Trustees. The Trustees delegate the exercise of certain powers in connection with the administration of the Institute as set out below.

The Trustees are aware of the Charity Governance Code published in 2020 which sets out the principles and recommended practice for good governance within the sector. The Institute has

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reviewed its current governance arrangements against the principles within the code and addressed any issues raised where required.

Audit Committee

The task of monitoring the Institute’s financial control systems and the management of major risk is delegated to the IISS Audit Committee. The current membership of the Audit Committee is:

Chris Jones (Chair of Committee & Honorary Treasurer) Catherine Roe Jens Tholstrup Matt Symonds

Investment Committee

The IISS Investment Committee is empowered to receive advice from the Investment Managers and to vary the investment policy at any time. The current membership of the Investment Committee is:

Chris Jones (Chairman of Committee & Honorary Treasurer) Grace Skaugen Jens Tholstrup Matt Symonds

Trustee Remuneration and Employment Committee

The IISS Remuneration Committee is responsible for the annual review of the Director-General and Chief Executive’s remuneration package, with oversight of the Institute’s overall human resources policies. The current membership of the Remuneration Committee is:

Bill Emmott (Chair of Committee and Chair of the IISS Trustees) Chris Jones (Honorary Treasurer) Caroline Atkinson

Nominations Committee

The IISS Nominations Committee is responsible for proposing new Trustees to the Board. The current membership of the Nominations Committee is:

Bill Emmott (Chair of Committee and Chair of the IISS Trustees) Catherine Roe Matthew Symonds

Donation Acceptance Committee

The IISS Donation Acceptance Committee was formed in 2018 to assist the Trustees in fulfilling their responsibilities for the financial health, ethical standards, and global reputation of the IISS when considering the acceptance of philanthropic donations. The Committee was disbanded in January 2021 when it was agreed that the review of philanthropic donations should be aligned with existing review processes for all other IISS funding sources and would fall to all Trustee members.

Director-General and Chief Executive

The Director-General and Chief Executive is responsible for the day-to-day management of the Institute’s affairs and for implementing policies agreed by the Trustees. The Director-General and Chief Executive is assisted by senior management.

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Annual Report and Financial Statements for the year ended 30[th] September 2021

Remuneration Policy

The IISS’s remuneration policy and practices reflect the Institute’s objectives of good governance combined with the need to attract and retain the best talent internationally. This policy aims to support the sustained growth and development of the Institute and its employees and to ensure that the Institute is able effectively to carry out its mission to provide objective information and analysis on geopolitical change as well as facilitate conflict resolution and the maintenance of international peace and security.

The Institute’s Staff Remuneration Committee, which consists of the Director-General and Chief Executive; the Director of Finance; and the Director of Human Resources, carries out an annual salary review with increases awarded for individual performance linked to a ‘competency framework’. This review incorporates IISS key management personnel, with the exception of the Director-General and Chief Executive. Salaries are positioned between the upper end of the charitable sector and middle of the corporate sector to ensure the Institute can compete globally in recruiting and retaining talent from the private sector, governments, and the international expert community. A review of market rates with reference to available salary surveys is undertaken regularly.

As referenced above, the IISS Trustee Remuneration and Employment Committee annually reviews the remuneration package of the Director-General and Chief Executive and the Institute’s overall human resources policies, including salary rates and staff benefits. Remuneration packages may consist of fixed elements such as salary, pension, life assurance and private medical insurance; and a variable element of a discretionary performance-based bonus payment. Employee benefits are reviewed annually.

The Trustees are invited to approve annually the staffing and salary budget and forecast for the year. This includes senior management. No Trustees are remunerated but travel expenses are reimbursed.

Public Benefit

The Trustees have given due consideration to the Charity’s Commission’s published guidance on the Public Benefit Requirement under the Charities Act 2011.

The beneficiaries of the Institute include individuals and organisations within the political, diplomatic, defence and academic fields, the public in general, international agencies and governments worldwide. The interests and concerns of these groups are constantly evolving, and the charity's development is influenced by the need to continue to address their current interests and concerns. As clearly evidenced in this report, the Institute has successfully reached these audiences during the year under review.

In the UK, the Institute’s staff have regularly provided facts and evidence-based analysis on geostrategic and geo-economic trends to key members of the expert media, parliamentarians, civil servants and ministers. Internationally, the Institute has provided unique defence diplomatic platforms in the Middle East and Asia that have facilitated high level consultations on defence issues and conflict resolution that has also engaged Europeans and North Americans. It has published evidencebased research that numerous governments have found added value to their internal assessments. The Institute has also briefed various inter-governmental organisations, including NATO and the EU, on important issues of public policy. It continues to put into the public domain the best available information on a wide range of international issues to ensure a more informed public debate.

Group Structure

IISS Middle East

The IISS Middle East branch office in Manama, Bahrain was established as a base for the Institute’s many research programmes and activities throughout the region and serves to connect IISS activities in Europe, North America and Asia with those in the Middle East. Since its foundation in May 2010,

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Annual Report and Financial Statements for the year ended 30[th] September 2021

the office has built a strong cohort of experts and administrative staff who work closely with the entire IISS global network to provide not just first-class information and analysis on Middle East and broader international strategic issues, but also strengthen links between the strategic community in the Middle East and those in other parts of the world.

Since 2004 the IISS has held annually the IISS Regional Security Summit: The Manama Dialogue in Bahrain. Full details of the Dialogue can be found on page 7.

The International Institute for Strategic Studies – US (IISS-Americas)

IISS-Americas is a branch of the IISS located in Washington DC. During the year, IISS-Americas continued its efforts to engage and expand the IISS membership base in the region, promote IISS activities and research to a North American audience of government leaders and policy shapers, and cultivate relationships with US policy makers to ensure strong US representation at the dialogues. Despite the continuing pandemic, IISS-Americas held several well-attended webinars on a diverse set of topics, including a very successful Ambassador’s Forum series. During the summer, as conditions eased, the office resumed live events with limited attendee numbers and developed the capacity to hold hybrid events to continue outreach to a global audience. This has served to reinforce the reputation of IISS-Americas as representing a vibrant, international, intellectual community.

Arundel House Enterprises Limited (AHEL)

AHEL is a wholly owned trading company with revenue arising from the letting of facilities and provision of event catering at Arundel House and the provision of Consultancy services. The company reported a profit for the year of £69,000 before gift aid (2020: £430 loss).

The International Institute for Strategic Studies (Asia) Limited (IISS-Asia) and the Strategic Studies Fund (SSF)

IISS-Asia is a company limited by guarantee registered in Singapore. In January 2021, IISS-Asia again convened the IISS Fullerton Forum: Shangri-La Dialogue Sherpa Meeting, an important intersessional activity of the Shangri-La Dialogue process. As detailed on pages 6-7, the Shangri-La Dialogue was unfortunately cancelled this year due to the COVID-19 pandemic. IISS-Asia was able to host one major Fullerton Lecture, however, with US Defence Secretary Lloyd Austin.

Despite the pandemic restrictions, IISS-Asia continued most of its other activities as normal. Notably, IISS-Asia research staff edited the annual Asia-Pacific Regional Security Assessment and organised and participated in IISS webinars on Asia-Pacific security. IISS-Asia also took the lead in recruiting and servicing IISS corporate and individual members in Singapore and the wider Asia-Pacific region.

The SSF is a trust fund established in Singapore for the purpose of raising funds to be applied in Singapore towards activities relevant to the objectives of the Institute and of benefit to the Singapore community. The results for IISS-Asia and the SSF are consolidated on the basis that the Institute holds a majority of the voting rights in IISS-Asia and has ultimate discretion over the disbursement of SSF funds and over its activities.

IISS India Organisation – (IISS-India)

IISS-India is a non-profit subsidiary of IISS with its registered office in New Delhi. It was established in August 2014 to assist in the expansion of IISS activities and reach in India and the South Asia region.

IISS Europe gemeinnützige GmbH (IISS-Europe)

On 4[th] November 2019, IISS-Europe was incorporated as a non-profit subsidiary of IISS with its registered office in Berlin, established to deepen IISS engagement with European powers, expand its analytical footprint in Germany and play an active part in shaping the security and defence debate in Germany and the EU. During 2021, the IISS-Europe office presence was expanded to include

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The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30[th] September 2021

research and operational staff in support of a broad five-year research programme on ‘Power shifts and the evolving international order: Strategic challenges for Germany and Europe’.

Statement of Trustees’ Responsibilities

The Trustees (who are also directors of The International Institute for Strategic Studies for the purposes of company law) are responsible for preparing the Report of the Trustees and the financial statements in accordance with applicable law and accounting standards (FRS102).

Company law requires the Trustees to prepare financial statements for each financial year. Under company law the Trustees must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the charitable company and the group and of the incoming resources and application of resources, including the income and expenditure, of the group for that period. In preparing these financial statements, the Trustees are required to:

The Trustees are responsible for keeping adequate accounting records that are sufficient to show and explain the charitable company’s transactions, disclose with reasonable accuracy at any time the financial position of the charitable company and enable them to ensure that the financial statements comply with the Companies Act and the provisions of the charity’s constitution. They are also responsible for safeguarding the assets of the charity and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

So far as each of the Trustees at the date of this report is aware, there is no relevant audit information of which the charity’s auditor is unaware. Each Trustee has taken all the steps that he/she ought to have taken as a Trustee in order to make himself/herself aware of any relevant audit information and to establish that the charity’s auditor is aware of that information.

Corporate Governance

Processes are in place to ensure that performance is monitored and that appropriate management information is prepared and reviewed regularly by both the executive management and the Trustees.

The systems of internal control are designed to provide reasonable, but not absolute, assurance against material misstatement or loss. They include:

Auditors

Crowe U.K. LLP has indicated its willingness to be reappointed as statutory auditor.

The Strategic Report and Report of the Trustees was approved by the Trustees in their capacity as Company Directors on 22 February 2022 and signed on their behalf by:

Bill Emmott Chair of the Trustees

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Annual Report and Financial Statements for the year ended 30[th] September 2021

REFERENCE AND ADMINISTRATIVE DETAILS

The International Institute for Strategic Studies , also known as the IISS, is a registered charity and a company limited by guarantee. The liability of each Board of Trustees member under the guarantee does not exceed the sum of £1.

Registered Office Arundel House
6 Temple Place
London
WC2R 2PG
Company Number 615259
Charity Number 206504
Trustees
Chair Bill Emmott
Vice-Chair Chung Min Lee
Hon Treasurer Chris Jones
Professor Dr Kurt Lauk
Jens Tholstrup
Catherine Roe
Matt Symonds
Matthew J Symonds
Caroline Atkinson
Dr Grace Skaugen

During the year under review, there were no Trustee changes.

For clarification purposes, there are two Trustees with the name Matthew (Matt) J Symonds.

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The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30[th] September 2021

Executive Directing Staff

Director-General and Chief Executive Director of Geo-Economics; Japan Chair Director of Defence and Military Analysis Director of Finance Director of Operations Director of HR Executive Director, IISS-Asia

Executive Director, IISS-Middle East Executive Director, IISS-Americas Executive Director, IISS-Europe

Dr John Chipman Dr Robert Ward Dr Bastian Giegerich Sally Taylor Dr John Hobart Jane Graham Dr Tim Huxley (resigned 23[rd] April 2021); James Crabtree (appointed 24[th] April 2021) Sir Thomas Beckett Ernest J Herold Dr Ben Schreer (appointed 19[th] July 2021)

Agents and Advisers

Legal Advisers

Bankers

Investment Managers

Pension Fund Managers

Pension Consultants

Auditors

Stone King Sewell LLP, 13 Queen Square, Bath BA1 2HJ

HSBC Bank plc, 60 Queen Victoria Street, London EC4N 4TR

Cazenove Capital Management (part of Schroder & Co. Limited), 12 Moorgate, London EC2R 6DA

Mobius Life, 7th Floor, 20 Gresham Street, London EC2V 7JE

Mercer (formerly JLT Benefit Solutions), The St Botolph Building, 138 Houndsditch, London EC3A 7AW

Crowe U.K. LLP, 2[nd] Floor, 55 Ludgate Hill, London EC4M 7JW

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The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30[th] September 2021

Independent Auditor’s Report to the Members of The International Institute for Strategic Studies

Opinion

We have audited the financial statements of The International Institute for Strategic Studies (‘the charitable company’) and its subsidiary (‘the group’) for the year ended 30 September 2021 which comprise the Consolidated Statement of Financial Activities, Consolidated and Charity Balance Sheets, Consolidated Cash Flow Statement and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Trustee's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the charitable company's or the group’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the Trustees with respect to going concern are described in the relevant sections of this report.

Other information

The Trustees are responsible for the other information contained within the annual report. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

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Annual Report and Financial Statements for the year ended 30[th] September 2021

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion based on the work undertaken in the course of our audit

Matters on which we are required to report by exception

In light of the knowledge and understanding of the group and charitable company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report included within the Trustees’ report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Responsibilities of trustees

As explained more fully in the Trustees’ responsibilities statement, the Trustees (who are also the directors of the charitable company for the purposes of company law) are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Trustees determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Trustees are responsible for assessing the charitable company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Trustees either intend to liquidate the charitable company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Details of the extent to which the audit was considered capable of detecting irregularities, including fraud and non-compliance with laws and regulations are set out below.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Extent to which the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of noncompliance with laws and regulations. We identified and assessed the risks of material misstatement of the financial statements from irregularities,

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Annual Report and Financial Statements for the year ended 30[th] September 2021

whether due to fraud or error, and discussed these between our audit team members. We then designed and performed audit procedures responsive to those risks, including obtaining audit evidence sufficient and appropriate to provide a basis for our opinion.

We obtained an understanding of the legal and regulatory frameworks within which the charity and group operates, focusing on those laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements. The laws and regulations we considered in this context were the Companies Act 2006, taxation legislation, employment legislation and general data protection legislation, together with the Charities SORP (FRS 102). We assessed the required compliance with these laws and regulations as part of our audit procedures on the related financial statement items.

In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which might be fundamental to the charity’s and group’s ability to operate or to avoid a material penalty. We also considered the opportunities and incentives that may exist within the charity and the group for fraud. The laws and regulations we considered in this context for the UK operations were taxation legislation, employment legislation and General Data Protection Regulation (GDPR). We also considered compliance with local legislation for the group’s overseas operating segments.

Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the Trustees and other management and inspection of regulatory and legal correspondence, if any.

We identified the greatest risk of material impact on the financial statements from irregularities, including fraud, to be within the timing surrounding recognition income and the override of controls by management. Our audit procedures to respond to these risks included enquiries of management, internal audit and the audit committee about their own identification and assessment of the risks of irregularities, sample testing on the posting of journals, reviewing accounting estimates for biases, reviewing regulatory correspondence and reading minutes of meetings of those charged with governance.

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of nondetection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing noncompliance and cannot be expected to detect non-compliance with all laws and regulations.

Use of our report

This report is made solely to the charitable company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the charitable company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the charitable company and the charitable company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Tim Redwood Senior Statutory Auditor For and on behalf of Crowe U.K. LLP Statutory Auditor

London

16 March 2022

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The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30[th] September 2021

CONSOLIDATED STATEMENT OF FINANCIAL ACTIVITIES

(incorporating an income and expenditure account)

Year ended 30th September
Unrestricted
Funds
Notes
£'000
Income from:
Donations
2
2,812
Charitable activities
Dialogues, conferences and lecture series
3
7,362
Research programmes
3
1,007
Publications
1,319
Membership
1,450
Other trading activities
268
Investments
74
Capital applied to income
Other income
25
Total
14,317
Expenditure on:
Raising funds
153
Charitable activities
Dialogues, conferences and lecture series
4
6,034
Research programmes
4
3,654
Publications
4
2,994
Membership
4
471
Other trading activities
198
Total
13,504
Net (losses)/ gains on investments
17
612
Net income/ (expenditure)
1,425
Transfers between funds
12
-
Other recognised gains/(losses):
Foreign exchange (losses)/ gains
(70)
Actuarial (losses) on defined benefit pension schemes
14
149
Net movement in funds
1,504
Funds brought forward at 1 October 2020
12
18,212
Funds carried forward at 30 September 2021
12,13
19,716		 Restricted
Funds
£'000
-
-
3,858
-
-
-
221
131
-		 Endowed
Funds
£'000
-
-
-
-
-
-
-
(131)
-
(131)
-
-
-
-
-
-
-
584
453
-
-
-
453
5,691
6,144		 Total Funds
2021
£'000
2,812
7,362
4,865
1,319
1,450
268
295
-
25
18,396
153
6,034
7,733
2,994
471
198
17,583
1,196
2,009
-
(70)
149
2,088
23,974
26,062		 Total Funds
2020
£'000
2,941
5,880
4,479
1,445
1,593
396
257
-
25
4,210 17,016
-
-
4,079
-
-
-		 138
4,884
7,804
2,823
564
396
4,079
-		 16,609
(53)
131
-
-
-		 354
-
(34)
(56)
131
71		 264
23,710
202 23,974

All amounts relate to continuing operations and, as all gains and losses are included, a separate statement of total recognised gains and losses has not been presented.

The notes on pages 26 to 47 form part of these accounts

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The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

CONSOLIDATED BALANCE SHEET (Company Number 615259)

As at 30th September
2021
Notes
£'000
Fixed assets
Intangible assets
6
230
Tangible assets
7
13,774
Investments
8
11,434
Total Fixed assets
25,438
Current assets:
Debtors
9
3,060
Cash at bank and in hand
6,178
Total Current assets
9,238
Liabilities:
Creditors: Amounts falling due within one year
10
(8,058)
Net current assets / (liabilities)
1,180
Total assets less current liabilities
26,618
Net assets excluding pension liability
26,618
Defined benefit pension liability
14
(556)
Total net assets
13
26,062
The Funds of the charity
Expendable endowment funds
12
6,144
Restricted income funds
12
202
Unrestricted income funds
12
20,272
Pensions reserve
12
(556)
Total unrestricted funds
13
19,716
Total charity funds
13
26,062		 2020
£'000
423
13,225
10,319
23,967
2,170
6,098
8,268
(7,520)
748
24,715
24,715
(741)
23,974
5,691
71
18,953
(741)
18,212
23,974

The consolidated balance sheet includes the assets, liabilities and funds of The International Institute for Strategic Studies (Asia) Limited, Arundel House Enterprises Limited, IISS India Organisation, IISS Europe gemeinnützige GmbH, and the Strategic Studies Fund.

The accounts were approved and authorised for issue by the Trustees on 22 February 2022 and signed on their behalf by:

Bill Emmott Chair of the Trustees

The notes on pages 26 to 47 form part of these accounts

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The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

CHARITY BALANCE SHEET (Company Number 615259)

As at 30th September
2021
Notes
£'000
Fixed assets
Intangible assets
6
230
Tangible assets
7
13,284
Investments
8
11,434
Total Fixed assets
24,948
Current assets:
Debtors
9
3,039
Cash at bank and in hand
1,424
Total Current assets:
4,463
Liabilities
Creditors: amounts falling due within one year
10
(5,436)
Net current liabilities
(973)
Total assets less current liabilities
23,975
Net assets excluding pension liability
23,975
Defined benefit pension liability
14
(556)
Total net assets
23,419
The Funds of the charity
Expendable endowment funds
12
6,144
Restricted income funds
12
84
Unrestricted funds
12
17,747
Pensions reserve
12
(556)
Total unrestricted funds
13
17,191
Total funds including pensions reserve
13
23,419		 2020
£'000
423
13,184
10,319
23,926
1,530
2,895
4,425
(4,807)
(382)
23,544
23,544
(741)
22,803
5,691
75
17,778
(741)
17,037
22,803

The unconsolidated surplus incurred by the Charity in 2021 was £498,000 (2020: deficit of £326,000)

The accounts were approved and authorised for issue by the Trustees on 22 February 2022 and signed on their behalf by:

Bill Emmott Chair of the Trustees

The notes on pages 26 to 47 form part of these accounts

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Annual Report and Financial Statements for the year ended 30th September 2021

CONSOLIDATED CASH FLOW STATEMENT

CONSOLIDATED CASH FLOW STATEMENT
Year ended 30th September
Notes
Cash flows from operating activities:
Net cash (used in) / provided by operating activities
17
Cash flows from investing activities:
Dividends, interest and rents from investments
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of software and website costs
Purchase of investments
Proceeds from sales of investments
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Draw down of money market facility
Net cash provided by (used in) financing activities
Change in cash and cash equivalents in the year
Cash and cash equivalents at the beginning of the reporting period
Cash and cash equivalents at the end of the reporting period
18		 2021
£'000
295
(1,111)
-
(89)
(2,028)
2,098
150		 2021
£'000
904
(835)
150
219
6,147
6,366		 2020
£'000
257
(577)
-
(222)
(3,404)
551
-		 2020
£'000
2,188
(3,395)
-
(1,207)
7,354
6,147

The notes on pages 26 to 47 form part of these accounts

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The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

NOTES TO THE FINANCIAL STATEMENTS

1 Accounting policies

a) Status

The Institute is a registered charity and a company limited by guarantee, incorporated in England and Wales. Its registered office address is Arundel House, 6 Temple Place, London WC2R 2PG. The Trustees constitute Directors for the purposes of the Companies Act and act as Trustees for the purposes of the Charities Act. The charity is a Public Benefit Entity.

b) Accounting convention

The accounts of the Charity and the Group have been prepared under the historical cost convention as modified by the revaluation of investments and in accordance with FRS102. The accounts are prepared in accordance with the Companies Act, and the current Statement of Recommended Practice: ‘Accounting and Reporting by Charities’ (SORP). The functional and reporting currency of the Group is GBP.

Basis of consolidation

The accounts include the assets, liabilities and funds, and the statement of financial activities of the charity and its subsidiary undertakings. Subsidiaries' activities are consolidated on a line by line basis. A separate statement of financial activities has not been prepared for the Charity alone as permitted by Section 408 of the Companies Act 2006.

Going concern

After making enquiries, the Trustees have reasonable expectation that the charity has adequate resources to continue its activities for the foreseeable future, and are satisfied that there are no material uncertainties surrounding the ability of the group to continue as a going concern. Accordingly, they continue to adopt the going 2009.266concern basis in preparing the financial statements as outlined in the Trustees' Report above.

Critical accounting judgements and key sources of estimation uncertainty

In the application of the group’s accounting policies, which are described in this note, trustees are required to make judgements, estimates and assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects the current and future periods.

Significant areas of estimate and judgement include provisions, income recognition, and assumptions used to value the defined benefit pension scheme and the remaining useful life of assets. Related accounting policies for these items are noted below. The principal accounting policies adopted, judgements and key sources of estimation uncertainty in the presentation of the financial statements are as follows:

c) Investments

6366

All investments are valued at their mid-market value at the balance sheet date, which ~~gives rise~~ to unrealised gains and losses. The differences between the carrying value (or cost if acquired during the year) and the proceeds of liquidated investments are identified as realised investment gains or losses. Realised and unrealised gains and losses are presented net in the Statement of Financial Activities.

Investment income and related tax credits are accounted for when received.

d) Restricted funds

Restricted funds are funds subject to specific restrictive conditions imposed by donors or by the purpose of the funds raised.

e) Expendable Endowment funds

The expendable endowment fund is treated as capital until the right to transfer funds to income and expend in accordance with the donor conditions has been granted.

f) Tangible fixed assets and depreciation

Furniture, fittings and equipment acquisitions are stated at cost. Freehold buildings are stated at cost. Depreciation is charged when assets are brought into use. The following depreciation policies are applied consistently across the group over the useful economic lives of the assets on a straight line basis:

i) Computers, printers and other electronic equipment with functional unit costs in excess of £1,000 are depreciated over a period of three years.

ii) Furniture, fittings and equipment of a non-electronic nature with unit costs in excess of £250 are depreciated over a period of five years.

iii) Plant and machinery items with unit costs in excess of £1,000 are depreciated over a period of ten years. iv) Leasehold improvements with unit costs in excess of £1,000 are depreciated over the life of the lease.

No depreciation is charged on freehold land or on assets in the course of construction.

26

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

g) Intangible fixed assets and amortisation

Website costs and software acquisitions are stated at cost. Amortisation is charged when assets are brought into use. The following amortisation policy is applied consistently across the group:

i) Software and website costs in excess of £1,000 are depreciated over their useful economic lives on a straight line basis over a period of three years.

No amortisation is charged on assets in the course of development.

h) Debtors

Debtors are stated in the balance sheet at estimated net realisable value, being the invoiced amount less any provision for bad and doubtful debtors. Provisions are made specifically against debtors where there is evidence of a dispute or an inability to pay. An additional provision is made against older balances.

i) Cash at bank and in hand

Cash includes cash-in-hand, cash-at-bank and bank overdrafts. Bank loans are included within Creditors.

j) Creditors

Trade and other creditors: Trade and other creditors are stated at cost.

k) Foreign currency

Assets and liabilities denominated in foreign currencies are translated into sterling at the rate of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate ruling at the date of the transaction. Exchange differences are taken to the Statement of Financial Activities.

Foreign currency subsidiaries are translated into UK£ Sterling on the following basis:

l) Publications and membership income

Publications revenue advanced to the Institute under agreement with the publishers is recognised during the financial year in which the sale arises. An estimate of additional royalty income due up to 30 September 2020, to be received in early 2021, has been made in these financial statements.

Membership income is recognised on the subscription period start date. Any income invoiced in advance of the subscription period start date is deferred and recognised in the relevant accounting year.

m) Grants

Research grants are credited to the Statement of Financial Activities in accordance with the progress and performance of the grant programme activities. Income for Dialogues is recognised to the extent that the event has been planned and progress work completed in line with the contract.

When donors specify that grants are for particular restricted purposes, this income is included in incoming resources of restricted funds.

n) Deferred income

Income is deferred to future periods where the donor has placed an external restriction that the income should be used in those future periods or where the Institute has not fully earnt entitlement to that income.

o) Expenditure

Expenditure is classified under the principal categories of Raising Funds, Charitable Activities, Commercial Activities Operating Expenditure and Financing Costs.

Charitable activities costs comprise all expenditure directly related to the objects of the Institute including direct staff costs attributable to each activity, together with a corresponding apportionment of central support costs.

Support costs are apportioned to charitable activities by a method based on the average headcount of employees allocated to each activity for the financial year.

Knowledge and Information expenses are included within support costs.

Financing Costs comprise those costs directly attributable to investment managers' fees/commissions and borrowing costs incurred in relation to financing.

Raising Funds comprise those costs directly attributable to fundraising activities.

Other Trading Activities Operating Expenditure comprise all costs incurred by Arundel House Enterprises Limited in delivering its catering, event and consultancy activities.

Expenditure is accounted for on an accruals basis.

27

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

p) Leasing

Rental costs under operating leases are charged to the Statement of Financial Activities in equal amounts over the period of the leases.

q) Pension costs

The Institute maintains a contributory defined benefit pension scheme which was closed to new entrants in 2001. The assets of the scheme are held separately from those of the Institute being invested in managed funds. The pension scheme is accounted for in accordance with FRS102 Retirement Benefits.

The Institute has defined contribution pension schemes which are open to all employees and also contributes to the personal pensions of some employees. Contributions to the scheme are accounted for when payable. Further details of all pension schemes can be found in Note 14.

r) Redundancy and termination payments

Redundancy and termination payments only occur when absolutely necessary as the Institute seeks to minimise organisational change. When redundancy or termination payments do arise, they are charged on an accruals basis and included with Staff Costs.

s) Knowledge and Information Services

The Knowledge and Information Services (formerly the Library) holds a comprehensive collection of books, journals, pamphlets and online resources covering a broad range of current international relations, security and defence topics. The collection is regularly updated for continued use by IISS research staff. New publications are expensed through the SoFA and the library does not hold any valuable publications which may require inclusion on the Balance Sheet.

28

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

2 Donations

Donation in support of the IISS-Middle East office and related research activities
Other		 2021
£'000
2,713
99
2,812		 2020
£'000
2,911
30
2,941

3 i) Dialogues, conferences and lecture series

Manama Dialogue
Shangri-La Dialogue
Riyadh Defense Forum
Lecture series		 2021
£'000
3,699
3,506
121
36
7,362		 2020
£'000
3,943
1,899
-
38
5,880

Funding for dialogues, conferences and lecture series received during the year from UK and international Governments totalled £7,251,000 (2020: £5,568,000).

3 ii) Research programmes

South Asia
Strategy, Technology and Arms Control (formerly Non-Proliferation and Nuclear Policy)
Europe
US Foreign policy and transatlantic affairs
Defence & Military Analysis
Conflict, Security & Development Programme
Geo-Economics & Energy Security
Middle East and the Gulf
Asia-Pacific
Cyber, Space and Future Conflict
Japan Chair Programme
Other Research Programmes		 2021
£'000
601
361
167
168
1,078
50
462
253
1,014
630
73
8
4,865		 2020
£'000
828
416
-
-
897
159
358
68
998
549
58
148
4,479

Funding for research projects received during the year from UK and international Governments totalled £3,637,000 (2020: £2,734,000)

29

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

4 i) Analysis of expenditure - charitable activities and governance

Group

Charitable activities
Primary costs
Dialogues and conferences
Research programmes
Publications
Membership
Support costs
Support operations
Total 2021
Total 2020		 Staff
costs
£'000
1,530
3,786
1,413
233
3,649
10,611
9,608		 Other direct
costs
£'000
3,139
1,243
164
10
1,282
5,838
5,666		 Depreciation
charges
£'000
-
7
57
-
747
811
794		 Exchange
(gains) /losses
£'000
-
-
-
3
(32)
(29)
7		 Allocation of
support costs
£'000
1,365
2,698
1,359
224
(5,646)
-
-		 Total
2021
£'000
6,034
7,734
2,993
470
-
17,231		 Total
2020
£'000
4,884
7,804
2,823
564
-
16,075
16,075

The above table analyses by expense category the costs related to the charitable ac ~~tivities and the governance~~ of the Institute. Charitable activities costs include both primary costs, which are directly attributable to specific charitable activities, and centrally incurred support costs. The total support costs are then apportioned across the specific activities in accordance with the average headcount of employees allocated to each activity for the financial year. Costs relating to commercial activities are not included in the above table.

Included in support costs for 2020 are governance costs of £77,000 (2020: £76,000). Governance costs include staff costs, trustee travel to board meetings and audit fees.

Staff costs include amounts paid to consulting fellows and other consulting associates not on the payroll, so will be higher than salaries and wages costs included in Note 5.

30

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

Net income/ expenditure is stated after charging:
Depreciation
Amortisation
Auditors' remuneration
- Audit fees
- Tax advisory and other services
Operating leases
- Land and buildings
Trustees' professional indemnity insurance
Staff costs
Wages and salaries
Social security costs
Employers' contribution to defined contribution pension schemes
Operating costs of defined benefit pension schemes (excluding finance costs)
Other forms of employee benefits		 2021
£'000
547
281
28
19
821
11
2021
£'000
8,427
810
417
33
565
10,251		 2020
£'000
425
372
26
19
806
11
2020
£'000
7,536
705
416
32
435
9,124

5 Staff costs

Costs of Consulting Fellows and other sub-contractors totalling £634,000 (2020: £718,000) are not included in the figures above.

Wages and salaries include £2,781,000 (2020: £2,071,000) in respect of restricted grant funded staff salaries.

Remuneration of key management personnel totalled £2,333,000 during the year (2020: £2,088,000).

Redundancy payments of £7,000 were paid during the year (2020: £2,000).

The average number of employees (headcount) during the year
Dialogues and conferences
Research programmes
Publications
Commercial Activities
Membership
Support
Number of employees whose emoluments were over £60,000
£640,001 to £650,001
£610,001 to £620,000
£210,001 to £220,000
£190,001 to £200,000
£180,001 to £190,000
£150,001 to £160,000
£130,001 to £140,000
£120,001 to £130,000
£110,001 to £120,000
£100,001 to £110,000
£90,001 to £100,000
£80,001 to £90,000
£70,001 to £80,000
£60,001 to £70,000		 No.
13
45
29
2
5
47
141
No.
1
-
1
2
1
1
3
4
4
4
2
8
2
7
40		 No.
12
41
26
2
6
46
133
No.
-
1
1
1
2
2
1
5
3
1
8
3
6
34

None of the above employees (2020: none) are accruing retirement benefits under the defined benefit scheme.

33 of the above employees (2020: 28) are accruing retirement benefits under money purchase schemes, and contributions on their behalf amounted to £259,000 (2020: £239,000).

For staff who are directly attributable to specific charitable activities (including both restricted and unrestricted funds), the pension costs are allocated on the same apportionment basis as their staff time/salaries. Support staff pension costs are apportioned on a headcount basis, outlined in note 4.i.

31

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

6 Intangible fixed assets

Group
Cost
At 1 October 2020
Exchange differences on consolidation
Disposals
Additions
At 30 September 2021
Amortisation
At 1 October 2020
Exchange differences on consolidation
Eliminated on disposals
Charge for the year
At 30 September 2021
Net book value
At 30 September 2021
At 30 September 2020		 Software and
Website costs
£'000
2,191
(2)
-
89
2,278
1,768
(1)
-
281
2,048
230
423		 Total
£'000
2,191
(2)
-
89
2,278
1,768
(1)
-
281
2,048
230
423

Projects under development total £NIL (2020 £7,000) in relation to database development costs.

Charity
Cost
At 1 October 2020
Exchange differences on consolidation
Disposals
Additions
At 30 September 2021
Amortisation
At 1 October 2020
Exchange differences on consolidation
Eliminated on disposals
Charge for the year
At 30 September 2021
Net book value
At 30 September 2021
At 30 September 2020		 Software and
Website costs
£'000
2,191
(2)
-
89
2,278
1,768
(1)
-
281
2,048
230
423		 Total
£'000
2,191
(2)
-
89
2,278
1,768
(1)
-
281
2,048
230
423

Projects under development total £NIL (2020 £7,000) in relation to database development costs.

32

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

7 Tangible fixed assets

Group
Cost
At 1 October 2020
Exchange differences on consolidation
Disposals
Additions
At 30 September 2021
Depreciation
At 1 October 2020
Exchange differences on consolidation
Eliminated on disposals
Charge for the year
At 30 September 2021
Net book value
At 30 September 2021
At 30 September 2020		 Freehold
land
£'000
3,000
-
-
-
3,000
-
-
-
-
-
3,000
3,000		 Freehold
buildings
£'000
11,456
-
-
-
11,456
2,523
-
-
115
2,638
8,818
8,933		 Furniture, fittings,
plant & machinery,
equipment, building
improvements &
motor vehicles
£'000
7,489
(123)
(547)
1,111
7,930
6,197
(118)
(537)
432
5,974
1,956
1,292		 Total
£'000
21,945
(123)
(547)
1,111
22,386
8,720
(118)
(537)
547
8,612
13,774
13,225

Furniture, fittings, plant & machinery, equipment, building improvements and motor vehicles contain assets in the course of construction of £114,000 (2020: £26,000).

Charity
Cost
At 1 October 2020
Exchange differences on consolidation
Disposals
Additions
At 30 September 2021
Depreciation
At 1 October 2020
Exchange differences on consolidation
Eliminated on disposals
Charge for the year
At 30 September 2021
Net book value
At 30 September 2021
At 30 September 2020		 Freehold
land
£'000
3,000
-
-
-
3,000
-
-
-
-
-
3,000
3,000		 Freehold
buildings
£'000
11,456
-
-
-
11,456
2,523
-
-
115
2,638
8,818
8,933		 Furniture, fittings,
plant & machinery,
equipment, building
improvements &
motor vehicles
£'000
6,865
(102)
(547)
576
6,792
5,614
(97)
(537)
346
5,326
1,466
1,251		 Total
£'000
21,321
(102)
(547)
576
21,248
8,137
(97)
(537)
461
7,964
13,284
13,184

Furniture, fittings, plant & machinery, equipment, building improvements and motor vehicles contain assets in the course of construction of £114,000 (2020: £26,000).

33

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

8 Fixed asset investments

Group and charity

Quoted
Hedge Funds
Property Fund
Portfolio Funds
UK Fixed Interest Funds
International Fixed Interest Funds
UK Equity Funds
International Equity Funds
Total Quoted investments
Portfolio cash
Total market value at 30 September
Total historical cost at 30 September
Reconciliation of opening and closing market values
Opening market value at 1 October
Additions at cost
Disposals at opening market value
Net gain/(loss) on revaluation
Closing market value at 30 September
Portfolio cash at 30 September
Total market value at 30 September		 2021
£'000
392
542
6,321
271
336
701
2,836
11,399
35
11,434
9,758
10,270
2,028
(2,070)
1,171
11,399
35
11,434		 2020
£'000
402
690
5,891
330
214
605
2,138
10,270
49
10,319
9,496
7,470
3,404
(561)
(43)
10,270
49
10,319

9 Debtors

Group
Trade debtors
Other debtors
Prepayments and accrued income		 2021
£'000
901
739
1,420
3,060		 2020
£'000
486
641
1,043
2,170
Charity
Trade debtors
Other debtors
Amounts owed by group and associated undertakings
Prepayments and accrued income		 2021
£'000
856
404
607
1,172
3,039		 2020
£'000
445
288
144
653
1,530

34

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

10 Creditors: amounts falling due within one year

Creditors: amounts falling due within one year
Group
Trade creditors
Other creditors
Taxation and social security
Accruals
Deferred income (note 11)		 2021
£'000
680
151
200
586
6,441
8,058		 2020
£'000
173
73
176
570
6,528
7,520
Charity
Trade creditors
Other creditors
Taxation and social security
Accruals
Deferred income (note 11)		 2021
£'000
638
89
184
514
4,011
5,436		 2020
£'000
195
66
176
497
3,873
4,807

11 Deferred income

Deferred income
Group
Brought forward at 1 October 2019
Received in the year
Expended in the year
Carried forward at 30 September 2020
Charity
Brought forward at 1 October 2019
Received in the year
Expended in the year
Carried forward at 30 September 2020		 2021
£'000
6,528
12,661
(12,748)
6,441
2021
£'000
3,873
6,757
(6,619)
4,011		 2020
£'000
4,844
6,529
(4,845)
6,528
2020
£'000
3,710
3,265
(3,102)
3,873

35

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

12 Movement in funds

Movement in funds
Group
Expendable endowment
Restricted
Gerald Segal Memorial Fund
Research Grants
Unrestricted
General fund
Pensions reserve
Total funds
Charity
Expendable endowment
Restricted
Gerald Segal Memorial Fund
Research Grants
Unrestricted
General fund
Pensions reserve
Total funds		 Balances
b/fwd
£'000
5,691		 Income
£'000
(131)
-
4,210
4,210
14,317
14,317
18,396
Income
£'000
(131)
2,769
2,769
9,752
9,752
12,390		 Expenditure
£'000
-
(2)
(4,077)
(4,079)
(13,504)
(13,504)
(17,583)
Expenditure
£'000
-
(2)
(2,758)
(2,760)
(10,328)
(10,328)
(13,088)		 Transfers
£'000		 Gains/
(losses)
£'000
584
-
542
149
691
1,275
Gains/
(losses)
£'000
584
-
581
149
730
1,314		 Balances
c/fwd
£'000
6,144
24
47		 22
180
71 - 202
18,953
(741)		 (36)
36		 20,272
(556)
18,212 - 19,716
23,974 - 26,062
Balances
b/fwd
£'000
5,691		 Transfers
£'000		 Balances
c/fwd
£'000
6,144
24
51		 22
62
75 - 84
17,778
(741)		 (36)
36		 17,747
(556)
17,037 - 17,191
22,803 - 23,419

Expendable endowment - restricted to fund a Chair in Japanese Security Studies at the IISS Gerald Segal Memorial Fund - to fund study on Asian issues. Restricted Grants - for research projects and specific non-research projects in strategic studies. Pensions reserve - represents the FRS102 pension liability.

13 Analysis of net assets by fund

Group

Expendable Restricted Unrestricted Total
Endowment Funds Funds Funds
£'000 £'000 £'000 £'000
Tangible assets - - 13,774 13,774
Intangible assets - - 230 230
Investments 6,134 - 5,300 11,434
Net current assets/ (liabilities) - 202 978 1,180
Pension liability - - (556) (556)
6,134 202 19,726 26,062
Charity
arity
Expendable Restricted Unrestricted Total
Endowment Funds Funds Funds
£'000 £'000 £'000 £'000
Tangible assets - - 13,284 13,284
Intangible assets - - 230 230
Investments 6,134 - 5,300 11,434
Net current assets/ (liabilities) - 84 (1,057) (973)
Pension liability - - (556) (556)
6,134 84 17,201 23,419

36

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

14 Pension schemes

The disclosures set out below relate to pension schemes to which contributions are made by the charity – a defined benefit scheme, individual personal pension schemes and a defined contribution scheme.

a Defined benefit scheme

The Institute sponsors the International Institute for Strategic Studies Staff Superannuation Scheme which is a defined benefit arrangement. The last completed full actuarial valuation of this scheme was carried out by a qualified independent actuary as at 1 March 2018. The scheme is closed to new entrants and no contributions were made during the year.

During the year, the Institute has made payments of £48,000 to reduce the overall scheme deficit as identified in the triennial actuarial valuation of the scheme as at 1 March 2018.

i) The amounts recognised in the balance sheet are as follows:

Present value of funded obligations
Fair value of plan assets
Deficit
Amounts in the balance sheet:
Liabilities
Assets
Net liability		 2021
£'000
(3,363)
2,807
(556)
(556)
-
(556)		 2020
£'000
(3,418)
2,677
(741)
(741)
-
(741)

ii) Changes in the present value of the defined benefit obligation are as follows:

Defined benefit obligation at start of year
Interest expense
Actuarial losses / (gains)
Benefits paid and expenses
Defined benefit obligation at end of year		 2021
£'000
3,418
58
(61)
(52)
3,363		 2020
£'000
3,385
61
(4)
(24)
3,418

iii) Changes in the fair value of the scheme assets are as follows:

Opening fair value of scheme assets
Interest Income
Actuarial gains / (losses)
Contributions by the company
Benefits paid and expenses
Fair value of scheme assets at the year end
The actual return on the plan assets in the year		 2021
£'000
2,677
46
88
48
(52)
2,807
2021
£'000
134		 2020
£'000
2,669
48
(60)
44
(24)
2,677
2020
£'000
(12)

37

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

14 Pension scheme (continued)

Net interest cost
Total amount charged to the Statement of Financial Activities		 2021
£'000
12
12		 2020
£'000
13
13

The International Institute for Strategic Studies expects to contribute £48,000 to its defined benefit pension scheme in the year ending 30 September 2022.

Return on plan assets (excluding amounts included in net interest cost)
gain / (loss)
Experience gains / (losses) arising on the plan liabilities
Effects of changes in the demographic and financial assumptions
underlying the present value of the plan liabilities - gain / (loss)
Total losses included in other recognised gains and losses		 2021
£'000
-
88
60
1
149		 2020
£'000
(60)
24
(20)
(56)

vi) The major categories of scheme assets are as follows:

UK Equities
Overseas Equities
Fixed Interest
Corporate Bonds
Diversified Growth
Property
Cash and other
Total Assets		 2021
£'000
256
719
1,028
-
566
178
60
2,807		 2020
£'000
113
462
603
792
506
181
20
2,677

vii) Principal assumptions at the balance sheet date (expressed as weighted averages)

2021 2020
Discount rate at 30 September 2.00% 1.70%
Inflation (RPI) 3.70% 3.20%
Inflation (CPI) 2.90% 2.40%
Allowance for revaluation of deferred pensions of CPI or 5% p.a. if less 2.90% 2.40%
Allowance for pension in payment increases of RPI or 5% p.a. if less 3.60% 3.10%
Allowance for pension in payment increases of RPI or 2.5% p.a. if less 2.50% 2.50%
Allowance for commutation of pension for cash at retirement 50% of Post A Day 50% of Post A Day
viii) The mortality assumptions adopted at 30 September 2021 imply the following Years
life expectancies at age 65:
Male retiring in 2021 22.60
Female retiring in 2021 24.50
Male retiring in 204 23.90
Female retiring in 2041 26.00

38

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

14 Pension scheme (continued)

b Personal pension plans

The Institute also contributes to the personal pension schemes of some employees. The contributions are charged to the Statement of Financial Activities when due and the cost for the financial year ended 30 September 2021 was £62,000 (2020: £60,000).

c Defined contribution scheme

The Institute has a defined contribution pension scheme which is open to all employees. The contributions made in the year ended 30 September 2021 were £349,000 (2020: £341,000). Contributions outstanding at the year end amounted to £56,000 (2020: £58,000).

d IISS-US pension scheme

The Institute contributes to a United States 401(k) defined contribution pension scheme which is open to employees at the IISS-US office. The contributions paid in the year ended 30 September 2021 were £30,000 (2020: £14,000). Contributions accrued at the year end amounted to £5,000 (2020: £2,000).

15 Leasing commitments

The future total minimum payments to which the Group is committed as at 30 September 2021 under operating lease agreements are as follows:

Office premises
Net present value of total lease commitments due:
Within one year
Between one and two years
Between two and five years
Over five years		 2021
£'000
1,039
1,050
2,108
1,639		 2020
£'000
756
1,015
2,473
2,009

16 Capital commitments

As at 30 September 2021, there were capital commitments contracted but not provided for of £190,000; for reinstating fixtures and the replacement of equipment at Arundel House (2020: £367,000).

17 Reconciliation of net incoming resources to net cash inflow from operating activities

Net income for the reporting period (as per the statement of financial activities)
Adjustments for:
Dividends and interest from investments
Depreciation charges
Amortisation charges
Pension reserve deficit funding
Losses/ (Gains) on investments
Exchange losses/ (gains) on fixed assets
Change in cash and cash equivalents due to exchange rate movements
Loss on disposal of fixed assets
(Increase)/ Decrease in debtors
Increase in creditors
Net cash provided by (used in) operating activities		 2021
£'000
2,009
(295)
547
281
(36)
(1,196)
6
(70)
10
(890)
538
904		 2020
£'000
354
(257)
425
372
(31)
53
4
(34)
39
(153)
1,416
2,188

39

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

18 Analysis of cash and cash equivalents

Cash at bank and in hand
Portfolio cash		 2021
£'000
6,178
35
6,213		 2020
£'000
6,098
49
6,147

19 Related Parties

a Trustees or connected persons

The Trustees did not receive any remuneration during the current or previous year.

No transactions, contracts or other arrangements (including grants) with any Trustees were entered into by the Institute during the year ended 30 September 2021 (2020: Nil).

Travel expenses for both governance and attending Institute dialogues and other activities were paid or reimbursed in respect of 1 trustee (2020: 5) and the total amount was £3,000 (2020: £5,000).

b Other related parties

The ultimate parent undertaking (Parent Charity) includes IISS-UK, and its two branches, IISS-US and IISS-Middle East.

I Arundel House Enterprises Ltd

Related party transactions of the ultimate parent undertaking with Arundel House Enterprises Ltd were as follows:

Balance at beginning of year
Expenses paid on behalf of Parent
Expenses paid on behalf of related party
Amounts paid in during the year
Foreign currency movement
Balance at end of year		 2021
£'000
3
(134)
282
(269)
27
(91)		 2020
£'000
139
(205)
419
(370)
20
3

II International Institute for Strategic Studies (Asia) Ltd

Related party transactions of the ultimate parent undertaking with IISS-Asia Ltd were as follows:

Balance at beginning of year
Expenses paid on behalf of Parent
Expenses paid on behalf of related party
Amounts paid out during the year
Amounts paid in during the year
Foreign currency movement
Balance forgiven on behalf of Parent
Balance at end of year		 2021
£'000
-
(11)
2,360
(1,146)
2
(1,205)
-		 2020
£'000
-
(19)
1,958
9
(1,492)
3
(459)
-

40

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

III Strategic Studies Fund

There were no related party transactions of the ultimate parent undertaking with the Strategic Studies Fund during 2021 (2020: Nil).

Related party transactions of IISS-Asia with the Strategic Studies Fund were as follows:

Balance at beginning of year
Expenses paid on behalf of Parent (IISS-Asia)
Expenses paid on behalf of related party
Amounts paid in during the year
Foreign currency movement
Balance at end of year		 2020
£'000
(495)
-
168
(98)
4
(421)		 2020
£'000
(316)
(378)
199
-
-
(495)

IV IISS India Organisation

Related party transactions of the ultimate parent undertaking with IISS India Organisation were as follows:

Balance at beginning of year
Expenses paid on behalf of Parent
Expenses paid on behalf of related party
Foreign currency movement
Balance at end of year		 2021
£'000
76
-
-
(4)
72		 2020
£'000
83
-
-
(7)
76

V IISS Europe gemeinnützige GmbH

Related party transactions of the ultimate parent undertaking with IISS Europe gemeinnützige GmbH were as follows:

Balance at beginning of year
Expenses paid on behalf of related party
Amounts paid out during the year
Foreign currency movement
Balance at end of year		 2021
£'000
65
251
240
(1)
555		 2020
£'000
-
47
18
-
65

41

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

20 Subsidiary undertakings

I Arundel House Enterprises Ltd

Registered office : Arundel House, 6 Temple Place, London, WC2R 2PG Registered number : 3720258

b Summary of profit and loss account for Arundel House Enterprises Ltd

Turnover
Cost of sales
Gross profit
Other expenses
Net profit before taxation
Gift Aid to IISS
Loss after taxation		 2021
£'000
300
(25)
275
(205)
70
(71)
(1)		 2020
£'000
416
(36)
380
(380)
-
-
-

c Summary of balance sheet for Arundel House Enterprises Ltd

Tangible fixed assets
Debtors
Cash at bank and in hand
Current assets
Creditors
Net assets
Aggregate capital and reserves		 2021
£'000
-
55
16
71
(61)
10
10		 2020
£'000
-
94
19
113
(102)
11
11

II International Institute for Strategic Studies (Asia) Ltd

Registered office : 9 Raffles Place, #51-01 Republic Plaza, Singapore 048619 Registration number : 200106226Z

b Summary of income statement for International Institute for Strategic Studies (Asia) Ltd

Dialogue and Lecture Series
Research programmes
Other
Total income
Dialogue and Lecture Series
Research programmes
Total expenses
Surplus for the year		 2021
£'000
3,506
1,425
22
4,953
(3,140)
(350)
(3,490)
1,463		 2020
£'000
1,899
1,371
16
3,286
(1,675)
(939)
(2,614)
672

42

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

c Summary of balance sheet for International Institute for Strategic Studies (Asia) Ltd

Tangible fixed assets
Debtors
Cash at bank and in hand
Current assets
Creditors
Net assets
Aggregate capital and reserves		 2021
£'000
355
80
4,160
4,240
(1,991)
2,604
2,604		 2020
£'000
42
799
3,137
3,936
(2,799)
1,179
1,179

III Strategic Studies Fund

Registered office : 9 Raffles Place, #51-01 Republic Plaza, Singapore 048619 IPC Registration number : 1798

b Summary of income statement for Strategic Studies Fund

Lectures Series
Research
Total income
Lectures Series
Research
Other expenses
Total expenses
Surplus for the year		 2021
£'000
36
128
164
(36)
(125)
-
(161)
3		 2020
£'000
38
177
215
(23)
(168)
-
(191)
24

c Summary of balance sheet for Strategic Studies Fund

Debtors
Creditors
Net assets
Reserves		 2021
£'000
421
(365)
56
56		 2020
£'000
495
(440)
55
55

IV IISS India Organisation

Registered office: E-301, East of Kailash, New Delhi-110065, India Incorporated in India with limited liability under number U80903DL2014NPL270367

43

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

b Summary of income statement for IISS India Organisation

Other Income
Total income
Dialogue and Lecture Series
Other expenses
Total expenses
Surplus/(Deficit) for the year		 2021
£'000
-
-
-
-
-
-		 2020
£'000
15
15
(12)
-
(12)
3

c Summary of balance sheet for IISS India Organisation

Debtors
Cash at bank and in hand
Current assets
Creditors
Net assets
Aggregate capital and reserves		 2021
£'000
7
17
24
(75)
(51)
(51)		 2020
£'000
7
22
29
(83)
(54)
(54)

V IISS Europe gemeinnützige GmbH

Registered office: Potsdamer Platz 10, Haus 2, 10785 Berlin, Deutschland

b Summary of income statement for IISS-Europe

Summary of income statement for IISS-Europe
Research
Other Income
Total income
Research
Total expenses
Surplus/(Deficit) for the year		 2021
£'000
682
11
693
(645)
(645)
48		 2020
£'000
34
-
34
(54)
(54)
(20)

c Summary of balance sheet for IISS-Europe

Tangible fixed assets
Debtors
Cash at bank and in hand
Current assets
Creditors
Net assets
Aggregate capital and reserves		 2021
£'000
135
87
561
648
(757)
26
26		 2020
£'000
-
-
24
24
(44)
(20)
(20)

44

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30[th] September 2021

21 Comparative Information

i) Consolidated Statement of Financial Activities (incorporating an income and expenditure account)

Year ended 30[th] September 2020

Unrestricted
Funds
Notes
£'000
Income from:
Donations
2
2,941
Charitable activities
Dialogues, conferences and lecture series
3
5,880
Research programmes
3
802
Publications
1,445
Membership
1,593
Other trading activities
396
Investments
84
Capital applied to income
-
Other income
25
Total
13,166
Expenditure on:
Raising funds
138
Charitable activities
Dialogues, conferences and lecture series
4
4,884
Research programmes
4
3,821
Publications
4
2,823
Membership
4
564
Other
4
-
Other trading activities
396
Total
12,626
Net gains on investments
17
(33)
Net income/ (expenditure)
507
Transfers between funds
12
-
Other recognised gains/(losses):
Foreign exchange gains
(34)
Actuarial losses on defined benefit pension schemes
14
(56)
Net movement in funds
417
Funds brought forward at 1 October 2019
12
17,795
Funds carried forward at 30 September 2020
12,13
18,212		 Restricted
Funds
£'000
-
-
3,677
-
-
-
173
187
-
4,037
-
-
3,983
-
-
-
-
3,983
-
54
-
-
-
54
17
71		 Endowed
Funds
£'000
-
-
-
-
-
-
-
(187)
-
(187)
-
-
-
-
-
-
-
-
(20)
(207)
-
-
-
(207)
5,898
5,691		 Total Funds
2020
£'000
2,941
5,880
4,479
1,445
1,593
396
257
-
25
17,016
138
4,884
7,804
2,823
564
-
396
16,609
(53)
354
-
(34)
(56)
264
23,710
23,974		 Total Funds
2019
£'000
9,036
7,560
4,463
1,282
1,422
527
99
-
148
24,537
201
5,371
7,919
3,883
726
-
517
18,617
81
6,001
-
48
(532)
5,517
18,193
23,710

All amounts relate to continuing operations and, as all gains and losses are included, a separate statement of total recognised gains and losses has not been presented.

45

The International Institute for Strategic Studies

Annual Report and Financial Statements for the year ended 30th September 2021

ii) Comparative movement in funds

For the year ended 30 September 2020

Group
Expendable endowment
Restricted
Gerald Segal Memorial Fund
Research Grants
Unrestricted
General fund
Pensions reserve
Total funds
Charity
Expendable endowment
Restricted
Gerald Segal Memorial Fund
Research Grants
Unrestricted
General fund
Pensions reserve
Total funds		 Balances
b/fwd
£'000
5,898		 Income
£'000
187
-		 Expenditure
£'000
-		 Transfers
£'000		 Gains/
(losses)
£'000
20
-		 Balances
c/fwd
£'000
5,691
26
(9)		 -
4,037		 (2)
(3,981)		 24
47
17 4,037 (3,983) - - 71
18,511
(716)		 13,166 (12,626) (31)
31		 67
-
(56)		 18,953
(741)
17,795 13,166 (12,626) - (123) 18,212
23,710 17,016 (16,609) - (143) 23,974
Balances
b/fwd
£'000
5,898		 Income
£'000
187
-		 Expenditure
£'000
-		 Transfers
£'000		 Gains/
(losses)
£'000
(20)		 Balances
c/fwd
£'000
5,691
26
(5)		 3,247 (2)
(3,191)		 24
51
21 3,247 (3,193) - - 75
18,002
(716)		 10,024 (10,164) (31)
31		 (53)
(56)		 17,778
(741)
17,286 10,024 (10,164) - (109) 17,037
23,205 13,084 (13,357) - (129) 22,803

Expendable endowment - restricted to fund a Chair in Japanese Security Studies at the IISS Gerald Segal Memorial Fund - to fund study on Asian issues. Restricted Grants - for research projects and specific non-research projects in strategic studies. Pensions reserve - represents the FRS102 pension liability.

iii) Comparative Analysis of net assets by fund

For the year ended 30 September 2020

Group
Tangible assets
Intangible assets
Investments
Net current assets/ (liabilities)
Pension liability
Charity
Tangible assets
Intangible assets
Investments
Net current assets/ (liabilities)
Pension liability		 Expendable
Endowment
£'000
-
-
5,691
-
-		 Restricted
Funds
£'000
-
-
-
71
-		 Unrestricted
Funds
£'000
13,225
423
4,628
677
(741)		 Total
Funds
£'000
13,225
423
10,319
748
(741)
5,691 71 18,212 23,974
Expendable
Endowment
£'000
-
-
5,691
-
-		 Restricted
Funds
£'000
-
-
-
75
-		 Unrestricted
Funds
£'000
13,184
423
4,628
(457)
(741)		 Total
Funds
£'000
13,184
423
10,319
(382)
(741)
5,691 75 17,037 22,803

46

The International Institute for Strategic Studies

FOR INFORMATION ONLY: CHARITY SOFA DOES NOT FORM PART OF AUDITED FINANCIAL STATEMENTS

YEAR ENDED 30TH SEPTEMBER 2021

Income from:
Donations
Charitable activities
Dialogues, conferences and lecture series
Research programmes
Publications
Membership
Investments
Capital applied to income
Other incoming resources
Total
Expenditure on:
Raising funds
Charitable activities
Dialogues, conferences and lecture series
Research programmes
Publications
Membership
Total
Net (losses)/ gains on investments
Net income/ (expenditure)
Transfers between funds
Other recognised gains/(losses):
Foreign exchange (losses)/ gains
Actuarial gains/ (losses) on defined benefit pension schemes
Net movement in funds
Funds brought forward at 1 October 2019
Funds carried forward at 30 September 2020		 Unrestricted
Funds
£'000
2,872
3,820
214
1,319
1,450
74
-
3
9,752
153
2,859
3,851
2,994
471
10,328
612
36
-
(31)
149
154
17,037
17,191		 Restricted
Funds
£'000
-
-
2,417
-
-
221
131
-		 Endowed
Funds
£'000
-
-
-
-
-
-
(131)
-
(131)
-
-
-
-
-
-
584
453
-
-
453
5,691
6,144		 Total Funds
2021
£'000
2,872
3,820
2,631
1,319
1,450
295
-
3
12,390
153
2,859
6,611
2,994
471
13,088
1,196
498
-
(31)
149
616
22,803
23,419		 Total Funds
2020
£'000
2,941
3,943
2,896
1,445
1,593
257
-
9
2,769 13,084
-
-
2,760
-
-		 138
3,189
6,643
2,823
564
2,760 13,357
(53)
9
-
-		 (326)
-
(20)
(56)
9
75		 (402)
23,205
84 22,803

47