Report and Accounts of the Service for the Year Ended 31 March 2010

1 Table of Contents

Directors of the Lighthouse Board 1 Office and Advisers 2 Executive Chairman’s Review 3 Directors’ Report and Management Commentary: 5 - Nature, Objectives and Strategy of the Business 5 - Current Developments and Performance 9 - Resources 17 - Risks and Uncertainties 19 - Relationships 19 - Financial Position 19 Remuneration Report 23 Statement of Accounting Officer’s responsibilities 25 Executive Chairman’s Statement on Internal Control 26 Net Expenditure Account for the Year Ended 31st March 2010 29 Statement of Financial Position as at 31st March 2010 30 Statement of Cash Flows for the Year Ended 31st March 2010 32 Statement of Changes in Reserves for the Year Ended 31st March 2010 33 Notes to the Accounts 34 Five Year Summary 67 Appendix A – Letter of Comfort 68 Directors of The Lighthouse Board:

Rear Admiral Sir J M de Halpert KCVO CB FRIN* Executive Chairman Captain D C Glass (retired 21st May 2009)* Director of Navigational Requirements Captain R H Barker (appointed 21st May 2009)* Director of Navigational Requirements Commodore S J Scorer* FCMI Director of Operations J S Wedge, CPFA MBA BA (Econ) Hons** Director of Finance and Support Services Captain N R Pryke, MCIT FNI* Deputy Chairman and Non - Executive F C Bourne*** Non – Executive D A Coltman*** Non – Executive M Gladwyn*** Non – Executive J D Price Secretary

* - Member of the Corporation of ** - Associate Member of the Corporation of Trinity House *** - Nominees of the Secretary of State for Transport (DfT) and Associate Member of the Corporation of Trinity House

1 Office and Advisers

Principal Office Corporation of Trinity House Trinity House Tower Hill London EC3N 4DH

Auditors of the General Lighthouse Fund Comptroller & Auditor General National Audit Office 157 -197 Buckingham Palace Road Victoria London SW1W 9SP

Bankers Lloyds TSB 230 High Street Dovercourt Essex CO12 3TA

Solicitors Norton Rose 3 More London Riverside, London SE1 2AQ

Actuaries Hymans Robertson LLP 30 Waterloo Street Glasgow G2 6DB

2 However, the pressure applied by the ship owners through these debates Executive Chairman’s Review in Parliament and direct lobbying of the Department for Transport (DfT) led to the setting up of a review of the General Lighthouse Authorities. This review was carried out by W.S. Atkins Limited. It took six months to complete and the final report was published on 15th March 2010. The The 2009/10 year has been dominated by events report is over 200 pages long and contains 52 recommendations, which and activity triggered by the first rise in Light Dues aim to improve the operational efficiency of the General Lighthouse for 16 years. The increases were introduced in two Authorities and the framework in which we operate. The report is wide stages on 1st July 2009 and 1st April 2010. The ranging but, while identifying improvements, shows that we are an increases were not well received by the shipping efficient, cost effective organization providing the world’s mariners with a community and resulted in a number of debates in very high level of service in our waters. Parliament and the lobbying of Ministers on the issue. On 14th May 2009, Lord Berkeley’s Marine Trinity House staff have played a key role throughout the W.S. Atkins review Navigation Aids Bill received its First Reading in the in providing information and advice to the consultants. This has been House of Lords, although it failed to make any particularly important in shaping the consultants’ views about navigation further progress in the 2008/09 Parliamentary matters, synergies and efficiencies and Light Dues. Directors also carried Session. The Bill proposed replacing the General out a series of staff ‘road shows’ to inform all staff of the outcome of the Lighthouse Authorities (GLAs) with a new Marine Navigation Aids W.S. Atkins review. Commission. An adjournment debate on ‘Light Dues, Lightships and ’ was held in Westminster Hall on 2nd June 2009. Lord Berkeley Meanwhile the General Lighthouse Authorities continue to operate in line tabled a motion of regret against the Light Dues increases in the House of with the document '2020 The Vision'. Endorsed by the DfT it is a Lords, which was debated on 9th July 2009. The Leader of the Opposition comprehensive strategy for marine navigation around the UK and the signed an Early Day Motion on 15th October 2009 calling for the revocation Republic of Ireland until 2020. It is currently the primary strategic of the Light Dues increase. This led to a debate in Parliament at the document for the General Lighthouse Authorities, together with the General Delegated Legislation Committee. On 19 November 2009, Lord Berkeley Lighthouse Authorities’ RadioNavigation Plan and Visual Aids to Navigation re-introduced his Marine Navigation Aids Bill and it received its Second Plan. Key points include the retention of a mix of visual and electronic Reading on 5th February 2010. However, it made no further progress due aids; the realisation of the potential of AIS and the development of a to the prorogue of the 2009/10 Parliamentary Session. terrestrial RadioNavigation back up, enhanced Loran (eLoran). This year has seen work continue on the General Lighthouse Authorities’ future All of these events required considerable skill and effort to present strategy beyond 2020 to 2025. It is planned to launch a new document authoritative arguments against these proposals, answer Parliamentary ‘2025 & Beyond’ in 2010, following extensive consultation with a wide Questions and brief Ministers, Lords and MPs as required, many of whom range of stakeholders. have wished to visit Trinity House. I am pleased to report that in all of these parliamentary debates, Trinity House has received significant praise for the first class job it is doing. It has been well recognized that the efficiencies that Trinity House has made in recent years have been a major reason why Light Dues have remained low and have been steadily reduced over the last 16 years.

3 Trinity House has also continued to operate successfully as the following Trinity House has come through a difficult and challenging year with its achievements demonstrate. During the year Trinity House has: reputation enhanced. This is of great credit to all the staff who have worked so diligently at Trinity House. We are well placed to take the organization • Continued the maintenance of AtoN availability above IALA forward with confidence that we can build on the outstanding work of the standards. last twelve months. • Completed a comprehensive AtoN Review. • Modernised Bishop Rock lighthouse. • Developed and implemented a new strategy for lightvessels. • Deployed new buoyage at the Lands End Traffic Separation Scheme. • Opened to the public, the refurbished Heritage Centre, with an official opening by HRH The Princess Royal. • Refurbished the Pier. Sir Jeremy de Halpert • Let a new 5 year helicopter contract. Executive Chairman of the Lighthouse Board • Retained ISO 9001:2008 and ISO 14001:2004 quality and environmental standards. • Achieved the highest RoSPA Health and Safety standard, diamond level. • Fostered high levels of staff motivation, illustrated by the 67% staff engagement score achieved in the last staff survey. • Achieved £1.7 million income from commercial work. • Taken part in the international emergency response exercise, MANCHEX. • Maintained high standards of corporate governance and strong financial controls as evidenced by reports from internal auditors. • Generated value for money savings of £847,000. • Met all financial targets, including containing operating costs below the rate of inflation.

The coming year promises to be a challenging one. Implementation of the W.S. Atkins review and the C-Mar Fleet Review will be a key part of our activity in the next year. The post General Election scene is likely to include the requirement for public service organizations such as Trinity House to make financial savings. In this regard, we have already complied with the Government required savings target to reduce the cost of back office functions.

I am also pleased to be able to report that Internal Audit have provided assurance that Trinity House’s current risk management, control and governance arrangements are “adequate and effective”.

4 where such equipment forms part of a system for providing information - Directors' Report and (a) to ships about the type, position and functioning of aids to the navigation of ships; or Management Commentary (b) to assist the GLAs in the efficient provision of aids to navigation of ships. Nature, Objectives and Strategy of the Trinity House is currently pursuing a number of changes to its powers through the proposed Marine Navigation Bill. Business These Accounts are prepared by Trinity House in respect of its function as Statutory Background the GLA for and in accordance with a directive made by the Under Section 193 of the Merchant Shipping Act 1995 the Corporation of DfT under the powers of the Secretary of State contained in Section 218 Trinity House is appointed as the GLA for England and Wales, the Channel of the Merchant Shipping Act 1995. The accounts are subsequently Islands and the adjacent seas and islands, and under Section 195 is vested consolidated to form part of the General Lighthouse Fund (GLF) Accounts, with the responsibility for the superintendence and management of all which are prepared pursuant to Section 211 of the Merchant Shipping Act lighthouses, buoys and beacons within its area. Trinity House has various 1995. powers and responsibilities in connection with the provision, maintenance, alteration, inspection and control of lighthouses, buoys and beacons under Corporate Governance Section 198 and Section 199 of the 1995 Act. Trinity House also has responsibilities within the area for the marking and removal of wrecks The Corporation established a constitution and terms of reference for the under Sections 252 and 253 of the 1995 Act, where such area does not lie Lighthouse Board on 4 June 1984 and this has since been updated and within or near an approach to a harbour or conservancy authority. Trinity amended, the last occasion being on 23 November 2009. This constitution House is currently responsible under Section 193(5) of the Merchant sets out the make up of the Board and its proceedings. The Board generally Shipping Act 1995 for in Gibraltar. The meets on eight occasions each year. It reviews and updates its policies, Corporation discharges the responsibilities of the DfT at Sombrero receives reports from Executive Directors and Committees and monitors Lighthouse (Anguilla). Trinity House meets residual pension liabilities in performance against sanctioned expenditure and against previous trends. respect of former employees of the Imperial Lighthouse Service in the West The Board formally reviews and approves the Strategic Plan, Corporate Indies, Sri Lanka and the Falkland Islands. Plan and the Annual Report and Accounts.

The Board works to a 'Code of Best Practice', which was updated in The Merchant Shipping and Maritime Security Act 1997 gives Trinity House September 2007 to ensure it continues to follow current best practice. It the powers to establish contracts to exploit spare capacity in its assets. sets out the responsibilities of Directors, the observance of public service The GLA (Beacons: Maritime Differential Correction Systems) Order 1997 values and the Board's relationship with the DfT. The Code is underpinned came into force on 12 January 1998 and states that the definition of by the seven principles as set out in the report on Standards in Public Life 'Beacon' in the Merchant Shipping Act includes equipment for a Differential (The Nolan Report). Global Positioning System. The GLA (Beacons: Automatic Identification System) Order 2006 came into force on 20 July 2006 and states that the The Board has also adopted the requirement to comply with the Code of definition of ‘Beacon’ in the Merchant Shipping Act includes equipment Best Practice as set out by the Committee on Corporate Governance (The provided for broadcasts in the frequency range 156.025 - 162.025 MHz Combined Code) as required for companies listed on the London Stock

5 public. Access can be obtained by contacting the Board Secretary at Tower Exchange. The Board has in place specific arrangements to fulfill the Hill, London. proposals of the Turnbull Report, using the ICAEW guidance document 'Implementing Turnbull: A Boardroom Briefing'. This includes a full analysis The following sub-committees of the Board are established to co-ordinate of the significant business risks to produce and continually up-date the Risk key activities: Schedule. This Schedule identifies the means by which these risks are controlled and who is accountable for managing each significant risk. a) Executive Committee Internal Audit include a full review of that risk analysis and the internal control function in their Annual Report. Internal Audit now base their The Board delegates the management of its day-to-day activities to the programme of audit work on the Risk Schedule and the set of Executive Directors, each of whom has responsibility for a specific area. Directorate/Departmental Risk Registers, which sit beneath it. The Executive Directors meet on a regular basis (usually monthly) to exchange views and information on the activities within each of their Based on these processes and the confirmation in successive Annual directorates. They collectively review policies and procedures prior to their Internal Audit Reports that 'work to date has not identified any significant submission to the Board in order to maintain a consistent approach across weaknesses in risk management, control and governance frameworks', the the Service. They also action and monitor policies once the Board has Board considers it has complied with the Combined Code for the whole of approved them. The Executive Committee in turn delegates the the accounting period. operational execution of many of its policies to its managers, and meets quarterly with all the senior managers to review policies and plans. In December 2000 HM Treasury issued an instruction that requires compliance with guidance on Corporate Governance in the Public Sector. Membership of the Executive Committee is as follows: This guidance was broadly based on the Turnbull Report and Trinity House was therefore able to comply with the requirements. One specific Rear Admiral Sir J M de Halpert requirement is the publication of a separate 'Statement on Internal Control' Captain R Barker within this Report and Accounts. This statement is set out on pages 27-29 Commodore S J Scorer and has been signed by the Executive Chairman and is in accordance with J S Wedge the current guidance issued by HM Treasury. S Basker

The Trinity House Executive Chairman combines the role of Chairman and b) Audit Committee Chief Executive. The Board considers this provides the most efficient and effective use of resources without compromising the basic principles of The Audit Committee is established to monitor and review management good governance. Although the Combined Code advocates separation of controls, the financial stewardship of the funds at the Board's disposal, risk these two roles, there are further checks and balances, not available to and corporate governance issues including Public Interest Disclosure Act listed companies, provided by the trustee actions of the Secretary of State (whistle-blowing) matters and the systems of internal control. It does this for Transport as exercised by Ports Division of DfT and through the by reviewing various sources of data including individual Internal Audit Secretary of State’s nominees on the Lighthouse Board. Reports, National Audit Office (NAO) reports and other information on the various aspects of the operation. The Committee meets with the Head of A register of interests that includes details of company directorships or Internal Audit to review their Annual Report and discuss any aspects of other significant interests held by Board members and senior managers, their commentary regarding the Service's overall internal control system. which may conflict with their management responsibilities, is maintained. The Committee also meets with the NAO to review the Annual Accounts The register is advertised on the Trinity House website and is open to the and to discuss any observations raised by the Auditors in their Management

6 Letter.

Membership of the Audit Committee is:- Membership of the Remuneration Committee is:-

F C Bourne (Chairman) D A Coltman (Chairman) M J Gladwyn (Deputy Chairman) F C Bourne Captain N R Pryke M Gladwyn

The following also attend meetings: d) Executive Remuneration Committee

Rear Admiral Sir Jeremy de Halpert In February 2004 the Board established an Executive Remuneration J S Wedge Committee to determine fair remuneration for staff below Director level J D Price and ensure that staff of the right quality are attracted, retained and NAO and Internal Audit motivated, within budgetary constraints and public sector pay guidance policy. The Committee operates under Terms of Reference that directly The membership and operation of the Audit Committee, is in line with the support the Remuneration Committee. The Committee consults the Audit Committee Handbook originally issued by HM Treasury in March 2007 Executive Chairman, the DfT and other GLAs as and when appropriate and and updated in 2009. The Audit Committee approved revised Terms of beneficial to ensure decisions are consistent and reflect best practice. Reference, based on this guidance, in March 2010 for submission to the Board in May 2010. The distinction between 'Members' and 'Attendees' Membership of the Executive Remuneration Committee is: operates in accordance with the Handbook. Consequently, the membership of the Committee consists of non-executive directors only. The Secretary J S Wedge (Chairman) to the Board attends meetings and takes the minutes, in accordance with Captain R Barker the Handbook's advice. Commodore S J Scorer c) Remuneration Committee e) Examiners’ Committee

This Committee assesses Directors’ remuneration and comprises three non- The Examiners' Committee is appointed to review all requirements for the executive Directors, who have no personal financial interest other than as Service's provision of AtoN and in particular to review any proposed non-executives in the matters to be decided, no potential conflicts of changes thereto, establishment of new Aids and discontinuance of others. interest arising from cross-directorships and no day-to-day involvement in The Committee is comprised of all the Elder Brethren who are 'Mariner the running of the Service. The Committee operates under Terms of Assistants' of the Corporation so some members are not otherwise Reference drawn from the Code of Best Practice prepared by the Study employed directly by the Lighthouse Service. They can bring the relevant Group on Directors' Remuneration (The Greenbury Code). The Committee independent view and experience necessary for the deliberations of this consults the Executive Chairman about its proposals other than in relation Committee. An Examiner is always on call to give decisions regarding to the Chairman's own remuneration and has access to professional advice casualties at sea and the investigation and marking of wrecks. from inside and outside sources. The Committee consults the DfT in relation to the performance of the Executive Chairman as regards his responsibilities acting as Accounting Officer.

7 Membership of the Examiners’ Committee is: - • The development of multi-skilled technicians; • A state of the art central control and monitoring centre at our main Captain R Barker (Chairman from 21st May 2009) depot; Rear Admiral Sir Jeremy de Halpert • Increasing use of modern business systems and communications; Captain D C Glass (Chairman up to the 21st May 2009) • The implementation of differential GPS; Commodore S J Scorer • The establishment on behalf of the three GLAs of a trial eLoran Captain N R Pryke service from Anthorn in Cumbria; Captain N D Squire • The creation of a commercial business arm to exploit spare capacity Captain R M Woodman in our assets. Captain Nick Dodson Commodore P J Melson (Advisory Member) This resulted in a reduction in the Trinity House workforce (ie excluding Captain D P Richards (Advisory Member) Lightdues and Tri GLA staff) from around 1500 staff at the start of the automation programme to around 284 staff by the end of this year. These Vision Statement considerable efficiencies have made a significant contribution to reducing Light Dues in the last 16 years. Trinity House’s vision statement is: The review of the GLA’s by W.S. Atkins, which was completed in March To deliver a reliable, efficient and cost effective 2010, makes 52 recommendations that offer further opportunities for efficiencies and modernization, that are captured in our latest strategic ''AIDS TO NAVIGATION SERVICE'' objectives. for the benefit and safety of all mariners. Strategic Objectives During the last few years Trinity House has subjected itself to a major culture change in that it has transformed itself from a very labour intensive, The following are our main strategic objectives: traditional organisation to a multi-skilled and highly automated service well- equipped for the challenges of the 21st Century. • Justify the provision of eLoran services from a UK transmitter based on an eLoran Strategy and associated business case by October 2010 This change has involved some major initiatives:- (S.Basker). • Continue to maintain AtoN availability to IALA standards by March • Automation of all lighthouses; 2011 (J. de Halpert). • Automation of all lightvessels; • Ensure that Examiners’ decisions on navigational requirements, • Solarisation of all lighted buoys; aimed at mitigating risk to safe navigation, are developed into AtoN • Solarisation of most lighthouses and lightvessel stations; solutions suitable for development and delivery by Operations and • A reduction in the number of lightvessel stations; substantiated by risk assessment incorporating appropriate vessel • A reduction in the tender fleet from 9 to 2 major vessels; traffic analysis and user consultation by March 2011 (R.Barker). • A reduction from 5 launches to one RIV; • Ensure full safety and operational standards are maintained, and to • A major re-organisation following the Business Process Review (BPR) budget by March 2011 (J. de Halpert). resulting in 31% fewer staff; • Deliver AIS as an AtoN as defined by the navigational requirement • A reduction from 5 depots to 1 main depot at Harwich with by March 2011 (J. Scorer). outstations at Swansea and St Just;

8 Current Developments and • Produce and implement a Maintenance Overhead Reduction Plan Performance including a capital investment projection by March 2011 (J Scorer). • Produce and implement a fully costed AtoN Casualty Reduction Plan Aids to Navigation by March 2011 (J Scorer). • Retain certification to ISM, ROSPA and ISO9001 and 14001 Trinity House has carried out a comprehensive AtoN review, during the standards and give consideration to the introduction of the year, using a risk analysis approach that was accepted as best practice by Occupational Health & Safety (OHSAS) 18001 standard by March NLB and CIL. This will ensure that a common AtoN tapestry exists across 2011 (J. de Halpert). each of the GLAs. The review takes into account off-shore renewable • Implement the 2010/11 Environmental Plan ensuring that the energy developments; the impact of new technology on AtoN provision organisation’s “carbon footprint” is reduced by March 2011 (J. de and the revised IALA Maritime Buoyage System. Implementing this review Halpert). will be a key piece of work for 2010 onwards. • Achieve greater synergy and efficiency between the GLAs through the chairmanship of the GLA Joint Strategic Board (JSB) and IGC The modernization of Bishop Rock was completed in the early part of 2010. Committees by March 2011 (J. de Halpert). Coquet lantern roof ventilator was successfully lifted and repaired by Field • Implement - reporting to the JSB - the recommendations arising Operation Technicians saving considerable amounts of money in from the Assessment of the Provision of Marine Aids to Navigation comparison with using an outside contractor. A project to repair the around the UK and Ireland by the agreed timescales as they affect foundations of has started. Trinity House by March 2011 (J. de Halpert). • Promote the GLA amendments to the Merchant Shipping Acts A new strategy for lightvessels was agreed and implemented during the through the Marine Navigation Bill together with the adoption of the year, retaining two more seaworthy lightvessels than originally planned. IMO Wreck Removal Convention in a manner which will allow the This reflected the increased safety of navigation risk presented by the GLAs to operate effectively by March 2011 (J. de Halpert). emerging offshore renewable energy infrastructure. • Ensure as far as is practically possible that Light Dues are set by DfT at an appropriate level to cover budgetary requirements and Following IMO’s acceptance of a northward extension of the Lands End maintain reserves by March 2011 (J.Wedge). Traffic Separation scheme, from 1st July 2009 an additional high focal plane • Seek efficiency savings and endeavour to keep expenditure increases lighted buoy, equipped with a racon, named ‘Bann Shoal’ was deployed. contained within the rate of inflation during the life of the 2010/13 Corporate Plan by March 2013 (J.Wedge). Detailed testing of Ericon and Phalcon racons has been carried out. • Support the introduction and augmentation of GPS, Galileo and GLONASS by December 2016 (S.Basker). e-Navigation

A comprehensive GPS jamming trial was undertaken at Newcastle-upon- Tyne using THV Galatea. The trials successfully demonstrated the vulnerability of shipboard navigational equipment to a loss of GPS and the need for eLoran as a way of providing resilient positioning, navigation and timing for e-Navigation.

9 The re-capitalisation of the DGPS infrastructure has continued throughout Lighthouse Estate the year. This is a tri-GLA project, delivered by VT Communications Ltd. The refurbished Lizard Lighthouse Heritage Centre was officially opened The largest and most complex set of eLoran trials were conducted in the on 13th July 2009 by HRH The Princess Royal. The project received much Orkney area and eLoran monitors were installed on all main GLA vessels. positive press coverage and was a credit to all concerned. External funding options for eLoran, including obtaining funding from EU INTERREG, are being pursued. A major project to improve the Harwich Pier was completed on time and within budget. IALA A decision was made in January 2010 to offer for sale on the open market, Trinity House continues to play a major role in IALA, providing papers and the former TH Penzance depot. Negotiations will also continue in parallel, leading key committees. Key areas of work include the development of a with Cornwall Council, who wished to acquire the site for development. new Maritime Buoyage System and the introduction of the first stage of the International Waterways Risk Assessment Program (IWRAP), Work was completed at St Just to provide a new storage facility. quantitative assessment tool. The period ahead will see implementation of the estates issues arising from AIS Infrastructure the 2010 AtoN Review.

The tri-GLA project to deploy AIS units as Aids to Navigation on various Helicopter Contract stations continues. Some technical issues with the ATONIS units remain to be resolved in 2010. A new helicopter contract was let. This is designed to meet the 140 flying days and 40 days spare time, requirements for helicopter service. The The tri-GLA project to develop software by ICAN Marine to analyse AIS contract was awarded to Police Aviation Services (PAS) and is due to start traffic date continues. Trinity House has carried on successfully using its in December 2010. established software supplied by Anatec. This has provided invaluable ship routing data through-out the year which has informed the AtoN Review Emergency Response and provided information to W.S. Atkins for use in their review of the GLAs. A detailed and quantitative assessment can now be made to ensure the A report on the Trinity House business continuity exercise PHOENIX was most cost effective response can be made for new wrecks or obstructions reviewed and implemented during the year. Trinity House also participated and also for the analysis of existing Aids to Navigation. in a major international exercise, MANCHEX, to test UK and French Maritime Rescue Services, following a disaster in the Dover Straits. Both Racons exercises provided practical experience of handling emergencies and identified potential improvements in business continuity plans. Detailed testing of Ericon and Phalcon racons has been carried out. Together with the other GLAs trials are being carried out to ascertain how Work will be completed in the year ahead to launch a new Business the deployment of racons will be affected by new technology radar which Continuity and Emergency Response Plan. is under development by several manufacturers.

10 Co-ordinated Fleet Management KPIs

Proposals were developed to adopt and implement co-ordinated GLA fleet Trinity House led the development of KPIs and benchmarking data that can management, following the recommendations of the C-MAR fleet review. be used to review GLA performance. A detailed KPI schedule and other The General Lighthouse Authorities’ proposals will lead to greater benchmarking data were provided to the GLA Review consultants, W.S. operational efficiency and reduced running costs for the management of Atkins. This information will provide objective measurement, benchmarking the GLA fleet. and monitoring of Trinity House’s performance.

Fleet Review Procurement

Further information has been provided to DfT to support the C-MAR review Trinity House has continued to lead on a number of tri-GLA procurement recommendations that THV Patricia should be replaced by a medium sized exercises during the year. These include the procurement of chain, shackles aids to navigation tender (MANT). A positive decision by DfT is important and associated mooring components; a GLA standardized buoy paint to protect Trinity House’s ability to carry out its statutory duties. system; and the GLA insurance contract tender. These joint GLA procurement exercises yield significant savings by bulk buying. For Quality and Environment example, the GLA insurance contract tender realized £60,000 in premium savings. Trinity House has also undertaken a european tender to rationalize Trinity House continues to retain ISO 9001:2008 and ISO 14001:2004 its suppliers of painting services. In addition, value for money savings of certification. Regular six monthly surveillance audits carried out by the £847,000 have been realized by smarter procurement during the year. external auditors, ABS, confirm that Trinity House maintains high quality environmental standards. IT

Health and Safety The IT Strategy was reviewed by the Board early in the year. It emphasizes the quality, reliability and availability of IT systems along with the Following the RoSPA verification audit, it was confirmed that Trinity House importance of ensuring business benefits and value for money. The current had achieved ROSPA QSA Award Level 5 (Diamond Level), the highest level IT Strategy has now entered the last of its three years with over 75% of obtainable. Trinity House scored 92% when compared against this all projects completed and the remainder in progress. A new IT Strategy standard. Trinity House put in place detailed contingency plans to prepare to cover the period 2011/14 will be compiled during 2010. There has been for a flu pandemic during this year. Whilst the impact of the flu virus was a focus on information security with initiatives to encrypt laptops; maintain less serious then predicted, the plans will be useful in the future, if this and update an Information Asset Register and embed the cycle of threat reappears. Information Asset Owners reporting on the information assets under their control. Other projects have included implementing phase 2 of MMIS and Marketing Server and Storage Virtualisation. Implementation of the new Stock and Procurement system will take place during 2010 following a detailed EU This has been a relatively good year for Marketing with commercial income procurement exercise. Online system availability during 2009/10 was exceeding the £1.5 million target, despite the effects of the economic 99.86%, well above the target of 97%. The target for resolving 90% of IT downturn. A comprehensive review of the Trinity House Marketing Strategy Support Calls within agreed SLAs was also exceeded with a 97.95% success was carried out and presented to the Board in September 2009. rate.

11 Employees

The annual pay remit was approved on time by DfT and successfully Availability of Differential Global Positioning System negotiated with the unions. This included the provision to “buy out” (DGPS) overtime rights from a group of managerial staff, which was subsequently implemented, saving £45,000 per annum and achieving a cultural change in working practices. The organisations strict zero tolerance approach Assuming overlapping coverage, the GLA DGPS Service availability was towards drugs and alcohol abuse was reinforced during the year. Reviews equal to or better than 99.9% in all areas for the year 2009/2010. IALA of the Finance, Procurement, Marine, Engineering and Marketing recommends presentation of DGPS Service availability taken over a two departments have been carried out during the year. These reviews will lead year period. Again assuming overlapping coverage, the GLA DGPS Service to a new, revised staff structure that will also take into account the availability was equal to or better than 99.93% in all areas for the two year implications of the fleet review and the AtoN review. The rest of the period 2008/2010 . The availability of the GLA DGPS service is therefore organisation will be reviewed at a departmental level on an internal basis 99.93% and within the target availability criteria of 99.8%. during 2011/12. Trinity House has continued to invest in the training and development of its staff, with a focus on management and leadership Aids to Navigation (AtoN) Availability development. The annual appraisal round produced high quality reviews from managers with well thought out staff development proposals. Availability of AtoN is the prime factor in any measurement to demonstrate compliance with our statutory responsibilities. The standards against which Triennial Risk Management Review we measure are those recommended as the minima by IALA. The figures shown below reproduced in accordance with those standards, show three Trinity House led the GLAs’ triennial risk management review, the year rolling averages under the various categories of aids and against the recommendations of which were approved by the Lights Finance minimum availability required for each category. It can be seen that in all Committee on 26th November 2009 and will be implemented in the period three categories our service has exceeded those minima in all years ahead. External consultant Willis Ltd, who were employed as part of the covered by the review. We consider this to be a major achievement and review to provide independent advice and to test the effectiveness and indeed a significant contribution towards the ongoing safety of all mariners. robustness of the GLAs’ risk management arrangements, concluded that the GLAs had implemented structured approaches to managing risk and continue to apply robust internal controls.

Performance Indicators

The core business of Trinity House is; "To deliver a reliable, efficient and cost effective AtoN service for the benefit and safety of all mariners". The Board measures its performance against this objective by the use of different indicators, which together show both the effectiveness and the economic cost of the service provided.

12 Trinity House Lighthouse Service

Aids to Navigation Availability - Three year rolling averages for financial years

AtoN Type Category IALA Min 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010

Lights 1 99.8% 99.83 99.83 99.87 99.93 99.95 Racons 1 99.8% 99.95 99.95 99.90 99.91 99.90 Lights 2 99.0% 99.86 99.89 99.92 99.95 99.95 Fog Signals 3 97.0% 99.90 99.91 99.87 99.90 99.86 Lights 3 97.0% 99.80 99.81 99.81 99.80 99.78

13 14 Running Costs

Set out below is an analysis of our operating costs over the last 10 years showing the trend of costs both in cash terms and on the basis of constant prices, having taken account of inflation. Running costs have fallen in constant price terms from £19,537k in 2000/01 to £17,145k in 2009/10 a reduction of 12.2%.

Operating Costs in Cash and Constant Prices

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

Operating Costs 19,537 20,365 20,423 22,002 22,568 21,341 21,219 21,014 23,604 22,232 Variance % 5.1% 4.2% 0.3% 7.7% 2.6% -5.4% -0.6% -1.0% 12.3% -5.8% Operating Costs 19,537 19,782 19,542 20,626 20,577 18,869 18,285 16,763 18,285 17,145 (Constant Prices) Variance % - 1.3% -1.2% 5.5% -0.2% -8.3% -3.1% -8.3% 9.1% -6.2% Average RPI 166.4 171.3 173.9 177.5 182.5 188.2 193.1 208.6 214.8 215.8

15 Light Dues

Following a consultation exercise in early 2009 light dues were increased on 1st July 2009 from 35p per Net Registered Tonnage (NRT) to 39p per NRT with an increased voyage cap from 7 per year to 9 on a rolling month basis. The rate was further increased from 1st April 2010 to 41p per NRT and the tonnage cap to 40,000 NRT (from 35,000 NRT). The increase on 1st July 2009 was the first increase since 1st April 1993, RPI having increased over that period by 52%.

16 Resources

Staff

The most important resource that Trinity House has at its disposal is Research and Development is undertaken on behalf of the three GLAs by people. There is a comprehensive staff Training Plan that aims to give staff the Research and RadioNavigation department based at Trinity House. This the skills and knowledge required to perform efficiently. Staff are department carries out work assessing and tracking advances in technology encouraged to develop through the performance review and development and market testing new products which have the possibility of providing system. In addition, skills gaps are identified through a careful strategic more efficient and cost effective methods of providing Lighthouse Service analysis and organization-wide development initiatives introduced as a requirements. It also participates in international forums such as IALA. result. For example, Trinity House has invested in leadership development Trinity House is also responsible for the collection of Light Dues on behalf and team working over the last three years following a needs analysis of the three GLAs. This is achieved using an internet based collection exercise. system, developed by Trinity House. Light dues collectors in each port, who are all members of the Institute of Chartered Shipbrokers, use the system The structure of the organisation is based around three main directorates: to collect light dues from ships entering UK ports. Operations, Finance & Support Services and Navigation. There is also a small Secretariat supporting the Executive Chairman. Trinity House is responsible for two Inter-GLA Functions: Research & RadioNavigation and Sickness Absence Light Dues collection. The budgeted distribution of staff numbers is shown in the table below. Sickness absence during the last two years was: 2009/10 2008/09

Operations 212 212 Finance & Support Services 48 48 2009/2010 2008/2009 Total number of days lost Navigation 8 8 due to sickness Secretariat 16 16 2044 2064 Total Trinity House 284 284 Average number of days lost per employee Inter GLA Research & Radio Navigation 14 14 6.49 6.50 Light Dues 5 5

Total 303 303 Equal Opportunities

Trinity House is an equal opportunity employer. All key HR processes such as appraisal, disciplinary or staff selection are designed to ensure that diversity issues in terms of gender, age, race, disability, sexual orientation or religion are fully considered.

17 Disabled Employees easier understanding by all and enabled it to be displayed in all suitable locations. The brand is now exhibited on all Trinity House vessels, The policy of the Board towards the employment of disabled people is that lighthouses and on our website. a disability is no bar to recruitment or advancement. The nature of the duties at lighthouses imposes some limitations on the employment of Licences, Patents and Trademarks disabled staff. A Genuine Occupational Qualification covers these posts. Trinity House did not hold any registered patents or trademarks in 2009/10. Employee Involvement The Service did not exploit any of its intellectual property rights, including copyright, commercially during the year. Trinity House grants licences to The provision of information to, and in consultation with, employees is a number of third parties to open some of its Lighthouses to the public, effected using a variety of communication mechanisms including joint from which it derives an income based on a percentage of revenue from committees covering all staff groups. Employees are informed of matters ticket sales. Such arrangements are in place at Alderney, Anvil Point, of concern to them; they are consulted frequently and regularly so that Flamborough Head, Lizard, Longstone, , Portland Bill, St account may be taken of their interests. Directors make presentations to Catherines, South Stack, Southwold and Start Point Lighthouses. all staff on important matters. During 2009/10, Directors presented the results of the W.S. Atkins review of the GLAs to all staff via a series of Environment roadshows. In addition, Trinity House introduced Staff Surveys 3 years ago. The results and emerging action points are frequently discussed at the Trinity House is totally committed to the protection of a sustainable employee forum meetings so that staff have a clear understanding of and environment and is fully attuned to the Government's initiatives for a more input to how Trinity house is continually developing the working proactive approach to this matter. Trinity House is continually reviewing environment. A follow up staff survey later in 2010 will provide more all environmental issues affecting the coastline in which Trinity House valuable benchmarking data. operates. Trinity House has placed high on the agenda the potential use of renewable energy sources, such as solar power, and continues to Physical Assets research other sources, such as wave, wind and tidal flow. As part of the commitment to this important issue, environmental objectives are included In addition to staff, Trinity House has a number of physical assets, which in operational plans. Trinity House has gained accreditation to the are essential to providing its service. These are detailed in note 24 to the internationally recognised Environmental Standard ISO 14001 in 2000 and accounts. The mariner is becoming increasingly more reliant on global achieved re-certification in 2003, 2006 and 2009. Trinity House produces navigation satellite systems (GNSS) for position fixing. If the Loran System an environmental plan containing key environmental targets and in Europe can be upgraded to eLoran and adopted as the terrestrial radio objectives, including the reduction in our carbon footprint. navigation service as backup to GNSS for safety of life at sea (SOLAS) Convention vessels, then the number of physical assets required for safe navigation is likely to reduce.

Branding

We have continued to develop the Trinity House brand to ensure that both business and the public understand and appreciate who Trinity House is and what we do. The simplification of the brand in 2005 has facilitated an

18 Risks and uncertainties Marine Departments where a Memorandum of Understanding for Inter-GLA Ship Support ensures adequate coverage for response to wrecks and casualties around all coasts. Trinity House's approach to risk takes account of its unique ring-fenced funding regime and the limited resources therefore available to finance Relationships with the DfT and ship-owners are managed through formal loss. Its overall risk management strategy, which aims to ensure effective and informal meetings and a joint DfT/GLA Framework Document. The internal control, is: formal meetings include an annual "Bi-Lateral" meeting between Trinity House, DfT and Ship Owners through the Lights Advisory Committee • To identify significant risks against key organisational aims and Chairman, representatives to debate the Trinity House Corporate Plan and objectives and to assign ownership of those risks in a schedule of an annual Lights Finance Committee (LFC) with all three GLAs, DfT and significant business risks. ship owners representatives which discusses all of the GLAs’ Corporate • To evaluate the significance of the risks in terms of probability and Plans. impact using recognised standards. • To respond to those risks through risk management controls. Trinity House is member of the key national committees underpinning • To review and report to the Board and Audit Committee regularly on maritime safety. At the Maritime and Coastguard Agency (MCA) these are those risks. the UK Safety of Navigation Committee (UKSON), the Port Marine Safety • To embed risk management as an intrinsic part of its organisational Steering Group (PMSG) Marine Safety Information Committee (MSI), UK processes by adopting a structured, hierarchical approach to risk Communications Committee, UKCOM plus other smaller groups. They are management. also founder members of the Nautical Offshore Renewable Energy Liaison • The Statement on Internal Control (page 26) emphasises the Committee (NOREL) which leads on all maritime safety issues in the importance that Trinity House attaches to risk management and the offshore field. regular review of risks. Apart from these set piece meetings DfT officials and ship owners have Relationships regular contact with Trinity House. Their representatives are involved in large scale projects, such as the building of new ships, from the beginning of each project. The marine community is consulted formally each year at the Trinity House Users Consultative Committee (THUCC). This is organised to inform the plans that are developed to aid the navigation of mariners. It also provides Financial Position users with the opportunity to raise any relevant issues. Trinity House is also influential in relation to international marine navigation with its close links to IALA. Strong links have been formed through the radio and Source of Finance research group with international marine authorities particularly in relation to the development of e-Loran and radio navigation services worldwide. Trinity House is financed by advances made by the DfT from the GLF whose Trinity House has strong links with the other GLAs. There is a well- principal income is from Light Dues levied on shipping using ports in the established inter-GLA consultation framework. At the top level the Chief United Kingdom and the Republic of Ireland. These advances, based on Executives and Chairmen will meet at least twice per annum at the Joint the annual cash requirements of Trinity House, finance both the revenue Chairmans Group (JCG). From April 2010 this will become the Joint and capital expenditure and are credited in the Income and Expenditure Strategic Board. Senior Managers and Directors form the GLAs Inter-GLA Account in the Accounts. In addition, Trinity House has sundry receipts in Committees (IGCs), which are based around professional specialisms such the form of buoy rentals, property rents, contractual services, a grant, as Finance and Engineering. There is an enduring relationship amongst the European Union funding and the proceeds from the sale of assets

19 Operating Results

The operating results for the year are set out in the Net Expenditure cash until 2010/11. Funds not drawn down remain in the GLF. Funds are Account and show a surplus of £9,257k for 2009/10 (£8,050k 2008/09). only drawn down based on the profile of cash required for the following Net expenditure deficit after interest of £2,080k was transferred to the week, thus liquidity is all handled within the GLF and not within the Trinity General Reserve (2008/09 £5,444k). House accounts.

For 2009/10 Trinity House’s performance against the cash limits set by DfT Main Financial Events can be summarised as follows: Light Dues were increased on 1st July 2009 for the first time since 1st April 1993, see page 18 for more details. Actual Cash Expenditure Limits Variance The DfT only sanctioned 90% of the budget during the first three months £000’s £000’s £000’s of the year resulting in delays in starting both revenue and capital projects, causing underspends in both of these areas. Running costs 22,707 23,490 (783) Expenditure on behalf 2,605 2,948 (343) Expenditure on Tangible Non-Current Assets of all GLAs 8,682 9,400 (718) Other cost i.e. Pensions During the year to 31 March 2010 expenditure on non-current assets was: & Ships Lease Capital expenditure 3,893 4,262 (369) Wreck removal - 1,626 (1,626) 331 293 38 Other costs (on behalf of DfT) 2009/10 2008/09 3 3 - Sombrero (on behalf of DfT) £000’s £000’s 38,221 42,022 (3,801) Total Work in Progress 382 1,619 Land - - Actuals vs. Budget Analysis Buildings 1,707 862 Tenders & Craft 561 422 Overall, there is a budget underspend of £4,168m (10%). Running costs Lightvessels 145 226 are underspent by 5% which is mainly attributable to only having 90% of Buoys & Beacons 461 353 our budget sanctioned for the first three months of the financial year. The Plant & Machinery 398 637 delay was caused by the uncertainty surrounding the setting of the Light Computer Equipment 224 127 Dues rate. Total 3,878 4,246 Cash drawdowns, Cash flow and Liquidity

The cash drawdown was below budget for the reasons provided in the Actual v Budget commentary above, and accruals for 2009/10 do not draw

20 The Accounts Direction provides that non-current assets shall be stated at Going Concern historic cost less depreciation. Trinity House has obtained independent valuations of the various depot buildings by Mr R E Weston BSc (Est Man.) The statement of financial position at 31 March 2010 shows net liabilities FRICS on behalf of Whydrow Chartered Surveyors as at 31 March 2010. of £118.936m. This reflects the inclusion of pension liabilities falling due in The valuation of the Penzance depot was carried by Mr S A Sly BSc (Hons) future years that may only be met by advances from the GLF. The Secretary MRICS on behalf of Charerwood Ltd in accordance the Practice Statements of State issued a letter of comfort in 2001 to the effect that in the unlikely and Guidance Notes set out in RICS Appraisal and Valuation Standards 6th event of insufficient money being available from the GLF to pay pension Edition January 2008 (as amended), published by the Royal Institute of liabilities the Department would request funds from Parliament to make Chartered Surveyors. Certain sites are deemed obsolete for operational the necessary payments. This letter is shown in Appendix 1. use, and are therefore surplus to requirement, and have been revalued at open market value. Details are as follows; Advances for 2010/11, taking into account the amounts required to meet the Board's liabilities falling due in that year, have already been included in Market Value Net Book Value the GLF forecasts for that year. DfT have officially sanctioned the 2010/11 as at 31/3/10 as at 31/3/10 Difference budget in a letter dated 2nd March 2010. It has accordingly been £ £ £ considered appropriate to adopt the going concern basis for the preparation of these financial statements. Old Harwich 630,000 630,000 - Penzance 475,000 475,000 - Accounting Policies

The Accounting Policies are reviewed each year in accordance with IAS8 - Accounting Policies, Changes in Accounting Estimates and Errors. This review is carried out at the tri-GLA Accounts Format Working Group each Trinity House London is owned by the Corporation, and is not an asset of year and at internal meetings, chaired by the Director of Finance and the GLF. Support Services. No Accounting Policies have altered since last year.

Payment of Creditors Policy

Trinity House seeks to adopt the conventions within the British Standards BS 7890, "Methods for achieving good payment performance in commercial transactions" which are reflected within the Trinity House's internal practices. Payment of all creditors' accounts are arranged by the date stipulated within the contract or other agreed terms of credit. Exceptions to this are as follows:

1. Payment within a shorter timescale where a discount may be available; 2. Where there is a genuine dispute in respect of the invoice concerned. In all cases the suppliers are immediately informed of the details of the query and that the payment will be withheld pending resolution.

21 Audit Suppliers are informed of our policy via a supplementary notice within contracts and are asked to provide any comments on this issue to the The accounting records of Trinity House are examined by the UK Director of Finance & Support Services. The average credit taken from Comptroller and Auditor General prior to consolidation in the Accounts of Trade Payables during the year was 17 days. the GLF. The GLF Accounts are formally certified by the UK Comptroller and Auditor General under the terms of Section 211 of the Merchant Events after the Year End Shipping Act 1995. There is no provision for a separate audit certificate to be appended to these Accounts. Following failure of factory acceptance testing, the GLAs have given notice to AB Pharos Marine Limited that the contract for the supply of AIS AtoN So far as the Executive Chairman acting in the role of the Accounting Units has been terminated. Under the contract the GLAs are entitled to Officer is aware, there is no relevant audit information of which Trinity return all Units within their possession to Pharos Marine. The GLAs have House auditors are unaware. The Accounting Officer has taken all the submitted a breakdown of consequential losses as a result of breach of steps that he ought to have taken to make himself aware of the relevant contract by Pharos Marine and negotiations between the GLAs and Pharos audit information and to establish that the Trinity House auditors are aware Marine are ongoing to reach an agreeable conclusion. The current value of that information. of the Trinity House share of work in progress in respect of this contract as at the 31 March 2010 is £204,739. No adjustments have been made within Executive Chairman the 31 March 2010 Accounts in respect of this event.

Sir Jeremy de Halpert

22 their success depends on the Board's ability to attract and retain staff of a Remuneration Report high quality. It is essential that the remuneration structure should be competitive with those of comparable organisations. The remuneration Remuneration Strategy strategy seeks to balance the fixed cost element with variable reward, providing the opportunity for variable remuneration in the form of the Trinity House operates a remuneration strategy based on spot rate salaries performance-based bonuses. The remuneration of the Directors and their informed by job evaluation and market testing. Trinity House uses the Hay pension entitlements are shown below: job evaluation methodology which provides a sound, tried and tested approach to job evaluation that ensures consistency and fairness across Remuneration of Directors job groups and directorates. It also enables us to benchmark with external comparators to ensure our salary rates remain competitive. We aim to pay 2009/20102009/2010 2008/2009 within the mid to upper quartile of the market in order to attract and retain Salary inc Benefits Salary inc 2008/2009 quality staff in often highly specialist, technical roles. Performance Performance Benefits Pay £000’s £ Pay £000’s £ Competency frameworks have been developed for all administrative positions and the lower level technical posts. These frameworks allow J M de Halpert 115-120 - 115-120 - employees to develop their skills and progress internally, thus facilitating J S Wedge 105-110 2,229 95-100 2,824 succession planning. Reward based purely on length of service is avoided, D C Glass* 10-15 - 85-90 258 as progression within the competency frameworks is dependent upon the R Barker** 80-85 101 - - achievement of various qualifications and skill levels. Trinity House market J S Scorer 100-105 153 95-100 148 tests all positions against local and national pay markets as appropriate M J Gladwyn 10-15 173 5-10 70 and undertakes an equal pay audit throughout the service every two years D A Coltman 15-20 4,942 5-10 3,160 to ensure our pay rates remain competitive. N R Pryke*** 20-25 820 15-20 935 F C Bourne 10-15 284 5-10 225 Trinity House operates a performance related pay system to incentivise staff. The current system is designed to increase staff awareness and The emoluments of Board Members (excluding the Executive Chairman) understanding of corporate level objectives and ensure that personal comprise: objectives link to departmental and strategic objectives. An annual staff 2009/2010 2008/2009 bonus is linked to the appraisal cycle. Every individual's performance and £000’s £000’s achievements are assessed in relation to objectives, behavioural and technical competencies. Bonus allocation is determined by individual Fees 50 45 performance and organisational level success against the year's corporate Salaries 364 248 strategic objectives. Performance Pay 35 37 Benefits in kind 2 3 This approach to pay policy ensures TH complies with age discrimination policy and rewards performance and competence as opposed to long Benefits represent travel and subsistence expenses (including tax), service. relocation expenses, gym membership and reimbursement of subscriptions to professional bodies. The creation of long-term effectiveness depends on the talents, contribution and commitment of the Executive Chairman and Directors;

23 J.de J.Wedge S J R. Barker * Retired 21 May 2009. Full year equivalent salary including performance Halpert Scorer pay £75k - £80k. a £000’s ** Director with effect from 11 May 2009. Full year equivalent salary Real 0 - 2.5 0 - 2.5 0 - 2.5 0 - 2.5 including performance pay £80k - £85k. Increase in pension *** N R Pryke receives remuneration as a Non Executive Director and an Examiner, his salary also includes payments of £6,369.20 made by Trinity b £000’s House on behalf of The Corporation of Trinity House, which were Real - 5-7.5 - - subsequently re-charged. Increase in lump sum The Executive Chairman's only emolument is a salary of £119,637 (2008/2009- £116,169) which included a performance related element of c £000’s £16,750 (2008/2009 - £15,484). Accrued 15-20 20-25 0-5 5-10 Pension Non-Executive Directors are employed on fixed term contracts for a period of 3 or 4 years, the term may be extended where appropriate. d £000’s Accrued - 70-75 - - Lump Sum Non -Executive Director Contract Start Expiry Date Captain N R Pryke 25 January 2005 31 January 2011 e £000’s (Contract renewed in 2008 for further 3 years) Cash M Gladwyn* 1 September 2007 31 August 2013 Equivalent 257 404 47 61 D A Coltman 23 October 2001 22 October 2010 Transfer Value at (Contract renewed in 2007 for further 3 years) 31 March 2009 F C Bourne* 20 July 2006 19 July 2012 f £000’s * Reappointed after year end. Cash 299 468 84 95 Equivalent Pensions Transfer Value at 31 March 2010 All Executive Board Members of Trinity House (including the Executive Chairman) are ordinary members of the Trinity House Lighthouse Service g £000’s Pension scheme. They are entitled to compensation for permanent loss of Real increase 39 36 30 29 office under the terms of the Trinity House Lighthouse Service in Cash compensation scheme which operates by analogy to the Civil Service Equivalent compensation scheme. Their contracts are ongoing until the age of 65, Transfer Value subject to satisfactory performance and require a twelve month written notice period.

24 Rows e and f of the above table show the Cash Equivalent Transfer Value Statement of Accounting Officer’s (CETV) of the director's pension benefits accrued at the beginning and end of the reporting period. A CETV is the actuarially assessed capitalised value responsibilities of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member's accrued benefits and any Under section 218(1) of the Merchant Shipping Act 1995 the Secretary of contingent spouse's pension payable from the scheme. It is a payment State for Transport, with the consent of HM Treasury, has directed Trinity made by a pension scheme or arrangement to secure pension benefits in House to prepare for each financial year a statement of accounts in the another pension scheme or arrangement when the member leaves a form and on the basis set out in the Accounts Direction. The accounts are scheme and chooses to transfer the pension benefits they have accrued in prepared on an accruals basis and must give a true and fair view of the their former scheme. The pension figures shown relate to the benefits that state of affairs of Trinity House and of income and expenditure, and cash the individual has accrued as a consequence of their total membership of flows for the financial year. the Trinity House pension scheme, not just their service in a senior capacity to which the disclosure applies. In preparing the accounts, the Accounting Officer is required to comply with the requirements of the Government Financial Reporting Manual and The figures include the value of any pension benefit in another scheme or in particular to: arrangement which the individual has transferred to the Trinity House Lighthouse Service pension scheme. They also include any additional • observe the Accounts Direction issued by the Secretary of State for pension benefit accrued to the member as a result of their purchasing Transport including the relevant accounting and disclosure additional pension benefits at their own cost. CETVs are calculated within requirements, and apply suitable accounting policies on a consistent the guidelines and framework prescribed by the Institute and Faculty of basis; Actuaries and do not take account of any actual or potential reduction to • make judgements and estimates on a reasonable basis; benefits resulting from Lifetime Allowance Tax which may be due when • state whether applicable accounting standards as set out in the pension benefits are drawn. Government Financial Reporting Manual have been followed, and disclose and explain any material departures in the accounts; and Row g reflects the real increase in the value of the CETV. It takes account • prepare the accounts on a going concern basis. of the increase in accrued pension due to inflation and contributions paid by the director and is calculated using common market valuation factors The Accounting Officer of the Department for Transport has designated for the start and end of the period. the Executive Chairman as Accounting Officer of Trinity House. The responsibilities of an Accounting Officer, including responsibility for the Note 19 contains further information on pensions for all staff. propriety and regularity of the funds allocated to Trinity House in its capacity as a General Lighthouse Authority under the control of the Accounting Officer, for keeping proper records and for safeguarding the assets of Trinity House, in its capacity as a General Lighthouse Authority are set out in the Framework Document between the Department for Transport and the General Lighthouse Authorities and HM Treasury’s Managing Public Money.

25 Executive Chairman's Statement Executive Chairman's Statement Capacity to Handle Risk on Internal Control Trinity House has in the past year regularly updated its Schedule of Scope of Responsibility significant business risks. This is in line with the ICAEW publication "Implementing Turnbull: A Boardroom Briefing". The Trinity House Risk Schedule divides the significant risks into four main categories: Acting in the role of Accounting Officer, I have responsibility for maintaining a sound system of internal control that supports the achievement of Trinity • Strategic Risks House’s policies, aims and objectives, whilst safeguarding the GLA funds • Financial Risks and assets for which I am personally responsible, in accordance with the • Operational Risks responsibilities assigned to me in Managing Public Money. These • Hazard Risks responsibilities were formally set out in a letter dated 4th February 2010 to me from Robert Devereux, Principal Accounting Officer of the The Schedule cross-references the risks identified to existing organisational Department for Transport. controls and policies e.g. Business Continuity & Emergency Response policy. The details of the operating arrangements the DfT has agreed with Trinity House are contained in the "Framework Document" (incorporating the The Board first approved the revised Risk Schedule in July 2003. A Director Financial Memorandum and Management Statement) dated 1 August 2008. is responsible for managing each risk. The process of embedding the risk management approach into the organisation has included: In practice the DfT work closely with Trinity House to manage risk. There is a regular flow of reporting information from Trinity House to the DfT, • Development and regular review of Directorate/Departmental risk including management accounts, Board reports and business cases. The registers with the involvement of managers and staff. DfT are involved at an early stage in key decisions. They are invited to • Internal Audit deriving their Audit Plan from the Risk Schedule and participate in larger projects e.g. DfT were represented on the Fleet Review registers. Steering Group in 2009. • Seminars with National Audit Office/Internal Audit and Trinity House managers to discuss risk management. The Purpose of the System of Internal Control • Workshops with other staff to reinforce awareness of risk management and fraud. The System of Internal Control is designed to manage risk to a reasonable • Publication of the Risk Schedule and Directorate/Departmental risk level rather than to eliminate all risk of failure to achieve policies, aims and registers to all staff. objectives; it can therefore only provide reasonable and not absolute • Putting risk management in job descriptions and as part of the assurance of effectiveness. The system of internal control is based on an induction process. ongoing process designed to identify and prioritise the risks to the • Including risk registers on team meeting agendas. achievement of Trinity House policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be Trinity House also leads the GLAs’ triennial risk management review, the realised, and to manage them efficiently, effectively and economically. It most recent of which was completed in October 2009. This contains the accords with Treasury guidance. The system of internal control has been risk management policy and strategy for the GLAs. It was approved by in place in Trinity House for the year ended 31 March 2010 and up to the the Trinity House Board and the Lights Finance Committee in November date of approval of the Annual Report and Accounts. 2009. This review includes the analysis of all main risks facing the GLAs

26 supported by third party assurance from a firm of independent risk • ISO270001 Gap Analysis conducted, with draft results reporting a consultants and draws on best practice guidance from the UK Risk positive position; Management Standard, prepared by the Institute of Risk Management, • The cycle of regular risk assessments, update of the Information Association of Insurance and Risk Managers and the National Forum for Asset Register and IAO Annual Assurance Reports has now bedded Risk Management in the Public Sector. A further triennial review will be in; and carried out in 2012. • Information Security is a standing agenda item on IT Department Management and Team meetings. The Risk and Control Framework External stakeholders are involved in managing risks through the joint users The Board and Audit Committee review the Risk Schedule every six consultative groups; navigation user consultation procedures; bilateral months. Prior to submission to these meetings each accountable Director meetings with industry representatives and the Lights Finance Committee. undertakes a review of the risks that they are responsible for managing. These provide stakeholders with the opportunity to comment on the This includes the information risks. The review of risks includes an Corporate Plan, budget and AtoNs that Trinity House provides. Stakeholders evaluation of the probability of the risk event occurring and the impact that comment on the full range of risks including Strategic, Financial, the occurrence would have both before and after controls have been put Operational and Hazard Risks. in place. Directors will determine whether the risks have altered from the very high, high, medium, low, or very low probability and impact categories The key changes to the risk profile of Trinity House during the year ended that they have previously been allocated. They also consider whether 31 March 2010 were: additional controls should be applied to reduce the residual risk further. Management of risk is an ongoing feature of work at Trinity House. It is • The increased risk of a change in Government policy in terms of the embedded into working practices through key polices and procedures such organisation’s statutory undertaking as a General Lighthouse as the: Authority as a result of the Marine Navigation Aids Bill and the DfT- led W.S. Atkins Review. This was mitigated as required by setting • Utilisation of a robust project management methodology based on out the organisation’s track record of business efficiencies and PRINCE 2; highlighting the costs and ineffectiveness of alternative models. • Project Risk Registers for key service projects; and • There was an increased risk to operational effectiveness caused by • Information Risk Policy and associated security procedures. the DfT’s decision to sanction only 90% of the budget at the start of the financial year. Trinity House maintains an Information Asset Register, with each asset • The increased risk of a lack of resources following the cumulative assigned an Information Asset Owner. The Information Asset Owners carry effects of the reduction in Light Dues in 2006. This risk subsequently out an annual review of information security risks using the Cabinet Office eased with the Government’s decision to raise Light Dues, although guidance. The outcome of this review is reported to the Board by the the risk of reductions in funding remains due to likely restrictions on Senior Information Risk Owner (SIRO). The following work has been public spending in the years ahead. carried out this year in relation to Information Security: • An increase in the risks associated with change management as a result of the introduction of co-ordinated management of the GLA • Staff Awareness sessions on Information Security carried out across fleet and implementation of the recommendations from the DfT-led the service, usually at Departmental Team Meetings. The CPNI DVD Assessment of the Provision of Aids to Navigation in the UK and was used as a prompt for discussions and Q&A; Ireland. These risks are being mitigated by ensuring a structured • Mandated use of encrypted USB storage devices; approach to both initiatives through the newly formed tri-GLA Joint • Laptops encrypted with Full Disk encryption software; Strategic Board.

27 • The increased risk of significant short-term staff absence due to • External Audit who independently audit Trinity House accounts and pandemic flu. This risk was mitigated by the preparation of summarise their findings in the management letter. Departmental contingency plans and has since eased due to the • The monthly analysis of the management accounts and work plans impact of the H1N1 virus being less severe than originally anticipated by the Executive Directors and Senior Managers. by Government health advisors. The Head of Internal Audit in his 2009/10 annual report, stated: Review of Effectiveness

Acting in the role of Accounting Officer, I have responsibility for reviewing ”In my opinion THLS’s arrangements for risk management, governance and the effectiveness of the system of internal control. My review of the control processes have been adequate and effective in 2009/10. effectiveness of the system of internal control is informed by the work of the internal auditors, Executive Directors and Senior Managers within This overall opinion is supported by my view in each of the following areas: Trinity House who have responsibility for the development and maintenance of the internal control framework, and comments made by Governance the external auditors in their management letter and other reports. I have THLS’s corporate governance processes and arrangements continue to been advised on the implications of the result of my review of the demonstrate a strong commitment to complying with best public sector effectiveness of the system of internal control by the Board and the Audit practice and were found to be working effectively. Committee and a plan to address weaknesses and ensure continuous improvement of the system is in place. Risk Management The organisations risk management arrangements are well established and The key elements of the ongoing review of the system of internal control were found to be working effectively. are: Internal Control • The Trinity House Lighthouse Board which meets eight times a year The organisation’s internal control processes in the areas reviewed during to decide policy, provide strategic direction and review progress. The the year were found to be working effectively with some minor control Board receives Audit Committee minutes and reports covering areas weaknesses and areas for improvement identified.” such as risk management. The Board also formally reviews its own effectiveness and that of the Audit Committee on an annual basis. • An Executive Directors' meeting each month which leads to the There have been no significant internal control problems in the year ended implementation of plans and reviews progress and performance. Risk 31 March 2010. management is formally reviewed by Directors and Senior Managers on a six-monthly basis but in practice is considered as part of the Therefore I can report that the System of Internal Control within Trinity control of all key projects and activities. House remains robust and effective, and complies with the best practice • The Audit Committee which operates in line with the "Audit principles set out in HM Treasury’s July 2005 Code of Good Practice for Committee Handbook". The Chairman of the Audit Committee Corporate Governance in Central Government Departments as far as is regularly reports to the Board at each meeting. appropriate. • Internal Audit, who provide regular reports that give an independent opinion on the adequacy and effectiveness of the system of internal control. The Head of Internal Audit produces an Annual Report, Sir Jeremy de Halpert, Executive Chairman which gives his opinion on the effectiveness of internal control. Date:

28 Net Expenditure Account for the year ended 31 March 2010

2009/10 2008/09 Note £000's £000's Expenditure Staff costs 4 11,001 11,238 Depreciation 5a 3,902 3,631 Amortisation 5a 348 316 Loss on revaluation 5a 195 - Pension cost 1,960 2,651 Other expenditure 5a 11,762 12,549 29,168 30,385

Income Advances from the General Lighthouse Fund 36,050 36,550 Other income 6a 1,723 1,414 Income on behalf of all GLAs 6b 326 397 Grant income 1(l) 326 74 38,425 38,435

Net Expenditure (9,257) (8,050)

Cost of capital 1(k), 5a (3,757) (3,468) Interest payable/receivable 7 8,398 9,268 Net Expenditure after cost of capital charge and interest (4,616) (2,250)

Net Expenditure on behalf of DfT Sombrero 5b 3 2 Other costs 5b 331 360 Total 334 362

Net Expenditure on behalf of all General Lighthouse Authorities Staff costs 5c 855 781 Other costs 5c 1,750 3,083 Total 2,605 3,864 Reversal of cost of capital 3,757 3,468

Net Expenditure after interest 2,080 5,444

29 Statement of Financial Position as at 31 March 2010

2009/10 2008/09 2007/08 Note £000's £000's £000's Non-Current Assets Property Plant & Equipment 8 51,696 51,861 52,856 Intangible Assets 9 339 650 851 Trade and Other Receivables 12 100 100 300 Total Non-Current Assets 52,135 52,611 54,007

Current Assets Inventories 11 2,285 1,993 1,798 Trade and other receivables 12 1,386 1,278 1,363 Other current assets - - - Financial assets - - - Cash and cash equivalents 13 13 100 868 Total Current Assets 3,684 3,371 4,029

Total Assets 55,819 55,982 58,036

Current Liabilities Trade and other payables 14 5,404 5,469 4,026 Other liabilities - - - Provisions: current element 15 617 430 653 Total Current Liabilities 6,021 5,899 4,679

Non Current Assets plus / less Net Current Assets / Liabilities 49,798 50,083 53,357

Non-Current Liabilities Provisions 15 211 486 640 Pension liabilities 19 151,627 127,489 136,104 Other payables 14 16,896 18,028 19,160 Financial liabilities - - - Total Non-Current Liabilities 168,734 146,003 155,904

Assets less Liabilities (118,936) (95,920) (102,547)

Reserves General Reserve (122,781) (99,486) (107,478) Revaluation Reserve 1,300 1,110 2,616 Capital Grant Reserve 2,545 2,456 2,315

Total (118,936) (95,920) (102,547)

30 The financial statements on pages 31 and 32 were approved by the Lighthouse Board on 16 September 2010, and signed on its behalf by:

The notes on pages 36 - 68 form part of these Accounts

31 Statement of Cash Flows for the year 31 March 2010

2009/10 2008/09 £000's £000's Cash flows from operating activities Net deficit after interest (2,080) (5,444) Pension benefits outflow (6,512) (6,434) Current service cost 1,879 2,651 Depreciation 3,902 3,631 Amortisation 348 316 Loss on revaluation of land and buildings 195 - Loss/(Profit) on disposal of property, plant and equipment 46 (159) Loss on disposal of intangibles 11 15 (Increase)/Decrease in trade and other receivables (108) 85 (Increase) in inventories (292) (195) (Decrease)/Increase in trade payables (255) 626 Use of provisions (88) (316)

Net cash outflow from operating activities (2,954) (5,224)

Cash flow from investing activities Purchase of property, plant and equipment (3,738) (3,644) Purchase of intangible assets (15) (125) Proceeds of disposal of property, plant and equipment 57 539 Proceeds of disposal of intangibles - - Repayments from other bodies - 200

Net cash outflow from investing activities (3,696) (3,030)

Cash flows from financing activities Movement in Government Grant Reserve 89 141 Pension financing cost 7,556 8,323 Inflow from new finance lease 0 6 Capital element of payments in respect of finance leases (1,082) (984)

Net cash flow from financing activities 6,563 7,486

Net cash flow from all activities (87) (768)

Net decrease in cash and cash equivalents in the period (87) (768) Cash and cash equivalents at the beginning of the period 100 868 Cash and cash equivalents at the end of the period 13 100

32 Statement of Changes in Reserves for the year 31 March 2010

General Revaluation Capital Grant Total Reserve Reserve Reserve Reserves £000’s £000’s £000’s £000’s

Balance at 1 April 2008 (107,478) 2,616 2,315 (102,547)

Changes in equity for 2008-2009 Net gain/(loss) on revaluation of property, plant and equipment 281 - - 281 Release of reserves to the Net Expenditure Account 13,155 (1,506) 141 11,790 Retained Surplus/(Deficit) (5,444) - - (5,444) Total recognised Income and expense for 2008-2009 7,992 (1,506) 141 6,627

Balance at 31 March 2009 (99,486) 1,110 2,456 (95,920)

Changes in equity for 2009-2010 Net gain/(loss) on revaluation of property, plant and equipment - 190 - 190 Release of reserves to the Net Expenditure Account (21,215) - 89 (21,126) Retained Surplus/(Deficit) (2,080) - - (2,080) Total recognised Income and expense for 2009/2010 (23,295) 190 89 (23,016)

(122,781) 1,300 2,545 (118,936)

33 Notes to the Accounts for the year 31 March 2010

1. Statement of Accounting Policies to make the necessary payments. These accounts have been prepared in accordance with the 2009/10 government Financial Reporting Manual (FReM) issued by HM Treasury. It has accordingly been considered appropriate to adopt a going concern The accounting policies contained in the FReM apply International Financial basis for the preparation of these financial statements. Reporting Standards (IFRS) as adapted or interpreted for the public sector context. c) Intangible Assets and Amortisation

Where the FReM permits a choice of accounting policy, the accounting Computer software has been capitalised and is amortised on a straight-line policy which has been judged to be the most appropriate to the particular basis over the estimated useful economic life of between 3 to 5 years circumstances of the GLA for the purpose of giving a true and fair view has dependant on the expected operating life of the asset as determined by been selected. The particular policies adopted by Trinity House are the TH IT Support Manager. described below. They have been applied consistently in dealing with items considered material in relation to the accounts. Intangible licences have been capitalised and are amortised over the life of the licence. In addition, these accounts have been prepared in accordance with the Accounts Direction issued by the Secretary of State for Transport on 10th Intangible Assets are shown at cost less amortisation. Amortisation is March 2003. calculated on a monthly basis and is commenced in the month after original purchase or when the asset is brought into use and is continued up to the a) Accounting Convention end of the month prior to disposal.

These accounts have been prepared under the historical cost convention. d) Non-Current Assets and Depreciation

b) Going Concern No-Current Assets are shown at cost less depreciation. Depreciation is calculated on a monthly basis and is commenced in the month after original The Statement of Financial Position at 31 March 2010 discloses net purchase or when the asset is brought into use and is continued up to the liabilities of £118,936,000. This reflects the inclusion of pension liabilities end of the month prior to sale. Assets in the course of construction are not falling due in future years. The Secretary of State for Transport, with the depreciated. agreement of the Treasury, issued a letter of comfort on December 2001 (appendix 1). The letter states that in the unlikely event of insufficient Book values have been retained in accordance with the Accounts Direction, money being available from the General Lighthouse Fund to pay pension and revaluations have only been undertaken for assets that are surplus to liabilities, the Department for Transport will request funds from Parliament requirements. Surplus assets have been restated in the accounts at open market value.

34 Depreciation is charged on a straight-line basis having regard to the e) Inventories estimated operating lives as follows: Inventories of consumable stores at depots and fuel stocks in tenders are valued at weighted average cost. CATEGORIES DEPRECIATION LIVES f) Research and Development Land and Buildings Land Not Depreciated The Board co-operates with the other Lighthouse Authorities through the Lighthouses (Building Structure) 50 years Research and Radio Navigation (R&RNav) Policy Committee for major Lighthouse Improvements 25 years research and development. Other direct expenditure on trial projects of a Other Buildings 50 years minor nature is charged to revenue as it is incurred. Work carried out by Tenders and Ancillary Craft Trinity House on behalf of the General Lighthouse Authorities is not Tenders 25 years included in the net expenditure of Trinity House but charged to the Income Tenders (Dry Dock and Repair) 2.5 years (30 months) and Expenditure Account as expenditure on behalf of all GLAs. Launches 15 years Workboats 10 years g) Leasing Commitments Lightvessels Lightvessel (Hulls) 50 years Assets obtained under finance leases are capitalised in the Statement of Lightvessel (Hull Conversions) 15 years Financial Position and depreciated as if owned. The interest element of the Lightvessel (Dry Dock and Repair) 5 years rental obligation is charged to the Net Expenditure Account over the period Buoys and Beacons of the lease and represents a constant proportion of the balance of capital Steel Buoys and Beacons 25 years repayments outstanding at the beginning of the year. The capital element Plastic Buoys 10 years of the future lease payments is stated separately under Payables, both Plant and Machinery within one year and over one year. Lighthouses and Lightvessels 15 years Automation equipment 15 years Expenditure incurred in respect of operating leases is charged to the Net Racons & Radio Beacons 15 years Expenditure Account as incurred. Depots and Workshops 10 years Office Equipment 10 years Rentals received under operating leases are credited to income. Vehicles 5 years Computers - Major systems 5 years h) Foreign Currency Transactions Computers - Other 3 years Assets leased under a Finance Lease 25 years being the expected All transactions in a foreign currency have been converted to Sterling useful life. (The primary lease immediately on receipt and are therefore translated at the exchange rate period is less than this but a ruling at the date of the transaction. Trinity House held no foreign currency secondary period sufficient to accounts as at 31 March 2010. cover the balance is available).

35 i) Taxation

The Fund is exempt from Corporation Tax under the provisions of the m) Provisions Merchant Shipping Act 1995. The Authority is liable to account for VAT on charges rendered for its services and is able to reclaim VAT on all costs Trinity House makes provisions for liabilities and charges in accordance under the provisions of the Value Added Tax Act 1983. with IAS 37 Provisions, Contingent Liabilities, and Contingent Assets where, at the Statement of Financial Position date, a legal constructive liability (i.e. j) Transactions on behalf of other General a present obligation from a past event) exists, the transfer of economic Lighthouse Authorities benefits is probable and a reasonable estimate can be made.

The General Lighthouse Authorities generally account for all aspects of their n) Financial Instruments responsibilities as statutory authorities. However, as a result of close co-operation, the GLAs agree that it is either more economic or practical Financial instruments are contractual arrangements that give rise to a for one GLA to be responsible and account for the costs of particular areas financial asset of one entity and a financial liability or equity instrument of of work. The costs incurred by Trinity House on behalf of other GLAs (which another entity. Financial assets are typically cash or rights to receive cash are shown separately on the Net Expenditure Account) are detailed at note or equity instruments in another entity. Financial liabilities are typically 5c. Income received by Trinity House on behalf of all GLAs is recognised obligations to transfer cash. A contractual right to exchange financial assets when invoiced and is detailed at note 6b. or liabilities with other entities will also be a financial asset or liability, depending on whether the conditions are potentially favourable or adverse k) Notional Credit on Net Liabilities to the reporting entity.

The Net Expenditure Account includes a notional credit on Net Liabilities Financial Assets at 3.5% of the average net liabilities during the year. This amount is Trinity House classifies its financial assets as loans and receivables. Loans reversed before reaching net expenditure for the year. and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and which l) Government Grants are not classified as available-for sale. Such assets are initially recognised at fair value. Where material, they are subsequently measured at amortised Government Grants received in respect of revenue expenditure are held cost using the effective interest method. on the Statement of Financial Position as deferred income and released to the Net Expenditure Account in the year the expenditure to which the grant Financial Liabilities was awarded is incurred. Financial liabilities are recognised initially at fair value and are subsequently measured at amortised cost. Financial liabilities are derecognised when Government Grants received in respect of eligible expenditure capitalised extinguished. in the Statement of Financial Position have been included in a Capital Grant reserve. This reserve will be released to the Net Expenditure Account by instalments over the depreciation life of the related assets. Information on specific Government Grants is detailed at note 20.

36 Embedded derivatives Some hybrid contracts contain both a derivative and a non-derivative component. In such cases, the derivative component is termed an embedded derivative. Where the economic characteristics and risks of the embedded derivatives are not closely related to those of the host contract, and the host contract itself is not carried at fair value through profit or loss, the embedded derivative is split out and reported at fair value with gains and losses being recognised in the Net Expenditure Account. Trinity House has carried out a review of its contracts and has determined that, as at 31 March 2010, no contracts contained embedded derivatives.

Determining fair value Fair value is defined as the amount for which an asset is settled or a liability extinguished, between knowledgeable parties, in an arms length transaction. This is generally taken to be the transaction value, unless, where material, the fair value needs to reflect the time value of money, in which case the fair value would be calculated from discounted cashflows. o) Income

In accordance with the Merchant Shipping Act TH are permitted to sell surplus capacity. Income from these activities is recognised in the period to which it relates. Income received in advance of provision of services in respect of contracts is deferred to match the related expenditure.

37 2. First-time adoption of IFRS General Revaluation Capital Grant Fund Reserve Reserve £000’s £000’s £000’s

Equity at 31 March 2008 under UK GAAP (107,361) 2,616 2,315 Adjustments for IAS 19 (117)

Equity at 1 April 2008 under IFRS (107,478) 2,616 2,315

£000’s Net Expenditure for 2007-2008 under UK GAAP 6,881 Adjustments for IAS 19 (117) Gain on sale of/disposal of fixed assets 1,165

Net Expenditure for 2007-2008 under IFRS 7,929

General Revaluation Capital Grant Fund Reserve Reserve £000’s £000’s £000’s

Equity at 31 March 2009 under UK GAAP (99,308) 1,110 2,456 Adjustments for IAS 19 (178)

Equity at 1 April 2009 under IFRS (99,486) 1,110 2,456

£000’s Net Expenditure for 2008-2009 under UK GAAP 7,967 Adjustments for IAS 19 (61) Gain on sale of/disposal of fixed assets 144

Net Expenditure for 2008-2009 under IFRS 8,050

3. Analysis of Net Expenditure by Segment

The Trinity House Board consider the provision of Aids to Navigation to be its one and only business segment.

38 4. Staff numbers and related costs 2009/2010 2009/2010 2009/2010 2008/2009 Staff costs comprise: Total Permanently Others Total employed staff £000’s £000’s £000’s £000’s Wages and salaries 11,161 10,989 172 10,855 Social security costs 880 880 - 854 Other pension costs - - - - Redundancy costs (6) (6) - 389 12,035 11,863 172 12,098 Less recoveries in respect of outward secondments - - - - Total net costs 12,035 11,863 172 12,098

Included in the above are:

Research and Development salaries 652 652 - 584 Light Dues salaries 203 203 - 197 Staff costs capitalised in fixed assets 179 179 - 79

Staff costs shown under expenditure of TH 11,001 10,829 172 11,238

Average number of persons employed

The average number of whole-time equivalent persons employed 2009/2010 2009/2010 2009/2010 2008/2009 during the year was as follows: Total Permanent Others Total Staff

Directly employed 304.6 304.6 - 312.2 Other 8.0 - 8.0 6.7 Staff engaged on capital projects 6.4 6.4 - 2.8

Total 319.0 311.0 8.0 321.7

39 5a. Other Expenditure 2009/2010 2008/2009 Note £000’s £000’s

Running costs 10,661 11,564 Rentals under operating leases 818 818 Interest charges 7 8,404 9,304 PFI service charges - - Research and Development expenditure - - Non-cash items: Depreciation 3,902 3,631 Amortisation 348 316 Loss on revaluation of assets 195 - Profit on disposal of asset - (144) Loss on disposal of property, plant and equipment 56 - Cost of Capital charges (3,757) (3,468) Provision provided for in year 15 227 311 Unwinding of discount on provisions 15 - -

Total 20,854 22,332

5.b Net Expenditure on behalf of DfT 2009/2010 2008/2009 £000’s £000’s Use of DfT resources: Staff & accommodation 118 100 Audit* 135 126 Professional services 78 134 Sombrero 3 2

Total 334 362

* Audit fees are incurred on behalf of the General Lighthouse Fund and all three General Lighthouse Authorities.

40 5.c Net Expenditure On Behalf Of All General Lighthouse Authorities 2009/2010 2008/2009 £000’s £000’s

VAT Refund re: GLF Investment (37) (92) Light Dues Collection Costs 666 621 Imperial Lighthouse Service Pensions 50 44 Research and Development 1,010 911 Special Sanctioned R&D including Galileo & eLoran 916 825 Wreck Removal - 1,555

Total 2,605 3,864

Salary Costs Included in the above

Research and Development 652 584 Light Dues 203 197

Total 855 781

2009/2010 2008/2009 6.a Income £000’s £000’s Buoy Rental 543 255 Property Rental 245 222 Tender Hire 399 357 Sundry Receipts 536 580

Total 1,723 1,414

41 2009/2010 2008/2009 6.b Income on Behalf of All GLAs £000’s £000’s

Contributions towards Radio Navigation Projects ie Galileo 84 27 Tri GLA Tender Hire 242 370

Total 326 397

2009/2010 2008/2009 7. Interest Payable/Receivable £000’s £000’s Loan interest receivable (5) (14) Deposit interest receivable (1) (22) Pension interest payable 7,556 8,323 Interest payable on Lease of THV ALERT 152 163 Interest payable on Lease of THV GALATEA 696 818

Total 8,398 9,268

42 8. Property, plant and equipment

Land Buildings Land Buildings L’vessels Tenders Buoys & Information Plant & Payments Total & Craft Beacons Technology Machinery on Account Ongoing Ongoing Surplus Surplus & Assets under Construction £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s Cost or valuation At 1 April 2009 936 16,697 803 616 7,063 37,536 5,126 2,106 31,549 1,701 104,133 Additions - 1,707 - - 145 561 461 224 398 382 3,878 Donations ------Disposals - (40) - - (2,092) (1,872) (7) (514) (637) - (5,162) Impairments ------Reclassifications 90 220 (290) (20) ------Revaluations - - (188) 183 ------(5) Transfers - 202 - - - - 455 - 195 (885) (33)

At 31 March 2010 1,026 18,786 325 779 5,116 36,225 6,035 1,816 31,505 1,198 102,811

Depreciation At 1 April 2009 44 3,785 - - 6,107 16,524 1,808 1,635 22,369 - 52,272 Charged in year 11 430 - - 223 1,100 389 276 1,473 - 3,902 Disposals - (15) - - (2,080) (1,847) (2) (502) (613) - (5,059) Impairments ------Reclassifications ------Revaluations ------

At 31 March 2010 55 4,200 - - 4,250 15,777 2,195 1,409 23,229 - 51,115

Net book value at 31 March 2009 892 12,912 803 616 956 21,012 3,318 471 9,180 1,701 51,861

Net book value at 31 March 2010 971 14,586 325 779 866 20,448 3,840 407 8,276 1,198 51,696

Asset financing: Owned 971 14,586 325 779 866 1,561 3,840 407 8,276 1,198 32,809 Finance Leased - - - - - 18,887 - - - - 18,887 On-balance sheet PFI contracts ------

Net book value at 31 March 2010 971 14,586 325 779 866 20,448 3,840 407 8,276 1,198 51,696

43 Land Buildings Land Buildings L’vessels Tenders Buoys & Information Plant & Payments Total & Craft Beacons Technology Machinery on Account Ongoing Ongoing Surplus Surplus & Assets under Construction £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s Cost or valuation At 1 April 2008 936 16,343 803 1,694 6,837 37,114 4,791 2,026 30,551 685 101,780 Additions - 862 - - 226 422 353 127 637 1,619 4,246 Donations ------Disposals - - - (360) - - (18) (92) (193) - (663) Impairments ------Reclassifications - (508) - 508 ------Revaluations - - - (1,226) ------(1,226) Transfers ------45 554 (603) (4)

At 31 March 2009 936 16,697 803 616 7,063 37,536 5,126 2,106 31,549 1,701 104,133

Depreciation At 1 April 2008 33 3,397 - 59 5,833 15,460 1,516 1,469 21,157 - 48,924 Charged in year 11 329 - - 274 1,064 296 253 1,404 - 3,631 Disposals ------(4) (87) (192) - (283) Impairments ------Reclassifications - 59 - (59) ------Revaluations ------

At 31 March 2009 44 3,785 - - 6,107 16,524 1,808 1,635 22,369 - 52,272

Net book value at 31 March 2008 903 12,946 803 1,635 1,004 21,654 3,275 557 9,394 685 52,856

Net book value at 31 March 2009 892 12,912 803 616 956 21,012 3,318 471 9,180 1,701 51,861

Asset financing: Owned 892 12,912 803 616 956 1,270 3,318 471 9,180 1,701 32,119 Finance Leased - - - - - 19,742 - - - - 19,742 On-balance sheet PFI contracts ------

Net book value at 31 March 2009 892 12,912 803 616 956 21,012 3,318 471 9,180 1,701 51,861

44 The accounts direction provides that fixed assets shall be stated at historic cost less depreciation. Trinity House has obtained independent valuations of the various Harwich depot buildings by Mr R E Weston BSc (Est.Man.) FRICS on behalf of Whybrow Chartered Surveyors as at 31 March 2010. For the Swansea depot the full valuations were carried out in March 2010 by Mr H Jones BSc MRICS on behalf of Cooke & Arkwright, Chartered Surveyors, details of operational depots are as follows: Market values as Net Book Value as at 31 March 2010 at 31 March 2010 Difference £ £ £

Harwich 4,550,000 9,896,820 (5,346,820) Swansea 70,000 351,467 (281,467)

Revalued Assets

The Miranda Building, 35/36 West Street and 7 Church Street, which all formed part of the old Harwich offices became surplus in 2005/06 and were revalued at Open Market Value in that year. These values have been reviewed as at 31st March 2010 resulting in revaluations for the Miranda Building to £250,000 (2008/09 £250,000), West Street to £250,000 (2008/2009 £100,000) and Church Street to £130,000 (2008/2009 £110,000)

The Mermaid Building which also formed part of the old Harwich offices, became surplus during 2006/2007 and was revalued at Open Market Value in that year. In February 2010 the building came back into operational use and its value was reviewed as at 31st March 2010 at £310,000 (2008/2009 £310,000)Mr R E Weston BSc (Est.Man.) FRICS on behalf of Whybrow Chartered Surveyors valued the land at £90,000 and the buildings at £220,000 which represents the reclassifications in the above table. The land had previously carried most of the value, resulting in a revaluation loss of £194,478 reflected in the Net Expenditure Account, and a revaluation gain on the buildings of £220,000 which is held in the Capital Reserve.

The Penzance Depot became surplus in 2004/2005 and was revalued in that year at Open Market Value. A full valuation has been carried out as at 31st March 2010 resulting in a revaluation to £475,000 (2008/2009 £650,000).

The valuation for the Penzance depot was carried out by Mr S A Sly BSc (Hons) MRICS on behalf of Charterwood Ltd in accordance the Practice Statements and Guidance Notes set out in the RICS Appraisal and Valuation Standards 6th Edition dated 1 January 2008 (as amended), published by the Royal Institution of Chartered Surveyors.

The valuations for all other surplus properties were carried out externally by Mr R E Weston BSc (Est. Man) FRICS on behalf of Whybrow Chartered surveyors as at 31st March 2010, in accordance with the Practice Statements and Guidance Notes set out in the RICS Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors. Reviews were undertaken for each of the sites.

45 The Properties included at a valuation would have been included on a historical cost basis at:

2009/2010 2009/2010 2009/2010 2009/2010 Penzance Miranda West Street Church Street £000’s £000’s £000’s £000’s

Cost 5 75 37 1 Depreciation (4) (61) (36) -

Net book value 1 14 1 1

2009/2010 2009/2010 2009/2010 2009/2010 Penzance Miranda West Street Church Street £000’s £000’s £000’s £000’s

5 75 37 1 Cost (4) (59) (36) - Depreciation 1 16 1 1 Net book value

Lighthouse Cottages included in Land and Buildings, Leased to Trinitas Services Ltd

Trinity House (TH) has entered into two agreements to lease 37 lighthouse cottages to Trinitas Services Ltd. With the automation of the lighthouses, TH disposed of all stand alone cottages, but retained cottages which were attached to or formed part of a lighthouse complex. It is considered that these Cottages which have been retained are 'day markers' or are necessary to retain for future operational requirements of the site ie to guarantee future access, and as such are considered to continue to be an operational requirement of the service and have therefore been valued at historic cost less depreciation in line with all other assets.

Sale of Fixed Assets

A loss on the sale of fixed assets of £56,258 was incurred during the year. This relates mainly to disposal of a Helicopter refueling facility and a Phalcon Racon.

46 9. Intangible assets Intangible Intangible software Licences Total £000’s £000’s £000’s Cost or valuations At 1 April 2009 1,404 150 1,554 Additions 15 - 15 Donations - - - Disposals (68) - (68) Impairments - - - Revaluation - - - Transfers* 33 - 33 At 31 March 2010 1,384 150 1,534

Amortisation At 1 April 2009 884 20 904 Charged in year 340 8 348 Disposals (57) - (57) Impairments - - - Revaluation - - - At 31 March 2010 1,167 28 1,195

Net book value at 31 March 2010 217 122 339

Cost or valuation At 1 April 2008 1,343 150 1,493 Additions 125 - 125 Donations - - - Disposals (68) - (68) Impairments - - - Revaluation - - - Transfers* 4 - 4 At 31 March 2009 1,404 150 1,554

Amortisation At 1 April 2008 629 13 642 Charged in year 309 7 316 Disposals (54) - (54) Impairments - - - Revaluation - - - At 31 March 2009 884 20 904

Net book value at 31 March 2009 520 130 650

* Transfers into intangible software are from tangible work in progress and relate to the software element of a number of Information Technology (IT) projects.

47 10. Financial Instruments The rate of interest on the loan that has been made to Trinitas Services Ltd is also fixed and therefore presents no risk against interest fluctuations.

Inter Currency Risks nation Disc al Fin requires disclosure of the role which Financial losur ancial Instrumenets h(aIve had duRreinpgo the year in creating or changing the risks the FRS 7 rting The Authority has no significant foreign currency transactions and is not Authority faces in und) ertaking itsSatcatnivdities. Because of the largely non ard 7 therefore exposed to any significant risk in terms of currency fluctuations. trading nature of the activities of TH and the m-ethFoind of funding from the ancial General Lighthouse Fund, the Authority is not exposed to Itnhsetrduegree of ments Fair Values financial risk faced by other business entities. The Authority does have: borrowing powers under the Merchant Shipping Act 1995 but very limited Set out below is a comparison by category of the book values and fair powers to invest in surplus assets. values of the Authority's financial assets and liabilities as at 31 March 2010

As permitted by IFRS 7, debtors and creditors which mature or become Book Value Fair Value payable within 12 months of the Statement of Financial Position date have £000’s £000’s been omitted from the profile. Financial Assets Cash at Bank and in Hand 13 13 Liquidity Risk Loan to Trinitas Services Ltd 100 100

The Authority relies primarily on advances from the General Lighthouse Fund for its cash requirements and is therefore not exposed to significant Financial Liabilities liquidity risks, although it is of course dependant indirectly on the liquidity Finance Lease Obligations of the General Lighthouse Fund. (MFT GALATEA/ RIV ALERT) 18,029 18,027

Interest Rate Risk

Trinity House have three finance leases on THV Galatea, THV Alert and The fair value of the finance lease obligation for the THV Galatea and the THV Patricia; it is not considered that these present any exposure to THV Alert is calculated as the net present value of future lease payments. interest rate risk.

THV Patricia has expired its primary term and is now on a fixed peppercorn rent. The interest rate for the finance lease for the THV Alert was fixed on 9th August 2006 and therefore poses no risk. The interest rate for the finance lease for the THV Galatea was fixed on 24th December 2008 and therefore poses no risk.

The Authority holds working funds in moneymarket accounts and is therefore exposed to interest rate fluctuations, although here again these balances are very small and so the risk is insignificant.

48 11. Inventories 2009/2010 2008/2009 £000’s £000’s

Consumable stores 1,976 1,762 Fuel oil 309 231

Total 2,285 1,993

12. Trade receivables and other current assets 2009/2010 2008/2009 £000’s £000’s Amounts falling due within one year: Trade receivables 495 284 Other receivables 362 138 Inter GLA debtors - 131 Prepayments and accrued income 273 390 VAT recoverable 256 335

Total 1,386 1,278

Amounts included above that fall within the Whole of Government Accounting boundary are: 2009/2010 2008/2009 £000’s £000’s

Central Government 258 335 Local Authorities 14 - NHS Trusts - - Public Corporations 30 14 Bodies external to Government 1,084 929

Total 1,386 1,278

49 Amounts falling due after more than one year: 2009/2010 2008/2009 £000’s £000’s

Trinitas Loan 100 100

Total 100 100

13. Cash and cash equivalents 2009/2010 2008/2009 £000’s £000’s

Balance at 1 April 100 868 Net change in cash and cash equivalent balances (87) (768) Balance at 31 March 13 100

The following balances at 31 March were held at: Commercial banks and cash in hand 13 100 Short term investments - - Balance at 31 March 13 100

14. Trade payables and other current liabilities 2009/2010 2008/2009 £000’s £000’s Amounts falling due within one year:

Other taxation and social security 384 369 Trade payables 1,216 878 Other payables 102 96 Inter GLA payables - 13 Accruals and deferred income 2,569 3,030 Current part of finance leases 1,133 1,083

Total 5,404 5,469

50 Amounts included above that fall within the Whole of Government Accounting boundary are:

2009/2010 2008/2009 £000’s £000’s

Central Government 384 369 Local Authorities - - NHS Trusts - - Public Corporations - - Bodies external to Government 5,020 5,100

Total 5,404 5,469

2009/2010 2008/2009 £000’s £000’s Amounts falling due after more than one year: Other payables, accruals and deferred income - - Finance leases 16,896 18,028 Imputed finance lease element of on-balance sheet PFI contracts - - NLF loans - -

Total 16,896 18,028

51 15. Provisions for liabilities and charges

Annual Compensation Restructuring Payments Provision Redundancies Orfordness Litigation MNOPF Total £000’s £000’s £000’s £000’s £000’s £000’s £000’s (i) (ii) (iii) (iv) (v) (vi)

Balance at 1 April 2009 534 143 239 - - - 916 Provided in the year - - - 100 50 77 227 Provisions not required written back (94) (48) (127) - - - (269) Provisions utilised in the year - - (46) - - - (46) Unwinding of discount ------Balance at 31 March 2010 440 95 66 100 50 77 828

Analysis of expected timing of discounted flows Annual Compensation Restructuring Payments Provision Redundancies Orfordness Litigation MNOPF Total £000’s £000’s £000’s £000’s £000’s £000’s £000’s

In the remainder of the Spending Review period (to 2013) 440 95 66 100 50 77 828 Between 2014 and 2018 ------Between 2019 and 2023 ------Thereafter ------Balance at 31 March 2010 440 95 66 100 50 77 828

Included in the amounts not expected to be called until after 2023 are: Annual Compensation Restructuring Payments Provision Redundancies Orfordness Litigation MNOPF Total £000’s £000’s £000’s £000’s £000’s £000’s £000’s

Amounts not expected to be called until the period ------beginning 2063 ------Amounts not expected to be called until the period beginning 2088

52 The Board has provided for:

(i) Annual Compensation Payments - the actuarially calculated estimate for the future liabilities for ACPs that are compensation payments until Age 60 and receipt of normal pension benefits.

(ii) Restructuring Costs - the estimated redundancy costs as a result of restructuring the organisation. It is expected that 100% of the remaining balance will be utilised during 2010/11.

(iii) Redundancies - the estimated redundancy costs as a result of changing from the THV Mermaid to the new THV Galatea and redundancies as a result of a re- organisation within Operations, Planning and Asset Management. It is expected that 100% of the provision will be incurred in 2010/11.

(iv) Cost of removal of optic and mercury from which is required no matter what the eventual outcome of this site.

(v) Potential litigation in respect of Asbestos claim, as advised by solicitors.

(vi) Additional contributions to the Merchant Navy Officers Pension Fund - provision for actuarially calculated estimate of additional contribution due to help meet the deficit in the Fund.

53 16. Capital commitments

Contracted capital commitments at 31 March 2010 not 2009/2010 2008/2009 otherwise included in these financial statements £000’s £000’s

Property, plant and equipment 1,602 1,415 Intangible assets - -

17. Commitments under leases

17.1 Operating leases 2009/2010 2008/2009 £000’s £000’s

Obligations under operating leases comprise: Land Not later than one year - - Later than one year and not later than five years - - Later than five years 74 79

Buildings Not later than one year - - Later than one year and not later than five years 8 - Later than five years 1 10

Other Not later than one year 401 103 Later than one year and not later than five years - 420 Later than five years 598 -

54 17.2 Finance Leases

Total future minimum lease payments under finance leases are given in the table below for each of the following periods.

Obligations under finance leases comprise: 2009/2010 2008/2009 £000’s £000’s Buildings Not later than one year - - Later than one year and not later than five years - - Later than five years - - - - Less interest element - - - - Other Not later than one year 1,948 1,083 Later than one year and not later than five years 9,740 4,858 Later than five years 12,074 13,170 23,762 19,111 Less interest element (5,734) (6,599) 18,028 12,512

18. Other financial commitments

Trinity House has entered into no non-cancellable contracts (which are not leases or PFI contracts), during the year (2008/09 Nil).

55 19. Pension Commitments

Trinity House Lighthouse Service Pension Scheme and There were no contributions due to the partnership pension providers at Trinity House Lighthouse Service Compensation Scheme the end of the reporting period. There were no contributions that had been prepaid at that date.

The pension entitlement of the employees of Trinity House Lighthouse The pension liabilities of Trinity House Lighthouse Service, along with the Service arises under an internally defined benefit pension scheme. The other Lighthouse Authorities, are paid by the General Lighthouse Fund as pension benefits of the Scheme are determined by the Secretary of State they fall due on the following basis:- under Section 214 of the Merchant Shipping Act 1995. The Secretary of State has determined that the rules of the Principal Civil Service Pension i) Payments to pensioners / spouses' / children for the financial year under Scheme shall apply. Compensation for premature loss of office is review. determined by the terms of the Trinity House Lighthouse Service Compensation Scheme, operated by direct analogy with the Civil Service ii) Lump sums paid to new pensioners and preserved lump sums coming Compensation Scheme. into effect during the year.

The Pension Scheme falls within the definition of a "Public Service Pension iii) Annual compensation payments paid to those members who are made Scheme" in Section 1 of the Pension Schemes Act 1993 and is not required redundant in advance of normal retirement age (60). to be separately funded. Since 1st October 2002 the Scheme has been made up of the Classic and Premium arrangements. The Classic iv) Accrued benefits due to employees who leave and who opt to have such arrangement operates on a noncontributory basis with the exception of benefits transferred to another scheme. contributions made to the Spouses' Pension Scheme and in a number of cases voluntary contributions made by employees for the purchase of v) Injury benefits. added years of service. Members of the Premium arrangement are required to contribute 3.5% of pensionable elements of pay and may also make vi) Refunds of spouses' pension contributions at leaving and/or age 60. voluntary contributions for the purchase of added years of service. Reduced by:-

Employees joining after 1 October 2002 could opt instead to open a vii) Contributions made by employees during the year in respect of the partnership pension account, a stakeholder pension with an employer Premium arrangement or spouses and dependant relatives and added contribution. Employer contributions of: years for the Classic arrangement.

2009/2010 2008/2009 viii) Accrued benefits transferred from other pension schemes in respect £ £ of current members. Partner Pension Accounts 3,176 2,291 The General Lighthouse Authorities obtain professional actuarial valuations were paid to one or more of a panel of four appointed stakeholder pension at 3 yearly intervals and are updated each year for IAS26 purposes. The providers. Employer contributions are age-related and range from 3% to last valuation was completed in 2008, valued as at 31st March 2008. 12.5% of pensionable pay.

56 The only differences between the full valuation and the IAS26 valuations are:

1) the IAS 26 valuation excludes the liabilities for Annual Compensation Payments (ACPs) 2) the IAS 26 valuation prescribes the discount rate as the yield on "AA" rated long-term corporate bonds. For the best-estimate funding basis, the discount rate represents the actuary's expectation of future investment returns from the assets notionally held by the scheme. As the Board does not operate a funded arrangement, there are no assets on which to base an estimate of future returns. Therefore, for the purpose of deriving a suitable discount rate, the actuary has assumed a notional portfolio that would reflect a common composition of assets in a defined benefit pension scheme.

The accumulated liability for the Trinity House Lighthouse Services Board in respect of all current employees was in the order of £31,330,000. The estimated liability for pensions in payment and deferred pensions of former employees of the Trinity House Lighthouse Service Board was £111,530,000. The actuary used the Projected Unit Credit Method and a 'best estimated' approach of future experience ie one that includes no margin for caution. The valuation assumed an investment return of 7.5% (pre-retirement) and 5.7% (post retirement), salary growth of 5.45%, price inflation of 3.60% and the rate of increase for pensions in payment and deferred pensioners of 3.7%. The actuary also applied standard actuarial tables for mortality rates.

The actuary's updated estimate of the liability of ACPs at 31st March 2010 is £440,000

31-Mar-10 31-Mar-09 £000’s £000’s

Active Members 37,171 26,484 Deferred Pensioners 31,100 22,850 Pensioners 83,356 78,155 Total Liability at Projected Unit Method 151,627 127,489

Real Discount Rate 1.80% 3.20% Inflation Rate 2.75% 2.75% Discount Rate 4.60% 6.04% Salary Growth Rate 3.75% 3.75% Pensions in Payment and Deferred Pensioners Growth Rate 2.75% 2.75%

57 £000’s £000’s £000’s

Scheme Liability at 31 March 2009 127,489 Current Service Cost 1,663 Curtailment Losses 216 Interest on Pension Scheme Liability 7,556 9,435 Benefits Payable Pensions or Annuities to retired employees and dependants (6,241) Commutations and lump sum benefits: On Retirement (363) On Early Retirement (87) On Death - Injury Benefits (9) (6,700) Pension payments to and on account of leavers Refunds to members leaving service (3) Group Transfers to other schemes - Individual Transfers to other schemes (6) Club Transfers out (154) (163) (6,863) Income received in respect of enhancements Employees: Purchase of added years 26 Widows/Widowers pension Scheme (WPS) Contributions 234 Employers: Bringing forward the payment of accrued lump sums - Enhancement to pensions on departure - Enhancement to pensions on retirement - 260 Pension transfers in Group transfers in from other schemes - Individual transfers in from other schemes 91 Club Transfers in - 91 351 Actuarial Gains and Losses Experience gains and losses arising on scheme liabilities (24,917) Changes in assumptions underlying the present value of scheme liabilities 46,132 21,215 21,215

Scheme liability at 31 March 2010 151,627

58 The "Experience Gains and Losses arising on the scheme liabilities" of (£24,197) and the total "Actuarial Losses" of £21,215,000 represent (15.96%) and 13.99% respectively of the total scheme liability at 31st March 2010.

£000’s

Opening Balance 127,489 Closing Balance 151,627 (24,138)

Operating Cost 1,879 Financing Costs 7,556 Pension Payments (6,512) Statement of Changes in Reserves 21,215 (24,138)

31 March 2010 31 March 2009 31 March 2008 31 March 2007 £000’s £000’s £000’s £000’s

Experience Gains and Losses on Scheme Liability amount - - (2,156) 822 Percentage of the present value of Scheme Liabilities 0.0% 0.0% 1.6% -0.1% Total amount recognised in the Statement of Changes in Reserves (21,215) 13,155 13,141 (17,127) Percentage of the present value of Scheme Liabilities 14.0% -10.3% -9.7% 11.7%

59 The DfT has reported the contingent liability for the GLAs' pensions for inclusion in the Resource Account for 2009/2010 and a liability of £408.5m (the estimated liability calculated at 31 March 2010) has been disclosed.

On 17 December 2001 the then DfT, Local Government and the Regions gave the GLAs a Letter of Comfort (see Appendix 1) in respect of contingent pension liabilities. The Letter states that in the unlikely event of insufficient money being available from the GLF to pay pension liabilities, the Department will request funds from Parliament to make the necessary payments.

In November 1998 it was agreed together with the DfT, the other GLAs and the Lights Advisory Committee that a full actuarial valuation would be completed at three yearly intervals. Hymans Robertson LLP have been engaged to provide actuarial support and have completed the 2009/2010 valuation.

The principal revenue of the Fund is light dues which are fixed by the Secretary of State (Minister for the Marine for Republic of Ireland) by orders under Section 205 of the Merchant Shipping Act 1995 (which are subject to negative resolution of Parliament). Subject to Parliamentary approval of such orders, the Secretary of State will seek to ensure that annual revenues are maintained at a sufficient level to meet the Pension Schemes liabilities.

Merchant Navy Officers' Pension Fund

The Board is a Participating Employer of the Merchant Navy Officers' Pension Fund (MNOPF) which is a defined benefit scheme providing benefits based on final pensionable salary. The MNOPF has a deficit of £557m identified in an actuarial valuation as at 31 March 2009. The rules of the MNOPF state that Participating Employers may be called to make lump sum payments to make up deficits. With effect from 8 June 2000 the rules were amended to state that an employer will not be regarded as ceasing to be a Participating Employer as a result of ceasing to employ Active Members or other eligible employees. The MNOPF has made an application to the Court to obtain confirmation that the position that applies from 8 June 2000 also applied before. As a Participating Employer, the Board can be required to contribute to the deficit. The hearing of this matter took place between 8th and 11th March 2005 and the judgement was handed down by Mr Justice Patten on 22nd March 2005. In general terms the judgement stated that the Trustees of the MNOPF are entitled to demand a contribution to meet the deficit in the Post 1978 section from all employers who ever participated in the Fund. This means that the burden will be spread over a large number of companies. It also means that the Trustees have the option of demanding from employers who have only ever participated in the Pre 1978 section to meet the deficit in the Post 1978 section.

TH made no contribution during either 2009/2010 or 2008/2009 towards the deficit identified by MNOPF but have made a provision for £77,186 in the 2009/2010 accounts based on a letter of illustrative deficit contributions received from MNOPF dated 18th May 2010.

60 20. Government Grants

The Capital Grant Reserve represents deferred Government Grants analysed as follows:

2009/2010 2008/2009 £000’s £000’s

Grants received from the UK Government 2,545 2,456 Grants received from the Irish Government - - Grants received from the EU - - Capital Grant Reserve 2,545 2,456

21. Contingent liabilities disclosed under IAS 37

Trinity House has the following contingent liabilities:

Protection and Indemnity

The Authority's marine protection and indemnity risks are insured through The Standard Steamship Owners' Protection and Indemnity Association (London) Limited which is a member of the International Group of Protection and Indemnity Clubs.

The Club has adopted a conservative underwriting policy and concentrates on insuring vessels operating in European inland waterways, harbours and coastal trades.

The mutual method of insuring these risks includes a re-insurance programme and the pooling arrangements of the International Group. However, in common with all members of International Group Clubs, the Authority could be liable for additional premium payments (Supplementary Calls) to cover any claims which cannot be met from funds available. The Standard Club has closed the years up to and including 2007/2008 and there will be no Supplementary Calls for these years. The Club have advised the Board that it does not anticipate Supplementary Calls for the years 2008/2009 and 2009/2010. As a result the Board has made no provision in the Accounts.

61 Merchant Navy Officers' Pension Fund (MNOPF) Lighthouse A new actuarial valuation was carried out as at 31st March 2009 which has It is well recognised that the cliff at Beachy Head is only currently stable. resulted in further deficits upon which members have been called upon to The cliff will fall in the future and this fall could cause either or both of the contribute. The Board have received illustrative deficit contributions due following: for payment on 30th September 2010 in respect of the 2009 deficit and have made provision for £77,186 accordingly (note 15). Any further liability Loss of the mains power supply - mitigation by the use of an installed diesel will be restricted to the additional deficit contributions sought in September alternator set. 2010 due to the deficit reported as at 31 March 2009 that cannot be Loss of use of the boat landing necessary to re-fuel the station. recovered from other employers (eg liquidated companies, etc), who are unable to pay their share in September 2010 and needs to be recovered The future of this station as an AtoN (Aid to Navigation) is subject to the from those remaining. The Board do not have reliable estimates of this 2010 Navigation Aids review in which it is proposed to downgrade the liability and have therefore made no further provision other than for the navigation light. Until then the cost to mitigate the risk is likely to be illustrative deficit contribution, but declare it as a contingent liability. between £50k - £250k. eLoran VT Contract Lighthouse Structural dilapidations have reached a point that has demanded that On 31st May 2007, a contract was signed for the provision of a UK and structural surveys be undertaken. The outcome of the surveys is likely to Irish Enhanced LORAN Signal-In-Space as part of a European Enhanced be that the tower will require an investment of circa £3m to secure its LORAN service. Broadcasting from Anthorn in Cumbria, the quarterly cost future as an AtoN, or £10m for complete removal. The Ministry of Defence to the GLAs of this service is £93,783. Provision of a new transmitter, which has a commitment to fund 50% of demolition costs. Consultancy work will is subject to approval from DfT will increase the future quarterly payment. be undertaken during 2010/11 to determine the work to be completed.

Orfordness Lighthouse The contract covers a period from 31st May 2007 to 1st October 2022. Beach erosion at Orfordness has raised concern that the lighthouse, which The GLAs have reserved the right to terminate the contract, at their sole is of brick construction, will become unstable in the very near future (3-6 discretion at the end of the first phase, on or about 1st October 2010. This years). This station as an AtoN is also subject to the 2010 Navigation Aids decision date is currently delayed but as an example if they were to review, which is indicating the discontinuation of this station and an terminate on 1st October 2010 the GLAs will be liable for a cost of upgrade to the Southwold AtoN. Should this outcome not come to fruition £1,139,130. If a new transmitter is installed a revised schedule will be then the cost would be in the region of £4m to maintain a navigational aid required. at the site. Otherwise the station will require either decommissioning of the lighthouse, leaving it to natural loss, or the controlled demolition of the At present, the Board do not envisage terminating the contract and have station. The cost of this is between £100k - £400k. Further consultation is made no provision in the Accounts. to be undertaken to determine the future of this station. What is known at this time is that the current structure is not suitable for long term use Lighthouse Estate for AtoN purposes and thus the removal of hazardous materials will have to occur in conjunction with the discontinuation of any service. £100k has As a result of regular surveys the Board recognise that there is a raised been provided in the accounts to carry out the removal of the hazardous degree of risk at a number of stations that may demand a currently materials, no further provisions have been made until the outcome is unquantified level of future investment. These stations are: known and the Board therefore declare it as a contingent liability.

62 • The cliff above the access road and the access road, to instigate St Catherine’s Lighthouse action to mitigate against the loss of the road or loss of use of the This lighthouse is built on an unstable cliff on the southern side of the Isle road. It is considered that the loss of the road is inevitable in 5 of Wight. The risks to this station fall into the following headings: to 10 years, which may also result in the loss of mains cable, water supply and telephone link. • Risk of structural damage due to ground faults; • Risk of collapse due to cliff erosion; The future of this station as an AtoN is subject to the 2010 Navigation Aids • Risk of collapse of the approach road due to ground faults; and review in which its future will be determined with a downgrade in the light • Risk of movement to the lighthouse sufficient to seize the rotation range the most likely outcome. Before access and services are lost, the of the optic. provision of a solarised main light (from a separate or within the existing structure) would need to be completed, leaving the remaining station The condition of the station is subject to continuous monitoring and facilities supplied by diesel, with future access via helicopter only. The cost surveys, however it is likely that a new lighthouse would need to be of these works is estimated to be in the region of £200k to £2m, however, established on land that would need to be acquired and the cost is due to the uncertain nature of these events the Board has made no expected to be between £2m - £3m depending on the clearance provision in the Accounts. requirements of the original site. A review of the available data including tilt and crack data shows little sign of movement since 2001, indicating a Royal Sovereign quiet period of movement, however it does not allow for large scale rapid A non-destructive structural survey performed in February 2009 estimated movements that might occur given the right climatic conditions. Monitoring the remaining life of the structure to be 15 to 20 years provided that therefore remains ongoing. areas of concrete degradation and corrosion to reinforcement were repaired as soon as practicably possible. The main risk resided around the Flamborough Head Fog Signal building & DGPS Tower condition of the post-tensioned tendons which are vital to ensure the The tip of the promontory that is Flamborough Head has a substantial cave structural integrity of the concrete tower. underneath it. The cave roof has a known fault and should the roof collapse, it is likely that the end of the promontory would also collapse Destructive investigative works to fully establish the condition of these taking with it the DGPS mast and the ex Fog Signal station which houses tendons is currently out to tender and is programmed to be performed in the DGPS equipment and diesel alternator equipment. Further to this there 2010. is a loss of material from the top of the cliff on the North and South sides which is now adjacent to the TH boundary. Provided that these investigations show that the tendons are in a serviceable condition the structure could then remain in service for the The cave is subject to annual condition surveys which monitor the roof period estimated during the structural survey provided a rigorous condition. However should it collapse it is considered that a new DGPS inspection/maintenance regime is established. The regime should be station would need to be established on land that would need to be initially based on an annual visual/photographic inspection with roped acquired. The cost is likely to be between £2m to £3m depending on the access inspections as required to ensure the repairs remain effective; the clearance requirements of the original site. cost for rope access would be £100k - £150k per inspection.

Hartland Point However, it must be noted that destructive investigative works could Annual surveys are undertaken regarding two aspects of this station: determine that the tendons in the tower below the accommodation have • The sea defences are surveyed to ensure their integrity to arrest the been compromised. If this situation occurs it may be feasible to remove sea erosion of the cliff on which the lighthouse is constructed; and the accommodation and the upper tower without damaging the caisson

63 The first agreement provides for some 34 lighthouse cottages at 14 foundation and the lower tower. The retained structure could then be fitted locations to be leased to Trinitas for 25 years. Trinitas has refurbished the with a new capping slab and form a platform that could then be used to cottages and has a contract with Rural Retreats to let them as holiday accommodate an AtoN as required. The estimated cost for this work is cottages. At present 30 cottages are let under this agreement. anticipated to be of the order of £5m to £10m. During 2006/2007 Trinity House refurbished a further 7 lighthouse cottages However, the only option may be to demolish the structure and replace it. at the Lizard, and entered into a second agreement to lease them to The estimated cost of demolition is £4m - £6m. Trinitas Service Ltd (TSL) for 20 years commencing February 2002, with an effective possession date of 14th December 2006. TSL rents one of the The total cost of the above is therefore estimated at between £12.75m and cottages under an assured shorthold tenancy agreement and has entered £27.25m, however, due to the uncertain nature of these events the Board into a contract with Cornish Cottages (previously known as Mullion has made no provisions in the Accounts. Cottages) to let 6 of them as holiday cottages.

The investment in bringing the original cottages and the Lizard cottages to material state together with the legal costs of the agreement was in the 22. Related-party transactions order of £990,000.

General Lighthouse Fund The freehold interest in the properties remains with TH. The potential uplift in value at the end of the lease period arising from the refurbishments is The Fund is administered by the Department for Transport who sponsor uncertain. A ground rent is payable during the currency of each lease but the three General Lighthouse Authorities. For this purpose each is there is no premium. considered to be a Non Departmental Public Body (NDPB). In order to finance the refurbishments TH has made a loan facility available The Authorities are regarded to be related parties. During the year there to Trinitas Services Ltd up to £1,000,000. The maximum amount which have been various material transactions between the Fund and the had been drawn down was £600,000. The loan has a fixed interest rate of Authorities. The Board has received advances of £36,050,000 (2008/2009 5% payable after three years. £36,500,000) from the General Lighthouse Fund and incurred expenditure 2009/2010 2008/2009 of £2,605,000 (2008/2009 £3,864,000) on behalf of all three Authorities £000’s £000’s (see note 5c). Opening Balance 100 300 Neither the Secretary of State for Transport, any key officials with Repaid during year - (200) responsibilities for the Fund or any of Trinity Lighthouse Service Board Closing Balance 100 100 members, key managerial staff or other related parties has undertaken any material transactions with the Fund during the year.

Trinitas Services Ltd In the event of a default on the loan TH would have a claim against the assets of Trinitas Services Ltd. The loan was to refurbish and provide soft Trinity House has entered into two agreements to lease 37 lighthouse furnishings to property owned by TH and as the value is retained within cottages to Trinitas Services Limited, a wholly owned subsidiary of the the properties, the risk is considered low. Corporation.

64 Heritage Lottery Fund Commodore J S Scorer, Director, F C Bourne, Non-Executive Director, Captain N R Pryke, Non-Executive Director are all appointed to the Board In accordance with the accounts direction the Heritage lottery Fund (HLF) of TSL as nominees of the Corporate Board responsible for Trinity House is deemed to be a related party of Trinity House since both organisations Charities. Rear Admiral J M de Halpert, Executive Chairman, on behalf of are sponsored by government departments. the Corporation of Trinity House, became a shareholder of TSL on 28 March 2006. In March 2007 a grant of £394,000, or 61% of the total estimated project cost of £649,752 was awarded to develop the Lizard Heritage Centre. Corporation of Trinity House During 2009/2010 the project was deemed complete for HLF purposes and The Corporation of Trinity House owns Trinity House Tower Hill and TH received the final grant funding of £179,646 from HLF (£214,354 in provides rent free accommodation for the use of TH. TH reimburses the 2008/2009). TH are not expecting any further funding in respect of this Corporation for service charges in proportion to the floor area occupied. project. During 2009/2010 TH paid £266,281 to The Corporation of Trinity House in respect of service charges incurred in using office space and facilities at Trinity House, London (£269,729 in 2008/2009). 23. Inter-GLA Transactions Conversely, the Corporation of Trinity House reimburses TH for the provision of services during the year. The Corporation paid £57,809 to TH Ships Agreement in respect of these services during the year (£101,440 in 2008/2009). The Commissioners of Irish Lights (CIL) provided the services of ILV East of England Development Agency Granuaile to Trinity House for 1 day under the terms of the Inter GLA Ship Agreement dated 12 December 2000. Trinity House provided the In accordance with the accounts direction the East of England Development services of THV Patricia to CIL for 2.38 days during the year. The Agency (EEDA) is deemed to be a related party of TH since both Commissioners of Northern Lighthouses (NLB) did not receive/ provide the organisations are sponsored by government departments. service of any ship from/to Trinity House during the year. While there was no transfer of funds between the GLAs in respect of this service, The redevelopment of the Harwich depot was part funded by a grant from the East of England Development Agency. In the grant offer letter of 5 the transaction would give rise to notional income of £19,105 (2008/2009 March 2003 EEDA agreed to fund 29% of the eligible costs of - £nil) and notional expenditure of £7,909 (2008/2009 - £68,400). redevelopment up to a maximum of £2.5 million. Certain conditions were attached to the grant such that it may be repayable if TH closes operations in Harwich before 2013 or if the expected increase in employment at the Harwich depot is not achieved.

During 2006/2007 the project was deemed complete for EEDA purposes and TH received the final grant funding of £250,000 from EEDA (£1,148,507 in 2005/2006). TH are not expecting any further funding in respect of this project.

65 24. Further Information

Number of Non-Current Assets: 2009/2010 2008/2009

Lighthouses 70 70 Lightvessels 12 12 Lightfloats 2 2 Buoys * 685 686 Beacons 24 24 Tenders 3 3 Ancillary Craft 9 8 Lighthouse abroad 1 1

Total 806 806

Number of Non-Current Assets Deployed

Lighthouses 69 69 Lightvessels 8 8 Lightfloats 2 2 Buoys * 551 504 Beacons 22 19 Tenders 3 3 Ancillary Craft 9 8 Lighthouses abroad 2 2

Total 666 615

Trinity House operates the Lighthouse at Sombrero (Anguilla) on behalf of the DfT.

It owns and has full responsibility for Europa Point (Gibraltar).

*The number of Buoys deployed will always be less than owned due to the diversity of buoy range, buoys undergoing repairs & refurbishments, others being held on tenders awaiting deployment and emergency wreck marking buoys held at various depots and forward storage areas.

66 Five Year Summary

IFRS Accounts UK GAAP Accounts Restated 2010 2009 2008 2007 2006 £000’s £000’s £000’s £000’s £000’s Expenditure Staff costs 11,001 11,238 10,533 11,271 11,054 Depreciation 3,902 3,631 3,805 4,192 4,003 Amortisation 348 316 466 105 - Loss on revaluation 195 - - - - Pension cost 1,960 2,651 2,431 1,927 1,536 Other expenditure (including profit/loss on sale of Fixed Assets) 11,762 12,549 9,651 10,533 9,402 Total 29,168 30,385 26,886 28,028 25,995

Income Advances from the General Lighthouse Fund 36,050 36,550 32,900 32,200 37,000 Other income 1,723 1,414 1,641 1,059 714 Income on behalf of all GLA's 326 397 21 141 133 Grant Income 326 74 253 180 28 Total 38,425 38,435 34,815 33,580 37,875

Net Expenditure (9,257) (8,050) (7,929) (5,552) (11,880) Cost of Capital (3,757) (3,468) (3,773) (3,444) (3,080) Interest payable/receivable 8,398 9,268 7,493 7,775 6,869 Net Expenditure after cost of capital charge and interest (4,616) (2,250) (4,209) (1,221) (8,091) Net Expenditure on behalf of DfT 334 362 251 380 374 Net Expenditure on behalf of all General Lighthouse Authorities 2,605 3,864 2,536 1,972 2,076 Reversal of Cost of Capital 3,757 3,468 3,773 3,444 3,080 Net Expenditure after interest 2,080 5,444 2,351 4,575 (2,561) Property Plant and Equipment 51,696 51,861 52,856 39,101 35,528 Intangible Assets 339 650 851 285 207 Trade and other receivables becoming due after more than one year 100 100 300 300 320 Non Current Assets plus / less Net Current Assets / Liabilities 49,798 50,083 53,357 38,820 36,086 Assets less Liabilities (118,936) (95,920) (102,547) (113,142) (92,409) Purchase of Property Plant & Equipment 3,878 4,246 20,500 7,647 8,426 Average No. of whole-time equivalent persons employed (inc. agency staff) 319.0 321.7 321.0 331.0 343.0

Figures for 2005/06 and 2006/07 are prepared under UK GAAP and have not been restated for International Reporting Standards. Other Income has been restated to show gross income in 2005/06.

67 APPENDIX 1

THE DEPARTMENT FOR TRANSPORT, LOCAL GOVERNMENT AND THE REGIONS

LETTER OF COMFORT IN RESPECT OF GENERAL LIGHTHOUSE FUND PENSIONS, CONTINGENT LIABILITIES, TO BE GIVEN TO THE GENERAL LIGHT- HOUSE AUTHORITIES

The pensions in respect of the beneficiaries of the Pension Schemes of the General Lighthouse Authorities (GLAs) are safe. This is recognised by the fact that the pensions liability of the General Lighthouse Fund (GLF) is reported to Parliament annually as a contingent liability of the Department of Transport, Local Government and the Regions (DTLR). This is a form of early warning to Parliament that it may be asked to authorise expenditure on this item. Any liability which a GLA might not be able to meet from its own resources (which in the GLA's case is the GLF) would fall to DTLR as the sponsor department.

DTLR has therefore already given the strongest public assurance that the pensions of the beneficiaries of the Pension Schemes of the GLAs will be paid by the inclusion of the liabilities of the GLF in their departmental contingent liability return to Parliament. Therefore in the unlikely event of insufficient money being available, DTLR will request funds from Parliament to ensure that the pensions are paid to the beneficiaries of the Pensions Schemes of the GLAs. The pensions of the GLAs are therefore assured by this Letter of Comfort.

Signed By:

On behalf of the Secretary of State For Transport, Local Government and the Regions Date 17.12.2001

68 Pictures front cover, from top to bottom: Strumble Head Lighthouse, Orfordness Lighthouse, St Anthony Lighthouse.

69